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NI

Nerdy Inc. (NRDY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue of $48.0M and non-GAAP adjusted EBITDA loss of $5.5M both exceeded guidance; gross margin compressed to 66.6% on higher session utilization and new tutor incentives .
  • Consumer Learning Memberships drove 82% of company revenue ($39.2M); Active Members ended at 37.5K; Institutional revenue fell to $6.8M amid post-ESSER normalization and funding caution .
  • 2025 outlook guides Q1 revenue to $45–$47M and FY revenue to $190–$200M; adjusted EBITDA guided to -$6M to -$8M in Q1 and -$8M to -$18M for FY; management expects to be EBITDA and cash flow positive in Q4’25 .
  • Near-term catalyst narrative: accelerated AI product cycle (AI session summaries, Tutor Copilot), price increases (~20% for new customers), and retention improvements; counterpoint is lower gross margin in Q1 from incentives and utilization .

What Went Well and What Went Wrong

What Went Well

  • Beat on both top line and adjusted EBITDA vs guidance; “delivered both revenue and adjusted EBITDA above the high end of guidance” .
  • Rapid AI rollout: AI session summarization, lesson plan/practice generators, and Tutor Copilot to enhance instruction quality and drive retention; “Initial signal is positive…99% positive feedback” .
  • Consumer engagement and retention improved; “consumer engagement rose 26% YoY in the fourth quarter” and weekly-membership mix driving higher ARPM/LTV .

What Went Wrong

  • Gross margin down to 66.6% (vs 71.3% LY; 70.5% in Q3) on higher utilization and new incentives; offsets to contribution dollar benefits take time to materialize .
  • Institutional revenue fell 40% YoY to $6.8M; bookings ($4.6M) and funding caution weighed; post-ESSER normalization required moderated investment .
  • GAAP net loss widened to $15.7M from $9.2M prior year; non-GAAP adjusted EBITDA fell to -$5.5M vs +$3.0M LY given lower revenue/margin and Institutional/product investments .

Financial Results

Core P&L (quarterly)

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$55.084 $51.0 $37.530 $47.990
Gross Margin (%)71.3% 65.7% 70.5% 66.6%
Gross Profit ($USD Millions)$39.270 $33.5 $26.453 $31.939
Net Loss ($USD Millions)$(9.240) $(14.4) $(24.958) $(15.771)
Adjusted EBITDA ($USD Millions, non-GAAP)$3.031 $(2.1) $(13.951) $(5.493)

EPS

MetricQ3 2024Q4 2023Q4 2024
Loss per share (Basic & Diluted, $)$(0.14) $(0.05) $(0.09)

Segment Revenue

Segment ($USD Millions)Q3 2024Q4 2024
Consumer$31.919 $40.993
Institutional$5.429 $6.826
Other$0.182 $0.171
Total Revenue$37.530 $47.990

KPIs

KPIQ2 2024Q3 2024Q4 2024
Active Members (K)35.5 39.7 37.5
Active Experts (K)—9.5 10.7
Learning Membership Revenue ($M)$36.4 $31.4 $39.2
ARPM ($ per month; point-in-time)~$281 (Q2 end) ~$302 (Q3 end) ~$302 (year-end)
Annualized run-rate from Learning Memberships ($M)~$120 (Q2 end) ~$144 (Q3 end) ~$136 (Q4 end)

Notes:

  • Q4 beats versus guidance: Revenue $48.0M vs $44–$47M; Adjusted EBITDA -$5.5M vs -$7 to -$10M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Revenue ($M)Q4 2024$44–$47 $48.0 Raised/Beat
Adjusted EBITDA ($M, non-GAAP)Q4 2024-$7 to -$10 -$5.5 Raised/Beat
Revenue ($M)Q1 2025—$45–$47 New
Adjusted EBITDA ($M, non-GAAP)Q1 2025—-$6 to -$8 New
Revenue ($M)FY 2025—$190–$200 New
Adjusted EBITDA ($M, non-GAAP)FY 2025—-$8 to -$18 New
Gross Margin (%)Q1–Q4 2025 trajectory—~60% (Q1), ~64% (Q2), ~66% (H2) (management commentary) New
Liquidity (Cash, $M)FY 2025 YE—$35–$40 expected; no debt New

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
AI/Technology initiativesUnified platform; onboarding focus; marketplace infrastructure upgrades for scheduling/invoicing/substitution Enhanced onboarding assistant & tutor match tracker; platform access for districts; groundwork for margin leverage AI session summaries (99% positive feedback), lesson plan/practice generators, Tutor Copilot; planned Teacher Copilot; broader AI personalization Accelerating productization and impact
Consumer retention/ARPMShift to premium weekly memberships; early improvements in activation/retention ARPM up to ~$302; Active Members up; older low-frequency cohorts weighed retention Retention elevated YoY; price increases (~20%) for new customers; ARPU over $400 in Feb; incentives improve engagement Improving retention and monetization
Institutional (VT4S)/FundingAccess-based freemium; 1.1M added access; hiring GTM; upfront costs 4.4M access; 117 contracts; bookings below expectations; post-ESSER moderation 5.0M access; revenue $6.8M (down YoY); moderated spend; paid tier planned for platform access Transitioning to paid access; cautious H1’25
Gross margin dynamicsInstitutional seasonality and substitution costs pressured margins 70.5%; higher consumer utilization partially offset by lower Institutional utilization 66.6%; incentives and utilization pressure; guided sequential improvement through 2025 Near-term pressure, medium-term recovery
Cost/Headcount/ProductivityBuilding GTM; higher product dev spend Efficiency gains helped beat EBITDA guidance ~15% corporate headcount reduction in Q1’25; ~$6M annual cash savings from AI productivity Structural cost leverage via AI
NYSE listing/compliance—Notice from NYSE (Nov 12) Regained NYSE minimum price compliance (Dec 3) Listing overhang reduced

Management Commentary

  • “We delivered both revenue and adjusted EBITDA above the high end of guidance…entering 2025 with a stronger platform and innovating at a faster pace.” — Chuck Cohn, CEO .
  • “Initial signal is positive…tutoring session usage higher for those exposed to AI session summaries…99% positive feedback rate from parents and students.” — CEO on AI session summaries .
  • “For each consecutive session with a learner, experts receive an extra $1 per session up to $40…already leading to improvements… and retention.” — CFO on incentives .
  • “We expect to be adjusted EBITDA and cash flow positive in the fourth quarter of 2025.” — CFO .
  • “We have moderated our investment in the Institutional business…align with a more normalized sales cycle post-ESSER and near-term funding uncertainties.” — CFO .

Q&A Highlights

  • Pricing and retention: Management implemented ~20% price increases for new customers, citing enhanced value from AI features and improved marketplace quality; retention trends continue to improve, supporting the 2025 acceleration outlook .
  • Gross margin path: Higher utilization and incentives drove Q4 margin pressure; guided gross margin to ~60% (Q1), ~64% (Q2), ~66% in H2 as pricing blends in .
  • Institutional mix: Expect Institutional ~15% of FY’25 revenue; bookings flat YoY with back-to-school re-acceleration; moderated GTM spend amid funding caution .
  • Productivity: AI-enabled initiatives allowed ~15% headcount reduction in Q1’25, ~$6M annualized savings, preserving innovation capacity .
  • Go-to-market for AI: Value is intuitive for schools (summaries/insights/reporting); introducing a paid platform access tier for districts in 2025 .

Estimates Context

  • We attempted to retrieve Wall Street consensus (S&P Global Capital IQ) for Q4’24 EPS and revenue; data was unavailable due to vendor request limits. Values retrieved from S&P Global were unavailable at the time of this analysis.
  • Comparison vs guidance: Q4 revenue beat ($48.0M vs $44–$47M) and adjusted EBITDA beat (-$5.5M vs -$7 to -$10M) indicate a positive surprise versus company expectations; EPS was a GAAP loss of $0.09 per share .

Key Takeaways for Investors

  • Q4 was an execution beat versus guidance, anchored by consumer strength; however, gross margin compression from incentives/utilization is the near-term headwind to watch .
  • AI product cycle is a core driver of retention and monetization; early data points (99% positive feedback, higher usage) support medium-term upside to consumer LTV and ARPM .
  • Institutional revenue reset is largely funding/ESSER-related; the strategic pivot to paid platform access and back-to-school seasonality suggest H2’25 re-acceleration potential .
  • Price increases (~20% for new customers) and incentives should blend into better gross margins sequentially in 2025; monitor ARPU/ARPM trajectories and cohort retention .
  • Structural cost actions (~15% headcount reduction; ~$6M annual savings) plus AI productivity provide operating leverage toward the goal of Q4’25 EBITDA and cash flow positivity .
  • Liquidity remains solid (no debt; $52.5M cash YE’24; $35–$40M guided YE’25), reducing financing risk during the transition period .
  • Trading lens: Near-term prints may reflect gross margin pressure in Q1 from incentives; focus on sequential margin recovery, consumer growth trajectory, and Institutional bookings momentum into back-to-school .