NRDY - Earnings call transcript Q3 2024

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Operator

Good afternoon. Thank you for attending today's Nerdy, Inc. Q3 2024 Earnings Call. My name is Cole, and I'll be the moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, T.J. Lynn, Associate General Counsel of Nerdy.

proceed. may You

T. Lynn

Jason thank Quarter and Cohn, joining for Nerdy; us Chairman Officer. Good Earnings you Call. Third and of Officer XXXX Chief Chuck Chief With Nerdy's Financial and afternoon, Executive for Pello, me Founder, are

risks or change letter for and circumstances such filings SEC which a any in any conditions disclaimers statements forward-looking as with over the the results does events, expected results, discussion outlook. date, statements, and or today's any reflect that based. Please Nerdy's the or expectations cause quarter change differ the forward-looking to updates results to on Chuck, I'll actual Nerdy Nerdy's to third in is any any but statement company's in refer future accept announcing shareholder refer measures. With significant of respect today's reconciliations the the revisions uncertainties that to strategy, the statements to could not financial Please any and obligation materially limited involve financial today from Before are Chuck. this letter call measures shareholder of call release statements that, to non-GAAP prepared let in to risks. Not remind me forward-looking not of will and with operating discussion of over opportunities, I results. Any GAAP. plans undertake or These to turn made we publicly are today's with these forward-looking will for and accordance contain that all discuss including, everyone to to, expectations turn

Charles Cohn

for year. progress we quarter, everyone the against we make for to Thanks, joining the T.J., out us third to goals and the laid primary In thank continued you today.

Learner. we product for goal the winning first shared Scaling The was every

of into experience XX-day identified in and impact ultimately, the predictive the sessions was seen we involved tutoring satisfaction, our the our efforts highest value. we in focused customer These to seamlessly which and platform that first we that retention, onboarding focus on retention great durable getting being of has that lifetime the We consumer have and areas Institutional significant engineering of to is lifetime both enhancements key customers. historically with benefit and portion fundamentals highly recently and value. We a new customer improvements friction drive shipped and where multiple the improvements will customers on of little As have could towards one shared experience. digital past, this resulted experience area, product a

improved and placement a assistant are seeing onboarding levels first satisfaction. tutor the and and new higher faster accuracy flow to time documented through we enables to completion Our sessions and to of be customer accurately request matches, rates efficiently, customer's more high-quality

tools customer new and experience rates, retention that attendance affecting pull specific Learning available improvements their weekly the requests These XX-day higher first The discoverability higher first have session, partially pages for back-to-school were first inbound in areas levels towards new are and non-tutoring delivering cohorts. trend trends in we post higher prior platform, non-tutoring last to of them. engagement first tutor in in-quarter per customer week, to digital was to levels to we spoke unit to availability frequency drive to further to higher across time making tracker customer full X-hour Consistent will process, their activation Our higher we the includes; introducing experience, are scheduling engagement transparency higher new to the new of greater a of breadth higher improvements to tutor provides improved in and X through from sessions options, that our improvements seeing which the customer are digital trends AI coupled expect of is service average in early improved It now lifetime tutoring shared it of due more economics. relationships, a value proportion quarter. period levels cohorts mix lower of session improved of also product levels into client match to Learning matched cohorts the with important that positive tutoring in month. These positively to customer customers. leading are Memberships and and confirm classes per changes consumer which benefited new we customers retention. These matching to and easier across replacements. These older joining month collectively live like quarter, products shift a for oriented retention manage level reduction experience the tutor consistent and reduces we last new tutoring the retention trends about lead tutor, habits, learning members this season, low-frequency with offset amount by user being new acquired our our Memberships, customers our higher in the tutoring usage believe around memberships including cohorts. Among included newly in levels the revenue which of improvements

subsequently this expect continue to through We trend subside. year-end and then

X we discussed investments Varsity in areas. we've Tutors year, made As the platform organization These primarily go-to-market for substantial investments the focused infrastructure. and Schools' throughout on

We the an was digital platforms last product initiative in on the which was unified Institutional faster completed that into go allow engineering significant future. a resources and and experience, first converging us much believe to quarter. we will The required and consumer

volume district entire building credibility. trust of to order the serve of to in and Varsity The and the second for was with access investment platform millions school of a of relationships aim students area Tutors to school the district enabling establish high

laying paid platform school when to platform a in roll the foundation preferred we their implement the programs in tutoring new our become district, to future. look access tutoring we they to out As are high-dosage

we in access quarter, to saw investment signing platform. third the market Varsity to organization for and Institutional penetration of growth. of up total continue enabled million In nearly drive platform and Tutors relevance strong expansion school for We X.X area to to for Schools in Tutors returned as our sales with successfully an was third our of platform the bookings districts access expected students students the growing go-to-market see XXX engagement the offering Varsity The Schools the beyond the need further student and to for third to million classroom. the than the school for additional demonstrating at school, during bringing traditional stronger the quarter. Student support our was districts students, for X.X interest

a on ESSER-related this internal long-term of As school resources trying a believe expend good period was of time. We at to significant significant placed to effort required in That support these school platform started, bookings launch capture to investment. us and hundreds access to was districts. short efforts

particular, introducing We However, our trade-off products third the it value in strategy to low a allowing access This and subsequently marginal focus, sustainable by larger strategy us to offerings. than growth Tutors a a partners partnered perceived function number go-to-market offer is build access no converted of our providing district the us is which relationships investments to paid made in market. The long-term resulted within term, and scale in have in who in partners driving short our execution and consumer paid the with platform yielding our high of quarter the sales cost K-XX to school results in in business. access level school cost of with total to us organization, ever anticipation of of and to impacted to districts products Institutional large bookings. district the higher drive came school of Varsity awareness the contracts were at to and XX% positive believe from that the platform and initially positions value our brand of before. XX% bookings resources via

the of which combined funding believe of September ESSER supported Our bookings the end XX, we was of by Institutional deliver upcoming X could thesis bookings substantial with years XXXX, school prior K-XX a on amount growth, district. with

back-to-school during lower opportunity contracts encompasses year-over-year, moderating XXX and durable within be of reflect the of in and a third involving believe attribute that the a yielded ESSER a platform the we're represent several post-ESSER better overly other qualified. market bookings, deal we'll contracts sales newly that cycle sales level school multiple opportunity level below environment for normalized free executed was successfully our schools, different increase those Institutional to expectations. within complexity the To support we one versus XX% more team, student an onboarding recurring with spend We which K-XX and entering funding factors, funding million sources uniquely schools we partners. The size of a deadline believe sources will quarter, representing focused a $X.X being only to on including access significant which district populations and profitable While we growth. hired

components to modernize last discussed marketplace been As working infrastructure. and of several our quarter, enhance we've

learning tutoring logistical required provides meaningful systems. Taking are for a and scheduling reliability. Due is policymakers Once quarter, due we allow the anticipated recognition experience we to believe reliability that delivered, with that gross us fully confidence of improvements systems, stages the to and in levels demand come. the infrastructure underlying to longer a other substitution margin the support awareness Varsity deliver while these live automation in final We improvements our fully and accelerate back, and our most to us growing session best-in-class are effective marketplace go-forward simultaneously and in initiatives invoicing for that will the by tutoring high-dosage to infrastructure step operating resourcing the taking to will including to believe on the several leverage infrastructure improvements Schools years implement. to delivering marketplace certain parents, third marketplace customer than in improving the initiatives way enhancements, us of provide the to educators Tutors higher that believe basis allow we

the high any competitive and to evolving look performance deliver needs interest time. With will learners the in the your to to to appreciate lifetime Jason coming our enable product meeting in strengthening in discuss which levels our enhancements over in provide the forward financials value subject, turn drive advantages, with financial that, engagement expand continued continue and company customers' We durable quarters. more and anywhere I'll at We platform, of we that any Jason? call detail. our of believe

Jason Pello

Thanks, good afternoon, everyone. and Chuck,

decrease to Chuck from run the Consumer third prior million resulted in we our a to continue to of approximately quarter, in and mentioned, X% delivered revenue make frequency $XXX quarter Learning of business. the up compared a were the ARPM to due mix year. ARPM was ARPM period. Consumer of out million, X% approximately lower represented annualized from of $XX.X at As for year-over-year. the XX declined end. higher year-over-year. up of as In due subscription September lower when of X% Learning Memberships' was we $XXX laid year towards Memberships at achieving primary X of $XXX members Learning Active of progress total an revenue Memberships we Revenue lower as primarily the XX,XXX second XX% company of end of revenue. of million quarter September the $XX.X rate goals XX

Our delivered total a of Institutional business million, year-over-year decrease of and X% revenue revenue. XX% of represented $X.X

to strategy us districts scale to before. a Our allowing Institutional our ever introduce is in our than platform products larger access business much school at

As offerings to from our us fee-based value market. Varsity platform Chuck school our bear XX% mentioned, strategic long-term initially within our allowing asset via for strategy access for converted and access Tutors school partners and us the gain our providing coming are subsequently differentiated Schools to convert and paid with in our and platform K-XX partnered districts bookings building the we who and growth the to free quarter platform total of paid is positions that a fruit introduce started with ultimately contracts to believe XX% to to offerings. We third district market to of sustainable to share that continued, that them

multiple steps taking environment to sales a XXXX. believe sources allow post-ESSER into within are recurring schools student profitable move cycle normalized Institutional growth funding us as our to encompasses populations in investments we and will and we different we However, to more deliver that a reflect moderate that durable

increases were in Non-GAAP quarter and in G&A which a of to the million the $XX.X for allowed gross gross us the the organization expenses, was X% the our last adjusted for guidance margin acquisition, scheduling, above excluding G&A, and our access-based order non-cash in allowing last organization, loss infrastructure period basis, approach our basis in for partially to are Sales an and to period invoicing compared our in Gross $XX.X platform-oriented of and product million development across marketing allowing million also our the Non-GAAP business, $XX.X brand million, P&L. believe lower quarter, million to administrative utilization our in of the $XX.X legal offset $XX.X maximize cost a EBITDA $XX.X acquisition primarily of marketing million million Tutors a of in same to costs, and we same $X.X expenses, margin year. by Gross due in from XX.X% consumer to adjusted a were non-GAAP including and margin to reach. organization lower year. a EBITDA EBITDA decrease needed to was sessions $XX.X customer the where an and to from period partially continuously the lower adjusted million controls. Compared Once on to for in our million September was million costs us comparable to of increase relative provision are and the model year-over-year on driven primarily ended and fully improve the last investments third investment fourth product $X.X a costs were decrease tutoring in Learning million year, down to increase our drive on negative million in XX.X% year. We $XX operating support and million X last were million costs in of and period drive expected a same driven operating by to by investments expected months million Varsity EBITDA period seasonal Institutional XX subscription Institutional lower was us were sales $X restructuring were quarter expenses investments product for marketing compared access-based X% by $XX.X same X last of gains customer coupled adjusted by General substitution to and of the support loss to and unified period yield to Included be our improvement our months improvements in compensation range to improving due the $XX.X improvements and utilization customer products higher growth sales last costs in simplify now business. Improvements diligent saw Moving development marketplace quarter. development with platform. Non-GAAP implemented, in awareness to year. Non-GAAP year. the in Memberships same The the compared XXXX. gains go-forward for spend, stock margin the or guidance primarily sales implemented have expenses the from products, these innovation to was in million and These sales are leverage Schools transaction lower million September launch and ended stock-based offset a $X.X last and non-GAAP $XX efficiency in our initiatives the was negative in systems, of while marketing year-over-year. operating quarter. sales profit million, ARPM, gross efficiency growth. the by were marketing consumer $X.X $XX compensation, settlement $XX.X period investments year. third $XX.X basis, compared non-cash decrease in our excluding GAAP million, experience. Sales and XX of during suite same GAAP

our plan debt. liquidity cash of sheet provides and As operate cash against X sources growth us pursue initiatives. million, We liquidity we with $XX balance company's ample of equivalents of to our September the XX, principal and were strong believe have and

business outlook. our to Turning

revenue revenues updating guidance. reflects full sequential EBITDA revenue session. quarter in guidance year and Varsity adjusted and Learning universities are fourth quarterly schools Memberships We and K-XX and from when Fourth providing Tutors higher Schools are quarter for

expect For of during of with a frequency flow-through Learning the decline higher member per lower primarily consumer lower average of year-over-year by to quarter quarter, Learning Institutional year-to-date a the be level result older expect the who revenues month. In lower in prior lower our bookings Memberships, the versus revenue impacted fourth will due cohorts coupled that business, we in from year. per purchased will fourth revenue subscribers the Membership cancellations number the we

expect of For a $XX we in quarter XXXX, million the million. range of to revenue fourth $XX

revenue of For the range full $XXX million. year, we the million in expect to $XXX

the XXXX. Fourth drive to Institutional We sequential the expect a reflects we and quarter guidance innovation organization fourth primarily from third lower flow-through expect quarter, with to growth. deliver and of investments improvement in continue adjusted EBITDA the in in into to product revenue EBITDA to development continued year-over-year, sales coupled the which would adjusted

XXXX, quarter of to For a negative $XX million. $X EBITDA the of fourth range expect adjusted negative in we million

For EBITDA of the in the full negative negative year, we million. $XX expect million range $XX adjusted to

mentioned, to pursue and believe liquidity interest that, Operator? ample for business to the As turn our closing, the again have initiatives. In we growth it With operator for Q&A. and fund we in time you over thank I'll company. for your continued your

Operator

Instructions] first JMP Securities. Boone [Operator is question Our from with Andrew

Andrew Boone

understood Guys, frequency consumers? there? do improve are engagement can of driving consumer on the terms of think visibility business? thinking platform terms guide. you the with talk How timing takes so in puts about Chuck, the How back guys But about in double-click the the in do you operationally, various of then overall customers? retention about stepping XQ we that you more of can guys side getting into and terms And for stability your more you

Charles Cohn

Andrew. Good question. Thanks,

that old the cohorts, and consumer quarter, overall frequency in through we some of that of performance is tutoring fact pulled that of to were which the had the perspective, every had as activity on French weekly as which on got not relates addition for night Those quarterly retention, LSAT higher higher a the that ARPM prep Tuesday the alone, levels into prepared is we year-over-year So, to at in a first blend little the year going bit levels were shareholder law think attributable weekly both night about a and tutoring drove were were and in of school were for on a of the then the that weekly letter improved back school. that that to the last on the and people of churn levels that tutoring, tutoring customers in a and habit-oriented into shared call, that the And focus that, frequency that a to year-end, way towards shared from we the I And were every for that enhancements memberships retention of basis. kind series in higher product on Thursday higher which focused activation. we the mix preparation its tutoring we get shared kind the not. XX-day blended habit. And, much back the quarter. Those to business made remarks, reoriented separately, we which weekly

made metrics and engagement. We've adaptive platform friction. to including a related They tutor. a itself of to tutor, to downstream self-service of session non-tutoring your the we're schedule. AI tools. through diagnostic then bunch of live out it testing your easier discoverability to changes success that products, of seeing a many removed classes, pull and higher it that some of rates of those series replace drive improvements the also they to first way tutor They the in made And positive to tutoring easier made figure status the then durable So are product-driven

And pulls season the it back-to-school of then we've mix on both a the product-driven connection quite basis much monthly traditionally seen So, this higher both year-over-year. grow then that separately, with of seen then in changes levels or all all engagement to and one-on-one retention. through we changes. And engagement, actually have non-tutoring for weekly engagement nicely of

on kind pull working go-forward on among to seeing the those that hope have the that have through we're basis. retention back retention on to we're and then year-over-year cohorts of of year-over-year wins we're reverted parity, back-to-school through several so months changes material high And can we first we'd all that negative right and a the that product-driven trends now, conviction of

we we'd positively. model cohorts to cumulative how that's So think total see members, it. retention shift pull and it kind shift those the answer expect as answer totality of the of through about retention -- But and

Operator

question We questions time. no this have further Securities. Gibas at queue [Operator Greg with from the We in Instructions] Northland a have

Gregory Gibas

bit go those million X.X what's X.X the we for of Curious could revenue, students nice How or school further if Institutional a to another there? kind offerings is up driving monetizing of And on that regarding see districts? trending kind the progress to enabled now. little decline upselling you million

Charles Cohn

question. Greg, good

success we this by So, most And we over as the swing the making the back-to-school shared a that of big the years quarters, of was platform couple to all end-to-ESSER and had. things related the couple taking past that we demand. was of active season high informed last and levels were of access motion. of saw of platform the progress bookings give had and one back-to-school And we the this the we've that season to strategy where

deadline sales new of strategic we're focusing that expected. And conversations product challenging And in have districts itself a done, on of one ] specific able ramping to little needs that and that as that its the positive we're the urgency more types we that saw at bit as of of that wants a related class, of reading for also with X/XX serve of the different a to level capabilities a we accommodate also can it's that broad students focused student span different season create to school and did there's our expected during before our of integrations whether math loss platform overly cases. And back-to-school or that use way acute a whether now needs. to many to allow to deadline. broad-based things broad school [ it's think these learning a the different opposed -- was place a education base class, ESSER in outside or evolved related after put and not on weekends that certain district spans team school, all a changes tutoring nicer retrospect, administer heading swath I K-X to in accommodate groups, software-driven remediating than that really in And parents, extent of a whether us that or and of all populations and have special students. There's the to multitude accommodate different is, broad needs. which have. funding different we've and platform And swath that school, We then into platform

So, we good newer we're largely we're and that of school motion smaller, the to and increase the deal as our year better with for sizes getting team, a little which at platform deal the expect into newer bit came finding team that strategy. with that school we have a pockets bit farther access get there's and team. matures And would We're seeing funding. kind these new all new attributed districts in we that back little have to -- that sizes a sales

back. they're high of but back-to-school on seeing of So not and this a then, front will average we're term, product into concurrently, stats but trust think lot of school building for and tremendous having pay we first complicated strategy deals. and We size. the shared the term, feel a lot progress pulling time made season levels It's of it long the deals itself we of We're motion school to trust. platform districts all we're of working. launch districts. through But some we converting the investment, we that I districts it. those deal volumes, is generating with good put it's building the engagement through some a across the access school we're And of about energy kind a good think deal the it's Short

good to the how access platform districts. ultimately we So accrues about the have strategic feel relationships and kind we to those advantage that of with strong that related

Jason Pello

a clear and behind market. that contracts Maybe strategy gain showing bear allowing Chuck said, We're some growth support this the and traditional platform, strategic platform entered engagement positions value period, the of mentioned, Yes. think high-dosage Platform within originally access Greg. access sustainable to just Tutors and really paid access market. partnered Chuck is we share differentiated to in via of question, numbers Schools platform asset the what building starting as converted that with Varsity free the for us district and for who put back-to-school partners tutoring was offerings. us and the K-XX the high total to the XX% came appreciate as for to with beyond evidence classroom, long-term is Student fruit. XX% the subsequently from need the school of bookings paid we our

nearly So, we going the think onboard about quarter that's work that third good schools. XXX into that did to the feel continue well to and XXXX beyond we and that during

Charles Cohn

that we've ultimately and we about the long-term a Yes. asset feel built of And we launched. But how that and definitely paid short-term price terms strategic profitability. generates in resource allocation growth back-to-school as good

Gregory Gibas

for I separately, as marketing seeing. if could success between guess, you're on Is there go-to-market to you different kind of Very year-over-year customer it basis. color side. kind QX spoke Wondering X? if that? you're or dynamics expect a guess think those Got it just ARPM seeing dynamics more little on to of, bit growth it. maybe relates strategy, Wanted a expectations changes I on driving you -- kind to of member kind of to what's versus turning you And in there? And acquisition get active maybe in then Great. consumer where gears any helpful. Kind I the of touch your lower costs initiatives

Charles Cohn

Sure. Thanks for question. the

think higher call, lower positive were offset included that proportion those in So, by we're the on trends Learning trend retention active cohorts XX,XXX partially the to end a members. year last about end spoke we'll That seeing will frequency mentioned in continue think and subsequently we a then we with customer the lower subside. through older of customers Memberships. of We new We that the the quarter. the the was year

ARPM. mentioned You

then That of on Importantly, we will trend we frequency saw of are we'll really that end the Customer $XXX LTV move feel at end higher you we there. good improvements, to move again, by quarter. QX. we as sales target costs that million marketing, acquisition segments on side, and that toward at our XX% $X.X as XXXX. Within XXXX end from about, think customers customers. the have efficiency consumer the the accrete $XXX continue able as QX those which we focused into QX, to QX about X% We improve specifically year-over-year the some marketing in durability to decreased or in $XXX consumer third ARPM about around efficiency ] continue conversion higher with improvement and CACs as were [ we down couple into When our quicker in we're of investments seeing paybacks.

Operator

the There are this no queue further questions in time. at

you today's that your call. all So for participation. concludes Thank

You now your line. may disconnect

Nerdy (NRDY) 7 Nov 242024 Q3 Earnings call transcript