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Nerdy (NRDY) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 6, 2026

Source: earnings call transcript

Executive summary

Nerdy Inc. Q2 FY26 — Strategic Focus on Consumer Business and AI-Driven Efficiency

Nerdy Inc. delivered improved Q2 FY26 operating performance, driven by gross margin expansion and reduced adjusted EBITDA loss, while strategically exiting its Varsity Tutors for Schools and First Tutors businesses. The company is sharpening its focus on the consumer learning segment, leveraging AI to enhance product development and operational efficiency, and aims to return to active member growth by year-end 2026. This strategic pivot is expected to accelerate the consumer roadmap and achieve free cash flow breakeven with existing liquidity.

Highlights

5

  • Total revenue was $43.3 million, with consumer generating $36.5 million, or 84% of total revenue.

  • Gross margin expanded 320 basis points to 64.7%.

  • Net loss improved to $6.9 million from $12 million a year ago.

  • Non-GAAP adjusted EBITDA loss narrowed 68% to $900,000 from $2.7 million a year ago, ahead of the midpoint of guidance.

  • Free cash flow improved 24% year over year to negative $6.3 million despite lower revenue.

Concerns

4

  • Full-year revenue outlook reduced to $168 million to $175 million from $180 million to $190 million due to business exits.

  • Active members decreased 5% year over year to 29.1 thousand, though the rate of decline is moderating.

  • Expected to incur $2 million to $4 million in exit-related costs, mostly in Q3.

  • Year-end cash balance expectation reduced to $30 million to $32 million from $40 million to $45 million due to timing of VT4S collections and wind-down costs.

Guidance & targets

CategoryTargetConfidence
Full-year Revenue
$168M-$175M
high materiality
High
Q3 Revenue
$32M-$35M
medium materiality
High
Q3 Non-GAAP Adjusted EBITDA
negative $9M to negative $6M
medium materiality
High
Full-year Non-GAAP Adjusted EBITDA
negative $4M to approximately break even
high materiality
High
Exit-related costs
$2M-$4M
medium materiality
High
Year-end Cash and cash equivalents
$30M-$32M
high materiality
High
Active Member Growth
positive
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Consumer
Represents the core focus of the company following strategic exits.
Percentage of total revenue: 84%
$36.5M———

Product announcements

ProductTypeDetails
Library of Lessonsexpansion
Adaptive Diagnostics, Quizzes, Practice Tests, Flashcardsexpansion
Study Planlaunch
Self-service checkout funnellaunch

Deals & partnerships

First Tutors Exit of a small legacy tutoring property in the United Kingdom.

Part of a strategic decision to narrow the company's focus to its highest return opportunities in the consumer learning segment.

Varsity Tutors for Schools (VT4S) Wind-down of the institutional business segment.

Decision made to concentrate people, capital, and product development on the consumer segment, where the company has a stronger brand and greater opportunity. This business was a low single-digit percentage of overall revenue.

Risks & headwinds

Revenue reduction due to business exits FY26

Full-year revenue outlook reduced by $12M-$15M (from $180M-$190M to $168M-$175M)

Mitigation:Strategic focus on higher-return consumer business to accelerate growth and improve ROI.

Exit-related costs mostly in Q3 FY26

Approximately $2M-$4M

Mitigation:These are one-time costs associated with the strategic wind-down and exit.

Seasonal low revenue quarter Q3 FY26

Q3 revenue guidance of $32M-$35M

Mitigation:Anticipated as part of normal business seasonality, with business ramping up in late Q3 and Q4 with back-to-school.

Year-end cash balance impact from VT4S exit end of FY26

Year-end cash balance expectation reduced to $30M-$32M from $40M-$45M

Mitigation:The change is due to timing of VT4S collections and expected wind-down costs, not a reflection of the consumer business economics. Existing liquidity is expected to fund the company through free cash flow breakeven.

What to watch in Q3 FY26

Active Member Growth

by end of 2026
Current down 5% YoY
Target positive growth

Why it matters

Returning to positive active member growth is a key objective for the company's core consumer business and overall growth trajectory.

And by the end of 2026, we expect to return to a positive active member group resulting from the ongoing initiatives to improve retention and a more efficient customer acquisition.

Find out whether NRDY delivers this. Inve re-checks your case every morning.

Q&A highlights

What factors led to the decision to wind down VT4S, and what is the expected net impact on cost and profitability?

Management explained that the decision was driven by increasing excitement and higher ROI potential in the consumer product, allowing them to accelerate the consumer roadmap. While VT4S was profitable, its complexity and lower leverage compared to the consumer business made it a strategic divestiture. The exit is expected to reduce the annual fixed cost run rate by approximately $11 million.

“So we continue to get more and more excited about the consumer product and the progress we make there and our ability to thread together all these different modalities of learning that allow for us to extend beyond tutoring. And for us to have much deeper, much more holistic relationships with learners that subjects that span, product modalities that span semesters, and we're excited about the momentum we see, the engagement, and then our ability to continue to improve the product. And there's an opportunity to pull forward that product roadmap and go faster.”

asked by Greg Gibbous · answered by Charles Cohn

2 min read 5 chapters

Detailed narrative

Strategic Business Exits and Focus on Consumer

Nerdy announced the wind-down of Varsity Tutors for Schools (VT4S) and the exit of First Tutors, a small UK legacy tutoring property. These strategic decisions aim to concentrate capital and management attention on the higher-return consumer business, which generated $36.5 million, or 84% of total revenue, in Q2.

The company believes this focus will allow it to accelerate its consumer roadmap and achieve higher returns on investment. The VT4S exit alone is expected to reduce the annual fixed cost run rate by approximately $11 million.

AI-Driven Operational Efficiency and Product Velocity

The company is leveraging AI to enhance productivity and reduce fixed costs. Total headcount was down 34% year-over-year, with the engineering organization 30% smaller while delivering substantially more product output. AI-related expenses increased to $2 million in Q2 from $0.4 million a year ago, reflecting a push to integrate AI across all teams.

This AI adoption has led to improved productivity across functions and contributed to G&A expense reduction, with AI spend expected to remain at or below current levels due to efficiency gains.

Enhanced Consumer Product Experience with 'Study Plan'

Nerdy has significantly enhanced its digital learning experience, launching or rebuilding almost every piece of its platform. This includes a library of over 15,000 lessons covering 220 subjects, available in dynamic textbook and presentation formats. The company has extended adaptive diagnostics, quizzes, and practice tests to over 200 subjects, integrating them into a new 'study plan.' This software-based system tracks activities, plans progress towards goals, and is visible to both students and tutors, aiming to drive daily engagement and personalization beyond live tutoring sessions.

Transition to Efficient Customer Acquisition Model

The new product infrastructure is designed to support a more efficient customer acquisition model. Historically reliant on telesales-assisted processes, Nerdy is shifting towards a self-service checkout funnel where learners can register online, experience the platform, and purchase learning memberships directly. This modern approach is expected to result in a substantially lower-cost and more scalable customer acquisition model, while simultaneously improving the overall customer experience.

Q2 Financial Performance and Revised Outlook

In Q2 FY26, Nerdy reported total revenue of $43.3 million and a non-GAAP adjusted EBITDA loss of $0.9 million, marking a 68% improvement year-over-year. Free cash flow also improved by 24% to negative $6.3 million. However, the full-year revenue outlook was revised down to $168 million-$175 million due to the business exits.

The year-end cash balance expectation was also reduced to $30 million-$32 million, primarily attributed to the timing of VT4S collections and wind-down costs, rather than a change in the consumer business economics.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.