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    NRDY
    Earnings call· Jun 2026(Q2 FY26)

    Nerdy Q2 FY26 earnings call NRDY

    Aug 6, 2026 Source

    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

    7
    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

    1
    SegmentRevenueYoYQoQMargin
    Consumer
    Represents the core focus of the company following strategic exits.
    Percentage of total revenue: 84%
    		$36.5M———

    Operational metrics

    7
    Average Revenue Per Unit Member (ARPUM)
    $366up 5% year over year
    Q2 FY26

    Moderated growth as expected due to lapping price increases enacted in Feb 2025.

    Active Members
    29.1 thousanddecrease of 5% year over year
    as of June 30th

    Company expects to return to positive active member growth by the end of 2026.

    AI-related expenses
    $2Mup sharply from prior year
    Q2 FY26

    Driven by push to have every team leverage AI; expected to be kept at or below current levels due to efficiency gains.

    Sales and marketing expenses
    $11.5Mdecrease of 15% year over year
    Q2 FY26

    Driven by AI-enabled productivity gains and reduced investment in institutional business.

    General and administrative expenses
    $22.9Mdown 14% year over year
    Q2 FY26

    Includes product development costs of $9.7M, down from $10.7M in Q2 FY25, mostly from lower headcount cost offset by higher AI spend.

    Product development cost
    $9.7Mcompared to $10.7M in Q2 FY25
    Q2 FY26

    Included within G&A expenses, mostly from lower headcount cost offset by higher AI spend.

    Annual fixed cost run rate reduction
    $11M
    annualized

    Resulting from the exit of Varsity Tutors for Schools (VT4S).

    Industry KPIs

    7
    MetricValueDetails
    Revenue$43.3MUSD
    Net incomenegative $6.9MUSD
    Gross margin64.7%%
    Sg a OPEX ratio$11.5M (Sales & Marketing); $22.9M (G&A)USD
    Adjusted EBITDA ebitanegative $0.9MUSD
    Operating income EBITnegative $6.9MUSD
    Cash investments balance$38.4MUSD

    Product announcements

    4
    ProductTypeDetails
    Library of Lessonsexpansion
    Adaptive Diagnostics, Quizzes, Practice Tests, Flashcardsexpansion
    Study Planlaunch
    Self-service checkout funnellaunch

    Deals & partnerships

    2
    First TutorsExit 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

    4
    Revenue reduction due to business exitsFY26

    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 costsmostly in Q3 FY26

    Approximately $2M-$4M

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

    Seasonal low revenue quarterQ3 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 exitend 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

    5

    Active Member Growth

    by end of 2026
    Currentdown 5% YoY
    Targetpositive 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.

    Q&A highlights

    1

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.