Nerdy, Inc.

Q2 revenue was $43.3 million, down 4% year over year and within guidance of $42 million to $44 million. Consumer revenue was $36.5 million; ARPM was $366, up 5% year over year; active members were 29.1 thousand, down 5% year over year. Gross margin was 64.7%, up 320 basis points year over year. Net loss improved to $6.9 million from $12 million, and non-GAAP adjusted EBITDA loss improved to $0.9 million from $2.7 million a year ago. Free cash flow was negative $6.3 million versus negative $8.2 million in the prior-year period, and cash and cash equivalents were $38.4 million at quarter-end. For Q3 2026, revenue is guided to $32 million-$35 million and non-GAAP adjusted EBITDA to negative $9 million to negative $6 million, excluding exit costs. Full-year 2026 revenue guidance is $168 million-$175 million, with non-GAAP adjusted EBITDA guided to negative $4 million to approximately breakeven, excluding exit costs. The company expects $2 million-$4 million of exit-related costs, mostly in Q3, and year-end cash of about $30 million-$32 million, inclusive of $20 million drawn on the term loan.

Chuck Cohn said the quarter showed continued operating improvement and that Nerdy is becoming a more focused consumer learning company centered on one connected system for learning, tutoring and progress. He emphasized a product rebuild that spans lessons, diagnostics, quizzes, practice tests, flash cards and a new Study Plan intended to tie together learning before, during and after tutoring. His tone was upbeat and strategic: he framed the business as leaner, more AI-enabled, and better positioned to improve retention, acquisition and long-term growth into 2027.

Atul Bagga highlighted that revenue and adjusted EBITDA were both within guidance, with free cash flow improving 24% year over year despite lower revenue. He cited 64.7% gross margin, up 320 basis points, helped by lower amortization after Q4 2025 abandonment charges and lower expert costs. He also pointed to cost discipline: sales and marketing fell to $11.5 million, G&A was $22.9 million, AI spend was $2 million, and headcount was down 34% year over year. On capital allocation, he said the VT4S exit lowers the annual fixed cost run rate by about $11 million, but year-end cash expectations fell to $30 million-$32 million because of working capital timing and wind-down costs, not because of consumer business deterioration.

Analysts focused first on why management chose to exit Varsity Tutors for Schools and what the financial impact would be. Cohn said consumer offers a much larger opportunity with higher ROI, while VT4S is a low single-digit percentage of the business, complex, and exposed to a challenged school funding environment; Bagga added the business is profitable and the exit removes about $11 million of annual fixed cost. A second question asked whether the consumer business or learning membership trends had changed; Bagga said learning membership is tracking the operating plan and the guidance cut was entirely due to the exits, while Cohn said the company is not aiming to merely moderate the decline but to accelerate growth through the rebuilt product and broader learning experience.