Nerdy Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
NRDY$6.23+5.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0001819404-24-000044
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001819404-24-000048
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 66 previous paragraphs and 74 current paragraphs.
49 unchanged; 16 reworded; 7 added; 1 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 7 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Cost of revenue for the three and six months ended June 30, 2024, increased primarily due to higher Expert costs of $2,561 thousand and $4,388 thousand, respectively, related to the continued scaling of our Consumer and Institutional businesses.
Current report
The decrease in gross margin for both current year periods was a result of lower margins related to our Institutional offerings, primarily due to higher utilization of tutoring sessions across our new access-based products and higher substitution costs in a seasonally high period in the school year. We have recently introduced improvements to our marketplace infrastructure systems, including: session scheduling enhancements, invoice automation improvements, and changes to the tutor substitution program logic which collectively are expected to meaningfully improve gross margin during the back-to-school period and on a go-forward basis, while simultaneously improving the customer experience due to the higher reliability level of our marketplace infrastructure systems.
Current report
Sales and marketing expenses for the three months ended June 30, 2024 and 2023 included stock-based compensation of $638 thousand and $691 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses increased $731 thousand, or 5%. Additionally, excluding these impacts in both periods, sales and marketing expenses for both the three months ended June 30, 2024 and 2023 were 29% of revenue.
Current report
•risks associated with the development and use of artificial intelligence and related regulatory uncertainty;
Current report
SMALLER REPORTING COMPANY STATUS
Current report
As of December 31, 2023, we were no longer a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. An entity is a “smaller reporting company” based upon the following criteria: (i) the market value of our shares of common stock held by non-affiliates is less than $250,000 thousand as of the prior June 30, or (ii) our annual revenues are less than $100,000 thousand during the prior fiscal year and the market value of our shares of common stock held by non-affiliates is less than $700,000 thousand as of the prior June 30.
Current report
According to 5120.1b of the SEC Financial Reporting Manual, once we fail to qualify for smaller reporting company status, we will remain unqualified until making a subsequent determination either: (i) our public float falls below $200,000 thousand as of the last business day of our most recently completed second fiscal quarter or (ii) our public float and annual revenues meet certain other requirements for subsequent qualification as of the last business day of our most recently completed second fiscal quarter. Based upon the facts and circumstances that existed as of June 30, 2024, we have re-entered smaller reporting company status and will use scaled disclosures permitted for a smaller reporting company.
Removed paragraphs (1)
Previous report
•risks associated with operating and scaling up our Institutional business;
Reworded paragraphs (16)
Previous wording
“Active Experts” is defined as the number of Experts who have instructed one or more sessions in a given period. Active Experts also includes our Institutional business, but excludes First Tutors UK. The following table summarizes Active Experts for the periods presented. Our Active Expert count for the three months ended March 31, 2024 was primarily driven by higher Institutional active experts when compared to the prior year period, which reflects the continued scaling of our Institutional business.
Current wording
“Active Experts” is defined as the number of Experts who have instructed one or more sessions in a given period. Active Experts also includes our Institutional business, but excludes First Tutors UK. The following table summarizes Active Experts for the periods presented. Our Active Expert count during the three and six months ended June 30, 2024 was primarily driven by higher Institutional active Experts when compared to the prior year periods, which reflects the continued scaling of our Institutional business.
Previous wording
Revenue growth in the current year period was driven by the continued scaling of our Consumer and Institutional businesses, partially offset by lower average revenue per member per month in our Consumer business.
Current wording
Revenue growth in both current year periods was driven by the continued scaling of our Consumer and Institutional businesses, partially offset by lower average revenue per member per month in our Consumer business. Additionally, revenue for the three and six months ended June 30, 2023 included legacy Package revenue of $4,906 thousand and $15,850 thousand, respectively, that did not recur in the current year periods due to the completion of the transition to Learning Memberships in our Consumer business.
Previous wording
Cost of revenue for the three months ended March 31, 2024, increased due to higher expert costs of $1,827 thousand, related to higher utilization of our services in our Consumer and Institutional businesses. Gross profit for the three months ended March 31, 2024 of $36,515 thousand increased by $2,625 thousand, or 8%, compared to the same period in 2023. Gross margin was 68% for the three months ended March 31, 2024, compared to gross margin of 69% for the three months ended March 31, 2023. The increase in gross profit was primarily driven by the continued scaling of our Consumer and Institutional businesses. The decrease in gross margin was primarily due to higher utilization of tutoring sessions across our new access-based products within our Institutional business in a seasonally high period in the school year.
Current wording
Gross profit for the three months ended June 30, 2024 of $33,487 thousand decreased by $612 thousand, or 2%, compared to the same period in 2023. Gross margin was 66% for the three months ended June 30, 2024, compared to gross margin of 70% for the three months ended June 30, 2023. Gross profit for the six months ended June 30, 2024 of $70,002 thousand increased by $2,013 thousand, or 3%, compared to the same period in 2023. Gross margin was 67% for the six months ended June 30, 2024, compared to gross margin of 69% for the six months ended June 30, 2023.
Previous wording
Sales and marketing expenses for the three months ended March 31, 2024 and 2023 included stock-based compensation of $535 thousand and $838 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses increased $2,135 thousand, or 15%. Additionally, excluding these impacts in both periods, sales and marketing expenses for the three months ended March 31, 2024 were 31% of revenue compared to 30% of revenue during the same period in 2023.
Current wording
Sales and marketing expenses for the six months ended June 30, 2024 and 2023 included stock-based compensation of $1,173 thousand and $1,529 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses increased $2,866 thousand, or 10%. Additionally, excluding these impacts in both periods, sales and marketing expenses for the six months ended June 30, 2024 were 30% of revenue compared to 29% of revenue during the same period in 2023.
Previous wording
These increases were driven by investments in our Institutional sales organization in order to drive customer acquisition, brand awareness, and reach, including through signing up school districts with free access to the Varsity Tutors platform. These impacts were partially offset by marketing efficiencies driven by the transition to Learning Memberships, which allows for a more efficient operating model in our Consumer business.
Current wording
Sales and marketing increases were driven by investments in our Institutional sales organization in order to drive customer acquisition, brand awareness, and reach, including through signing up school districts with free access to the Varsity Tutors platform, which is a strategy to introduce school districts to the platform fee-based offerings. These investments were partially offset by Consumer marketing efficiency gains.
Previous wording
General and administrative expenses include compensation for certain employees, support services, product development expenses intended to support continued innovation, and other operating expenses. Product development costs were $10,663 thousand and $8,430 thousand for the three months ended March 31, 2024 and 2023, respectively, an increase of $2,233 thousand. Product development costs include compensation for employees on our product and engineering who are responsible for developing new and improving existing offerings, maintaining our website, improving efficiencies across our organization, and third-party expenses.
Current wording
General and administrative expenses include compensation for certain employees, support services, product development expenses intended to support continued innovation, and other operating expenses. Product development costs were $11,569 thousand and $8,392 thousand for the three months ended June 30, 2024 and 2023, respectively, an increase of $3,177 thousand. Product development costs were $22,232 thousand and $16,822 thousand for the six months ended June 30, 2024 and 2023, respectively, an increase of $5,410 thousand. Product development costs include compensation for employees on our product and engineering teams who are responsible for developing new and improving existing offerings, maintaining our website, improving efficiencies across our organization, and third-party expenses.
Previous wording
General and administrative expenses for the three months ended March 31, 2024 and 2023 included non-cash stock based compensation of $10,577 thousand and $10,211 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses increased $1,910 thousand, or 10%. Additionally, excluding these impacts in both periods, general and administrative expenses for both the three months ended March 31, 2024 and 2023 were 40% of revenue.
Current wording
General and administrative expenses for the three months ended June 30, 2024 and 2023 included non-cash stock based compensation of $10,676 thousand and $9,440 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses increased $2,230 thousand, or 11%. Additionally, excluding these impacts in both periods, general and administrative expenses for the three months ended June 30, 2024 were 44% of revenue compared to 42% during the same period in 2023.
Previous wording
Our investments in product development and our platform-oriented approach to growth have allowed us to launch and continuously improve our suite of ‘always on’ subscription products, including Learning Memberships for Consumers, and our District, Teacher, and Parent Assigned offerings for Institutional customers. These subscription and access-based offerings simplify our operating model needed to support the organization, which allows us to maximize our investment in our common platform.
Current wording
Our investments in product development and our platform-oriented approach to growth have allowed us to launch and continuously improve our suite of ‘always on’ subscription products, including Learning Memberships for Consumers, and our District, Teacher, and Parent Assigned offerings for Institutional customers. We believe these subscription and access-based offerings simplify our operating model needed to support the organization, which allows us to maximize our investment in our common platform.
Previous wording
During the three months ended March 31, 2023, we recognized a loss of $21,682 thousand related to non-cash mark-to-market adjustments on our warrants and earnouts prior to the warrant and earnout transactions in September 2023 (our third quarter). Of the loss recognized in the three months ended March 31, 2023, $8,414 thousand and $13,268 thousand related to warrants and earnouts, respectively.
Current wording
During the three and six months ended June 30, 2023, we recognized a (gain) loss of $(4,198) thousand and $17,484 thousand, respectively, related to non-cash mark-to-market adjustments on our warrants and earnouts prior to the warrant and earnout transactions in September 2023 (our third quarter). Of the gain recognized in the three months ended June 30, 2023, $2,333 thousand and $1,865 thousand related to warrants and earnouts, respectively. Of the loss recognized in the six months ended June 30, 2023, $6,081 thousand and $11,403 thousand related to warrants and earnouts, respectively.
Previous wording
Interest income for the three months ended March 31, 2024 was $886 thousand, an increase from $833 thousand in the same period in 2023. This increase was driven by higher interest income on our cash balances during the current year period.
Current wording
Interest income for the three months ended June 30, 2024 was $879 thousand, an increase from $783 thousand in the same period in 2023. Interest income for the six months ended June 30, 2024 was $1,765 thousand, an increase from $1,616 thousand in the same period in 2023. These increases were driven by higher interest income on our cash balances during both current year periods.
Previous wording
As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents totaling $76,960 thousand and $74,824 thousand, respectively. We have incurred cumulative losses from our operations, and we may incur additional losses in the future. Our operations have historically been financed primarily through capital contributions and debt financings. To the extent we generate negative operating cash flows, it is possible that we may have to finance future operations primarily or in part from cash on hand.
Current wording
As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents totaling $69,838 thousand and $74,824 thousand, respectively. We have incurred cumulative losses from our operations, and we may incur additional losses in the future. Our operations have historically been financed primarily through cash on hand, capital contributions, and debt financings. To the extent we generate negative operating cash flows, it is possible that we may have to finance future operations primarily or in part from cash on hand.
Previous wording
Cash provided by operating activities for the three months ended March 31, 2024 decreased $2,441 thousand compared to the same period in 2023 as higher revenues and marketing efficiencies were more than offset by investments in our Institutional sales organization and product development to drive innovation and support our continued growth. Additionally, cash provided by operating activities in the current year period was impacted by unfavorable changes in working capital, primarily related to payments for other current assets.
Current wording
Cash used in operating activities for the six months ended June 30, 2024 was $1,235 thousand compared to cash provided by operating activities of $2,279 thousand in the same period in 2023 as higher gross profit and marketing efficiencies were more than offset by investments in our Institutional sales organization and product development to drive innovation and support our continued growth.
Previous wording
Cash used in investing activities was $2,221 thousand and $982 thousand for the three months ended March 31, 2024 and 2023, respectively. Cash used in investing activities for both periods related to capital expenditures primarily for the development of internal use software and IT equipment.
Current wording
Cash used in investing activities was $3,755 thousand and $2,049 thousand for the six months ended June 30, 2024 and 2023, respectively. Cash used in investing activities for both periods related to capital expenditures primarily for the development of internal use software and IT equipment.
Previous wording
We did not have any financing activities in either the three months ended March 31, 2024 or 2023.
Current wording
We did not have any financing activities in either the six months ended June 30, 2024 or 2023.
Previous wording
Certain statements in this report may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions, or strategies regarding the future, including our expectations with respect to: continued improvements in sales and marketing leverage; the growth of our Institutional business; simplifying our operations model while growing our business; and the sufficiency of our cash to fund future operations. Any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “approximately,” “believes,” “contemplates,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “outlook,” “plans,” “possible,” “potential,” “predicts,” “projects,” “should,” “seeks,” “will,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Our financial condition, results of operations, and cash flows may differ materially from those in the forward-looking statements as a result of various factors, including:
Current wording
Certain statements in this report may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions, or strategies regarding the future, including our expectations with respect to: enhancing the Learning Membership experience and on our expansion of freemium strategies; continued improvements in sales and marketing leverage; the growth of our Institutional business; simplifying our operations model while growing our business; and the sufficiency of our cash to fund future operations. Any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “approximately,” “believes,” “contemplates,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “outlook,” “plans,” “possible,” “potential,” “predicts,” “projects,” “should,” “seeks,” “will,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Our financial condition, results of operations, and cash flows may differ materially from those in the forward-looking statements as a result of various factors, including:
Previous wording
•risks associated with our ability to acquire and retain customers in our Consumer business;
Current wording
•risks associated with our ability to acquire and retain customers, operate, and scale up our Consumer and Institutional businesses;
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Current report — wording carried from elsewhere
General and administrative expenses for the six months ended June 30, 2024 and 2023 included non-cash stock based compensation of $21,253 thousand and $19,651 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses increased $4,140 thousand, or 10%. Additionally, excluding these impacts in both periods, general and administrative expenses for the six months ended June 30, 2024 were 42% of revenue compared to 41% during the same period in 2023.