Nerdy Inc.

Previous wording

“Active Member(s)” is defined as the number of Learners with an active paid Learning Membership as of the date presented. Variations in the number of Active Members are due to changes in demand for our solutions, seasonality, testing schedules, and the launch of new membership options. As a result, we believe Active Members is a key indicator of our ability to attract, engage, and retain Learners. Active Members exclude our Institutional business. Our Active Member count as of March 31, 2025 was lower when compared to March 31, 2024 due to lower retention in older customer cohorts that included a higher proportion of lower frequency Learning Memberships.

Current wording

“Active Member(s)” is defined as the number of Learners with an active paid Learning Membership as of the date presented. Variations in the number of Active Members are due to changes in demand for our solutions, seasonality, testing schedules, and the launch of new membership options. As a result, we believe Active Members is a key indicator of our ability to attract, engage, and retain Learners. Active Members exclude our Institutional business. Our Active Member count as of June 30, 2025 was lower when compared to June 30, 2024 primarily due to lower retention in older customer cohorts that included a higher proportion of lower frequency Learning Memberships.

Previous wording

“Active Experts” is defined as the number of Experts who have instructed one or more sessions in a given period. We believe Active Experts is a key indicator of our ability to service Learners and provide Experts with revenue-generating opportunities. Active Experts includes our Institutional business. The following table summarizes Active Experts for the periods presented. Our Active Expert count during the three months ended March 31, 2025 when compared to the prior year period decreased primarily due to lower Consumer Active Experts as a result of our Expert incentives, which has promoted utilization of the highest quality Experts by encouraging them to work with more Learners and develop deeper relationships that allow for increased revenue-generating opportunities.

Current wording

“Active Experts” is defined as the number of Experts who have instructed one or more sessions in a given period. We believe Active Experts is a key indicator of our ability to service Learners and provide Experts with revenue-generating opportunities. Active Experts includes our Institutional business. The following table summarizes Active Experts for the periods presented. Our Active Expert count during the three and six months ended June 30, 2025 when compared to the prior year periods decreased due to lower Consumer Active Experts as a result of our Expert incentives, which has promoted utilization of the highest quality Experts by encouraging them to work with more Learners and develop deeper relationships that allow for increased revenue-generating opportunities, coupled with lower utilization of tutoring sessions in our Institutional business as a result of lower bookings.

Previous wording

Revenue for the three months ended March 31, 2025 declined when compared to the prior year period primarily due to a lower number of Learning Memberships, as well as lower Institutional revenue. These impacts were partially offset by higher ARPM in our Consumer business as a result of a mix shift to higher frequency Learning Memberships and price increases enacted during the first quarter of 2025, coupled with higher retention in newer cohorts due primarily to improvements in the user experience and new Expert incentives.

Current wording

Revenue in both current year periods decreased when compared to the prior year periods primarily due to lower Institutional revenue and a specific ($3,007 thousand and $4,475 thousand for the three and six months ended June 30, 2024, respectively) state-funded Consumer revenue program that did not recur in 2025. For both current year periods, these impacts were partially offset by higher ARPM in our Consumer business as a result of a mix shift to higher frequency Learning Memberships and price increases enacted during the first quarter of 2025, coupled with higher retention in newer cohorts due primarily to improvements in the user experience and new Expert incentives.

Previous wording

Cost of revenue for the three months ended March 31, 2025 increased primarily due to higher Expert costs of $2,503 thousand. The increase in Expert costs was primarily driven by Expert incentives enacted during the fourth quarter of 2024 and higher utilization of tutoring sessions across both our Consumer and Institutional businesses. We believe these incentives drive Expert satisfaction and engagement with our platform (and Learners) by allowing certain Experts to receive additional income for each sequential recurring session with the same student. Following the adoption of the new incentives, we are already seeing faster time to the first session, more sessions in the first 30 days, lower tutor replacement rates, and higher retention – all of which should continue to strengthen our business.

Current wording

We believe these incentives drive Expert satisfaction and engagement with our platform (and Learners) by allowing certain Experts to receive additional income for each sequential recurring session with the same student. Following the adoption of the new incentives, we are seeing faster time to the first session, more sessions in the first 30 days, lower tutor replacement rates, and higher retention.

Previous wording

Gross margin for the three months ended March 31, 2025 decreased primarily due to Expert incentives enacted during the fourth quarter of 2024 and higher utilization of tutoring sessions across both our Consumer and Institutional businesses. We expect price increases for new Consumer customers enacted during the first quarter of 2025 will yield sequential quarterly improvements to gross margin as we move throughout the year.

Current wording

Gross margin for both current year periods decreased primarily due to Expert incentives enacted during the fourth quarter of 2024. Gross margin for the three months ended June 30, 2025 improved sequentially quarter-over-quarter as a result of price increases for new Consumer customers enacted during the first quarter of 2025. We expect to deliver sequential quarterly gross margin improvements as we move throughout the year.

Previous wording

Sales and marketing expenses for the three months ended March 31, 2025 included non-cash stock-based compensation and restructuring costs of $344 thousand and $193 thousand, respectively. Sales and marketing expenses for the three months ended March 31, 2024 included non-cash stock-based compensation of $535 thousand. Excluding these impacts in both periods, sales and marketing expenses decreased $1,609 thousand, or 10%. This decrease was primarily driven by Consumer marketing efficiency gains coupled with the moderation of our investment in our Institutional business to align with a more normalized sales cycle post-ESSER and given near-term funding uncertainties. We believe a significant opportunity exists in the Institutional space and that the product enhancements we are planning to make for the unified platform will drive growth in future periods.

Current wording

Sales and marketing expenses for the three months ended June 30, 2025 and 2024 included non-cash stock-based compensation of $330 thousand and $638 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses decreased $1,671 thousand, or 11%. Sales and marketing expenses for the six months ended June 30, 2025 included non-cash stock-based compensation and restructuring costs of $674 thousand and $193 thousand, respectively. Sales and marketing expenses for the six months ended June 30, 2024 included non-cash stock-based compensation of $1,173 thousand. Excluding these impacts in both periods, sales and marketing expenses decreased $3,280 thousand, or 10%.

Previous wording

General and administrative expenses include compensation for certain employees, support services, product and development expenses intended to support continued innovation, and other operating expenses. Product and development costs were $10,734 thousand and $10,663 thousand for the three months ended March 31, 2025 and 2024, respectively. Product and 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.

Current wording

General and administrative expenses include compensation for certain employees, support services, product and development expenses intended to support continued innovation, and other operating expenses. Product and development costs were $10,683 thousand and $11,569 thousand for the three months ended June 30, 2025 and 2024, respectively. Product and development costs were $21,417 thousand and $22,232 thousand for the six months ended June 30, 2025 and 2024, respectively. Product and 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, 2025 and 2024 included non-cash stock based compensation and restructuring costs of $7,244 thousand and $455 thousand, respectively. General and administrative expenses for the three months ended March 31, 2024 included non-cash stock based compensation $10,577 thousand. Excluding these impacts in both periods, general and administrative expenses decreased $687 thousand, or 3%. Subscription offerings simplify both the sales process and the operating model needed to support customers. When combined with new software-driven processes and system implementations coupled with internal AI-enabled productivity improvements, headcount restructuring, and other cost reduction efforts, we have been able to generate operating efficiencies and remove significant costs from the business.

Current wording

General and administrative expenses for the three months ended June 30, 2025 and 2024 included non-cash stock based compensation of $7,208 thousand and $10,676 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses decreased $3,139 thousand, or 14%. General and administrative expenses for the six months ended June 30, 2025 included non-cash stock based compensation and restructuring costs of $14,452 thousand and $455 thousand, respectively. General and administrative expenses for the six months ended June 30, 2024 included non-cash stock based compensation $21,253 thousand. Excluding these impacts in both periods, general and administrative expenses decreased $3,826 thousand, or 9%.

Previous wording

Interest income for the three months ended March 31, 2025 was $462 thousand, a decrease from $886 thousand in the same period in 2024, driven by lower interest income on our cash balances during the current period.

Current wording

Interest income for the three months ended June 30, 2025 was $365 thousand, a decrease from $879 thousand in the same period in 2024, driven by lower interest income on our cash balances during the current period. Interest income for the six months ended June 30, 2025 was $827 thousand, a decrease from $1,765 thousand in the same period in 2024, driven by lower interest income on our cash balances during the current period.

Previous wording

As of March 31, 2025 and December 31, 2024, we had cash and cash equivalents totaling $44,922 thousand and $52,541 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 and capital contributions. To the extent we continue to 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, 2025 and December 31, 2024, we had cash and cash equivalents totaling $36,722 thousand and $52,541 thousand, respectively. We have incurred cumulative losses from our operations, and we will likely incur additional losses in the future. Our operations have historically been financed primarily through cash on hand and capital contributions. To the extent we continue to 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

As of March 31, 2025, we had no debt obligations. Our cash requirements under our contractual obligations and commitments consist primarily of lease arrangements. For information on our lease obligations and the amount and timing of future payments, see Note 15 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of our 2024 Annual Report. There have been no material changes to our leasing arrangements previously disclosed in our 2024 Annual Report.

Current wording

As of June 30, 2025, we had no debt obligations. Our cash requirements under our contractual obligations and commitments consist primarily of a lease arrangement. For information on our lease obligations and the amount and timing of future payments, see Note 15 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of our 2024 Annual Report. There have been no material changes to our leasing arrangements previously disclosed in our 2024 Annual Report.

Previous wording

Cash used in operating activities for the three months ended March 31, 2025 was $6,444 thousand compared to cash provided by operating activities of $4,353 thousand in the same period in 2024. This decrease was primarily due to lower revenue and gross margin, the payment of a legal settlement of $2,000 thousand, and changes in working capital.

Current wording

Cash used in operating activities for the six months ended June 30, 2025 increased $12,254 thousand when compared to the same period in 2024, primarily due to lower revenue and gross margin, the payment of a legal settlement of $2,000 thousand, and changes in working capital.

Previous wording

Cash used in investing activities was $1,175 thousand and $2,221 thousand for the three months ended March 31, 2025 and 2024, 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 $2,333 thousand and $3,755 thousand for the six months ended June 30, 2025 and 2024, 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 during the three months ended March 31, 2025 or 2024.

Current wording

We did not have any financing activities during the six months ended June 30, 2025 or 2024.

Previous wording

We are 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 wording

We are 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. Based upon the facts and circumstances that exist as of June 30, 2025, we will remain a smaller reporting company for our Annual Report on Form 10-K for the year ended December 31, 2025 (and interim periods therein) and for our quarterly reports in the 2026 interim periods.