Nerdy Inc.
For the period ended Dec 31, 2025. Filed Feb 26, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 26, 2026
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-K
Period ended 2024-12-31; filed 2025-02-27.
0001819404-25-000009
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-26.
0001819404-26-000015
Item 7. 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 77 previous paragraphs and 82 current paragraphs.
42 unchanged; 18 reworded; 20 added; 17 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 8 previous and 10 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 (20)
Current report
Abandonment of Capitalized Internal-Use Software
Current report
In the fourth quarter of 2025, management made a strategic decision to abandon certain components of our previously capitalized internal-use software including our legacy Live Learning Platform, our legacy Learner user experience, our legacy Expert user experience, and our legacy landing pages. These components and functions were rebuilt on entirely new, AI-native codebases, preserving essential business logic and data while migrating to modern, decoupled systems. We believe this modernization of our software platform onto entirely new, AI-native codebases will allow for not only the immediate improvement of the experiences we can offer to Learners, but also allow for more efficient product innovation in the future. In connection with this abandonment, we recorded a write-off of a portion of our previously capitalized internal-use software, which was included in “Cost of revenue” in the Consolidated Statement of Operations for the year ended December 31, 2025. For additional information on the abandonment charge, see Note 8 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
Current report
“Average Revenue per Member per Month” (“ARPM”) is defined as the average Consumer Learning Membership subscription revenue per member per month as of the dates presented. Variations in ARPM are primarily due to changes in the mix of Learning Memberships sold and pricing changes. We believe ARPM is a key indicator of the value we provide to our customers. ARPM excludes our Institutional business. ARPM as of December 31, 2025 was higher when compared to December 31, 2024 due to the mix shift to higher frequency Learning Memberships coupled with price increases for new Consumer customers enacted during the first quarter of 2025. The impact of these changes was further bolstered by higher retention in newer cohorts due primarily to improvements in the user experience and new Expert incentives.
Current report
Revenue for the year ended December 31, 2025 decreased when compared to the prior year period primarily due to lower Institutional revenue and a specific state-funded program ($7,437 thousand for the year ended December 31, 2024) within Consumer revenue that did not recur in 2025. Also within Consumer Revenue, Learning Membership revenue increased 2% year-over-year. The current year period was positively impacted by higher ARPM in our Consumer business as a result of a mix shift to higher frequency Learning Memberships and price increases for new Consumer customers enacted during the first quarter of 2025, coupled with higher retention in newer cohorts due primarily to improvements in the user experience and investments in Expert pay and incentives.
Current report
The following table presents our revenue by category of Learners for the periods presented.
Current report
Cost of revenue for the year ended December 31, 2025 was impacted by a charge for the abandonment of capitalized internal-use software, net of accumulated amortization, of $7,757 thousand related to our replacement of certain components of our platform with AI-native codebases, as discussed above. Excluding this impact, cost of revenue increased $5,614 thousand due to higher Expert costs of $5,243 thousand, primarily driven by investments in Expert pay and incentives. We believe these investments 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 continue to see faster time to the first session, more sessions in the first 30 days, lower tutor replacement rates, and higher retention.
Current report
Gross margin for the year ended December 31, 2025 was negatively impacted by the previously discussed charge related to the abandonment of capitalized internal-use software. Excluding this impact, gross margin decreased primarily due to investments in Expert pay and incentives. For the third consecutive quarter, gross margin improved sequentially quarter-over-quarter as gross margin, excluding the impact of the abandonment charge, of 67% for the fourth quarter of 2025 increased approximately 380 basis points when compared to the third quarter of 2025. The continued expansion was primarily a result of a mix shift to higher frequency Learning Memberships coupled with price increases for new Consumer customers enacted during the first quarter of 2025 and better optimization of tutoring incentives. We expect gross margin improvement to continue into 2026 as the mix of our Consumer revenue continues to shift into higher frequency and higher priced Learning Memberships, and as we are able to better optimize tutoring incentives.
Current report
Sales and marketing expenses for the year ended December 31, 2025 included non-cash stock-based compensation and restructuring costs of $1,321 thousand and $193 thousand, respectively. Sales and marketing expenses for the year ended
Current report
This decrease in sales and marketing expenses was driven by Consumer marketing efficiency gains coupled with the moderation of our investment in the Institutional business given school district funding uncertainties in 2025.
Current report
AI-enabled productivity improvements, coupled with new software-driven processes and system implementations, headcount reductions, and other cost reduction efforts, have enabled us to generate operating efficiencies and remove significant costs from the business. Recent advances in our application of AI across our entire tech stack provide us with the opportunity to move faster and drive further levels of productivity and operating leverage, while improving both the customer experience and operational consistency as we scale our business.
Current report
Interest Income, net
Current report
The following table presents a reconciliation of income tax expense and the effective income tax rate for the period presented, reported under ASC Topic 740 after the adoption of Accounting Standards Update (“ASU”) 2023-09.
Current report
On November 3, 2025 (the “Closing Date”), we and certain of our subsidiaries entered into a Loan and Security Agreement (“Loan Agreement”) with Hercules Capital, Inc. (“Hercules”) and the lenders party thereto, pursuant to which the lenders made available up to two tranches of term loans in an aggregate principal amount of $50,000 thousand (the “Term Loan”), subject to certain terms and conditions, with the first tranche of up to $30,000 thousand available for borrowing in multiple draws of at least $2,500 thousand and the second tranche of up to $20,000 thousand available for borrowing in multiple draws of at least $2,500 thousand.
Current report
On the Closing Date, we borrowed $20,000 thousand under the Term Loan. These proceeds may be used for working capital and other general corporate purposes as permitted by the Term Loan. The remaining $10,000 thousand under the first tranche of Term Loan is available to be drawn until December 31, 2026. After the first tranche is drawn in full or after December 31, 2026, the second Term Loan tranche may be made available, subject to the approval of the lenders. Our ability to access the maximum borrowing capacity under the Term Loan will require our future TTM Contribution Margin (as defined in the Loan Agreement) to exceed historical levels.
Current report
•Debt, Interest, and Other Debt-Related Obligations. See Note 12 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report for information on our debt and the timing of future principal, interest, and other payments related to our Term Loan; and
Current report
Debt Covenants
Current report
The Loan Agreement includes customary representations and warranties and covenants associated with our Term Loan. Such terms include (1) covenants concerning financial and other reporting obligations, and (2) certain limitations on indebtedness, liens, investments, distributions (including dividends), share repurchases, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts. Such covenants and limitations on indebtedness include (but are not limited to) that the Company must maintain the greater of (i) $15,000 thousand of Qualified
Current report
Cash (as defined in the Loan Agreement) or (ii) Qualified Cash that results in Remaining Months Liquidity (as defined in the Loan Agreement) of at least 6 months. Additionally, our outstanding borrowings must not exceed certain multiples of our TTM Contribution Margin (as defined in the Loan Agreement). If at any time, our outstanding borrowings exceed the required multiple of the TTM Contribution Margin, we will be required to immediately repay principal until the outstanding borrowings are less than the applicable multiple. As of December 31, 2025, we were in compliance with these covenants, the Term Loan had outstanding borrowings of $20,000 thousand, and we had an available borrowing capacity of $10,000 thousand.
Current report
Cash provided by financing activities for the year ended December 31, 2025 was $19,499 thousand. We received proceeds of $20,000 thousand from borrowings under our Term Loan. In connection with entering into the Loan Agreement and the borrowings under our Term Loan, we paid $501 thousand of deferred financing fees. We did not have any financing activities during the year ended December 31, 2024.
Current report
We evaluate fixed assets, including capitalized internal-use software, for retirement and abandonment when events or changes in circumstances indicate an asset may no longer be used as intended (for example, technology obsolescence, replacement initiatives, or other decisions to discontinue use). When an asset is permanently abandoned or otherwise disposed of, we cease depreciation, remove the asset’s cost and related accumulated depreciation or amortization from the balance sheet, and record any resulting gain or loss in the statement of operations.
Removed paragraphs (17)
Previous report
Revenue for the year ended December 31, 2024 declined primarily due to lower average revenue per member per month (“ARPM”) in our Consumer business, partially offset by higher revenues in our Institutional business. Revenue for the year ended December 31, 2023 included legacy Package revenue of $15,850 thousand that did not recur in the current year period due to the completion of the transition to Learning Memberships in our Consumer business.
Previous report
The following table presents the Company’s revenue by business category for the periods presented.
Previous report
(a)Other consists of EduNation Limited, a company incorporated in England and Wales (“First Tutors UK”) and other services.
Previous report
Cost of revenue for the year ended December 31, 2024 increased due to higher Expert costs of $4,096 thousand, primarily related to higher utilization of tutoring sessions across Learning Memberships in our Consumer business and the continued scaling of our Institutional business.
Previous report
Gross margin for the year ended December 31, 2024 decreased primarily due to lower ARPM coupled with higher utilization of tutoring sessions across Learning Memberships in our Consumer business and higher substitution costs during the first half of the year in our Institutional business. We have introduced improvements to our marketplace infrastructure systems, including session scheduling enhancements, invoice automation improvements, and changes to the tutor placement and substitution program logic. We believe these enhancements will improve the customer experience due to the higher reliability level of our marketplace infrastructure systems and improve gross margins by lowering costs.
Previous report
Operating Expenses
Previous report
Sales and marketing increases were driven by investments in our Institutional sales organization which were made to drive customer acquisition, brand awareness, and reach, including through signing up school districts with access to the Varsity Tutors platform, which is a strategy to introduce school districts to the platform and ultimately convert them to our fee-based offerings. These investments were partially offset by Consumer marketing efficiency gains.
Previous report
We believe 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 high-dosage tutoring 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 unified platform.
Previous report
Unrealized Loss on Derivatives, Net
Previous report
During the year ended December 31, 2023, we recognized a net loss of $13,385 thousand related to non-cash mark-to-market adjustments on our warrants and earnouts contracts prior to the settlement in 2023 of all of our warrants and earnouts. We did not have any mark-to-market adjustments on our warrants and earnouts contracts during the year ended December 31, 2024 as we did not have any warrants or earnouts outstanding. For additional information on the warrant and earnout transactions, refer to Notes 1, 4, and 13 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
Previous report
Interest Income
Previous report
Cash used in financing activities for the year ended December 31, 2023 was $1,940 thousand, which related to transaction costs paid in connection with the warrant and earnout transactions. We did not have any financing activities during the year ended December 31, 2024. For additional information on the warrant and earnout transactions, refer to Notes 1, 4, and 13 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
Previous report
EMERGING GROWTH COMPANY STATUS
Previous report
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Previous report
Additionally, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
Previous report
We expect to remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing date of the TPG Pace’s initial public offering (such anniversary date is October 6th, 2025), (b) in which we have total annual gross revenue of at least $1,235,000 thousand or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of common stock that are held by non-affiliates equals or exceeds $700,000 thousand as of the prior June 30th, or (2) the date on which we have issued more than $1,000,000 thousand in non-convertible debt securities during the prior three-year period. Based upon the facts and circumstances that existed as of December 31, 2024, we remained an emerging growth company for our Annual Report on Form 10-K for the year ended December 31, 2024 and will continue to be for our quarterly reports in the 2025 interim periods. However, due to the fifth anniversary of the closing date of the TPG Pace’s initial public offering occurring in 2025, we will no longer be an emerging growth company starting with our Annual Report on Form 10-K for the year ended December 31, 2025, and as a result, will no longer be able to take advantage of the exemptions listed above.
Previous report
According to 5120.1b of the SEC Financial Reporting Manual, once we failed to qualify for smaller reporting company status, we remained unqualified until making a subsequent determination either: (i) our public float fell 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 met certain other requirements for subsequent qualification as of the last business day of our most recently completed second fiscal quarter. Based upon our subsequent determination that occurred as of December 31, 2024, we have re-entered smaller reporting company status and will use scaled disclosures in annual and quarterly reports, as applicable, permitted for a smaller reporting company.
Reworded paragraphs (18)
Previous wording
We operate a platform for live online learning. Our mission is to transform the way people learn through technology. Our purpose-built proprietary platform leverages technology, including artificial intelligence (“AI”), to connect students, users, parents, guardians, and purchasers (“Learner(s)”) of all ages to tutors, instructors, subject matter experts, educators, and other professionals (“Expert(s)”), delivering superior value on both sides of the network. Our comprehensive learning destination provides learning experiences across numerous subjects and multiple formats, including Learning Memberships, one-on-one instruction, small group tutoring, large format classes, tutor chat, essay review, adaptive assessments, and self-study tools. Our flagship business, Varsity Tutors LLC (“Varsity Tutors”), is one of the nation’s largest platforms for live online tutoring and classes. Our solutions are available directly to Learners (“Consumer(s)”), as well as through education systems (“Institution(s)”). Our platform offers Experts the opportunity to generate income from the convenience of home, while also increasing access for Learners by removing barriers to high-quality live online learning. Our offerings include Varsity Tutors for Schools, a product suite that leverages our platform capabilities to offer high-dosage tutoring and our online learning solutions to Institutions. We have built a diversified business across the following audiences: K-8, High School, College, Graduate School, and Professional.
Current wording
We operate a next-generation live tutoring and intervention platform that leverages the power of human expertise with advanced artificial intelligence (“AI”) to personalize learning, accelerate student achievement, and empower educators. Our mission is to transform the way people learn through technology. Our purpose-built proprietary platform leverages technology, including AI, to connect students, users, parents, guardians, and purchasers (“Learner(s)”) of all ages to tutors, instructors, subject matter experts, educators, and other professionals (“Expert(s)”), delivering superior value on both sides of the network. Our comprehensive learning destination provides learning experiences across numerous subjects and multiple formats, including Learning Memberships, one-on-one instruction, small group tutoring, large format classes, chat, essay review, adaptive assessments, and self-study tools. Our flagship business, Varsity Tutors LLC (“Varsity Tutors”), is one of the nation’s largest platforms for live online tutoring and classes. Our solutions are available to Learners either directly through Learning Memberships (“Consumers”) and through education systems (“Institutions”). Our platform offers Experts the opportunity to generate income from the convenience of home, while also increasing access for Learners by removing barriers to high-quality live online learning. Our offerings include Varsity Tutors for Schools, a product suite that leverages our next-generation live tutoring and intervention platform capabilities to offer high-dosage tutoring and our online learning solutions to Institutions. We have built a diversified business across the following audiences: K-8, High School, College, Graduate School, and Professional.
Previous wording
We have experienced in the past, and expect to continue to experience seasonal fluctuations in our revenue and earnings due to Learner and Institutional spending and consumption habits, and the timing of the academic year. Historically, we experience lower than normal revenue during the summer when schools and universities are out of session in the United States (the “U.S.”) and when people travel for vacations and holidays. Due to seasonality, comparisons of our historical quarterly results of operations on a sequential basis may not provide meaningful insight into our overall financial performance.
Current wording
We have experienced in the past, and expect to continue to experience seasonal fluctuations in our revenue and earnings due to Learner and Institutional spending and consumption habits, and the timing of the academic year. Historically, we experience lower than normal revenue during the summer when schools and universities are typically out of session in the United States (the “U.S.”) and when people travel for vacations and holidays. Due to seasonality, comparisons of our historical quarterly results of operations on a sequential basis may not provide meaningful insight into our overall financial performance.
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, the extension of Learning Memberships to additional Consumer audiences, 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 EduNation Limited, a company incorporated in England and Wales (“First Tutors UK”), as well as our Institutional business. Our Active Member count as of December 31, 2024 was lower when compared to December 31, 2023 due to a higher mix of lower frequency Learning Memberships during 2024.
Current wording
“Active Member(s)” is defined as the number of Learners with an active paid Learning Membership as of the dates 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 December 31, 2025 was lower when compared to December 31, 2024 primarily due to operational challenges that we are actively addressing through the appointment of a new Chief Operating Officer in 2025 to drive enhanced operational execution and systematic process improvements. We also rolled out new Learner and Expert platform user experiences in the fourth quarter that we believe will re-accelerate growth.
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 during the year ended December 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 year ended December 31, 2025 decreased when compared to the prior year period. This decrease was 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, coupled with lower utilization of tutoring sessions in our Institutional business as a result of lower bookings. We believe our Active Expert count at December 31, 2025 is sufficient to meet our near-term growth objectives.
Previous wording
Sales and marketing expenses for the year ended December 31, 2024 and 2023 included non-cash stock-based compensation of $2,345 thousand and $2,795 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses increased $3,625 thousand, or 5%.
Current wording
December 31, 2024 included non-cash stock-based compensation of $2,345 thousand. Excluding these impacts in both periods, sales and marketing expenses decreased $10,669 thousand, or 15%.
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 $43,928 thousand and $40,859 thousand for the years ended December 31, 2024 and 2023, respectively, an increase of $3,069 thousand. Product and development costs include compensation for employees on our product, engineering, and design 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 $41,338 thousand and $43,928 thousand for the years ended December 31, 2025 and 2024, respectively, a decrease of $2,590 thousand. Product and development costs include compensation for employees on our product, engineering, and design 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 year ended December 31, 2024 included non-cash stock-based compensation, of $38,744 thousand. General and administrative expenses for the year ended December 31, 2023 included non-cash stock-based compensation, costs related to the warrant and earnout transactions, a provision for legal settlement, and restructuring costs of $41,474 thousand, $1,940 thousand,$1,250 thousand, and $841 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses increased $8,070 thousand, or 10%.
Current wording
General and administrative expenses for the year ended December 31, 2025 included non-cash stock-based compensation and restructuring costs of $26,486 thousand and $455 thousand, respectively. General and administrative expenses for the year ended December 31, 2024 included non-cash stock-based compensation of $38,744 thousand. Excluding these impacts in both periods, general and administrative expenses decreased $9,555 thousand, or 11%.
Previous wording
Interest income was $3,104 thousand for the year ended December 31, 2024, compared to $3,377 thousand for the year ended December 31, 2023. This decrease was driven by lower interest income on our cash balances during the year ended December 31, 2024.
Current wording
Interest income was $1,073 thousand for the year ended December 31, 2025, compared to $3,104 thousand for the year ended December 31, 2024. This decrease was driven by lower interest income on our cash balances during the year ended December 31, 2025 and by interest expense related to our outstanding borrowings under our term loan that was originated in November 2025.
Previous wording
Our effective income tax rate was (0.17)% and (0.16)% for the years ended December 31, 2024 and 2023, respectively. Income tax expense recorded during the years ended December 31, 2024 and 2023 represents amounts owed to state authorities. The following table presents a reconciliation of income tax expense with amounts computed at the federal statutory tax rate for the periods presented.
Current wording
Our effective income tax rate was (0.26)% and (0.17)% for the years ended December 31, 2025 and 2024, respectively. Income tax expense recorded during the years ended December 31, 2025 and 2024 represents amounts owed to state authorities.
Previous wording
As of December 31, 2024 and 2023, we had cash and cash equivalents totaling $52,541 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 and capital contributions. 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 December 31, 2025 and 2024, we had cash and cash equivalents totaling $47,895 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 or from our Term Loan (as defined below). If cash on hand or from our Term Loan is not sufficient to fund our business, we may also need to implement significant cost-containment measures or explore additional financing alternatives. However, there can be no assurance that additional financing would be available to us on acceptable terms, or at all, or that any cost-containment measures we implement would be sufficient or effective in reducing losses or preserving liquidity.
Previous wording
Our cash requirements under our contractual obligations and commitments consist primarily of lease arrangements. See Note 15 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report for information on our lease obligations and the amount and timing of future payments. As of December 31, 2024, we had no debt obligations.
Current wording
•Leases. See Note 13 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report for information on our lease obligations and the amount and timing of future payments.
Previous wording
Cash used in operating activities for the year ended December 31, 2024 increased $8,043 thousand when compared to the same period in 2023 as lower revenue and gross margin coupled with investments in our Institutional sales organization and product development to drive innovation and support our continued growth were partially offset by favorable changes in working capital primarily related to fluctuations in the timing of sales and collections of receivables.
Current wording
Cash used in operating activities for the year ended December 31, 2025 increased $3,243 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. These impacts were partially offset by lower sales and marketing and general and administrative expenses.
Previous wording
Cash used in investing activities was $6,863 thousand and $6,887 thousand for the years ended December 31, 2024 and 2023, respectively. Cash used in investing activities related to capital expenditures primarily for the development of internal use software and information technology (“IT”) equipment.
Current wording
Cash used in investing activities was $5,370 thousand and $6,863 thousand for the years ended December 31, 2025 and 2024, respectively. Cash used in investing activities related to capital expenditures primarily for the development of internal-use software and information technology (“IT”) equipment.
Previous wording
We do not have any incremental costs to obtain or fulfill a contract that require capitalization. We elected as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with customers that have an expected duration of one year or less.
Current wording
We do not have any incremental costs to obtain or fulfill a contract that requires capitalization. We elected as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with customers that have an expected duration of one year or less.
Previous wording
Revenue earned through Learning Memberships is recognized from one-on-one instruction and small group tutoring as performance obligations are satisfied. Given the customer receives benefit from the completion of each session (as Learners are not obligated to meet with the same Expert for a minimum number of sessions), we concluded each one-on-one or small group tutoring session is a separate performance obligation. Revenue is recognized and deferred revenue is relieved on the date services are delivered to Learners in an amount that reflects the consideration we are contractually entitled to receive in exchange for those services.
Current wording
Revenue earned through Learning Memberships is recognized from tutoring as performance obligations are satisfied. Given the customer receives benefit from the completion of each session (as Learners are not obligated to meet with the same Expert for a minimum number of sessions), we concluded each tutoring session is a separate performance obligation. Revenue is recognized and deferred revenue is relieved on the date services are delivered to Learners in an amount that reflects the consideration we are contractually entitled to receive in exchange for those services.
Previous wording
Revenue is recognized from one-on-one instruction and small group tutoring as performance obligations are satisfied. Given the Institutions receive benefit from the completion of each session (as Institutions are not obligated to meet with the same Expert for a minimum number of sessions), we concluded each one-on-one or small group tutoring session is a separate performance obligation. Revenue is recognized, and to the extent cash for the purchase of services by Institutions is collected in advance (at one time or in installments), deferred revenue is relieved on the date services are delivered to the Institutions in an amount that reflects the consideration we are contractually entitled to receive in exchange for those services. For Institutions that do not pay in advance, we typically invoice these Institutions on a monthly basis for each session provided, with amounts recorded to accounts receivable, net of any related allowance for credit losses.
Current wording
Revenue is recognized from tutoring as performance obligations are satisfied. Given the Institutions receive benefit from the completion of each session (as Institutions are not obligated to meet with the same Expert for a minimum number of sessions), we concluded each tutoring session is a separate performance obligation. Revenue is recognized, and to the extent cash for the purchase of services by Institutions is collected in advance (at one time or in installments), deferred revenue is relieved on the date services are delivered to the Institutions in an amount that reflects the consideration we are contractually entitled to receive in exchange for those services. For Institutions that do not pay in advance, we typically invoice these Institutions on a monthly basis for each session provided, with amounts recorded to accounts receivable, net of any related allowance for credit losses.
Previous wording
We recognize the cost of services received in exchange for awards of equity instruments based on the grant-date fair value of equity awards. That cost is recognized straight-line or graded (when applicable) over the period during which the employee is required to provide service in exchange for the award - the requisite service period. Any forfeitures of stock-based compensation are recorded as they occur. The grant date fair value of the restricted stock units was determined based upon the closing price of our Class A Common Stock on the date of grant. The grant date fair value of the stock appreciation rights, restricted stock awards, and stock options was determined using the Black-Scholes Model. The grant date fair value of the Founder’s Award was determined using the Monte Carlo Option Pricing Method.
Current wording
We recognize the cost of services received in exchange for awards of equity instruments based on the grant-date fair value of equity awards. That cost is recognized straight-line or graded (when applicable) over the period during which the employee is required to provide service in exchange for the award - the requisite service period. Any forfeitures of stock-based compensation are recorded as they occur. The grant date fair value of the restricted stock units was determined based upon the closing price of our Class A Common Stock on the date of grant. The grant date fair value of the stock appreciation rights and stock options was determined using the Black-Scholes Model. The grant date fair value of the Founder’s Award and market-based performance restricted stock units were determined using the Monte Carlo Option Pricing Method.
Previous wording
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 wording
As of December 31, 2025, 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. We will remain a smaller reporting until our next determination date in 2026.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The following table presents a reconciliation of income tax expense with amounts computed at the federal statutory tax rate for the period presented, reported under ASC Topic 740 prior to the adoption of ASU 2023-09.
Current report — wording carried from elsewhere
Our cash requirements under our contractual obligations and commitments consist primarily of: