Nerdy, Inc.

Hello all and welcome to the Nerdy Fair Quarter 2021 Earnings Call. My name is Brica and I'll be today's event specialist. Following the presentation, we will have a question and answer session. If you would like to register a question, please press star followed by the number 1 on your telephone keypads. I would now like to hand the call over to your host, Marta Nicholls. So Marta, please go ahead.

Good afternoon, and thank you for joining us for NERDI's Third Quarter 2021 Earnings Call. With me are Chuck Cohn, Founder, Chairman, and Chief Executive Officer of NERDI, and Jason Pello, Chief Financial Officer. Before I turn the presentation over to Chuck, I'll remind everyone that this discussion contains forward-looking statements, including but not limited to expectations with respect to NERDI's future financial and operating results, strategy, opportunities, plans, and outlook. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Any forward-looking statements are made as of today's date, and NERDI does not undertake or accept any obligation to publicly release any updates or revisions to any forward-looking statements to reflect any change in expectations or any change in events, conditions, or circumstances on which any such statement is based. Please refer to the disclaimers in today's press release announcing NERDI's Q3 results and the company's and PPG PACE Tech Opportunities filings with the SEC for a discussion of the risks. Not all of the financial measures that we will discuss today are prepared in accordance with GAAP. Please refer to today's press release for reconciliations of these non-GAAP measures. With that, let me turn the call over to Chuck.

Chuck? Thanks, Marta, and thanks to all of you for joining us today to discuss our third quarter results. We're excited to speak with you for the first time as a standalone public company, having completed our transaction with TBG Pace Tech Opportunities and our listing on the New York Stock Exchange in September. As we shared in today's press release and shareholder letter, the future is bright, and we're looking forward to this next chapter and the capital we now have to drive the shift from offline to online learning. I believe it's a once in a generation opportunity, and I am looking forward to you joining us on this journey. NERDI's mission is to transform how people learn, and we believe that innovative technology can make all the difference. We seamlessly connect experts and learners in any subject, anywhere, anytime, and make learning more personalized and accessible. Our business continued to grow in Q3 as we executed our strategy of subject expansion, format expansion, and product innovation. We experienced record bookings in the quarter of $44.5 million as schools returned to classrooms, up 32% year over year. And we saw continued strong performance in our key operating metrics during Q3, with active learners up 36%, online sessions jumping 45% year-over-year, and active experts increasing 23% year-over-year while maintaining our sessions per active expert. In July and August, we saw a return to more normal seasonality, which resulted in slower than expected consumption, followed by a dramatic acceleration in bookings in September after all schools returned to in-person learning. We experienced a return to more normal summer seasonality in Q3, as easing COVID restrictions permitted families to take much needed vacations. This was quite a bit different from the 2020 period where we experienced higher than usual consumption in the summer at a time when lockdowns were common and summer vacations were skipped. This change in consumer behavior was different from what we envisioned at the beginning of the year when COVID was peaking. The relative consumption of our services during the summer of 2021 ultimately looked more like 2017, 18, and 19, while higher than usual consumption in the summer months of 2020 proved to be an outlier. Since students returned to school in September, we've seen record bookings driven by consumer demand for our core one-on-one products. As students return to classrooms nationwide, bookings in our direct-to-consumer business, that is our historic one-to-one-in-classes business, for September and October combined have grew at 31% compared to those same two months a year ago. Our total bookings, including our new K-12 institutional strategy, grew 63% during September and October. And we continue to see comparable bookings growth in November. Revenue grew 19% in the third quarter to $31.3 million. As a reminder, revenue is primarily driven by consumption in the period and utilization of hours by customers the increased bookings occurred later in the quarter and those higher levels of bookings are now starting to get consumed as we enter q4 based on the significant demand we are seeing in both the direct-to-consumer and in our direct-to-school initiatives we made the deliberate decision to pull forward investments in sales, expert supply, and product development to make the most of this sizable opportunity heading into 2022. If you look at where we experienced accelerated demand once summer ended and schools all had resumed, it was basically all across key areas of the business. In our direct-to-consumer offerings, demand was up across the board, including K-12, college, and professionals. and we are seeing an incremental boost with the addition of our new K-12 institutional strategy, which I'll touch on more in a moment. Last year, when schools went virtual, a lot of schools elected to assign take-home exams were let pass-fail and stopped assigning traditional letter grades to assess student performance. This year, schools are almost entirely back to in-person instruction and are evaluating students again and assigning grades. This has led to heightened levels of consumer demand for supplemental support, including tutoring among both K-12 and college students. Our professional testing offerings have also continued to experience robust growth. The increased demand trends we've seen, coinciding with the return of a new normal in-classroom environment, validate a long-held understanding we have about our business. When learning and outcomes matter to students, our business accelerates. The more that outcomes matter, the better we do. And the recent bookings results are the logical and expected result of grades and test scores battering again the students. As we approach the end of 2021, we have increased confidence that the favorable consumer demand trends and the demand we're seeing from our direct-to-school initiatives will persist into 2022. Given these trends, as well as our growth investments, we have increased confidence in our full-year 2022 revenue targets. We continue to innovate in Q3, investing in the expansion of NERDI's product portfolio with our launch of Varsity Tutors for Schools. This new product leverages our platform capabilities to offer our online learning solutions directly to K-12 school districts and states. Institutions can seamlessly deploy our educational solutions across broad populations of students in an efficient manner. This initiative offers the opportunity to further our mission and have an enormous impact by expanding access to high-quality supplemental online learning solutions to broader student populations. And the need has never been greater. We've received a strong reception for Varsity Tutors for Schools that's translating into early success. with 47 contracts with partners with a one-year value of nearly $10 million signed since our launch in August. This initial traction has been above our expectations and gives us confidence that we are well-positioned to help schools at a broad scale and that they appreciate the partnerships we can bring to bear to help address COVID learning loss. We are excited about this effort and believe that over time, it can be as big as our direct-to-consumer efforts. The capabilities of this new K-12 offering represent the beginning of an institutional go-to-market strategy that will allow us to serve learners through many organizations, including schools, universities, businesses, and others. We view partnering with these institutions to offer a broader learning platform as a service as a long-term opportunity to help improve the way that supplemental learning is administered. As an example of how this shows up in our new K-12 offering, many schools are adopting a small group approach, specifically with one expert coaching up to five learners per session. To address this need, we rolled out new functionality that leverages our technology capabilities to assess, identify, and then group students with similar needs based on adaptive diagnostic testing results aligned to a specific state or Common Core standards. a critical functionality for schools and institutions. The 1 to 5 learning format builds upon our current class and tutoring formats. It integrates adaptive testing and other content into a single UI on our proprietary live learning platform, along with new administrator tools and integrations with learning management and student information systems. Our existing learning solutions previously offered almost exclusively via direct-to-consumer model, now meet the needs of a broad array of audiences and institutions. Our investments in platform and software-driven capabilities will serve as building blocks to quickly assemble new solutions, making it possible to efficiently enter new addressable markets, starting with our direct-to-school initiative. In addition, the American Rescue Plan provides $123 billion to help K-12 schools reopen safely, and at least 20% is earmarked to help address pandemic-related learning loss over the next several years. This is significant funding, and live tutoring has proven to be one of the most effective interventions to address learning loss. The Department of Education recommends high-dosage tutoring as an appropriate strategy for federal funding. We believe this funding is an important jumpstart for schools in the long-term adoption of third-party learning solutions and that we are uniquely positioned to help schools administer, measure, and optimize the benefits for their students. COVID learning loss is real and will take many years to remediate. A recent McKinsey study on COVID in education shows that on average, students have fallen five months behind in mathematics and four months behind in reading. These losses will take significant time and resources to address, and NERDI's Learning Platform as a Service offering provides a range of necessary solutions for schools to help them immediately address this urgent issue. Turning briefly to some of our growth initiatives in our direct-to-consumer business, during the third quarter of 2021, We also continued to expand our large format classes with 55 new STAR courses. To date, we provided millions of hours of free live online instruction to hundreds of thousands of learners. The STAR course format has served as a powerful tool to build our brand, expand reach with new audiences, and drive repeat engagement across multiple formats. In parallel, we invested in expanding subject breadth and the frequency of our small group class offering to drive growth and reach new audiences, which resulted in small group class revenue increasing approximately 94% year-over-year during the third quarter. And beyond introducing new subjects, formats, and products, we've continued ongoing investments in AI and improving match quality as our personalization capabilities remain critical to differentiating how we can help learners and enhancing the online experience of our platform. These investments power the network effects in our business and have helped us attract, retain, and drive engagement among both learners and experts. We remain confident in the underlying trends driving demand for our services. The long-term transition from offline to online learning, the large and growing addressable market, and our ability to scale and innovate at a rapid pace to deliver solutions that meet learner needs in any subject, anywhere, and at any time. With that, I'll turn the call over to Jason to discuss the financials in more detail. Jason?