Nerdy, Inc.

Good afternoon. Thank you for attending today's NRDI Q2 2024 earnings call. My name is Matt, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, T.J. Lin, Associate General Counsel of NRDI. You may proceed.

Good afternoon, and thank you for joining us for NRDI's second quarter 2024 earnings call. With me are Chuck Cohn, Founder Chairman and Chief Executive Officer of NRDI, and Jason Pello, Chief Financial Officer. Before I turn the call over to Chuck, I'll remind everyone that this discussion will contain 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 shareholder letter announcing NERDI's second quarter results and the company's filings with the SEC for discussion of the risk. Not all of the financial measures that we will discuss today are prepared in accordance with GAAP. Please refer to today's shareholder letter for reconciliations of these non-GAAP measures. With that, let me turn the call over to Chuck.

Thanks, D.J., and thank you to everyone for joining us today. In the second quarter, we continued to make progress against the three primary goals we laid out for the year, including our first goal, which was to scale the winning product for every learner. We recently completed the convergence of all of RCTeachers for Schools' institutional customers onto the unified consumer experience used for learning memberships. The unified platform provides a modern, intuitive, and personalized learning experience that better serves the needs of learners, while also allowing us to increase the pace of innovation and leverage product improvements across both our consumer and institutional businesses to drive value in both businesses. Within our consumer business, we experienced a higher than expected level of seasonal end-of-year and summer cancellations, which has resulted in fewer active members than anticipated as we enter this back-to-school period. These changes were primarily driven by our lowest-priced product, which, in retrospect, didn't sufficiently encourage learners to establish a weekly habit, and instead were overly focused on flexibility. This experience caused us to scrutinize and reexamine our product priorities through the lens of what drives retention consistently over time within the tutoring categories. In particular, we found that the learning membership frequencies focused on making tutoring a weekly habit in service of an important learning goal naturally drove significantly better retention and higher lifetime value. Based upon this learning, we have reoriented our product selection toward our premium learning membership, which encouraged the development of a weekly tutoring habit with a consistent tutor over a long period of time to support achieving an important learning outcome. Examples include a parent ensuring their first-grade student could read or a college student getting a great grade in an organic chemistry course in service of their dream of becoming a doctor and going to medical school. Over the last 45 days, we've been focused as a team towards executing on the fundamentals of a great customer experience, including shipping multiple significant improvements to the learning membership user experience. In particular, one area of renewed focus is on a learner's first 30-day activation period, which includes significant enhancements to the scheduling experience that improves the schedule reliability, match quality, and ease of scheduling through a better digital onboarding experience. While many of these improvements were recently deployed, the early signal is quite promising as it relates to both reducing churn of older cohorts and driving overall improved engagement and retention of new cohorts. The shift in our product mix towards premium memberships coupled with digital user experience improvements is positively affecting newly acquired cohorts with faster times to a first session, higher levels of tutoring sessions per week, higher levels of non-tutoring engagement due to improved discoverability across the platform, higher average revenue per member per month, or ARPUM, higher new learning member monthly recurring revenue, and higher levels of retentions. So, while we're entering the back school period with fewer active members than anticipated, we are encouraged by the recent improvements we're experiencing. Our second goal for the year was to continue to expand the number of learners we can impact. Our premium strategy in our institutional business is allowing us to introduce our products to school districts at a larger scale than ever before. During the second quarter, we successfully enabled access to the Varsity Tutors for Schools platform for an additional 1.1 million students, bringing the total to 3.3 million students at nearly 600 school districts. For the full year, we have set an ambitious target of enabling access to the Varsity Tutors platform for 10 million students, or approximately 20% of the K-12 population in the United States. By providing a robust set of academic test prep and enrichment resources at no cost to our school district partners, we aim to efficiently build trust and credibility at scale and lay the foundation to becoming the preferred tutoring platform for these school district partners as they look to implement paid tutoring programs. We believe this is a scalable way to introduce ourselves to a large portion of students and parents in the United States, which we believe will create a halo effect with our consumer businesses. and allow us to build a larger revenue business with lower customer acquisition costs over time. This quarter, we also continue to make progress to improve the Varsity Tutors for Schools student and administrator experiences. All Varsity Tutors for Schools customers have been converged now onto the unified consumer product experience used for learning membership. A change we believe can drive heightened levels of engagement and customer satisfaction by making the already available resources more discoverable and usable. Our revamped administrative dashboard increases school district leaders' ability to measure the impact of our high-dosage tutoring programs by providing a real-time view of program key performance metrics that reinforce the value of our programs. Our third goal was to lay the foundation to deliver profitable growth. We recently completed the expansion of the Varsity Tutors for Schools sales and go-to-market team. Hiring occurred later in the year and onboarding the sales team in the seasonally slower summer period has taken a bit longer than originally forecasted. That's resulted in lower than anticipated bookings during the summer months and a more back-weighted bookings expectation. We still believe that these investments are appropriate given the level of market activity as we head into back-to-school coupled with the growing awareness in the market that high-dosage tutoring is the most effective way to accelerate learning. We also feel good about the product enhancements made as we head into back to school and how that ladders up to a more compelling offering for our customers. During the second quarter, we experienced higher than anticipated tutor substitute costs within our institutional business in a seasonally high period during the school year. As a reminder, this is our first school year with our new access-based subscription product. In response, we recently introduced improvements to our underlying marketplace infrastructure systems, including session scheduling enhancements, invoicing overall, and tutor substitution automation that we believe will allow for us to provide best-in-class logistical reliability. We believe the software-based enhancements to our marketplace infrastructure will represent a material competitive advantage over time and 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 levels we're able to deliver. We also expected these changes, which have required material time and energy, will now enable us to more efficiently and easily scale the institutional business and handle even larger-scale institutional opportunities. As we enter the back-to-school selling season, we are hyper-focused on ensuring our marketplace delivers an exceptional experience for our customers. The recent convergence of our consumer and institutional platform, coupled with the shift back to our core value proposition in the consumer business and the expansion of the Market Tutor for Schools go-to-market teams will enable a return to durable and profitable growth as we exit the year. We appreciate your continued interest in our company and look forward to meeting the evolving needs of learners 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?