Nerdy, Inc.

Cole, Good afternoon, thank you for attending today's nerdy incorporated Q4 2024 earnings call my name is Cole and i'll be the moderator for today's call. Cole, All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end and I like to pass the conference over to your host TJ Lynn associate general counsel of nerdy you may proceed.

Good afternoon, and thank you for joining us for NERDI's fourth quarter 2024 earnings call. With me are Chuck Cohn, founder, chairman, and chief executive officer of NERDI, and Jason Pella, chief financial officer. Before I turn to follow up with 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 revision 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 fourth quarter results and the company's 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 shareholder letter for reconciliations of these non-GAAP measures. With that, let me turn the call over to Chuck.

Thanks, TJ, and thank you to everyone for joining us today. In 2024, we unified our consumer and institutional offerings, improved our marketplace technology, and enhanced our all-access subscription offerings. We had a strong fourth quarter where we delivered both revenue and adjusted EBITDA above the high end of guidance, and we're entering 2025 with a stronger platform and are innovating at a faster pace. Our vertically integrated quality controlled marketplace manages the entire learning journey, vetting, matching, scheduling, adaptive testing, live tutoring, and continuous improvement directly on platform. This closed loop system drives quality and retention. And in 2025, AI will optimize every step from personalized lessons and practice problems to real-time insights, live instruction, and program reporting. Our goal is to make our learning experience the default choice for both learners and institutions. With over 10 million hours of one-on-one tutoring recorded to date, we're in a position to benefit from AI-driven enhancements that will allow us to elevate engagement and drive growth and profitability improvements. We're introducing several AI-powered products to our platform that allow us to better provide learner and expert support throughout the learning journey. First, our new AI session playback tool that leverages generative AI to turn each tutoring session into actionable insights for learners, parents, and educators. Our platform now automatically transcribes and summarizes every session, highlighting key concepts and areas of strength or weakness and links directly to the relevant sections of the recorded video. For consumers, these insights help learners track progress and they give parents a clear view of their investments value. The initial signal is positive with tutoring session usage higher for those exposed to AI session summaries with a 99% positive feedback rate from parents and students. For institutions, teachers gain data-driven insights to refine instruction or interventions, while administrators benefit from transparent reporting. Real-time feedback from these summaries also drives compounding improvements across our vertically integrated platform, allowing us to refine service delivery at a pace not previously possible. As we move throughout the year, we will deepen our AI capabilities for institutions with dynamic exit ticket generation, leverage transcripts to generate homework after each session, and create lesson plans in advance of the next one. We will also add an advanced predictive analytics suite, including cohort level analysis and reporting tools, aiding district leaders in identifying at-risk students and providing them clear visibility into program efficacy. We recently released our next generation AI lesson plan and practice problem generators to make creating robust, customized, standards-aligned lesson content in seconds seamless. These tools are now available for both experts for tutoring and with our paid institutional product to teachers, and initial signal's been positive. This year, we will continue to build AI products for teachers and schools that make access to our platform more compelling and increase the value of the AI and software tools provided on the platform. Many of these tools also drive efficiency and benefit us operationally. For instance, by automating content creation, we're reducing operational costs and improving profitability. We recently introduced Tutor Copilot, a product that provides AI-driven support that elevates real-time instruction, enabling every tutor to deliver personalized, high-quality sessions. It's embedded in our live learning platform and Tutor Copilot offers instructional suggestions, it generates lessons and practice content, and it helps deepen student engagement. This product's an example of how we integrate AI into the learning experience in a way that enhances rather than replaces the personal touch that learners value. By reducing prep time and streamlining lesson planning, It ensures more time is spent on interactive live instruction. Looking ahead to the rest of 2025, we'll continue to enhance our AI driven offerings to continue to refine and elevate the tutor and student experience. This year, we're planning to upgrade our AI tutor currently available for consumers and then make it available broadly to institutions. This will empower students and on demand support between live sessions, creating a cohesive learning ecosystem across both consumer and institutional audiences. We'll also refine our expert learner matching algorithm, incorporating more factors and data for even greater precision and improve match quality and ultimately customer lifetime value. Additionally, we're in the early stages of agentifying processes to increase quality and reduce costs. For instance, if a tutor isn't the right fit after a session, our AI can initiate and complete a replacement within minutes of a session completing, minimizing customer frustration and ensuring an exceptional experience. Once we perfect Tutor Copilot, we'll adapt those learnings to launch a Teacher Copilot for our paid institutional platform, further embedding our tools in classrooms. For consumers, we will focus on driving retention and extending lifetime value through a higher quality and more personalized offering building on our strong Q4 momentum. Over the past quarter, it's apparent that our progress on foundational marketplace aspects like vetting, matching and scheduling and more has positioned us to now shift greater focus toward AI driven innovation. These AI products and tools are now advanced enough to drive significant improvements with less effort while allowing us to compound many small wins across the entire learning journey. Now, looking back on 2024, we made significant progress against the three primary themes we laid out last year, including scaling the winning product for every learner. We unified our consumer and institutional platforms to deliver a modern, intuitive, and personalized learning experience. This streamlined approach enables faster feature releases complemented by improved onboarding and activation for new learners. As a result, consumer engagement rose 26% year-over-year in the fourth quarter, and new customer retention improved. Key investments included My Learning Hub and subject portals, which enable easier resource discovery and progress tracking. We streamlined onboarding for a simpler path to getting started with a tutor, and we improved tutor matching to pair learners with the right tutor more effectively. We also emphasized learning memberships that focused on weekly tutoring sessions, And that's led to quicker first sessions, more frequent tutoring engagement, increased engagement with non-tutoring tools, and higher average revenue per member per month, as well as stronger retention. We expect these changes will drive a return to growth, enhance unit economics, and support our path to profitability in 2025. Over the past year, we invested in our institutional go-to-market strategy and platform to scale varsity tutors for schools, and we expanded the number of learners we can impact. We productized and launched access to our platform, ultimately introducing offerings to more than 5 million students across 1,100 school districts. These efforts increased awareness in our company at a larger scale, built trust with K-12 institutions, and positioned us as a preferred tutoring partner for districts implementing paid tutoring programs. In the fourth quarter, 43% of paid contracts and 36% of total bookings value came from school district partners who initially partnered with Varsity Tutors for Schools via access to our platform and then subsequently converted to our paid offerings. On a go-forward basis, we'll be shifting our focus toward paid access to the Varsity Tutors platform for any new customers given the significant AI-led product enhancements that are being introduced in 2025. This past year, we made substantial improvements to modernize several components of our marketplace infrastructure, including scheduling, invoicing, substitution, and other logistics capabilities that we believe will allow us to provide a best-in-class customer experience. These improvements simplified operations, reduced tutor and marketplace operations costs, and simultaneously improved the customer experience. We believe the recent advances in AI provide us with the opportunity to drive further levels of productivity improvement, including through automation of key processes that will allow us to improve both the customer experience and operational consistency while also removing substantial costs. In fact, we believe headcount peaked during the back to school period in 2024, and we now anticipate that the productivity improvements driven by AI will allow us to scale without hiring in the majority of areas on a go-forward basis. In closing, we're energized by the rapid pace of innovation that is positioning us to achieve significant progress towards our vision of AI for HI, or artificial intelligence for human interaction, and what it can mean for our company. We look forward to providing you with additional updates as we embrace these new AI technologies and fulfill our mission to transform how people learn by 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.