Nerdy, Inc.

Good afternoon, and thank you for attending the NERDI Incorporated Q1 2025 Earnings Call. My name is Jason. I'll be the moderator today. All lines be muted during the presentation portion of the call and opportunity for questions and answers at the end. I would now like to pass the conference over to your host, E.J. Lin, Associate General Counsel of NERDI. You may proceed.

Good afternoon, and thank you for joining us for NERDI's first quarter 2025 earnings call. With me are Chuck Cohn, Thunder Chairman and Chief Executive Officer of NERDI, and Jason Pellow, Chief Financial Officer. Before I turn the call over to Chuck, I'll remind everyone 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 offense, conditions, or circumstances on which any such statement is based. Please refer to the disclaimers in today's shareholder letter announcing NERDI's first 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 today's call. In the first quarter, we continued to execute against our goals to deliver product innovation and operational improvements that will enable a return to growth and profitability. Our investments in the quality of our revenue and focus on delivering enhancements to learning memberships are continuing to build momentum. improvements to the onboarding experience and learner expert matching process and the launch of several new products are improving match quality and lifetime value through more personalized offering. Due to the increased value we continue to incorporate into our learning memberships, we increase consumer pricing during the quarter. When combined with the makeshift to higher frequency learning memberships, Average revenue per member per month, or ARPA, increased to $335, a 14% improvement on a year-over-year basis as of March 31, 2025. Coupled with improvements to new customer acquisition, monthly recurring learning membership revenue inflected positively on a year-over-year basis at the end of March, a clear indication that our quality of revenue strategy is taking hold. During the first quarter, we implemented tutor incentives that are driving higher utilization of tutoring sessions across both our consumer and institutional businesses. Following the adoption of the new expert incentives, we are already seeing several positive leading indicators in the learner-expert relationship, including faster time to first session, more sessions in the first 30 days, more sessions per active tutor, lower tutor replacement rates, and higher customer retention. all of which should continue to strengthen our business. During the quarter, gross margins were lower year-over-year due to the temporary timing differences between the investments we've made in Tudor incentives and the price increases enacted for our new consumer customers. As we move throughout the year and mix towards a higher proportion of new consumer customers, we expect to deliver sequential quarterly improvements to gross margin. Our recent streak of strong execution combining product innovation with streamlined processes and systems sets us up to scale more efficiently and accelerate future growth. From a product perspective, we continue to deliver new products at a rapid pace. For years, our proprietary AI has powered matching algorithms, adaptive assessments, content creation, and the operational workflows that keep our vertically integrated quality controlled marketplace operating. Now, we're turning those same engines outward. So, learners, families, and educators see the benefits in real time through Live Plus AI that include a unified experience rolling out across every audience we serve, from families purchasing tutoring to K-12 school districts licensing the platform for their students, expert tutors on our marketplace, and even classroom teachers and partner schools. Live Plus AI is grounded in a simple truth. Technology is most powerful when it amplifies, not replaces, the human bond at the center of learning. By embedding AI tools directly into the learning experience, including AI enhanced tutoring, AI session insights and video playback, 24-7 chat tutoring by humans or AI, live classes, tutor co-pilot, and much more, we're giving students hands-on exposure to this transformative technology and personalizing their learning. Recently, the President signed an executive order titled Advancing Artificial Intelligence Education for American Youth, which calls for integrating AI across K-12 education, training teachers on AI utilization, and developing workforce skills for an AI-powered future. The executive order validates our existing strategy, giving schools added confidence to embrace AI, reducing hesitation, boosting interest and enabling them to better personalize learning for each student while building the AI fluency students will need in the future. During the first quarter, we introduced generative AI capabilities that turn each tutoring session into actionable insights for learners, parents, and educators. Our platform automatically transcribes and summarizes every session, highlighting key concepts and areas of strength or weakness, and it links it directly to the relevant sections of the recorded video. AI-generated summaries are now provided for all sessions, providing links to key learning moments during each tutoring session. For consumers, these insights help learners track progress and give parents a clear view of their investment's value. We've now broadly rolled out these improvements to all consumer customers after seeing higher tutoring session utilization in our testing, along with greater than 95% positive feedback rate among parents and students and improved customer retention. For institutions, AI-generated session summaries are now available for all Varsity Tutors for Schools sessions, allowing teachers and administrators to gain data-driven insights to refine instruction or interventions while benefiting from transparent reporting and clearer visibility into program efficacy. As we move throughout the year, we will deepen our AI capabilities for institutions with dynamic exit ticket generation and advanced cohort-level analysis and analytics, aiding district leaders in identifying at-risk students earlier and allocating resources more effectively. We also released our next-generation AI lesson plan and practice problem generators to create robust, customized, standards-aligned lesson content in seconds. These tools are now available to both experts for tutoring and within our paid institutional products to teachers. By automating lesson preparation, progress summaries, and individualized practice problems, our tools can free up substantial time each week for educators. It also helps advance key district priorities, such as accelerating learning gains, improving student outcomes, and strengthening staff retention. For learners, they benefit by getting access to a robust set of academic resources that provide them with additional support between live sessions. Moving on to our business outlook, we're executing on multiple levers in order to deliver on our path to profitability. First, product innovation is enhancing the onboarding experience. In particular, AI session summaries, tutor incentives, and higher session frequency learning memberships are improving retention rates in recent cohorts on a year-over-year basis. Second, price increases are leading to revenue and gross margin improvements in new customer cohorts. As we move throughout the year and make shifts toward a higher proportion of new consumer customers, we expect to deliver sequential quarterly improvements to gross margin and end the year with ARPUM above $370 on a consolidated basis. Finally, by rolling out AI-powered productivity tools and software-driven workflows, we improved operating leverage and decreased headcount by about 16% since December 31st. We believe that the recent advances in AI provide us with the opportunity to drive further levels of productivity, including the gentrification of key processes that will allow us to improve both the customer experience and operational consistency while also removing substantial costs. We expect the combination of the above levers will lead to learning membership revenue returning to growth in the second quarter of 2025. As we move throughout the year, we expect to deliver sequential quarterly improvements in consolidated revenue growth rates and gross margin that we expect will culminate in becoming adjusted EBITDA and operating cash flow positive in the fourth quarter of 2025. In closing, artificial intelligence is reshaping education, and its impact is greatest when paired with the empathy, encouragement, and accountability of skilled educators. By bringing our AI capabilities to the forefront through Live Plus AI, we are elevating the learner experience, deepening customer engagement, and widening the competitive moat we have built over more than a decade. As 2025 unfolds, we will expand these capabilities, strengthen relationships across every audience we serve, and execute on our path to sustainable, profitable growth. And with that, I'll turn the call over to Jason to discuss the financials in more detail. Jason?