Nerdy, Inc.

Good afternoon. Thank you for attending NERDI Incorporated's Q3 2025 earnings call. My name is Micaiah, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, T.J. Lynn, Associate General Counsel of NERDI. You may proceed.

Good afternoon, and thank you for joining us for NERDI's third quarter 2025 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 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 third 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. As we close out the third quarter of 2025, I want to start by acknowledging some challenges we face this back-to-school season. Our starting point heading into the fourth quarter was behind where we were targeting, with delays in key product launches delaying our anticipated inflection in growth and profitability by a quarter. These setbacks, including some operational challenges, stem from the growing strain on our underlying systems, which were built over years to support an expanding array of products from live scheduled video tutoring to instant on-demand video tutoring to AI tools to diagnostics and more, and they span both our consumer and institutional offerings. As we've scaled the sprawl, these systems created technical debt that slowed our product velocity, leading to slower timelines and launches. This new school year, several key initiatives were impacted as product launches were delayed, which culminated in us not fully capitalizing on back to school peak. These disparate technology systems led to a disconnected experience across product modalities, including tutoring, livestream classes, AI tools, and our practice and self-study tools, each in a different user interface. This slow down year to date and product delays in the back to school period in particular prompted a period of deep introspection for me. This summer, we started a few new vendor relationships with early stage enterprise software startups. Their ability to build that new features almost entire products in a week or two was 10 times faster than what I had ever witnessed before. With brand new code bases defaulting to AI coding versus just AI assisted coding, and no preconceived notions of what was possible or how to build software. They were able to build at 10 times the pace of what we'd seen before. That experience inspired me to rethink every aspect of how we build products and software. I dove into these root technical issues myself, working closely with a small group to rethink our platform for the ground up in this AI native era. In effect, it required replatforming my own skillset and learning to build software natively with AI. And it represented a transition from being a non-technical founder to a technical founder made possible with and thanks to extensive AI augmentation. Our platform is now undergoing the same replatforming and metamorphosis. What I realized is that to truly harness AI's potential in enhancing every aspect of live human tutoring, we needed to shed legacy constraints entirely. I've personally led a small group that worked day and night to rebuild key aspects of our core infrastructure from scratch using AI-assisted software development and preserving essential business logic and data while migrating to modern decoupled systems. As we proved out this new way of working and building, we enlisted our entire product and engineering org and have made significant progress. We are now targeting having nearly 100% of our traffic on new code bases written by AI by the end of November. What's really exciting is that it's already unlocking customer facing innovation at a pace we've never seen before. And by the end of the year, we anticipate our backend legacy systems will be fully decoupled, allowing us to integrate AI much more deeply across the platform and launch new interactive context-aware experiences with a fraction of the effort. This reinvention isn't abstract. It's already delivering tangible progress. For instance, our 2.0 version of our flagship live learning platform video tutoring product launched with a rollout from September to October, achieving a reduction of approximately 50% in audio video air rates and nearly 40% cost savings per session, along with very positive tutor feedback and very positive student feedback on usability and quality. We're also rolling out brand new, completely rethought new student and tutor experiences. with October launches of entirely new and unified experiences that bring together all of our products into a cohesive interface. Products like our new AI Practice Hub featured in our last shareholder letter are now fully integrated into both the student experience and our new live learning platform. This enables content and AI tools to enhance the entire customer journey and fully leverages the personalization and enhancements that AI now makes possible. Other AI driven wins include better site conversion on our new homepage, as well as significant drop in the tutor replacement rate via new AI vetting of tutors with interactive conversational AI interviews that have automated 80% of the tutor application review. That has boosted new tutor quality and the quality of matches, which we believe will lead to meaningful retention improvements. We're collapsing disparate experiences into a unified, cohesive platform that supports discovery across multiple subjects, multiple modalities, and multiple academic years. For example, our new learner experience not only integrates Practice Hub directly into the core experience, but it also makes it easier to discover and enroll in live classes, as well as find and use diagnostics and other self-study tools. We've seen early indicators that this drives higher engagement, Historically, when users adopt multi-subject or multi-modality learning, retention improves meaningfully. Since launch, we've seen more than 50% growth in the consumption of self-study tools and content with emerging positive trends on repeat user engagement. With the new multi-format, multi-subject integrated experience, we believe we can extend the retention improvements that we're currently seeing in the first month for new customers, which are up meaningfully year over year, into later stages of the customer lifecycle. In the fourth quarter, our focus will extend beyond the first month activation and onboarding, and we'll focus extensively on new product and new subject discovery for customers. As one small example of an improvement that's easy now that was hard in the past, we look forward to launching our first version of gamification, which we believe could take user delight to a whole new level. Our Live Plus AI approach remains central to how we are enhancing the overall experience. That's where human tutors augmented by AI create an offering and drive outcomes that neither could achieve alone. This was underscored by a recent Carnegie Mellon study that showed human tutoring augmented by AI drove a much higher level of student outcomes than AI alone or humans alone. That reality is a key reason why the idea of AI enhanced human tutoring was elevated to the highest levels of education policy, and it's been exciting to see the AI education effort kick off in September at a White House event I was fortunate to attend. Our multi-year partnership with Carnegie Mellon's METL's Applied Learning Sciences program has been transformative, yielding cutting-edge research and AI innovation that is now poised to redefine online tutoring. By applying advanced discourse analysis, large language models, and other AI techniques to session transcripts and video feeds, we've uncovered key insights into effective tutoring dynamics that demonstrate the clear advantages of one-on-one interactions over traditional methods. It's also allowed for us to identify actionable strategies to enhance session quality and mitigate issues like inconsistent human performance. We're now operationalizing these findings to optimize experiences before, during, and after tutoring sessions. We're delivering tailored insights to students and tutors post-session and pairing the insights we surfaced with automated actions like agentic practice problems and more that enhance the overall experience for users on the platform. We anticipate these enhancements will drive substantial gains in retention over the coming months and years. To execute this vision and improve our overall execution, we've strengthened our operational leadership. In August, we appointed a new chief operating officer with proven experience, scaling operations and marketplaces, and concurrently hired 13 director and senior director level operational leaders across key functions in the company. This is centralized control, upleveled our talent across all operational leadership roles at the top several layers of the company, and it's accelerated process improvements from software driven efficiencies to better demand forecasting. As one such example, AI in sales is playing a key role here, with real-time heads-up displays, agent prompting, and call scoring having lifted conversions by more than 10%. These improvements have the potential to decrease overall sales and customer acquisition costs in the near future. On the institutional side, our efforts to align our products with established intervention frameworks that schools rely upon, like MTSS and RTI, is resonating. Our new end-to-end Varsity Tutors for Schools experience launches towards the end of the quarter and will better align to how schools operate, make it easier for school leaders to prescribe interventions and act upon data, and ultimately be a more sellable product for district-wide sales. In the third quarter, we continued our path to profitability, delivering 960 basis points improvement in non-GAAP adjusted EBITDA margin year-over-year, driven by improved operating efficiency and cost reductions across every P&L line item. AI-enabled productivity improvements coupled with new software-driven processes are substantially improving our operations and are allowing us to do more with less. For example, our headcount was down by approximately 27% year-over-year as compared to the third quarter of last year. Recent advancements in our application of AI that are made possible by a new and more flexible platform provide us the opportunity to move faster and drive further levels of productivity and operating leverage. while improving the customer experience as we continue to scale our business. Thank you for your continued support. We look forward to showing you in the quarters ahead what we'll be able to do with a new, modern tech stack, an evolved approach to product development, and liberated from tech debt. With that, I'll turn the call over to Jason to discuss the financials in more detail. Jason?