Nerdy, Inc.

Good afternoon. Thank you for attending NERDI Inc's Q4 2025 earnings call. My name is Tamiya, 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. Lin, Associate General Counsel of NERDI. You may proceed.

Good afternoon, and thank you for joining us for NERDI's fourth quarter 2025 earnings call. With me are Chuck Cohn, founder, chairman, and chief executive officer of NERDI, and Jason Pella, 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 circumstance 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 today's call. In the fourth quarter, I'm pleased to share we delivered on the three goals we set entering 2025. Return the business to growth, accelerate our transformation into an AI-native platform, and achieve positive non-gap adjusted EBITDA. Fourth quarter revenue is $49.1 million above the top end of guidance and up 2% year over year. This was the first quarter since Q1 of 2024 in which both our consumer and institutional businesses grew simultaneously. Non-GAAP adjusted EBITDA was positive $1.3 million, beating our guidance range of negative $2 million to break even and improving by $6.8 million from Q4 2024. We completed the rollout of our new learner and expert experiences in the fourth quarter with an AI native code base and entered 2026 with a stronger, more flexible foundation, improved unit economics, and significantly higher product development velocity. Zooming out, we get a lot of questions about how AI is changing how we think about our business and our industry. The demand signals we are seeing and the conversations we're having with customers indicate that the market for high-quality, personalized, one-on-one tutoring remains large and enduring. And it represents a big opportunity for us to better serve and reach these learners. Roughly 50 million students progress through the K-12 education system and higher education system in the United States each year. And families seek premium private tutoring for meaningful long-term goals. whether it's a first grader learning to read with a specialist, a high school junior aiming for an elite college, or a college student fighting to stay on the path to medical school and get past organic chemistry. These are deeply personal journeys where sustained human connection, accountability, expertise, rapport, and trust, and a little pushing can go a long way to getting differential results. The U.S. academic tutoring market is estimated at approximately $20 billion per year, yet we currently serve fewer than 40,000 active members. Given our strong monetization, success does not require capturing the entire market, and we have very purposely focused our platform and go-to-market on serving that long-term recurring need and scaling high-quality live learning with a focus on one-to-one relationships. Most of the people I talk to, including almost all the investors and research analysts we meet with, rely on dedicated tutors for exactly those reasons for their own children. Ask any parents they prefer that their child learn from a human tutor or AI, and they will all provide the same answer, a human tutor. We're trying to actually take the best of both worlds and amplify what would otherwise be possible. Meaningful penetration of the premium segment for high quality personalized tutoring always represents a substantial and durable opportunity. This is precisely why we invested so heavily in 2025 to rebuild our platform from the ground up with an entirely new AI native code base. AI now makes the expert tutors on our platform dramatically more effective by automating and personalizing the creation of the perfect content and lessons for tutoring sessions, generating real-time insights, improving progress visibility for parents, and preserving irreplaceable human relationships that drive outcomes. The result is our live plus AI model that lets us serve a meaningfully larger portion of this enduring premium market while delivering a solution that is improving in quality by the month. Returning to sustainable growth required us to get back to fundamentals in our consumer business. Specifically, this meant shifting towards higher-frequency learning memberships built around a consistent weekly tutoring habit as well as meaningfully strengthening the core value of our platform through product innovation. The results have validated this strategy. Monthly recurring learning membership revenue returned to year-over-year growth by the end of Q1. In Q2, consumer learning membership revenue grew 4% year-over-year for the first time since Q2 of 2024, with ARPUM reaching $348, a 24% increase. Q3 consolidated revenue growth improved 1,000 basis points sequentially. In Q4, we delivered our most complete quarter yet. with $49.1 million of revenue, up 2% year-over-year, with both consumer and institutional businesses growing simultaneously. Active members ended the year at 33.2 thousand. Throughout the year, we intentionally moved to higher-frequency, higher-priced memberships to drive better ARPM and longer-term retention. Each quarter throughout 2025, our year-over-year revenue growth improved sequentially, positioning us for continued momentum as we entered 2026. In 2025, our most important work was strengthening the Live Plus AI platform and rebuilding it to be AI native. Peer-reviewed research shows that while pure AI tools can improve some content delivery mechanisms, they fall short on dimensions that matter most to students and parents, emotional connection, accountability, sustained motivation, and deep understanding. Our model pairs expert tutors with AI, and the combination delivers outcomes that neither could achieve alone. As a simple example of how AI is improving the product from a customer's perspective, last year we rolled out hyper-personalized lesson plans and advanced tutoring sessions. We built in real-time tools to help tutors during live sessions. And then we delivered a comprehensive outcomes-oriented summary of the actual session afterwards. Parents love being able to see their kids on camera at that exact moment that they had the aha moment. And it's something that we call moments of learning and was something that was a home run feature that we rolled out in the back half of last year. These received more than 95% positive feedback from parents and students, and they led to higher session utilization and improved customer retention. Over the course of 2025, we expanded this capability to include multi-session context, quantitative engagement metrics, and cohort level analytics for school districts as well. In Q4, we completed the rollout of our entirely new learner and expert user experiences. We surveyed 277 active customers who experienced both versions this past month. 85% rated the new platform better than the same, delivering an 82% customer satisfaction score. Customers highlighted improved intuitiveness, clear progress visibility, and easier discovery of learning options. The new AI-native architecture now lets us innovate at a pace that was not previously possible, delivering more value to customers faster than ever before. In the fourth quarter, we delivered on our commitment to positive non-gap adjusted EBITDA. The milestone was driven by revenue growth, gross margin expansion, durable cost reductions we've made, and operational efficiencies gained through automation. Fourth quarter non-GAAP adjusted EBITDA was positive $1.3 million, and non-GAAP adjusted EBITDA margin expanded by more than 1,400 basis points year over year, demonstrating the structural improvement we've made in our cost base. The shift to higher frequency memberships and new customer price increases implemented in Q1 of 2025 drove meaningful ARPUM growth and better retention in newer cohorts, giving us more durable and recurring revenue. Non-GAAP adjusted gross margin, excluding the one-time abandonment charge as we moved to the new platform, reached 66.8% in Q4, the third consecutive quarter of sequential improvement. Last year, we went about better aligning the earning potential experts have on our platform with the retention of customers. While early year investments in Tudor incentives decreased first half gross margins, they delivered the expected behavioral changes, faster time to first session, more sessions in the first 30 days, lower replacement rates, and higher retention. We also drove efficiency across every P&L line. Full year headcount declined 22% through automation aimed at improving the customer experience and touching many different parts of our marketplace, including tutor matching, substitution, customer service, and scheduling. This also helped drive durable cost reductions and improved unit economics. These changes, together with the new platform, position us to compound productivity and operating leverage as we grow. Looking ahead to 2026, the foundational work of the past year, replatforming, cost discipline, and the AI-native capabilities is now beginning to pull through to stronger financial performance. We have three clear priorities as we return to full-year growth and profitability. First, we'll continue to enhance personalized learning across our Live Plus AI platform. Our new architecture gives us the ability to innovate far faster than before. We'll continue to apply AI in practical ways that enhance the core Live Plus AI experience our customers already value. With over 10 million hours of live one-on-one tutoring on the platform to date, we are able to deliver personalized learning experiences that get progressively better over time to students in ways that few other platforms like ours can't. And with the recent addition of many new ways for students to learn and get academic assistance outside of just tutoring on the platform, we expect to deepen our engagement with each learner and further improve our ability to better personalize the product to their specific needs. The second big priority for 2026 is that we'll return to active member growth. As a result of the tremendous progress we made this past year to get to an AI-native platform, we are now focused on expanding our active member base. We'll accelerate top of funnel growth through new marketing channels to drive awareness and virality, coupled with the launch of an improved mobile experience. The new platform is more modern and intuitive, improves discoverability of new subjects and products, and it makes it easier to get tremendous value out of a student's learning membership, which we expect to lead to improved customer retention and higher growth rates. Our third and last goal for 2026 is that we will compound gross margin and structural cost improvements. The heavy lifting of the past 12 months is now pulling through to financials. We are targeting break-even, non-gap adjusted EBITDA for the full year 2026, an improvement of more than 1,000 basis points for the full year versus the full year 2025. We expect gross margin to expand each quarter as tutor incentive programs are further optimized and as consumer revenue continues to shift towards higher frequency learning memberships. combined with a lower overall cost structure that is leaner and more efficient, we believe these changes will deliver increasing operating leverage as revenue grows. We'll also use AI to streamline our operations and further reduce costs. Our 2026 guidance does not yet reflect the full benefit of the new platform rollout, which is still in early adoption. We look forward to updating you as we progress throughout the year. With that, I'll turn the call over to Jason to discuss the financials in more detail.