Nerdy Q2 Earnings Call Highlights

Key Points

• Q2 performance improved: Revenue fell 4% year over year to $43.3 million, but gross margin expanded to 64.7%, net loss narrowed to $6.9 million, and adjusted EBITDA loss improved to $900,000.
• Nerdy is refocusing on consumer learning: The company will wind down Varsity Tutors for Schools and exit First Tutors, expecting to cut annual fixed costs by about $11 million. The exits reduced 2026 revenue guidance to $168 million–$175 million, while management maintained that the consumer business outlook is unchanged.
• Product and efficiency investments continue: Nerdy is expanding AI-enabled learning tools, including a Study Plan and a self-service checkout funnel, while reducing headcount. Management expects year-end cash of approximately $30 million–$32 million and believes existing liquidity can fund operations through free-cash-flow breakeven.

Nerdy NYSE: NRDY reported second-quarter results that showed improved margins and a narrower loss, while the online learning company announced plans to wind down its Varsity Tutors for Schools business and exit First Tutors, a smaller U.K. tutoring operation.

Founder, Chairman and Chief Executive Officer Chuck Cohn said the decisions are intended to concentrate the company’s capital, product development and management attention on its consumer learning business. Consumer revenue totaled $36.5 million in the quarter, representing 84% of Nerdy’s total revenue of $43.3 million.

“Q2 demonstrated continued improvement in Nerdy’s operating performance,” Cohn said, describing the company as a more focused consumer learning business centered on connected tools for learning, tutoring and progress tracking.

Second-Quarter Financial Results

Total revenue was down 4% year over year to $43.3 million, within the company’s guidance range of $42 million to $44 million. Consumer average revenue per month, or ARPM, rose 5% from a year earlier to $366.

Learning Memberships stood at 29,100 as of June 30, down 5% year over year. However, the company said the rate of membership decline moderated for the fourth consecutive quarter. Chief Financial Officer Atul Bagga said Nerdy expects active member growth to turn positive by the end of 2026, supported by retention initiatives and a more efficient customer-acquisition approach.

• Gross margin expanded 320 basis points year over year to 64.7%.
• Net loss improved to $6.9 million, compared with a $12 million loss a year earlier.
• Non-GAAP adjusted EBITDA loss narrowed 68% to $900,000 from $2.7 million in the prior-year quarter.
• Free cash flow was negative $6.3 million, improving from negative $8.2 million a year earlier.
• Cash and cash equivalents totaled $38.4 million at quarter-end.

Bagga attributed the gross-margin improvement to lower amortization of capitalized internal-use software following abandonment charges in the fourth quarter of 2025, as well as lower expert costs. Sales and marketing expense declined 15% year over year to $11.5 million, while general and administrative expense fell 14% to $22.9 million.

Exits Narrow Focus to Consumer Business

Nerdy said it will shut down Varsity Tutors for Schools, or VT4S, and leave First Tutors. Cohn said VT4S accounted for a low-single-digit percentage of the overall business but carried complexity amid a school funding environment that has been challenged for several years.

The company expects the exits to reduce its annual fixed-cost run rate by approximately $11 million. It anticipates incurring roughly $2 million to $4 million in exit-related costs, mostly during the third quarter.

Bagga said the school-focused business was profitable, but management sees a larger opportunity and higher potential return on investment in consumer learning products. The exits also are intended to support Nerdy’s path toward sustained profitability and free-cash-flow breakeven.

The company reduced its 2026 revenue guidance to a range of $168 million to $175 million, from a prior outlook of $180 million to $190 million. Management said the lower forecast reflects the businesses being exited rather than a change in expectations for the consumer business.

For the third quarter, Nerdy expects revenue of $32 million to $35 million and a non-GAAP adjusted EBITDA loss of $9 million to $6 million, excluding exit costs. The company described the third quarter as its seasonally lowest-revenue period, with back-to-school cohorts converting into revenue late in the quarter and into the fourth quarter.

For the full year, Nerdy now expects non-GAAP adjusted EBITDA between a loss of $4 million and approximately break-even, excluding exit costs. Its prior outlook called for approximately break-even adjusted EBITDA.

AI Investment and Product Expansion

Nerdy said it is using artificial intelligence tools to accelerate product development while reducing fixed headcount. Total headcount was down 34% year over year at the end of the second quarter, and the engineering organization was 30% smaller than a year earlier, according to Cohn.

AI-related expense totaled $2 million in the quarter, compared with $700,000 in the first quarter and $400,000 in the year-earlier period. Bagga said nearly all employees use AI tools daily, and the company expects AI usage to rise while efficiency improvements keep AI spending at or below current levels.

Cohn said Nerdy has launched or rebuilt nearly every part of its digital learning experience surrounding live tutoring since the beginning of 2026. Its content library now includes more than 15,000 lessons spanning 220 subjects, alongside diagnostics, quizzes, practice tests, flashcards and other learning materials.

The company is integrating those resources into a “Study Plan” designed to combine a learner’s goals, available time, mastered skills and recommended activities, including live tutoring. The plan is visible to students and tutors, and Nerdy expects to extend it to all tutoring relationships in August.

Nerdy is also moving toward a self-service customer-acquisition model. Historically, most customers converted through a telesales-assisted process, but Cohn said learners can now register online, experience the platform and purchase Learning Memberships through a self-service checkout funnel. Management believes the approach can lower acquisition costs and improve scalability.

Cash Outlook

Nerdy now expects to finish 2026 with approximately $30 million to $32 million in cash and cash equivalents, including $20 million drawn on its term loan. Its previous year-end cash expectation was $40 million to $45 million.

Bagga said the change primarily reflects the timing of VT4S collections and expected wind-down costs. Because VT4S contracts are generally annual, prepaid arrangements, exiting before the peak booking period reduces expected cash collections. He said the lower year-end cash outlook does not reflect changed economics in the consumer business.

Based on its current operating plan, Nerdy said its existing liquidity is expected to fund the company through free-cash-flow breakeven.

About Nerdy (NYSE:NRDY)

Nerdy, Inc NYSE: NRDY is an American education technology company that operates a live online learning marketplace. Through its flagship Varsity Tutors platform, the company connects students, professionals and lifelong learners with a network of thousands of educators for personalized one-on-one tutoring, group classes and test preparation. The platform leverages proprietary matching algorithms to pair learners with instructors based on subject expertise, learning style and scheduling preferences.

Founded in 2007 by entrepreneur Chuck Cohn, Nerdy began as Varsity Tutors in Washington, DC, before establishing its headquarters in St.

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