Nerdy Reports Q2 Revenue of $43.3 Million, Cuts 2026 Outlook

Nerdy (NYSE: NRDY) held its second-quarter earnings call on Thursday. The full call transcript follows. 5 million, or 84% of the total. 7%.

9 million. 9 million from $12 million a year earlier. Nerdy said it exited Varsity Tutors for Schools and First Tutors, shifting its focus to the consumer segment to enhance its learning platform and increase ROI. Platform enhancements include a comprehensive study-plan system that uses AI to improve the customer experience and operational efficiency.

The company lowered its 2026 revenue guidance to $168 million-$175 million, citing business exits. It expects Q3 revenue to be seasonally lower because of school holidays. Management also cited a 34% reduction in headcount and increased AI. The company expects to finish the year with $30 million-$32 million in cash and, under its current operating plans, aims to reach free cash flow breakeven.

's second quarter 2026 earnings call by welcoming participants and explaining that lines would be muted during the presentation, with questions and answers to follow. He then handed the call to TJ Lynn, Nerdy's Associate General Counsel. Lynn welcomed listeners to the call and introduced Chuck Cohn, Nerdy's Founder, Chairman and Chief Executive Officer, and Atul Baga, its Chief Financial Officer. Before turning the discussion over to Cohn, Lynn cautioned that it would include forward-looking statements concerning Nerdy's future financial and operating results, strategy, opportunities, plans and outlook.

He said those statements involve Nerdy cautions that actual results could differ materially from expectations because of significant risks and uncertainties. Forward-looking statements speak only as of today, and the company undertakes no obligation to publicly update or revise them to reflect changed expectations or changes in the events, conditions or circumstances underlying those statements. For a discussion of risks, readers should consult the disclaimers in today’s shareholder letter announcing Nerdy’s second-quarter results and the company’s SEC filings. Some financial measures discussed on the call are not prepared in accordance with GAAP.

Reconciliations of those non-GAAP measures are available in today’s shareholder letter. TJ then handed the call to Chuck Cohn, Nerdy’s founder, chairman and CEO. Cohn thanked participants and said Q2 showed continued improvement in the company’s operating performance. He said the quarter also highlighted Nerdy’s evolution into a focused consumer learning company built around one connected system for learning, tutoring and progress.

3. 5 million, representing 84% of total revenue. 7%. 9 million from $12 million a year earlier.

7 million a year earlier, coming in ahead of the midpoint of the guidance range. The company said it had made two decisions to focus on what it views as its highest-return opportunity: winding down Varsity Tutors for Schools and exiting First Tutors, a small legacy tutoring business in the United Kingdom. It said the moves would concentrate its people, capital and product development on its consumer business, where it has its strongest brand and deepest operating experience, and where it sees the greatest opportunity to create a differentiated learning experience.

The company said it believes the market opportunity is significantly larger and potential returns on investment substantially higher, and that progress in its consumer product and business has been encouraging. 5 million. ARPAM was $366, up 5% year over year. 1 thousand on June 30, down 5% year over year.

The pace of decline moderated for the fourth consecutive quarter. Returning the member base to sustained growth remains an important back-to-school objective. While the rate of decline has continued to narrow, ARPAM, gross margin and operating efficiency have improved. The company expects a stronger product experience, described later, to support retention and acquisition through the back-to-school season and into 2027.

The company lowered its full-year revenue outlook to $168 million to $175 million from $180 million to $190 million, citing businesses it decided to exit. Q3 is seasonally the lowest revenue quarter, as students are out of school during the summer; revenue typically ramps up quickly as school starts in late Q3 and continues into Q4. Reflecting that seasonality and the institutional wind down, Q3 non-GAAP adjusted EBITDA guidance is negative $9 million to negative $6 million, excluding exit costs. The revised full-year non-GAAP adjusted EBITDA outlook is negative $4 million to approximately break even, excluding exit costs.

Before we Nerdy’s total headcount at the end of Q2 was down 34% year over year. Its engineering organization was 30% smaller than a year earlier, while delivering substantially more product output. The company incurred 2 million of AI-related expenses during the quarter, sharply higher than in the prior year. Nerdy said it is moderating that spending and managing it more carefully.

Variable AI costs helped accelerate the work without adding the permanent headcount a traditional production model would have required. Nerdy said AI is enabling a smaller organization to build faster, operate with fewer fixed costs and direct more resources toward customers. The company described this as one of the clearest ways AI is changing its business. Since the beginning of 2026, Nerdy has launched or rebuilt almost every part of the digital learning experience around its live tutoring product and complementary non-tutoring products.

The company said this will significantly expand the breadth and quality of its offerings for customers, before beginning to discuss examples. The selected consumer product enhancements are intended to improve the customer experience. Our library now offers more than 15,000 lessons across 220 discrete subjects, with two formats: a dynamic, textbook-style option for self-study and a presentation-style option tutors can use in live sessions. This gives us structured lessons prepared for almost every subject.

We believe these materials can improve the experience across millions of tutoring sessions each year. We expanded adaptive diagnostics, quizzes, full-length practice tests, flashcards and lessons to 200-plus subjects, bringing them together in what we call a study plan. This software-based tool tracks and schedules activities over time toward a goal. It can serve as a shared system for supporting daily active usage and providing value before, during and after tutoring sessions, as learners work toward longer-term goals.

The significance of this work is not simply the amount of content. Each lesson, diagnostic question, quiz, worksheet and activity is organized The shared academic taxonomy enables a diagnostic to pinpoint a skill gap, a study plan to recommend the next appropriate activity, and a tutor to use the same information to guide what a learner should do next. The plan combines four elements previously handled separately: the learner’s goal, the time available to achieve it, skills already mastered, and the mix of lessons, practice, diagnostics and live tutoring most likely to support progress.

Students and tutors can view the same plan in their respective experiences, and it is also available on the live learning platform where tutoring takes place. The plan is now a core part of the learning membership experience and will be extended to 100% of tutoring relationships in August. Tutoring sessions were historically often perceived by customers as the product, while interactions could be limited between sessions.

The company is building a platform where the study plan highlights ways to learn a subject both during and between live tutoring sessions, and where it can serve Our experience across more than ten million hours of live tutoring, along with many more practice activities, informs how we personalize learning and sequence content. Daily engagement is supported by a consistent stream of activity. ” That product infrastructure can also enable more efficient customer acquisition and activation. Previously, most customers converted through a telesales-assisted, consultative process.

In the new model, learners can register online, explore the platform and purchase a learning membership through a self-service checkout funnel. We believe this approach can lower acquisition costs, scale more effectively and improve the customer experience. To close, we are entering the back-to-school season as a more focused, lean company, with higher-quality products and a more efficient operating model. We believe this positions us well for the year ahead.

I’ll now turn the call over to Atul to discuss the Atul Baga, Chief Financial Officer, said second-quarter revenue and non-GAAP adjusted EBITDA were within guidance. Free cash flow improved 24% year over year as the company continued working to reduce costs. He said the quarter’s results and actions outlined by Chuck advanced his goal of reaching positive free cash flow while investing selectively in areas that support member growth. 3 million, within the 42 million to 44 million guidance range and down 4% year over year, reflecting declines in both consumer and institutional revenue.

5 million, or 84% of total revenue. Average revenue per month (ARPAM) was 366, up 5% year over year. Baga said ARPAM growth moderated as expected as the company began lapping price increases introduced in February 2025. 1 thousand as of June 30, down 5% year over year.

Baga said the rate of decline had continued to narrow sequentially for the last four Nerdy expects to return to positive active member growth by the end of 2026, following consecutive quarters and ongoing efforts to improve retention and acquire customers more efficiently. 7%, up 320 basis points from Q2 of 2025. The company attributed the expansion to lower amortization of capitalized internal-use software after abandonment charges in Q4 2025, as well as lower expert costs moving to operating expenses. 5 million, down 15% year over year, reflecting AI-enabled productivity gains and reduced investment in the institutional business.

9 million. 7 million in the same period last year. The change was mostly due to lower headcount costs, partly offset by higher AI spending. 4 million in the same quarter last year.

Nerdy said the increase reflected efforts to have every team use AI, adding that adoption across the company had moved quickly. Essentially all team members now use AI tools on a We use AI daily to address problems that previously required additional headcount or external software. The results are evident: product velocity is at its highest level in the company's history, headcount declined 34% year over year, and productivity improved across every function. Those gains contributed directly to the G&A improvement I just described.

We expect AI usage to keep increasing, while efficiency gains in deploying AI are expected to hold AI spending at or below current levels. 9 million, within our guidance range of negative 2 million to break even. 7 million. 8 million, or 68% year over year.

Performance relative to guidance reflected lower marketing spend, reduced variable staffing costs and G&A controls, partly offset by higher AI spending. 4 million in cash and cash equivalents. 2 million in the same period in 2025, or an improvement of 24%, despite lower revenue. Turning to the business outlook, two strategic decisions are intended to sharpen focus on the core business and direct capital and management attention to areas expected to generate the highest long-term return.

As Chuck mentioned, the company has exited First Tutors, a small tutoring business in the United Kingdom, and is shutting down Varsity Tutors for Schools, or VT4S. Together, these steps simplify the company and redirect capital toward its highest-return assets. The company expects approximately $2 million to $4 million in exit-related costs, mostly in Q3. The VT4S exit is expected to lower the annual fixed-cost run rate by approximately $11 million.

Excluding the exit, the full-year outlook is largely unchanged from previously announced revenue, non-GAAP adjusted EBITDA, and cash guidance. Revenue is expected to range from $32 million to $35 million in the third quarter of 2026. For full-year 2026, revenue is expected to be $168 million to $175 million, compared with the prior range of $180 million to $190 For the third quarter of 2026, the company expects non-GAAP adjusted EBITDA of negative $9 million to negative $6 million, excluding the exit cost. For full-year 2026, it forecasts non-GAAP adjusted EBITDA from negative $4 million to approximately breakeven, versus its previous outlook of approximately breakeven.

The third quarter is typically the company’s lowest-revenue quarter, as back-to-school cohorts convert into revenue late in the third quarter and into the fourth. The company now expects to end the year with approximately $30 million to $32 million in cash and cash equivalents, including $20 million drawn on its term loan, compared with its prior forecast of $40 million to $45 million. It attributed the change to the timing of VT4S collections and expected wind-down costs. VT4S contracts are generally annual, paid in advance and recognized as revenue over the following 12 months.

Exiting the business ahead of the peak booking period reduces cash collections and the year-end cash balance assumptions included in the prior outlook. To be clear, the year-end The change in cash balance does not reflect altered economics in the consumer business; it reflects the working-capital cycle of the business we are exiting. Under our current operating plan, we expect existing liquidity to fund the company through free cash flow breakeven. To conclude, revenue and non-GAAP adjusted EBITDA were within guidance.

The non-GAAP adjusted EBITDA loss improved 68%, while free cash flow improved 24% year over year. My mandate remains unchanged: to bring Nerdy to positive free cash flow while investing prudently in areas that drive member growth. A simpler business, a leaner cost structure and capital directed toward the best opportunities are how we will achieve that. I will now hand the call to the operator for Q&A.

We will begin the question-and-answer session. Please limit yourself to one question and one follow-up. To ask a question, press star one to raise your hand. Press star one again to withdraw your question.

Please pick up your handset when asking a question for optimal sound quality. If your device is muted locally, remember to unmute it. Please hold while we compile the Q&A queue. Greg Gibbes of Northland Securities asked CEO Chuck Cohn and Atul about the reasons for winding down Varsity Tutors for Schools and the expected net effect on costs or profitability once the process is complete.

Cohn thanked Gibbes and said the company was increasingly encouraged by its consumer product and progress there. He described an opportunity to connect different learning formats, expand beyond tutoring and build deeper, broader relationships with learners across subjects, product formats and semesters. Cohn said the company was encouraged by momentum and engagement, and saw an opportunity to accelerate its product roadmap. The supplied section ends as he begins to discuss another consideration.

The investment in Varsity Tutors for Schools represents a low single-digit percentage of the overall business and comes with complexity. School funding has been challenging for several years. In weighing the relative opportunities, the company said it is more excited about the consumer business, where it expects a higher return on each dollar of invested capital and believes it can accelerate its consumer roadmap. The move also supports its path to permanent profitability and the focus it has described.

Those were the key factors behind the decision, and the company said it is encouraged by its ability to pursue consumer growth and the progress already underway. Atul Baga, Chief Financial Officer, said the business is profitable. The full-year annualized impact of cost reductions is about 11 million, representing fixed costs taken out. He also noted that revenue is expected to decline following the exits from VT4S and First Tutors, adding that the business’s profitability can be extrapolated from those figures.

He said the bigger issue… Returning to Chuck’s earlier point, our focus is on the areas where we see the greatest opportunities and where our efforts and resources can have the most leverage. Greg Gibbes, an analyst at Northland Securities, said that was helpful and asked what had changed in the consumer business outlook, including what was behind the moderating decline in learning memberships. Atul Baga, chief financial officer, said learning memberships were tracking in line with the operating plan, with no material change from the original plan.

He said the guidance change was entirely due to the exits from the First Tutors and VT4S businesses that the company had discussed. Chuck Cohn, founder, chairman and CEO, said the aim was not to moderate the decline but to accelerate growth significantly. He said the company was excited about the product’s potential to change how people interact across different modalities, as well as its work to rebuild and expand available content across hundreds The company said its product could help reshape the consumer relationship across different subjects. It said this potential is not reflected in its guidance, but that it is working to deliver it through the product.

Greg Gibbes, an analyst at Northland Securities, said he understood. The operator then invited callers to ask questions by pressing star one, repeated the instruction and said there were no further questions. The call ended, and attendees were told they could disconnect.