SEC Form 10-Q filed by Nerdy Inc.

8/8/24 4:07:24 PM ET

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 1-39595

NERDY INC.

(Exact name of registrant as specified in its charter)


Delaware		98-1499860
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	8001 Forsyth Blvd., Suite 1050
	St. Louis, Missouri 63105
(Address of Principal Executive Offices) (Zip Code)

(314) 412-1227

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

NRDY

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the numbers of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class A common stock, par value $0.0001 per share - 112,608,847 shares of common stock as of July 31, 2024

Class B common stock, par value $0.0001 per share - 65,437,458 shares of common stock as of July 31, 2024

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NERDY INC.

QUARTERLY REPORT ON FORM 10-Q

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		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited).	1

	Condensed Consolidated Statements of Operations (Unaudited).	1

	Condensed Consolidated Statements of Comprehensive Loss (Unaudited).	2

	Condensed Consolidated Balance Sheets (Unaudited).	3

	Condensed Consolidated Statements of Cash Flows (Unaudited).	4

	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited).	5

	Notes to Condensed Consolidated Financial Statements (Unaudited).	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	18

Item 4.	Controls and Procedures.	18

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings.	18

Item 1A.	Risk Factors.	18

Item 5.	Other Information.	19

Item 6.	Exhibits.	19

	SIGNATURES	20

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PART I. FINANCIAL INFORMATION.

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).

NERDY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	50,984	$	48,839	$	104,711	$	98,019
Cost of revenue	17,497		14,740		34,709		30,030
Gross Profit	33,487		34,099		70,002		67,989
Sales and marketing expenses	15,537		14,859		32,929		30,419
General and administrative expenses	33,179		29,713		65,155		59,413


Operating Loss	(15,229)		(10,473)		(28,082)		(21,843)
Unrealized (gain) loss on derivatives, net	—		(4,198)		—		17,484
Interest income	(879)		(783)		(1,765)		(1,616)
Other expense, net	10		5		35		16

Loss before Income Taxes	(14,360)		(5,497)		(26,352)		(37,727)
Income tax expense	38		53		61		76
Net Loss	(14,398)		(5,550)		(26,413)		(37,803)

Net loss attributable to noncontrolling interests	(5,305)		(2,252)		(9,874)		(15,574)
Net Loss Attributable to Class A Common Stockholders	$	(9,093)	$	(3,298)	$	(16,539)	$	(22,229)

Loss per share of Class A Common Stock:
Basic and Diluted	$	(0.08)	$	(0.03)	$	(0.15)	$	(0.24)


Weighted-Average Shares of Class A Common Stock Outstanding:
Basic and Diluted	109,924		94,448		108,757		93,119

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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NERDY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net Loss	$	(14,398)	$	(5,550)	$	(26,413)	$	(37,803)
Foreign currency translation adjustments	2		31		(8)		65
Total Comprehensive Loss	(14,396)		(5,519)		(26,421)		(37,738)

Comprehensive loss attributable to noncontrolling interests	(5,304)		(2,239)		(9,877)		(15,547)
Total Comprehensive Loss Attributable to Class A Common Stockholders	$	(9,092)	$	(3,280)	$	(16,544)	$	(22,191)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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NERDY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands)


	June 30, 2024		December 31, 2023
ASSETS
Current Assets
Cash and cash equivalents	$	69,838	$	74,824
Accounts receivable, net	7,245		15,398
Other current assets	5,303		4,815
Total Current Assets	82,386		95,037
Fixed assets, net	17,006		16,388
Goodwill	5,717		5,717
Intangible assets, net	2,745		3,061
Other assets	3,473		4,541
Total Assets	$	111,327	$	124,744

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	2,677	$	3,443
Deferred revenue	11,082		20,480


Other current liabilities	11,938		11,682
Total Current Liabilities	25,697		35,605
Other liabilities	3,080		3,533

Total Liabilities	28,777		39,138
Stockholders’ Equity
Class A common stock	11		11
Class B common stock	7		7
Additional paid-in capital	583,948		567,709
Accumulated deficit	(531,820)		(515,281)
Accumulated other comprehensive income	26		31
Total Stockholders’ Equity Excluding Noncontrolling Interests	52,172		52,477
Noncontrolling interests	30,378		33,129
Total Stockholders’ Equity	82,550		85,606
Total Liabilities and Stockholders’ Equity	$	111,327	$	124,744

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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NERDY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


	Six Months Ended June 30,
	2024		2023
Cash Flows From Operating Activities
Net Loss	$	(26,413)	$	(37,803)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation & amortization	3,358		3,091
Amortization of intangibles	305		302
Unrealized loss on derivatives, net	—		17,484

Non-cash stock-based compensation expense	22,426		21,180





Other changes in operating assets and liabilities:
Decrease in accounts receivable, net	8,153		6,423
(Increase) decrease in other current assets	(491)		1,306
Decrease in other assets	1,046		717
Decrease in accounts payable	(57)		(260)
Decrease in deferred revenue	(9,398)		(9,841)
Increase in other current liabilities	51		719
Decrease in other liabilities	(215)		(1,039)
Net Cash (Used in) Provided By Operating Activities	(1,235)		2,279
Cash Flows From Investing Activities
Capital expenditures	(3,755)		(2,049)
Net Cash Used In Investing Activities	(3,755)		(2,049)
Cash Flows From Financing Activities











Net Cash Used In Financing Activities	—		—
Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash	4		(16)
Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash	(4,986)		214
Cash, Cash equivalents, and Restricted Cash, Beginning of Year	75,140		91,547
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	70,154	$	91,761

Supplemental Cash Flow Information
Non-cash stock-based compensation included in capitalized internal use software	$	939	$	1,015
Purchase of fixed assets included in accounts payable	10		—

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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NERDY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in thousands)


	As Of and For The Three Months Ended June 30,		As Of and For The Six Months Ended June 30,
	2024	2023	2024		2023
Class A Common Stock
Beginning of period	11	10	$	11	$	9
Activity under stock compensation plans	—	—	—		1
End of period	11	10	11		10
Class B Common Stock


Beginning and end of period	7	7	7		7
Additional Paid-In Capital
Beginning of period	575,495	529,410	567,709		522,031
Non-cash stock-based compensation	11,667	10,512	23,155		21,759
Activity under stock compensation plans	—	—	—		(1)
Conversion of combined interests into Class A common stock	588	123	841		304


Rebalancing of ownership percentage between controlling and the noncontrolling interests	(3,802)	(3,972)	(7,757)		(8,020)
End of period	583,948	536,073	583,948		536,073
Accumulated Deficit
Beginning of period	(522,727)	(494,038)	(515,281)		(475,107)
Net loss	(9,093)	(3,298)	(16,539)		(22,229)
End of period	(531,820)	(497,336)	(531,820)		(497,336)
Accumulated Other Comprehensive Income
Beginning of period	25	8	31		(12)
Foreign currency translation adjustments	1	18	(5)		38
End of period	26	26	26		26
Total Stockholders’ Equity Excluding Noncontrolling Interests	52,172	38,780	52,172		38,780
Noncontrolling Interests
Beginning of period	32,368	25,007	33,129		34,122
Net loss	(5,305)	(2,252)	(9,874)		(15,574)
Non-cash stock-based compensation	100	110	210		436
Foreign currency translation adjustments	1	13	(3)		27
Conversion of combined interests into Class A common stock	(588)	(123)	(841)		(304)


Rebalancing of ownership percentage between controlling and the noncontrolling interests	3,802	3,972	7,757		8,020
End of period	30,378	26,727	30,378		26,727
Total Stockholders’ Equity	82,550	65,507	$	82,550	$	65,507
Class A Common Stock - Shares
Beginning of period	109,002	97,926	106,416		95,296
Activity under stock compensation plans	1,948	2,039	3,903		4,169
Conversion of combined interests into Class A common stock	1,295	193	1,926		693


End of period	112,245	100,158	112,245		100,158
Class B Common Stock - Shares
Beginning of period	66,674	69,258	67,256		69,306
Activity under stock compensation plans	48	96	97		548
Conversion of combined interests into Class A common stock	(1,295)	(193)	(1,926)		(693)


End of period	65,427	69,161	65,427		69,161

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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NERDY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except per share information and where indicated otherwise)

NOTE 1 — BASIS OF PRESENTATION AND BACKGROUND

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), under the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”), and on a basis substantially consistent with the audited consolidated financial statements of Nerdy Inc. (herein referred to as “Nerdy,” the “Company,” “us,” “our,” or “we,” and unless otherwise stated or context otherwise indicates, all such references herein mean Nerdy and its consolidated subsidiaries) as of and for the year ended December 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with such audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

These unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments and accruals) that management considers necessary for a fair statement of the Company’s results of operations, comprehensive income (loss), financial condition, cash flows, and stockholders’ equity (deficit) for the interim periods presented. Interim results are not necessarily indicative of the results for any other interim period or for the entire year.

Nerdy Inc., a member of Nerdy LLC (as defined below), has the right to appoint a majority of the managers of Nerdy LLC and therefore, controls Nerdy LLC. As a result, the financial results of Nerdy LLC and its wholly-owned subsidiaries are consolidated with and into Nerdy Inc., and a portion of the consolidated net earnings (loss) of Nerdy LLC, which the Legacy Nerdy Holders (as defined below) are entitled to or are required to absorb, are allocated to the noncontrolling interests (the “NCI”).

Background

Nerdy Inc. was formed on September 20, 2021 in connection with a business combination between TPG Pace Tech Opportunities and Live Learning Technologies LLC (along with its wholly-owned subsidiaries, “Nerdy LLC”). Nerdy LLC is a holding company that is the sole owner of multiple operating companies, including Varsity Tutors LLC (“Varsity Tutors”) and Varsity Tutors for Schools LLC (“Varsity Tutors for Schools”). As a result of the business combination and related transactions, Nerdy LLC merged with a wholly-owned subsidiary of Nerdy Inc., with Nerdy LLC surviving such merger. Nerdy Inc. is a holding company that has no material assets other than its ownership interests in Nerdy LLC and its indirect interests in the subsidiaries of Nerdy LLC, and has no independent means of generating revenue or cash flow.

Nerdy Inc. has the following classes of securities issued and outstanding: (i) Class A common stock, par value $0.0001 per share (the “Class A Common Stock”) and (ii) Class B common stock, par value $0.0001 per share (the “Class B Common Stock”). The shares of Class B Common Stock are owned by the Legacy Nerdy Holders (as defined below), have voting rights only, and have no dividend or economic rights. The Company does not intend to list its Class B Common Stock on any stock exchange. Nerdy LLC has units issued and outstanding (the “OpCo Units”) to its members, the legacy holders of Nerdy LLC (the “Legacy Nerdy Holder(s)”) and Nerdy Inc. Nerdy Inc. and Nerdy LLC will at all times maintain a one-to-one ratio between the number of shares of Class A and Class B Common Stock issued by Nerdy Inc. and the number of OpCo Units issued by Nerdy LLC.

NOTE 2 — RECENTLY ISSUED ACCOUNTING STANDARDS

The Company has considered all new accounting pronouncements and based on current information, has concluded that there are no new pronouncements (other than the ones described below) that had or will have an impact on its results of operations, comprehensive income (loss), financial condition, cash flows, and stockholders’ equity (deficit).

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. This ASU is effective for annual periods beginning after December 15, 2024 (i.e., Nerdy’s financial statements for the year ending December 31, 2025), with early adoption permitted. This ASU requires a prospective method of adoption, but allows for a retrospective method of adoption. The Company is currently evaluating the impact of this ASU on its disclosures.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 updates reportable segment disclosure primarily by requiring disclosures of significant segment expenses, while also aligning interim and annual disclosure requirements under ASC Topic 280. Additionally, this

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requires a public entity that has a single reportable segment to provide all the disclosures required by this ASU and all existing segment disclosures in ASC Topic 280. This ASU is effective for annual periods beginning after December 15, 2023 (i.e., Nerdy’s financial statements for the year ending December 31, 2024) and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU requires a retrospective method of adoption. The Company is currently evaluating the impact of this ASU on its disclosures.

NOTE 3 — NONCONTROLLING INTERESTS

As of June 30, 2024, Legacy Nerdy Holders owned 65,427 OpCo Units, equal to 36.8% of the economic interest in Nerdy LLC, and 65,427 shares of Class B Common Stock. As of December 31, 2023, Legacy Nerdy Holders owned 67,256 OpCo Units equal to 38.7% of the economic interest in Nerdy LLC, and 67,256 shares of Class B Common Stock.

Nerdy Inc. owned 63.2% and 61.3% of the outstanding OpCo Units as of June 30, 2024 and December 31, 2023, respectively. The financial results of Nerdy LLC and its subsidiaries were consolidated with and into Nerdy Inc., and the portions of the consolidated net earnings (loss) of Nerdy LLC, which the Legacy Nerdy Holders were entitled to or required to absorb, was allocated to NCI. At the end of each reporting period, Nerdy LLC equity attributable to Nerdy Inc. and the Legacy Nerdy Holders was rebalanced to reflect Nerdy Inc.’s and the Legacy Nerdy Holders’ ownership in Nerdy LLC. Prior to the earnout transaction in September 2023 (the Company’s third quarter), the Company excluded earnouts in the calculation of the ownership interests in Nerdy LLC as the earnouts were subject to forfeiture.

The following table summarizes the changes in ownership of OpCo Units in Nerdy LLC, excluding earnouts, for the periods presented.


	As Of and For The Three Months Ended June 30,				As Of and For The Six Months Ended June 30,
	2024		2023		2024		2023
OpCo Units
Nerdy Inc.
Beginning of period	109,002		93,284		106,416		90,654
Vesting or exercise of equity awards	1,948		2,039		3,903		4,169
Conversion of Combined Interests into Class A Common Stock	1,295		193		1,926		693



End of period	112,245		95,516		112,245		95,516
Legacy Nerdy Holders
Beginning of period	66,674		65,900		67,256		65,948
Vesting or exercise of equity awards	48		96		97		548
Conversion of Combined Interests into Class A Common Stock	(1,295)		(193)		(1,926)		(693)



End of period	65,427		65,803		65,427		65,803
Total
Beginning of period	175,676		159,184		173,672		156,602
Vesting or exercise of equity awards	1,996		2,135		4,000		4,717




End of period	177,672		161,319		177,672		161,319
Ownership Percentage
Nerdy Inc.
Beginning of period	62.0	%	58.6	%	61.3	%	57.9	%
End of period	63.2	%	59.2	%	63.2	%	59.2	%
Legacy Nerdy Holders
Beginning of period	38.0	%	41.4	%	38.7	%	42.1	%
End of period	36.8	%	40.8	%	36.8	%	40.8	%

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NOTE 4 — REVENUE

The following table presents the Company’s revenue by business category for the periods presented.


	Three Months Ended June 30,								Six Months Ended June 30,
	2024		%		2023		%		2024		%		2023		%
Consumer	$	39,716	78	%	$	40,296	82	%	$	81,318	77	%	$	80,631	82	%
Institutional	11,135		21	%	8,354		17	%	23,022		22	%	16,894		17	%
Other (a)	133		1	%	189		1	%	371		1	%	494		1	%
Revenue	$	50,984	100	%	$	48,839	100	%	$	104,711	100	%	$	98,019	100	%

(a)Other consists of EduNation Limited, a company incorporated in England and Wales, and other services.

Contract liabilities are reported within “Deferred revenue” on the Company’s Condensed Consolidated Balance Sheets. Deferred revenue consists of advanced payments from customers for performance obligations that have not been satisfied. Deferred revenue is recognized when the performance obligations have been completed. The Company expects to recognize substantially all of the deferred revenue balance in the next twelve months. The following table presents the Company’s “Accounts receivable, net” and “Deferred revenue” reported on the Condensed Consolidated Balance Sheets for the periods presented.


	June 30, 2024		December 31, 2023
Accounts receivable, net	$	7,245	$	15,398
Deferred revenue	$	11,082	$	20,480

“Accounts receivable, net” is reported net of reserves of $623 and $544 as of June 30, 2024 and December 31, 2023, respectively.

NOTE 5 — INCOME TAXES

Nerdy Inc. holds an economic interest in Nerdy LLC (see Notes 1 and 3), which is treated as a partnership for U.S. federal income tax purposes. As a partnership, Nerdy LLC is generally not subject to U.S. federal income tax under current U.S. tax laws as its net taxable income (loss) and any related tax credits are passed through to its members and included in their tax returns, even though such net taxable income (loss) or tax credits may not have actually been distributed. Nerdy Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its distributive share of the net taxable income (loss) and any related tax credits of Nerdy LLC. The Company continues to maintain a full valuation allowance against the deferred tax assets at Nerdy Inc. as of June 30, 2024.

The effective income tax rate was (0.26)% and (0.23)% for the three and six months ended June 30, 2024, respectively, and (0.96)% and (0.20)% for the three and six months ended June 30, 2023, respectively. The effective income tax rates differed significantly from the statutory rates in both current and prior year periods, primarily as a result of changes in the valuation allowance and income tax benefit attributable to the NCI. Income tax expense reported in both current and prior year periods represents amounts owed to state authorities.

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NOTE 6 — LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share of Class A Common Stock.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net Loss Attributable to Class A Common Stockholders	$	(9,093)	$	(3,298)	$	(16,539)	$	(22,229)
Less: Undistributed net earnings attributable to participating securities	—		—		—		—
Net loss attributable to Class A Common Stockholders for basic and diluted loss per share	$	(9,093)	$	(3,298)	$	(16,539)	$	(22,229)
















Weighted-average shares of Class A Common Stock for basic and diluted loss per share	109,924		94,448		108,757		93,119

Basic and Diluted loss per share of Class A Common Stock	$	(0.08)	$	(0.03)	$	(0.15)	$	(0.24)

The following table details the securities that have been excluded from the calculation of weighted-average shares for diluted loss per share of Class A Common Stock for the periods presented as they were anti-dilutive.


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Stock options	1,939	1,503	1,939	1,503
Stock appreciation rights	5,721	6,062	5,721	6,062
Restricted stock awards	22	216	22	216
Restricted stock units	18,504	18,521	18,504	18,521
Restricted stock units - founder’s award	9,258	9,258	9,258	9,258
Warrants	—	19,311	—	19,311
Earnouts	—	7,964	—	7,964
Combined Interests that can be converted into shares of Class A Common Stock	65,427	65,803	65,427	65,803

NOTE 7 — CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Condensed Consolidated Balance Sheets to the Condensed Consolidated Statements of Cash Flows for the periods presented.


	June 30, 2024		December 31, 2023		June 30, 2023		December 31, 2022
Cash and cash equivalents	$	69,838	$	74,824	$	90,929	$	90,715
Restricted cash included in Other current assets	184		184		516		516
Restricted cash included in Other assets	132		132		316		316
Total Cash, Cash Equivalents, and Restricted Cash shown in the Condensed Consolidated Statements of Cash Flows	$	70,154	$	75,140	$	91,761	$	91,547

The Company includes amounts in restricted cash required to be set aside by contractual agreement. Restricted cash consists of cash collateralized letters of credit in support of its office leases in Tempe, Arizona.

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NOTE 8 — FIXED ASSETS, NET

The following table presents fixed assets and accumulated depreciation reported on the Condensed Consolidated Balance Sheets for the periods presented.


	June 30, 2024		December 31, 2023
Fixed assets	$	47,468	$	43,494
Accumulated depreciation	(30,462)		(27,106)
	$	17,006	$	16,388

The following table presents amortization expense related to capitalized internal use software and depreciation expense reported in the Condensed Consolidated Statements of Operations for the periods presented.


		Three Months Ended June 30,				Six Months Ended June 30,
	Statement of Operations Location	2024		2023		2024		2023
Amortization expense related to capitalized internal use software	Cost of revenue	$	1,490	$	1,295	$	2,882	$	2,592
Depreciation expense	General and administrative expenses	230		243		476		499

NOTE 9 — INTANGIBLE ASSETS, NET

The Company’s intangible assets consist entirely of trade names. The following table presents the carrying amount and accumulated amortization related to trade names reported on the Condensed Consolidated Balance Sheets for the periods presented.


	June 30, 2024		December 31, 2023
Carrying amount	$	6,100	$	6,122
Accumulated amortization	(3,355)		(3,061)
	$	2,745	$	3,061

The following table presents amortization expense related to intangible assets reported in the Condensed Consolidated Statements of Operations for the periods presented.


		Three Months Ended June 30,				Six Months Ended June 30,
	Statement of Operations Location	2024		2023		2024		2023
Amortization expense related to intangible assets	General and administrative expenses	$	153	$	152	$	305	$	302

NOTE 10 — DERIVATIVE FINANCIAL INSTRUMENTS

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company does not hold or issue financial instruments for speculative or trading purposes. Prior to the warrant and earnout transactions in September 2023 (the Company’s third quarter), the Company had issued and outstanding warrants and earnouts to non-employees. The warrants and earnouts held by non-employees were not in the scope of Accounting Standards Codification (“ASC”) Topic 718, “Compensation—Stock Compensation” and were classified as derivative liabilities under ASC Topic 480, “Distinguishing Liabilities from Equity” or ASC Topic 815, “Derivatives and Hedging.” The following table presents the effects of the Company’s derivative instruments in the Condensed Consolidated Statements of Operations for the periods presented.


		Three Months Ended June 30,				Six Months Ended June 30,
	Statement of Operations Location	2024		2023		2024		2023
Non-employee warrants	Unrealized (gain) loss on derivatives, net	$	—	$	(2,333)	$	—	$	6,081
Non-employee earnouts	Unrealized (gain) loss on derivatives, net	—		(1,865)		—		11,403
		$	—	$	(4,198)	$	—	$	17,484

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NOTE 11 — FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities include cash and cash equivalents, restricted cash, receivables, and accounts payable for which the carrying value approximates fair value due to their short maturities (less than 12 months). Certain assets and liabilities, including definite-lived assets and goodwill, are measured at fair value on a non-recurring basis. There were no fair value measurement adjustments recognized related to definite-lived assets or goodwill during the three and six months ended June 30, 2024 or 2023.

NOTE 12 — RELATED PARTIES

Tax Receivable Agreement

Nerdy Inc. has a tax receivable agreement with certain Legacy Nerdy Holders (the “TRA Holder(s)”) (the “Tax Receivable Agreement”). The Tax Receivable Agreement generally provides for the payment by Nerdy Inc. to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state, and local income tax that Nerdy Inc. actually realizes (or is deemed to realize in certain circumstances) as a result of: (i) certain increases in tax basis that occur as a result of (A) the reverse recapitalization (including as a result of cash received in the Reverse Recapitalization and debt repayment occurring in connection with the reverse recapitalization) or (B) exercises of the redemption or call rights set forth in the Nerdy LLC operating agreement; and (ii) imputed interest deemed to be paid by Nerdy Inc. as a result of, and additional basis arising from, any payments Nerdy Inc. makes under the Tax Receivable Agreement. Nerdy Inc. will retain the benefit of the remaining 15% of these net cash savings.

As of June 30, 2024, Nerdy Inc. has not recognized a liability of $117,399 under the Tax Receivable Agreement after concluding it was not probable that such Tax Receivable Agreement payments would be paid based on its estimates of Nerdy’s LLC future taxable income. Nerdy Inc. did not make any payments to the TRA Holders under the Tax Receivable Agreement during the three and six months ended June 30, 2024 or 2023. The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of the Company in the future. If the valuation allowance recorded against the deferred tax assets applicable to the tax attributes referenced above is released in a future period, the Tax Receivable Agreement liability may be considered probable at that time and recorded within the statement of operations.

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Independent Contractor Classification Matters

The Company, through its consolidated subsidiaries, is subject to various legal and regulatory proceedings at the federal, state, and municipal levels challenging the classification of third-party Experts on its platform as independent contractors, and claims that, by the alleged misclassification, it has violated various labor and other laws that would apply to employees. The Company disputes any allegations of wrongdoing and intends to continue to defend itself vigorously in these matters.

In 2019, a Complaint was filed in a Superior California Court against Varsity Tutors alleging that Varsity Tutors misclassified California tutors as independent contractors as opposed to employees in violation of the California Labor Code and seeking penalties and other remedies under California’s Private Attorneys General Act (“PAGA”). In October 2023, Varsity Tutors agreed to a tentative settlement in this matter that remains subject to Court approval (as required by PAGA), which is expected in the third or fourth quarter of 2024. No expense was recorded in the Condensed Consolidated Statements of Operations related to these matters for the three and six months ended June 30, 2024. The Company expensed $450 in the three and six months ended June 30, 2023, which was included in “General and administrative expenses” in the Condensed Consolidated Statements of Operations, related to this matter. At June 30, 2024 and December 31, 2023, the Company had accrued $2,000 for this matter, which was included in “Other current liabilities” on the Condensed Consolidated Balance Sheets, respectively.

Other

The Company is subject to various other legal proceedings and actions in the normal course of business. In the opinion of management, based upon the information presently known, the ultimate liability, if any, arising from such pending legal proceedings, as well as from asserted legal claims and known potential legal claims which are likely to be asserted, taking into account established accrual for estimated liabilities (if any), are not expected to be material individually or in the aggregate to the consolidated financial condition, result of operations, or cash flows of the Company.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and capital resources of Nerdy Inc. and its consolidated subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein and our audited consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”), filed with the United States Securities and Exchange Commission (the “SEC”) on February 27, 2024. In addition, the following discussion and analysis of Nerdy Inc.’s financial condition and results of operations also contains forward-looking statements that involve risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth in the sections entitled “Item 1A. Risk Factors” in Part I of the 2023 Annual Report and “Item 1A. Risk Factors” in Part II of this report, as well as under the section “Cautionary Note On Forward-Looking Statements” below. Unless otherwise stated or the context otherwise indicates, all references in the succeeding paragraphs to “Nerdy,” “the Company,” “us,” “our” or “we” mean Nerdy Inc. and its consolidated subsidiaries.

OVERVIEW

We operate a platform for live online learning. Our mission is to transform the way people learn through technology. Our purpose-built proprietary platform leverages technology, including artificial intelligence (“AI”), to connect students, users, parents, guardians, and purchasers (“Learner(s)”) of all ages to tutors, instructors, subject matter experts, educators, and other professionals (“Expert(s)”), delivering superior value on both sides of the network. Our comprehensive learning destination provides learning experiences across numerous subjects and multiple formats, including Learning Memberships, one-on-one instruction, small group tutoring, large format classes, tutor chat, essay review, adaptive assessments, and self-study tools. Our flagship business, Varsity Tutors LLC (“Varsity Tutors”), is one of the nation’s largest platforms for live online tutoring and classes. Our solutions are available directly to Learners (“Consumer(s)”), as well as through education systems (“Institution(s)”). Our platform offers Experts the opportunity to generate income from the convenience of home, while also increasing access for Learners by removing barriers to high-quality live online learning. Our offerings include Varsity Tutors for Schools, a product suite that leverages our platform capabilities to offer high-dosage tutoring and our online learning solutions to Institutions. We have built a diversified business across the following audiences: K-8, High School, College, Graduate School, and Professional.

KEY OPERATING METRICS

We monitor the following key operating metrics to evaluate the growth of our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

“Active Member(s)” is defined as the number of Learners with an active paid Learning Membership as of the date presented. Variations in the number of Active Members are due to changes in demand for our solutions, seasonality, testing schedules, the extension of Learning Memberships to additional Consumer audiences, and the launch of new membership options. As a result, we believe Active Members is a key indicator of our ability to attract, engage, and retain Learners. Active Members exclude EduNation Limited, a company incorporated in England and Wales (“First Tutors UK”), as well as our Institutional business.


Active Members in thousands	June 30, 2024	March 31, 2024	December 31, 2023	September 30, 2023	June 30, 2023	March 31, 2023
Active Members	35.5	46.1	40.7	39.5	31.0	32.9
YoY change	15%	40%	101%	250%	1,450%	n/a

“Active Experts” is defined as the number of Experts who have instructed one or more sessions in a given period. Active Experts also includes our Institutional business, but excludes First Tutors UK. The following table summarizes Active Experts for the periods presented. Our Active Expert count during the three and six months ended June 30, 2024 was primarily driven by higher Institutional active Experts when compared to the prior year periods, which reflects the continued scaling of our Institutional business.


	Three Months Ended June 30,		Change	Six Months Ended June 30,		Change
Active Experts in thousands	2024	2023	%	2024	2023	%
Active Experts	11.6	10.0	16%	14.4	12.0	20%

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RESULTS OF OPERATIONS


	Three Months Ended June 30,								Six Months Ended June 30,
dollars in thousands	2024		%		2023		%		2024		%		2023		%
Revenue	$	50,984	100	%	$	48,839	100	%	$	104,711	100	%	$	98,019	100	%
Cost of revenue	17,497		34	%	14,740		30	%	34,709		33	%	30,030		31	%
Gross Profit	33,487		66	%	34,099		70	%	70,002		67	%	67,989		69	%
Sales and marketing expenses	15,537		31	%	14,859		30	%	32,929		32	%	30,419		31	%
General and administrative expenses	33,179		65	%	29,713		61	%	65,155		62	%	59,413		60	%


Operating Loss	(15,229)		(30)	%	(10,473)		(21)	%	(28,082)		(27)	%	(21,843)		(22)	%
Unrealized (gain) loss on derivatives, net	—		—	%	(4,198)		(9)	%	—		—	%	17,484		18	%
Interest income	(879)		(2)	%	(783)		(1)	%	(1,765)		(2)	%	(1,616)		(2)	%
Other expense, net	10		—	%	5		—	%	35		—	%	16		—	%

Loss before Income Taxes	(14,360)		(28)	%	(5,497)		(11)	%	(26,352)		(25)	%	(37,727)		(38)	%
Income tax expense	38		—	%	53		—	%	61		—	%	76		—	%
Net Loss	(14,398)		(28)	%	(5,550)		(11)	%	(26,413)		(25)	%	(37,803)		(38)	%

Net loss attributable to noncontrolling interests	(5,305)		(10)	%	(2,252)		(4)	%	(9,874)		(9)	%	(15,574)		(15)	%
Net Loss Attributable to Class A Common Stockholders	$	(9,093)	(18)	%	$	(3,298)	(7)	%	$	(16,539)	(16)	%	$	(22,229)	(23)	%

Revenue

Revenue growth in both current year periods was driven by the continued scaling of our Consumer and Institutional businesses, partially offset by lower average revenue per member per month in our Consumer business. Additionally, revenue for the three and six months ended June 30, 2023 included legacy Package revenue of $4,906 thousand and $15,850 thousand, respectively, that did not recur in the current year periods due to the completion of the transition to Learning Memberships in our Consumer business.

The following table presents our revenue by business category for the periods presented.


	Three Months Ended June 30,								Change
dollars in thousands	2024		%		2023		%		$		%
Consumer	$	39,716	78	%	$	40,296	82	%	$	(580)	(1)	%
Institutional	11,135		21	%	8,354		17	%	2,781		33	%
Other (a)	133		1	%	189		1	%	(56)		(30)	%
Revenue	$	50,984	100	%	$	48,839	100	%	$	2,145	4	%


	Six Months Ended June 30,			Change
dollars in thousands		2024		%		2023		%		$		%
Consumer		$	81,318	77	%	$	80,631	82	%	$	687	1	%
Institutional		23,022		22	%	16,894		17	%	6,128		36	%
Other (a)		371		1	%	494		1	%	(123)		(25)	%
Revenue		$	104,711	100	%	$	98,019	100	%	$	6,692	7	%

(a)Other consists of First Tutors UK and other services.

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Cost of Revenue and Gross Profit

The following table sets forth our cost of revenue and gross profit for the periods presented.


	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
dollars in thousands	2024			2023			$		%	2024			2023			$		%
Revenue	$	50,984		$	48,839		$	2,145	4%	$	104,711		$	98,019		$	6,692	7%
Cost of revenue	17,497			14,740			(2,757)		(19)%	34,709			30,030			(4,679)		(16)%
Gross Profit	$	33,487		$	34,099		$	(612)	(2)%	$	70,002		$	67,989		$	2,013	3%
% Margin	66		%	70		%				67		%	69		%

Cost of revenue for the three and six months ended June 30, 2024, increased primarily due to higher Expert costs of $2,561 thousand and $4,388 thousand, respectively, related to the continued scaling of our Consumer and Institutional businesses.

Gross profit for the three months ended June 30, 2024 of $33,487 thousand decreased by $612 thousand, or 2%, compared to the same period in 2023. Gross margin was 66% for the three months ended June 30, 2024, compared to gross margin of 70% for the three months ended June 30, 2023. Gross profit for the six months ended June 30, 2024 of $70,002 thousand increased by $2,013 thousand, or 3%, compared to the same period in 2023. Gross margin was 67% for the six months ended June 30, 2024, compared to gross margin of 69% for the six months ended June 30, 2023.

The decrease in gross margin for both current year periods was a result of lower margins related to our Institutional offerings, primarily due to higher utilization of tutoring sessions across our new access-based products and higher substitution costs in a seasonally high period in the school year. We have recently introduced improvements to our marketplace infrastructure systems, including: session scheduling enhancements, invoice automation improvements, and changes to the tutor substitution program logic which collectively are expected to meaningfully improve gross margin during the back-to-school period and on a go-forward basis, while simultaneously improving the customer experience due to the higher reliability level of our marketplace infrastructure systems.

Operating Expenses

The following table sets forth our operating expenses for the periods presented.


	Three Months Ended June 30,				Change			Six Months Ended June 30,				Change
dollars in thousands	2024		2023		$		%	2024		2023		$		%
Sales and marketing expenses	$	15,537	$	14,859	$	678	5%	$	32,929	$	30,419	$	2,510	8%
General and administrative expenses	33,179		29,713		3,466		12%	65,155		59,413		5,742		10%
Total operating expenses	$	48,716	$	44,572	$	4,144	9%	$	98,084	$	89,832	$	8,252	9%

Sales and Marketing

Sales and marketing expenses for the three months ended June 30, 2024 and 2023 included stock-based compensation of $638 thousand and $691 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses increased $731 thousand, or 5%. Additionally, excluding these impacts in both periods, sales and marketing expenses for both the three months ended June 30, 2024 and 2023 were 29% of revenue.

Sales and marketing expenses for the six months ended June 30, 2024 and 2023 included stock-based compensation of $1,173 thousand and $1,529 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses increased $2,866 thousand, or 10%. Additionally, excluding these impacts in both periods, sales and marketing expenses for the six months ended June 30, 2024 were 30% of revenue compared to 29% of revenue during the same period in 2023.

Sales and marketing increases were driven by investments in our Institutional sales organization in order to drive customer acquisition, brand awareness, and reach, including through signing up school districts with free access to the Varsity Tutors platform, which is a strategy to introduce school districts to the platform fee-based offerings. These investments were partially offset by Consumer marketing efficiency gains.

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General and Administrative

General and administrative expenses include compensation for certain employees, support services, product development expenses intended to support continued innovation, and other operating expenses. Product development costs were $11,569 thousand and $8,392 thousand for the three months ended June 30, 2024 and 2023, respectively, an increase of $3,177 thousand. Product development costs were $22,232 thousand and $16,822 thousand for the six months ended June 30, 2024 and 2023, respectively, an increase of $5,410 thousand. Product development costs include compensation for employees on our product and engineering teams who are responsible for developing new and improving existing offerings, maintaining our website, improving efficiencies across our organization, and third-party expenses.

General and administrative expenses for the three months ended June 30, 2024 and 2023 included non-cash stock based compensation of $10,676 thousand and $9,440 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses increased $2,230 thousand, or 11%. Additionally, excluding these impacts in both periods, general and administrative expenses for the three months ended June 30, 2024 were 44% of revenue compared to 42% during the same period in 2023.

General and administrative expenses for the six months ended June 30, 2024 and 2023 included non-cash stock based compensation of $21,253 thousand and $19,651 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses increased $4,140 thousand, or 10%. Additionally, excluding these impacts in both periods, general and administrative expenses for the six months ended June 30, 2024 were 42% of revenue compared to 41% during the same period in 2023.

Our investments in product development and our platform-oriented approach to growth have allowed us to launch and continuously improve our suite of ‘always on’ subscription products, including Learning Memberships for Consumers, and our District, Teacher, and Parent Assigned offerings for Institutional customers. We believe these subscription and access-based offerings simplify our operating model needed to support the organization, which allows us to maximize our investment in our common platform.

Unrealized Loss on Derivatives, Net

During the three and six months ended June 30, 2023, we recognized a (gain) loss of $(4,198) thousand and $17,484 thousand, respectively, related to non-cash mark-to-market adjustments on our warrants and earnouts prior to the warrant and earnout transactions in September 2023 (our third quarter). Of the gain recognized in the three months ended June 30, 2023, $2,333 thousand and $1,865 thousand related to warrants and earnouts, respectively. Of the loss recognized in the six months ended June 30, 2023, $6,081 thousand and $11,403 thousand related to warrants and earnouts, respectively.

Interest Income

Interest income for the three months ended June 30, 2024 was $879 thousand, an increase from $783 thousand in the same period in 2023. Interest income for the six months ended June 30, 2024 was $1,765 thousand, an increase from $1,616 thousand in the same period in 2023. These increases were driven by higher interest income on our cash balances during both current year periods.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents totaling $69,838 thousand and $74,824 thousand, respectively. We have incurred cumulative losses from our operations, and we may incur additional losses in the future. Our operations have historically been financed primarily through cash on hand, capital contributions, and debt financings. To the extent we generate negative operating cash flows, it is possible that we may have to finance future operations primarily or in part from cash on hand.

Cash Requirements

Our cash requirements within the next twelve months include working capital requirements, sales and marketing activities, and capital expenditures. We believe our cash on hand will be sufficient to satisfy these future requirements.

As of June 30, 2024, we had no debt obligations. Our cash requirements under our contractual obligations and commitments consist primarily of lease arrangements. For information on our lease obligations and the amount and timing of future payments, see Note 17 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of our 2023 Annual Report. There have been no material changes to our leasing arrangements previously disclosed in our 2023 Annual Report.

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The following table sets forth our cash flows for the periods presented.


	Six Months Ended June 30,
dollars in thousands	2024		2023
Cash (used in) provided by:
Operating activities	$	(1,235)	$	2,279
Investing activities	(3,755)		(2,049)
Financing activities	—		—
Effect of Exchange Rate Change on Cash, Cash equivalents, and Restricted Cash	4		(16)
Net (Decrease) Increase in Cash, Cash equivalents, and Restricted Cash	$	(4,986)	$	214

Operating Activities

Cash used in operating activities for the six months ended June 30, 2024 was $1,235 thousand compared to cash provided by operating activities of $2,279 thousand in the same period in 2023 as higher gross profit and marketing efficiencies were more than offset by investments in our Institutional sales organization and product development to drive innovation and support our continued growth.

Investing Activities

Cash used in investing activities was $3,755 thousand and $2,049 thousand for the six months ended June 30, 2024 and 2023, respectively. Cash used in investing activities for both periods related to capital expenditures primarily for the development of internal use software and IT equipment.

Financing Activities

We did not have any financing activities in either the six months ended June 30, 2024 or 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies and estimates are more fully described in our 2023 Annual Report. There have been no material changes to our critical accounting policies and estimates previously disclosed in our 2023 Annual Report.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2 within “Notes to Condensed Consolidated Financial Statements (Unaudited)” in Part 1, Item 1 of this report for a discussion regarding recently issued accounting standards.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Certain statements in this report may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions, or strategies regarding the future, including our expectations with respect to: enhancing the Learning Membership experience and on our expansion of freemium strategies; continued improvements in sales and marketing leverage; the growth of our Institutional business; simplifying our operations model while growing our business; and the sufficiency of our cash to fund future operations. Any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “approximately,” “believes,” “contemplates,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “outlook,” “plans,” “possible,” “potential,” “predicts,” “projects,” “should,” “seeks,” “will,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Our financial condition, results of operations, and cash flows may differ materially from those in the forward-looking statements as a result of various factors, including:

•our limited operating history, which makes it difficult to predict our future financial and operating results;

•our history of net losses;

•risks associated with our ability to acquire and retain customers, operate, and scale up our Consumer and Institutional businesses;

•risks associated with our intellectual property, including claims that we infringe on a third party’s intellectual property rights;

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•risks associated with our classification of some individuals and entities we contract with as independent contractors;

•risks associated with the liquidity and trading of our securities;

•risks associated with payments that we may be required to make under the tax receivable agreement;

•litigation, regulatory, and reputational risks arising from the fact that many of our Learners are minors;

•changes in applicable laws or regulations;

•the possibility of cyber-related incidents and their related impacts on our business and results of operations;

•risks associated with the development and use of artificial intelligence and related regulatory uncertainty;

•the possibility that we may be adversely affected by other economic, business, and/or competitive factors;

•risks associated with managing our rapid growth; and

•other risks and uncertainties included under “Risk Factors” within Part II, Item 1A of this report and in our 2023 Annual Report filed with the SEC on February 27, 2024.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” elsewhere in this report. Readers are urged to carefully review and consider the various disclosures made in this report and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

EMERGING GROWTH COMPANY STATUS

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We expect to remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of TPG Pace Tech Opportunities’ initial public offering, (b) in which we have total annual gross revenue of at least $1,235,000 thousand, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of common stock that are held by non-affiliates equals or exceeds $700,000 thousand as of the prior June 30 or (2) the date on which we have issued more than $1,000,000 thousand in non-convertible debt securities during the prior three-year period.

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SMALLER REPORTING COMPANY STATUS

As of December 31, 2023, we were no longer a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. An entity is a “smaller reporting company” based upon the following criteria: (i) the market value of our shares of common stock held by non-affiliates is less than $250,000 thousand as of the prior June 30, or (ii) our annual revenues are less than $100,000 thousand during the prior fiscal year and the market value of our shares of common stock held by non-affiliates is less than $700,000 thousand as of the prior June 30.

According to 5120.1b of the SEC Financial Reporting Manual, once we fail to qualify for smaller reporting company status, we will remain unqualified until making a subsequent determination either: (i) our public float falls below $200,000 thousand as of the last business day of our most recently completed second fiscal quarter or (ii) our public float and annual revenues meet certain other requirements for subsequent qualification as of the last business day of our most recently completed second fiscal quarter. Based upon the facts and circumstances that existed as of June 30, 2024, we have re-entered smaller reporting company status and will use scaled disclosures permitted for a smaller reporting company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our exposure to market risk, foreign currency exchange rates, and interest rates are immaterial.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2024. Based on that evaluation, the Company’s CEO and CFO concluded that, as of June 30, 2024, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Limitations on Effectiveness of Controls and Procedures

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control Over Financial Reporting

There were no significant changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.

For information regarding our legal proceedings, refer to Note 13 within “Notes to Condensed Consolidated Financial Statements (Unaudited)” in Part I, Item 1 of this report, which is incorporated herein by reference.

For disclosure of environmental proceedings with a governmental entity as a party pursuant to Item 103(c)(3)(iii) of Regulation S-K, we have elected to disclose matters where we reasonably believe such proceeding would result in monetary sanctions, exclusive of interest and costs, of $1,000 thousand or more. Applying this threshold, there are no such environmental proceedings to disclose as of and for the three months ended June 30, 2024.

ITEM 1A. RISK FACTORS.

In addition to the information set forth elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”), you should carefully consider the risk factors we previously disclosed in our Annual Report on Form 10-K as of and for the year

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ended December 31, 2023 (the “2023 Annual Report”), filed with the SEC on February 27, 2024. As of the date of the Quarterly Report, there have been no material changes to the risk factors previously disclosed in our 2023 Annual Report. These risks could materially and adversely affect our business, financial condition, results of operations, and cash flows. However, these risks are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations, and cash flows.

ITEM 5. OTHER INFORMATION.

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

During the three months ended June 30, 2024, the adoption or termination of contracts, instructions, or written plans for the purchase or sale of our securities by a director or “officer,” as defined in Rule 16a-1(f) under the Exchange Act, each of which is intended to satisfy the affirmative defense conditions of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K, were as follows:

Name

Title

Action

Date Adopted

Expiration
Date

Aggregate Number of Securities to be Purchased or Sold

Christopher Swenson (a)

Chief Legal Officer

Termination

3/15/2023

6/13/2024

204,000

Christopher Swenson (b)

Chief Legal Officer

Adoption

6/14/2024

2/12/2025

167,758

(a)Christopher Swenson, the Company's Chief Legal Officer, terminated a Rule 10b5-1 Plan on June 13, 2024. Mr. Swenson’s plan provided for the potential sale of up to 204,000 shares of the Company's Class A Common Stock. The plan was adopted on March 15, 2023, and was set to expire on June 25, 2024.

(b)Christopher Swenson, the Company's Chief Legal Officer, entered into a Rule 10b5-1 Plan on June 14, 2024. Mr. Swenson’s plan provides for the potential sale of up to 167,758 shares of the Company's Class A Common Stock. The plan expires on February 12, 2025, or upon the earlier completion of all authorized transactions under the plan.

No other director or “officer,” as defined in Rule 16a-1(f) under the Exchange Act, of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K during the three months ended June 30, 2024.

ITEM 6. EXHIBITS.

The following exhibits are either provided with this Form 10-Q or are incorporated herein by reference.


Exhibit No.						Description

3.1						Certificate of Incorporation of Nerdy Inc. (incorporated by reference to Exhibit 3.1 filed with the Company’s Form 8-K filed on September 24, 2021 (File No. 001-39595)).

3.2						Bylaws of Nerdy Inc. (incorporated by reference to Exhibit 3.2 filed with the Company’s Form 8-K filed on September 24, 2021 (File No. 001-39595)).

31.1						Certification of Charles Cohn pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 8, 2024.

31.2						Certification of Jason Pello pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 8, 2024.

* 32.1						Certification of Charles Cohn and Jason Pello, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 8, 2024.

101						Interactive Data File (Form 10-Q for the quarterly period ended June 30, 2024 filed in iXBRL (Inline eXtensible Business Reporting Language)). The financial information contained in the iXBRL-related documents is “unaudited” and “unreviewed.”

104						The cover page from the Company’s Form 10-Q for the quarterly period ended June 30, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

* These certifications are deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, Nerdy Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Nerdy Inc.

Date: August 8, 2024	By:	/s/ Jason Pello
		Name: Jason Pello
		Title: Chief Financial Officer

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Date	Price Target	Rating	Analyst
11/11/2024		Neutral → Underweight	JP Morgan
11/8/2024		Mkt Outperform → Mkt Perform	JMP Securities
11/8/2024	$6.00 → $1.00	Overweight → Neutral	Cantor Fitzgerald
8/9/2024	$5.00 → $3.00	Buy → Hold	Canaccord Genuity
8/9/2024		Overweight → Neutral	JP Morgan
8/9/2024		Outperform → Market Perform	Northland Capital
8/9/2024		Outperform → Mkt Perform	Raymond James
3/11/2024	$5.00	Overweight	JP Morgan

SEC Form 10-Q filed by Nerdy Inc.

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