Nerdy Earnings Call: AI Gains Amid Revenue Challenges

Nerdy ((NRDY)) has held its Q3 earnings call. Read on for the main highlights of the call.

Nerdy’s recent earnings call painted a mixed picture for the company, with significant advancements in AI integration and platform efficiency being overshadowed by challenges such as product launch delays, a decline in active members, and reduced institutional revenue. While the company has made strides in improving its financial metrics and operational savings, these positive developments were not enough to counterbalance the setbacks in other areas, impacting overall revenue growth.

AI Integration and Platform Overhaul

Nerdy has successfully launched the 2.0 version of its flagship Live Learning Platform, achieving notable improvements such as a 50% reduction in audio/video error rates and 40% cost savings per session. This platform overhaul is part of a broader strategy to transition nearly 100% of traffic to new AI-written code bases by the end of November, showcasing the company’s commitment to leveraging technology for operational efficiency.

Improved Financial Efficiency

The company reported a 960 basis point improvement in non-GAAP adjusted EBITDA margin year-over-year. This was driven by enhanced operating efficiency and cost reductions across every P&L line item, indicating a strong focus on financial discipline and operational optimization.

Increased ARPM

Nerdy experienced a 24% year-over-year increase in ARPM, reaching $374 as of September 30, 2025. This growth was attributed to a strategic shift towards higher frequency Learning Memberships and price increases, reflecting the company’s efforts to enhance revenue per member.

Institutional Segment Innovation

The introduction of a new end-to-end Varsity Tutors for Schools experience aligns with established intervention frameworks like MTSS and RTI. This innovation promises better alignment with school operations and improved sellability for district-wide sales, potentially boosting the company’s institutional segment.

Product Launch Delays

Delays in key product launches resulted in missed opportunities during the back-to-school peak period. This impacted anticipated growth and profitability timelines, highlighting the importance of timely execution in product development.

Decline in Active Members

A decline in active members has affected revenue, with operational challenges cited as the cause. In response, Nerdy has hired a new COO to improve execution and address these challenges, indicating a proactive approach to reversing this trend.

Institutional Revenue Decline

Institutional revenue decreased by 20% year-over-year, primarily due to federal and state funding delays impacting high-dosage tutoring contracting and program start dates. This decline underscores the challenges faced in the institutional segment.

Overall Revenue Decrease

Nerdy’s third-quarter revenue decreased by 1% year-over-year to $37 million. This was largely due to lower institutional revenue, although higher consumer revenue partially offset the decline. The company continues to navigate the complexities of its revenue streams.

Forward-Looking Guidance

Looking ahead, Nerdy provided guidance that reflects cautious optimism. The company reported third-quarter revenue within their guidance range and an improved adjusted EBITDA loss. They anticipate ending the year with $45 million to $48 million in cash, bolstered by a new $50 million term loan agreement. For Q4, revenue is expected to range between $45 million and $47 million, with a non-GAAP adjusted EBITDA loss ranging from $2 million to breakeven. These projections indicate a focus on financial stability and strategic growth.

In summary, Nerdy’s earnings call highlighted both achievements and challenges. While the company has made significant strides in AI integration and financial efficiency, setbacks such as product launch delays and a decline in active members have impacted overall performance. Looking forward, Nerdy remains focused on leveraging technology and strategic initiatives to drive growth and improve financial outcomes.