Nerdy (NRDY 7.14%), the online learning platform behind Varsity Tutors, released its second quarter results on August 7, 2025. The earnings report showed total GAAP revenue of $45.3 million, slightly trailing analyst estimates of $46.5 million (GAAP) and down from $51.0 million in Q2 2024. Notably, the company made progress in its core Consumer membership business, with revenue growth returning after several quarters of declines. Margins compressed year over year due to increased tutor incentives. Overall, the results fell within company guidance, though the GAAP revenue shortfall versus consensus and ongoing challenges in Institutional revenue kept the quarter mixed.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $(0.07) | N/A | $(0.08) | 12.5 % |
| Revenue (GAAP) | $45.3 million | N/A | $51.0 million | (11.2 %) |
| Gross Margin | 61.5 % | 65.7 % | (4.2) pp | |
| Non-GAAP Adjusted EBITDA (Loss) | "$(2.8 million)" should be "$(2.8 million)" if rounded from $(2,758,000), but the correct value is "$(2.8 million)" if rounding to one decimal place. However, the exact value in the source is "$(2.76 million)" or "$(2,758,000)". The cell value "$(2.8 million)" is valid if rounding to one decimal place, as 2,758,000/1,000,000 = 2.758, which rounds to 2.8. Therefore, validation: yes | $(2.1 million) | (33.3 %) | |
| Cash and Cash Equivalents | $36.7 million | $70.2 million | (47.7 %) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About Nerdy’s Business and Strategic Focus
Nerdy connects learners with subject matter experts through its suite of online education products. The company’s main product, Learning Memberships, deliver recurring live tutoring sessions, live classes, and access to digital learning tools across more than 3,000 subjects and grade levels.
In recent years, Nerdy has focused on integrating artificial intelligence (AI) into its core services. The platform now uses AI for expert-learner matching, adaptive test assessments, and session insights, while expanding its range of learning and productivity tools. The company’s key drivers now hinge on the pace of AI feature adoption, optimizations in pricing and product design, and a scalable two-sided network that connects students and tutors efficiently.
Quarterly Highlights and Operational Developments
The second quarter saw a shift in the composition and performance of Nerdy’s two major business lines: Consumer and Institutional. Revenue for the Consumer segment, which consists of Learning Memberships and other direct-to-consumer products, was $37.8 million. This represented 4% year-over-year growth in Consumer Learning Membership revenue, the first such increase since Q2 2024. However, active members stood at 30,600 as of June 30, 2025, marking a decline of 12% compared to the prior year’s period. The average revenue per member per month (ARPM) rose to $348, up 24% year over year. The ARPM gains were driven by a shift to higher-priced and higher-frequency membership plans, as well as price increases enacted in Q1 2025.
In the Institutional segment, which sells solutions to school districts under Varsity Tutors for Schools, Institutional revenue fell to $7.3 million, down 34% year over year. Despite lower recognized revenue, bookings in the Institutional business rose 21%, reaching $4.9 million with 50 new contracts signed. About half (50%) of new bookings value came from paid contracts, showing progress in converting free districts onto Nerdy’s paid AI-powered platform. Management called out that U.S. K-12 funding trends and customer acceptance of AI upgrades remain crucial for future segment recovery.
AI-driven product development remained a major theme throughout the period. The company launched its Live+AI suite, an integrated set of features that includes AI session summaries, automated onboarding, and the Tutor Copilot tool for experts and educators. These enhancements are designed to improve session engagement, reduce onboarding friction, and offer parents and administrators actionable insights from every tutoring interaction. Feedback on new AI features has been positive, with early data pointing to better session attendance and higher customer retention rates. Management emphasized that successful differentiation on these AI capabilities is central to Nerdy’s strategy for both Consumer and Institutional segments.
Margins tightened as gross margin (GAAP) decreased to 61.5%, down from 65.7% in Q2 2024. The drop primarily reflects higher investments in tutor incentives rolled out in late 2024. These incentives aim to improve session quality, tutor retention, and fast-track student engagement. While the move meant lower short-term margins, management expects that as more customers enroll at higher prices, gross margins (GAAP) should improve sequentially through the rest of 2025. Operating expenses also declined, largely due to a 16% reduction in headcount enabled by new AI-driven process automation and productivity tools in Q1 2025. On a non-GAAP basis, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss was $2.7 million, which was better than the company’s guided range and less than the loss recorded last year.
With no debt and $36.7 million in cash on the balance sheet, the company believes it has ample liquidity to fund the business and pursue growth initiatives.
Looking Ahead: Guidance and What to Watch
For the third quarter, Nerdy projects revenue between $37 million and $40 million, which reflects typical seasonal declines in summer demand and spending ahead of the back-to-school period. Expected non-GAAP adjusted EBITDA loss is in the range of $11 million to $13 million. For fiscal 2025, management guided for revenue between $191 million and $197 million for the full year 2025, with a non-GAAP adjusted EBITDA loss of $13 million to $17 million for the full year 2025. The company reaffirmed its goal of reaching profitability on a non-GAAP adjusted EBITDA basis in Q4 2025.
Cash and liquidity are expected to remain foundational for execution, with the company held $36.7 million in cash and no debt as of June 30, 2025. Year-end cash is projected to be between $30 million and $35 million, assuming no major operational changes. Looking forward, investors will be watching several factors: the pace of rollout and adoption for new AI-powered product features, the ability to sustain ARPM growth amid falling active member counts, and the timing of potential stabilization in Institutional segment revenues. Any change to these trends could require shifts in the company's expectations for profitability or cash use in future quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
