10-Q: Nerdy Inc. Reports Q2 2026 Results: Revenue Declines, Losses Widen

Nerdy Inc. announced its second-quarter 2026 financial results, showing a decrease in revenue and an increase in operating loss, alongside strategic decisions to wind down certain business operations.

Summary

• Nerdy Inc. reported revenue of $43.2 million for the three months ended June 30, 2026, a decrease from $45.3 million in the same period last year.
• For the six months ended June 30, 2026, revenue was $92.0 million, down from $92.9 million in the prior year.
• The company reported an operating loss of $6.5 million for the three months ended June 30, 2026, compared to a loss of $12.3 million in the prior year.
• The net loss attributable to Class A Common Stockholders was $4.7 million ($0.04 per share) for the three months ended June 30, 2026, compared to $7.9 million ($0.07 per share) in the prior year.
• Nerdy Inc. is winding down its Varsity Tutors for Schools business, expecting to incur $2 million to $4 million in exit costs.
• The company is also abandoning its First Tutors business.
• Active Members decreased by 5% year-over-year to 29.1 thousand as of June 30, 2026, though the rate of decline has narrowed sequentially.
• Average Revenue Per Member Per Month (ARPM) increased by 5% year-over-year to $366.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to declining revenues, increasing operating losses, and the strategic decision to wind down a business line, despite some operational efficiencies.

Positives

• Gross profit for the three months ended June 30, 2026, increased slightly to $28.0 million from $27.8 million in the prior year, with a gross margin of 65% compared to 62%.
• Gross profit for the six months ended June 30, 2026, increased by 9% to $60.3 million from $55.5 million in the prior year, with a gross margin of 66% compared to 60%.
• The company expects to return to positive Active Member growth by the end of 2026.
• Average Revenue Per Member Per Month (ARPM) increased by 5% year-over-year to $366 for the three months ended June 30, 2026, driven by price increases.
• Operating expenses decreased by 14% for both the three and six-month periods ended June 30, 2026, compared to the prior year, driven by AI-enabled productivity gains and reduced investment in the Institutional business.
• The company was in compliance with its debt covenants as of June 30, 2026.

Negatives

• Revenue for the three months ended June 30, 2026, decreased by 4% to $43.2 million compared to $45.3 million in the prior year.
• Revenue for the six months ended June 30, 2026, decreased by 1% to $92.0 million compared to $92.9 million in the prior year.
• Operating loss for the three months ended June 30, 2026, was $6.5 million, an improvement from $12.3 million in the prior year, but still a significant loss.
• Operating loss for the six months ended June 30, 2026, was $12.3 million, an improvement from $28.9 million in the prior year.
• Net loss attributable to Class A Common Stockholders was $4.7 million ($0.04 per share) for the three months ended June 30, 2026, compared to $7.9 million ($0.07 per share) in the prior year.
• Net loss attributable to Class A Common Stockholders was $8.7 million ($0.07 per share) for the six months ended June 30, 2026, compared to $18.4 million ($0.15 per share) in the prior year.
• Active Members decreased by 5% year-over-year to 29.1 thousand as of June 30, 2026.
• Active Experts decreased by 13% year-over-year to 8.4 thousand for the three months ended June 30, 2026.

Risks

• The company received a letter from the NYSE indicating non-compliance with the minimum bid price requirement, with a six-month compliance period ending September 5, 2026.
• A proposed reverse stock split is intended to increase the per share trading price to regain compliance with NYSE listing requirements, but its effectiveness is uncertain and could decrease liquidity.
• The company is subject to legal proceedings challenging the classification of third-party Experts as independent contractors.
• The company has a history of net losses and negative operating cash flows, which may require additional financing or cost-containment measures.
• The wind-down of Varsity Tutors for Schools may result in exit costs of approximately $2 million to $4 million and could impact business and results of operations.
• The company's ability to access maximum borrowing capacity under its term loan requires future TTM Contribution Margin to exceed historical levels.
• The company may be required to make payments under the Tax Receivable Agreement, the liability for which was not probable as of June 30, 2026.
• The company's offerings continue to evolve, making future financial and operating results difficult to predict.

Future Outlook

The company expects to return to positive Active Member growth by the end of 2026, driven by platform enhancements. Revenue for future periods will be impacted by the wind-down of Varsity Tutors for Schools. The company believes its current cash on hand will be sufficient to satisfy cash requirements for the next twelve months.

Management Comments

• While our Active Member count as of June 30, 2026 was lower when compared to June 30, 2025, the rate of decline has narrowed sequentially for four consecutive quarters and we believe the recent rollout and continued advancement of our new Learner and Expert platform user experiences will result in positive growth by the end of 2026.
• We believe our Active Expert count at June 30, 2026 is sufficient to meet our near-term growth objectives.
• We are applying AI systematically across the tech stack, helping drive continued cost reductions and improved unit economics.
• Our board believes that a higher stock price may help generate the interest of new investors, a reverse stock split may not result in a per-share price that will attract certain types of investors, such as institutional investors or investment funds, and such share price may not satisfy the investing guidelines of institutional investors or investment funds.

Industry Context

StockSavvy.ai notes that Nerdy Inc.'s performance in the online tutoring and education technology sector is facing headwinds, with declining revenues and strategic shifts like business line wind-downs. While the company highlights AI-driven efficiencies and a narrowing decline in active users, the overall market for educational services remains competitive, and the company's efforts to regain NYSE listing compliance through a reverse stock split indicate financial pressures.

Comparison to Industry Standards

• The company's revenue decline of 4% for the quarter and 1% for the year-to-date period contrasts with the general growth trend in the broader EdTech market, which has seen increased adoption of online learning solutions.
• While Nerdy Inc. is focusing on AI for efficiency, competitors like Chegg and Coursera are also leveraging AI and expanding their offerings, creating a competitive landscape where differentiation and sustained growth are crucial.
• The company's struggle to maintain a minimum stock price of $1.00 on the NYSE is a significant concern, especially when compared to more established EdTech players that typically maintain higher valuations and investor confidence.

Legal Proceedings

• The company is subject to legal and regulatory proceedings challenging the classification of third-party Experts as independent contractors.
• The company is subject to various other legal proceedings and actions in the normal course of business, which management believes will not be material individually or in the aggregate.

Related Party Transactions

• Nerdy Inc. has a Tax Receivable Agreement with certain Legacy Nerdy Holders, which provides for payments based on tax savings realized by Nerdy Inc. as a result of certain increases in tax basis.

Stakeholder Impact

• Shareholders may be negatively impacted by the declining stock price and the potential for delisting from the NYSE, although a reverse stock split aims to mitigate this.
• Employees involved in the Varsity Tutors for Schools business line may be affected by the planned wind-down, potentially leading to severance and termination costs.
• Customers (Learners and Institutions) may experience changes in service offerings due to the wind-down of Varsity Tutors for Schools.
• Creditors may be impacted by the company's financial performance and its ability to service its debt, although the company is currently in compliance with its debt covenants.

Next Steps

• The company expects to recognize substantially all exit-related costs for the wind-down of Varsity Tutors for Schools during the third quarter of 2026.
• The company plans to return to positive Active Member growth by the end of 2026.
• The company's board is submitting a reverse stock split proposal to stockholders for approval to regain and maintain compliance with NYSE listing requirements.

Key Dates

Recommendation

While the company shows some operational efficiencies and a narrowing decline in active members, the persistent revenue decline, widening operating losses, strategic business wind-downs, and the critical risk of NYSE delisting due to low stock price warrant caution. The planned reverse stock split is a reactive measure to a significant problem. Until there is clear evidence of a sustainable turnaround and a return to profitable growth, a 'hold' recommendation is prudent.

Keywords

tutoring, online learning, education technology, Varsity Tutors, consumer, institutional, EdTech, financial results