Business context and reporting period
This is TPG Pace Tech Opportunities Corp.’s unaudited Form 10-Q for the three months ended March 31, 2021—not an operating-company 10-Q from Nerdy Inc. TPG Pace was a blank-check company pursuing a business combination; its reported results do not provide Nerdy’s standalone operating or financial performance.
On January 28, 2021, TPG Pace agreed to combine with Live Learning Technologies LLC (Nerdy). The proposed transaction valued Nerdy at $1.25 billion, subject to specified adjustments, and remained subject to approvals and other closing conditions. Closing was not assured.
Financial results and liquidity
- Revenue: $0 for Q1 2021 and Q1 2020; the company had not commenced operating activities.
- Net income: $28.3 million in Q1 2021 versus $0 in Q1 2020. The 2021 result principally reflected a $32.8 million non-cash gain from lower fair value of derivative liabilities, offset by $4.5 million of professional fees and other expenses. Interest income was $6,763. Basic and diluted earnings per share were $0.50 for both Class A and Class F shares.
- Cash flow: Operating activities used $825,432; financing provided $2.0 million from a Sponsor loan. Cash increased by $1.17 million to $1.71 million.
- Assets and liquidity: Total assets were $452.0 million, including $450.0 million in the restricted Trust Account and $1.95 million in current assets. Trust funds were generally unavailable for operating expenses before a business combination or liquidation.
- Liabilities: Current liabilities were $32.9 million, including $26.72 million of derivative liabilities, $4.16 million of accrued professional fees and expenses, and a $2.0 million Sponsor note. Total liabilities were $48.6 million, including $15.75 million of deferred underwriting compensation payable only if a business combination closes. Shareholders’ deficit was $46.7 million.
- Margins and debt: Operating margins are not meaningful because the company had no revenue. The Sponsor note was non-interest-bearing; the filing reports no other long-term debt.
Material changes versus the prior comparable period
- Net income rose from zero to $28.3 million, driven by the fair-value gain on derivatives rather than operating revenue.
- Derivative liabilities fell from $59.5 million at December 31, 2020 to $26.7 million at March 31, 2021, producing the $32.8 million gain. Management cautioned that derivative fair-value changes could fluctuate materially in future quarters, without affecting cash flows.
- Cash outside the Trust Account rose from $534,095 at year-end to $1.71 million; the company also borrowed $2.0 million from its Sponsor during the quarter.
Outlook, risks, contingencies, and unusual items
- The proposed Nerdy transaction contemplated $150 million of PIPE proceeds and an estimated approximately $265 million cash contribution to Nerdy at closing. The combined company was expected to use an Up-C structure; TPG Pace expected to own about 60% of OpCo units and control Nerdy. These were transaction expectations, not completed results.
- The transaction required shareholder and Nerdy member approvals, among other conditions, and could be terminated if not completed within 180 days after the agreement date. TPG Pace had 24 months from its October 2020 IPO closing to complete a business combination or redeem public shares and liquidate.
- Management warned it expected further, potentially significant, transaction-related expenses and might need additional funding. On May 12, 2021, the Sponsor committed to lend funds if needed to meet obligations through August 31, 2022 and defer repayment of loans until after that date.
- The company disclosed a material weakness in internal controls over accounting for complex financial instruments, following errors that led to a restatement of its 2020 financial statements. Management said it was implementing remediation and expected to complete it by the end of Q2 2021.
- The filing reports no legal proceedings and no material changes to risk factors disclosed in the company’s May 14, 2021 Form 10-K/A. It also states the Sponsor may not have sufficient assets to meet its indemnity obligations relating to certain Trust Account claims.
Important facts for investors to verify
- Confirm the business-combination status, approval conditions, financing, redemption levels, and final cash and equity consideration; the proposed terms were not completed as of this filing.
- Review Nerdy’s own filings for operating revenue, growth, profitability, cash flows, and debt; these figures are not supplied here.
- Reconcile the derivative liability amount: the balance sheet and fair-value note report $26.72 million, while the MD&A text refers to $26.27 million.
- Track remediation of the material weakness and any subsequent filings or restatements. The filing also contains references to a Form 10-K/A in its controls discussion and to an “Annual Report” in its business-combination discussion; verify these apparent cross-references against the original filing.