NRDY

Nerdy Inc. 2026 Q2 10-Q Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2026, for Nerdy Inc. (NYSE: NRDY), a holding company that operates a live tutoring and intervention platform (Varsity Tutors). The company is classified as an accelerated filer and a smaller reporting company. As of July 31, 2026, there were 127,879,473 shares of Class A common stock and 63,730,417 shares of Class B common stock outstanding.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Q2 2026 revenue decreased 4% year-over-year (YoY) to $43.2M, driven by lower Consumer and Institutional revenue. YTD revenue was flat at $92.0M.
• Margin Expansion: Gross margin improved to 65% in Q2 2026 (from 62% in Q2 2025) and 66% YTD (from 60% YTD 2025). This was primarily due to lower amortization of capitalized internal-use software following a Q4 2025 charge and reduced Expert costs.
• Loss Reduction: Operating loss narrowed significantly to $6.5M in Q2 2026 from $12.3M in Q2 2025. YTD operating loss decreased to $12.3M from $28.9M. Improvements were driven by reduced operating expenses (Sales & Marketing down 15% QoQ; G&A down 14% QoQ) and higher gross profit.
• Debt Service: Interest expense of $0.7M (Q2) and $1.3M (YTD) reflects borrowings under a Term Loan originated in November 2025. Outstanding borrowings were $20.0M as of June 30, 2026.
• Business Abandonment: The company abandoned the "First Tutors" business in Q2 2026, recording write-offs of associated assets and liabilities.

Guidance, Outlook, and Risks

• Strategic Wind-Down: Subsequent to the reporting period (July 31, 2026), the company committed to winding down its "Varsity Tutors for Schools" business line. Estimated exit costs range from $2.0M to $4.0M, expected to be recognized in Q3 2026.
• Operational Outlook: Management expects to return to positive Active Member growth by the end of 2026. The rate of decline in Active Members has narrowed for four consecutive quarters. Average Revenue Per Member (ARPM) increased 5% YoY to $366, driven by price increases.
• Liquidity: The company holds $38.4M in cash and has $10.0M remaining borrowing capacity under its Term Loan (subject to covenants). Management believes current cash is sufficient for the next 12 months.
• Listing Risk: The company received notice from the NYSE regarding non-compliance with the minimum bid price requirement (stock closed at $0.92 on June 30, 2026). A reverse stock split is proposed to regain compliance by September 5, 2026.
• Legal & Tax: The company faces ongoing litigation regarding independent contractor classification. A potential Tax Receivable Agreement (TRA) liability of $118.2M has not been recorded as payments are not currently deemed probable.

Investor Verification Checklist

• Reverse Stock Split Approval: Verify if the proposed reverse stock split is approved by shareholders to maintain NYSE listing.
• Varsity Tutors for Schools Exit: Monitor Q3 2026 results for the actual recognition of the estimated $2M-$4M wind-down costs.
• Active Member Trends: Confirm if the projected return to positive Active Member growth materializes in Q3 and Q4 2026.
• Debt Covenants: Review future filings to ensure continued compliance with the Term Loan covenants, specifically the TTM Contribution Margin multiple and Qualified Cash requirements.
• TRA Liability: Watch for changes in the valuation allowance that could trigger the recognition of the $118.2M Tax Receivable Agreement liability.