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What changed in Nerdy Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Nerdy Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+245 added−310 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-27)

Top changes in Nerdy Inc.'s 2024 10-K

245 paragraphs added · 310 removed · 210 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIt is not possible to predict whether or when such legislation may be adopted in additional jurisdictions, and certain proposals, if adopted, could harm our business through a decrease in consumer registrations and revenue, or through a change in marketing strategies; however, a federal data privacy and security standard, which is also a possibility, may provide substantial clarity and benefits for businesses that collect and maintain such data.
Biggest changeIt is not possible to predict whether or when such legislation may be adopted in additional jurisdictions, and certain proposals, if adopted, could harm our business through a decrease in consumer registrations and revenue, or through a change in marketing strategies; however, a federal data privacy and security standard, which is also a possibility, may provide substantial clarity and benefits for businesses that collect and maintain such data. 9 Table of Contents These regulations are often complex and subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies, such as federal, state, and local administrative agencies.
The acuity of these problems, combined with the growing broad bipartisan recognition that high-dosage tutoring is a highly effective way to address the issue, is leading to an acceleration in market activity, with multiple states focused on rolling out state-funded, statewide tutoring programs. • Changing Workforce Dynamics : The advent of technology has dramatically changed how people view work, and platforms that enable interactions directly between providers and consumers are disrupting traditional, antiquated models.
These problems, combined with the growing broad bipartisan recognition that high-dosage tutoring is a highly effective way to address the issue, is leading to an acceleration in market activity, with multiple states focused on rolling out state-funded, statewide tutoring programs. • Changing Workforce Dynamics : The advent of technology has dramatically changed how people view work, and platforms that enable interactions directly between providers and consumers are disrupting traditional, antiquated models.
Learners can access thousands of Experts on Nerdy’s platform using numerous devices, providing them with the ability to learn across our various learning formats anytime and from anywhere, including at pre-scheduled times and on-demand. • Long-Term, Consistent Learning : We have developed products that have created an opportunity to develop longer and more all-encompassing relationships that span academic calendar years, subjects, and learning formats. 4 Table of Contents • Purpose-Built Technology : Our platform was designed specifically for learning with interactive technology tools such as two-way video, collaborative work-spaces, recording and replay capabilities, and adaptive diagnostic testing, as well as integrated personalization features to facilitate instruction and provide a more engaging and enjoyable experience to Learners. • Expansive Range of Subjects : We are focused on developing breadth and depth in our subject catalog.
Learners can access thousands of Experts on our platform using numerous devices, providing them with the ability to learn across our various learning formats anytime and from anywhere, including at pre-scheduled times and on-demand. • Long-Term, Consistent Learning : We have developed products that have created an opportunity to develop longer and more all-encompassing relationships that span academic calendar years, subjects, and learning formats. 4 Table of Contents • Purpose-Built Technology : Our platform was designed specifically for learning with interactive technology tools such as two-way video, collaborative work-spaces, recording and replay capabilities, and adaptive diagnostic testing, as well as integrated personalization features to facilitate instruction and provide a more engaging and enjoyable experience to Learners. • Expansive Range of Subjects : We are focused on providing breadth and depth in our subject catalog.
Product Innovation and Adaptation Supporting Changing Needs of our Audiences We build new products and technology capabilities that will enable us to better meet Learner and Expert needs in the future, support innovation, and help drive continued growth while further strengthening our competitive moat.
Product Innovation and Adaptation Supporting Changing Needs of our Audiences We build new products and technology capabilities that we believe will enable us to better meet Learner and Expert needs in the future, support innovation, and help drive continued growth while further strengthening our competitive moat.
Cohn previously worked in energy & power investment banking at Wells Fargo Securities and venture capital at Ascension Ventures, which he then left to focus on growing Nerdy full-time at the end of 2011. He serves on the national council board of the entrepreneurship program at Washington University in St. Louis. Mr.
Cohn previously worked in investment banking at Wells Fargo Securities and venture capital at Ascension Ventures, which he then left to focus on growing Nerdy full-time at the end of 2011. He serves on the national council board of the entrepreneurship program at Washington University in St. Louis. Mr.
And with recent advancements in technology, like the learning solutions Nerdy offers, transforming the way people learn has never been more possible. We believe school administrators and educators are rethinking how they can deliver the best outcomes for students, looking for new solutions beyond the traditional approach, which historically solved learning demands only with internal and in-person resources.
And with recent advancements in technology, like the learning solutions we offer, transforming the way people learn has never been more possible. We believe school administrators and educators are rethinking how they can deliver the best outcomes for students, looking for new solutions beyond the traditional approach, which historically solved learning demands only with internal and in-person resources.
These new products provide Varsity Tutors for Schools with a comprehensive product portfolio capable of meeting the high-dosage tutoring needs of school districts by providing the flexible implementation models that meet the common use cases districts encounter, allowing them to better serve students and their community.
Our high-dosage tutoring products provide Varsity Tutors for Schools with a comprehensive product portfolio capable of meeting the tutoring needs of school districts by providing flexible implementation models that meet the common use cases districts encounter, allowing them to better serve students and their community.
We believe that as our range of subjects offered and audiences served through the platform grows across learning categories, our market presence and brand recognition will expand, driving more Learners and Experts to our platform. 8 Table of Contents Direct-to-Consumer Audience Our comprehensive learning destination provides learning experiences across numerous subjects and multiple formats.
We believe that as our range of subjects offered and audiences served through the platform grows across learning categories, our market presence and brand recognition will expand, driving more Learners and Experts to our platform. Direct-to-Consumer Audience Our comprehensive learning destination provides learning experiences across numerous subjects and multiple formats.
As a result of our subscription-based business, Experts have the ability to develop deeper relationships that allow for more consistent revenue-generating opportunities. • Flexibility : As the modern workforce mindset shifts toward flexibility and choice, our platform empowers Experts to work from wherever, whenever, and however they want, giving them convenience and control over their work schedule. • Purpose-Built Technology : Our platform empowers Experts with interactive technology features such as two-way video, collaborative work-spaces, recording and replay capabilities, and adaptive diagnostic testing, as well as integrated personalization features to make delivering online instruction easy. • Frictionless Payment Processing : We ensure the Experts are paid on-time and securely with frequent payments, alleviating administrative burden and hassle and allowing them to focus on helping Learners learn.
As a result of our subscription-based business, Experts have the ability to develop deeper relationships that allow for more consistent revenue-generating opportunities. • Flexibility : As the modern workforce mindset shifts toward flexibility and choice, our platform empowers Experts to work where, when, and how they want, giving them convenience and control over their work schedule. • Purpose-Built Technology : Our platform empowers Experts with interactive technology features such as two-way video, collaborative work-spaces, recording and replay capabilities, and adaptive diagnostic testing, as well as integrated personalization features to make delivering online instruction easy. • Frictionless Payment Processing : We ensure the Experts are paid on-time and securely with frequent payments, alleviating administrative burden and hassle and allowing them to focus on helping Learners learn.
We have seen strong demand and increasing engagement as we continue to evolve our services and products toward ‘always on’recurring relationships with Learners that better serve our multiple direct-to-consumer audiences. Institutional Audience The education system in the U.S. is under tremendous stress, creating an environment with immense opportunity for transformation.
We have seen strong demand and increasing engagement as we continue to evolve our services and products toward ‘always on’recurring relationships with Learners that better serve our multiple direct-to-consumer audiences. 7 Table of Contents Institutional Audience The education system in the U.S. is under tremendous stress, creating an environment with immense opportunity for transformation.
The thousands of subjects we currently offer our Learners serves their needs across the entire learning lifecycle. • Learning Across Multiple Formats : Learning Memberships combine all of our products into a singular solution with all-inclusive pricing, making it easy and affordable for Learners to engage in multiple learning formats. • Cost Effective : We believe we provide the best value for our Learners by offering a cost-effective and superior learning experience in comparison to traditional offline learning models.
The thousands of subjects we currently offer our Learners serve their needs across the entire learning lifecycle. • Learning Across Multiple Formats : Our subscription offerings combine all of our products into a singular solution with all-inclusive pricing, making it easy and affordable for Learners to engage in multiple learning formats. • Cost Effective : We believe we provide the best value for our Learners by offering a cost-effective and superior learning experience in comparison to traditional offline learning models.
Learners use our platform for a broad set of purposes: • to proactively improve their academic performance; • to remediate academic underperformance; • for enrichment to learn about a subject they are passionate about or to advance a foundational skill they want to develop; • to learn new professional and technical skills; • to obtain professional and technical designations and certifications; • to maximize their chances of admission into their school or program of choice, spanning private schools, to undergraduate programs, to graduate school, and beyond; and • to address COVID-19-related learning loss.
Learners use our platform for a broad set of purposes: • to proactively improve their academic performance; • to remediate academic underperformance; • for enrichment to learn about a subject they are passionate about or to advance a foundational skill they want to develop; • to learn new professional and technical skills; • to obtain professional and technical designations and certifications; and • to maximize their chances of admission into their school or program of choice, spanning private schools, to undergraduate programs, to graduate school, and beyond.
By providing numerous learning 5 Table of Contents formats to help Learners access top Experts across multiple learning formats, our platform empowers both Learners and Experts to have more agency, optimize interactions, and enhance their learning and instructing experience. • Demand for Long-Term, Consistent Learning : Learners are expressing interest in supplemental learning solutions that support a more consistent use pattern over extended periods of time and a default to recurring, ‘always on’ relationships. • Learning Loss and Chronic Absenteeism : The National Center for Education Statistics (“NCES”) published what is known as the “Nation's Report Card”.
By providing numerous learning formats to help Learners access top Experts across multiple formats, our platform empowers both Learners and Experts to have more agency, optimize interactions, and enhance their learning and instructing experience. 5 Table of Contents • Demand for Long-Term, Consistent Learning : Learners are expressing interest in supplemental learning solutions that support a more consistent use pattern over extended periods of time and a default to recurring, ‘always on’ relationships. • Learning Loss and Chronic Absenteeism : The National Center for Education Statistics (“NCES”) publishes what is known as the “Nation's Report Card”, and results have shown that students have fallen behind in reading and math.
We have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product names, taglines, and logos in the U.S. and other countries to the extent it is determined to be appropriate and cost-effective. As of February 13, 2024, we have several registered and pending trademarks in the U.S. and foreign jurisdictions.
We have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product names, taglines, and logos in the U.S. and other countries to the extent it is determined to be appropriate and cost-effective. We have several registered and pending trademarks in the U.S. and foreign jurisdictions.
Information about our Executive Officers The section below provides information regarding our executive officers as of February 13, 2024: Charles Cohn , age 38, is our Founder, Chairman, President, and Chief Executive Officer. Mr. Cohn founded the Company in 2007. Mr.
Information about our Executive Officers The section below provides information regarding our executive officers as of February 13, 2025: Charles Cohn , age 39, is our Founder, Chairman, President, and Chief Executive Officer. Mr. Cohn founded the Company in 2007. Mr.
For additional information regarding the impact of regulatory and administrative investigations, audits, and inquiries on our business and financial results, see “Risk Factors” in Part I, Item 1A of this report. 10 Table of Contents Government Regulation There are a variety of regulations that apply to how we operate our business, including, for example, regulations related to marketing efforts (such as the CAN-SPAM Act of 2003, the Telephone Consumer Protection Act of 1991 (“TCPA”), Federal Trade Commission (the “FTC”) guidelines related to communications with consumers, the Children’s Online Privacy Protection Act (“COPPA”), the Family Educational Rights and Privacy Act (“FERPA”), among others); regulations related to data privacy of consumers (such as the California Consumer Privacy Act (“CCPA”), the Student Online Personal Protection Act (“SOPPA”) among others) and how we process such information (such as the CCPA and other similar legislation that is or may be enacted (including the California Privacy Rights and Enforcement Act of 2020 (“CPRA”)), as well as data security and data breaches; regulations related to background checks as regulated by the Fair Credit Reporting Act (“FCRA”) and similar state laws and new hire reporting (for employees and independent contractors depending on the state) and other federal, state, local, and foreign laws of general applicability to employers, direct-to-consumer companies, and companies in general (these laws, regulations, and standards govern issues such as worker classification, labor and employment, anti-discrimination, payments, whistleblowing and worker confidentiality obligations, personal injury, text messaging, subscription services, intellectual property, consumer protection and warnings, marketing, taxation, privacy, data security, competition, unionizing and collective action, arbitration agreements and class action waiver provisions, terms of service, mobile application and website accessibility, money transmittal, and background checks).
Government Regulation There are a variety of regulations that apply to how we operate our business, including, for example, regulations related to marketing efforts (such as the CAN-SPAM Act of 2003, the Telephone Consumer Protection Act of 1991 (“TCPA”), Federal Trade Commission (the “FTC”) guidelines related to communications with consumers, the Children’s Online Privacy Protection Act (“COPPA”), and the Family Educational Rights and Privacy Act (“FERPA”), among others); regulations related to data privacy of consumers (such as the California Consumer Privacy Act (“CCPA”) and the Student Online Personal Protection Act (“SOPPA”) among others) and how we process such information (such as the CCPA and other similar legislation that is or may be enacted (including the California Privacy Rights and Enforcement Act of 2020 (“CPRA”)), as well as data security and data breaches; regulations related to background checks as regulated by the Fair Credit Reporting Act (“FCRA”) and similar state laws and new hire reporting (for employees and independent contractors depending on the state); and other federal, state, local, and foreign laws of general applicability to employers, direct-to-consumer companies, and companies in general (these laws, regulations, and standards govern issues such as worker classification, labor and employment, anti-discrimination, payments, whistleblowing and worker confidentiality obligations, personal injury, text messaging, subscription services, intellectual property, consumer protection and warnings, marketing, taxation, privacy, data security, competition, unionizing and collective action, arbitration agreements and class action waiver provisions, terms of service, mobile application and website accessibility, money transmittal, and background checks).
As of February 13, 2024, we had approximately five hundred full and part-time employees, none of whom are covered under a collective bargaining agreement. Additionally, we have agreements with approximately four hundred globally-sourced, independent contractors, which are primarily used in customer support, tutor operations, and engineering roles.
As of February 13, 2025, we had approximately six hundred full and part-time employees, none of whom are covered under a collective bargaining agreement. Additionally, we have agreements with approximately four hundred 8 Table of Contents globally-sourced, independent contractors, which are primarily used in customer support, tutor operations, and engineering roles.
We continue to evolve and enhance our product experience to build relevance and find solutions to unmet needs across all of our audiences, which opens up new avenues for growth and lifetime value expansion, and otherwise accelerates our product roadmap.
We continue to evolve and enhance our product experience to build relevance and find solutions to unmet needs across all of our audiences, which we expect will open up new avenues for growth and lifetime value expansion, and otherwise accelerate our product roadmap.
As part of our partnerships with Institutions, we provide them access to the Varsity Tutors for Schools platform. Our comprehensive platform access includes: 24/7 chat-based tutoring, essay review & coaching, live enrichment classes, SAT and ACT test prep classes, StarCourses , self-study tools, college & career readiness resources, adaptive assessments, and recorded enrichment classes.
As part of our partnerships with Institutions, we provide access to the Varsity Tutors for Schools platform. Our comprehensive unified, platform access includes: 24/7 chat-based tutoring, essay review & coaching, live academic and enrichment classes, SAT and ACT test prep classes, self-study tools, and adaptive assessments.
Pello holds a Bachelor’s and Master’s degree in Accounting from the University of Missouri-Columbia and is a registered CPA in Missouri (inactive). Chris Swenson , age 52, has served as our Chief Legal Officer and Corporate Secretary since August 2019, having started Nerdy’s legal department in May 2015 as its Vice President and General Counsel. Prior to joining Nerdy, Mr.
Pello started his career at PricewaterhouseCoopers and holds Bachelor’s and Master’s degree in Accounting from the University of Missouri-Columbia. He is a registered CPA in Missouri (inactive). Chris Swenson , age 53, has served as our Chief Legal Officer and Corporate Secretary since August 2019, having started Nerdy’s legal department in May 2015 as its Vice President and General Counsel.
Memberships are helping transform our relationship with customers into one that is recurring in nature and spans subjects and learning formats. The model encourages ongoing consistent learning over longer periods of time, which is leading to significant improvements in customer engagement and lifetime value. In 2023, we introduced a significantly upgraded and enhanced Learning Membership digital experience.
Memberships are helping transform our relationship with customers into one that is recurring in nature and spans subjects and learning formats. The model encourages ongoing consistent learning over longer periods of time, which we believe can lead to significant improvements in customer engagement and lifetime value.
Pello served as Vice President, Corporate Finance at Save-A-Lot, a grocery chain owned by private equity from December 2017 until September 2019. Prior to that role, Mr.
Pello served as our Vice President, Finance, and Accounting from September 2019 until October 2020. Prior to joining Nerdy, Mr. Pello served as Vice President, Corporate Finance at Save-A-Lot, a grocery chain owned by private equity from December 2017 until September 2019. Mr.
Swenson was a partner at the national law firm of Polsinelli PC, and began serving as Nerdy’s outside counsel in 2008, shortly after it was founded. Mr. Swenson received a BSBA with distinction and a BA from Washington University in St. Louis, as well as his law degree from the University of Missouri-Kansas City. 12 Table of Contents
Prior to joining Nerdy, Mr. Swenson was a partner at the national law firm of Polsinelli PC, and began serving as Nerdy’s outside counsel in 2008, shortly after it was 10 Table of Contents founded. Mr. Swenson received a BSBA with distinction and a BA from Washington University in St.
Learning Memberships include access to one-on-one instruction, small group tutoring, large format classes, tutor chat, essay review, adaptive assessments, and self-study tools. Learning Memberships are for Learners of all ages, ranging from kindergarten to college and professional Learners, and can be used in any subject, at any time.
Learning Memberships include access to one-on-one instruction, live and recorded classes, self-study tools, college & career readiness resources, and adaptive assessments. Learning Memberships are for Learners of all ages, ranging from kindergarten to college and professional Learners, and can be used in any subject, at any time.
We collectively call them AI for HI ® , short for Artificial Intelligence for Human Interaction. The latest AI advancements are allowing us to rapidly develop transformative experiences involving the real-time generation of content with near zero costs and improving our ability to deliver live human interaction and personalized learning at scale.
AI is allowing us to rapidly develop transformative experiences involving the real-time generation of content with near zero costs and improving our ability to deliver live human interaction and personalized learning at scale.
Our Learning Platform as a Service offering leverages the technology infrastructure and product capabilities originally developed for our Consumer business, providing a single comprehensive software platform that allows Institutions to roster entire student bases and deploy solutions for different segments of students.
Our Learning Platform as a Service offering leverages the technology infrastructure and product capabilities originally developed for our Consumer business, providing a single, unified platform that allows Institutions to roster entire student bases and deploy solutions for different segments of students. The offerings can be deployed across large populations in a scalable manner to meet the needs of specific populations.
In doing so, we’re able to build solutions that improve quality, decrease cost, improve convenience, and meet the needs of Learners by enabling access to high quality live learning, and other powerful learning resources.
In doing so, we’re able to build solutions that improve quality, decrease cost, improve convenience, and meet the needs of Learners by enabling access to high quality live learning, and other powerful learning resources. Learning Memberships Learning Memberships are an ‘all access’, subscription offering that aims to support Learners across academic calendar years, subjects, and learning formats.
Our unique and scalable platform leverages millions of data points to deliver live, personalized learning, offering administrators and school officials a critical solution as they lead the next generation of Learners.
With the strategic investments we are making to adapt our platform for Institutions and school districts, we believe we are well-positioned to be the learning solution of choice. Our unique and scalable platform leverages millions of data points to deliver live, personalized learning, offering administrators and school officials a critical solution as they lead the next generation of Learners.
We also have numerous registered domain names for websites that are used in the business, such as 11 Table of Contents www.nerdy.com, the businesses of the subsidiary entities, such as www.varsitytutors.com, and other businesses and their respective variations.
Additionally, we have common law rights in some trademarks in the U.S. and foreign jurisdictions, as well as many registered copyrights in the U.S. We also have numerous registered domain names for websites that are used in the business, such as www.nerdy.com, the businesses of the subsidiary entities, such as www.varsitytutors.com, and other businesses and their respective variations.
Additionally, we also rolled out AI Lesson Plan Generator and AI Tutor Chat to enhance the user experience and drive increased engagement on the platform. Looking ahead, we will continue to deploy new capabilities and products. We expect to see improvements in retention over time as we deliver new products, improve customer and tutor management tools, and drive improved engagement.
Looking ahead, we will continue to deploy new capabilities and products. We expect to see improvements in retention over time as we deliver new products, improve customer and tutor management tools, and drive improved engagement.
Importantly, the investments we make to support a learning solution for one audience can be scaled to apply to new audiences, resulting in returns that are multiples of our initial investment. There are specific groupings of core competencies, or layers, of our platform that we believe to be particularly differentiated and powerful.
We consistently invest in improving our capabilities and technology architecture, as well as in developing new solutions that can be leveraged across new markets and audiences. Importantly, the investments we make to support a learning solution for one audience can be scaled to apply to new audiences, resulting in returns that are multiples of our initial investment.
Meanwhile, according to one study, “chronic absenteeism”, which is defined as the percentage of students absent more than 10% of school days, was at 26% in certain states in 2023. This is above pre-pandemic levels of 15% in 2019.
Meanwhile, “chronic absenteeism”, which is defined as the percentage of students absent more than 10% of school days, remains above pre-pandemic figures.
Learning Platform as a Service Our Learning Platform as a Service offers a customizable set of solutions allowing learning to be ‘always on’ and available for Learners.
Upgrades to the digital experience for Learners are in service of that ultimate outcome and are aimed at increasing engagement across each of those vectors. Learning Platform as a Service Our Learning Platform as a Service offers a customizable set of solutions allowing learning to be ‘always on’ and available for Learners.
We believe the simplification and evolution of our product suite that positions Varsity Tutors for Schools as the product, with access to powerful academic tools and resources included that is supported by three flexible models for administering high-dosage tutoring, better positions us to attract new Institutional customers to the offering while also building deeper and larger relationships with existing ones.
We believe the simplification and evolution of our product suite positions us to attract new Institutional customers to the offering while also building deeper and larger relationships with existing ones.
Our Learning Platform as a Service offering leverages the technology infrastructure and product capabilities originally developed for our Consumer business, providing a single comprehensive software platform that allows Institutions to roster entire student bases and deploy solutions for different segments of students.
Our Learning Platform as a Service offering leverages the technology infrastructure and product capabilities originally developed for our Consumer business, providing a single, unified platform that allows Institutions to roster entire student bases and deploy solutions for different segments of students. 6 Table of Contents We have built access and subscription-based products for our Institutional business that are oriented toward providing district-wide solutions that can be deployed across entire student and teacher populations, significantly widening the impact we can have with our school district partners.
Cohn has a BSBA in Finance and Entrepreneurship from Washington University in St. Louis. Jason Pello , age 44, has served as our Chief Financial Officer since October 2020. Previously, Mr. Pello served as our Vice President, Finance and Accounting from September 2019 until October 2020. Prior to joining Nerdy, Mr.
Cohn has a BSBA in Finance and Entrepreneurship from Washington University in St. Louis. Jason Pello , age 45, has served as our Chief Financial Officer since October 2020. Mr. Pello is responsible for the Company’s financial operations, including leading all aspects of the financial planning and analysis, accounting, treasury management, investor relations, and tax functions. Previously, Mr.
Under the terms of the Tax Receivable Agreement, 85% of these potential future tax benefits realized by Nerdy Inc. as a result of such redemptions will be paid to certain Legacy Nerdy Holders. Human Capital We are a remote-first company, which means that working remotely is the primary option for our employees.
Human Capital We are a remote-first company, which means that working remotely is the primary option for most of our employees.
With the use of generative AI for content creation, we have been able to rapidly expand Subject Portals to our top 200 most in-demand subjects, and have simultaneously expanded the amount of learning resource content available within each Subject Portal.
With the use of generative AI for content creation, we have been able to rapidly expand the content depth of our learning resources in our most in-demand subjects. Additionally, we have developed AI Lesson Plan Generator and AI Tutor Chat to enhance the user experience and drive increased engagement on the platform.
We will continue to drive consumer awareness of the value and availability of our platform.
While we have scaled to millions of users with access to our platform, many Consumers and Institutions in the U.S. are not aware of the online solutions we offer. We will continue to drive consumer awareness of the value and availability of our platform.
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Recent results have shown that fourth and eighth graders have fallen behind in reading and dropped to levels not seen since 1992 and math scores have had the largest ever decline on record.
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We continue to focus on enhancing the Learning Membership experience by modernizing and unifying the student user experience across the entire platform, streamlining the onboarding experience to drive higher levels of engagement earlier in the customer learning journey, making it easier for customers to manage their tutoring relationships, and improving discoverability of the breadth of our learning tools.
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Learning Memberships In 2022, we continued to evolve our product offerings to better meet the needs of Learners by launching Learning Memberships, our ‘all access’ subscription offering that aims to support Learners across academic calendar years, subjects, and learning formats.
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In 2024, we saw strong interest in districts signing up for access to our platform, as we have successfully enabled access to the Varsity Tutors for Schools platform at more than 1.1 thousand school districts, encompassing more than five million students.
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The updates are aimed at enriching the experience, encouraging achievement, reinforcing personal accountability to learning, and improving the discoverability of learning formats and subjects.
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Student engagement with our platform has been stronger than expected, demonstrating the relevance of our offering and the growing need for student support beyond the traditional classroom.
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These upgrades of the digital experience for Learners are in service of that ultimate outcome and are aimed at increasing engagement across each of those vectors. The new Learning Membership experience includes: My Learning Hub The new My Learning Hub transforms the way members engage with our platform, making engaging and discovery with our platform more intuitive and user-friendly.
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Our Technology Platform The convergence of subscription business models and access-based products across Consumer and Institutional has allowed us to unify the Varsity Tutors for Schools and Consumer user experience into one that is modern, intuitive, and personalized to better serve the needs of our customers.
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The My Learning Hub serves as the new home page and central destination for 6 Table of Contents Learning Members, allowing members to effortlessly access their upcoming live tutoring schedule, easily track their past learning interactions in a subject, and track progress and achievement toward learning goals.
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There are specific groupings of core competencies, or layers, of our unified platform that we believe to be particularly differentiated and powerful. We collectively call them AI for HI ® , short for Artificial Intelligence for Human Interaction.
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The My Learning Hub enables easier discovery of new subjects, and will encourage users to explore additional areas of interest through personalized AI-generated learning recommendations that predict and suggest the next product interaction across learning formats and subjects that are most likely to drive engagement and customer value.
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For additional information regarding the impact of regulatory and administrative investigations, audits, and inquiries on our business and financial results, see “Risk Factors” in Part I, Item 1A of this report.
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My Learning Hub also brings together all of the key account management information and resources into a simple user experience that provides easy self-service management tools to better meet the changing needs of Learning Members and, at the same time, drive operating efficiency.
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Louis, as well as his law degree from the University of Missouri-Kansas City.
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Subject Portals Our new Subject Portals enable Learners to easily find all the different ways they can learn a given subject. We know our typical Learner prefers to learn a given subject in multiple different ways and this new experience honors that with improved discoverability.
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With the new Subject Portal experience updates, we aim to increase the number of learning formats Learners leverage on our platform in each subject, thereby driving increases in engagement and frequency of use and improving the value received by Learners. AI Content Generation With AI Content Generation, we used generative AI to generate lesson plans, including problems, answers, and explanations.
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In addition, the AI Lesson Plan Generator is embedded in the user interface in the Live Learning Platform itself as a dynamic and editable pane that is present during the live video-based tutoring sessions.
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Experts can use the Lesson plan ‘as is’, or edit it to the needs of the Learner on the fly to further enhance and personalize the content in real time to the needs of the Learner.
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We believe the expansion of AI generated content and practice resources will lead to more frequent engagement in between tutoring sessions and a more personalized and specific experience tailored to the concepts and skills where the Learner needs the most support. AI Tutor Chat AI Tutor Chat enables Learners to receive help from an AI tutor.
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Learners are able to get help faster and learn in the way that best suits their needs and objectives at that moment. AI Tutor is able to provide a high level of customer satisfaction across a broad array of subjects, which we believe will lead to increased engagement on the platform.
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In 2022, as part of our ‘always on’ vision, we built two access and subscription-based products, Teacher Assigned and On Demand, for our Institutional business that were oriented toward providing district-wide solutions that could be deployed across entire student and teacher populations, significantly widening the impact we can have with our school district partners.
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In 2023, we made significant platform enhancements that have enabled us to further shift our Institutional business to one that is access and subscription-based, and that provides more value to our Institutional customers.
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The Varsity Tutors for Schools platform now comes with access to powerful academic resources and tools, and the ability to choose between three simple models for high-dosage tutoring administration.
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We also made significant improvements to our high-dosage tutoring product by providing more flexible implementation models and pricing options that enable school districts to more easily implement large-scale, high-dosage tutoring to a broader base of students.
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Our Teacher Assigned product was our first ‘always on’ subscription based offering for districts that enabled teachers to provide high-dosage tutoring to students in the classroom based upon their unique insights and knowledge of what was occurring. We’ve seen strong engagement with Teacher Assigned districts and growing excitement in the market for this solution.
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The insights garnered from Teacher Assigned, combined with learnings from our new subscription-based Consumer model, led to us introducing two new access-based subscription products in 2023, District Assigned and Parent Assigned.
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School district leaders know the specific needs of their students, teachers, and communities best and now our multiple high-dosage tutoring models make it easier for them to 7 Table of Contents implement a solution seamlessly and aligned with the unique needs of their district.
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With Varsity Tutors for Schools , you can now choose to administer tutoring centrally at the school district level, empower teachers to manage tutoring, or provide parents with Learning Memberships and oversee tutoring outside of schools for their own students. • District Assigned : Offers a suite of features that helps school staff deliver personalized tutoring to targeted groups of students with a focus on bridging learning gaps.
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Using District Assigned, school administrators can manage tutoring programs centrally, identify the school division staff that is best suited to request tutoring, and define academic focus areas for student learning. • Teacher Assigned : When students start to fall behind in class, Teacher Assigned tutoring empowers the educators who know them best to schedule face-to-face personalized instruction from high quality consistent tutors.
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Teachers get an extra set of hands per student while every student receives the individualized support they need to close learning gaps and return to class more confident and engaged. • Parent Assigned : Empowering parents to be advocates for their child’s learning can help them take an active role in their student’s educational experience.
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Our parent program enables school district parents to request tutoring for their students and schedule sessions at home with access to Learning Memberships. Parents can also register their students for our live classes, leverage our recorded content to help students with homework, and use our adaptive assessments to understand their student’s learning gaps and progress.
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Our Technology Platform Our Consumer and Institutional models are driven by a scalable technology platform that is engineered for learning. We consistently invest in improving our capabilities and technology architecture, as well as in developing new solutions that can be leveraged across new markets and audiences.
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The offerings can be deployed across large populations in a scalable manner to meet the needs of specific populations. With the strategic investments we are making to adapt our platform for Institutions and school districts, we are well-positioned to be the learning solution of choice.
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While we have scaled to hundreds of thousands of users, many people and Institutions in the U.S. are not aware of the online solutions we offer. Many still believe they need to drive to 9 Table of Contents a brick-and-mortar location, often during rush hour traffic, to find supplemental learning assistance.
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Reverse Recapitalization On September 20, 2021, TPG Pace Tech Opportunities Corp., an exempted company incorporated in the Cayman Islands (“TPG Pace”), and Live Learning Technologies LLC, a Delaware limited liability company (along with its wholly-owned subsidiaries, “Nerdy LLC”), consummated a business combination (the “Closing”), pursuant to the business combination agreement, dated as of January 28, 2021 (as amended, the “Business Combination Agreement”).
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Nerdy LLC is a holding company that is the sole owner of several operating companies, including its flagship business Varsity Tutors. Immediately prior to the Closing, TPG Pace became a Delaware corporation and was renamed Nerdy Inc.
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This transaction is referred to herein as the “Reverse Recapitalization.” As a result of the Reverse Recapitalization, Nerdy LLC is consolidated with and into Nerdy Inc. The Reverse Recapitalization was accomplished through an umbrella partnership corporation (“Up-C”) structure, which is often used by partnerships and limited liability companies (operating as partnerships) undertaking an initial public offering.
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The Up-C structure allowed legacy Nerdy LLC equity holders (the “Legacy Nerdy Holders”) to retain their equity ownership in Nerdy LLC, an entity that is classified as a partnership for U.S. federal income tax purposes, and provides potential future tax benefits for Nerdy Inc. when the Legacy Nerdy Holders ultimately redeem their pass-through interests for shares of Class A common stock, par value $0.0001 per share (the “Class A Common Stock”) in Nerdy Inc. as a result of a tax receivable agreement (the “Tax Receivable Agreement”).
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Diversity and Inclusion We have a diverse talent pipeline that allows us to model our leadership principles, foster innovation, build high performing teams, and deliver results. We firmly believe that a diverse workforce enables stronger company performance, enhances culture, and better positions us to serve the varied needs of our customers.
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We aspire to and promote a welcoming, inclusive culture that values all people - regardless of sex, gender, race, color, religion, national origin, age, disability, veteran status, sexual orientation, gender expression, or experiences - through recruiting outreach and internal connection. We are committed to being an organization that is as diverse as the audiences we serve.
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As of February 13, 2024, approximately 64% of employees were women and approximately 22% of employees were racially and ethnically diverse.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTo the extent that we need funds and Nerdy LLC or its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of their financing arrangements or are otherwise unable to provide such funds, our liquidity and financial condition could be adversely affected. 33 Table of Contents Moreover, because we have no independent means of generating revenue, our ability to make tax payments and payments under the Tax Receivable Agreement is dependent on the ability of Nerdy LLC to make distributions to us in an amount sufficient to cover our tax obligations and obligations under the Tax Receivable Agreement.
Biggest changeTo the extent that we need funds and Nerdy LLC or its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of their financing arrangements or are otherwise unable to provide such funds, our liquidity and financial condition could be adversely affected.
Our reputation, brand, and the network effects among Experts and Learners on our platform are important to our success, and if we are not able to maintain and continue developing our reputation, brand, and network effects, our business, financial condition, and results of operations could be adversely affected.
Our reputation and brand, and the network effects among Experts and Learners on our platform are important to our success, and if we are not able to maintain and continue developing our reputation and brand, and the network effects, our business, financial condition, and results of operations could be adversely affected.
If we are not successful in quickly and efficiently scaling up offerings with new and existing Learners or Institutions, our reputation and our results of operations results will suffer. Our continued growth and profitability depends on our ability to successfully scale up our existing and newly launched offerings. As we continue aggressively growing our business, we may require new employees.
If we are not successful in quickly and efficiently scaling up offerings with new and existing Learners or Institutions, our reputation and our results of operations will suffer. Our continued growth and profitability depends on our ability to successfully scale up our existing and newly launched offerings. As we continue aggressively growing our business, we may require new employees.
Additionally, the approval processes of some Institutions, which are required for formal contract execution, are lengthy and cumbersome and, in many cases, are not completed prior to the time we begin performance. This means that we, at times, incur substantial costs prior to the formal execution of these agreements by Institutions.
Additionally, the approval processes of some Institutions, which are required for formal contract execution, are lengthy and cumbersome and, in many cases, are not completed prior to the time we begin performance. This means that at times we incur substantial costs prior to the formal execution of these agreements by Institutions.
For example, we may face retention challenges as a result of Learners’ dissatisfaction with the quality of the platform, quality of the Experts, level and quality of customer service, platform reliability, or other factors.
For example, we may face retention challenges as a result of Learners’ dissatisfaction with the quality of the platform, quality of Experts, level and quality of customer service, platform reliability, or other factors.
Experts may access the platform and continue to offer one-on-one and group instruction from any location in which they have access to our platform, even if located outside of the U.S., which exposes us to foreign and international risks.
Experts may access the platform and continue to offer one-on-one and group instruction from any location in which they have access to our platform, even if located outside of the U.S., which exposes us to foreign and international risks.
Many jurisdictions have or are considering enacting privacy or data protection laws or regulations relating to the collection, use, storage, transfer, disclosure, and/or other processing of personal data.
Many jurisdictions have or are considering enacting privacy or data protection laws or regulations relating to the collection, use, storage, transfer, disclosure, and/or other processing of personal data.
Such laws and regulations may include data residency or data localization requirements (which generally require that certain types of data collected within a certain country be stored and processed within that country), data export restrictions or international transfer laws (which prohibit or impose conditions upon the transfer of such data from one country to another), requirements that companies implement privacy or data protection and security policies or requirements that companies grant individuals certain rights, such as the right to access, correct, and delete personal data stored or maintained by such companies, be informed of security breaches that affect their personal data, or provide consent to use their personal data for other purposes.
Such laws and regulations may include data residency or data localization requirements (which generally require that certain types of data collected within a certain country be stored and processed within that country), data export restrictions or international transfer laws (which prohibit or impose conditions upon the transfer of such data from one country to another), requirements that companies implement privacy or data protection and security policies or requirements that companies grant individuals certain rights, such as the right to access, correct, and delete personal data stored or maintained by such companies, be informed of security breaches that affect their personal data, or provide consent to use their personal data for other purposes.
A determination in, or settlement of, any legal proceeding(s), whether we are party to such legal proceeding or not, that classifies independent contractors with whom we contract as employees, could harm our business, financial condition, and results of operations, including as a result of: • monetary exposure arising from or relating to failure to withhold and remit taxes, unpaid wages and wage and hour laws and requirements (such as those pertaining to failure to pay minimum wage and overtime, or to provide required breaks and wage statements), expense reimbursement, statutory and punitive damages, penalties, including related to attorney general actions by states, and government fines; • injunctions prohibiting continuance of existing business practices; • claims for employee benefits, social security, workers’ compensation, and unemployment; • claims of discrimination, harassment, and retaliation under civil rights laws; • managing the growth of our business, including increasing or unforeseen expenses; • developing and scaling a technology infrastructure to efficiently handle increased utilization by Learners, especially during peak periods; 14 Table of Contents • claims under laws pertaining to unionizing, collective bargaining, and other concerted activity; • other claims, charges, or other proceedings under laws and regulations applicable to employers and employees, including risks relating to allegations of joint employer liability or agency liability; and • harm to our reputation and brand.
A determination in, or settlement of, any legal proceeding(s), whether we are party to such legal proceeding or not, that classifies independent contractors with whom we contract as employees, could harm our business, financial condition, and results of operations, including as a result of: • monetary exposure arising from or relating to failure to withhold and remit taxes, unpaid wages and wage and hour laws and requirements (such as those pertaining to failure to pay minimum wage and overtime, or to provide required breaks and wage statements), expense reimbursement, statutory and punitive damages, penalties, including related to attorney general actions by states, and government fines; • injunctions prohibiting continuance of existing business practices; 12 Table of Contents • claims for employee benefits, social security, workers’ compensation, and unemployment; • claims of discrimination, harassment, and retaliation under civil rights laws; • managing the growth of our business, including increasing or unforeseen expenses; • developing and scaling a technology infrastructure to efficiently handle increased utilization by Learners, especially during peak periods; • claims under laws pertaining to unionizing, collective bargaining, and other concerted activity; • other claims, charges, or other proceedings under laws and regulations applicable to employers and employees, including risks relating to allegations of joint employer liability or agency liability; and • harm to our reputation and brand.
The market price for our Class A Common Stock may be influenced by many factors, including: • actual or anticipated variations in our operating results; • changes in financial estimates by us or by any securities analysts who might cover our stock; • changes in laws and regulations affecting our business; • conditions or trends in our industry; 29 Table of Contents • changes as a result of macroeconomic events; • stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the software and information technology industries; • announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships, or divestitures; • announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; • the public’s reaction to our press releases, our other public announcements, and our filings with the SEC; • capital commitments; • investors’ general perception of our company and our business; • recruitment or departure of key personnel, including Charles Cohn, our Founder, Chairman, President, and Chief Executive Officer; • sales of Class A Common Stock, including sales by our directors and officers or specific stockholders • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; and • the volume of shares of Class A Common Stock available for public sale.
The market price for our Class A Common Stock may be influenced by many factors, including: • actual or anticipated variations in our operating results; • changes in financial estimates by us or by any securities analysts who might cover our stock; • changes in laws and regulations affecting our business; • conditions or trends in our industry; • changes as a result of macroeconomic events; • stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the software and information technology industries; • announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships, or divestitures; 27 Table of Contents • announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; • the public’s reaction to our press releases, our other public announcements, and our filings with the SEC; • capital commitments; • investors’ general perception of our company and our business; • recruitment or departure of key personnel, including Charles Cohn, our Founder, Chairman, President, and Chief Executive Officer; • sales of Class A Common Stock, including sales by our directors and officers or specific stockholders • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; and • the volume of shares of Class A Common Stock available for public sale.
The actual increases in tax basis covered by the Tax Receivable Agreement, as well as the amount and timing of our ability to use any deductions (or decreases in gain or increases in loss) arising from such increases in tax basis, are dependent upon significant future events, including but not limited to the timing of the redemptions of OpCo Units, the price of Class A Common Stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of tax basis associated with the OpCo Units of the redeeming holder at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount, character, and timing of taxable income Nerdy LLC generates in the future, the timing and amount of any earlier payments that we may have made under the Tax Receivable Agreement, the U.S. federal income tax rate then applicable to us, and the portion of our payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis.
The actual increases in tax basis covered by the Tax Receivable Agreement, as well as the amount and timing of our ability to use any deductions (or decreases in gain or increases in loss) arising from such increases in tax basis, are dependent upon significant future events, including but not limited to the timing of the redemptions of units of Nerdy LLC (“OpCo Units”), the price of Class A Common Stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of tax basis associated with the OpCo Units of the redeeming holder at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount, character, and timing of taxable income Nerdy LLC generates in the future, the timing and amount of any earlier payments that we may have made under the Tax Receivable Agreement, the U.S. federal income tax rate then applicable to us, and the portion of our payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis.
Negative perception of our platform or Company may harm our reputation, brand, and networks effects, including as a result of: • complaints or negative publicity about us, Experts on our platform, our product offerings, or our policies and guidelines, including our practices and policies, even if factually incorrect or based on isolated incidents; • illegal, negligent, reckless, or otherwise inappropriate behavior by Experts, Learners, or third parties; • a failure to provide Experts with competitive compensation and opportunities to work with Learners; • actual or perceived disruptions or defects in our platform, such as privacy or data security breaches, site outages, payment disruptions, or other incidents that impact the reliability of our offerings; • litigation regarding or investigations by regulators into our platform or our business; • Learners’ lack of awareness of, or compliance with, our policies and terms and conditions; • Experts’ lack of awareness of, or compliance with, our terms and conditions; • changes to our policies that Learners or others perceive as overly restrictive, unclear, or inconsistent with our values or mission, or that are not clearly articulated; • changes to our terms and conditions that Experts perceive as overly restrictive, unclear, or inconsistent with our values, or mission, or that are not clearly articulated; • a failure to enforce our policies or terms and conditions in a manner that Learners, Experts, and other users perceive as effective, fair, and transparent; • inadequate or unsatisfactory Learner support service experiences; • illegal or otherwise inappropriate behavior by Experts, management team members, or other employees or contractors; • negative responses by Experts or Learners or other users to new offerings on our platform; • political or social policies or activities; or • any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or our industry as a whole.
Negative perception of our platform or Company may harm our reputation and brand, and the networks effects, including as a result of: • complaints or negative publicity about us, Experts on our platform, our product offerings, or our policies and guidelines, including our practices and policies, even if factually incorrect or based on isolated incidents; • illegal, negligent, reckless, or otherwise inappropriate behavior by Experts, Learners, or third parties; • a failure to provide Experts with competitive compensation and opportunities to work with Learners; • actual or perceived disruptions or defects in our platform, such as privacy or data security breaches, site outages, payment disruptions, or other incidents that impact the reliability of our offerings; • litigation regarding or investigations by regulators into our platform or our business; • Learners’ lack of awareness of, or compliance with, our policies and terms and conditions; • Experts’ lack of awareness of, or compliance with, our terms and conditions; • changes to our policies that Learners or others perceive as overly restrictive, unclear, or inconsistent with our values or mission, or that are not clearly articulated; • changes to our terms and conditions that Experts perceive as overly restrictive, unclear, or inconsistent with our values, or mission, or that are not clearly articulated; • a failure to enforce our policies or terms and conditions in a manner that Learners, Experts, and other users perceive as effective, fair, and transparent; • inadequate or unsatisfactory Learner support service experiences; • illegal or otherwise inappropriate behavior by Experts, management team members, or other employees or contractors; • negative responses by Experts or Learners or other users to new offerings on our platform; 15 Table of Contents • political or social policies or activities; or • any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or our industry as a whole.
We may also choose to cease engaging with Experts who are located in jurisdictions where we may be prohibited or otherwise restricted from engaging Experts as independent contractors, which may adversely affect our business. Our business depends heavily on the adoption of our offerings by new and existing customers.
We may also choose to cease contracting with Experts who are located in jurisdictions where we may be prohibited or otherwise restricted from engaging Experts as independent contractors, which may adversely affect our business. Our business depends heavily on the adoption of our offerings by new and existing customers.
Accordingly, any errors, defects, disruptions, or other performance problems with our platform, including features in third-party products that restrict or prevent access to our platform or our ability to adequately communicate with Learners and Experts, could damage our reputation, decrease satisfaction and retention, and impact our ability to attract new Learners and Experts in the future.
Accordingly, any errors, defects, disruptions, or other performance problems with our platform, including features in third-party products that restrict or prevent access to our platform or our ability to adequately communicate with Learners and Experts, could damage our reputation, decrease satisfaction and retention, and impact our ability to attract new Learners, Institutions, and Experts in the future.
A number of competitive factors could cause us to lose potential opportunities or force us to offer our solutions on less favorable economic terms, including: • competitors may develop service offerings that Learners find to be more compelling than ours; • competitors may adopt more aggressive pricing policies and offer more attractive sales terms and adapt more quickly to new technologies and changes in student requirements; • competitors may offer better compensation to Experts or divert qualified Experts from our platform; and • current and potential competitors may establish relationships among themselves or with third parties to enhance their products and expand their markets, and our industry is likely to see an increasing number of new entrants and increased consolidation.
A number of competitive factors could cause us to lose potential opportunities or force us to offer our solutions on less favorable economic terms, including: • competitors may develop service offerings that Learners find to be more compelling than ours; • competitors may adopt more aggressive pricing policies and offer more attractive sales terms and adapt more quickly to new technologies and changes in student requirements; • competitors may offer better compensation to Experts or divert qualified Experts from our platform; and • current and potential competitors may establish relationships among themselves or with third parties to enhance their products and expand their markets, and our industry may see an increasing number of new entrants and increased consolidation.
Our rapid growth has placed, and will continue to place, a significant strain on our administrative and operational infrastructure and other resources. Our ability to manage our operations and growth may require us to continue to expand our marketing and sales personnel, technology team, finance, accounting, legal, and administration teams, as well as our infrastructure.
Our rapid growth has placed, and may continue to place, a significant strain on our administrative and operational infrastructure and other resources. Our ability to manage our operations and growth may require us to continue to expand our marketing and sales personnel, technology team, finance, accounting, legal, and administration teams, as well as our infrastructure.
We engage all of the Experts as independent contractors, and therefore, any of these outcomes could result in substantial costs to us, could significantly impair our financial condition and our ability to conduct our business as we choose, and could damage our reputation and our ability to attract and retain Experts and employees.
We engage all of our Experts as independent contractors, and therefore, any of these outcomes could result in substantial costs to us, could significantly impair our financial condition and our ability to conduct our business as we choose, and could damage our reputation and our ability to attract and retain Experts and employees.
Our ability to maintain high Learner retention will depend in part on the ability of the Experts to devote the necessary time and effort to develop their own teaching style(s), lesson plans, course curriculum, and content.
Our ability to maintain high Learner retention will depend in part on the ability and willingness of Experts to devote the necessary time and effort to develop their own teaching style(s), lesson plans, course curriculum, and content.
We may be exposed to claims and losses, including class action lawsuits, brought by or on behalf of our Learners or Experts, which could have a material adverse effect on our business.
We may be exposed to claims and losses, including class action lawsuits, brought by or on behalf of our Learners, Institutions, or Experts, which could have a material adverse effect on our business.
If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position. 31 Table of Contents Our bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position. 29 Table of Contents Our bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
A health pandemic, depending upon its duration and severity, could have a material adverse effect on our business. For example, the COVID-19 pandemic has had numerous effects on the global economy.
A health pandemic, depending upon its duration and severity, could have a material adverse effect on our business. For example, the COVID-19 pandemic had numerous effects on the global economy.
Issues in the development and use of AI, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business operations.
Issues in the development and use of AI, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other unforeseen adverse consequences to our business operations.
The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement, including that (i) we have sufficient income to fully utilize the tax attributes covered by the Tax Receivable Agreement, (ii) net operating losses and credits that are available as of the termination are utilized through the earlier of the scheduled expiration of such losses or credits or the fifth anniversary of the termination, (iii) the applicable tax rates will be 34 Table of Contents those specified by law as in effect as of the termination date, (iv) non-amortizable asset basis is utilized on an accelerated timeline, and (v) any OpCo Units (other than those held by us) outstanding on the termination date are deemed to be redeemed on the termination date.
The calculation of anticipated future payments will be based upon certain assumptions and deemed events set forth in the Tax Receivable Agreement, including that (i) we have sufficient income to fully utilize the tax attributes covered by the Tax Receivable Agreement, (ii) net operating losses and credits that are available as of the termination are utilized through the earlier of the scheduled expiration of such losses or credits or the fifth anniversary of the termination, (iii) the applicable tax rates will be those specified by law as in effect as of the termination date, (iv) non-amortizable asset basis is utilized on an accelerated timeline, and (v) any OpCo Units (other than those held by us) outstanding on the termination date are deemed to be redeemed on the termination date.
The performance and reliability of our platform, and its uninterrupted access, are critical to our operations, reputation, and ability to attract new Learners and Experts, as well as our acquisition and retention of Learners and Experts already using our platform.
The performance and reliability of our platform, and its uninterrupted access, are critical to our operations, reputation, and ability to attract new Learners and Experts, as well as our acquisition and retention of Learners, Institutions, and Experts already using our platform.
Although our business has experienced significant growth in the past, we cannot provide any assurance that our revenue will continue to grow at the same rate in the future.
Although our business has experienced significant growth in the recent past, we cannot provide any assurance that our revenue will continue to grow at the same rate in the future.
As a non-traditional form of delivering learning and/or instruction direct-to-consumers over the internet, our online learning offerings may be subject to increased scrutiny by prospective Learners. Online product offerings that we or our competitors offer may not be successful or operate efficiently, and new entrants to the field of online learning also may not perform well.
As a non-traditional form of delivering learning and/or instruction direct-to-consumers over the internet, our online learning offerings may be subject to increased scrutiny by prospective Learners. Online product offerings that we or our competitors offer may not be successful, and new entrants to the field of online learning also may not perform well.
While our revenue has grown in recent periods, this growth may not be sustainable and we cannot assure you that we will be able to achieve profitability. The Company’s operations and performance depend in part on economic conditions, and adverse economic conditions may adversely affect the Company’s business, results of operations, and financial condition.
While our revenue has grown in recent periods, this growth may not be sustainable and we cannot assure you that we will be able to achieve profitability. Our operations and performance depend in part on economic conditions, and adverse economic conditions may adversely affect our business, results of operations, and financial condition.
In order to process credit card payments, we are required to comply with payment rules established by payment card networks, such as the Payment Card Industry and its Data Security Standard. Our failure to comply with these laws or requirements could result in fines or impact our ability to accept payments in the future.
In order to process credit card payments, we are required to comply with payment rules established by payment card networks, such as the Payment Card Industry and its Data Security Standard, as well as with applicable laws. Our failure to comply with these laws or requirements could result in fines or impact our ability to accept payments in the future.
Failures of our platform, or disruption to its access, could reduce Learners’ and Experts’ satisfaction with our offerings and could harm our reputation.
Failures of our platform, or disruption to its access, could reduce Learners’, Institutions’, and Experts’ satisfaction with our offerings and could harm our reputation.
Any of these factors could significantly reduce the revenue that we generate, which would negatively impact our operations and could compromise our ability to grow our business and achieve profitability. We have grown rapidly and expect to continue to invest in our growth for the foreseeable future.
Any of these factors could significantly reduce the revenue that we generate, which would negatively impact our operations and could compromise our ability to grow our business and achieve profitability. We have grown rapidly in recent years and expect to continue to invest in our growth for the foreseeable future.
We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt 28 Table of Contents the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
Among other things, our governing documents, include provisions regarding: • the ability of our Board to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders after such date and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by the Chief Executive Officer, the Chairman of the Board, or our Board, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; • the ability of our Board to amend the bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company. 36 Table of Contents These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board or management.
Among other things, our governing documents, include provisions regarding: • the ability of our Board to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders after such date and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by the Chief Executive Officer, the Chairman of the Board, or our Board, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; • the ability of our Board to amend the bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
If we do not successfully maintain and develop our brand, reputation, and network effects and successfully differentiate our offerings from competitive offerings, our business may not grow, we may not be able to compete effectively, and we could lose existing qualified Experts 17 Table of Contents or existing Learners or fail to attract new qualified Experts, new Learners, or other new users, any of which could adversely affect our business, financial condition, and results of operations.
If we do not successfully maintain and develop our brand, reputation, and network effects and successfully differentiate our offerings from competitive offerings, our business may not grow, we may not be able to compete effectively, and we could lose existing qualified Experts or existing Learners or fail to attract new qualified Experts, new Learners, or other new users, any of which could adversely affect our business, financial condition, and results of operations.
Factors impacting a Learner’s willingness and ability to stay engaged in an offering include personal factors, such as ability to continue to pay for the offering(s), lack of interest in continuing to learn in a particular area, distractions in the Learner’s learning environment, and sufficient time to engage in the offering(s), all of which are generally beyond our control. 19 Table of Contents • Circumvention of the platform/Disintermediation .
Factors impacting a Learner’s willingness and ability to stay engaged in an offering include personal factors, such as ability to continue to pay for the offering(s), lack of interest in continuing to learn in a particular area, distractions in the Learner’s learning environment, and sufficient time to engage in the offering(s), all of which are generally beyond our control. • Circumvention of the platform/Disintermediation .
Our principal asset is our interest in Nerdy LLC, and, accordingly, we will depend on distributions from Nerdy LLC to pay taxes, make payments under the Tax Receivable Agreement, and cover our corporate and other overhead expenses. We are a holding company and have no material assets other than our ownership interest in Nerdy LLC.
Our principal asset is our interest in Nerdy LLC, and, accordingly, we will depend on distributions from Nerdy LLC to pay taxes, make payments under the Tax Receivable Agreement (as defined below), and cover our corporate and other overhead expenses. We are a holding company and have no material assets other than our ownership interest in Nerdy LLC.
We may be an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of our initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1,235,000 thousand in annual revenue in any fiscal year, (ii) the market value of our shares of common stock that is held by non-affiliates exceeds $700,000 thousand as of any June 30 or (iii) we issue more than $1,000,000 thousand of non-convertible debt over a three-year period.
We will be an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of TPG Pace’s initial public offering (October 2025), though we may cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1,235,000 thousand in annual revenue in any fiscal year, (ii) the market value of our shares of common stock that is held by non-affiliates exceeds $700,000 thousand as of any June 30 or (iii) we issue more than $1,000,000 thousand of non-convertible debt over a three-year period.
Additionally, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the 30 Table of Contents adoption of certain accounting standards until those standards would otherwise apply to private companies.
Additionally, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
The Department of Labor published a final rule on independent contractor classification on January 10, 2024. The new rule changes the legal test used for classification of independent contractors under the Fair Labor Standards Act.
The Department of Labor published a final rule on independent contractor classification on January 10, 2024. The new rule changed the legal test used for classification of independent contractors under the Fair Labor Standards Act.
In particular, any failure to successfully implement systems enhancements and improvements will likely negatively impact our ability to manage our expected growth, ensure uninterrupted operation of key business systems, 20 Table of Contents and comply with the rules and regulations that are applicable to public reporting companies.
In particular, any failure to successfully implement systems enhancements and improvements will likely negatively impact our ability to manage our expected growth, ensure uninterrupted operation of key business systems, and comply with the rules and regulations that are applicable to public reporting companies.
If our obligation to make payments under the Tax Receivable Agreement is accelerated by election of the TRA Holders in connection with a change of control, we generally expect the accelerated payments due under the Tax Receivable Agreement to be funded out of the proceeds of the change of control transaction giving rise to such acceleration.
If our obligation to make payments under the Tax Receivable Agreement is accelerated by election of the TRA Holders in connection with a change of control, we generally expect the accelerated payments due under the Tax Receivable Agreement to be funded out of the proceeds of the change of control 32 Table of Contents transaction giving rise to such acceleration.
Such underperformance could create the perception that online offerings in general are not an effective way to learn or educate, whether or not our offerings achieve satisfactory performance, which could make it difficult for us to 15 Table of Contents successfully attract prospective Learners. Additionally, telehealth services, and other non-traditional online services are becoming increasingly prevalent.
Such underperformance could create the perception that online offerings in general are not an effective way to learn or educate, whether or not our offerings achieve satisfactory performance, which could make it difficult for us to successfully attract prospective Learners. Additionally, telehealth services, and other non-traditional online services are becoming increasingly prevalent.
Learners and Experts could seek to challenge those terms and conditions, including but not limited to: 16 Table of Contents network access, usage by minors, recorded sessions, taxes, integration with other policies, confidentiality, content, restrictions, arbitration, disclaimer of warranties, limitation of liability, indemnification, third-party beneficiaries, non-solicitation provisions, non-disclosure provisions, non-exclusivity, non-disparagement, governing law/choice of law, jurisdiction, venue, notice requirements, affiliate marketing, other platform activities, contract termination (including early contract termination), authority, installment payments, subscriptions, refunds, minimum billing, redemptions, guarantees, compensation (and adjustments/additions thereto), independent contractor status, insurance, intellectual property rights, and economics of the relationships (noting that some of these items apply solely to Learners, some apply solely to Experts, and some apply to both).
Learners, Institutions, and Experts could seek to challenge those terms and conditions, including but not limited to: network access, usage by minors, recorded sessions, taxes, integration with other policies, confidentiality, content, restrictions, arbitration, disclaimer of warranties, limitation of liability, indemnification, third-party beneficiaries, non-solicitation provisions, non-disclosure provisions, non-exclusivity, non-disparagement, governing law/choice of law, jurisdiction, venue, notice requirements, affiliate marketing, other platform activities, contract termination (including early contract termination), authority, installment payments, subscriptions, refunds, minimum billing, redemptions, guarantees, compensation (and adjustments/additions thereto), independent contractor status, insurance, intellectual property rights, and economics of the relationships (noting that some of these items apply solely to Learners, some apply solely to Institutions, some apply solely to Experts, and some apply to two or more).
If the markets for a direct-to-consumer or an institutional, online learning platform do not develop as we expect or if we fail to address the needs of these markets, our business may be harmed. Some of our offerings have only been meaningfully integrated into our broader platform over the past year and thus have a limited operating history.
If the markets for a direct-to-consumer or an institutional, online learning platform do not develop as we expect or if we fail to address the needs of these markets, our business may be harmed. Some of our offerings have only been meaningfully integrated into our broader platform recently and thus have a limited operating history.
To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will accrue interest until paid. We may be required to make payments under the Tax Receivable Agreement for certain tax benefits that we may claim, and the amounts of such payments could be substantial.
To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will accrue interest until paid. We may be required to make payments under the Tax Receivable Agreement (as defined below) for certain tax benefits that we may claim, and the amounts of such payments could be substantial.
We are also subject to the terms of our privacy policies, and obligations to third parties related to privacy, data protection, and information security. We strive to comply with applicable laws, regulations, policies, and other legal obligations relating to privacy, data protection and information security to 26 Table of Contents the extent possible.
We are also subject to the terms of our privacy policies, and obligations to third parties related to privacy, data protection, and information security. We strive to comply with applicable laws, regulations, policies, and other legal obligations relating to privacy, data protection and information security to the extent possible.
If we pursue litigation to assert our intellectual property or proprietary rights, an adverse decision could limit our ability to assert our intellectual property or proprietary rights, limit the value of our intellectual property or proprietary rights, or otherwise negatively impact our business, financial condition, and results of operations.
If we pursue litigation to assert our intellectual property or proprietary rights, an adverse decision could limit our 26 Table of Contents ability to assert our intellectual property or proprietary rights, limit the value of our intellectual property or proprietary rights, or otherwise negatively impact our business, financial condition, and results of operations.
In the event that our operating business expands domestically or internationally, our effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under GAAP, changes in deferred tax assets and liabilities, or changes in tax laws.
In the event that our operating business expands domestically or internationally, our effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be 30 Table of Contents recorded under GAAP, changes in deferred tax assets and liabilities, or changes in tax laws.
In providing services to Learners and contracting with Experts to provide offerings to Learners, we collect personally identifiable information from Learners, prospective Learners, and Experts, and prospective Experts, such as names, birth dates, 27 Table of Contents contact information, and payment information, as well as limited access to social security numbers of employees and Experts through third-party systems.
In providing services to Learners and contracting with Experts to provide offerings to Learners, we collect personally identifiable information from Learners, prospective Learners, and Experts, and prospective Experts, such as names, birth dates, contact information, and payment information, as well as limited access to social security numbers of Experts through third-party systems.
We have experienced attempted security incidents in the past and we may face additional attempted security intrusions in the future. Any such incidents could expose us to claims, litigation, regulatory, or other governmental investigations, administrative fines, and potential liability.
We have experienced attempted security incidents in the past and we may face additional attempted security intrusions in the future. 20 Table of Contents Any such incidents could expose us to claims, litigation, regulatory, or other governmental investigations, administrative fines, and potential liability.
We may need additional capital in the future to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to grow our business. We believe that our existing cash balances will be sufficient to meet our minimum anticipated cash requirements for at least the next twelve months.
Additional capital may not be available on favorable terms, or at all, which could compromise our ability to grow our business. We believe that our existing cash balances will be sufficient to meet our minimum anticipated cash requirements for at least the next twelve months.
We will be required to refine our operational, financial, and management controls and reporting systems and procedures.
We may be required to refine our operational, financial, and management controls and reporting systems and procedures.
As a result of plans to expand our business operations, including to jurisdictions in which tax laws may not be favorable, our obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect our after-tax profitability and financial results.
If we expand our business operations, including to jurisdictions in which tax laws may not be favorable, our obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect our after-tax profitability and financial results.
Our ability to effectively manage any significant growth of our business will depend on a number of factors, including our ability to: • effectively recruit, onboard, motivate, and retain new employees, including in software engineering, data science, product, design, marketing, sales, and customer service, while retaining existing employees, maintaining the most important aspects of our corporate culture, and effectively executing our business plan; • effectively recruit, vet, contract, and curate new independent contractors, while retaining existing independent contractors, maintaining and improving our platform and its curation in connection with effectively executing our business plan; • continue to improve our operational, financial, and management controls; and • protect and further develop our strategic assets, including our intellectual property rights.
Our ability to effectively manage any significant growth of our business will depend on a number of factors, including our ability to: • effectively recruit, onboard, motivate, and retain new employees, including in software engineering, data science, product, design, marketing, sales, and customer service, while retaining existing employees, maintaining the most important aspects of our corporate culture, and effectively executing our business plan; • effectively recruit, vet, contract, and curate new independent contractors, while retaining existing independent contractors, maintaining and improving our platform and its curation in connection with effectively executing our business plan; • continue to improve our operational, financial, and management controls; • effectively manage our cost structure and liquidity; • effectively manage the implementation, onboarding, and servicing of our Institutional customers; and 18 Table of Contents • protect and further develop our strategic assets, including our intellectual property rights.
Third parties may knowingly or unknowingly infringe, misappropriate, or otherwise violate our copyrights, trademarks, and other intellectual property and proprietary rights and we may not be able to prevent infringement, misappropriation, or other violation without substantial expense to us.
Third parties may challenge any copyrights, trademarks, and other intellectual property and proprietary rights owned or held by us. Third parties may knowingly or unknowingly infringe, misappropriate, or otherwise violate our copyrights, trademarks, and other intellectual property and proprietary rights and we may not be able to prevent infringement, misappropriation, or other violation without substantial expense to us.
While we do not currently expect this rule will impact the classification of our Experts as independent contractors, there is a risk that as this new rule is interpreted it may subject our Experts to reclassification.
While the new rule has not impacted, and we do not currently expect it will impact, the classification of our Experts as independent contractors, there is a risk that as this new rule is interpreted in the future it may subject our Experts to reclassification.
Further, the existence and need to comply in certain markets could impact our ability to make our platform available in those markets (without taking additional compliance 23 Table of Contents steps).
Further, the existence and need to comply in certain markets could impact our ability to make our platform available in those markets (without taking additional compliance steps).
These laws could require us to obtain money transmitter licenses, or other licenses or approval for financial transactions, that may cause disruption regarding our ability to accept credit card payments, thereby impacting our sales and revenue.
Some jurisdictions have adopted laws that govern payments and other financial activities. These laws could require us to obtain money transmitter licenses, or other licenses or approval for financial transactions, that may cause disruption regarding our ability to accept credit card payments, thereby impacting our sales and revenue.
We have encountered and will continue to encounter these risks and if we do not manage them successfully, our business, financial condition, results of operations, and prospects may be materially and adversely affected. We have incurred significant net losses since our formation, and it may be difficult for us to achieve and maintain profitability.
We have encountered and will continue to encounter these risks and if we do not manage them successfully, our business, financial condition, results of operations, and prospects may be materially and adversely affected. 11 Table of Contents We have incurred significant net losses and generated negative operating cash flows since our formation, and it may be difficult for us to achieve and maintain profitability.
The successful development of our reputation, brand, and network effects will depend on a number of factors, many of which are outside our control.
The successful development of our reputation and brand, and the network effects among Experts and Learners on our platform will depend on a number of factors, many of which are outside our control.
We invest substantial resources in developing and implementing marketing and sales strategies that focus on identifying new Learners and Experts for our platform. If our execution of this strategy proves to be inefficient or unsuccessful in generating a sufficient quantity of high-quality prospective Learners and Experts, our revenue could be adversely affected. • Changes in search engine methodologies .
We invest substantial resources in developing and implementing marketing and sales strategies that focus on identifying new Learners. If our execution of our marketing strategies prove to be inefficient or unsuccessful in generating a sufficient quantity of high-quality Learners, our revenue could be adversely affected. • Changes in search engine methodologies .
As a result, members of our senior management, our existing directors, and principal stockholders, if they were to act together, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors any merger, consolidation, sale of all or substantially all of our assets or other significant corporate transactions. For example, Mr.
As a result, members of our senior management, our existing directors, and principal stockholders, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation, sale of all or substantially all of our assets or other significant corporate transactions.
If the protection of our intellectual property and proprietary rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused in the marketplace, and our ability to attract customers may be adversely affected. 28 Table of Contents Third parties may challenge any copyrights, trademarks, and other intellectual property and proprietary rights owned or held by us.
If the protection of our intellectual property and proprietary rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused in the marketplace, and our ability to attract customers may be adversely affected.
It may be difficult to overcome any skepticism, and there can be no assurance that online offerings of the kind we develop will ever achieve mass market acceptance. We rely on our new and existing Learners to drive utilization and to generate revenue .
It may be difficult to overcome any skepticism, and there can be no assurance that online offerings of the kind we develop will ever achieve mass market acceptance. We rely on our new and existing Learners to drive utilization and to generate revenue, and if we fail to attract and retain Learners our business and operating results will suffer .
Our use of open source software may also present additional security risks because the source code for open source software is publicly available, which may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open source software.
Our use of open source software may also present additional security risks because the source code for open source software is publicly available, which may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open source software. Any of these risks could be difficult to eliminate or manage.
Inability of Experts to meet Learner needs could cause the quality of the instruction and the quality of the customer experience to decline, which could contribute to decreased Learner satisfaction and retention. • Personal factors .
Inability or unwillingness of Experts to meet Learner needs could cause the quality of the instruction and the quality of the customer experience to decline, which could contribute to decreased Learner satisfaction and retention. 17 Table of Contents • Personal factors .
The term of the Tax Receivable Agreement commenced upon the completion of the Reverse Recapitalization and will continue until all tax benefits that are subject to the Tax Receivable Agreement have been utilized or expired and all required payments are made, unless we exercise its right to terminate the Tax Receivable Agreement (or the Tax Receivable Agreement is terminated due to other circumstances described below) and we make the termination payment specified in the Tax Receivable Agreement.
We will retain the benefit of the remaining 15% of these net cash savings. 31 Table of Contents The term of the Tax Receivable Agreement commenced upon the completion of the reverse recapitalization and will continue until all tax benefits that are subject to the Tax Receivable Agreement have been utilized or expired and all required payments are made, unless we exercise its right to terminate the Tax Receivable Agreement (or the Tax Receivable Agreement is terminated due to other circumstances described below) and we make the termination payment specified in the Tax Receivable Agreement.
We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions, such as those passed in Nevada, California, Colorado, Virginia, Connecticut, Utah and other states, which are continuing to emerge and evolve.
We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions, such as those passed in various U.S. states, which are continuing to emerge and evolve.
Risks Related to Our Business Model, Operations, and Growth Strategy We have a limited operating history, which makes it difficult to predict our future financial and operating results, and we may not achieve our expected financial and operating results in the future.
Risks Related to Our Business Model, Operations, and Growth Strategy Our offerings continue to evolve, which makes it difficult to predict our future financial and operating results, and we may not achieve our expected financial and operating results in the future. Our offerings continue to evolve, and we may not achieve our expected financial and operating results in the future.
If we fail to manage this growth effectively, the success of our business model may be compromised. We have experienced rapid growth in a relatively short period of time. Our revenue grew from $103,968 thousand in 2020 to $193,399 thousand in 2023.
If we fail to manage this growth effectively, the success of our business model may be compromised. In recent years we experienced rapid growth in a relatively short period of time. Our revenue grew from $103,968 thousand in 2020 to $190,231 thousand in 2024.
If purchases or utilization of our offerings does not increase, we are unable to launch new offerings in a cost-effective manner, or we are otherwise unable to manage new offerings effectively, our ability to grow our business and achieve profitability would be impaired and the quality of our solutions and the satisfaction of the Learners and Institutions using our platform could suffer. 18 Table of Contents If we are not successful in scaling up our Institutional offerings to education systems, we could suffer losses and our results of operations will suffer.
If purchases or utilization of our offerings does not increase, we are unable to launch new offerings in a cost-effective manner, or we are otherwise unable to manage new offerings effectively, our ability to grow our business and achieve profitability would be impaired and the quality of our solutions and the satisfaction of the Learners and Institutions using our platform could suffer.
Such changes in U.S. federal income tax laws could adversely affect our or Nerdy LLC’s business, cash flows, and future profitability.
Such changes in U.S. federal income tax laws could adversely affect our or Nerdy LLC’s business, cash flows, and future profitability, which would have an adverse effect on our business, cash flows, and future profitability.
Further, any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of personal data, or their interpretation, or any changes regarding the manner in which the consent of users or other data subjects for the collection, use, retention, or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features.
Further, any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of personal data, or their interpretation, or any changes regarding the manner in which the consent of users or other data subjects for the collection, use, retention, or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features. 24 Table of Contents If we were found in violation of any applicable privacy or data protection laws or regulations, our business may be materially and adversely affected, and we would likely have to change our business practices and potentially the services and features available through our platform.
Our ability to effectively manage any significant growth of new offerings and increasing purchases and utilization will depend on a number of factors, including our ability to: • satisfy existing Learners and Institutions in, and attract and engage new Learners or Institutions for, our offerings; • attract qualified Experts to support expanding offerings and utilization; • develop and produce new products; • successfully introduce new features and enhancements and maintain a high level of functionality in our platform; and • deliver high-quality technical support and customer service to Experts and Learners using our platform.
Our ability to effectively manage any significant growth of new offerings and increasing purchases and utilization will depend on a number of factors, including our ability to: • satisfy existing Learners and Institutions in, and attract and engage new Learners or Institutions for, our offerings; • attract qualified Experts to support expanding offerings and utilization; • develop and produce new products; • successfully introduce new features and enhancements and maintain a high level of functionality in our platform; and • deliver high-quality technical support and customer service to Experts and Learners using our platform. 16 Table of Contents Establishing new offerings or expanding existing offerings will require us to make investments in management and key staff, increased investments in our technology platform, incur additional marketing expenses, and reallocate other resources.
To launch a new offering, we must integrate our platform with the relevant products, content, subject information, Experts with subject knowledge, and other operating model or platform modifications that we use to manage functions for our offerings.
If we pursue unsuccessful offerings, we may forego more profitable offerings and our operating results and growth would be harmed. To launch a new offering, we must integrate our platform with the relevant products, content, subject information, Experts with subject knowledge, and other operating model or platform modifications that we use to manage functions for our offerings.
In 2023, the Company had approximately 17 thousand Active Experts with independent contractor agreements. The Company defines an Active Expert as having instructed one or more sessions in a given period.
In 2024, we had approximately 20 thousand Active Experts with independent contractor agreements. We define an Active Expert as having instructed one or more sessions in a given period.
The use of AI technologies presents emerging ethical and social issues, and if we enable or offer solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a whole, we may experience brand or reputational harm, competitive harm, and/or legal liability. 25 Table of Contents Risks Related to Regulations Our activities are subject to federal and state laws and regulations and other requirements, and these regulations are subject to change.
The use of AI technologies presents emerging ethical and social issues, and if we enable or offer solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a whole, we may experience brand or reputational harm, competitive harm, and/or legal liability.
Our ability to fully integrate these new services into our platform or achieve satisfactory financial results from them is unproven. Because we have a limited operating history and the market for our services, including newly built products and services, is rapidly evolving, it is difficult for us to predict our operating results, particularly with respect to our most recent offerings.
Because we have a limited operating history and the market for our services, including newly built products and services, is rapidly evolving, it is difficult for us to predict our operating results, particularly with respect to our most recent offerings.
As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could materially adversely affect our liquidity. 35 Table of Contents In certain circumstances, Nerdy LLC will be required to make tax distributions to the Nerdy LLC unitholders, including us, and the tax distributions that Nerdy LLC will be required to make may be substantial.
As a result, in such circumstances, we could make payments that are greater than our actual cash tax savings, if any, and may not be able to recoup those payments, which could materially adversely affect our liquidity.
The Nerdy LLC tax distribution requirement may complicate our ability to maintain our intended capital structure. Nerdy LLC will generally make quarterly tax distributions, to the Nerdy LLC unitholders, including us.
In certain circumstances, Nerdy LLC will be required to make tax distributions to the Nerdy LLC unitholders, including us, and the tax distributions that Nerdy LLC will be required to make may be substantial. The Nerdy LLC tax distribution requirement may complicate our ability to maintain our intended capital structure.
AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving regulatory landscape. The introduction of AI technologies may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results.
The introduction of AI technologies may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−0 removed8 unchanged
Biggest changeThe Audit Committee receives regular presentations and reports on cybersecurity risks, and prior to the Board’s delegation, the Board periodically received such presentations and reports. Those presentations and reports have covered or will cover topics such as recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, and technological and peer company trends.
Biggest changeThose presentations and reports have covered or will cover topics such as recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, and technological and peer company trends.
Our cybersecurity program focuses on these key areas: • Governance : The Audit Committee has oversight of cybersecurity risk management and regularly interacts with our Chief Technology Officer (“CTO”) and other members of management. • Education and Awareness : We provide regular, mandatory training for personnel regarding cybersecurity threats to equip them with effective tools to address and mitigate cybersecurity threats, and to communicate our information security policies, standards, processes, and practices. • Cross-Functional Approach : We have adopted a cross-functional approach to identifying, preventing, and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. • Third-Party Risk Management : We have adopted a risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers, and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. • Technical Safeguards : We deploy technical safeguards designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and revised through vulnerability and cybersecurity threat assessments. • Incident Response and Recovery Planning : We maintain incident response and recovery plans addressing our response to a cybersecurity incident, and such plans are tested and evaluated on a regular basis.
Our cybersecurity program focuses on these key areas: • Governance : The Audit Committee has oversight of cybersecurity risk management and regularly interacts with our Chief Technology Officer (“CTO”) and other members of management. • Education and Awareness : We provide regular, mandatory training for personnel regarding cybersecurity threats to equip them with effective tools to address and mitigate cybersecurity threats, and to communicate our information security policies, standards, processes, and practices. • Cross-Functional Approach : We employ a cross-functional approach to identifying, preventing, and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. • Third-Party Risk Management : We have adopted a risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers, and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. • Technical Safeguards : We deploy technical safeguards designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and revised through vulnerability and cybersecurity threat assessments. • Incident Response and Recovery Planning : We maintain incident response and recovery plans addressing our response to a cybersecurity incident, and such plans are tested and evaluated on a regular basis.
Depending on their nature, cybersecurity threats in the future may materially affect our business strategy, results of operations, or financial condition. See “Risk Factors” in Part I, Item 1A of this report.
Depending on their nature, cybersecurity threats in the future may materially affect our business strategy, results of operations, or financial condition. See “Risk Factors” in Part I, Item 1A of this report. 35 Table of Contents
Our cybersecurity policies, standards, processes, and practices have been established as part of our risk management program and are based on recognized frameworks, including as adopted by the National Institute of Standards and Technology (the “NIST”).
Our cybersecurity policies, standards, processes, and practices have been established as part of our risk management program and are based on recognized frameworks, including as adopted by the National Institute 34 Table of Contents of Standards and Technology (the “NIST”).
Through ongoing communication, we 37 Table of Contents monitor the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents in real time, and report such threats and incidents to the Audit Committee when appropriate.
Through ongoing communication, we monitor the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents in real time, and report such threats and incidents to the Audit Committee when appropriate.
These efforts include internal and external activities, including reviews of our information security control environment, assessments, tabletop exercises, threat modeling, vulnerability testing, and other exercises focused on evaluating the effectiveness of our cybersecurity measures and planning, and information security maturity assessments. In late 2023, the Board of Directors delegated oversight of cybersecurity risks to the Audit Committee.
These efforts include internal and external activities, including reviews of our information security control environment, assessments, tabletop exercises, threat modeling, vulnerability testing, and other exercises focused on evaluating the effectiveness of our cybersecurity measures and planning, and information security maturity assessments. The Audit Committee receives regular presentations and reports on cybersecurity risks.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+0 added−0 removed1 unchanged
Biggest changePursuant to such SEC regulations, the Company has elected to use a threshold of $1,000 thousand for purposes of determining whether disclosure of any such proceedings is required. Applying this threshold, there are no such environmental proceedings pending as of the filing date of this report or that were resolved during the fourth quarter of 2023. ITEM 4.
Biggest changePursuant to such SEC regulations, the Company has elected to use a threshold of $1,000 thousand for purposes of determining whether disclosure of any such proceedings is required. Applying this threshold, there are no such environmental proceedings pending as of the filing date of this report or that were resolved during the fourth quarter of 2024. ITEM 4.
ITEM 3. LEGAL PROCEEDINGS. For information regarding our legal proceedings, refer to “Commitments and Contingencies” in Note 19 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report, which is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS. For information regarding our legal proceedings, refer to “Commitments and Contingencies” in Note 17 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report, which is incorporated herein by reference.
MINE SAFETY DISCLOSURES. Not applicable. 38 Table of Contents PART II
MINE SAFETY DISCLOSURES. Not applicable. 36 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed2 unchanged
Biggest changePerformance Graph As of December 31, 2022, we were a “smaller reporting company,” as defined by Item 10(f)(1) of Regulation S-K, but are no longer a “smaller reporting company” as of December 31, 2023.
Biggest changePerformance Graph We are a “smaller reporting company,” as defined by Item 10(f)(1) of Regulation S-K, and therefore are not required to provide the information required by paragraph (e) of Item 201 of Regulation S-K. ITEM 6. [RESERVED] 37 Table of Contents
The actual number of Class A Common Stock is greater than this number of record holders and includes stock holders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
The actual number of Class A Common Stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
We did not pay any cash dividends on our Class A Common Stock during the year ended December 31, 2023, nor do we have plans to pay cash dividends on our common stock in the foreseeable future.
We did not pay any cash dividends on our Class A Common Stock during the year ended December 31, 2024, nor do we have plans to pay cash dividends on our common stock in the foreseeable future.
Issuer Purchases of Equity Securities There were no purchases of equity securities by the issuer or affiliated purchasers, as defined in Rule 10b-18(a)(3) the Securities Exchange Act of 1934, during the fourth quarter of 2023.
Issuer Purchases of Equity Securities There were no purchases of equity securities by the issuer or affiliated purchasers, as defined in Rule 10b-18(a)(3) the Securities Exchange Act of 1934, during the fourth quarter of 2024.
Our Class B common stock, par value $0.0001 per share (the “Class B Common Stock”) is not traded on any established public trading market. On February 13, 2024, there were approximately 45 stockholders and 24 stockholders of our Class A Common Stock and Class B Common Stock, respectively.
Our Class B common stock, par value $0.0001 per share (the “Class B Common Stock”) is not traded on any established public trading market. On February 13, 2025, there were approximately 38 stockholders and 21 stockholders of our Class A Common Stock and Class B Common Stock, respectively.
Removed
Pursuant to 5120.1c of the United States Securities and Exchange Commission (the “SEC”) Financial Reporting Manual, we may continue to use the scaled disclosures permitted for a smaller reporting company through our annual report on Form 10-K for the year ended December 31, 2023, and therefore are not required to provide the information required by paragraph (e) of Item 201 of Regulation S-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

41 edited+11 added−36 removed31 unchanged
Biggest changeYear Ended December 31, Change Active Experts in thousands 2023 2022 % Active Experts 17.2 20.8 (17)% RESULTS OF OPERATIONS Year Ended December 31, dollars in thousands 2023 % 2022 % Revenue $ 193,399 100 % $ 162,665 100 % Cost of revenue 56,952 29 % 49,732 31 % Gross Profit 136,447 71 % 112,933 69 % Sales and marketing expenses 68,448 36 % 74,183 45 % General and administrative expenses 125,570 65 % 129,559 80 % Operating Loss (57,571) (30) % (90,809) (56) % Unrealized loss (gain) on derivatives, net 13,385 7 % (26,620) (17) % Interest income (3,377) (2) % (483) — % Other (income) expense, net (19) — % 183 — % Loss before Income Taxes (67,560) (35) % (63,889) (39) % Income tax expense 109 — % 19 — % Net Loss (67,669) (35) % (63,908) (39) % Net loss attributable to noncontrolling interests (27,495) (14) % (28,509) (17) % Net Loss Attributable to Class A Common Stockholders $ (40,174) (21) % $ (35,399) (22) % Revenue Revenue growth in the current year was driven by the completion of our evolution towards ‘always on’ recurring revenue products, strong adoption of Learning Memberships, and lifetime value expansion in our Consumer business coupled with the continued scaling of our Institutional business.
Biggest changeOur Active Expert count during the year ended December 31, 2024 was primarily driven by higher Institutional active Experts when compared to the prior year period, which reflects the continued scaling of our Institutional business. 38 Table of Contents Year Ended December 31, Change Active Experts in thousands 2024 2023 % Active Experts 20.2 17.2 17% RESULTS OF OPERATIONS Year Ended December 31, dollars in thousands 2024 % 2023 % Revenue $ 190,231 100 % $ 193,399 100 % Cost of revenue 61,837 33 % 56,952 29 % Gross Profit 128,394 67 % 136,447 71 % Sales and marketing expenses 71,623 37 % 68,448 36 % General and administrative expenses 126,879 67 % 125,570 65 % Operating Loss (70,108) (37) % (57,571) (30) % Unrealized loss on derivatives, net — — % 13,385 7 % Interest income (3,104) (2) % (3,377) (2) % Other expense (income), net 23 — % (19) — % Loss before Income Taxes (67,027) (35) % (67,560) (35) % Income tax expense 115 — % 109 — % Net Loss (67,142) (35) % (67,669) (35) % Revenue Revenue for the year ended December 31, 2024 declined primarily due to lower average revenue per member per month (“ARPM”) in our Consumer business, partially offset by higher revenues in our Institutional business.
RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS See Note 3 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report for a discussion regarding recently issued and adopted accounting standards. 47 Table of Contents EMERGING GROWTH COMPANY STATUS We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act.
RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS See Note 3 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report for a discussion regarding recently issued and adopted accounting standards. 43 Table of Contents EMERGING GROWTH COMPANY STATUS We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act.
Per the terms of our legacy high-dosage contracts, services purchased by Institutions are generally redeemed following the date of the first payment. We recognize revenue for unredeemed payments for services over the period in which the performance obligation is satisfied (unredeemed payments expire after a stated usage period) with the Institution based on historical usage patterns.
Per the terms of our prepaid high-dosage contracts, services purchased by Institutions are generally redeemed following the date of the first payment. We recognize revenue for unredeemed payments for services over the period in which the performance obligation is satisfied (unredeemed payments expire after a stated usage period) with the Institution based on historical usage patterns.
The following discussion should be read in conjunction with the financial statements under Part II, Item 8 of this report, “Cautionary Note On Forward-Looking Statements” on page 1 of this report, and “Risk Factors” in Part I, Item 1A of this report. This section of this report generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
The following discussion should be read in conjunction with the financial statements under Part II, Item 8 of this report, “Cautionary Note On Forward-Looking Statements” on page 1 of this report, and “Risk Factors” in Part I, Item 1A of this report. This section of this report generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Based upon the facts and circumstances that existed as of December 31, 2023, we remained an emerging growth company for our Annual Report on Form 10-K for the year ended December 31, 2023 and will continue to be for our quarterly reports in the 2024 interim periods.
Based upon the facts and circumstances that existed as of December 31, 2024, we remained an emerging growth company for our Annual Report on Form 10-K for the year ended December 31, 2024 and will continue to be for our quarterly reports in the 2025 interim periods.
The grant date fair value of the Founder’s Award was determined using the Monte Carlo Option Pricing Method. For additional discussion on stock-based compensation, see Note 20 in “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
The grant date fair value of the Founder’s Award was determined using the Monte Carlo Option Pricing Method. For additional discussion on stock-based compensation, see Note 18 in “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
Income tax expense recorded during the years ended December 31, 2023 and 2022 represents amounts owed to state authorities. The following table presents a reconciliation of income tax expense with amounts computed at the federal statutory tax rate for the periods presented.
Income tax expense recorded during the years ended December 31, 2024 and 2023 represents amounts owed to state authorities. The following table presents a reconciliation of income tax expense with amounts computed at the federal statutory tax rate for the periods presented.
Historically, we experience lower than normal revenue during the summer when schools and universities are out of session in the United States (the “U.S”). and when people travel for vacations and holidays. Due to seasonality, comparisons of our historical quarterly results of operations on a sequential basis may not provide meaningful insight into our overall financial performance.
Historically, we experience lower than normal revenue during the summer when schools and universities are out of session in the United States (the “U.S.”) and when people travel for vacations and holidays. Due to seasonality, comparisons of our historical quarterly results of operations on a sequential basis may not provide meaningful insight into our overall financial performance.
We expect to remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing date of the TPG Pace’s initial public offering, (b) in which we have total annual gross revenue of at least $1,235,000 thousand or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of common stock that are held by non-affiliates equals or exceeds $700,000 thousand as of the prior June 30th, or (2) the date on which we have issued more than $1,000,000 thousand in non-convertible debt securities during the prior three-year period.
We expect to remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing date of the TPG Pace’s initial public offering (such anniversary date is October 6th, 2025), (b) in which we have total annual gross revenue of at least $1,235,000 thousand or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of common stock that are held by non-affiliates equals or exceeds $700,000 thousand as of the prior June 30th, or (2) the date on which we have issued more than $1,000,000 thousand in non-convertible debt securities during the prior three-year period.
Cash used in investing activities related to capital expenditures primarily for the development of internal use software and information technology (“IT”) equipment. Financing Activities Cash used in financing activities for the year ended December 31, 2023 was $1,940 thousand, which related to transaction costs paid in connection with the Warrant Transactions and Earnout Transaction.
Cash used in investing activities related to capital expenditures primarily for the development of internal use software and information technology (“IT”) equipment. 41 Table of Contents Financing Activities Cash used in financing activities for the year ended December 31, 2023 was $1,940 thousand, which related to transaction costs paid in connection with the warrant and earnout transactions.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this report, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Nerdy Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this report, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Nerdy Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.
SMALLER REPORTING COMPANY STATUS As of December 31, 2022, we were a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
SMALLER REPORTING COMPANY STATUS As of December 31, 2023, we were no longer a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
For Institutions that do not pay in advance, we typically invoice these Institutions on a monthly basis for each session provided, with amounts recorded to accounts receivable, net of any related allowance for doubtful accounts. Per the terms of our subscription contracts, purchased services can be redeemed for a set period of time from the date of payment.
For Institutions that do not pay in advance, we typically invoice these Institutions on a monthly basis for each session provided, with amounts recorded to accounts receivable, net of any related allowance for credit losses. Per the terms of our access-based, subscription contracts, purchased services can be redeemed for a set period of time from the date of payment.
An entity is a “smaller reporting company” based upon the following criteria (i) the market value of its shares of common stock held by non-affiliates is less than $250,000 thousand as of the prior June 30, or (ii) its annual revenue is less than $100,000 thousand during the prior fiscal year and the market value of its shares of common stock held by non-affiliates is less than $700,000 thousand as of the prior June 30.
An entity is a “smaller reporting company” based upon the following criteria: (i) the market value of our shares of common stock held by non-affiliates is less than $250,000 thousand as of the prior June 30, or (ii) our annual revenues are less than $100,000 thousand during the prior fiscal year and the market value of our shares of common stock held by non-affiliates is less than $700,000 thousand as of the prior June 30.
We generate revenue by selling services to Learners and Institutions for one-on-one instruction and small group tutoring that are fulfilled by Experts, who deliver instruction on our behalf through our proprietary Live Learning Platform.
We generate revenue by selling tutoring services to Learners and Institutions that are fulfilled by Experts, who deliver instruction on our behalf through our proprietary Live Learning Platform.
Revenue is recognized from one-on-one instruction and small group tutoring as performance obligations are satisfied. Given the Institutions receive benefit from the completion of each session (as Institutions are not obligated to meet with the same Expert for a minimum number of sessions), we concluded each one-on-one or small group tutoring session is a separate performance obligation.
Given the Institutions receive benefit from the completion of each session (as Institutions are not obligated to meet with the same Expert for a minimum number of sessions), we concluded each one-on-one or small group tutoring session is a separate performance obligation.
The preparation of these consolidated financial statements requires us to make judgments, estimates, and assumptions. We make these subjective determinations after considering our historical performance, management’s experience, current economic trends, and events and information from outside sources. Inherent in this process is the possibility that actual results could differ from these estimates and assumptions for any particular period.
We make these subjective determinations after considering our historical performance, management’s experience, current economic trends, and events and information from outside sources. Inherent in this process is the possibility that actual results could differ from these estimates and assumptions for any particular period.
Interest Income Interest income was $3,377 thousand for the year ended December 31, 2023, compared to $483 thousand for the year ended December 31, 2022.
Interest Income Interest income was $3,104 thousand for the year ended December 31, 2024, compared to $3,377 thousand for the year ended December 31, 2023.
This increase was driven by higher interest income on our cash balances during the year ended December 31, 2023. 44 Table of Contents Income Tax Expense Our effective income tax rate was (0.16)% and (0.03)% for the years ended December 31, 2023 and 2022, respectively.
This decrease was driven by lower interest income on our cash balances during the year ended December 31, 2024. 40 Table of Contents Income Tax Expense Our effective income tax rate was (0.17)% and (0.16)% for the years ended December 31, 2024 and 2023, respectively.
Year Ended December 31, dollars in thousands 2023 2022 Computed tax (21%) $ (14,188) $ (13,417) Partnership outside basis adjustments 2,266 (3,840) Income tax benefit attributable to NCI 6,979 7,085 Income tax credit (1,121) (412) Change in valuation allowance charged to expense 11,907 14,301 State income tax benefit, net of effect on federal tax (2,888) (2,406) Other, net (2,846) (1,292) Income tax expense $ 109 $ 19 LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash As of December 31, 2023 and 2022, we had cash and cash equivalents totaling $74,824 thousand and $90,715 thousand, respectively.
Year Ended December 31, dollars in thousands 2024 2023 Computed tax (21%) $ (14,076) $ (14,188) Partnership outside basis adjustments 47 2,266 Income tax benefit attributable to NCI 6,180 6,979 Income tax credit (630) (1,121) Change in valuation allowance charged to expense 11,019 11,907 State income tax benefit, net of effect on federal tax (2,699) (2,888) Other, net 274 (2,846) Income tax expense $ 115 $ 109 LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash As of December 31, 2024 and 2023, we had cash and cash equivalents totaling $52,541 thousand and $74,824 thousand, respectively.
Unrealized Loss (Gain) on Derivatives, Net During the years ended December 31, 2023 and 2022, we recognized a net loss (gain) of $13,385 thousand and $(26,620) thousand, respectively, related to non-cash mark-to-market adjustments on our Warrants and Earnouts contracts to non-employees. Of the net loss recognized in 2023, $11,091 thousand and $2,294 thousand related to warrants and earnouts, respectively.
Unrealized Loss on Derivatives, Net During the year ended December 31, 2023, we recognized a net loss of $13,385 thousand related to non-cash mark-to-market adjustments on our warrants and earnouts contracts prior to the settlement in 2023 of all of our warrants and earnouts.
General and administrative expenses for the year ended December 31, 2023 included non-cash stock-based compensation, transaction costs, a provision for legal settlement, and restructuring costs of $41,474 thousand, $1,940 thousand, $1,250 thousand, and $841 thousand, respectively.
General and administrative expenses for the year ended December 31, 2023 included non-cash stock-based compensation, costs related to the warrant and earnout transactions, a provision for legal settlement, and restructuring costs of $41,474 thousand, $1,940 thousand , $1,250 thousand, and $841 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses increased $8,070 thousand, or 10%.
These estimates are reassessed each reporting period. 46 Table of Contents Institutions Our revenue from contracts with Institutions, which are generally short-term in duration of (one year or less), is recognized from services as performance obligations are satisfied.
These estimates are reassessed each reporting period. Institutions Our revenue from contracts with Institutions, which are generally short-term in duration (one year or less), is recognized from services as performance obligations are satisfied. Contracts with Institutions are generally sold through access-based subscriptions, whereby Institutions pay a fixed rate over the contract term.
Active Members in thousands December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Active Members 40.7 39.5 31.0 32.9 20.2 41 Table of Contents “Active Experts” is defined as the number of Experts who have instructed one or more sessions in a given period.
Active Members in thousands December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 Active Members 37.5 39.7 35.5 46.1 40.7 39.5 YoY change (8)% 1% 15% 40% 101% 250% “Active Experts” is defined as the number of Experts who have instructed one or more sessions in a given period.
Product development costs include compensation for employees on our product, engineering, and design teams who are 43 Table of Contents responsible for developing new and improving existing offerings, maintaining our website, improving efficiencies across our organization, and third-party expenses.
Product and development costs include compensation for employees on our product, engineering, and design teams who are responsible for developing new and improving existing offerings, maintaining our website, improving efficiencies across our organization, and third-party expenses. General and administrative expenses for the year ended December 31, 2024 included non-cash stock-based compensation, of $38,744 thousand.
To the extent we generate negative operating cash flows, it is possible that we may have to finance future operations primarily or in part from cash on hand. Cash Requirements Our cash requirements within the next twelve months include working capital requirements, sales and marketing activities, and capital expenditures.
We have incurred cumulative losses from our operations, and we may incur additional losses in the future. Our operations have historically been financed primarily through cash on hand and capital contributions. To the extent we generate negative operating cash flows, it is possible that we may have to finance future operations primarily or in part from cash on hand.
Our investments in product development and our platform-oriented approach to growth have allowed us to launch a suite of ‘always on’ subscription products including Learning Memberships for consumers, and our District, Teacher, and Parent Assigned offerings for Institutional customers. Subscription and access-based offerings simplify the operating model needed to support customers and grow the business.
We believe our investments in product development and our platform-oriented approach to growth have allowed us to launch and continuously improve our suite of ‘always on’ subscription products, including Learning Memberships for Consumers, and our high-dosage tutoring offerings for Institutional customers.
For additional information on the Public and FPA Warrant Exchange, the Private Warrant Transaction, and the Earnout Transaction, refer to Notes 1, 5, and 14 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
We did not have any financing activities during the year ended December 31, 2024. For additional information on the warrant and earnout transactions, refer to Notes 1, 4, and 13 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
We believe our cash on hand will be sufficient to satisfy these future requirements. Our cash requirements under our contractual obligations and commitments consist primarily of lease arrangements. See Note 17 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report for information on our lease obligations and the amount and timing of future payments.
See Note 15 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report for information on our lease obligations and the amount and timing of future payments. As of December 31, 2024, we had no debt obligations. The following table sets forth our cash flows.
Active Members exclude EduNation Limited, a company incorporated in England and Wales (“First Tutors UK”), as well as our Institutional business.
Active Members exclude EduNation Limited, a company incorporated in England and Wales (“First Tutors UK”), as well as our Institutional business. Our Active Member count as of December 31, 2024 was lower when compared to December 31, 2023 due to a higher mix of lower frequency Learning Memberships during 2024.
As a result of this transition, we are presenting Active Members (as defined below) as a key operating metric. “Active Member(s)” is defined as the number of Learners with an active paid Learning Membership as of the date presented.
KEY FINANCIAL AND OPERATING METRICS We monitor the following key operating metrics, among others, to evaluate the performance of our business. “Active Member(s)” is defined as the number of Learners with an active paid Learning Membership as of the date presented.
Operating Expenses The following table sets forth our operating expenses for the periods shown: Year Ended December 31, Change dollars in thousands; (favorable)/unfavorable 2023 2022 $ % Sales and marketing expenses $ 68,448 $ 74,183 $ (5,735) 8 % General and administrative expenses 125,570 129,559 (3,989) 3 % Total operating expenses $ 194,018 $ 203,742 $ (9,724) 5 % Sales and Marketing Sales expenses consist of compensation for our employees engaged in our sales process.
Operating Expenses The following table sets forth our operating expenses for the periods shown: Year Ended December 31, Change dollars in thousands 2024 2023 $ % Sales and marketing expenses $ 71,623 $ 68,448 $ 3,175 5 % General and administrative expenses 126,879 125,570 1,309 1 % Total operating expenses $ 198,502 $ 194,018 $ 4,484 2 % Sales and Marketing Sales and marketing expenses for the year ended December 31, 2024 and 2023 included non-cash stock-based compensation of $2,345 thousand and $2,795 thousand, respectively.
General and Administrative General and administrative expenses include compensation for certain employees, support services, product development expenses intended to support continued innovation, and other operating expenses. Product development costs were $40,859 thousand and $36,097 thousand for the years ended December 31, 2023 and 2022, respectively, an increase of $4,762 thousand.
Product and development costs were $43,928 thousand and $40,859 thousand for the years ended December 31, 2024 and 2023, respectively, an increase of $3,069 thousand.
Cash used in financing activities for the year ended December 31, 2022 was $1,000 thousand, which primarily related to payments made to legacy Nerdy holders in connection with the reverse recapitalization. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires us to make judgments, estimates, and assumptions.
Year Ended December 31, dollars in thousands 2023 2022 Cash used in: Operating activities $ (7,560) $ (48,002) Investing activities (6,887) (5,317) Financing activities (1,940) (1,000) Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash (20) (13) Net Decrease in Cash, Cash Equivalents, and Restricted Cash $ (16,407) $ (54,332) Operating Activities Cash used in operating activities for the year ended December 31, 2023 decreased $40,442 thousand compared to the same period in 2022.
Year Ended December 31, dollars in thousands 2024 2023 Cash used in: Operating activities $ (15,603) $ (7,560) Investing activities (6,863) (6,887) Financing activities — (1,940) Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash (1) (20) Net Decrease in Cash, Cash Equivalents, and Restricted Cash $ (22,467) $ (16,407) Operating Activities Cash used in operating activities for the year ended December 31, 2024 increased $8,043 thousand when compared to the same period in 2023 as lower revenue and gross margin coupled with investments in our Institutional sales organization and product development to drive innovation and support our continued growth were partially offset by favorable changes in working capital primarily related to fluctuations in the timing of sales and collections of receivables.
For additional information regarding our the Public and FPA Warrant Exchange, the Private Warrant Transaction, and the Earnout Transaction, refer to “Overview” within Part I, Item 2 of this report and Notes 1, 5, and 14 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
We did not have any mark-to-market adjustments on our warrants and earnouts contracts during the year ended December 31, 2024 as we did not have any warrants or earnouts outstanding. For additional information on the warrant and earnout transactions, refer to Notes 1, 4, and 13 within “Notes to Consolidated Financial Statements” in Part II, Item 8 of this report.
Active Experts also includes our Institutional business, but excludes First Tutors UK. The following table summarizes Active Experts for the periods presented. Our Active Expert count at December 31, 2023 reflects our evolution to Learning Memberships, which has allowed the highest quality Experts the ability to develop deeper relationships that allow for more consistent revenue-generating opportunities.
Active Experts also includes our Institutional business, but excludes First Tutors UK. The following table summarizes Active Experts for the periods presented.
Contracts with Institutions are sold through subscriptions (District Assigned, Teacher Assigned, and Parent Assigned), whereby Institutions pay a fixed monthly rate over the contract term, and our legacy high-dosage contracts, which consist of payments for services that can be redeemed following the date of first payment or payments after services are completed.
We have also sold prepaid high-dosage contracts, 42 Table of Contents which consist of payments for services that can be redeemed following the date of first payment or payments after services are completed. Revenue is recognized from one-on-one instruction and small group tutoring as performance obligations are satisfied.
Additionally, cash used in operating activities in the current year period was positively impacted by favorable changes in working capital, primarily related to fluctuations in the timing of sales and collections of receivables and the payments of other current liabilities. 45 Table of Contents Investing Activities Cash used in investing activities was $6,887 thousand and $5,317 thousand for the years ended December 31, 2023 and 2022, respectively.
Investing Activities Cash used in investing activities was $6,863 thousand and $6,887 thousand for the years ended December 31, 2024 and 2023, respectively.
Cost of revenue for the year ended December 31, 2023 increased primarily due to higher Expert costs of $6,816 thousand related to higher tutoring volumes in both our Consumer and Institutional business. Gross profit for the year ended December 31, 2023 of $136,447 thousand increased by $23,514 thousand, or 21%, compared to the same period in 2022.
Year Ended December 31, Change dollars in thousands 2024 2023 $ % Revenue $ 190,231 $ 193,399 $ (3,168) (2) % Cost of revenue 61,837 56,952 4,885 9 % Gross Profit $ 128,394 $ 136,447 $ (8,053) (6) % % Margin 67 % 71 % Cost of revenue for the year ended December 31, 2024 increased due to higher Expert costs of $4,096 thousand, primarily related to higher utilization of tutoring sessions across Learning Memberships in our Consumer business and the continued scaling of our Institutional business. 39 Table of Contents Gross margin for the year ended December 31, 2024 decreased primarily due to lower ARPM coupled with higher utilization of tutoring sessions across Learning Memberships in our Consumer business and higher substitution costs during the first half of the year in our Institutional business.
The following table presents the Company’s revenue by business category for the periods presented.
Cost of Revenue and Gross Profit The following table sets forth our cost of revenue and gross profit for the periods presented.
Removed
The Public and FPA Warrant Exchange, the Private Warrant Transaction, and the Earnout Transaction Public and FPA Warrant Exchange On September 25, 2023, we concluded an offer to holders of our then-outstanding publicly traded warrants, each exercisable to purchase one share of Nerdy Inc.’s Class A Common Stock at a price of $11.50 per share (the “Public Warrant(s)”) and warrants to purchase one share of Nerdy Inc.’s Class A Common Stock at a price of $11.50 per share issued in connection with a forward purchase agreement (the “FPA Warrant(s)”), which provided such holders the opportunity to receive 0.25 shares of Nerdy Inc.’s Class A Common Stock (the “Public Offer exchange rate”) in exchange for each Public Warrant and FPA Warrant tendered by such holders (the “Offer”).
Added
Revenue for the year ended December 31, 2023 included legacy Package revenue of $15,850 thousand that did not recur in the current year period due to the completion of the transition to Learning Memberships in our Consumer business. The following table presents the Company’s revenue by business category for the periods presented.
Removed
This Offer included a solicitation of consents from holders of the Public Warrants and FPA Warrants to amend the warrant agreement with respect to certain terms of the Public Warrants and the FPA Warrants (the “Public and FPA Warrant Amendment”, together with the Offer, the “Public and FPA Warrant Exchange”).
Added
Year Ended December 31, Change dollars in thousands 2024 % 2023 % $ % Consumer $ 154,230 81 % $ 158,654 82 % (4,424) (3) % Institutional 35,277 18 % 33,815 17 % 1,462 4 % Other (a) 724 1 % 930 1 % (206) (22) % Revenue $ 190,231 100 % $ 193,399 100 % $ (3,168) (2) % (a) Other consists of EduNation Limited, a company incorporated in England and Wales (“First Tutors UK”) and other services.
Removed
At the closing of the Offer, all remaining outstanding Public and FPA warrants that were not exchanged at the election of the holder were converted into 0.225 shares of Class A Common Stock, pursuant to the Public and FPA Warrant Amendment.
Added
We have introduced improvements to our marketplace infrastructure systems, including session scheduling enhancements, invoice automation improvements, and changes to the tutor placement and substitution program logic. We believe these enhancements will improve the customer experience due to the higher reliability level of our marketplace infrastructure systems and improve gross margins by lowering costs.
Removed
As a result of the Public and FPA Warrant Exchange, 12,000 thousand Public Warrants and FPA Warrants were exchanged for 2,992 thousand shares of Nerdy Inc.’s Class A Common Stock, with a nominal cash settlement in lieu of fractional shares. No Public Warrants and FPA Warrants remained outstanding after the Public and FPA Warrant Exchange.
Added
Excluding these impacts in both periods, sales and marketing expenses increased $3,625 thousand, or 5%.
Removed
Private Warrant Transaction Concurrently with the Offer, holders of our then-outstanding warrants to purchase one share of Nerdy Inc.’s Class A Common Stock at a price of $11.50 per share issued in connection with a private placement (the “Private Placement Warrant(s)”) and warrants to purchase one unit of Nerdy LLC (the “OpCo Unit(s)”) at an exercise price of $11.50 (the exercise of which would also result in the issuance of one corresponding share of Class B common stock (together with the Class A Common Stock, the “Common Stock”)) (the “OpCo Warrant(s)”) agreed to amend the warrant agreement with respect to certain terms of the Private Placement Warrants and OpCo Warrants (the “Private Placement Warrant Amendment”, together with the Public and FPA Warrant Amendment, the “Warrant Amendment”).
Added
Sales and marketing increases were driven by investments in our Institutional sales organization which were made to drive customer acquisition, brand awareness, and reach, including through signing up school districts with access to the Varsity Tutors platform, which is a strategy to introduce school districts to the platform and ultimately convert them to our fee-based offerings.
Removed
The Warrant Amendment, among other provisions, required that upon the closing of the Offer that (a) each Private Placement Warrant be automatically exchanged or exercised on a cashless basis into shares of Class A Common Stock and (b) each OpCo Warrant that is outstanding be automatically exercised on a cashless basis into OpCo Units with an equivalent number of shares of Class B Common Stock being issued, in each case, at the same ratio as the Public Offer exchange rate (the “Private Warrant Transaction”, together with the Public and FPA Warrant Exchange, the “Warrant Transactions”).
Added
These investments were partially offset by Consumer marketing efficiency gains. General and Administrative General and administrative expenses include compensation for certain employees, support services, product and development expenses intended to support continued innovation, and other operating expenses.
Removed
As a result of the Private Warrant Transaction, 5,281 thousand Private Placement Warrants were exchanged or exercised on a cashless basis for 1,314 thousand shares of the Company’s Class A Common Stock, with a nominal cash settlement in lieu of fractional shares and 2,052 thousand OpCo Warrants were exchanged 40 Table of Contents or exercised on a cashless basis for 513 thousand OpCo Units (with an equivalent number of shares of Class B Common Stock), with a nominal cash settlement in lieu of fractional shares.
Added
We believe these subscription and access-based offerings simplify our operating model needed to support the organization, which allows us to maximize our investment in our unified platform.
Removed
No Private Placement Warrants and OpCo Warrants remained outstanding after the Private Warrant Transaction.
Added
Cash Requirements Our cash requirements within the next twelve months include working capital requirements, sales and marketing activities, and capital expenditures. We believe our cash on hand will be sufficient to satisfy these future requirements. Our cash requirements under our contractual obligations and commitments consist primarily of lease arrangements.
Removed
The Private Placement Warrants, the Public Warrants, the FPA Warrants, and the OpCo Warrants are collectively referred to herein as the “Warrant(s).” Earnout Transaction Concurrently with the Offer, holders of our then-outstanding shares or units of (i) Class A Common Stock or (ii) OpCo Units (and a corresponding number of Class B Common Stock), as applicable, that were subject to forfeiture if the achievement of certain stock price thresholds of the Class A Common Stock were not met within five years of the reverse recapitalization (assuming there was no change in control event) (the “Earnout(s)”) agreed to forfeit (and thus surrender for cancellation) 60% of the Earnouts they held and agreed that the remaining 40% of the Earnouts will no longer be subject to potential forfeiture and will be either regular shares of Class A Common Stock or regular OpCo Units (with an equivalent number of regular shares of Class B Common Stock) (the “Earnout Transaction”).
Added
However, due to the fifth anniversary of the closing date of the TPG Pace’s initial public offering occurring in 2025, we will no longer be an emerging growth company starting with our Annual Report on Form 10-K for the year ended December 31, 2025, and as a result, will no longer be able to take advantage of the exemptions listed above.
Removed
As a result of the Earnout Transaction, 2,764 thousand shares of Class A Common Stock and 2,015 thousand OpCo Units (with an equivalent number of shares of Class B Common Stock) were cancelled and 1,842 thousand shares of Class A Common Stock and 1,343 thousand OpCo Units (with an equivalent number of shares of Class B Common Stock) remain outstanding after the Earnout Transaction and are no longer subject to forfeiture.
Added
According to 5120.1b of the SEC Financial Reporting Manual, once we failed to qualify for smaller reporting company status, we remained unqualified until making a subsequent determination either: (i) our public float fell below $200,000 thousand as of the last business day of our most recently completed second fiscal quarter or (ii) our public float and annual revenues met certain other requirements for subsequent qualification as of the last business day of our most recently completed second fiscal quarter.
Removed
The 36 thousand Earnouts held by the Company are now regular shares of Class A Common Stock and are no longer subject to forfeiture.
Added
Based upon our subsequent determination that occurred as of December 31, 2024, we have re-entered smaller reporting company status and will use scaled disclosures in annual and quarterly reports, as applicable, permitted for a smaller reporting company.
Removed
The collective net effect of the Public and FPA Warrant Exchange, the Private Warrant Transaction, and the Earnout Transaction resulted in a net increase of 37 thousand shares of our Common Stock, or less than 0.1%, in the amount of our Common Stock outstanding at the closing of these transactions.
Removed
Macroeconomic Trends Adverse macroeconomic conditions, including inflation, slower growth or a recession, tighter credit, higher interest rates, and higher unemployment rates, had negative impacts on consumer confidence and spending in 2023 and 2022, and some of these conditions are expected to continue into 2024.
Removed
Specifically, our financial results have been impacted by wage inflation among our employees and other inflationary pressures. We continuously explore the best pricing of our services and will consider future pricing actions to offset these inflationary pressures.
Removed
KEY FINANCIAL AND OPERATING METRICS We monitor the following key operating metrics to evaluate the growth of our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. During the second quarter of 2023, we completed the transition from our Package model to Learning Memberships within our Consumer business for all new customers.
Removed
Year Ended December 31, Change dollars in thousands; favorable/(unfavorable) 2023 % 2022 % $ % Consumer $ 158,654 82 % $ 140,820 86 % 17,834 13 % Institutional 33,815 17 % 19,054 12 % 14,761 77 % Other (a) 930 1 % 2,791 2 % (1,861) (67) % Revenue $ 193,399 100 % $ 162,665 100 % $ 30,734 19 % (a) Other consists of the Legacy Businesses and other services. 42 Table of Contents Cost of Revenue and Gross Profit The following table sets forth our cost of revenue and gross profit for the periods presented.
Removed
Year Ended December 31, Change dollars in thousands; favorable/(unfavorable) 2023 2022 $ % Revenue $ 193,399 $ 162,665 $ 30,734 19 % Cost of revenue 56,952 49,732 (7,220) (15) % Gross Profit $ 136,447 $ 112,933 $ 23,514 21 % % Margin 71 % 69 % Cost of revenue includes the cost of Experts performing instruction, amortization of capitalized technology costs, and other costs required to deliver instruction to Learners.
Removed
Gross margin was 71% during the year ended December 31, 2023, an increase of 113 basis points when compared to the prior year period.
Removed
These increases in the current year period were primarily driven by growth in our Consumer business as a result of the strong adoption of Learning Memberships, which has led to lifetime value expansion and higher gross margin.
Removed
Marketing expenses primarily include third-party costs related to media costs, including television, radio, podcasts, paid-social, paid-search, and other paid channels. Sales and marketing expenses also include costs associated with the delivery of our large format classes, including StarCourses , and expenditures across new marketing channels to drive brand awareness and reach.
Removed
Sales and marketing expenses for the year ended December 31, 2023 included non-cash stock-based compensation of $2,795 thousand. Sales and marketing expenses for the year ended December 31, 2022 included non-cash stock-based compensation and restructuring costs of $4,086 thousand and $345 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses decreased $4,099 thousand, or 6%.
Removed
Additionally, excluding these impacts in both periods, sales and marketing expenses for the year ended December 31, 2023 were 34% of revenue compared to 43% of revenue during the same period in 2022, a 893 basis point improvement year-over-year.
Removed
Sales and marketing spend and efficiency improvements were driven by the transition to Learning Memberships, including the continued expansion of lifetime value, our focus on optimizing the level of marketing spend, and a more efficient operating model in our Consumer business.
Removed
We also delivered substantial Varsity Tutors for School revenue growth, yielding efficiencies from prior investments in the Institutional sales and go-to-market organization. Our more efficient operating model in our Consumer business and the continued scaling of our Institutional business continue to lead to sales and marketing efficiency improvements as the business delivers revenue growth.
Removed
General and administrative expenses for the year ended December 31, 2022 included non-cash stock-based compensation and restructuring costs of $43,158 thousand and $1,134 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses decreased $5,202 thousand, or 6%.
Removed
Additionally, excluding these impacts in both periods, general and administrative expenses for the year ended December 31, 2023 were 41% of revenue compared to 52% of revenue during the same period in 2022, a 1,102 basis point improvement year-over-year.
Removed
Combined with our ongoing automation efforts involving self-service capabilities, the application of AI, and other efficiency efforts, we have been able to generate operating efficiencies and remove significant costs from the business.
Removed
The net loss recognized for the year ended December 31, 2023 related to our Warrants was due to a higher average trading price of our Public Warrants, including in the period after the Offer and prior to the completion of the Warrant Transactions.

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