Nerdy Inc.
08/07/2025 | Press release | Distributed by Public on 08/07/2025 14:10
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and capital resources of Nerdy Inc. and its consolidated subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein and our audited consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report"), filed with the United States Securities and Exchange Commission (the "SEC") on February 27, 2025. In addition, the following discussion and analysis of Nerdy Inc.'s financial condition and results of operations also contains forward-looking statements that involve risks, uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth in the sections entitled "Item 1A. Risk Factors" in Part I of the 2024 Annual Report and "Item 1A. Risk Factors" in Part II of this report, as well as under the section "Cautionary Note On Forward-Looking Statements" below. Unless otherwise stated or the context otherwise indicates, all references in the succeeding paragraphs to "Nerdy," "the Company," "us," "our" or "we" mean Nerdy Inc. and its consolidated subsidiaries.
OVERVIEW
We operate a platform for live online learning. Our mission is to transform the way people learn through technology. Our purpose-built proprietary platform leverages technology, including artificial intelligence ("AI"), to connect students, users, parents, guardians, and purchasers ("Learner(s)") of all ages to tutors, instructors, subject matter experts, educators, and other professionals ("Expert(s)"), delivering superior value on both sides of the network. Our comprehensive learning destination provides learning experiences across numerous subjects and multiple formats, including Learning Memberships, one-on-one instruction, small group tutoring, large format classes, tutor chat, essay review, adaptive assessments, and self-study tools. Our flagship business, Varsity Tutors LLC ("Varsity Tutors"), is one of the nation's largest platforms for live online tutoring and classes. Our solutions are available directly to Learners ("Consumer(s)"), as well as through education systems ("Institution(s)"). Our platform offers Experts the opportunity to generate income from the convenience of home, while also increasing access for Learners by removing barriers to high-quality live online learning. Our offerings include Varsity Tutors for Schools, a product suite that leverages our platform capabilities to offer high-dosage tutoring and our online learning solutions to Institutions. We have built a diversified business across the following audiences: K-8, High School, College, Graduate School, and Professional.
KEY 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. Variations in the number of Active Members are due to changes in demand for our solutions, seasonality, testing schedules, and the launch of new membership options. As a result, we believe Active Members is a key indicator of our ability to attract, engage, and retain Learners. Active Members exclude our Institutional business. Our Active Member count as of June 30, 2025 was lower when compared to June 30, 2024 primarily due to lower retention in older customer cohorts that included a higher proportion of lower frequency Learning Memberships.
| Active Members in thousands |
June 30, 2025 |
March 31, 2025 |
December 31, 2024 |
September 30, 2024 |
June 30, 2024 |
March 31, 2024 |
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| Active Members | 30.6 | 40.5 | 37.5 | 39.7 | 35.5 | 46.1 | |||||||||||||||||||||||||||||
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YoY change
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(14)% | (12)% | (8)% | 1% | 15% | 40% | |||||||||||||||||||||||||||||
"Average Revenue per Member per Month" ("ARPM") is defined as the average Consumer Learning Membership subscription revenue per member per month as of the date presented. Variations in ARPM are primarily due to changes in the mix of Learning Memberships sold and pricing changes. We believe ARPM is a key indicator of the value we provide to our customers. ARPM excludes our Institutional business. ARPM as of June 30, 2025 was higher when compared to June 30, 2024 due to the mix shift to higher frequency Learning Memberships coupled with price increases enacted during the first quarter of 2025.
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ARPM in ones
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June 30, 2025 |
March 31, 2025 |
December 31, 2024 |
September 30, 2024 |
June 30, 2024 |
March 31, 2024 |
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ARPM
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$ | 348 | $ | 335 | $ | 302 | $ | 302 | $ | 281 | $ | 293 | |||||||||||||||||||||||
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YoY change
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24% | 14% | (2)% | (13)% | (20)% | (19)% | |||||||||||||||||||||||||||||
"Active Experts" is defined as the number of Experts who have instructed one or more sessions in a given period. We believe Active Experts is a key indicator of our ability to service Learners and provide Experts with revenue-generating opportunities. Active Experts includes our Institutional business. The following table summarizes Active Experts for the periods presented. Our Active Expert count during the three and six months ended June 30, 2025 when compared to the prior year periods decreased due to lower Consumer Active Experts as a result of our Expert incentives, which has promoted utilization of the highest quality Experts by encouraging them to work with more Learners and develop deeper relationships that allow for increased revenue-generating opportunities, coupled with lower utilization of tutoring sessions in our Institutional business as a result of lower bookings.
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Three Months Ended June 30, |
Change |
Six Months Ended June 30, |
Change | ||||||||||||||||||||||||||||||||
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Active Experts in thousands
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2025 | 2024 | % | 2025 | 2024 | % | |||||||||||||||||||||||||||||
| Active Experts | 9.7 | 11.6 | (16)% | 12.1 | 14.4 | (16)% | |||||||||||||||||||||||||||||
RESULTS OF OPERATIONS
|
Three Months Ended June 30, |
Six Months Ended June 30, |
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| dollars in thousands | 2025 | % | 2024 | % | 2025 | % | 2024 | % | |||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 45,263 | 100 | % | $ | 50,984 | 100 | % | $ | 92,858 | 100 | % | $ | 104,711 | 100 | % | |||||||||||||||||||||||||||||||
| Cost of revenue | 17,421 | 38 | % | 17,497 | 34 | % | 37,405 | 40 | % | 34,709 | 33 | % | |||||||||||||||||||||||||||||||||||
| Gross Profit | 27,842 | 62 | % | 33,487 | 66 | % | 55,453 | 60 | % | 70,002 | 67 | % | |||||||||||||||||||||||||||||||||||
| Sales and marketing expenses | 13,558 | 30 | % | 15,537 | 31 | % | 29,343 | 32 | % | 32,929 | 32 | % | |||||||||||||||||||||||||||||||||||
| General and administrative expenses | 26,572 | 59 | % | 33,179 | 65 | % | 54,983 | 59 | % | 65,155 | 62 | % | |||||||||||||||||||||||||||||||||||
| Operating Loss | (12,288) | (27) | % | (15,229) | (30) | % | (28,873) | (31) | % | (28,082) | (27) | % | |||||||||||||||||||||||||||||||||||
| Interest income | (365) | (1) | % | (879) | (2) | % | (827) | (1) | % | (1,765) | (2) | % | |||||||||||||||||||||||||||||||||||
| Other expense, net | 4 | - | % | 10 | - | % | 4 | - | % | 35 | - | % | |||||||||||||||||||||||||||||||||||
| Loss before Income Taxes | (11,927) | (26) | % | (14,360) | (28) | % | (28,050) | (30) | % | (26,352) | (25) | % | |||||||||||||||||||||||||||||||||||
| Income tax expense | 74 | - | % | 38 | - | % | 102 | - | % | 61 | - | % | |||||||||||||||||||||||||||||||||||
| Net Loss | (12,001) | (26) | % | (14,398) | (28) | % | (28,152) | (30) | % | (26,413) | (25) | % | |||||||||||||||||||||||||||||||||||
Revenue
Revenue in both current year periods decreased when compared to the prior year periods primarily due to lower Institutional revenue and a specific ($3,007 thousand and $4,475 thousand for the three and six months ended June 30, 2024, respectively) state-funded Consumer revenue program that did not recur in 2025. For both current year periods, these impacts were partially offset by higher ARPM in our Consumer business as a result of a mix shift to higher frequency Learning Memberships and price increases enacted during the first quarter of 2025, coupled with higher retention in newer cohorts due primarily to improvements in the user experience and new Expert incentives.
The following table presents our revenue by business category for the periods presented.
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Three Months Ended June 30, |
Change | ||||||||||||||||||||||||||||||||||
| dollars in thousands | 2025 | % | 2024 | % | $ | % | |||||||||||||||||||||||||||||
| Consumer | $ | 37,824 | 83 | % | $ | 39,716 | 78 | % | $ | (1,892) | (5) | % | |||||||||||||||||||||||
| Institutional | 7,308 | 16 | % | 11,135 | 21 | % | (3,827) | (34) | % | ||||||||||||||||||||||||||
| Other | 131 | 1 | % | 133 | 1 | % | (2) | (2) | % | ||||||||||||||||||||||||||
| Revenue | $ | 45,263 | 100 | % | $ | 50,984 | 100 | % | $ | (5,721) | (11) | % | |||||||||||||||||||||||
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Six Months Ended June 30, |
Change | ||||||||||||||||||||||||||||||||||
| dollars in thousands | 2025 | % | 2024 | % | $ | % | |||||||||||||||||||||||||||||
| Consumer | $ | 75,837 | 81 | % | $ | 81,318 | 77 | % | $ | (5,481) | (7) | % | |||||||||||||||||||||||
| Institutional | 16,688 | 18 | % | 23,022 | 22 | % | (6,334) | (28) | % | ||||||||||||||||||||||||||
| Other | 333 | 1 | % | 371 | 1 | % | (38) | (10) | % | ||||||||||||||||||||||||||
| Revenue | $ | 92,858 | 100 | % | $ | 104,711 | 100 | % | $ | (11,853) | (11) | % | |||||||||||||||||||||||
Cost of Revenue and Gross Profit
The following table sets forth our cost of revenue and gross profit for the periods presented.
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Three Months Ended June 30, |
Change |
Six Months Ended June 30, |
Change | ||||||||||||||||||||||||||||||||||||||||||||
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dollars in thousands
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2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 45,263 | $ | 50,984 | $ | (5,721) | (11)% | $ | 92,858 | $ | 104,711 | $ | (11,853) | (11)% | |||||||||||||||||||||||||||||||||
| Cost of revenue | 17,421 | 17,497 | 76 | -% | 37,405 | 34,709 | (2,696) | (8)% | |||||||||||||||||||||||||||||||||||||||
| Gross Profit | $ | 27,842 | $ | 33,487 | $ | (5,645) | (17)% | $ | 55,453 | $ | 70,002 | $ | (14,549) | (21)% | |||||||||||||||||||||||||||||||||
| % Margin | 62 | % | 66 | % | 60 | % | 67 | % | |||||||||||||||||||||||||||||||||||||||
Cost of revenue for the three months ended June 30, 2025 decreased primarily due to lower Expert costs of $292 thousand, driven by lower utilization of tutoring sessions in our Institutional business when compared to the prior year period as a result of lower bookings. These impacts were partially offset by Expert incentives enacted during the fourth quarter of 2024. Cost of revenue for the six months ended June 30, 2025 increased primarily due to higher Expert costs of $2,211 thousand, primarily driven by the Expert incentives enacted during the fourth quarter of 2024.
We believe these incentives drive Expert satisfaction and engagement with our platform (and Learners) by allowing certain Experts to receive additional income for each sequential recurring session with the same student. Following the adoption of the new incentives, we are seeing faster time to the first session, more sessions in the first 30 days, lower tutor replacement rates, and higher retention.
Gross margin for both current year periods decreased primarily due to Expert incentives enacted during the fourth quarter of 2024. Gross margin for the three months ended June 30, 2025 improved sequentially quarter-over-quarter as a result of price increases for new Consumer customers enacted during the first quarter of 2025. We expect to deliver sequential quarterly gross margin improvements as we move throughout the year.
Operating Expenses
The following table sets forth our operating expenses for the periods presented.
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Three Months Ended June 30, |
Change |
Six Months Ended June 30, |
Change | ||||||||||||||||||||||||||||||||||||||||||||
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dollars in thousands
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2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Sales and marketing expenses | $ | 13,558 | $ | 15,537 | $ | (1,979) | (13)% | $ | 29,343 | $ | 32,929 | $ | (3,586) | (11)% | |||||||||||||||||||||||||||||||||
| General and administrative expenses | 26,572 | 33,179 | (6,607) | (20)% | 54,983 | 65,155 | (10,172) | (16)% | |||||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 40,130 | $ | 48,716 | $ | (8,586) | (18)% | $ | 84,326 | $ | 98,084 | $ | (13,758) | (14)% | |||||||||||||||||||||||||||||||||
Sales and Marketing
Sales and marketing expenses for the three months ended June 30, 2025 and 2024 included non-cash stock-based compensation of $330 thousand and $638 thousand, respectively. Excluding these impacts in both periods, sales and marketing expenses decreased $1,671 thousand, or 11%. Sales and marketing expenses for the six months ended June 30, 2025 included non-cash stock-based compensation and restructuring costs of $674 thousand and $193 thousand, respectively. Sales and marketing expenses for the six months ended June 30, 2024 included non-cash stock-based compensation of $1,173 thousand. Excluding these impacts in both periods, sales and marketing expenses decreased $3,280 thousand, or 10%.
These decreases in sales and marketing expenses were driven by Consumer marketing efficiency gains coupled with the moderation of our investment in the Institutional business given near-term funding uncertainties. We believe a significant
opportunity exists in the Institutional space and that the product enhancements we are making to the Live+AI™ platform will drive growth in future periods.
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. Product and development costs were $10,683 thousand and $11,569 thousand for the three months ended June 30, 2025 and 2024, respectively. Product and development costs were $21,417 thousand and $22,232 thousand for the six months ended June 30, 2025 and 2024, respectively. Product and development costs include compensation for employees on our product and engineering 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 three months ended June 30, 2025 and 2024 included non-cash stock based compensation of $7,208 thousand and $10,676 thousand, respectively. Excluding these impacts in both periods, general and administrative expenses decreased $3,139 thousand, or 14%. General and administrative expenses for the six months ended June 30, 2025 included non-cash stock based compensation and restructuring costs of $14,452 thousand and $455 thousand, respectively. General and administrative expenses for the six months ended June 30, 2024 included non-cash stock based compensation $21,253 thousand. Excluding these impacts in both periods, general and administrative expenses decreased $3,826 thousand, or 9%.
AI-enabled productivity improvements, coupled with new software-driven processes and system implementations, headcount reductions, and other cost reduction efforts, have enabled us to generate operating efficiencies and remove significant costs from the business. Recent advances in AI provide us with the opportunity to drive further levels of productivity, including the agentification of key processes that will allow us to improve both the customer experience and operational consistency while further reducing the operating costs necessary to scale our business.
Interest Income
Interest income for the three months ended June 30, 2025 was $365 thousand, a decrease from $879 thousand in the same period in 2024, driven by lower interest income on our cash balances during the current period. Interest income for the six months ended June 30, 2025 was $827 thousand, a decrease from $1,765 thousand in the same period in 2024, driven by lower interest income on our cash balances during the current period.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
As of June 30, 2025 and December 31, 2024, we had cash and cash equivalents totaling $36,722 thousand and $52,541 thousand, respectively. We have incurred cumulative losses from our operations, and we will likely incur additional losses in the future. Our operations have historically been financed primarily through cash on hand and capital contributions. To the extent we continue to 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 believe our cash on hand will be sufficient to satisfy these future requirements.
As of June 30, 2025, we had no debt obligations. Our cash requirements under our contractual obligations and commitments consist primarily of a lease arrangement. 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 our 2024 Annual Report. There have been no material changes to our leasing arrangements previously disclosed in our 2024 Annual Report.
The following table sets forth our cash flows for the periods presented.
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Six Months Ended June 30, |
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| dollars in thousands | 2025 | 2024 | |||||||||
| Cash used in: | |||||||||||
| Operating activities | $ | (13,489) | $ | (1,235) | |||||||
| Investing activities | (2,333) | (3,755) | |||||||||
| Financing activities | - | - | |||||||||
| Effect of Exchange Rate Change on Cash, Cash equivalents, and Restricted Cash | 3 | 4 | |||||||||
| Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $ | (15,819) | $ | (4,986) | |||||||
Operating Activities
Cash used in operating activities for the six months ended June 30, 2025 increased $12,254 thousand when compared to the same period in 2024, primarily due to lower revenue and gross margin, the payment of a legal settlement of $2,000 thousand, and changes in working capital.
Investing Activities
Cash used in investing activities was $2,333 thousand and $3,755 thousand for the six months ended June 30, 2025 and 2024, respectively. Cash used in investing activities for both periods related to capital expenditures primarily for the development of internal use software and IT equipment.
Financing Activities
We did not have any financing activities during the six months ended June 30, 2025 or 2024.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies and estimates are more fully described in our 2024 Annual Report. There have been no material changes to our critical accounting policies and estimates previously disclosed in our 2024 Annual Report.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 2 within "Notes to Condensed Consolidated Financial Statements (Unaudited)" in Part 1, Item 1 of this report for a discussion regarding recently issued accounting standards.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements in this report may constitute "forward-looking statements" for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team's expectations, hopes, beliefs, intentions, or strategies regarding the future, including our expectations with respect to: revenue growth; enhancing the Learning Membership experience; continued improvements in sales and marketing leverage; gross margin and operating leverage; the growth of our Institutional business; changes to our marketplace infrastructure systems; simplifying our operations model while growing our business; the sufficiency of our cash to fund future operations. Any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipates," "approximately," "believes," "contemplates," "continues," "could," "estimates," "expects," "intends," "may," "might," "outlook," "plans," "possible," "potential," "predicts," "projects," "should," "seeks," "will," "would," and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Our financial condition, results of operations, and cash flows may differ materially from those in the forward-looking statements as a result of various factors, including:
•our offerings continue to evolve, which makes it difficult to predict our future financial and operating results;
•our history of net losses and negative operating cash flows, which could require us to need other sources of liquidity;
•risks associated with our ability to acquire and retain customers, operate, and scale up our Consumer and Institutional businesses;
•risks associated with our intellectual property, including claims that we infringe on a third-party's intellectual property rights;
•risks associated with our classification of some individuals and entities we contract with as independent contractors;
•risks associated with the liquidity and trading of our securities;
•risks associated with payments that we may be required to make under the tax receivable agreement;
•litigation, regulatory, and reputational risks arising from the fact that many of our Learners are minors;
•changes in applicable law or regulation;
•the possibility of cyber-related incidents and their related impacts on our business and results of operations;
•risks associated with the development and use of artificial intelligence and related regulatory uncertainty;
•the possibility that we may be adversely affected by other economic, business, and/or competitive factors;
•risks associated with managing our rapid growth; and
•other risks and uncertainties included under "Risk Factors" within Part II, Item 1A of this report and in our 2024 Annual Report filed with the SEC on February 27, 2025.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled "Risk Factors" elsewhere in this report. Readers are urged to carefully review and consider the various disclosures made in this report and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
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. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition 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 TPG Pace Tech Opportunities' 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 30 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. Based upon the facts and circumstances that existed as of June 30, 2025, we continued to be an emerging growth company for our quarterly report for the period ended June 30, 2025. 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.
SMALLER REPORTING COMPANY STATUS
We are 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. 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. Based upon the facts and circumstances that exist as of June 30, 2025, we will remain a smaller reporting company for our Annual Report on Form 10-K for the year ended December 31, 2025 (and interim periods therein) and for our quarterly reports in the 2026 interim periods.
Nerdy Inc. published this content on August 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on August 07, 2025 at 20:11 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]