Yahoo Finance Nerdy Inc (NRDY) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic Expansions
Total Revenue: $53.7 million, a 9% year-over-year increase.
Consumer Learning Membership Subscription Revenue: $39.9 million, up 34% year-over-year, 74% of total revenue.
Institutional Revenue: $11.9 million, up 39% year-over-year, 22% of total revenue.
Active Members: 46,100 as of March 31, 2024, a 40% increase year-over-year.
Gross Margin: 68%, slightly down from 68.9% in the same period last year.
Adjusted EBITDA: $24,000, slightly above guidance.
Operating Cash Flow: Positive $4.4 million.
Bookings: $4.4 million in institutional bookings.
Annualized Run Rate: Approximately $162 million from learning memberships at quarter end.
Net Income: Not explicitly mentioned, focus on adjusted EBITDA provided.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Nerdy Inc reported a 34% year-over-year increase in consumer learning membership subscription revenue, totaling $39.9 million, which represents 74% of total company revenue.
The company achieved a record quarterly institutional revenue of $11.9 million, marking a 39% increase year over year.
Active membership grew by 40% year over year, reaching 46,100 members as of March 31, 2024, surpassing the guidance target.
Nerdy Inc delivered non-GAAP adjusted EBITDA of $24,000, slightly above the top end of their guidance range, and also reported positive operating cash flow of $4.4 million.
The company successfully expanded its reach, enabling access to its platforms for an additional 1.2 million students, bringing the total to 2.2 million students across over 475 school districts.
Negative Points
Despite overall growth, there was a noted decrease in gross margin primarily due to higher utilization of tutoring sessions in new access-based products within the institutional business.
The company is still in the process of testing additional product offerings and price points, which has led to a decrease in ending RPM (Revenue Per Month) for the quarter.
Nerdy Inc faces ongoing challenges with the timing and magnitude of conversions from freemium to membership models, particularly in integrating these services across consumer and institutional platforms.
There are additional costs associated with the ambitious target of enabling access to the Varsity Tutors for Schools platform for 10 million students.
The company mentioned a mix shift towards premium offerings which, while promising, requires careful management to avoid negative impacts on revenue.
Q & A Highlights
Q: Can you discuss the timing and potential magnitude of conversions from freemium and VTS to membership on the consumer side, especially given 2.2 million students have access to the platforms? A: (Charles Cohn - CEO, Founder) We are making sequential progress in integrating our consumer and institutional products for a unified experience. This integration allows us to leverage developments across various subjects and educational levels. The unified platform enhances user experience whether accessed through schools or directly by consumers, potentially increasing engagement and retention.
Q: What is your revenue trajectory through the year, especially with your Q2 guide suggesting a healthy revenue ramp in the second half? A: (Jason Pello - CFO) Our business typically sees a larger back half due to the back-to-school period. Increased engagement on our platform and higher conversion rates through learning memberships are expected to drive consumer revenue. On the institutional side, expanding our sales team and territories should boost bookings in Q3, impacting Q4 revenue.
Q: Can you elaborate on your target of enabling access to Varsity tutors for 10 million students this year? What does this entail and what are the associated costs? A: (Charles Cohn - CEO, Founder) This target involves embedding our platform in school districts to build trust and credibility. We are investing in a localized go-to-market sales effort, which has proven effective. The strategy includes providing free access to our platform, which facilitates more strategic and longer-term relationships with school districts.
Q: How should we think about balancing consumer marketing versus investments for 2024, and how is Signum helping drive awareness with school districts? A: (Jason Pello - CFO) Signum is opening doors faster with school districts, leading to paid conversations. On the consumer side, we're seeing good conversion at the top of the funnel, with product improvements driving better retention and extending customer lifetime value.
Q: Regarding the institutional side, what insights can you share from the shift to a freemium model? A: (Charles Cohn - CEO, Founder) The freemium model is showing positive early signs. It's opening doors with school districts faster and driving higher engagement with our platform. This strategy is expected to lead to upselling into paid offerings and retaining legacy paid customers.
Q: What drove the change in seasonality, implying a stronger Q4? A: (Charles Cohn - CEO, Founder) We leaned more into premium mix shifts based on positive early signals, which affected seasonality. Additionally, product updates shipped later than expected, impacting engagement and retention timelines. Our focus on embedding our platform in school districts is setting us up for a strong back-to-school period.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
