Q3 2025 Nerdy Inc Earnings Call

All lines will be muted in the presentation portion of the call with an opportunity for questions and answers at the end I would now like to pass the conference over to your host T. J Lynn Associate General Counsel of Nerdy you May proceed.

Good afternoon, and thank you for joining us for <unk> third quarter 2025 earnings call with me are Chuck tone, founder Chairman and Chief Executive Officer, Gary and Jason Pelo, Chief Financial Officer.

Before I turn the call over to Chuck I'll remind everyone that this discussion will contain forward looking statements, including but not limited to expectations with respect to <unk> future financial and operating results strategy opportunities plans and outlook.

These forward looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results.

And any forward looking statements are made as of today's date and <unk>.

<unk> does not undertake or accept any obligation to publicly release any updates or revisions to any forward looking statements to reflect any change in expectations or any change in events conditions or circumstances on which any such statement is based.

Please refer to the disclaimers in today's shareholder letter announcing <unk> third quarter results and the company's filings with the SEC for a discussion of the risks.

Not all of the financial measures that we will discuss today are prepared in accordance with GAAP.

These refer to today's shareholder letter for reconciliations of these non-GAAP measures.

That let me turn the call over to Chuck.

Thanks T J and thank you to everyone for joining today's call as we close out the third quarter of 2025, I'm going to start by acknowledging some challenges we faced this back to school season.

Our starting point heading into the fourth quarter was behind where we are targeting with delays in key product launches delaying our anticipated inflection in growth and profitability by a quarter.

These setbacks, including some operational challenges stemming from the growing strain on our underlying systems, which were built over years to support an expanding array of products from life scheduled video tutoring to instant on demand video during two AI tools.

<unk> and more and they span both our consumer and institutional offerings as we've scaled the sprawl of these systems created technical debt that sonar products velocity, leading to slower timelines and launches. This school year. Several key initiatives were impacted as product launches were delayed which culminated in us not fully capitalizing on back to school peak.

These disparate technology systems led to a disconnected experience across product modalities, including tutoring livestream classes AI tools and our practice himself study tools each in a different user interface.

This slow down year to date and product delays and the back to school period in particular prompted a period of deep introspection for me.

This summer we started a few new vendor relationships with early stage enterprise software startups.

Their ability to build net new features almost entire products in a week or two was 10 times faster than what I had ever witnessed before.

With brand New code basis, defaulting to AI coding versus just AI assisted coding and no preconceived notions of what was possible or how to build software. They were able to build at 10 times the pace of what we'd seen before.

That experience inspired me to rethink every aspect of how we build products and software.

I drove into these root technical issues myself working closely with a small group to rethink our platform for the ground up in this AI data Bureau.

Speaker #1: The latest and key product launches , delaying our anticipated inflation and growth and profitability by a quarter . These setbacks , including some operational challenges , stem from the growing strain on our underlying systems , which were built over years to support an expanding array of products from live scheduled video tutoring to instant on demand video .

Operator: I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, T. J. Lynn, Associate General Counsel of Nerdy. You may proceed.

And in fact that required re platforming my own skill set and learning to build software natively with AI and AR represented the transition from being a non technical founder to a technical founder made possible with and thanks to extensive AI augmentation.

Our platform is now undergoing the same re platforming and metamorphosis.

Speaker #1: During to AI tools to diagnostics and more . And they span both our consumer and institutional offerings as we've scaled the sprawl of these systems , created technical debt to support our product velocity , leading to slower timelines and launches .

T.J. Lynn: Good afternoon, and thank you for joining us for Nerdy's Q3 2025 earnings call. With me are Chuck Cohn, Founder, Chairman, and Chief Executive Officer of Nerdy, and Jason Pello, Chief Financial Officer. Before I turn this call over to Chuck, I'll remind everyone that this discussion will contain forward-looking statements, including, but not limited to, expectations with respect to Nerdy's future financial and operating results, strategy, opportunities, plans, and outlook. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Any forward-looking statements are made as of today's date, and Nerdy does not undertake or accept any obligation to publicly release any updates or revisions to any forward-looking statements to reflect any change in expectations or any change in events, conditions, or circumstances on which any such statement is based.

What I realized is that truly harness AI as potential enhancing every aspect of life human tutoring, we needed to shed legacy constraints entirely.

Speaker #1: This new school year . Several key initiatives were impacted as product launches were delayed , which culminated in US not fully capitalizing on back to school peak .

I have personally a lot of small group that work day and night to rebuild key aspects of our core infrastructure from scratch using AI assisted software development and preserving our central business logic and data while migrating to modern decoupled systems.

Speaker #1: These disparate technology systems led to a disconnected experience across product modalities , including tutoring , livestream classes , AI tools , and our practice and self-study tools , each in a different user interface .

As we proved out this new way of working and building, we enlisted our entire product and engineering work and have made significant progress. We are now targeting having nearly 100% of our traffic on new code basis written by AI by the end of November.

Speaker #1: This slowdown year to date and product delays in the back to school period , in particular , prompted a period of deep introspection .

Speaker #1: For me . This summer , we started a few new vendor relationships with early stage enterprise software startups . Their ability to build net new features , almost entire products in a week or two was ten times faster than what I had ever witnessed before .

What's really exciting is that it's already unlocking customer facing innovation at a pace, we've never seen before and by the end of the year, we anticipate our backend legacy systems will be fully decoupled, allowing us to integrate AI much more deeply across the platform and launched new interactive <unk>.

T.J. Lynn: Please refer to the disclaimers in today's shareholder letter announcing Nerdy's Q3 results and the company's filings with the SEC for a discussion of the risks. Not all of the financial measures that we will discuss today are prepared in accordance with GAAP. Please refer to today's shareholder letter for reconciliations of these non-GAAP measures. With that, let me turn the call over to Chuck.

Speaker #1: With brand new code bases defaulting to AI coding versus just AI assisted coding . And no preconceived notions of what was possible or how to build software .

Extra where experiences with a fraction of the effort.

This reinvention isn't subtract, it's already delivering tangible progress.

Speaker #1: They were able to build at ten times the pace of what we'd seen before. That experience inspired me to rethink every aspect of how we build products and software.

Chuck Cohn: Thanks, T. J., and thank you to everyone for joining today's call. As we close out Q3 2025, I want to start by acknowledging some challenges we faced this back-to-school season. Our starting point heading into Q4 was behind where we were targeting, with delays in key product launches delaying our anticipated inflection in growth and profitability by a quarter. These setbacks, including some operational challenges, stem from the growing strain on our underlying systems, which were built over years to support an expanding array of products from live-scheduled video tutoring, to instant-on-demand video tutoring, to AI tools, to diagnostics, and more, and they spanned both our consumer and institutional offerings. As we scaled to sprawl, these systems created technical debt that slowed our product velocity, leading to slower timelines and launches.

For instance, our two point over version of our flagship live learning platform video tutoring product launched with a rollout from September to October achieving a reduction of approximately 50% in audio video error rates and nearly 40% cost savings per session along.

Speaker #1: I dove into these root technical issues myself , working closely with a small group to rethink our platform for the ground up in this AI native era .

Speaker #1: In effect , it required replatforming my own skill set and learning to build software natively with AI , and it represented a transition from being a non-technical founder to a technical founder , made possible with and thanks to extensive AI augmentation , our platform is now undergoing the same replatforming and metamorphosis .

Long with very positive tutor feedback and very positive student feedback on usability and quality.

We're also rolling out brand, new completely rethought, new student and tutor experiences with October launches of entirely new and unified experiences that bring together all of our products into a cohesive interface.

Speaker #1: What I realized is that to truly harness AI's potential , enhancing every aspect of live human tutoring , we needed to shed legacy constraints entirely .

Products like our new AI practice hub featured in our last shareholder letter are now fully integrated into both the student experience and our new learning platform.

Chuck Cohn: This new school year, several key initiatives were impacted as product launches were delayed, which culminated in us not fully capitalizing on back-to-school peak. These disparate technology systems led to a disconnected experience across product modalities, including tutoring, livestream classes, AI tools, and our practice and self-study tools, each in a different user interface. This slowdown year-to-date and product delays in the back-to-school period in particular prompted a period of deep introspection for me. This summer, we started a few new vendor relationships with early-stage enterprise software startups. Their ability to build net-new features, almost entire products in a week or two, was 10 times faster than what I had ever witnessed before.

Speaker #1: I've personally led a small group that worked day and night to rebuild key aspects of our core infrastructure from scratch , using AI assisted software development and preserving essential business logic and data while migrating to modern decoupled systems .

This enables content and AI tools to enhance the entire customer journey and fully leverages, the personalization and enhancements that AI now makes possible.

Speaker #1: As we proved that this new way of working and building , we enlisted our entire product and engineering org and have made significant progress .

Other AI driven wins include better site conversion of our new homepage as well as the significant drop in the tutor replacement rate.

Speaker #1: We are now targeting having nearly 100% of our traffic on new code bases written by AI . By the end of November . What's really exciting is that it's already unlocking customer facing innovation at a pace we've never seen before , and by the end of the year , we anticipate our back end legacy systems will be fully decoupled , allowing us to integrate AI much more deeply across the platform and launch new interactive , context aware experiences with a fraction of the effort .

<unk>, new AI vetting of tutors with interactive conversational AI interviews that are automated 80% of the theater application review that.

That has boosted new tutor quality and the quality of matches, which we believe will lead to meaningful retention improvements.

Collapsing disparate experiences into a unified cohesive platform that supports discovery across multiple subjects multiple modalities and multiple academic years.

Chuck Cohn: With brand-new code bases, defaulting to AI coding versus just AI-assisted coding, and no preconceived notions of what was possible or how to build software, they were able to build at 10x the pace of what we'd seen before. That experience inspired me to rethink every aspect of how we build products and software. I dove into these root technical issues myself, working closely with a small group to rethink our platform from the ground up in this AI-native era. In effect, it required re-platforming my own skill set and learning to build software natively with AI, and it represented a transition from being a non-technical founder to a technical founder made possible with, and thanks to, extensive AI augmentation. Our platform is now undergoing the same re-platforming and metamorphosis.

For example, our new learner experience not only integrates practice up directly into the core experience, but it also makes it easier to discover and enroll in live classes as well as finding use diagnostics and other self study tools.

Speaker #1: This reinvention isn't abstract , it's already delivering tangible progress . For instance , our 2.0 version of our flagship live learning platform , video Tutoring product , launched with a rollout from September to October , achieving a reduction of approximately 50% in audio , video error rates and nearly 40% cost savings per session .

We are seeing early indicators that this drives higher engagement historically when users adopt multi subject our multi modality learning retention improves meaningfully.

Since launch we have seen more than 50% growth in the consumption of self study tools and content with emerging positive trends on repeat user engagement.

Speaker #1: Along with very positive tutor feedback and very positive student feedback on usability and quality . We're also rolling out brand new , completely rethought , new student and tutor experiences with October launches entirely new and unified experiences that bring together all of our products into a cohesive interface .

With the new multi format multi subject integrated experience. We believe we can extend the retention improvements that we're currently seeing in the first month for new customers, which are up meaningfully year over year into later stages of the customer lifecycle.

Chuck Cohn: What I realized is that to truly harness AI's potential, enhancing every aspect of live human tutoring, we needed to shed legacy constraints entirely. I've personally led a small group that worked day and night to rebuild key aspects of our core infrastructure from scratch using AI-assisted software development, and preserving essential business logic and data while migrating to modern, decoupled systems. As we proved out this new way of working and building, we enlisted our entire product and engineering org, and have made significant progress. We are now targeting having nearly 100% of our traffic on new code bases written by AI by the end of November. What's really exciting is that it's already unlocking customer-facing innovation at a pace we've never seen before.

In the fourth quarter, our focus will extend beyond the first month activation and Onboarding and will focus extensively on new product and new subject discovery for customers.

Speaker #1: Products like our new AI Practice Hub featured in our last shareholder letter , are now fully integrated into both the student experience and our new live learning platform .

Just one small example of improvement that's easy now that was hard in the past we look forward to launching our first version of gamification, which we believe could take user delight to a whole new level.

Speaker #1: This enables content and AI tools to enhance the entire customer journey and fully leverages the personalization and enhancements that AI now makes possible .

Our lives plus AI approach remains central to how we are enhancing the overall experience.

Speaker #1: Other AI driven wins include better site conversion on our new homepage , as well as significant drop in the tutor replacement rate via new AI vetting of tutors with interactive conversational AI interviews that have automated 80% of the tutor application review that has boosted new tutor quality and the quality of matches , which we believe will lead to meaningful retention improvements .

That's where human tutors augmented by AI created an offering and drive outcomes that neither could achieve alone.

This is underscored by our recent Carnegie Mellon study that showed human tutoring augmented by AI drove a much higher level of student outcomes than AI alone or humans alone.

Chuck Cohn: By the end of the year, we anticipate our back-end legacy systems will be fully decoupled, allowing us to integrate AI much more deeply across the platform and launch new interactive, context-aware experiences with a fraction of the effort. This reinvention isn't abstract. It's already delivering tangible progress. For instance, our 2.0 version of our flagship Live Learning Platform video tutoring product launched with a rollout from September to October, achieving a reduction of approximately 50% in audio-video error rates and nearly 40% cost savings per session, along with very positive tutor feedback and very positive student feedback on usability and quality. We're also rolling out brand-new, completely rethought new student and tutor experiences with October launches of entirely new and unified experiences that bring together all of our products into a cohesive interface.

Speaker #1: We're collapsing disparate experiences into a unified, cohesive platform that supports discovery across multiple subjects, multiple modalities, and multiple academic years.

That reality is a key reason why the idea of AI enhanced human tutoring was elevated to the highest levels of education policy and it's been exciting to see the education effort kickoff in September and a white house event I was fortunate to attend.

Speaker #1: For example , our new learner experience not only integrates Practice Hub directly into the core experience , but it also makes it easier to discover and enroll in live classes as well as find and use diagnostics and other self-study tools .

Our multi year partnership with Carnegie Mellon metals applied learning Sciences program has been transformative yielding cutting edge research and AI innovation that is now poised to redefine online tutoring.

Speaker #1: We've seen early indicators that this drives higher engagement . Historically , when users adopt multi-subject or multimodality learning , retention improves meaningfully . Since launch , we've seen more than 50% growth in the consumption of self-study tools and content with emerging positive trends on repeat user engagement .

By applying advanced discourse analysis large language models and other AI techniques to session transcripts and video feeds we've been covered key insights into effective tutoring dynamics that demonstrate the clear advantages of one on one interactions over traditional methods. It's also allowed for us to identify actionable strategies to enhance session.

Speaker #1: With the new multi-format Multi-subject integrated experience , we believe we can extend the retention improvements that we're currently seeing in the first month for new customers , which are up meaningfully year over year into later stages of the customer lifecycle .

Quality and mitigate issues like inconsistent human performance.

We're now operationalized these findings to optimize experiences before during and after tutoring sessions.

Speaker #1: In the fourth quarter , our focus will extend beyond the first month activation and onboarding and will focus extensively on new product and new subject discovery for customers .

Chuck Cohn: Products like our new AI Practice Hub, featured in our last shareholder letter, are now fully integrated into both the student experience and our new Live Learning Platform. This enables content and AI tools to enhance the entire customer journey, and fully leverages the personalization and enhancements that AI now makes possible. Other AI-driven wins include better site conversion on our new homepage, as well as a significant drop in the tutor replacement rate via new AI vetting of tutors with interactive conversational AI interviews that have automated 80% of the tutor application review. That has boosted new tutor quality and the quality of matches, which we believe will lead to meaningful retention improvements. We're collapsing disparate experiences into a unified, cohesive platform that supports discovery across multiple subjects, multiple modalities, and multiple academic years.

We're delivering tailored insights as students and tutors post session impairing the insights of the surface with automated actions like agenda practice problems and more that enhance the overall experience for users on the platform. We anticipate these enhancements will drive substantial gains in retention over the coming months and years.

Speaker #1: As one small example of an improvement . That's easy . Now , that was hard in the past . We look forward to launching our first version of gamification , which we believe could take user delight to a whole new level .

To execute this vision and improve our overall execution, we've strengthened our operational leadership in August we appointed a new chief operating officer with proven experience scaling operations in marketplaces, and concurrently hired 13 director and senior director level operational leaders across key functions in the company.

Speaker #1: Our lifesci approach remains central to how we are enhancing the overall experience . That's where human tutors , augmented by AI , create an offering and drive outcomes that neither could achieve alone .

Speaker #1: This was underscored by a recent Carnegie Mellon study that showed human tutoring augmented by AI , drove a much higher level of student outcomes than AI alone , or humans alone .

This is a centralized control up level of our talent across all operational leadership roles at the top several layers of the company and its accelerated process improvements from software driven efficiencies to better demand forecasting.

Speaker #1: That reality is a key reason why the idea of AI enhanced human tutoring was elevated to the highest levels of education policy , and it's been exciting to see the AI education effort kick off in September , at a white House event .

As one such example, AI and sales is playing a key role here with real time heads up displays agent, prompting call, scoring having lifted conversion by more than 10%.

Chuck Cohn: For example, our new learner experience not only integrates Practice Hub directly into the core experience, but it also makes it easier to discover and enroll in live classes, as well as find and use diagnostics and other self-study tools. We've seen early indicators that this drives higher engagement. Historically, when users adopt multi-subject or multi-modality learning, retention improves meaningfully. Since launch, we've seen more than 50% growth in the consumption of self-study tools and content, with emerging positive trends on repeat user engagement. With the new multi-format, multi-subject integrated experience, we believe we can extend the retention improvements that we're currently seeing in the first month for new customers, which are up meaningfully year-over-year, into later stages of the customer lifecycle. In Q4, our focus will extend beyond the first month activation and onboarding, and we'll focus extensively on new product and new subject discovery for customers.

Speaker #1: I was fortunate to attend . Our multi-year partnership with Carnegie Mellon's Metals Applied Learning Sciences program has been transformative , yielding cutting edge research and AI innovation that is now poised to redefine online tutoring by advanced discourse analysis .

These improvements have the potential to decrease overall sales and customer acquisition costs in the near future.

On the institutional side, our efforts to align our products with established intervention frameworks that schools rely upon like MTS <unk> and RTI is resonating.

Speaker #1: Large language models and other AI techniques to session transcripts and video feeds . We've uncovered key insights into effective tutoring dynamics that demonstrate the clear advantages of one on one interactions over traditional methods .

Our new end to end varsity tutors for schools experience launches towards the end of the quarter and will better align to hospitals operate make it easier for school leaders to prescribe interventions and act upon data and ultimately be more sellable product for district wide sales.

Speaker #1: It's also allowed for us to identify actionable strategies to enhance session quality and mitigate issues like inconsistent human performance . We're now operationalizing these findings to optimize experiences before , during , and after tutoring sessions we're delivering tailored insights to students and tutors , post session and pairing the insights .

In the third quarter, we continued our path to profitability delivering 960 basis points improvement in non-GAAP adjusted EBITDA margin year over year, driven by improved operating efficiency and cost reductions across every P&L line item.

AI enabled productivity improvements coupled with new software driven processes are substantially improving our operations and are allowing us to do more with less for example, our head count was down by approximately 27% year over year as compared to the third quarter of last year.

Speaker #1: We surfaced with automated actions like Agentic practice problems , and more that enhance the overall experience for users on the platform . We anticipate these enhancements will drive substantial gains and retention over the coming months and years .

Chuck Cohn: As one small example of an improvement that's easy now that was hard in the past, we look forward to launching our first version of gamification, which we believe could take user delight to a whole new level. Our live plus AI approach remains central to how we are enhancing the overall experience. That's where human tutors augmented by AI create an offering and drive outcomes that neither could achieve alone. This was underscored by a recent Carnegie Mellon study that showed human tutoring augmented by AI drove a much higher level of student outcomes than AI alone or humans alone. That reality is a key reason why the idea of AI-enhanced human tutoring was elevated to the highest levels of education policy, and it's been exciting to see the AI education effort kick off in September at a White House event I was fortunate to attend.

Speaker #1: To execute this vision and improve our overall execution , we've strengthened our operational leadership . In August , we appointed a new chief Operating Officer with proven experience scaling operations and marketplaces and concurrently hired 13 director and Senior director level operational leaders across key functions in the company .

Recent advancements in our application of AI that are made possible by our new and more flexible platform provide us the opportunity to move faster and drive further levels of productivity and operating leverage while improving the customer experience as we continue to scale our business.

Thank you for your continued support we look forward to showing you in the quarters ahead, we'll be able to do with a new modern tech stack and evolved approach to product development and liberated from tech debt with that.

Speaker #1: This is centralized control , up our talent across all operational leadership roles at the top , several layers of the company and accelerated process improvements from software driven efficiencies to better demand forecasting .

I'll turn the call over to Jason to discuss the financials in more detail Jason.

Thanks, Chuck and good afternoon, everyone third.

Speaker #1: As one such example , AI and sales is playing a key role here , with real time heads up displays , agent prompting and call scoring .

Third quarter revenue was in line with expectations.

<unk> revenue of $37 million within our guidance range of 37% to $40 million, which.

Chuck Cohn: Our multi-year partnership with Carnegie Mellon's Meadows Applied Learning Sciences program has been transformative, yielding cutting-edge research and AI innovation that is now poised to redefine online tutoring. By applying advanced discourse analysis, large language models, and other AI techniques to session transcripts and video feeds, we've uncovered key insights into effective tutoring dynamics that demonstrate the clear advantages of one-on-one interactions over traditional methods. It has also allowed for us to identify actionable strategies to enhance session quality and mitigate issues like inconsistent human performance. We're now operationalizing these findings to optimize experiences before, during, and after tutoring sessions. We're delivering tailored insights to students and tutors post-session, and pairing the insights we surfaced with automated actions like agentic practice problems and more that enhance the overall experience for users on the platform. We anticipate these enhancements will drive substantial gains in retention over the coming months and years.

Speaker #1: Having lifted conversions by more than 10% . These improvements have the potential to decrease overall sales and customer acquisition costs in the near future .

A decrease of 1% year over year from $37 $5 million during the same period in 2024 and.

Speaker #1: On the institutional side , our efforts to align our products with established frameworks that schools rely upon , like MTS and RTI is resonating our new end to end varsity tutors for schools experience launches towards the end of the quarter and will better align to how schools operate .

And more importantly, a 1000 basis point improvement in growth rates sequentially on a year over year basis versus the second quarter.

US on a path to return to growth in the near term.

Revenue decreased slightly when compared to the prior year period due to lower institutional revenue, partially offset by higher consumer revenue.

Speaker #1: Make it easier for school leaders to prescribe interventions and act upon data and ultimately be a more sellable product for district wide sales .

Within consumer revenue learning membership revenue increased 5% year over year.

Speaker #1: In the third quarter , we continued our path to profitability , delivering 960 basis points improvement in non-GAAP adjusted EBITDA margin year over year , driven by improved operating efficiency and cost reductions across every line item .

This was partially offset by a specific state funded consumer revenue program of $900000 in Q3 of 2024 that did not recur in 2025.

The current year period was positively impacted by higher ARPA and our consumer business as a result of the mix shift to higher frequency learning memberships and price increases enacted during the first quarter of 2025.

Speaker #1: AI enabled productivity improvements coupled with new software driven processes are substantially improving our operations and are allowing us to do more with less .

These changes are coupled with higher retention and newer cohorts due primarily to improvements in the user experience and new export incentives.

Speaker #1: For example , our headcount was down by approximately 27% year over year as compared to the third quarter of last year . Recent advancements in our application of AI that are made possible by a new and more flexible platform provide us the opportunity to move faster and drive further levels of productivity and operating leverage .

Chuck Cohn: To execute this vision and improve our overall execution, we've strengthened our operational leadership. In August, we appointed a new Chief Operating Officer with proven experience scaling operations and marketplaces, and concurrently hired 13 director and senior director-level operational leaders across key functions in the company. This has centralized control, upleveled our talent across all operational leadership roles at the top several layers of the company, and it's accelerated process improvements from software-driven efficiencies to better demand forecasting. As one such example, AI and sales is playing a key role here, with real-time heads-up displays, agent prompting, and call scoring having lifted conversion by more than 10%. These improvements have the potential to decrease overall sales and customer acquisition costs in the near future. On the institutional side, our efforts to align our products with established intervention frameworks that schools rely upon, like MTSS and RTI, are resonating.

Revenue recognized in the third quarter from learning memberships was $33 million and represented 89% of total company revenue.

As of September 30th ARP, almost $374, which represented a 24% increase year over year and there were $34 3000 active members.

Speaker #1: While improving the customer experience . As we continue to scale our business . Thank you for your continued support . We look forward to showing you in the quarters ahead what we'll be able to do with a new modern tech stack and evolved approach to product development and liberated from tech debt .

Our active member count as of September 30 was lower when compared to the prior year and our expectations for this back to school season.

This was primarily due to operational challenges that we are actively addressing in part through the appointment of a new CLO to drive enhanced operational execution and systematic process improvements.

Speaker #1: With that , I'll turn the call over to Jason to discuss the financials in more detail . Jason . Thanks .

Speaker #2: Chuck , and good afternoon , everyone . Third quarter revenue was in line with expectations , delivering revenue of $37 million within our guidance range of 37 to $40 million , which represented a decrease of 1% year over year from $37.5 million during the same period in 2020 .

We are also rolling out new students and Tudor platform user experiences to all users in the fourth quarter that we believe will reaccelerate growth.

Our institutional business delivered revenue of $3 7 million and represented 10% of total company revenues during the third quarter.

Speaker #2: For , and more importantly , a 100 basis point improvement in growth rates sequentially on a year over year basis versus the second quarter , putting us on a path to return to growth in the near term , revenue decreased slightly when compared to the prior year period due to lower institutional revenue , partially offset by higher consumer revenue .

Varsity tutors for schools executed 44 contracts, yielding quarterly bookings of $6 8 million.

Chuck Cohn: Our new end-to-end Varsity Tutors for Schools experience launches towards the end of the quarter and will better align to how schools operate, making it easier for school leaders to prescribe interventions and act upon data, and ultimately be a more sellable product for district-wide sales. In Q3, we continued our path to profitability, delivering 960 basis points improvement in non-GAAP adjusted EBITDA margin year-over-year, driven by improved operating efficiency and cost reductions across every P&L line item. AI-enabled productivity improvements, coupled with new software-driven processes, are substantially improving our operations and are allowing us to do more with less. For example, our headcount was down by approximately 27% year-over-year as compared to Q3 of last year.

Which represented a decrease of 20% year over year.

In our institutional business revenues and bookings continue to be impacted by federal and state funding delays and the related impact to high dosage tutoring contracting and program start dates.

Speaker #2: Within consumer revenue . Learning membership revenue increased 5% year over year . This was partially offset by a specific state funded consumer revenue program of $900,000 in Q3 2024 that did not recur in 2025 .

We believe the combination of our lives plus AI capabilities and our hydro it's tutoring offerings are unique in todays K 12 market and what are new and firstly tutors for schools experienced launches towards the end of the quarter on a new co days, we will be able to offset any funding uncertainty to return to growth.

Speaker #2: The current year period was positively impacted by higher in our consumer business . As a result of the mix shift to higher frequency learning , memberships and price increases enacted during the first quarter of 2025 .

The second consecutive quarter gross margin improved sequentially quarter over quarter as margins increased approximately 140 basis points when compared to the second quarter of 2025.

Speaker #2: These changes are coupled with higher retention in newer cohorts , due primarily to improvements in the user experience and new expert incentives . Revenue recognized in the third quarter from learning memberships was $33 million and represented 89% of total company revenue as of September 30th was $374 , which represented a 24% increase year over year , and there were 34.3 thousand active members .

This gross margin expansion was primarily a result of price increases for new consumer customers enacted during the first quarter of 2025.

Chuck Cohn: Recent advancements in our application of AI that are made possible by a new and more flexible platform provide us the opportunity to move faster and drive further levels of productivity and operating leverage while improving the customer experience as we continue to scale our business. Thank you for your continued support. We look forward to showing you in the quarters ahead what we'll be able to do with a new, modern tech stack, an evolved approach to product development, and liberated from tech debt. With that, I'll turn the call over to Jason to discuss the financials in more detail. Jason? Thanks, Chuck, and good afternoon, everyone. Q3 revenue was in line with expectations, delivering revenue of $37 million, within our guidance range of $37 to $40 million, which represented a decrease of 1% year-over-year from $37.5 million during the same period in 2024.

As mentioned on our prior two earnings calls the year over year decreases in gross margin were primarily due to investments in our partnerships with experts through pay and incentives.

Following the adoption of these incentives we continue to see faster time to the first session.

Speaker #2: Our active member count as of September 30th was lower when compared to the prior year , and our expectations for this back to school season .

Sessions in the first 30 days.

Lower Tudor replacement rates and higher retention all of which should continue to strengthen our business over the long term.

Speaker #2: This was primarily due to operational challenges that were actively addressing , in part through the new COO to drive enhanced operational execution and systematic process improvements .

We expect sequential quarterly gross margin improvement to continue into the fourth quarter of 2025.

The mix of our consumer revenues continue to shift into higher frequency and higher price learning memberships.

Speaker #2: We are also rolling out new student and tutor platform user experiences appointment of a That we believe will re-accelerate growth our institutional business delivered revenue of $3.7 million and represented 10% of total company revenue during the third quarter .

And as we are able to better optimize tutoring incentives now made possible due to improvements in the new tutor experience platform.

Sales and marketing expenses for the quarter on a GAAP basis, or $16 6 million a decrease of $3 7 million from $20 3 million in the same period last year.

Chuck Cohn: More importantly, a 1,000 basis point improvement in growth rates sequentially on a year-over-year basis versus the second quarter put us on a path to return to growth in the near term. Revenue decreased slightly when compared to the prior year period due to lower institutional revenue, partially offset by higher consumer revenue. Within consumer revenue, Learning Memberships revenue increased 5% year-over-year. This was partially offset by a specific state-funded consumer revenue program of $900,000 in Q3 2024 that did not recur in 2025. The current year period was positively impacted by higher ARPM in our consumer business as a result of the mix shift to higher-frequency Learning Memberships and price increases enacted during Q1 2025. These changes are coupled with higher retention in newer cohorts due primarily to improvements in the user experience and new expert incentives.

Speaker #2: Varsity tutors for schools executed 44 contracts , yielding quarterly bookings of $6.8 million , which represented a decrease of 20% year over year in our institutional business , revenues and bookings continue to be impacted by federal and state funding delays and the related impact to high dosage tutoring , contracting and program start dates .

These decreases in sales and marketing expenses were driven by consumer marketing efficiency gains.

With the moderation of our investment in institutional business, given near term funding uncertainties.

General and administrative expenses for the quarter on a GAAP basis were $25 $8 million.

Speaker #2: We believe the combination of our live plus AI capabilities and our high dosage tutoring offerings are unique in today's K-12 market , and when our new end to end varsity tutors for schools experience launches toward the end of the quarter on a new code base , we will be able to offset any funding uncertainty and return to growth for the second consecutive quarter , gross margin improved sequentially quarter over quarter as margins increased approximately 140 basis points when compared to the second quarter of 2025 .

A decrease of $6 million from $31 8 million in the same period last year.

Included in G&A cost product in development cost of $10 $3 million.

AI enabled productivity improvements, coupled with new software driven processes and systems implementations head count reductions and other cost reduction efforts have enabled us to generate operating efficiencies and removed significant cost from the business.

Recent advances in our application of AI across the entire tech stack provide us with the opportunity to move faster and drive further levels of productivity and operating leverage.

Speaker #2: This gross margin expansion was primarily a result of price increases for new consumer customers enacted during the first quarter of 2025 . As mentioned on our prior two earnings calls .

Chuck Cohn: Revenue recognized in Q3 from Learning Memberships was $33 million and represented 89% of total company revenue. As of 30 September, ARPM was $374, which represented a 24% increase year-over-year, and there were 34,300 active members. Our active member count as of 30 September was lower when compared to the prior year and our expectations for this back-to-school season. This was primarily due to operational challenges that we're actively addressing, in part through the appointment of a new COO to drive enhanced operational execution and systematic process improvements. We are also rolling out new student and tutor platform user experiences to all users in Q4, that we believe will re-accelerate growth. Our institutional business delivered revenue of $3.7 million and represented 10% of total company revenue during Q3.

While improving both the customer experience and operational consistency as we scale our business.

Speaker #2: The year over year decreases in gross margin were primarily due to investments in our partnerships with experts through pay and incentives . Following the adoption of these incentives , we continue to see faster time to the first session .

In the third quarter, we delivered a 960 basis point improvement in non-GAAP adjusted EBITDA margin year over year.

Driven by improved operating efficiency and cost reductions across every P&L line item.

Speaker #2: More sessions in the first 30 days , lower tutor replacement rates and higher retention , all of which should continue to strengthen our business over the long term .

non-GAAP adjusted EBITDA loss of $10 2 million for the three months ended September 30th beat our guidance of negative $11 million to negative $30 million.

Speaker #2: We expect sequential quarterly gross margin improvement to continue into the fourth quarter of 2025 . As the mix of our consumer revenues continue to shift into higher frequency and higher priced learning memberships .

And compared to a non-GAAP adjusted EBITDA loss of $14 million in the prior year period.

Our third quarter performance reinforces our confidence in the near term path to profitability.

Speaker #2: And as we are able to better optimize tutoring incentives now made possible due to improvements in the new tutor experience platform , sales and marketing expenses for the quarter .

AI enabled productivity improvements, coupled with new software driven processes and systems are substantially improving our operations, allowing us to reduce head count which was down by approximately 27% year over year at the end of the third quarter.

Speaker #2: On a GAAP basis , were $16.6 million , a decrease of $3.7 million from $20.3 million in the same period last year . These decreases in sales and marketing expenses were driven by consumer marketing efficiency gains , coupled with the moderation of our investment in institutional business given near-term funding uncertainties .

Chuck Cohn: Varsity Tutors for Schools executed 44 contracts, yielding quarterly bookings of $6.8 million, which represented a decrease of 20% year-over-year. In our institutional business, revenues and bookings continue to be impacted by federal and state funding delays and the related impact to high-dosage tutoring contracting and program start dates. We believe the combination of our live plus AI capabilities and our high-dosage tutoring offerings are unique in today's K-12 market. When our new end-to-end Varsity Tutors for Schools experience launches toward the end of the quarter on a new code base, we will be able to offset any funding uncertainty and return to growth. For the second consecutive quarter, gross margin improved sequentially quarter over quarter as margins increased approximately 140 basis points when compared to Q2 2025.

We believe these results coupled with continued improvements enacted in the fourth quarter keep us on the path to profitability on a non-GAAP adjusted EBITDA basis in the near term.

Moving to liquidity and capital resources.

As of September 30th the company's principal sources of liquidity were cash and cash equivalents of $32 $7 million.

Speaker #2: General and administrative expenses for the quarter on a GAAP basis were $25.8 million , a decrease of $6 million from $31.8 million in the same period last year .

Today, we are announcing that on November three we entered into a loan agreement that provides for a term loan in an aggregate principal amount of up to $50 million.

Speaker #2: Included in G&A costs were product and development costs of $10.3 million . AI enabled productivity improvements coupled with new software driven processes and systems implementations , headcount reductions and other cost reduction efforts have enabled us to generate operating efficiencies and remove significant costs from the business .

Which enhances our financial flexibility as we work to become profitable on a non-GAAP adjusted EBITDA basis in the near term, while avoiding equity dilution.

On November 3rd we borrowed $20 million under the term loan the.

The proceeds will be used for working capital and other general corporate purposes.

Chuck Cohn: This gross margin expansion was primarily a result of price increases for new consumer customers enacted during Q1 2025. As mentioned on our prior two earnings calls, the year-over-year decreases in gross margin were primarily due to investments in our partnerships with experts through pay and incentives. Following adoption of these incentives, we continue to see faster time to the first session, more sessions in the first 30 days, lower tutor replacement rates, and higher retention, all of which should continue to strengthen our business over the long term. We expect sequential quarterly gross margin improvement to continue into Q4 2025 as the mix of our consumer revenues continue to shift into higher-frequency, higher-price learning memberships, and as we are able to better optimize tutoring incentives, now made possible due to improvements in the new tutor experience platform.

Speaker #2: Recent advances in our application of AI across the entire tech stack provide us with the opportunity to move faster and drive further levels of productivity and operating leverage , while improving both the customer experience and operational consistency .

With our cash on hand, and the funding available under the term loan. We believe we have ample liquidity to fund the business to pursue growth initiatives.

Turning to our business outlook.

Today, we are introducing fourth quarter guidance and updating full year guidance.

Speaker #2: As we scale our business in the third quarter , we delivered a 960 basis point improvement in non-GAAP adjusted EBITDA margin year over year , driven by improved operating efficiency and cost reductions across every P and L line item .

Fourth quarter revenue guidance reflects higher sequential quarterly revenues in both our consumer and institutional businesses when K 12 schools and universities are in session.

For the fourth quarter and full year, we expect consumer revenue will be impacted by the decline in the number of active members.

Speaker #2: non-GAAP adjusted EBITDA loss of $10.2 million for the three months ended September 30th beat our guidance of $11 million to -$13 million , and compared to a non-GAAP adjusted EBITDA loss of $14 million in the prior year period , our third quarter performance reinforces our confidence in the near-term path to profitability .

This will be partially offset by year over year improvements in ARPA them due to the mix shift to higher frequency lurgi memberships, coupled with price increases and retention due to improvements to the user experience investments in tutor paying incentives.

In our institutional business revenues are impacted by federal and state funding delays and the related impact to high dosage tutoring contracting and program start dates.

Speaker #2: AI enabled productivity improvements , coupled with new software driven processes and systems . Are substantially improving our operations and allowing us to reduce headcount , which was down by approximately 27% year over year .

Chuck Cohn: Sales and marketing expenses for the quarter on a GAAP basis were $16.6 million, a decrease of $3.7 million from $20.3 million in the same period last year. These decreases in sales and marketing expenses were driven by consumer marketing efficiency gains, coupled with the moderation of our investment in institutional business given near-term funding uncertainties. General and administrative expenses for the quarter on a GAAP basis were $25.8 million, a decrease of $6 million from $31.8 million in the same period last year. Included in G&A costs were product and development costs of $10.3 million. AI-enabled productivity improvements, coupled with new software-driven processes and systems implementations, headcount reductions, and other cost reduction efforts have enabled us to generate operating efficiencies and remove significant costs from the business.

For the fourth quarter of 2025, we expect revenue in the range of $45 million to $47 million.

For the full year, we expect revenue in the range of $175 million to $177 million.

Speaker #2: At the end of the third quarter . We believe these results , coupled with continued improvements enacted in the fourth quarter , keep us on the path to profitability .

Turning to adjusted EBITDA guidance.

Speaker #2: On a non-GAAP adjusted EBITDA basis , in the near term , moving to liquidity and capital resources as of September 30th , the company's principal sources of liquidity were cash and cash equivalents of $32.7 million .

For the fourth quarter and full year, adjusted EBITDA improvements year over year reflect consumer and institutional marketing efficiency improvements coupled with the benefits from AI enabled productivity and operating leverage improvements and diligent G&A cost control.

Speaker #2: Today , we are announcing that on November 3rd , we entered into a loan agreement that provides for a term loan in an aggregate principal amount of up to $50 million , which enhances our financial flexibility as we work to become profitable on a non-GAAP adjusted EBITDA basis .

Offsetting these improvements our investments and expert pay rates and incentives, which are leading to higher engagement and retention.

For the fourth quarter of 2025, we expect non-GAAP adjusted EBITDA loss in the range of $2 million to breakeven.

Speaker #2: In the near term , while avoiding equity dilution . On November 3rd , we borrowed $20 million under the term loan . The proceeds will be used for working capital and other general corporate purposes .

For the full year, we expect a non-GAAP adjusted EBITDA loss in the range of $19 million to $21 million.

We expect to end the year with $45 to $48 million in cash inclusive of the $20 million funded under the new term loan, which we believe provides us with ample liquidity.

Chuck Cohn: Recent advances in our application of AI across the entire tech stack provide us with the opportunity to move faster and drive further levels of productivity and operating leverage, while improving both the customer experience and operational consistency as we scale our business. In Q3, we delivered a 960 basis point improvement in non-GAAP adjusted EBITDA margin year-over-year, driven by improved operating efficiency and cost reductions across every P&L line item. Non-GAAP adjusted EBITDA loss of $10.2 million for the three months ended 30 September 2023 beat our guidance of negative $11 million to negative $13 million, and compared to a non-GAAP adjusted EBITDA loss of $14 million in the prior year period. Our Q3 performance reinforces our confidence in the near-term path to profitability.

Speaker #2: With our cash on hand in the funding available under the term loan , we believe we have ample liquidity to fund the business and pursue growth initiatives .

In closing thank you again for your time and for your continued interest in our company with that I'll turn it over to the operator for Q&A operator.

Speaker #2: Turning to our business outlook today , we are introducing fourth quarter guidance and updating full year guidance . Fourth quarter revenue guidance reflects higher sequential quarterly revenues in both our consumer and institutional businesses .

Thank you at this time, we will now begin today's Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad.

Speaker #2: When K-12 schools and universities are in session for the fourth quarter and full year , we expect consumer revenue will be impacted by the decline in the number of active members .

At this time I would like to pass the call over to our first question there Ross Sandler Barclays Ross you may begin.

Speaker #2: This will be partially offset by year over year improvements in RPM due to the mix shift to higher frequency learning memberships , coupled with price increases and retention due to improvements to the user experience and investments in Tudor pay and incentives in our institutional business , revenues are impacted by federal and state funding delays and the related impact to high dosage tutoring , contracting , and program start dates .

Great. Thank you Hey, guys.

Okay.

The new management structure with the COO and 13 new team leads.

How is that going to impact.

Chuck Cohn: AI-enabled productivity improvements, coupled with new software-driven processes and systems, are substantially improving our operations and allowing us to reduce headcount, which was down by approximately 27% year-over-year at the end of Q3. We believe these results, coupled with continued improvements enacted in Q4, keep us on the path to profitability on a non-GAAP adjusted EBITDA basis in the near term. Moving to liquidity and capital resources, as of 30 September 2023, the company's principal sources of liquidity were cash and cash equivalents of $32.7 million. Today, we are announcing that on 3 November 2023, we entered into a loan agreement that provides for a term loan in an aggregate principal amount of up to $50 million, which enhances our financial flexibility as we work to become profitable on a non-GAAP adjusted EBITDA basis in the near term while avoiding equity dilution.

Kind of speed of execution.

The company and how are you guys dividing the responsibilities and then the second question is.

Speaker #2: For the fourth quarter of 2025 , we expect revenue in the range of 45 to $47 million for the full year , we expect revenue in the range of 175 to $177 million , turning to adjusted EBITDA guidance for the fourth quarter and full year adjusted EBITDA improvements year over year reflect consumer and institutional marketing efficiency improvements , coupled with the benefits from AI enabled productivity and operating leverage improvements and diligent G&A cost control .

With the new Tech stack, Youre, obviously, you're going to see faster product velocity, how do you expect that to impact the kpis of the business.

Do we expect to see kind of a faster remember growth or better retention.

Next year any color on how youre thinking about.

Benefits from the Tech stock. Thank you.

Thanks Ross.

Yeah. So we're very excited about John joining us as chief operating officer, and probably a decade at Amazon.

Speaker #2: Offsetting these improvements , our investments in expert pay rates and incentives , which are leading to higher engagement and retention for the fourth quarter of 2025 , we expect non-GAAP adjusted EBITDA loss in the range of $2 million to break even for the full year , we expect a non-GAAP adjusted EBITDA loss in the range of 19 to $21 million .

And.

Deep experience scaling complicated marketplace businesses, and implementing product and technology in such a way as to drive significant operational improvements.

Chuck Cohn: On 3 November 2024, we borrowed $20 million under the term loan. The proceeds will be used for working capital and other general corporate purposes. With our cash on hand and the funding available under the term loan, we believe we have ample liquidity to fund the business and pursue growth initiatives. Turning to our business outlook, today we are introducing Q4 guidance and updating full-year guidance. Q4 revenue guidance reflects higher sequential quarterly revenues in both our consumer and institutional businesses when K-12 schools and universities are in session. For Q4 and full year, we expect consumer revenue will be impacted by the decline in the number of active members. This will be partially offset by year-over-year improvements in ARPM due to the mix shift to higher-frequency Learning Memberships, coupled with price increases and retention due to improvements to the user experience and investments in tutor pay and incentives.

We're going to be kind of collapsing layers of structure.

Speaker #2: We expect to end the year with $45 to $48 million in cash, inclusive of the $20 million funded under the new term loan, which we believe provides us with ample liquidity.

Product engineering ops or into <unk>.

We've generally I think centralizing control, having more simplified operating structure that allows for us to make sure that the in her section.

Speaker #2: In closing , thank you again for your time and for your continued interest in our company . With that , I'll turn it over to the operator for Q&A .

Speaker #2: Operator .

Our investments in process spirit.

When we pull through to operations.

Speaker #3: Thank you . At this time , we'll now begin today's Q&A session . If you would like to ask a question , please press star followed by one on your telephone keypad .

Much more closely linked and I think that's something that we're excited about but.

Importantly, we have made tremendous progress over the course of the.

Speaker #3: At this time , I'd like to pass the call over to our first questionnaire . Ross Sandler with Barclays . Ross , you may begin .

Quarterly tremendous progress and so.

Over the course of the call. It 12 years significant technology that built up that eventually just slowed the rate at which we can test and launch new experiences.

Speaker #4: Great . Thank you . Hi , guys . Chuck , the new management structure with the COO and a 13 new team leads .

Chuck Cohn: In our institutional business, revenues are impacted by federal and state funding delays and the related impact to high-dosage tutoring contracting and program start dates. For Q4 2025, we expect revenue in the range of $45 to 47 million. For the full year, we expect revenue in the range of $175 to 177 million. Turning to adjusted EBITDA guidance, for Q4 and full year, adjusted EBITDA improvements year-over-year reflect consumer and institutional marketing efficiency improvements, coupled with the benefits from AI-enabled productivity and operating leverage improvements, and diligent G&A cost control. Offsetting these improvements are investments in expert pay rates and incentives, which are leading to higher engagement and retention. For Q4 2025, we expect non-GAAP adjusted EBITDA loss in the range of $2 million to break even.

And what you can see and what is visualized.

Speaker #4: How is that going to impact the kind of speed of execution for the company ? And how are you guys dividing up the responsibilities ?

On our website you can see for yourself.

The letter is a dramatic increase and product velocity.

Innovation and so we're super Super excited about how much faster and we're going to be able to launch new products that are much more deeply integrated much more unified and ultimately better for the customer and that's something that we are.

Speaker #4: And then second question is with the new tech stack , you're obviously going to see faster product velocity . How do you expect that to impact the KPIs of the business .

I think you will see starting to <unk>.

Speaker #4: Do we expect to see faster member growth or better retention next year ? Any color on how you're thinking about benefits from the tech stack ?

Engagement metrics, we're gonna be able to increase the velocity of testing on the external website after going many years with very little changing on our external public facing website you can see.

Speaker #4: Thank you .

The velocity in which we're offering new homepages judo of galleries of new practice hub type experiences.

Speaker #1: Thanks , Ross . Yeah , so we're very excited about John joining us as our chief operating officer . And he spent a decade at Amazon .

You should expect to see that continue that wasn't possible until quite recently and sort of got to a point I think in the quarter were in the multiple initiatives that sort of stalled out.

Speaker #1: And has deep experience scaling complicated marketplace businesses . And implementing products . And technology in such a way as to drive significant operational improvements and we're going to be kind of collapsing layers of structure , product engineering , ops , all roles into head .

Chuck Cohn: For the full year, we expect a non-GAAP adjusted EBITDA loss in the range of $19 to 21 million. We expect to end the year with $45 to 48 million in cash, inclusive of the $20 million funded under the new term loan, which we believe provides us with ample liquidity. In closing, thank you again for your time and for your continued interest in our company. With that, I'll turn it over to the operator for Q&A. Operator? Thank you. At this time, we'll now begin today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. At this time, I'd like to pass the call over to our first questioner, Ross Sandler with Barclays. Ross, you may begin. Great. Thank you. Hey, guys. Chuck, the new management structure with the COO and 13 new team leads.

Longer than expected rise in school launch, which was a bummer, but it also forced us to really rethink the entire experience and now a few.

A few breakthrough work to the point, where our teams are moving dramatically faster pace than was the case before and I think that will impact both in decent metrics, but also.

Speaker #1: We've generally , I think , centralizing control and having more simplified operating structures that allows for us to make sure that the intersection of our investments in product engineering and how those ultimately pull through to operations are much more closely linked .

Positively impact revenue and also allow us to remove cost last year.

Rob This is Jason the only thing I'd add is with the new inline experience significantly reduces friction enhances discover ability.

Speaker #1: I think that's something that we're excited about . But , you no importantly , like we have made tremendous progress over the course of the quarter , tremendous progress .

We would expect improvement to multi modality for students using multiple learning opportunity.

Speaker #1: And so over the course of call it 12 years , significant technology , debt built up that eventually just slowed the rate at which we could test .

Across the site multi subject and multi student within the same family coupled with higher retention as these features rollout to the entire customer base in the fourth quarter.

Speaker #1: And launch new experiences . And what you can see in what is visualized both on our website that you can see for yourself in the shareholder letter , is a dramatic increase in product velocity and innovation .

Chuck Cohn: How is that going to impact the kind of speed of execution for the company, and how are you guys dividing up the responsibilities? The second question is, with the new tech stack, you're obviously going to see faster product velocity. How do you expect that to impact the KPIs of the business? Do we expect to see kind of faster member growth or better retention next year? Any color on how you're thinking about benefits from the tech stack? Thank you. Thanks, Ross. Yeah, we're very excited about John joining us as our Chief Operating Officer. He spent a decade at Amazon and has deep experience scaling complicated marketplace businesses and implementing product and technology in such a way as to drive significant operational improvements. We're going to be kind of collapsing layers of structure. Product, engineering, ops, all rolls into him.

Thank you.

This question comes from the line of Jason Hilton with Suncor Energy you may begin.

Speaker #1: And so we're super , super excited about how much faster we're going to be able to launch new products that are much more deeply integrated , much more unified , and ultimately better for the customer .

But can I guys Sidney thanks for taking my question.

Speaker #1: And that's something that we're I think you will see starting to engage with metrics to be able to increase the velocity of testing on the external website .

I'm wondering the prepared remarks mentioned that the product delays pushing out the sort of growth inflection by quarter.

We also mentioned that some of these issues caused you to Miss the back to school season, I was hoping you could maybe talk a little bit to the timing dynamic here and so I could better understand sort of what's giving you confidence that there won't be sort of a continued drag from missing that peak period.

Speaker #1: After going many years of very little changing on our external public facing website , you can now see the velocity in which we're launching new home pages and new tutor galleries and new practice hubs .

Speaker #1: Type experiences . And so you should expect to see that continue . That wasn't possible until quite recently . It sort of got to a point , I think , in the corner where there were multiple initiatives that sort of stalled out longer than expected , right ?

Throughout the school year.

Sure. So the first thing that they launched entirely new experiences across almost the entire website at this point. So by the end of the month, we're targeting nearly 100% of traffic will be on brand New code basis, and you will be able to see that for yourself.

Speaker #1: At school launch , which was a bummer . But it also forced us to really rethink the entire experience . And now , thanks to a few breakthroughs , we're to the point where our teams are moving at dramatically faster pace than was the case before .

It will be.

<unk>, what we're calling ruminate design style kind of permeate. The site you can find the theme and that is all on a modern react.

Chuck Cohn: We've generally, I think, been centralizing control, having more simplified operating structures. It allows for us to make sure that the intersection of our investments in product engineering and how those ultimately pull through to operations are much more closely linked. I think that's something that we're excited about. Importantly, we have made tremendous progress over the course of the quarter, tremendous progress. Over the course of, call it, 12 years, significant technology debt built up that eventually just slowed the rate at which we could test and launch new experiences. What you can see and what is visualized both on our website that you can see for yourself, also in the shareholder letter, is a dramatic increase in product velocity and innovation.

Speaker #1: And I think that'll impact both engagement metrics , but also positively impact revenue and also allow us to remove cost faster . Ross , this is Jason .

Codebase, and so that alone frankly has already accelerated.

Our innovation capacity pretty significantly separating it from many of our historical systems separately, though.

Speaker #2: The only thing I'd add is , you know , with the new inline experience significantly reduces friction , enhances discoverability , and we would expect improvements to multimodality .

We're seeing sequential improvement and a bunch of different underlying metrics, including MLR growth. So some of those.

Speaker #2: So students using multiple learning opportunities across the site , Multi-subject and multi student within the same families , coupled with higher retention as these features roll out to the entire customer base in the fourth quarter .

Late two by philosophy, some of those relate to simplifying system and <unk>.

Centralizing, our operating but I think we are.

Positive about all the trends as we sort of get deeper and deeper into the square.

Great. That's really helpful. And then I was hoping maybe you could also just talk a bit about some of the the underlying issues at some of the funding delays if it's purely related to sort of the government shutdown there it seems like but given the timing there's probably some other factors going on there and then maybe also if you could share a little bit more about some of the benefits that you expect to be derived from the new end to end varsity tutors for skills experience. Thanks.

Chuck Cohn: We're super, super excited about how much faster we're going to be able to launch new products that are much more deeply integrated, much more unified, and ultimately better for the customer. That's something that I think you will see starting to engagement metrics. We're going to be able to increase the velocity of testing on the external website after going many years of very little changing on our external public-facing website. You can now see the velocity at which we're launching new homepages, new tutor galleries, and new practice hub type experiences. You should expect to see that continue. That wasn't possible until quite recently. It sort of got to a point, I think, in the quarter where there were multiple initiatives that sort of stalled out longer than expected right at school launch, which was a bummer, but it also.

Speaker #3: Thank you . The next question comes from the line of Jason Tilkin with Concord Energy . You may begin .

Speaker #5: Good night guys , and thanks for taking my question . Wondering , you know , in the prepared remarks mentioned that the product delays pushing out the sort of growth inflection by quarter .

Yes, I would say all of our strategic for schools, it's kind of what youre seeing in the market just delays funding from federal and state level to school districts is impacting the timing of bookings and then that downstream basis impacting the timing of <unk>.

Speaker #5: You also mentioned that some of these issues caused you to miss the back to school season . I was hoping you could maybe talk a little bit to the timing dynamic here .

Speaker #5: And so I could better understand sort of what's giving you confidence that there won't be sort of a continued drag from missing that that peak period as we move throughout the school year .

Programs start launches, but we still remain confident in our product fit long term potential of the market.

Level of spend within Washington tutors for schools in the institutional business. We believe supports durable and profitable growth and then maybe just if you take a step back the breath of our life with AI.

Speaker #1: Sure . So the first thing should be that we've launched entirely new experiences across almost the entire website at this point . So by the end of the month , we're targeting nearly 100% of traffic will be on brand new code bases , and you will be able to see that for yourself .

They are offering high dosage tutoring and all of our AI enabled teacher and administrative tools.

Chuck Cohn: Forced us to really rethink the entire experience. Now, thanks to a few breakthroughs, we're to the point where our teams are moving at a dramatically faster pace than was the case before. I think that'll impact both engagement metrics, but also positively impact revenue and also allow us to remove costs faster. Ross, this is Jason. The only thing I'd add is with the new inline experience, it significantly reduces friction, enhances discoverability, and we would expect improvements to multimodality for students using multiple learning opportunities across the site, multi-subject, and multi-student within the same families, coupled with higher retention as these features roll out to the entire customer base in Q4. Thank you. The next question comes from the line of Jason Pilchen with Canaccord Genuity. You may begin. Good night, guys, and thanks for taking my question.

Pretty much unmatched in the market from our perspective in that district leaders looked to optimize learning outcome again, they all lines with the MTF that framework.

Speaker #1: So it'll be our beautiful what we're calling Luminex design style kind of permeates the site , unifies the theme , and that is all on a modern react code base .

And better support teachers, the strategic shift in school toward embracing AI as a learning tool is happening.

Speaker #1: And so that alone , frankly , has already accelerated our innovation capacity . Pretty significantly , separating it from many of our historical systems .

As an efficiency asset that's underway that school districts develop guidance on AI for high quality learning material tutoring and classroom instruction and then the last thing I'd say is students based on the latest <unk> scores, which released in September are still way behind and so all of those three factors together give us.

Speaker #1: Separately , though , we're just seeing sequential improvements in a bunch of different underlying metrics , including growth . So some of those relate to product velocity .

A pretty significant opportunity to continue to grow that business. The other thing I'd mention is when theres been incredible insights since we first launched it a few years ago and.

Speaker #1: Some of those relate to simplifying systems and centralizing how we're operating . But I think we're feeling positive about all the trends as we sort of get deeper and deeper into the school year .

Certainly more complexity than we imagined and we've worked through a lot of that but there are many many different insights that we wanted to have acted upon and integrated into the product more deeply such as Tony abuse of Resourcing constraints, and what's really exciting about this kind of new unified experience and modernize code base is we can now.

Speaker #5: Great . That's really helpful . And then I was hoping maybe you could just talk a little bit about some of the the underlying issues of some of the funding delays , if it's purely related to sort of the government shutdown or seems like given the timing , there's probably some other factors going on there .

Speaker #5: And then maybe also if you could share a little bit more about some of the benefits that you expect to be derived from the new end to end varsity tutors for school's experience .

Much more deeply integrated.

Everything together in such a way where it really actionable a really useful first of all so the Holy Grail.

Speaker #5: Thanks .

Chuck Cohn: Wondering, the parent marks mentioned that the product delays pushing out the sort of growth inflection by a quarter. You also mentioned that some of these issues caused you to miss the back-to-school season. I was hoping you could maybe talk a little bit to the timing dynamic here, so I could better understand sort of what's giving you confidence that there won't be sort of a continued drag from missing that peak period as we move throughout the school year. Sure. The first thing should be that we've launched entirely new experiences across almost the entire website at this point. By the end of the month, we're targeting nearly 100% of traffic will be on brand new code bases, and you will be able to see that for yourself.

Speaker #2: Yeah . I'd say on . varsity for schools , it's kind of what you're seeing in the market . Just delays funding from federal and state levels to school districts .

And Ed Tech is to have a proactive.

Intervention platform or get the insights, which students are at risk and then can actually act upon those insights and take action and that's what we're going to be able to bring to bear and so we have the different forms of intervention with Hydro's Institute, the ring and human chat tutoring and AIG are in different forms of live classes for academic support enrichment in test.

Speaker #2: Is impacting , you know , the timing of bookings . And then that's downstream basis impacting the timing of programs . Start launches .

Speaker #2: We still remain confident in our product fit long term potential of the market . You know , the level of spend within .

Speaker #1: Our two years .

Speaker #2: For schools and the institutional business , you know , we believe supports durable and profitable growth . And then maybe just if you take a step back , the breadth of our live plus AI offering , high dosage tutoring and all of our AI enabled teacher and administrative tools , you know , is pretty much unmatched in the market from our .

Rapid diagnostics.

It could actually be able to thread them together in a way consistent with schools.

And how they work, which we have done and heightened excuse me, but had not done with all of the ancillary.

Chuck Cohn: It'll be our beautiful, what we're calling Luminex design style that kind of permeates the site, unifies the theme, and that is all on a modern React code base. That alone, frankly, has already accelerated our innovation capacity pretty significantly, separating it from many of our historical systems. Separately, we're just seeing sequential improvements in a bunch of different underlying metrics, including MRR growth. Some of those relate to product velocity, some of those relate to simplifying systems, and centralizing how we're operating. I think we're feeling positive about all of the trends as we sort of get deeper and deeper into the school year. Great. That's really helpful.

Intervention, that's what we're going to be able to unify and that's what will also have to have a much much broader impact in the quarters ahead, and so we've made great progress there and we'll finish off.

Speaker #2: perspective . And as district leaders look to optimize learning outcomes again , they all line with the GM-CSF framework and better support teachers .

Speaker #1: The strategic shift in schools .

Speaker #2: Toward embracing AI as a learning tool is happening . As an efficiency asset . That's underway , and as school districts develop guidance on AI for high quality learning material , tutoring and classroom instruction .

All of that work and ship it in the coming weeks.

Excited about just how much better it is and I think we ever kind of envision.

Thank you very much I appreciate it.

Speaker #2: And then the last thing I'd say is students , you know , based on the latest Naep scores , which were released in September , are still way behind .

Thank you. The next question comes from the line of easily with Congress is Carolyn you may begin.

Speaker #2: And so all of those three factors together give us a pretty significant opportunity to continue to grow that business .

Thank you Chelsea and thanks for taking my question I guess circling back and the new flagship life learning platform. Like you guys mentioned, a couple of kids, yes, 50% less audio video era.

Speaker #1: Yeah , no , the other thing I'd mention is , you know , there's been incredible insights since we first launched this business a few years ago .

Speaker #1: And there was certainly more complexity than we imagined . And we've worked through a lot of that . But there were many , many different insights that we've loved to have acted upon .

Pissant cost saving precession.

Chuck Cohn: I was hoping maybe you could also just talk a little bit about some of the underlying issues and some of the funding delays, if it's purely related to sort of the government shutdown. It seems like, given the timing, there's probably some other factors going on there. Maybe also, if you could share a little bit more about some of the benefits that you expect to be derived from the new end-to-end Varsity Tutors for Schools experience. Thanks. Yeah. I'd say on Varsity Tutors for Schools, it's kind of what you're seeing in the market. Just delays, funding from federal and state levels to school districts is impacting the timing of bookings, and then that, on a downstream basis, impacting the timing of program start launches. We still remain confident in our product fit, long-term potential to market.

Speaker #1: And integrated into the product more deeply . But just couldn't due to resourcing constraints and what's really exciting about this kind of new , unified experience and modernized code base is we can now much more deeply integrate everything together in such a way where it's really actionable and really useful for schools .

Corporate and consumption.

I guess my question Chuck to you and Jason is.

How will this translate into revenue growth in the future and better cost saving we just wanted to see from that standpoint, the ROI on this investment.

We understand that you're going to finish the call dates by the end of this month.

So just wanted to get the timing of the ROI.

Speaker #1: And so the Holy Grail here in edtech is to have a proactive intervention platform where you get the insights of which students are at risk and then can actually act upon those insights and take action .

Sure. So as we move over volume you're going to see and we are seeing the cost of any given staffing with just some marginal cost associated with it progressively drop.

Speaker #1: And that's what we're going to be able to bring to bear . And so we have the different forms of intervention with high dosage tutoring and human chat , tutoring and tutoring and different forms of live classes for academic support and enrichment and test prep and diagnostics .

The bigger immediate win that is already occurring.

Move over as that it's just more reliable and like with any product or service and a more reliable and you can make platform, particularly like in audio video based platform the better it is for ultimately customer retention.

Chuck Cohn: The level of spend within Varsity Tutors for Schools and the institutional business, we believe, supports durable and profitable growth. If you take a step back, the breadth of our Live plus AI offering, High-Dosage Tutoring, and all of our AI-enabled teacher and administrative tools is pretty much unmatched in the market from our perspective. As district leaders look to optimize learning outcomes, they all align with the MTSS framework and better support teachers. The strategic shift in schools toward embracing AI as a learning tool is happening. There's an efficiency asset that's underway, as school districts develop guidance on AI for high-quality learning materials, tutoring, and classroom instruction. The last thing I'd say is students, based on the latest NAEP scores, which were released in September, are still way behind.

Speaker #1: But to actually be able to thread them together in a way consistent with schools and how they work , which we had done in high dosage treatment but had not done with all of these ancillary forms of intervention .

And so that that alone is a big win and then importantly, and this already integrate with hundred subjects worth of content and tools.

Speaker #1: That's what we're going to be able to unify , and that's what will allow for us to have a much , much broader impact in the quarters ahead .

<unk> and hundreds and hundreds of thousands.

Practice problems in diagnostic tests, and flashcards, and Youre able to drive the same way more delightful experience. So if you're Fitzgerald, daughter wants to turn the library platform peak or green or purple you can do that which is exactly what minded that can see got access to it.

Speaker #1: And so we're making great progress there , and we'll finish all that work and ship it in the coming weeks . But we're excited about just how much better it is than I think we ever kind of envisioned .

Speaker #5: Thank you very much . Appreciate it .

And so it's going to be an incredibly integral.

Speaker #3: Thank you . The next question comes from the line of ye Li with concord Fitzgerald . You may begin .

Chuck Cohn: All of those three factors together give us a pretty significant opportunity to continue to grow that business. Yeah. No, the other thing I'd mention is there's been incredible insights since we first launched this business a few years ago. There was certainly more complexity than we imagined, and we've worked through a lot of that, but there were many, many different insights that we've loved to have acted upon and integrated into the product more deeply, but just couldn't due to resourcing constraints. What's really exciting about this kind of new unified experience and modernized code base is we can now much more deeply integrate everything together in such a way where it's really actionable and really useful for schools. The Holy Grail in edtech is to have a proactive.

Interactive experience, we can build new functionality.

<unk> period, when it was just completely like out of the realm of possibility and youre going to find just a much more interactive experience. So relating it back to your question the cost of operating the platform already is going down significantly and then separately our ability to reduce customer service cost will also.

Speaker #6: Thank you . Chelsea , for taking my question . I guess circling back in the new flagship live learning platform , like you guys mentioned , a couple of KPIs 50% less audio , video errors , 40% cost saving per sessions , and 50% growth in consumption .

Speaker #6: So I guess my question to you and Jason is how will this translate into revenue growth in the future and better cost savings ?

Go down because we can fully integrate inline experiences.

The actual platform itself such that nobody needs to call. In addition to the fact that it's so much more reliable and then lastly, I would expect that the biggest one of all is actually on the retention side, because it'll be so much more to life.

Speaker #6: We just want to see from an investment standpoint , the ROI in this investment . You know , we understand you're going to finish the code base by the end of this month .

Speaker #6: So just just want to get the timing of the ROI .

Chuck Cohn: Intervention platform where you get the insights on which students are at risk and then can actually act upon those insights and take action. That's what we're going to be able to bring to bear. We have the different forms of intervention with high-dosage tutoring, human chat tutoring, AI tutoring, and different forms of live classes for academic support, enrichment, test prep, and diagnostics. To actually be able to thread them together in a way consistent with schools and how they work, which we had done in high-dosage tutoring but had not done with all of these ancillary forms of intervention, that's what we're going to be able to unify, and that's what will allow for us to have a much, much broader impact in the quarters ahead.

Got it.

Speaker #1: Sure . So as we move over volume , you're going to see and we are seeing the cost of any given session , which is some marginal cost associated with it progressively drop the bigger immediate win that is already occurring as folks move over is that it's just more reliable .

And then follow up is okay appointment of the CLO, John in California, So our senior executives.

So I just wanted to get a sense of like the first 100 day plan that you have with them I understand that and the consumer side that are approved.

Speaker #1: And like with any product or service , the more reliable you can make . Platform , particularly like an audio video based platform , the better it is for ultimately customer retention .

I would ask is.

Now what is the game plan to I guess increase those metrics.

Speaker #1: And so that alone is a big win . And then importantly , this already integrates with hundreds of subjects worth of content and tools .

So it's all about product velocity and.

Collapsing decision, making and I think what we're broadly already seeing is that we are solving problems that historically were hard to solve that is certainly aided by the fact that we're getting to net new kind of basis.

Speaker #1: Hundreds and hundreds and hundreds of thousands of practice problems . And diagnostic tests and flashcards . And you're able to drive just a way more delightful experience .

Chuck Cohn: We're making great progress there, and we'll finish all that work and ship it in the coming weeks. We're excited about just how much better it is than I think we ever kind of envisioned. Thank you very much. Appreciate it. Thank you. The next question comes from the line of Yee Lee with Cantor Fitzgerald. You may begin. Thank you, Chuck and Jason, for taking my question. I guess circling back in the new flagship Live Learning Platform, you guys mentioned a couple of KPIs: 50% less audio-video errors, 4% cost-saving per session, and 50% growth in consumption. I guess my question, Chuck, to you and Jason is, how will this translate into revenue growth in the future and better cost-saving? We just want to see, from an investor standpoint, the ROI in this investment.

We are making that leap.

Speaker #1: So if your six year old daughter wants to turn the live learning platform pink or green or purple , you can do that .

And in doing so we're able to you then.

Drive a whole host of different improvements to the funnel that historically might have otherwise been harder. So we're just put a rapidly improving the predictability of the performance rooting out inefficiency.

Speaker #1: Which is exactly what mine did the second she got access to it . And so it's going to be an incredibly interactive , interactive experience .

Speaker #1: We can build new functionality that , frankly , it was just completely out of the realm of possibility . And you're going to find just a much more interactive experience .

And improving reliability and so there's a whole host of different.

Functional specific ways that we're going about doing that but they ultimately ladder up to a more reliable efficient and then eventually from.

Speaker #1: So relating it back to your question , the cost of operating the platform already is going down significantly . And then separately , our ability to reduce customer service costs will also go down because we can fully integrate inline experiences in the actual platform itself , such that nobody needs to call .

Our sequencing perspective, the full operation and I think we're making good progress across all three fronts.

Yes, the only thing I'd add there.

We delivered.

Okay, Oh, sorry.

Sorry about that in the third quarter.

New team helped us deliver nearly 1000 basis point improvement year over year, and adjusted EBITDA margin by improving the operational efficiency and cost reductions across nearly every single P&L line items.

Speaker #1: In addition to the fact that it's so much more reliable . And then lastly , I would expect that the biggest win of all is actually on the retention side , because it will be so much more delightful .

Chuck Cohn: We understand you're going to finish the code base by the end of this month. Just want to get the timing of the ROI. Sure. As we move over volume, you're going to see, and we are seeing, the cost of any given session, which is some marginal cost associated with it, progressively drop. The bigger immediate win that is already occurring as folks move over is that it's just more reliable. With any product or service, the more reliable you can make a platform, particularly an audio-video based platform, the better it is for ultimately customer retention. That alone is a big win. Importantly, this already integrates with hundreds of subjects' worth of content and tools, hundreds and hundreds and hundreds of thousands of practice problems, diagnostic tests, and flashcards, and you're able to drive just a way more delightful experience.

These cost out initiatives are ahead of targets that are ahead of schedule. We believe all of these recent advances in AI provide us and the team with the opportunity to drive further levels of productivity as we continue to scale.

Speaker #6: Got it . And then follow up is okay . Appointment of the CEO John . And the 13 , 13 or 14 . Senior executives .

The enhanced operational execution that this team is bringing to the table all the systematic process improvements those provides the confidence in the near term path profitability, which we think is key.

Speaker #6: So I just want to get a sense of like the first 100 day plan that you have for him . I understand that in the consumer side , you're driving better .

Speaker #6: Rpu , but however the active members have gone down , what is the game plan to I guess , increase those metrics ?

Yes.

Actually my follow up question getting to you the financial side.

Obviously, you guys have the term loan kicking that ask Joe 20 already but it is high you in nature.

Speaker #1: So it's all about product velocity and collapsing decision making . And I think what we're broadly already seeing is that we are solving problems that historically were hard to solve .

Bob.

Just wanted to get your take as I say, you drove almost 1000 points.

Improvements in EBITDA.

Looking at your Guy in 2026, yet right because we haven't even finished this year right.

Speaker #1: That is certainly aided by the fact that we're getting to net new code bases . But are in fact making that leap . And in doing so , we're able to then drive a whole host of different improvements to the funnel that historically might have otherwise been harder .

Chuck Cohn: If your six-year-old daughter wants to turn the Live Learning Platform pink or green or purple, you can do that, which is exactly what mine did the second she got access to it. It's going to be an incredibly interactive experience. We can build new functionality that, frankly, was just completely out of the realm of possibility. You're going to find just a much more interactive experience. Relating it back to your question, the cost of operating the platform already is going down significantly. Separately, our ability to reduce customer service costs will also go down because we can fully integrate inline experiences in the actual platform itself such that nobody needs to call, in addition to the fact that it's so much more reliable.

How confident are you with it.

The new liquidity.

Place that you know that we're going to be.

Free cash flow EBITDA breakeven go forward like what when would that be.

Speaker #1: So we're just progressively improving the predictability of the performance , rooting out inefficiency , and improving reliability . And so there's a whole host of different functional , specific ways that we are going about doing that .

On the ecosystem for sure. So that's it for me.

Good question look the term loan.

With that in cash on the balance sheet, we are well capitalized we remain confident in ability to deliver profitable growth in 2026.

Speaker #1: But they ultimately ladder up to a more reliable , efficient , and then eventually from a sequencing perspective , delightful operation . And I think we're making good progress across all three fronts .

Ample liquidity to operate against our plan with the debt we had the opportunity to work. The prior partner, we had a great relationship with and then when I think about like the opportunity to cost out.

Speaker #1: Yeah .

Speaker #2: The only thing I'd add there .

Speaker #1: The third quarter , we delivered .

It's very substantial I mean 1000 basis points improvement in Q3, that's going to carry into Q4 last year in Q4.

Speaker #2: Okay , I was just going to add to that in the third quarter , the new team helped us deliver a nearly 1000 basis point improvement year over year , and adjusted EBITDA margin by improving the operational efficiency and cost reductions across nearly every single line item .

$6 million. This year, we've got a negative two to zero with every opportunity to become profitable all of that will continue to benefit 2026.

Chuck Cohn: Lastly, I would expect that the biggest win of all is actually on the retention side because it'll be so much more delightful. Got it. The follow-up is, okay, appointment of the COO, John, and the 13 or 14 senior executives. I just want to get a sense of the first 100-day plan that you have for him. I understand that in the consumer side, you're driving better ARPU. However, the active members have gone down. What is the game plan to, I guess, increase those metrics? Sure. It's all about product velocity and collapsing decision-making. I think what we're broadly already seeing is that we are solving problems that historically were hard to solve. That is certainly aided by the fact that we're getting to net new code bases, but we are, in fact, making that leap.

Speaker #2: You know , these costs had initiatives are ahead of targets . They're ahead of schedule . We believe all these recent advances in AI provide us and the team with the opportunity to drive further levels of productivity as we continue to scale and the enhanced operational execution that this team is bringing to the table , all the systematic process improvements , those provide us the confidence in the near-term path profitability , which we think is key .

And.

Provides us the opportunity to drive substantial leverage in the business.

And we're seeing that thank you Kevin.

Yes.

Those are I completely independent banks. So we thought it was a good idea to have access to that smaller community in general.

We don't anticipate actually.

Utilize the data and the objective remains to be profitable, but we believe it's been.

Speaker #6: And that's exactly my follow up question , Jason , to you on the financial side , is obviously , you guys have the term loan , $50 million for 20 already , but it is high yield in nature .

Pushed out slightly due to product delays that were very very quickly find that make up ground on and we think ultimately will lead to a significantly better product better platform better business.

Speaker #6: Just want to get your take . I understand you , you drove almost 1000 points of improvement in EBITDA . You know I'm not looking to guide in 2026 yet .

Okay.

Thank you. The next question comes from the line of Greg Gibbons with Northland Securities.

Speaker #6: Right . Because we haven't even finished this year . Right . Is how confident is are you with the you know , the new liquidity in place that you know that we're going to reach free cash flow EBITDA break even going forward , like when will that be on a consistent basis ?

Chuck Cohn: In doing so, we're able to then drive a whole host of different improvements to the funnel that historically might have otherwise been harder. We're just progressively improving the kind of predictability of the performance, rooting out inefficiency, and improving reliability. There's a whole host of different functional specific ways that we are going about doing that, but they ultimately ladder up to a more reliable, efficient, and then eventually, from a sequencing perspective, delightful operation. I think we're making good progress across all three fronts. Yeah. The only thing I'd add there is in the third quarter, we delivered okay.

Your line is now open.

Hey, good afternoon, Chuck adjacent and thanks for taking the questions apologies if I missed this but did.

Did you kind of comment on ARPA on the member growth assumptions implied in your Q4 guidance.

We have not from an RPM perspective.

Speaker #2: Sure .

Speaker #6: So that's it for .

Speaker #2: Me . Yeah .

Speaker #1: Good .

In the third quarter, we were at $374, which was up 24% year over year, which is a continuation of the changes we saw.

Speaker #2: Good question . So look the term loan with that in cash on the balance sheet were well capitalized . We remain confident in the ability to deliver profitable growth in 2026 .

Throughout the first half of the year, where customers are switching to higher frequency learning membership and that was coupled with some pricing changes in the first quarter.

Speaker #2: We've got ample liquidity to operate against our plan with the debt we had the opportunity to work with the prior partner . We had a great relationship with .

Speaker #2: And then when I think about the opportunity to cost out , it's very substantial . I mean , 1000 basis points improvement in Q3 that's going to carry into Q4 last year in Q4 .

And then from an active member perspective, we would look to end the year with 32000 members.

Chuck Cohn: I was just going to add that in the third quarter, the new team helped us deliver a nearly 1,000 basis point improvement year over year in adjusted EBITDA margin by improving the operational efficiency and cost reductions across nearly every single P&L line item. These cost-add initiatives are ahead of targets, they're ahead of schedule. We believe all these recent advances in AI provide us and the team with the opportunity to drive further levels of productivity as we continue to scale. The enhanced operational execution that this team is bringing to the table, all the systematic process improvements, those provide us the confidence in the near-term path possibility, which we think is key.

Which is.

Uh huh.

Consistent with like the active member change that we've seen year over year in Q2 and Q3.

Speaker #2: You know , we were negative $6 million this year . We've got a -2 to 0 with every opportunity to become profitable . All of that will continue to , you know , benefit 2026 .

But what I would also mention is we continue to focus on higher value customers that have higher LTV.

Speaker #1: And .

Speaker #2: , you .

Speaker #1: Know .

Speaker #2: Provides us the opportunity to drive substantial leverage in the business, and we're seeing that.

Seeing that in the business today active MLR was up 7% at the end of Q3, New MRI continues to improve as we move throughout the back to school selling season and you got.

Speaker #6: Thank you .

Speaker #2: Jonathan .

Speaker #1: So those are completely independent things . So we thought it's a good idea to have access to liquidity in general . We don't anticipate actually utilizing that .

All the new operators in place driving improvement and so net net.

That's how we're thinking about the fourth quarter, we were able to throttle over 1000 basis points.

Speaker #1: And the objective remains to be profitable . But we believe it's been pushed out slightly due to product delays that were very , very quickly trying to make up ground on .

Chuck Cohn: That's exactly my follow-up question getting to you on the financial side. Obviously, you guys have the term loan, 15 minutes out of JOL 20 already, but it is high yield in nature. Just want to get your take. I understand you drove almost 1,000 points of improvements in EBITDA. I'm not looking to guide in 2026 yet, right, because we haven't even finished this year, right? How confident are you with the new liquidity in place that we're going to reach free cash flow EBITDA break even going forward? When will that be on a consistent basis? Sure. That's it for me. Yeah. Good question. Look, the term loan, with that and cash on the balance sheet, we're well-capitalized. We remain confident in the ability to deliver profitable growth in 2026. We've got ample liquidity to operate against our plan.

EBITDA margin improvement.

AD revenue and flat.

Speaker #1: And we think ultimately will lead to a significantly better product , better platform , better business .

With that improve efficiency and we feel pretty good about about ability to drive significant operating leverage next year. So.

We're picking up by the sequence of the year and the back to school period.

Speaker #3: Thank you. The next question comes from the line of Greg Gibbs with Northland Securities. Your line is now open.

Gotten significantly strengthened as we've gotten a little bit deeper into the school year, thanks to a bunch of those operational improvements.

And we would expect that a lot of the Boston improvements of our shipping now.

Speaker #2: Hey good .

Speaker #7: Afternoon , Chuck and Jason . Thanks for taking the questions . Apologies if I missed this , but did you kind of comment on RPM and member growth assumptions implied in your Q4 guidance ?

<unk> further strengthening and so that is occurring at the same time <unk> also been able to optimize marketing spend and.

Speaker #2: We have not , you know , from an open perspective , you know , in the third quarter , we were at $374 , which was up 24% year over year , which is a continuation of the changes we saw .

Ultimately going to be lower year over year, all of which will drive a lot of operating leverage. So we have felt good about that dynamic between being smarter on it.

Physician side.

Part level is positive MSR growth in Q3.

Speaker #2: You know , throughout the first half of the year where customers are switching to higher frequency learning memberships . And that was coupled with some pricing changes in the first quarter .

Chuck Cohn: With the debt, we had the opportunity to work with a prior partner we had a great relationship with. When I think about the opportunity to cost out, it's very substantial. I mean, 1,000 basis points improvement in Q3 that's going to carry into Q4. Last year in Q4, we were negative $6 million. This year, we've got a negative $2 to 0 with every opportunity to become profitable. All of that will continue to benefit 2026, and provides us the opportunity to drive substantial leverage in the business. We're seeing that. Thank you, Kevin. Yeah, those are completely independent things. We thought it's a good idea to have access to just more liquidity in general. We don't anticipate actually utilizing that.

Thus far.

And by that in this call and so we're kind of feeling good about those trends we recognize.

Speaker #2: And then from an active member perspective , we would look to end the year with 32,000 members , which is . You know , consistent with like the active member change that we've seen year over year in Q2 and Q3 .

We want to drive significant growth in collections, yet profitability and there is work to be done there, but the progress is.

Actual efforts on pulling through unrealized.

Got it very helpful.

Speaker #2: But what I what I would also mention is , you know , we continue to focus on higher value customers that have higher LTV .

And if I could follow up regarding the delays in product launches as you know you mentioned werent able to kind of capitalize on the back to school week as a result of that could you maybe characterize the response to learning member trends you've seen since those launches despite missing that critical period.

Speaker #2: We're seeing that in the business today . Active MRI is up 7% at the end of Q3 . New MRI continues to improve as we move throughout the back to school , selling season .

Speaker #2: And you've got , you know , all the new operators in place driving improvements . And so net net , you know , that's how we're thinking about the fourth quarter .

Sure. So some of those are kind of independent right. So they impact on existing customers and their satisfaction with them. Once you become an active customer that youre getting a better experience on <unk> learning platform and we will continue to do work upfront so that people actually become more and more aware of it prior to joining but I think we.

Chuck Cohn: The objective remains to be profitable, but we believe it's been pushed out slightly due to product delays that we're very, very quickly trying to make up ground on. We think ultimately it will lead to a significantly better product, better platform, better business. Thank you. The next question comes from the line of Greg Gibbs with Northland Securities. Your line is now open. Hey. Good afternoon, Chuck and Jason. Thanks for taking the questions. Apologies if I missed this, but did you kind of comment on ARPM and member growth assumptions implied in your Q4 guidance? We have not. From an ARPM perspective, in the third quarter, we were at $374, which was up 24% year over year, which is a continuation of the changes we saw throughout the first half of the year where customers are switching to higher-frequency Learning Memberships.

Speaker #1: Yeah . We were able to drive almost 1000 basis points of margin improvement . And as revenue in flex with that improved efficiency , we feel pretty good about about the ability to drive significant operating leverage .

You've seen the products launched in there and concurrent with that occurring and keep in mind. We're also improving a whole host of different aspects of the platform one of the big wins in this quarter was AI betting and actually using it as conversational.

Speaker #1: Thanks to your so kind of thinking about like the sequence of the year and the back to school period , you know , it has gotten significantly strengthened as we've gotten a little bit deeper into the school year , thanks to a bunch of those operational improvements .

Interviews with tutors to better bet that at a much much lower level.

In combination that's driving improvements to retention year over year, which was already up when a strengthening and then one of the big benefits of this unified platform will be beyond kind of the first call it month or two where we've long seen this year improvements year over year and retention our ability to.

Speaker #1: And we would expect that a lot of the product improvement that we're shipping now contribute to further strengthening . And so that is occurring at the same time that we've also been able to optimize marketing spend and , you know , it's ultimately going to be lower year over year , which will drive a lot of operating budget .

Speaker #1: So we kind of feel good about that dynamic between being smarter on the customer acquisition side , the what was positive MRR growth in Q3 and , you thus far as of this call .

Effectuate <unk>.

More significant retention trends that oftentimes required much deeper relationships and the leveraging of more different modalities. So Wi Fi is in diagnostics and AI to learn a whole host of other things are going to actually drive discovery in a thoughtful way that is cohesive and easy and good for the customer.

Chuck Cohn: That was coupled with some pricing changes in the first quarter. From an active member perspective, we would look to end the year with 32,000 members, which is consistent with the active member change that we've seen year over year in Q2 and Q3. What I would also mention is we continue to focus on higher-value customers that have higher LTV. We're seeing that in the business today. Active MRR was up 7% at the end of Q3. New MRR continues to improve as we move throughout the back-to-school selling season. You've got all the new operators in place driving improvements. Net net, that's how we're thinking about the fourth quarter. Yeah, we were able to drive almost 1,000 basis points of EBITDA margin improvement.

Speaker #1: And so we're kind of feeling good about those trends . We recognize , you know , we want to drive significant growth , inflection and profitability in there's work to be done there .

That becomes so much easier and thats something that we would expect to actually happen from.

Speaker #1: But the progress is is actual efforts are pulling through in real life .

From now and on a sequential basis as we both roll out these experiences.

Speaker #7: Got it . Very helpful . If I could follow up regarding the delays and product launches . You you mentioned weren't able to kind of capitalize on the back to school week as a result of that .

More customers in that separately as we continue to enhance that.

Speaker #7: Could you maybe characterize the response to learning member trends ? You've seen since those launches , despite missing that critical period ?

Got it I appreciate the color thanks, guys.

Thanks, Greg.

Thank you Eric.

No questions registered so as a reminder, it is star one to ask a question.

Speaker #1: Sure . So some of those are kind of independent , right . So they impact like existing customers that are satisfaction then you get a better experience on our new learning platform and we'll continue to do work , pull it up funnel so that people actually become more and more aware of it .

We will pause briefly to see if any more questions become registered.

Chuck Cohn: As revenue inflects with that improved efficiency, we feel pretty good about the ability to drive significant operating leverage next year. Kind of thinking about the sequence of the year and the back-to-school period, it has gotten significantly strengthened as we've gotten a little bit deeper into the school year, thanks to a bunch of those operational improvements. We would expect that a lot of the product improvements that we're shipping now contribute to further strengthening. That is occurring at the same time that we've also been able to optimize marketing spend, and it's ultimately going to be lower year over year, which will drive a lot of operating leverage.

Speaker #1: Prior to joining . But I think we've seen the products that have launched and they're concurrent with that occurring . And keep in mind , we're also improving a whole host of different aspects of the platform .

At this time there are no further questions registered I'll now like to conclude today's call. Thank you all for participating at this time you may now disconnect your lines.

Speaker #1: One of the big wins this quarter was AI vetting and actually using it to have conversational interviews with tutors to better vet them at a much , much lower level .

Speaker #1: But kind of in combination . That's driving improvements . To retention year over year , which was already up strengthening . And then one of the big benefits of this unified platform will be beyond kind of the first call it month or two , where we've long seen this year improvements year over year retention , our ability to effectuate much more significant retention trends that oftentimes require much deeper relationships , and the leveraging of more different modalities .

Chuck Cohn: We kind of feel good about that dynamic between being smarter on the customer acquisition side, what was positive MRR growth in Q3, and thus far, at least kind of as of this call. We're kind of feeling good about those trends. We recognize we want to drive significant growth in flexion and profitability, and there's work to be done there. The progress is actual efforts we're pulling through in real life. Got it. Very helpful. If I could follow up regarding the delays in product launches, you mentioned you weren't able to kind of capitalize on the back-to-school week as a result of that. Could you maybe characterize the response to learning member trends you've seen since those launches despite missing that critical period? Sure. Some of those are kind of independent, right? They impact existing customers and their satisfaction with them.

Speaker #1: So we've classes and diagnostics and AI tutor and a whole host of other things . Our ability to actually drive discovery in a thoughtful way that is cohesive and easy and good for the customer .

Speaker #1: That becomes so much easier . And that's something that we would expect to actually happen from now and on . On a sequential basis , as we both roll out these experiences to more customers and then separately , as we continue to enhance them .

Speaker #7: Got it . Appreciate the color . Thanks , guys .

Speaker #2: Thanks , Greg .

Speaker #3: Thank . There are currently no questions registered . So as a reminder , it is star one to ask a question . We'll pause for briefly to see if any more questions become registered .

Chuck Cohn: Once you become an active customer, you get a better experience on our new Live Learning Platform. We'll continue to do work to pull it up funnel so that people actually become more and more aware of it prior to joining. I think we've seen the products that have launched, and they're concurrent with that occurring. Keep in mind, we're also improving a whole host of different aspects of the platform. One of the big wins this quarter was AI vetting and actually using it to have conversational interviews with tutors to better vet them at a much, much lower level. Kind of in combination, that's driving improvements to retention year over year, which was already up and is strengthening.

Speaker #3: At this time , there are no further questions registered . I would now like to conclude today's call . Thank you all for participating at this time .

Chuck Cohn: One of the big benefits of this unified platform will be beyond kind of the first, call it, month or two, where we've long seen this year improvements year over year in retention, our ability to effectuate much more significant retention trends that oftentimes require much deeper relationships and the leveraging of more different modalities, so live classes, diagnostics, AI tutor, and a whole host of other things. Our ability to actually drive discovery in a thoughtful way that is cohesive, easy, and good for the customer becomes so much easier. That's something that we would expect to actually happen, call it, from now and on on a sequential basis as we both roll out these experiences to more customers and then separately as we continue to enhance them. Got it. Appreciate the call. Thanks, guys. Thanks, Greg. Thank you.

Chuck Cohn: There are currently no questions registered. As a reminder, it is star one to ask a question. We'll pause briefly to see if any more questions become registered. At this time, there are no further questions registered. I will now have to conclude today's call. Thank you all for participating. At this time, you may now disconnect your line.