Last May we unveiled our plan to evolve our products and revenue model toward long-term recurring ‘always-on’ relationships with our customers. We did this in response to evolving customer needs that created an opportunity to develop longer and more all-encompassing relationships spanning academic calendar years, subjects, and learning formats. We believed this was true for both our Consumer and Institutional school district customers and began to converge our product and revenue strategies in response to the changes we were witnessing.

We created new subscription and recurring revenue products, including Learning Memberships for Consumers and On Demand and Teacher Assigned products for Institutional customers, that were built specifically to address the ongoing support we believed both types of customers desired. We shared that this new focus would require trading off revenue recognition in the short-term because our Package model has more front-loaded revenue recognition than the Learning Membership model where subscription revenue is recognized linearly over time. We estimated that by month six for a given Learning Membership customer, the cumulative revenue would catch up and surpass that of a given Package customer, a phenomenon we called the ‘J Curve’.

We expected that by the start of the second quarter in 2023 the cumulative build of recurring revenue from Learning Membership customers would cause us to return to growth in our Consumer business, as well as for the total company, but now with a product suite and revenue model we believed would position us for higher levels of growth, profitability, and predictability in the years to come.

I am pleased to share that we made substantial progress in the fourth quarter and our shift to an ‘always on’ business model is ahead of plan. Learning Membership adoption continues to exceed our expectations, demonstrating higher conversion, engagement and customer retention than our former Package model, which in turn has led to meaningfully higher customer lifetime values and operating leverage. Separately, we are seeing strong interest in our new recurring revenue Institutional products with Varsity Tutors for Schools. This momentum within both our Consumer and Institutional businesses is validating the shift we made in our go-to-market strategies last year. This progress, combined with operating efficiencies gained from the business model evolution, provides us increased confidence in achieving adjusted EBITDA profitability by the end of 2023 as previously communicated.

Fourth Quarter in Review

In the fourth quarter, we delivered on our commitment to enhance Learning Memberships by providing unlimited access to three new products - Codeverse, Tutor Chat, and Essay Review. With the addition of these formats, we were able to grow the percentage of customers engaging in a non-tutoring format in their first month to over 30% in December. Multi-format engagement has historically been highly correlated with higher retention, higher lifetime value, and customer satisfaction.

We delivered revenue of $41.8 million for the fourth quarter, above our guidance range of $39-41 million. These results reflect stronger than anticipated active Learning Memberships, which totaled over 20K as of December 31, 2022, and continued strength in lifetime value performance from Learning Memberships.

Learning Membership revenue continues to grow at a rapid pace. Revenue recognized in the fourth quarter from Learning Memberships grew to $20.8 million, a $15.0 million increase from the third quarter, representing 50% of total recognized revenue, up from just 2% of total recognized revenue in the second quarter and 18% in the third quarter. In fact, Learning Memberships revenue has already reached an annualized run-rate of more than $87 million as of December 31, 2022, an increase from $50 million as of September 30, 2022. Annualized run-rate is defined as the number of Learning Members at the end of the period multiplied by average revenue per Learning Membership per month multiplied by twelve months. This recurring revenue customer base provides us with increased forecasting visibility into future periods.

The rapid transition to Learning Memberships is also allowing us to deliver gross margin expansion and a more scalable and efficient operating model. During the fourth quarter gross margins of 70.5% were approximately 230 bps higher than gross margin of 68.2% during the comparable period in 2021. As we shift toward a higher proportion of Learning Membership customers (and revenue) we expect continued gross margin expansion in 2023.

Learning Memberships also enabled further marketing yield optimization during the fourth quarter with Marketing expenses as a percentage of revenue improving by approximately 370 bps year-over-year, driving further efficiencies in our Consumer business. Higher engagement and retention among Learning Membership customers, and an Average Revenue per Learning Membership (ARPM) of approximately $350 per month during the fourth quarter, combined to drive continued lifetime value expansion and an accelerated marketing payback period.

As visualized in the chart below, recent monthly cohorts’ cumulative Learning Membership average revenue per customer continues to expand and separate from the historical amount an average Consumer customer would spend over time under our historical package model by the third or fourth month after starting (with further separation and elevation occurring beyond that point). These results clearly demonstrate the superior lifetime value of our Learning Membership model and the higher average value of the Consumer customers we are adding to the platform.

Varsity Tutors for Schools

During the fourth quarter, Varsity Tutors for Schools delivered on a major milestone in our product evolution with the go-live of both On Demand and Teacher Assigned. These new products are oriented toward providing district-wide solutions that can be deployed across entire student and teacher populations, significantly widening the impact we can have with our school district partners. Additionally, these new offerings align to a school district’s in-class curriculum, are embedded into a school’s workflow, and importantly are directed by teachers, who we believe are ideally suited to assess their own students’ learning needs.

We executed over 70 contracts, including 15 On Demand contracts and our first Teacher Assigned partnership, an important milestone as we transition toward more expansive partnerships with larger school districts, including the bundling of recurring revenue products. Collectively, these contracts resulted in a record $11.3 million of bookings during the fourth quarter.

We believe these results clearly demonstrate that our new ‘always on’ product offerings are resonating with school district partners, especially when bundled together or combined with our existing high-dosage tutoring products. These strong results and continued momentum to start the year give us with increased confidence that Varsity Tutors for Schools is well positioned to provide solutions that administrators, teachers and students are seeking to support their evolving needs.

Teacher Assigned Tutoring allows educators to schedule face-to-face, personalized support from tutors. (https://www.youtube.com/watch?v=FCjI2SCVfWY)

2023 Focus

Scaling ‘Always On’ Recurring Revenue Products

Given the success of Learning Memberships across our Academic audiences, we plan to transition our Test Prep and Professional audiences to Learning Memberships by the end of 2023. With the completion of this transition we will have shifted 100% of our Consumer business to ‘always on’ recurring revenue products.

With a strong foundation in place, we believe we can continue to drive higher levels of Learning Membership growth across all of our Consumer audiences through further product enhancements and testing. Specifically, we plan to iterate on the pricing and the structure of Learning Memberships to broaden their appeal at the top of the funnel and drive further growth in conversion and customer acquisition. We also plan to create more flexibility for customers to manage their membership and tutoring frequency, including new self-service capabilities, which we believe will increase retention and lifetime value by better aligning Learning Memberships to evolving customer needs. Additionally, we plan to make it easier for members to discover multiple new learning paths, including new learning formats and programming coverage to drive further engagement among members with the aim of providing more value and enhancing customer satisfaction.

Within our Institutional business, we expect our new Teacher Assigned and On Demand products will represent a growing proportion of Institutional bookings during the year as we remain focused on district-wide bundled solutions and partnerships with larger school districts.

Driving Profitability

As Learning Membership mix continues to increase as a percentage of total revenue we believe we will be able to drive continued gross margin expansion and further simplify our operating model in the year ahead.

We also plan to make further investments in automation, self-service capabilities, as well as weaving additional AI capabilities throughout our platform to enhance both the Learner and Expert experience.

Recently we have seen improved adjusted EBITDA performance each month as we progress further through the J Curve. Given our recent momentum, we have

increased visibility into and confidence in achieving adjusted EBITDA profitability by the end of 2023 as previously communicated.

AI for HI^® – Artificial Intelligence for Human Interaction

We’ve long believed that AI for HI - Artificial Intelligence for Human Interaction - has the ability to transform how people learn. AI has been central to our ability to improve quality, enhance personalization, and decrease the cost of our offerings. Today, AI powers our ability to identify the highest quality Experts, assess Learners’ foundational knowledge, and helps ensure the right Expert-Learner match, among many other use cases.

The latest AI advancements are allowing us to rapidly develop transformative experiences involving the real-time generation of content with near zero costs, improving our ability to deliver live human interaction and personalized learning at scale, and providing new superpowers to Experts and Learners on the platform.

We recently announced the launch of two new AI-driven products and plan to leverage the latest advances in machine learning and AI, including ChatGPT and similar technologies, to drive further product enhancements, personalization, and cost efficiency in the year ahead. The first two products include an AI-Generated Lesson Plan Creator embedded in the company’s Live Learning Platform that is available for use during live tutoring sessions and, separately, AI-Generated Chat Tutoring, a product that pairs conversational AI-driven chat with the ability to access a live Expert on-demand. These new products represent the Company’s ongoing orientation toward taking a software and AI-driven approach to solve customer and business problems and build a scalable platform.

We plan to roll out additional products and features for Consumer customers that expand on these new capabilities as a part of Learning Memberships. We believe that these additional products and tools will allow us to further personalize the experience for each Learner and Expert yielding higher levels of engagement, retention, and customer lifetime value driving both revenue predictability and operating leverage.

AI-generated lesson plan creator creates personalized lesson plans focused on the unique needs of each learner. (https://vimeo.com/802724744)

In Closing

I am proud of our team’s execution against the vision we put forth just nine months ago when we announced our stated goal to transition our business towards ‘always on’ recurring revenue streams with the introduction of Learning Memberships and new Institutional products including Teacher Assigned and On Demand.

These efforts have laid a strong foundation for growth, helped establish a business model that can produce longer-term and higher value relationships with our customers, serve as a more scalable platform for future innovation, and position us to achieve adjusted EBITDA profitability by the end of 2023. In the coming year we look forward to continuing to push the pace of innovation and enhancing our ability to meet the needs of both Consumer and Institutional Learners in any subject, anywhere, and at any time.

We appreciate your continued interest in our Company.

CHUCK COHN

Founder, Chairman & CEO

First Quarter and Full Year 2023 Outlook

The accelerated rollout and evolution toward recurring revenue streams, including Learning Memberships, continued in the fourth quarter, reflecting the strong adoption we have seen from consumers during the back-to-school season and fall semester. We continue to see more evidence that validates our belief that the Learning Membership model leads to longer duration and higher lifetime value customer relationships, enhanced gross margins, and a more scalable and efficient operating model.

Consistent with our prior guidance, we continue to expect that we will exit the aggregate J-Curve business model transition, driving year-over-year growth with more attractive unit-level economics, as we start the second quarter in 2023.

We believe the combination of our unique platform, comprehensive product offerings including Learning Memberships, the interest and early contracting successes we are seeing for Varsity Tutors for Schools new offerings, and our ability to deliver high-quality live learning at scale personalized to each Learner positions us for continued growth as the education landscape rapidly evolves.

Revenue Guidance

As is typical for our business, we expect sequential quarterly revenue growth from the fourth to the first quarter. For the full year, we expect growth will be driven by the continued evolution towards recurring revenue streams, the corresponding build in the number of Learning Membership subscribers, and higher Institutional revenues.

Full year revenue guidance reflects our decision to shift 100% of the Consumer business to Learning Memberships by the end of 2023, including the remaining Test Prep and Professional audiences. Revenue guidance also reflects normal summer seasonality, including anticipated lower levels of new customer

acquisition, consumption, and retention during the summer months when K12 schools and universities are out of session.

Adjusted EBITDA Guidance

Our adjusted EBITDA guidance for both the first quarter and full year reflects the continuing benefits from our recurring revenue products which focus on long-term relationships with higher value customers, an improving gross margin profile, and operating efficiencies stemming from our continued shift to recurring revenue business models.

Full year adjusted EBITDA guidance reflects the impact of normal summer seasonality and higher variable costs in the third quarter as we ramp into the back-to-school selling season.

Our strong balance sheet with no debt and $90.7 million of cash provides us with ample liquidity to operate against our plan and pursue growth initiatives.

Financial Discussion

Revenue for the three months ended December 31, 2022 was $41.8 million as we continued to progress through the J-Curve, essentially flat compared to $42.0 million during the same period in 2021. Revenue for the year ended December 31, 2022 was $162.7 million, an increase of 16% from $140.7 million during the same period in 2021. Annual revenue growth was driven by continued strength in our Consumer business, including the evolution towards ‘always on’ Learning Memberships (which lowered revenue recognition in the short-term in service of higher levels of future revenue and growth), as well as the growth we experienced in our Institutional business.

Gross Profit and Gross Margin

Gross profit of $29.5 million for the three months ended December 31, 2022 increased by $0.8 million or 3% compared to the same period in 2021. Gross margin of 70.5% for the three months ended December 31, 2022, was approximately 230 bps higher than gross margin of 68.2% during the comparable period in 2021. The increase in fourth quarter gross profit was primarily driven by gross margin expansion across our Consumer audience, as we evolve towards a greater mix of Learning Memberships, a trend we expect to continue into 2023.

Gross profit for the year ended December 31, 2022 of $112.9 million increased by $19.0 million, or 20%, compared to the same period in 2021. Gross margin of 69.4% for the year ended December 31, 2022 was approximately 260 bps higher than gross margin of 66.8% during the comparable period in 2021. The increase in gross profit for the full year was driven by growth across Consumer audiences, including Learning Memberships, and growth in our Institutional business.

Sales and Marketing

Sales and marketing expenses for the three months ended December 31, 2022 on a GAAP basis were $17.0 million, a decrease of $0.9 million from $17.9 million in the same period in 2021. Excluding non-cash stock compensation and restructuring costs, sales and marketing expenses for the three months ended December 31, 2022 were $15.7 million, or 38% of revenue, compared to $17.2 million, or 41% of revenue in the same period in 2021, an improvement of approximately 330 bps year-over-year.

Sales and marketing expenses for the year ended December 31, 2022 on a GAAP basis were $74.2 million, an increase of $8.8 million from $65.4 million in the same period in 2021. Excluding non-cash stock compensation and restructuring costs, sales and marketing expenses for the year ended December 31, 2022 were $69.8 million, or 43% of revenue, compared to $62.1 million, or 44% of revenue in the same period in 2021.

We continued to focus on optimizing the level of marketing spend in the fourth quarter, yielding efficiencies in our Consumer business. These efficiencies were partially offset by the investments we have made in our Institutional sales and go-to-market organization in support of Varsity Tutors for Schools, which we expect to grow into as revenue continues to grow and we slow the rate of hiring entering 2023, thereby creating operating leverage. We expect to achieve continued efficiencies in future periods as Learning Memberships become a greater percentage of total revenue, leading to a more efficient sales and operating model.

Sales and marketing expenses as a percentage of revenue may fluctuate from quarter to quarter based on Learning Membership sales, the size and volume of institutional contracts, bookings, consumption patterns that drive revenue levels, seasonality, and the timing of our investments in marketing activities.

General and Administrative

General and administrative expenses for the three months ended December 31, 2022 on a GAAP basis were $32.9 million, a decrease of $1.4 million from $34.3 million in the same period in 2021. Excluding non-cash stock compensation expenses, restructuring, and transaction related costs, general and administrative expenses for the three months ended December 31, 2022 were $21.0 million, or 50% of revenue, compared to $18.6 million, or 44% of revenue in the fourth quarter of 2021.

General and administrative expenses for the year ended December 31, 2022 on a GAAP basis were $129.6 million, an increase of $7.6 million from $122.0 million in the same period in 2021. Excluding non-cash stock compensation expenses, restructuring, and transaction related costs, general and administrative expenses for the year ended December 31, 2022 were $85.3 million, or 52% of revenue, compared to $60.8 million, or 43% of revenue in the same period in 2021.

Nerdy became a publicly traded company in the third quarter of 2021, resulting in higher transaction-related general and administrative expenses on a GAAP basis in the comparable periods last year. On a non-GAAP basis, investments in new product development, the build out of Varsity Tutors for Schools, and administrative expenses related to being a public company resulted in higher fourth quarter and year-to-date expenses versus the comparable periods last year.

Our investments in product development have allowed us to launch a suite of new ‘always on’ subscription products including Learning Memberships for consumers, and our Teacher Assigned and On Demand offerings for institutional customers. These subscription offerings simplify both the sales process and the operating model needed to support customers. Combined with our ongoing efforts in automation, self-service capabilities and the application of artificial intelligence and machine learning in our business, we have been able to generate operating efficiencies and remove significant costs from the business. We also moderated the pace of corporate hiring and third party vendor spend starting in the third quarter of 2022. In the fourth quarter of 2022, we announced the completion of workforce reductions of approximately 17% of our total workforce driven by the operating efficiencies enabled by our new ‘always on’ strategy and product offerings.

As Learning Membership mix continues to increase as a percentage of total Active Learners, we believe we will be able to further simplify our operating model throughout the course of 2023 as the cumulative build of Learning Memberships accelerates and we exit the J Curve, returning to growth in our Consumer business in the second quarter.

Net Loss, Non-GAAP Adjusted Net Loss, and Non-GAAP Adjusted EBITDA Loss

Net loss on a GAAP basis was $(15.1) million for the three months ended December 31, 2022, compared to net earnings of $33.1 million in the same period in 2021. Excluding non-cash stock compensation expenses, mark-to-market derivative adjustments, restructuring and transaction related costs, and non-recurring one-time items, adjusted net loss was $(6.8) million for the fourth quarter of 2022 versus $(7.1) million in the fourth quarter of 2021.

For the year ended December 31, 2022, net loss on a GAAP basis was $(63.9) million, compared to a net loss of $(30.7) million in the same period in 2021. Excluding non-cash stock compensation expenses, mark-to-market derivative adjustments, restructuring and transaction

related costs, and non-recurring one-time items, adjusted net loss for the year ended December 31, 2022 was $(41.8) million versus an adjusted net loss of $(32.9) million in the same period one year ago.

Non-GAAP adjusted EBITDA loss was $(5.5) million in the fourth quarter of 2022 compared to $(5.5) million in the fourth quarter of 2021. Non-GAAP adjusted EBITDA loss was $(35.7) million for the year ended December 31, 2022, compared to $(22.4) million in the same period one year ago.

For both non-GAAP adjusted net loss and non-GAAP adjusted EBITDA loss, gross profit improvements were offset by investments in technology and product capabilities, and the buildout of Varsity Tutors for Schools. In addition, we previously expanded and enhanced our finance, accounting, and legal functions in connection with being a public company.

See pages 15 to 16 for reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure.

Liquidity and Capital Resources

As of December 31, 2022, the Company’s principal sources of liquidity were cash and cash equivalents of $90.7 million. Our strong balance sheet provides us with ample liquidity to operate against our plan and achieve expected adjusted EBITDA profitability by the end of 2023 as previously communicated.