Nerdy Inc. (NRDY) Earnings Call Transcript
September 15, 2022
Earnings Call Speaker Segments
Okay. I know everyone's going to find their seats, and we're racing from chat to chat. But I'm excited, our next fireside chat here is with the team from Nerdy. We've got Chuck Cohn, CEO; Jason Pello, CFO. Guys, welcome to the conference.
Thanks for having us, Eric.
Yes. Thank you.
Great to see you in person, too. We're off the Zoom. We're in person. We're a big audience. It’s great.
Feels great.
Okay. Chuck, I always like to start, with someone like you, you're an entrepreneur, you're building this business. For those who don't know it as well, why don't we just take half a step back and you give us your perspective on what you've been building at Nerdy and what your strategic priorities and vision for the company are in the years ahead?
Sure. So Nerdy is an online platform for live online learning that connects experts and learners in more than 3,000 different subjects, brings together a multitude of different learning formats and allows for them to accomplish their goals in a way that is online, live, is focused on delivering high levels of expert value over time, and we think very differentiated. And so our consumer business and consumer-facing brand is Varsity Tutors. And there's 2 different segments to it. So historically, we've been focused on the consumer audience, and that model is focused on historically selling packages and classes to consumers in tutoring and then a variety of different online class formats. One of the big changes we've announced recently, I think we'll get into this a bit later, is related to learning memberships, where we're building always-on solutions that -- it's effectively a subscription offering that has all-access features that enable somebody to engage in a variety of different ways across those 3,000 different subjects, across classes and then do so in a low upfront price commitment. That's one of our big areas of focus right now. Our second is that we have an institutional-focused offering called Varsity Tutors for schools, and that's something that we launched about a year ago. And that allows school districts and administrators to leverage all of our different product formats, all the different ways to learn and engage across entire school districts.
Got it. Okay. Perfect. And taking all of that in the way you position the company in your go-to-market strategies, I think a lot of investors typically hear terms like education and technology, and they lump everything together and a whole bunch of companies that aren't really supposed to be lumped together get lumped together. Would love your perspective on how do you view the competitive landscape. Who are you competing with? What do you think are perceptions that are right or wrong about the broader competitive landscape in which you exist?
Sure. So we've always considered ourselves historically, a consumer Internet platform that was a 2-sided marketplace where we vertically integrated in a differentiated way to provide value to consumers. Where there's an inherent discovery problem, there's inherent quality problem, and we are improving quality, we are decreasing costs, we are making it more convenient. And because it's a platform-based approach to growth, there's all these different things you can learn on the subject, we compete with, call it, 5,000 mom-and-pop tutoring companies, hundreds of test prep companies. You have folks in the offline enrichment space and learning centers and then professional testing companies as well. And you got to think about the market on the consumer side bifurcated into online versus offline or asynchronous versus live. And we're living in that live online format where we've differentiated ourselves by delivering high-quality, live online learning at scale. And that's not really being done across thousands of subjects in a scaled way. And as a result, it's pretty differentiated. But certainly, from the consumer's perspective, they're evaluating it subject by subject, topic by topic. And we're trying to appeal to really all the different need states they might have. So that over time, they engage with different formats on the platform and continue to spend with us, continue to engage with us, continue to learn with us and get value from the platform.
Okay. I want to shift a little bit to probably the dominant debate here at the conference this week, which is the current macro environment. But I think you have an interesting perspective on 2 things we've undergone over the last couple of years. Number one, I've always heard from you, Chuck, about the state of the student, the state of learning, what people went through during COVID. Would love to get your state of how you're seeing as we're coming out of the pandemic, the mixture of what you offer and the education landscape and where students are today. I think that's an interesting macro view that you always have some interesting stuff to share on that. And then broadly, you still come back to the macro environment of consumption and what you're seeing in the broader environment just from a spending standpoint. So I would love it if you could touch upon big macro topics from both those perspectives.
Sure. So one of the things that we saw over the course of the last couple of years was there's been this incredible normalization of online learning. People realize you can go online, you can get a high-quality experience. It can be more convenient, it could be tailored your needs. And that is now possible. You don't have to drive to a strip mall after school or after work to get help in a professional subject or skill or for your kid for them to get help. So that's broadly understood now. The second thing is schools and college admissions are more competitive than ever. And so we're seeing that both at the high school level as well as the college level, there's this increased focus on GPA and accomplishment that then is driving a focus on student outcomes in a way that is actually driving underlying consumer demand trends. And so those 2 things have come together in a big way to drive a lot of growth at the high school and college level. We're also seeing parents at the K-8 level have an increased focus on supporting their students because they looked inside the classroom during COVID and realized that they needed to be more engaged. So there's a higher level of parental involvement there, particularly towards some of the math and science type subjects as well as towards enrichment. And then one of the areas that's newer for us, but seeing a lot of growth, is the professional segment where we're oftentimes bundling together different offerings for professional certification exams in a way that's higher quality, lower cost and then more convenient. And those are the big consumer trends we're seeing. There's a lot of focus on science and math in particular. That's something that continues to be really strong throughout the summer and then into back-to-school, and we think that's a long-term need state that will continue to be the case. And then the thing that we're seeing on the institutional side with Varsity Tutors for schools is that you're seeing these headlines, and I think administrators are feeling it, that students are way behind, something like 2 years behind in many cases. And there's significant funding that's available for those students to fund COVID learning loss remediation. And schools are focused on that. They're also focused on better supporting teachers and solving some of the attrition problems that they're experiencing. So one of the things that we've been focused on is building products that can allow for them to solve both of those acute problems this back-to-school season.
Got it.
The only other thing I'd add is, historically, in the education space, we haven't seen any impact from macroeconomic declines. There was an acute period, that was COVID, where that was the case. And we've worked our way through that, and there's tailwinds behind us now. Now that kids are back in school, learning and outcomes matter. And then during this recent back-to-school period, we're not seeing any discernible impacts on consumer spending. And then on the institutional side, engagement is starting to ramp up to a much greater extent now that kids are back in school safely and educators are realizing the COVID learning loss needs that they're experiencing.
Okay. That covered a lot of ground. Great. Perfect. As you mentioned earlier, Chuck, I do want to shift to the decision to move towards membership. Maybe, Chuck, take a step back, I know you gave us a little bit of color in your broader answer before, but what drove some of the decision process to move towards the membership model? And as you think about the building blocks to progress towards this is the next medium-term state of the company, how should we be thinking about execution, consumer adoption? How should we be thinking about some of the checkpoints along the way?
Sure. So there's -- historically, we had a package model for tutoring, we had a package model for classes. And each time somebody wanted to engage in a form of tutoring or with classes, they would purchase a product. And that was a great business. It grew us into where we are today, had favorable unit level economics. But one of the things that we saw was that by its very nature, it was defined in time line that when you purchased the set amount at the end of that, we then had to take effort to drive you to continue to engage. And we thought there was an opportunity to orient the model into what we call an always-on model where it's recurring in nature. And it sets the expectation right out of the gate for a student that they're going to meet every week on a recurring basis over the course of a long period of time. And one of the things that I think we would all acknowledge is true is that when you meet on a consistent basis to try to learn something, you're more likely to accomplish the goal. You're more likely to learn it. And this model aligns with that. It also removes all the friction or effort that would have been associated with having to purchase another product to get help. So rather than go to 10 different places to cobble together different forms of live or asynchronous learning solutions, you can do all of that in our learning membership model. And then additionally, historically, you would prepay for services. In this model, we're lowering the upfront commitment on day 1 to a couple of hundred dollars versus what historically had been north of $1,200 in the tutoring model, so actually lowering the upfront commitment, but people are committing to much longer periods of time. So call it, 12 months being the typical engagement, the average amount that they're spending per month is more than $300. And so the economics are very favorable and aligning towards that. It's also better for student outcomes because they're going to meet more consistently, which is what we've seen so far, higher engagement, higher retention, higher net promoter scores and then happier students because they're meeting more consistently, getting better results.
Got it. And then following on this, this is probably the #1 question we get about the short to medium term with the company is, obviously, it has impacts, as you flow through some of the KPIs people are used to. What happens to active revenue per user. What happens to active user growth? And also maybe there's going to be less seasonality in the model going forward. So how should we be thinking about all the different impacts of what it will do to your P&L and the transition we're going through right now?
Yes. I can take that one. On the revenue per learner side of it, just as a reminder, the way it works, you could buy a package or a membership anywhere from 3 to 24 months, price ranges from $200 to over $500, depending on the frequency that you're buying. So what you're seeing from a total contract value perspective there with the most common package today being 12 months and the average revenue per member being over $300 per month is that customers are actually committing to over $3,600 over the course of the year, which on an LTV basis, after just 6 months, exceeds what were our historical LTVs over a 2-year period in the package space. So definitely an improvement thereby focusing on those higher-value, higher-revenue learners. And then...
The thing I would add is there was something like 30% of the customers who were engaged in very low revenue engagement, whether it was buying an hour at a time or 2 hours at a time. And something like 30% of the consumer customers accounted for 6% or 7% of the net bookings ballpark. And by shifting the focus towards these long-term engagements, we're actually getting more of those customers, so conversion on tutoring or memberships is up year-over-year. And we're able to then from a cost-out perspective, be more efficient in terms of our engagement because relative to the value of the relationship, a lot of times, the cost investment upfront is the same, whether somebody uses us for an hour or 50 hours or 100 hours or many years. And so we actually think this is going to allow for us to drive a lot of operating efficiency over time.
Absolutely. And then on the active learner metric that you mentioned, because we are combining the classes of academic enrichment into the membership model, we're walking away from those customers that were on a stand-alone basis, again, they were lower LTV, more transactional in nature. And by combining them into the fuller membership offering, we think will drive higher levels of retention over time and increase the value perception that we're providing to our customers. So in the near term, what that means from a KPI perspective is that we've guided to active learners being down in the mid-teens during Q3, Q4. And then as we move beyond next year and lap this, we'll start to accelerate growth again.
Maybe just one follow-up. I think it's fairly clear the positive benefit when you come through this on the membership side. How do you think about addressing people who don't necessarily want to become members and are still potential to be less frequent users on the platform, but you don't want to not have those folks engaging with the brand and all the great content and taking availability of your services? How do you think about striking that balance?
Sure. So this is our first big swing at a completely evolved subscription offering that entitles people to all of the different products available on our platform. We would expect that over time, we'll continue to evolve those offerings and price points and then the actual amount that you have to potentially commit upfront. So we're going to continue to experiment with those. We recognize there's other need states that we can appeal to, but this particular one that we're focused on, we believe, is the super majority of revenue in the category.
The one thing I'd say is there is always going to be a component, so test prep or professional certifications, where there's an acute need to pass an exam. We'll still offer packages in those space because largely, we see customers looking to consume tutoring over a shorter time horizon. But by and large, and we're already seeing it this back-to-school season, the majority of our customers are leaning into the membership model, which gives us more confidence to lean in further.
Great. Okay. Chuck, you referenced it earlier, but I want to come back to the institutional opportunity. Outside of the membership transition, it's probably the second biggest bucket. We get a lot of questions from investors. You've done some big hires in this space. You've talked about the big market opportunity. Maybe just start with where we are right now in terms of the initial reception you're seeing as you look at your product array against the broader landscape for the institutional opportunity. How those things are lining up and what you're most focused on?
So historically, we're focused on consumers, as I mentioned. We always knew there was a big opportunity to help schools and other institutions. And we got to a point a couple of years ago where we felt like we have the diagnostic testing infrastructure in place. We had the class capability. We had live stream. We had online tutoring in both small and large groups in our proprietary platform. And there was an opportunity now from a platform maturity perspective to help school districts at scale. So the product that we first went to market with this past year was called High Dosage tutoring and it's 1-on-1 up to 1-on-5 online group tutoring on a recurring basis for a focused intervention on a subset of students. And it went well. We grew the business to what I think the last 2 quarters was about 10% of GAAP revenue and made a lot of progress there and got good feedback from customers. And one of the things we realized along the way was that there were a couple of different ways that we could potentially take our modularized platform and then build it in a way that solves some acute problems for school districts. And so that led to 2 net new incremental products that we're partnering with schools on this back-to-school. So one of those is On Demand, which is primarily a chat-based solution for schools. It's also a different type of relationship where instead of applying to a small subsegment of students, it actually applies to the entire district. And then separately, we have another product that's called Teacher Assigned. And so Teacher Assigned allows every single teacher in a school district to assign tutoring to any student that needs it whenever they need it. And as simple as that sounds, it has never been done before. And it's something that can both help students before they fall behind. It embeds the solution in the school day, and then it really lowers some of the stress that teachers feel related to some of the students that are falling behind and makes their jobs easier. And so we're seeing superintendents see this as a way they can demonstrate to teachers that they're investing behind them in a way that would cause them to want to continue to work at that school district, which is a big problem that administrators are focused on.
Yes. No, understood on that front. In terms of the go-to-market opportunity with institutional, can you talk a little bit about the investments you have to make in sales force and how should we think about ramping the sales force? Because over the last recent periods, you've talked about going into it with a focus on maybe some larger school districts. That's obviously a very different sales proposition than going to the consumer. Just help us understand what you're building there.
Sure. So with these 2 new additional products this spring, we shifted our focus to district-wide solutions. That involves focusing on a more top-down approach to sponsorship, potentially multiple years in nature and then involving a larger constituency. So it's potentially much larger contracts, but it's also a longer sales cycle. And so that's changed the types of enterprise account executives that we're looking for. It's also changed our approach in terms of how we position this. And as a result, we're shifting that focus to a more experienced team with deeper relationships who better understands how to navigate large school districts. And we're planning to, more or less, maintain that total level of spend into the near term. So we feel like we have the right size team this back-to-school. We wouldn't expect that it would grow, except as it relates to supporting specific school districts that we land where there's investments we need to make that are discrete and after we land them. But we feel good about the total level of investment, and then we'll grow into it from an operating leverage perspective in the quarters and year ahead.
Got it. Okay. Super clear. Maybe bringing Jason to the conversation, you guys have talked about achieving adjusted EBITDA profitability by the end of 2023. Obviously, there's been a pretty big shift from -- in the investor mindset from growth towards profitability. I'm sure you get this question a fair bit. Can you just help people understand what are the key building blocks we should be monitoring as you progress towards that goal? How many of the things are about internal execution versus external growth and components where things -- the inside control, outside control component of that path as well?
Yes. The good news is I think much of it is in our control. I think you need to remind yourself, over the course of the last 18 months, we've significantly invested in the business. So we built out Varsity Tutors for schools. We doubled the size of our product and engineering team to help bring all these new products to market. We had to scale out the back office teams to become a public company. All those investments are made, right? They were in advance. And as Chuck mentioned, we believe we'll be able to scale into the opportunity set as revenue continues to grow against those opportunities. Separately, as I move down the P&L, we started to moderate our marketing spend towards the highest payback period efforts, eliminating some of the more experimental spend. And then from a variable expense side, the memberships will allow us to have less touch points with customers. The level of interaction will go down because you don't have to resell them with the always-on nature of it. And the longer-term commitments and combination with tutors will give us operating efficiency there as well. So over the course of the next 12 months, we've committed that by the end of 2023, we'll be adjusted EBITDA positive. We're actively working internally to pull that forward, and we feel good about where we sit today.
Okay. Great. And within that philosophy of the march towards profitability and layered on top of it against the growth goals Chuck has been talking about, how should we think about broader marketing within that mix? The element of leaning in towards growth, while at the same time, managing towards profitability. How do you strike that right balance?
Well, one of the things, given that the customer mix is changing that we try to do, and given that we have a very clear understanding of our historical economics, of course, relative to LTV to CAC and ROAS and other metrics, is we've tried to maintain effectively CAC, but then mix shift the customer acquisition towards these potentially much higher value customers. So from an operating discipline perspective, we're setting that bar. But it's in effect pulling forward the payback period and economics associated with those investments. And then as Jason mentioned, some of the more speculative or future-leaning brand activities like television, where we've been experimenting we've pulled back on to really shift the focus on the consumer side towards customer acquisition around these membership customers that are engaging and always on learning.
So maybe just a quick follow-up there. When you think about the vast majority of the incremental growth on the platform being about the membership initiatives, we should be really monitoring some of these newer paths to go to market, which are much more aligned with driving a membership-based poles to less frequent users just in terms of marketing channels and where you might get efficacy.
Yes. And it's also about -- regardless of what channel they came in on once they're on the platform. We're speaking up all the access they get access to in addition to just maybe the acute need that brought them in. So the marketing continues down funnel and how we message the value of the product in addition to shifting the focus towards need states that are more recurring in nature.
Okay. I do want to give folks in the room an opportunity if anybody does have any questions, happy to take 1 or 2 from the audience. I've got plenty to still go through with the team, but if someone wants to jump in, I'm happy to make it as interactive as possible. Well, let me keep going, and please raise your hand if you do have any questions. I think, Chuck when you think about the pillars you've laid out, what do you see as the mission-critical investments that you have to make in the platform to get to where you want to go over the long term? Obviously, there's the membership approach, there's the institutional approach, the different avenues in which you're going to capture market opportunity and growth. How should we be thinking about the top investments and the ones that maybe even take up the most of your time and attention in terms of making sure you get them right as a platform?
So, and you alluded to this a little bit, we're taking a platform-oriented approach to growth. There are a variety of different ways that you can engage on the platform. And one of the ways to break down that answer is by product formats. We are both -- we both have product formats, and we're adding additional product formats. And one of the things that we think about when we make these investments is the extent to which those products can allow for us to create things that appeal to either the consumer audience or the institutional audience. And then within each of those, the extent to which we can actually customize them for a particular use case. So a real-world example would be, we did not have chat-based here, and we only had a variety of forms of live video-based tutoring. We recognized that was a need state that schools had. We also made sure to build it in a way that could also be leveraged by the consumer audience. And so over the course of the last couple of months, as we built that, we first are going to market with schools. We're second going to market with consumers, and we're able to double leverage the investment that we make. And we're then taking the product capabilities and then tailoring them for a specific audience segment. And so an example would be on the K-5 versus high school versus college will actually take a class capability, create classes or other asynchronous content and then package it in a way that really appeals to those consumers. And one of the things that we did recently was we acquired a business called Codeverse. They have coding games for kids. It's incredibly engaging, it's fun. And if you think about that for the K-5 audience in particular, there's times where that acute need related to, say, algebra tutoring or reading tutoring might wane, but now there's other reasons to stay on the platform. There's other reasons to engage. And that's an example where that product capability will also be leverageable by institutions.
Okay. You led into what I wanted to talk about next a little bit there. What did you see in Codeverse that that was the right acquisition, the right thing to allocate capital to at this time? And you gave a little bit of an illusion there, how should we be thinking about what it adds to the platform over the medium to long term? And maybe I want to follow up on that. But why this asset at this time? How should we be thinking about your thought process?
Well, the way that we came in to learn about it was we actually did what we call a StarCourse with them, and these are typically celebrity-led courses or partnerships with other platforms or institutions where they'll teach a live stream class. And the engagement levels we saw were just through the roof, better than anything we've ever seen in terms of the sign up rates on Codeverse for varsity tutors customers and then vice versa. And we thought there was an opportunity to just drive higher levels of multiproduct engagement in a way that was very additive. We also really like the team. And then lastly, I do think it's important to note that it was a very small amount of capital that's involved in the transaction, so it's favorable deal terms.
Okay. Following up on that, when you think about your broader M&A strategy, there's always elements of organic versus inorganic growth, and all these businesses, help share your philosophy or you and the team's philosophy on how you think about weighing, measuring, building something yourself versus going out and possibly accelerating path to market or product functionality?
I can start on that one. I think internally, from an organic perspective, we think to have a truly great company, you have to be able to build products yourself and then bring them to market. So we've got the team capable of doing that. When we look at M&A, it's to try to add a capability that we don't have to pull forward the product roadmap. Codeverse was a great example of that, low-cost acquisition that had gamification, coding, one of our fastest-growing subjects and enable us to roll it into the membership offering and drive greater value for our customers. So that's really the mindset we think in today's venture capital-backed environment, very tough to get funding. We would expect that there will be more acquisitions of similar guys where someone has developed a great product, but they just haven't been able to scale it on their own and achieve that exit velocity. And we'll be able to pull them into the product portfolio, both from a product perspective but also from an outlier perspective.
Well, sticking with that theme, we do find ourselves as a unique moment in time, venture capital funding is in a different place now than it was 12, 18 months ago. Growth assets are in a different place now than they were 12, 18 months ago. And yet you guys have the asset value and the cash value and all the things you have on the asset side of your balance sheet. How should we be thinking about investments into the business, the way to accelerate the business by making investments outside the business? Have your capital allocation priorities changed or shifted at all as you've seen the landscape around you shift to some degree and maybe ROIs around how you could allocate capital might change?
I think the benefit to the platform-based approach is we were able to take consumer products and really quickly enter the varsity tutors for school space because we can use products we have developed historically in that new market. And we're seeing a lot of vice versa between the 2 from a product road map perspective. So we think that the ROI that we're getting from each of these new products that we're bringing to market is essentially 2x because it can serve both market states. Going forward, you should expect that we'll continue to invest in the business to achieve profitability by the end of 2023, but take an acquisitive mindset as it relates to being opportunistic where the deals present themselves.
Yes. And maybe the one thing I'd add is we did moderate some of our marketing investments, pull-forward payback varies. We moderated the rate of hiring a bit. And so given that personnel account for the supermajority of our costs, we're just growing into a lot of those costs, which presents a lot of operating leverage. There's a one-time build-out of public company costs. There's a one-time build-out of our varsity tutors for schools segment, in particular. And we're now growing in the higher levels of revenue in the future year that will then drive a bunch of operating leverage. So those 2 things alone are big areas of focus. We obviously have new product format on the consumer side. We have a new product -- 2 new products on the institutional side. And then we're putting effort against just driving more and more operating efficiency, probably a slightly higher level than would have been the case a year ago. And so we're rallying around can we pull forward path to profitability a little bit, but feel really good about doing so by the end of '23 as previously communicated.
Okay. I'll keep going. I do want to ask -- I think it was very clear what you said about how to grow the consumer side of the business, the institutional side of the business. Maybe one other question just about the platform in general. How should investors think about growing content and incenting content to align with you as a platform and how we should think about the broader content landscape that's out there and areas where you either see optimism for reasons for pockets of growth or pockets of content that could change some of the narratives around the platform. It's a big broad topic but would love to get your thoughts on just the content side of the equation and how that might evolve.
Well, we have, call it, several hundred thousand practice problems, diagnostic tests. Many of them are adapted that can be leveraged in the actual sessions or classes and those add a lot of value, and we're continuing to add them where necessary, but have a pretty big repository today. That's one thing that we've historically built. The other is in our StarCourse format where you have celebrity or institution-led offerings like, say, the Field Museum presenting on a certain topic or Bill Nye the Science Guy or a couple of other partners. We're actually now not just live streaming those, it's becoming a cumulative library over time, and you're starting to see those videos available on demand. Additionally, we're actually -- we have about 250 live classes that we're doing every week. We're recording those, and those are leverageable over time. It's a cumulative library. And so that library was something that won't be available today, but it's something that is growing in nature, will eventually become available. And the investments we're making will form a natural content asset. And then lastly, I think this is where M&A comes in and there's some really high-quality content out there. In education, specifically, very often, it isn't monetized. So there's folks who create great content assets could be videos, could be static content of some form. And we think there's an interesting opportunity to then leverage that within the platform in a way that's additive in a very cost-conscious way.
Okay. Super clear. Chuck, I want to turn to you personally not to put you on the spot, but I think it's been interesting to us to see that you've been a purchaser of your stock. You've been putting your own capital to work behind the stock. I think that's always worth flagging for investors. Why don't you talk through a little bit of your own thought process around buying the stock and how you're thinking about it feeding back into running the business?
So I've been doing this 15 years, and we've evolved several times over. First, it was an online platform for in-person tutoring of a high quality. We then evolved to what is one of the largest, if not the largest, online tutoring or live instruction platforms in the United States through the transactional model, we discussed. And then lastly, we entered this new phase of subscription-based offerings on both the consumer and institutional side. And one of the things that we shared in the last earnings call, the last shareholder letter that I wrote is some of the ways that we think this can fundamentally change. We're already seeing it fundamentally change the consumer experience, orienting towards supporting students over many years, leaning into what it will be higher gross margin relationships, leaning into a variety of operating efficiencies. And what we're seeing and what we shared is that there's a lot about it that's just way easier on the consumer side. And then separately, on the institutional side, the scale and opportunity is just absolutely massive. We think we can have a big impact. We're seeing administrators and district officials be incredibly receptive to the products. And frankly, I've never seen our team execute at a higher level and be more unified in their area of focus. And so all those things that we've shared before, gave me a lot of confidence that things -- that there's just a tremendous opportunity and our stock price didn't reflect it. So I think it was about $30 million of purchases in totality, which I think is a great investment. And I'm thrilled to be working with this team.
Great. Okay. Super clear. We've been putting everyone a little bit on the spot at the end, Chuck, and saying, look, we're here, we're having a conversation about the broader industry about your company. When you look out over the next 1 to 3 years, it can be a comment about the company, it could be a comment about the broader industry at large, what do you think investors maybe either don't appreciate or don't understand or a message you want to deliver about where you think the landscape goes, something that's out of the box thoughts you have about growth and industry evolution?
One is that we've heard feedback that -- or questions that suggest that investors are thinking about the learning membership model as effectively a pricing change as opposed to a product change. And it's a product change. You get access to all sorts of stuff that is of great value and perceived value to consumers that you did not previously get access to. The friction removal is substantial. And customers love it. And I think that's one big disconnect. It's not just pricing. It's not the fact that you have to commit less upfront. It's the fact that you can get supported in a multitude of different ways that wasn't the case historically and students have all these different need states. It doesn't matter whether you're a K-5 student or a college student, you have all these different things you need to learn all these different ways you can get supported. And the initial product that we're going to market with, we think, is way more compelling, but there's an opportunity to dramatically improve it through all the things we talked about today in the months and years ahead. And then separately, one of the things that's interesting about the institutional side, particularly because there was $25 billion set aside for COVID learning loss under the American Rescue Plan, and there's additional funding to the extent that your product is aligned with what's going on in the school day, is that there's going to be, in our opinion, this recurring need state that schools have. They're open to leveraging online platforms to a case that wasn't historically. And then as we get into next year, given that only about 11% of those specific COVID learning loss funds have been spent as of 6/30, we expect that there will be a lot of urgency on the institution side to remediate some of the substantial learning loss that has occurred and then do so prior to some of those funding deadlines running out. So that means potentially more long-term contracts, that means more district-wide contracts, and more holistic bundled solutions. That really helps school districts solve an important problem so they are more likely to win, and we feel well positioned there.
Okay. Super clear. Well, guys, thank you so much for being part of the conference this year. Really enjoyed the conversation. Please join me in thanking the team from Nerdy for being a part of the conference.
Thank you.
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