TPG Pace Tech Opportunities Corp.
Q1 2021 Earnings Call Transcript

Published: 10 May 2021

[Operator:]

Good afternoon. And thank you for joining us for Nerdy First quarter 2021 Earnings Call. With me are Chuck Cohn, Founder, Chairman, and Chief Executive Officer of Nerdy and Jason Pelo, Chief Financial Officer. Before I turn the presentation over to Chuck I'll remind everyone that this discussion contains forward-looking statements, including, but not limited to expectations with respect to future performance, including projected financial information, which is not audited or reviewed by auditors and certain anticipated financial impacts of the proposed transaction to combine Nerdy with TPP and paced tech opportunities, the satisfaction of the closing conditions to the proposed transaction and the timing of the completion of the transaction. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, TPG Pace and Nerdy do 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.

[Chuck Cohn:]

Thanks Marta. And thank you all for joining us today to discuss our first quarter results. We've had a strong start to the year and our first quarter exceeded our targets. We are seeing strong results stemming from our investments in growth and innovation. We're encouraged by the anticipated return to a new normal given the positive impact we expect such a return will have on our business. As States reopen and schools returned to in-person instruction. We are seeing demand for our learning solutions accelerate last year in the first half of 2020, the COVID-19 pandemic and resulting school closures and closure of testing centers created a short-term challenge for our business that our team innovated through. We are now seeing those demand headwinds turn into tailwinds and add to the product driven growth we had already been experiencing. Our key operating and financial metrics were ahead of our targets in Q1. I'll highlight just a few, as we noted in our analyst day presentation, two weeks ago, active learners grew 67% year over year. Online sessions grew 186% year over year and sessions per active expert Rose 60% versus a year ago. Improvements across these key operating metrics translated into strong financial performance. Specifically online revenue in the first quarter grew 100% year over year and doubled to reach $34.6 million while total revenue grew at 50%, this was driven by strong Werner and engagement growth. As learners increasingly adopted our multi-format approach to delivering personalized learning. Our gross margin also expanded significantly to 68% versus 63% in the same period. One year ago, driven by the transition to delivering instruction. 100% online, coupled with increased adoption of our paid small group class offering Jason we'll spend more time on our financial results shortly, but before I turn it over to him, I wanted to touch on several topics to help provide some context and allow you to get to know Nerdy better. Let's start with who we are and what we do Nerdy. His mission is to transform how people learn. We believe that innovative technology can make all the difference at Nerdy. We are aiming to seamlessly connect experts and learners in any subject anywhere, anytime, and to make Werning more personalized and accessible. Our flagship brand varsity tutors is one of the leading platforms for one-on-one instruction and tutoring in the United States.

[Jason Pelo:]

Thanks, Jeff, and good afternoon, everyone. Our, my Mets up from the 2020 continued into the first quarter and strengthened we're seeing continued growth from the investments we've made in product marketing and other areas to drive improved operating results. As Chuck discussed, we built a business that's scalable, efficient and growing rapidly. And the scalability of our platform was further demonstrated during the quarter by the improved operating leverage across each of our major cost line items. First on the top line, our Q1 total revenue growth was up 50% year over year with online revenue growth doubling at a hundred percent year over year revenue growth was driven by several factors, including subject expansion in areas like professional and expansion in a new formats beyond one-on-one instruction, such as small group classes, as learners are increasingly adopting our multi-format approach to delivering personalized instruction. We've also been increasing the frequency of star courses taught on the platform, which are delivered for free. These store courses allow us to provide exceptional value to learners, drive engagement among existing learners and increase awareness among new learners. We believe the extent to which we were providing improved access to high quality educational resources in affordable live learning solutions allows us to attract talent mission-driven employees and build our brand. We also expect this will appeal to a large investor segment. Our gross margins during the quarter increased to 68% versus 63% in the first quarter of the last year and increased the more than 440 basis point margin expansion for the quarter was primarily driven by the transition to delivering instruction 100% online, coupled with the increased adoption of our paid small class group, offering looking at our other costs, sales and marketing expenses grew by $4.4 million year over year in Q1 to $14.6 million, but they overall decreased as a percentage of revenue from 44% to 42%.

[Operator:]

[Q - Unidentified analyst:]

[Unidentified participant:]

[Chuck Cohn:]

Thanks, Jason. And thanks again to all of you for joining us today. We're pleased to share our strong Q1 results with you today, and even more excited about what we believe the future holds. If you'd like to learn more about Nerdy, I encourage you to view our analyst day presentation on our investor [e-mail] and view the videos about our products and customers linked to in today's earnings release. We also hope to see you at either the Needham conference the week of May 17th or the JP Morgan conference the week of May 24th. Thanks again. And we look forward to speaking with each of you soon.