Nerdy (NRDY) risk factors, FY2025 10-K

Risks Related to Our Business Model, Operations, and Growth Strategy

1. 01Our offerings continue to evolve, which makes it difficult to predict our future financial and operating results, and we may not achieve our expected financial and operating results in the future
2. 02We have incurred significant net losses and generated negative operating cash flows since our formation, and it may be difficult for us to achieve and maintain profitability33% rewritten
3. 03Our operations and performance depend in part on economic conditions, and adverse economic conditions may adversely affect our business, results of operations, and financial condition
4. 04We contract with some individuals and entities classified as independent contractors, not employees, and if federal or state law mandates that they be classified as employees, our business may be adversely impacted
5. 05Our business depends heavily on the adoption of our offerings by new and existing customers. If we fail to attract new Learners or retain existing Learners, our revenue growth and profitability may be adversely impacted
6. 06We rely on our new and existing Learners to drive utilization and to generate revenue, and if we fail to attract and retain Learners our business and operating results will suffer
7. 07Illegal, improper, or otherwise inappropriate activity of Experts and Learners, whether or not occurring while utilizing our platform, could expose us to liability and harm our business, brand, financial condition, and results of operations
8. 08Many of our Learners are minors, which may subject us to significant and/or heightened litigation risks, regulatory scrutiny, and reputational damage
9. 09We may be exposed to claims and losses, including class action lawsuits, brought by or on behalf of our Learners, Institutions, or Experts, which could have a material adverse effect on our business
10. 10Attracting new Learners or Institutions for the launch of new offerings is complex and time-consuming. If we pursue unsuccessful offerings, we may forego more profitable offerings and our operating results and growth would be harmed
11. 11Attracting new Experts for our existing online offerings and the launch of new offerings is complex and time-consuming. If we pursue unsuccessful offerings, we may forego more profitable offerings and our operating results and growth would be harmed
12. 12If we are not successful in quickly and efficiently scaling up offerings with new and existing Learners or Institutions, our reputation and our results of operations will suffer
13. 13If we are not successful in scaling up our Institutional offerings to education systems, we could suffer losses and our results of operations will suffer
14. 14Contracts with Institutions present unique risks and uncertainties that are not present when selling directly to Learners
15. 15Our financial performance depends heavily on Learner retention within our offerings, and factors influencing Learner retention may be out of our control
16. 16We expect to continue to invest in our growth for the foreseeable future. If we fail to manage this growth effectively, the success of our business model may be compromised20% rewritten
17. 17These activities will require significant capital expenditures and allocation of valuable management and employee resources, and our growth will continue to place significant demands on our management and our operational and financial infrastructure
18. 18We face competition from established, as well as other emerging companies, which could divert customers to our competition, result in pricing pressure, and significantly reduce our revenue
19. 19Our business is affected by seasonality driven by school and standardized testing schedules
20. 20We have historically generated negative cash flows from operations and may need additional capital in the future to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to grow our business25% rewritten
21. 21Our employees located outside of the U.S. and foreign residents accessing our platform and purchasing our offerings expose us to foreign risks
22. 22Experts may access the platform and continue to offer one-on-one and group instruction from any location in which they have access to our platform, even if located outside of the U.S., which exposes us to foreign and international risks
23. 23Failures of our platform, or disruption to its access, could reduce Learners’, Institutions’, and Experts’ satisfaction with our offerings and could harm our reputation
24. 24If our security measures are breached or fail, we could lose Learners, Experts, Institutions, and employees; fail to attract new Learners, Experts, Institutions, and employees; and could be exposed to protracted and costly litigation
25. 25We depend on third-party vendors, tools, and platforms for services including but not limited to hosting, discovery, advertising, delivering content, and more32% rewritten
26. 26Our platform contains open source software components, and failure to comply with the terms of the underlying licenses could restrict our ability to market or operate our platform31% rewritten
27. 27If we do not retain our senior management team and key employees, we may not be able to sustain our growth or achieve our business objectives
28. 28Increased input costs, including costs for Experts, or limited availability of Experts, could negatively impact our businesses, financial condition, results of operations, and cash flows
29. 29Issues in the development and use of AI, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other unforeseen adverse consequences to our business operations

Risk Related to Our Indebtedness

1. 30Our operating activities may be restricted as a result of covenants related to our Term Loan, which we may be required to repay in an event of default, which could have a materially adverse effect on our businessNew
2. 31restrictions on our ability to operate our business. The Term Loan is guaranteed by certain of our subsidiaries and secured by a lien on substantially all of our and the guarantors' assetsNew
3. 32Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operationsNew

Risks Related to Regulations

1. 33Our activities are subject to federal and state laws and regulations and other requirements, and these regulations are subject to change37% rewritten
2. 34enacted or are considering measures related to the use of AI and machine learning in products and services. Any such regulations could require us to change our business practices for compliance, or else be subject to regulatory action and/or finesNew
3. 35Changes in laws or regulations relating to consumer data privacy or data protection, or any actual or perceived failure by us to comply with such laws and regulations or our privacy policies, could materially and adversely affect our business43% rewritten
4. 36regulation of data protection and data privacy across the globe, including in the U.S. with the increasingly active approach of the FTC to enforcing data privacy under the FTC Act Section 5 of the Unfair and Deceptive Acts frameworkNew

Risks Related to Intellectual Property

1. 37Failure to adequately protect our intellectual property and other proprietary rights could adversely affect our business, results of operations, and financial condition32% rewritten
2. 38Our quarterly operating results have fluctuated in the past and may do so in the future, which could cause our stock price to decline
3. 39The trading price of the shares of Class A Common Stock may be volatile, and purchasers of the Class A Common Stock could incur substantial losses
4. 40If equity research analysts do not publish research or reports or publish unfavorable research or reports about us, our business, or our market, our stock price and trading volume could decline
5. 41Concentration of ownership among members of our senior management, our existing directors, and principal stockholders may prevent new investors from influencing significant corporate decisions
6. 42Due to the significant and rapid advances in AI, we may incur write-downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition and results of operationsNew
7. 43If we fail to maintain effective internal control over financial reporting and effective disclosure controls and procedures, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our company22% rewritten
8. 44Because we do not anticipate paying any cash dividends on the Class A Common Stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment
9. 45We are subject to risks related to taxation in the U.S57% rewritten
10. 46Our bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees
11. 47We are subject to changing laws and regulations regarding regulatory matters and corporate governance, and public disclosure will increase our costs and the risk of non-compliance48% rewritten
12. 48accounting and tax standards or practices, (iii) changes in the composition of operating income by tax jurisdiction, and (iv) pre-tax operating results of our businessNew
13. 49Our principal asset is our interest in Nerdy LLC, and, accordingly, we will depend on distributions from Nerdy LLC to pay taxes, make payments under the Tax Receivable Agreement (as defined below), and cover our corporate and other overhead expenses
14. 50We may be required to make payments under the Tax Receivable Agreement (as defined below) for certain tax benefits that we may claim, and the amounts of such payments could be substantial
15. 51In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreement
16. 52If our payment obligations under the Tax Receivable Agreement are accelerated in connection with certain mergers, other forms of business combinations, or other changes of control, the consideration payable to holders of our Class A Common Stock could be substantially reduced
17. 53We will not be reimbursed for any payments made under the Tax Receivable Agreement in the event that any tax benefits are subsequently disallowed
18. 54Delaware law and our Governing Documents contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable
19. 55Our failure to meet the New York Stock Exchange’s continued listing requirements could result in a delisting of our Class A Common Stock