Good afternoon, and thank you for attending today's Nerdy third quarter 2022 results conference call. My name is Jason. I'll be the 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. If you'd like to ask a question, please press star one on your cell phone keypad. I'd now like to pass the conference over to our host, Molly Sorg, Head of Investor Relations. Good afternoon, and thank you for joining us for Nerdy's third quarter 2022 earnings call. With me are Chuck Cohn, Founder, Chairman, and Chief Executive Officer of Nerdy, and Jason Pello, 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 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. Please refer to the disclaimers in today's shareholder letter announcing Nerdy's 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. Please refer to today's shareholder letter for the reconciliations of these non-GAAP measures. With that, let me turn the call over to Chuck. Chuck? Thanks, Molly, and thank you to everyone who has joined us today. We're happy to be back in front of you discussing our third quarter results. Two quarters ago, we unveiled to you our ambitious plan to evolve our products and revenue model to orient towards long-term recurring relationships with customers that default to being always on. We did this in response to market changes we were seeing, including new consumer and institutional customer preferences for learning solutions that could provide ongoing support across academic calendar years, subjects, and learning formats. As a result, we began to converge our product and revenue strategies and developed new recurring revenue products, including Learning Memberships for consumers and On Demand, Teacher Assigned for school district customers. Early data suggested our transition to Learning Memberships would lead to longer duration and higher lifetime value customer relationships, enhanced gross margins, better marketing efficiency, better forecasting visibility, and a more scalable and efficient operating model. We also believe the transition would allow us to serve a larger market of learners while offering experts an opportunity for more consistent earnings. We shared that this transition would require trading off revenue recognition in the short term because our package model recognizes revenue in a front-loaded manner. While in our Learning Memberships model, revenue is recognized linearly over time. We estimated that cumulative revenue for a given customer would catch up and surpass that of a package customer by month six in the transition. We described this revenue recognition difference as the J-curve. Two quarters into this initiative, we are pleased to report that the new business model has exceeded our expectations and validated our underlying assumptions and more. Based on the positive feedback we received as schools started across the country, combined with the favorable customer economics we observed, we determined Learning Memberships is the winning model, and we made Learning Memberships the primary solution offered to consumers during the quarter. In doing so, we made the decision to lean farther into the J-curve on revenue recognition as we transitioned a larger percentage of the business than previously targeted to Learning Memberships. We also discontinued our academic and enrichment class, à la carte sales, by rolling them into our Learning Membership offering. As anticipated and consistent with what we discussed in August, summer travel and leisure was heightened, with consumption seasonally declining over the summer months. We saw continued strengthening of demand for supplemental learning as schools went back into session and demand picked up. Notably, we haven't observed any discernible macroeconomic pressure on demand for our products. We delivered revenue of $31.8 million in the third quarter, results that were just above the midpoint of our guidance range of $30-$33 million. This result reflects stronger than anticipated performance given our decision to shift a higher proportion of new customers to Learning Memberships, which decreases recognized revenue in the current quarter in order to be able to generate higher levels of revenue in subsequent quarters from those specific customers. During the third quarter, approximately 62% of new learners in our consumer business purchased a Learning Membership as opposed to a package. Revenue recognized in the third quarter from Learning Memberships grew to $5.8 million, or 18% of total recognized revenue, up from just 2% of total recognized revenue in the second quarter. Learning Memberships revenue has already grown to an annualized run rate of $50.2 million as of September 30th. As I have mentioned, for our consumer business, Learning Memberships are helping to transform our relationship with customers into one that is recurring in nature, spanning multiple subjects and learning formats. This model encourages ongoing, consistent learning over longer periods of time, which is leading to significant improvements in customer engagement. In addition to one-on-one tutoring, each membership includes access to unlimited live and asynchronous learning formats with content available for the entire household. We are seeing these benefits deliver positive multi-format engagement trends, and over 25% of our early cohorts have adopted at least one other learning format beyond one-on-one tutoring. For customer audiences where our class and learning resource content is broader, that number grows to 40%. The higher retention and engagement is leading to superior customer monetization and lifetime value trends relative to our package model. Our recent monthly cohort's cumulative membership revenue is on a path to equal or exceed historical average customer revenue cohort curves after approximately four months, more than making up for the approximately 30% of customers and less than 10% of revenue that consumer class customers historically represented. This clearly demonstrates the superior economics of our Learning Membership and the higher value of the active learners we are adding to the platform. We now expect by the end of the calendar year, our monthly subscription revenue recognized from Learning Memberships will exceed the revenue recognized from package customers. By the end of the first quarter next year, we expect our monthly consumer revenue will be driving year-over-year growth in our consumer business again with superior unit level economics as we exit the J-curve. We have developed a powerful and unique proposition for learners. We are continuing to invest in serving a wider array of learning needs by offering more learning resources and providing customers with more value. Customer surveys and engagement trends support our view that Learning Memberships provide the value customers desire. Based upon our historical experience with customers engaging in learning across multiple formats, as well as our recent experience with Learning Membership customers, we have seen that multi-format engagement is highly correlated with better retention and extending customer lifetime value and monetization. In the fourth quarter, we are continuing to enhance Learning Memberships by adding unlimited access to three new products, Codeverse, Tutor Chat, and Essay Review. Codeverse is our recently acquired kids coding platform. Tutor Chat provides 24/7 support to every student with access to homework help and support from highly qualified tutors via live chat across core K through 12 subjects. Essay Review provides writing support for students whenever they need it by allowing students to upload written work to receive thoughtful feedback within 48 hours on essays, papers, reports, admissions essays, and more. Tutor Chat and Essay Review were both originally developed for Varsity Tutors for Schools, and we are now leveraging them in a key consumer product. This is a good example of our platform-based approach to growth, where we build a product or capability once and leverage it multiple times across different audiences. As we expand our product portfolio, make our platform more sticky, and enhance the value we provide the Learning Membership customers, we anticipate that we can further grow customer lifetime values. Turning now to our institutional business, two quarters ago, we announced we were building two new products that would support our always-on vision. The products, On Demand and Teacher Assigned, offer school districts district-wide solutions that can be deployed across entire student and teacher populations, widening the impact we can have with our school district partners. On Demand provides universal support to all students with access to 24/7 on-demand chat-based tutoring, essay editing, and self-directed learning tools. Teacher Assigned is a solution that empowers educators who know students best to schedule face-to-face, online, personalized support with experts. Teachers can leverage an extra set of hands focused on reinforcing what happens in the classroom with a targeted focus on the specific needs of an individual student. These comprehensive solutions serve the entire student population, supporting long-term partnerships with schools. When these new product offerings are combined with our existing high-dosage tutoring product, we believe Nerdy provides the tools that students, teachers, and administrators are seeking by offering access to always-on educational resources. Earlier this year, we also discussed that we adjusted the institutional sales team's focus towards larger school district opportunities where there is an interest in more holistic and longer-lasting partnerships. During the third quarter, Varsity Tutors for Schools signed 21 new contracts yielding $5.6 million of bookings with an average contract value that more than doubled versus all prior periods. This shift in focus to larger school district opportunities has also driven continued growth in our deal pipeline as we head into the fourth quarter. We are seeing high levels of interest in our new products that address entire district-wide student populations and target higher contract values. These partnerships involve more complicated implementations and the involvement of more stakeholders, which is leading to longer contracting and implementation timelines, though we believe the more significant relationships we are building with institutions are a worthy trade-off. Turning now to our marketplace dynamics, our third quarter results reflect momentum across both our consumer and institutional businesses as we reorient our products towards higher value and more recurrent relationships. As we previously shared, by orienting our business to consumers with recurring need states, we are targeting higher lifetime value customers. Midway through the quarter, we began slowing the number of new experts added to the platform so as to both concentrate on deeper relationships with fewer experts and to provide those experts with more revenue-generating opportunities. It's been just over one year since Nerdy became a public company. During that time, the education landscape has changed dramatically. We continue to innovate at a rapid pace, bring new products and capabilities to market, and evolve our go-to-market strategies to position Nerdy as the preferred solution to meet both consumer and institutional learners' needs in any subject, anywhere, and at any time. As the Learning Membership subscriber base increases and institutional revenues grow, we expect that these new go-to-market strategies will continue to yield operating efficiencies. We remain confident in our ability to achieve adjusted EBITDA profitability by the end of 2023, as previously communicated. With that, I'll turn the call over to Jason to discuss the financials in more detail. Jason? Thanks, Chuck, and good afternoon, everyone. I'm pleased to be speaking with you today about Nerdy's strong third quarter performance and our outlook for the balance of the year. Our team continued to execute at a high level during the third quarter and made substantial progress against our business model evolution. As Chuck mentioned, during this year's back-to-school season, we accelerated our transition to learning memberships as a result of the strong customer response and the positive economics we are experiencing. As we shared in our past two earnings calls, this evolution towards learning memberships results in lower near-term revenue and adjusted EBITDA. However, we expect that it'll ultimately allow us to generate superior long-term customer unit economics and drive higher levels of growth and profitability. This shift in revenue recognition is reflected in our revenue growth rates for the 3 and 9 months ended September 30, 2022. Expenses as a percentage of revenue also reflect the impact of recognized revenue being at the bottom of the J-curve during the third quarter. It's important to keep this in mind as we discuss our financial results for the period. In the third quarter, we recognized revenue of $31.8 million, results that were just above the midpoint of our guidance range of $30-$33 million, despite presenting a higher proportion of customers with Learning Memberships than originally targeted. Revenue growth was driven by continued strength in our consumer offerings and the addition of our institutional business. Institutional revenue of $2.4 million represented 7% of total revenue in the third quarter and was impacted by normal summer seasonality and longer than anticipated contracting and implementation timelines as we target larger school district opportunities. Moving down the P&L. Gross profit of $21.9 million for the third quarter represented an increase of 6% compared to the same period last year. Gross profit increases were driven by growth across consumer audiences and the addition of Varsity Tutors for Schools. Gross margins of 69% for the three months ended September 30th expanded approximately 300 basis points from 66% in the same period last year. Sales and marketing expenses on a GAAP basis were $16.2 million in the third quarter, a decrease of $2.6 million compared to the same period in 2021. Non-GAAP sales and marketing expenses, excluding non-cash stock-based compensation, were $15.1 million or 48% of revenue in the third quarter of 2022. This compares to 52% of revenue in the same period of last year and approximately 400 basis point improvement. Throughout the third quarter, we continued to moderate the level of marketing spend, yielding efficiencies in our consumer business. These efficiencies were partially offset by continued investments 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, creating operating leverage. Over the last several months, our evolution to a learning membership model, when coupled with investments in automation, self-service capabilities, and our machine learning matching algorithm, is allowing us to generate operating efficiencies. As learning memberships mix continues to increase as a percentage of total active learners, we believe we'll be able to further simplify the sales process and operating model, generating additional efficiencies. We also continue to moderate the pace of corporate hiring and third-party vendor spend in the third quarter and expect to gain operating leverage from prior investments as we allow revenue to grow without a proportional increase in both variable and fixed costs. We expect these efficiencies will begin to materialize in the first quarter of 2023 as the cumulative build of learning memberships and institutional revenues accelerate and we exit the J-curve. We reported a non-GAAP adjusted EBITDA loss of $14 million in the third quarter of 2022 at the high end of our guidance range of $14 million-$17 million. Improvements were primarily driven by higher gross margin rates, marketing efficiency gains, reducing the pace of hiring, and diligent cost oversight. The lower adjusted EBITDA relative to last year was primarily driven by the shift to a membership model and the associated lower near-term revenue recognition that naturally flows through the lower adjusted EBITDA in the current quarter and were reflective of being at the bottom of the J-curve during Q3. As Chuck mentioned, these investments have allowed us to deliver several new and exciting products, including Learning Memberships and our Teacher Assigned and On Demand institutional offerings. Turning to our business outlook, today we're providing fourth quarter and full year guidance. As Chuck mentioned, the traction and response we received from customers related to Learning Memberships has exceeded our expectations. We're also beginning to see more evidence that validates our belief that the model would lead to longer duration and higher lifetime value customer relationships, enhanced gross margins, and a more scalable and efficient model. The acceleration to Learning Memberships has continued in the fourth quarter and is the primary supplemental learning solution we're presenting to customers. Today, we're narrowing our fourth quarter and full year revenue guidance ranges to reflect the significant momentum we're realizing in the transition to Learning Memberships, as well as the longer lead times we're experiencing in our institutional business due to the previously discussed focus on opportunities with larger school districts. As is typical for our business, we expect sequential quarterly revenue growth driven by increases in the number of Learning Memberships subscribers and higher institutional revenues. For the fourth quarter of 2022, we expect revenue in the range of $39 million-$41 million. For the full year 2022, we are narrowing our expected revenue guidance in the range of $160 million-$162 million within the guidance range we provided when we first introduced Learning Memberships in May. We are targeting to exit the aggregate J-curve whereby aggregate monthly consumer revenue returns to year-over-year growth by the end of the first quarter in 2023. Our adjusted EBITDA guidance for both the fourth quarter and full year reflects the natural flow-through from lower recognized revenue in the quarter that is the result of accelerating the transition to Learning Memberships as we capitalize on the long-term shift towards always-on learning solutions. The guidance also reflects the continued moderation of marketing spend and reduced levels of hiring beginning to demonstrate operating leverage. For the fourth quarter of 2022, we expect a non-GAAP adjusted EBITDA loss in the range of $6 million-$8 million. For the full year 2022, we expect a non-GAAP adjusted EBITDA loss in the range of $36 million-$38 million, also consistent with the guidance ranges provided in May. I also wanted to highlight that the second and third quarters of 2022 represent our highest projected cash use quarters, which are impacted by summer seasonality and the short-term cash flow impact as we shift to a membership model. With no debt and $106.4 million of cash on our balance sheet, we have ample liquidity to fund the business and pursue growth initiatives. Given the operating efficiencies I mentioned earlier and their ability to positively impact the P&L, and as learning membership mix grows, we remain confident in our ability to achieve adjusted EBITDA profitability by the end of 2023. Thank you again for your time. With that, I'll turn the call back over to Chuck. Thanks, Jason, and thanks again to all of you for joining us today. As always, we appreciate your interest in Nerdy and look forward to continuing the dialogue during this exciting time for the company. With that, I'll turn it over to the operator for Q&A. Operator? If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. Our first question comes from Eric Sheridan with Goldman Sachs. Your line is now open. Thanks so much for taking the questions. Maybe two if I can. With what you're learning on the membership side, how should we be thinking about elements of LTV changes looking out into next year, less seasonality in the business, and maybe some of the early learnings from those components on the membership piece that we should be keeping in mind? I know it's a little early to maybe guide to 2023, but just how we should be thinking about the output of the velocity on the membership side and what it means for the business in 2023. In the institutional piece, how much of the narrowing the range in Q4 was down to the institutional business? Is there any sense you can give us of the backlog or elements of sales force productivity in the institutional business so we can better understand what's being built there for the long term from a revenue base? Thanks so much. Thanks, Eric. Good questions. I'll take the first one and hand the second one over to Jason. You know, as you know, we started rolling out Learning Memberships in spring. It accounted for about 2% of recognized revenue in the second quarter and about 18% of recognized revenue in the third quarter. One of the things that we shared in the shareholder letter was actually plotting our LTV curves relative to our old blended model of packages and classes. You'll see that there's significant LTV trajectory growth at LTV in the trajectory of the cohort curves relative to the old blended package and class model. We feel really, really good about the trends. Three to 4 months in, you're seeing that the recognized revenue from Learning Memberships is actually eclipsing that of the package model for a given customer and is on a really, really healthy trajectory. We've seen each of the last several months, really starting with May and then moving into this most recent September cohort, really positive signs there. We have not been through an entire school year, and we haven't been through some of the end of term periods, but the results are really encouraging. Then if you look at the marketing side, we've been able to hold our marketing CAC and CAC in totality flat on the consumer side approximately, and that's with blending into what we believe are much higher LTV customers. It's a little early to say how much that could change the LTV to CAC trajectory, but we feel really encouraged to share some of that data in the shareholder letter that allow you to, I think, see some of the trends that we're actually seeing. Yep. Maybe to address your questions related to the guide down in Q4 and larger tiers for schools. I think it Important one to remember, you know, as we leaned into Learning Memberships, that does expand and deepen, you know, the length of the J-curve. I'd say that's a little bit less than half of the change that we see. Varsity Tutors for Schools accounting for just over half of the guide down. Over the last two quarters, we've talked about the change in focus for the institutional sales team towards larger school districts. You know, certainly larger school districts require, you know, more constituent buy-in, which is elongating those contract periods. But what's important here is, you know, unlike the B2B space where companies are pulling down third-party spending, government funding for schools has already been provided. The money's in the market, and schools are seeking out solutions just like ours, to meet their student and teacher needs. You know, from our perspective, the delays are just that. They're timing delays, they're transitory, and our focus on new products will lend themselves to these district-wide sales is the right one for the long term. Our next question comes from Ryan MacDonald with Needham. Your line is now open. Hi. Thanks for taking my questions. Chuck, maybe first for you. You know, great to see some of the progress you're making on the Learning Memberships and the signs of higher LTV there. When you talk about leaning more into that as we go into fourth quarter and into early next year, can you talk about what that looks like in terms of how you continue to try to push that prioritization to sort of the existing learners that are on your platform? Does this come with sort of a discontinuation of the package altogether as we think about 2023? Would just love to know some of the moving parts there. Thanks. Sure. Thanks, Ryan. Good question. The way that we went about rolling this out was actually testing it audience by audience and seeing the extent to which Learning Memberships resonated with a given audience, like me, like elementary school students or middle school or high school or college or some other sub-segment therein. As we proved out that it was actually resonating, and it was converting with favorable economics, we then shifted a higher and higher proportion of the business to Learning Memberships. Every time we do that, there's a little bit of a kind of mini J-curve, so to speak, related to the fact that we need to train the consultative sales organization. We need to update collateral and other materials. We need to update all of the content that we have available and make sure that it actually resonates with that given audience. As we went farther into the school year and as each of the different waves of school started, we saw that it was converting well. A lot of the customer economics that were now maturing looked really favorable, and we just became excited about how these longer duration contracts could lead to higher lifetime value relationships, how they could ultimately drive enhanced gross margins. They could drive better marketing efficiency. You saw a 400 bps improvement in sales and marketing efficiency in the current quarter, and we'd expect for continued efficiency to pull through in the coming quarters. It could bring better forecasting visibility. Lastly, that it actually was going to allow for us to operate a more scalable and efficient business model that could pull through to, you know, our goals of becoming adjusted EBITDA profitable this coming year, which we feel really good about. As we got farther into the school year, we increased the percentage of customers. 62% of consumers in the current quarter purchased a Learning Membership. In October, it's actually shifted up to about 75%. We do think that there's a segment of the customer base where Learning Memberships, at least in its current form, you know, isn't maybe the right model to introduce today. That includes test prep and professional, where sometimes there's more short term and acute needs that are limited in duration relative to, say, a long-term contract. Our expectation is we won't shift 100% of the business, but we'll shift, you know, call it 80-something% of the business over the course of the coming quarters to Learning Memberships on the consumer side. Yeah, maybe just to add one comment to that. You know, on the consumer side, we would expect by the end of this calendar year that our monthly subscription revenue from Learning Memberships would exceed that of the package customers. Then maybe just to look a little bit further beyond that, by the end of the first quarter, our monthly consumer revenue will be driving year-over-year growth with more attractive unit level economics and having exited the J-curve during this transition period. Yeah. To build on that, I think one of the things that's interesting here is as the mix of Learning Memberships as a percentage of total goes up, there's going to be an opportunity to simplify our sales process, our operating model, and then rationalize some of the offerings in a way that drives a lot of operating leverage. That's super helpful color. I appreciate it. Maybe just on that point of sort of running a more efficient operating model moving forward, I'm curious what you're seeing in terms of usage, in terms of tutor usage on the membership product versus the package and how or what potential efficiencies you see there in terms of either how you continue to scale the number of tutors on the platform or perhaps maybe optimize the number of tutors on the platform as we look out into next year. Thanks. Good question. One of the things that we started focusing on in the middle of the quarter, and you'll see pull through to a greater extent in the coming quarter, is we started focusing on onboarding fewer tutors and actually giving them more work. One of the benefits of the Learning Memberships from the expert side of the platform is it allows for a higher level of recurring income generation opportunities. From the expert's perspective, they can actually count on meeting with a student every week for an entire school year, which is just more dependable, consistent than, you know, a more transactional customer type. The feedback from the expert side has been really positive, and we're going to focus on allocating more work to those active experts and then orienting the relationships towards these long-term customer engagements in a way that develops a positive customer relationship and also gives the experts themselves a higher level of consistency to that income stream. Thus far, that's been really well-received. We really started focusing on it in the middle of the quarter, and you'd expect to see it pull through in the coming quarters in terms of fewer experts joining the platform, but more work per expert. Excellent. Appreciate the color. Thanks again. Yep, thanks for the question. Our next question comes from Aaron Kessler with Raymond James. Your line is now open. Yeah. Hi, guys. Great. A couple questions. Maybe just can you give us a sense maybe for the cost for some of the additional learning membership services you're offering, the three that you mentioned, I think Codeverse, Tutor Chat, and Essay Review. And second, maybe something back on the institutional side. Is there an update on maybe total contracts or total contract value? Wondering if there's any churn that you're seeing with the existing contracts as you move to larger school districts. Thank you. Yeah, sure. I can maybe take the second one first. We included in the shareholder letter that during the quarter we booked $5.6 million of institutional contracts. There was 22, I think, recurring contracts or renewals. Importantly, as we've shifted towards this larger school district focus, we're seeing that the contract values have more than doubled in the third quarter versus the first half of the year on the one hand. In the renewal section, we're starting to see that those clients that have renewed have more than doubled their level of contract value with us. Positive signs on both sides. You know, as we mentioned, those higher value contracts and larger school district deals do take a little bit more time. Those kind of metrics that I provided give us, you know, the optimism that it truly is just a timing issue. Then on your first question, three new products that we're adding for our Learning Memberships. One is classes. We're offering 250 live classes per week that come as part of this all-inclusive model. We then have Tutor Chat, the chat-based tutoring offering that we originally built for Varsity Tutors for Schools that we're now incorporating into Learning Memberships. Then lastly, we have Essay Review, which is the on-demand essay editing tool that we also built for Varsity Tutors for Schools that we're again leveraging into Learning Memberships. Two good examples of how we can build once and then leverage a number of times, which is something we're pretty excited about. These combined with Codeverse, we believe are going to be ways that we can generate value for customers throughout different kind of pathways in their learning journey. Whether it's summer and they may not have an acute tutoring need, there's an opportunity to engage in coding classes and leverage some of these other products that can drive higher levels of engagement and retention. We don't expect for them to be on a marginal basis, expensive. If anything, they would more than pay for themselves through just higher levels of retention and repurchase rates at the end of contract terms. We feel really good about the relationship between getting customers to engage more and that leading to higher levels of retention and engagement over time. That's something that we're going to continue to lean into. It's something that we've seen historically in our package model, and it's continuing to prove out in our membership model. We're pretty excited to include these three new products this quarter. The other thing I'd add, Aaron, even with the introduction of these new products into the Learning Membership during the fourth quarter, we still expect that Learning Memberships as compared to our historical package business will yield accretive growth margins. Great. Thank you. Our next question comes from Maria Ripps with Canaccord. Your line is now open. Great. Thanks for taking my questions. First, sort of as you're in the process of transitioning to the membership model and we see what seems to be sort of an active learner account reset this quarter, how are you thinking about your active learners sort of progressing from here? And can you talk about how your marketing message has evolved around your new membership product? Yeah, absolutely. When we think about active learners, you know, the thing that we need to keep in mind, and we guided toward this last quarter, was that we would be including what were historically sold on a standalone basis, academic and enrichment classes within the learning membership. We anticipated that the learner counts would go down. During the quarter, we did see that there was some flow-through from, residual classes during the summer into the quarter. That was offset by higher than anticipated uptake from a membership perspective as well as from our existing base, partially offset by, reductions in the delays of implementation of Varsity Tutors for Schools. Net-net, active learner changes were largely in line with our expectations, probably a little bit higher given the strong demand we saw on the one-to-one side across both packages and memberships, and then the flow-through that we saw related to classes. When you think about Q4, we would anticipate that active learner counts would be down about 10% on a year-over-year basis. As we continue to have those classes fold into learning memberships, and continue to roll those out to a great portion of our customer base. Got it. The second question was around your marketing message for your new membership product. The way we've largely thought about this is the Learning Membership is most likely to resonate with a customer with a recurrent need state. One of the things that we focused on is how really optimizing your study time across multiple subjects, multiple modalities can ultimately allow for a student to achieve educational outcomes to an extent that just can't happen in a more transactional environment. One of the things that we've really focused on is the fact that we can support you across all these different need states, and the fact that we have tutors in over 3,000 subjects that can help you on a recurrent basis. Between tutoring and classes and other modalities, we have really everything that you might need to achieve academic success. That more holistic messaging that's oriented towards a longer term need state is something that's pulled through our marketing, and then we've lessened the focus on transactional and last-minute help. Understood. Thank you very much. Thanks, Maria. Our next question comes from Doug Anmuth with JPMorgan. Your line is now open. Thanks for the questions. Thanks for the charts on page 11 of the letter. Those are helpful. Just curious, is there anything in your view that could push out or delay the J-curve inflection and membership surpassing the package model, you know, roughly 6 months out as you've laid out? Can you just talk a little bit about how the better-than-expected membership traction informs what you can develop from a product perspective over time? Thanks. Sure. Thanks, Doug. Yeah, we feel really good about all the trends we're seeing thus far related to kind of customer uptake and then the LTV trends over time. One of the things that, you know, we reserve the right to do in the future is kind of innovate on the actual product and pricing, and we want to be a little bit flexible in that regard. Based on the current economics, we feel good about moving through the J-curve in that six-month period. There's also different flavors of the membership that we could create over time that might have different pricing and margin structures and ultimately cause for, you know, a slightly different, kind of transition there. We also think those are the sort of things that could dramatically expand TAM and allow for us to target completely different and net new customers. While we're focused right now on just nailing the execution related to our current implementation of Learning Memberships, there's the opportunity to innovate on top of this with different pricing and content included in other membership offerings in the future. You see that a little bit in those cohorts that you referenced in shareholder letters. You know, from May to June, we introduced, you know, twice a week frequency. Simple change, but, you know, drove substantial improvements in the steepness of the LTV curve. You know, since then, you've seen a high level of consistency. But I would, you know, agree with Chuck that we do reserve the right to continue to tweak or test our way into this and bundle the solution in different ways to meet different audiences and need states. But for now, I think we feel really good about where we're at. Thank you both. Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Your line is now open. Thank you. Hi, guys. Congrats on the quarter. Two for me. The first is, I think we've seen a lot, especially over the last couple of weeks, in the media about the decline in kind of test scores, you know, call it on the K-12 level. I guess, have you seen this kind of light a fire under the admin to try and put new processes in place to address this issue? How does that kind of coincide with, call it the longer deal cycles you're seeing across institutions? Hey, Brett. I think you were referencing the national report card and the NAEP scores, which was certainly headline news nationally, drove a lot of inbound interest, and also, you know, of course, as a citizen, it's cause for great concern in the sense that the test scores are actually worse than I think many people had thought nationwide related to students and kind of the amount of learning regression over the course of the last two years. In terms of how that then impacts the business, I think it's kind of twofold. One, it's made schools feel a little bit more pressure to think about some of these solutions, and there's more kind of top-down evaluation of how schools are doing on a statewide basis. Of course, many of these scores were given out state by state. The news cycle certainly followed this. I think there's definitely a little bit more focus on solving this issue in the more near term than might otherwise have been the case. You know, this is consistent with the trends that we've seen over the course of the last couple of years, and we feel good about our ability to partner with school districts and district administrators to really help students that clearly need a lot of help. I'd say it, you know, consistent with what we've seen and positive in the sense that, you know, more attention on these acute problems, you know, a good thing. We expect that these problems would have been solved anyways, given some of the timelines involved over the course of the next 18 months and the acuity of the problem. Separately, certainly, you know, the headline news drove inbound demand on the consumer side. And made parents a little bit more conscious of learning loss and paying attention to the need to invest against building foundational skills in their kids. I'd say it was a slight positive in that regard, but you know, more than anything, it just reinforces the importance of what we're doing and the extent to which our products and services can really help students when they really need help. Got it. That's very helpful. Thank you. Maybe just one follow-up on the Learning Membership. Can you talk about maybe demand from different cohorts, whether it's, you know, call it K-4, 4-8, high school or college, and what you're seeing in there, and I guess which kind of cohorts are really outperforming the others? Sure. You know, consistent with what I think I mentioned earlier, the more recurrent the need state is for a customer, the greater that Learning Memberships resonates with them. We're seeing that high school, middle school, elementary school are all areas where there's strong, consistent demand. At the college level, within the kind of groups of students that are looking for long-term help oriented around an academic class, the product resonates really well. There's certainly some customers that are looking for more short-term needs. You know, that's probably. It's resonating pretty well, but not quite as well as in the high school audience, where all the classes tend to be an entire school year long class. We think that we can continue to adapt the products to meet the sub-segment needs for each of these given audiences. Even in an area like, say, foreign languages, there's elementary school students learning it. There's people learning it in school formally. There's adult learners learning it for professional purposes. There's an opportunity to take what is currently somewhat of a one-size-fits-all approach to foreign languages in the specific example, and then start tailoring it to a greater and greater extent, depending on the needs state of the underlying customer. You know, we think that's gonna be a big, big vector of growth as we continue to refine the extent to which Learning Memberships can appeal to different sub-segments of the audience. By and large, you know, it's resonating everywhere, and we feel really good about how we can continue to build from a strong foundation this back-to-school to something much bigger in years to come. Perfect. Understood. Thank you. Thanks, Brett. Our next question comes from Andrew Boone with JMP. Your line is now open. Good afternoon, and thanks so much for taking my questions. Paid sessions was down 18% year-over-year. Understood the J-curve and everything else, but is there anything else to call out there that we should be thinking about? As we think about marketing, understood the greater efficiency and the goal of driving EBITDA by the end of 2023, but can you talk about philosophically, what would it take for you guys to turn that back on or be more aggressive there? Or how are you thinking about just marketing spend overall, as LTVs seem to be very positive? Thanks so much. Yeah, sure. I'll take maybe the first one. Chuck Cohn can take the marketing question. On paid sessions, that is, you know, absolutely a reflection of the fact that historically we sold academic and enrichment classes on a standalone basis, and we've decided to consciously roll those into Learning Memberships to drive higher levels of customer perceived value, multi-format engagement and overall retention downstream. You know, the decline is what we would've expected as we moved through the transition towards a greater proportion of our customers choosing Learning Memberships. Yeah. Those class customers that bought a la carte classes accounted for about 30% of consumer customers in totality, but less than 10% of revenue. You know, one of the other changes that you should expect other than just the fact that paid sessions goes down in the short term, is that we're able to drive operating efficiencies because we're actually servicing fewer but higher LTV customers and then focusing our resources on engaging them. We feel really good about rolling the class model into Learning Memberships, and the fact that it serves as a real value creator for our customers and also something that'll drive long-term retention and engagement. Then on the marketing side, you know, right now we're focused on driving profitable growth and efficiency, nailing execution on Learning Memberships, and then our two new products on Varsity Tutors for Schools, and the focus on larger school district contracts. As we get into next year, and as we see higher levels of data on retention and LTV, that would be where we start leaning into new and different marketing channels that can allow for us to grow TAM, in addition to continuing to iterate on different flavors of memberships that allow us to target different audiences, and different price points. You know, we feel really good about the LTV trajectory. We feel good about the fact that, you know, CAC relative to our package model for learning memberships are basically flat, but we think LTVs will be much higher, and that gross margins will be much higher as well. You know, we haven't been through an entire school year, so we're gonna be prudent in that regard and you know, monitor the cohort's performance closely. As we see that data prove out, that'll inform our marketing strategy next year. Thanks so much. Thanks, Andrew. Our next question comes from Mario Lu with Barclays. Your line is now open. Great. Thanks for taking the questions. I have a couple on multiple formats. In the shareholder letter, you mentioned that customers that engage in learning across multiple formats see, you know, better retention and higher LTV. Just curious, if you could share, you know, the split of the formats currently. Is desktop the most popular one today, and is the expectation that over time it goes more towards, you know, tablets and mobile as well? And then secondly, are there any initiatives in place, in terms of strategy that would push more customers to use these multiple formats over time? Sure. Yeah, a good question, and I realize that learning formats can be interpreted in a couple of different ways. When we said learning formats, we were referring to tutoring versus classes versus self-study versus other forms of async content like Codeverse. We were not referring to desktop versus mobile. Our platform is available on Android and iOS and desktop, and people use it in a variety of different ways. The big growth lever that we see is that when we can get people to interact in something other than the original modality that they were brought in on. If they came in on tutoring, to the extent that we can get them to try out classes or try out, you know, an async product, that's where we see really high retention. I think the stat was in our package model historically, it almost doubled LTV if you could get somebody to use three different modalities of learning. One of the things that we're trying to do here, and I think we're already seeing this pull through in our cohort results, when we're able to expose somebody to a new type of interaction, a new way to learn, a new thing to do, we get rewarded with higher levels of engagement and retention and repurchase rates. To the extent we're able to keep somebody engaged and give them more reasons to come back, it pulls through to a bunch of, you know, very, very positive unit-level economic benefits, and that's one of the things that we're focused on in Q4 with the introduction of Tutor Chat and Essay Review and Codeverse. Great. Thank you. Maybe just one on institutional. It seems like you're gaining, you know, better than expected retention and higher value contracts. Is the expectation still to be, you know, roughly 10% of total revenue for the segment over time, or is that gone higher? Thanks. Yeah. I would say over the fullness of time, we would actually expect it to be beyond 10%. You know, we're still in the early innings of this business. It's, you know, just over a year old. We introduced two new products this year. They're resonating well. We expect to start selling them to a greater extent during the fourth quarter now that they're live and available. So that percentage will increase over time, as we move forward. As it relates to 2022, it'll be about, you know, 10%-15% this year, partially and mostly impacted by those elongated contracting time periods that we're seeing as we target larger school districts in the fourth quarter. Yeah. We're feel really, you know. I think one of the things you heard us share is that as we focused on larger school districts, we've actually gotten really good buy-in and really high levels of engagement. One of the things that we've seen is that because we're talking about district-wide sales that encompass all the students in the school district, that then necessitates involving stakeholders, you know, of all sorts. It's turning out to be a longer sales cycle that's more complicated, but it's occurring as a result of school districts being interested in bundled solutions that span multiple years. As a result, they're more complicated conversations, but we see it as a big positive. It's definitely a little lumpy, but over time, you know, still extremely bullish on the opportunity and expect it'll drive a lot of growth in the years to come. Great. Thank you. Our next question comes from Greg Gibas with Northland Securities. Your line is now open. Hey, good afternoon, Chuck Cohn and Jason Pello. Thanks for taking the questions. I guess first, just to confirm, I think you said in the quarter, 18% of revenue was generated by the learning membership model versus the traditional package. And were you expecting that to get to over 50% in Q4? And then secondly, you know, what do you foresee being that gross margin difference between the two business models? Yeah. We did say that, you know, revenue in the second quarter was 2% for Learning Memberships of total revenue. It was 18% in the third quarter. My comment earlier was that on a monthly basis, by the end of the year, membership revenue would exceed package revenue on the consumer side, and that's exclusive of Varsity Tutors for Schools. You know, all that is intended to say that, you know, we are quickly mix shifting towards a higher proportion of recurring revenue from Learning Memberships that does elongate and deepen the J-curve a little bit in the fourth quarter, hence the guide down relative to, you know, the prior expectations. We view that as a positive thing as we'll start 2023 with a higher, you know, membership base full of, you know, with recurring revenue. You know, continued progress, and we look forward to providing Q4 results in February. On the second part of your question, gross margin, you know, it's early days. We haven't been through all of the peak, you know, semester usage, but we're confident that it will drive gross margin accretion even after adding in free new products. I think it's too early to say exactly what, but we feel good about the general trajectory and that in totality, this will be a gross margin enhancer. Okay. Got it. I guess just a quick follow-up. You know, do you anticipate maybe it's the institutional business growing, potentially taking away from the consumer business at all, or really no relationship there? We think it's totally incremental and you know, very often within these schools, they're targeting Title I students, so those living at or below the poverty line. It tends to be a different demographic that receives the supermajority of funding than the consumer side of the business. It's a big market, right? It's you know, depending on the statistics you look at you know, a $15 billion-plus consumer market. Then you know, on the institutional side, there's you know, almost all of the $24 billion for COVID learning loss still remaining, you know, 80-something% still remaining. Two big markets, we think they're distinct, but we are getting a lot of leverage from the fact that we can build once and then leverage multiple times across different audiences. We think that's something that's gonna drive a lot of operating leverage next year. Got it. Makes sense. Thank sense. Thank you.