Good afternoon. My name is Hannah, and I will be your conference operator today. At this time, I would to welcome everyone to the Nerdy First Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Molly Sorg, Head of Investor Relations, you may begin your conference.

Good afternoon, and thank you for joining us for Nerdy’s First 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 states or revisions to any forward-looking statements to reflect any change in expectations or any changes in events, conditions or circumstances on which any such statement is based. Please refer to the disclaimers in today’s press release announcing Nerdy’s first 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 press release for 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 to discuss our strong start to 2022 in addition to some of our more recent business developments. Let’s get started with a few of our highlights. In the first quarter, Nerdy once again achieved new all-time demand records with revenues of $46.9 million, up 36% over the prior period and bookings of $48.5 million, up 30% versus the first quarter of 2021. We also experienced continued strength in our marketplace dynamics, with Active Learners up 56%, Online Sessions up 57% and the number of Active Experts on our platform up 37% compared to the first quarter of last year. On the consumer side, the education trends we highlighted in February, including the increased adoption and normalization of online learning, the GPA war and heightened ownership for learning outcomes supported strong first quarter engagement. Demand during the first quarter across academic tutoring bookings remained strong, with high school academics growing at 30%, college academics growing at 20% and K-5 academics growing at 47% versus the same period a year ago. Our Professional Development business continued to experience strong demand with bookings growing 57% in the quarter versus the prior period. This booking strength was partially offset by test prep, including the Veritas Prep business s we discontinued in the fourth quarter. Test prep for exams like the SAT, ACT, GRE, and other similar exams now represent less than 7% of consumer bookings in the quarter. That demand has shifted toward academic tutoring and is driving a focus on long-term relationships to maximizing grades and GPA, which we believe is a significant and long-term tailwind. We believe these education trends are leading to consumer interest in supplemental learning solutions that support…

Thanks, Chuck, and good afternoon, everyone. It’s exciting to be talking with you today after another strong quarter from Nerdy. As we continue to innovate and bring new products to market, deepening our relationships with learners, we are seeing strong top line results. We once again achieved all-time bookings and revenue records in the first quarter as we continue to see momentum in the underlying trends driving demand for our services. Bookings of $48.5 million in the first quarter were up 30% over the first quarter of 2021 and revenue of $46.9 million during the quarter yielded 36% growth year-over-year. Bookings and revenue growth continue to be driven by the strength in our direct-to-consumer offerings across key formats and audiences. Our small class and group revenue increased 243% to reach $6.4 million in revenue, up from $1.9 million in the first quarter of 2021, accounting for 14% of our first quarter revenue as compared to just 5% in the same period a year ago. The increase was driven by the introduction of small group tutoring in Varsity Tutors for Schools, as well as the continued adoption of small group classes among the consumer audience. As Chuck mentioned, we continue to evolve for product operating in support of the evolution towards always-on learning by expanding the launch of a monthly membership program. Under the membership model, customers pay a fixed monthly rate for a minimum contract term, ranging from 3 to 36 months with a number of sessions per month varying from 1 to 3 times per week. Typical monthly prices for a contract meeting once per week are in the range of $200 to $325 per month, with cost savings of learners meet more frequently. We believe offering a membership option that is in the $200 to $300 range per…

Thanks, Jason, and thanks again to all of you for joining us today. We appreciate your interest in Nerdy and look forward to continuing the dialogue during this exciting time for the Company as we improve access to supplemental learning solutions and advance our mission to transform how people learn. Before we turn it over to the operator for Q&A, I wanted to share that Ian Clarkson, our President and Chief Operating Officer, will be departing the Company. I’d like to personally thank Ian for his many contributions to the growth of Nerdy, including helping us go public this past September. He’s been a key member of our leadership team. He’s played an important role scaling the Company. He’s helped us develop a strong team, including at the executive level that has set the Company up for continued success for many years to come. Ian will be providing transition services to the Company as a consultant and advisor over the next nine months. Thank you for your contributions, Ian. With that, let’s turn the call over to the operator and get started with Q&A. Operator?

[Operator Instructions] The first question is from the line of Ryan MacDonald with Needham.

Maybe Jason, the first one for you. As we think about sort of the updated outlook and the cut to the top line of guidance, can you parse out a bit sort of the mix of the decline, I guess, that’s expected due to the soft macro versus the transition of the customer base over to this membership model? Thanks.

Yes, absolutely, Ryan. The majority of the decline related to the guidance revision is due to the change in the revenue recognition pattern to the evolution of our membership model. So, I would say two-thirds of the change is due to the membership model being introduced with one-third due to consumer pressures that we started to see in March and April coupled with our expectations for an even higher level of summer travel compared to what we previously expected. We’re also hearing that consumers are buying closer to need. So, historically, where a customer would buy a package of 20 hours, right now, they’re buying smaller packages to get them through the end of the calendar school year. But then they’re also telling us, look, call me back -- let’s go back to school because I know that the need exists from our students, and we expect to rebuy then. So two-thirds is the membership model change, which is intentional, and one-third is probably the macro that we’re seeing from consumers.

That’s really helpful color. And then, Chuck, for you. It was really interesting to see the continued evolution of the institutional offering to include chat-based and sort of all in, can you -- offering to touch the entire student population. Can you just talk about what’s driving the -- what drove that platform expansion? I know a big component of sort of spend and allocation of spend is sort of understanding -- the district’s understanding sort of testing and assessments to see who’s kind of far enough behind. Is there any difficulty in sort of identifying sort of the most at-need students? And so, they’re just shifting purchasing patterns to have something that can address sort of the entire schools, sort of wall to wall? Thanks.

So, a couple of quarters ago, we actually outlined our product road map for our institutional business that we called Learning Platform as a Service. So, the big idea here was that a school or other institution should be able to leverage our platform and deploy different product solutions across different segments of their student population in a way that’s seamless and allows for them to tailor experiences and meet the needs of individual student segments, recognizing that there are some segments like, for instance, high-dosage tutoring where schools are particularly interested in focusing on a subset of students. We’re seeing very often it’s 1%, 2%, 3%, 4% of students who need a much, much more focused form of intervention that oftentimes runs the entire school year and needs multiple times per week. As we thought about the other ways that we can school administrators meet their objectives and help students, one of the ways that came up was in the form of a chat-based solution. In addition to a whole list of other ways that live instruction and supplemental support could be delivered through a scale solution leveraging the internet. So, in this, it actually serves a different student need. And it allows school districts to offer a solution to all students. So normally, this is a product that we envision schools deploying across the entire school district as opposed to a sub segment and it allows for that to serve that’s a really important catchment system to ensure that students can get help whenever they want. So, 24/7, 7 days a week, but it’s a little bit different than the live, focused intervention that we’ve been selling to date that has a very important need and in and of itself is a very large market. Chat, we see as complementary. And the same is true for our other product, our Teacher-Led Tutoring product where a teacher can assign tutoring to students to ensure they get the help they need in a really focused fashion for specific students spanning a whole host of different subjects. And so as simple of a concept as Teacher-Led Tutoring might be, it really has never been available. So, what we’re trying to do is bring the power of our platform to allow for teachers to get leverage in a way that makes them more effective and allows for specific students spanning all grade types within a K-12 school district to get the help that they need. So both of these kind of come together and create what we think is a very elegant and tiered product offering that can be bundled together but can help schools solve a variety of different needs for students that they have in their school population.

Ryan, I was just going to add, I think importantly, the broader product offering in schools is important as we move into this new school year. Their needs continue to evolve and develop. And given our platform-based approach, we’re able to continue to evolve with them and meet those needs. And so, we feel really well, really strong about the positioning that we have going into this key selling season over the course of the summer heading into the fall in schools?

I was just going to ask a quick follow-up before I jump back in the queue. Are you seeing I guess in the conversations you’re having with schools and districts today, where there’s sort of this interest in purchasing both at the time -- at the same time and sort of viewing them as complementary or in the market is still one where they’re maybe going, either high dosage or chat-base at this point?

Yes. We see these as complementary and the conversations that we’re having are about bundled solutions. And we’ve already seen school districts prior to us actually having these products go out and find alternative solutions that allow them to make their -- effectively their own bundling solution where very often, they’re purchasing from a variety of different vendors with different modalities and learning related to tutoring and then brining them together in a way that allow them to deploy a holistic solution . And what we’ve done here is bring them together under one group one technology platform that allows for them to get both seamless integration on the technology side, allows them to interact with fewer vendors and then importantly allows for them to get leverage from their purchasing where there could be favorable economics associated with bundling, all these different services together. So, we’re seeing people very interested in using multiple different modalities for different formats that best suit learner needs. And that varies to some extent, depending on the subjects and the grades and then the amount of intervention that’s required, which I think is why schools are so interested in multiple different formats.

The next question is from the line of Eric Sheridan with Goldman Sachs.

Maybe following up on the revenue guide color you gave there to the series of questions from the first analyst. Just understanding a little bit better the evolution of the membership model beyond just 2022, how should we be thinking about it as a driver of penetration of greater growth, of revenue recognition beyond just the element you called out of Q4 over Q3? And any element of where you could see spinning into the membership plan among your existing base of users? And how should we think about that mix shift causing dynamics of revenue growth going forward? And then, the second question beyond just the mix shift dynamic on the membership piece would be, understood the need to make the investments against the long-term dynamics and the opportunity you’re going after. But if we were to have a macroeconomic environment that was to continue to worsen beyond what you saw in March and April, how should we think about some of the fixed versus variable dynamics of costs in the business and investments that were must make for the long-term versus areas where it could be more variable going forward? Thanks.

Thanks, Eric, and two good questions. So, on the first, you mentioned evaluation. I think that’s the right world. So, it’s the intentional level. And it’s one that’s being made in response to change in consumer trends towards this concept that we’re calling always on learning that relates to people looking for much longer term relationships that span longer periods of time, and it’s now possible because of the normalization of education, online learning specifically and people are more open to these recurring relationships. So, one of the things that is important about this, and I’m sure it’s obvious is that the upfront cost is quite a bit less. So, it can be as much as 80% less upfront in the first month, which makes it price accessible to a much broader segment of the population than would have been the case previously. So, what we’re seeing thus far is that the one-to-one membership model is actually receiving higher conversion in our initial data than the one-to-one package offering. So, we think there’s an opportunity to expand the number of customers over time, we’re actually leveraging the platform. And then, because this relationship defaults to always-on, where it can recur over long periods of time, there’s an opportunity to build a membership base over the course of many years that accumulates and gives us higher levels of predictability in revenue, higher levels of profitability and also allows us to simplify our business a whole list of different ways. So, we think there’s a lot of really interesting things here, and we’re going to continue to lean in, which, as Jason mentioned, requires sacrificing some short-term revenue recognition, but it’s in exchange for all hosts of simplification to the business, benefits to consumers and we think unit level economic improvements over…

And then maybe just to add to that, we’ll also bring in some of the more speculative investments and concentrate on more progress in fewer areas. So, some examples would include reducing spend associated with speculative marketing activities as well as shipping resources from less important areas, as was the case with Veritas Prep, which we discontinued in Q4, so focusing on the membership model evolution as well as making sure we’re appropriate positioned for actually Tutors for Schools as we head into the key back to slow season. Another last thing I would added is most importantly, we’ve got a really strong balance sheet, $141 million in cash and we still expect to achieve profitability by the end of 2023.

Yes. And we’re coming off some strong quarter as well.

Our next question is from the line of Maria Ripps with Canaccord.

Just following up on your membership model launch. Anything you can share with us in terms of what portion of your learners that will offer the membership option actually sign for it? And where do you expect that mix sort of longer term? And do you expect to offer both pricing models on the DTC side or do you intend to sort of transition entirely to the subscription model over time? And then, I have a quick follow-up.

Thanks, Maria. Yes, we’re in the early stage of the membership rollout. So we -- you started to see it, I think, impact the bookings numbers a little bit in March which factors into the whole gross sales we’re really having in the first month of membership payment as the gross bookings. And then in the last couple of months, we’ve started to increase it to a higher percentage of customers, but we’re trying to make it a measured rollout and evaluate the efficacy and make sure we’re being thoughtful in which segments of the audience population that we’re offering it to. So, it’s still early days, and we’re going to be continuing to expand it and measure the outcome, but the initial data is very promising, but early.

And are you -- do you expect to keep both sort of models over time?

Yes. We think there’s a place for both. And there is certain subjects and audience areas that lend themselves to its long-term recurring relationships, and there’s other segments where there might be more of a short-term need. And we’re still trying to work through the right way to pair both together to maximize the flexibility from the customer’s perspective and allow us to serve different student populations. But there will definitely -- there’s definitely one of the things we’re rolling it out in a way that allows for us to mix and measure our way into different audience segments. And so, we’re trying to be thoughtful about that rollout and where we actually remove packages versus where there’s multiple different options available. So again, early days, and we’re trying to do what’s right for the business, what’s right to the customer and what’s right for ease in operations as well.

And then, given that the membership model sort of creates a more predictable steady demand and it seems like it brings higher sales conversion, can you maybe just talk about whether you expect any margin implications when this pricing model is fully ramped?

The way that we’re pricing the membership packages now, we would expect similar gross margins over time. I think we’re still early, we’re still in price discovery, I’d say, as it relates to what the consumer is looking for. But over time, we would expect the gross margin profile to be consistent with what we’ve seen during the first quarter at 70%.

The next question is from the line of Doug Anmuth with JP Morgan.

I have two. First, Jason, just hoping that for the guide you could perhaps parse out a little bit around how are you thinking about Active Learners and then ARPU as you go through ‘22? And then just secondly, just curious with the guidance for ‘22, does that -- on the DTC side, does that assume stable trends with March and April, or is there any further kind of deterioration and softening built in there? Thank you.

Yes, no problem. Thanks for the questions. So from an Active Leaner perspective, I mean certainly, you saw the number, about 56% during the first quarter. We saw a strong growth there. And a lot of that was predicated on what we have been guiding to, which was significant levels of implementation in our Varsity Tutors for Schools initiative. So, from a learner perspective, if you’re modeling that downstream, we’ve always said that you should expect ARPU declines on the consumer side in the mid- to single digits, given the mix shift towards a higher proportion of classes. And then, what we’re seeing here on the institutional side is certainly a lower price point as more of those students are also participating in the 1-to-5 classes offering. So, net-net, if I had to forecast over the fullness of the year, I think you should continue to model mid-double-digits declines in ARPU as we move forward, which is consistent with what we saw during the first quarter, given the mix expectations between consumer and institutional.

Yes, mid-teens, yes.

And then, I alluded to it earlier, again, I think two-thirds of the decline in the guide is more -- is related to the membership, one-third the macro, [Technical Difficulty] wallet, they’re buying closer but they know that [Technical Difficulty] students and their children have significant needs, and they expect to come back to [Technical Difficulty]. The other thing to keep in mind in the consumer [Technical Difficulty] it’s much easier to put your arms around as consumers are more used to paying for things on either subscription or membership basis. The lower upfront price point [Technical Difficulty] per month is going up really well. And customers are willing to do [Technical Difficulty] for that lower price [Technical Difficulty] because they know that [Technical Difficulty].

The one other thing I’d mention is some of this is definitely related to the fact we’re gearing up for some sort of months leisure summer. One of the things that we [Technical Difficulty] is that people are planning to take a very leisurely summer [Technical Difficulty]. So you’re seeing fewer academic activity schedule [Technical Difficulty] and we don’t attribute any of that effort to [Technical Difficulty] difficult to disentangle from [Technical Difficulty] package today that I’m not going to [Technical Difficulty] and then repurchase and other one U.S. back to school starts So, that’s what we attribute to people being very clear. There’s a little bit less summer academic activities planned, but everything will lead us to believe there’s still a great, great need and a lot of demand for tutoring as back-to-school season.

The next question is from the line of Andrew Boone with JMP Securities.

Two, please. So to start off, I’ll go down the same topic everyone else is. Given the learnings that you’re seeing in terms of lower prices with subscription, are there any learnings that you can extend back to your subscription model, does that make you rethink in terms of any of your price points or just to go-to-market in terms of maybe offering some more packages? And then secondly, going to Varsity Tutors for Schools. It sounds like sales execution improved in terms of the 61 findings you guys talked about. Can you help us better understand the drivers there, whether that’s just better sales execution and maturation of the sales force? Anything you’d like to call it there?

Good question. So, we’ve been experiencing with various forms of subscriptions for a while now and it continued to kind of hone in on what we thought would be most compelling to consumers. And as we’ve continued to increase the level of testing we’ve done and seen good traction, there’s obviously been a shift in the headlines over the course of the last couple of months on what’s going on with the economy. So, as we think about what’s likely to resonate in a future state, beyond what we’re seeing today, we also think that having memberships that are lower upfront and lend themselves towards recurring relationships that just default to on and can span many years, we think that’s a really good solution. So, that certainly an environment where there’s macro pressures is helpful, but it’s also unrelated to that, I think, a function of just normalization of education, people wanting help across a wide variety of subjects potentially spanning many years of this whole GPA war concept where people are really focused on GPA, which of course, is the culmination of good grades and lots and lots and lots of classes as opposed to test prep where people would historically trim a little bit more in. And so, those kind of two things converge to create an environment where we can create products that are lower upfront that resonate more with customers that we believe they’ll be more likely to buy. And that over time can generate relationships that are much, much longer in duration than what was possible in the package model.

And the only thing I’d add is that mindset absolutely parlays itself into our schools offering. So, as it relates to the on-demand and teacher-led products, we’re in the early stages of price discussions with school partners. What I could tell you is that the on-demand and teacher-led offerings to be very competitively priced in order to allow school districts to significantly increase the number of students that can be helped with our product offerings. So, the pursuing cost would be much lower than the high dosage tutoring, but there’ll be a lot more students covered given school contracts. We’re in the early innings of these conversations. But net-net, we expect to provide more details after we get through this key back-to-schooling season, which happens from July and August.

Anything on the sales force or sales execution to call out?

Sure. So, on the sales execution front, we recently had Anthony Salcito joined to lead our institutional efforts. So he’s the Chief Institutional Business Officer, joined us just a couple months ago, helped overall our product strategy with an eye towards back-to-school execution and a focus on larger accounts than we targeted historically. So, Anthony was previously the Vice President of Worldwide Education for Microsoft and led their $4 billion, $5 billion P&L for all education customers worldwide and has been a tremendous help thus far in really informing and evolving our strategy as to how we bring these multitude of different product capabilities we have together in a really elegant way that can meet the unique needs of schools, which of course has been a net new area for us over the course of the past year. So, it’s also something that the way that we’re going to market and the way that we’re framing these relationships lends itself to recurrence over much longer periods of time and embeds the offerings in a way that we think make them really sticky. So, while only 2% of the American Rescue Plan funds or $24 billion have been spent at the end of the year and we expect for that to drive growth for over the next several years in a really material fashion, we are also using this as an opportunity to really catalyze our entry into schools and then build products that provide so much value that there’s a lot of stickiness and recurrence that schools would never kind of want to get rid of them is our goal. So we -- to kind of summarize, new leader, super excited about his contributions. We have a new product strategy that augments the high-dosage tutoring model that’s already getting a lot of success and traction. And then there’s a kind of refocusing occurring on different accounts than we’ve had in the past. So, again, back to one of the other questions around the investments we’ve made here. We have kind of slowed the overall total rate of hiring and we’re now growing into that investment available to provide operating leverage in the year ahead. So, I feel really good about the momentum that we have for the rest of the year.

The next one is from the line of Aaron Kessler with Raymond James.

A couple of questions. Maybe just on the gross margins. Can you just give us a sense for how we should think about gross margin remainder of the year, maybe kind of the seasonality that we should think about for gross margins, especially with the school districts probably having an influence on that? And just any further update on bookings for Varsity Tutors for Schools in Q1 or kind of ending schools? And then, any updates on kind f Q2 bookings there as well?

So, on the gross margin, certainly, we saw improved gross margins in Q1 year-over-year, about 200 basis points of improvement, probably three key factors that drove that drove that improvement. One, we discontinued Veritas Prep, which was a lower-margin product during the fourth quarter. Second, we continue to optimize our class offering looking at the frequency, the depth of the product offering and continue to refine the go-to-market strategy there. And as you saw during the quarter, pretty significant increase is in the class business, up 243% year-over-year. So certainly, the mix has continued to improve at 14%, which is in line with our prior discussions. And then, the last piece would be we did increase prices to a small extent at the start of the year, consistent with historical patterns. And then, on a go-forward basis, we continue to believe 70% margins is the target and the expectation for the remainder of 2022. and similarly believe that the Varsity Tutors for Schools product offerings will be in line with what you’ve seen to date in the first quarter as we move through the course of the coming year.

And any updated stats on bookings for Varsity Tutors for Schools, either maybe ending school you had in Q1 or the quarter-to-date trends are you seeing as well?

Well, we’re not planning to break them out, but one of the things with that we can share today is that we’re still tracking for the original GAAP forecast that we shared and feel good about Varsity Tutors for Schools accounting for 10% or more GAAP revenue for the year. So that continues to track. And as we head in the back-to-school and we have these two new product offerings to complement high-dosage tutoring, that’s already received a lot of traction. I think we feel good about that original forecast and what was implied there. And then, we’re just now heading into what we’ll determine the full extent of the repurchases from existing customers, what product they’re interested in leveraging with their student base and then also open net new customers that we would expect and target higher to contract with over the course of the next quarter. So, this is really the period where it kind of all kicks off. But, I think we feel really good about the momentum we have and then the extent to which we can meet the market need.

The next question is from the line of Brett Knoblauch with Cantor Fitzgerald.

Maybe just on the membership model at, call it, the low end of the range, $200 a month, that’s $2,400 for the year. Last year, it looks like average revenue per learner was $1,100? What percentage of your learners last year paid $2,400 where it might be -- makes more sense on a price basis for that learner to enroll in the membership model as opposed to the more transactional consumer model they did last year?

Well, what’s interesting about it -- and thank you for that question, is that you don’t think we’re sacrificing customers with this model. It not only appeals to folks who can afford to pay upfront, but it appears to be also appealing to those people, net new customers as well. So, that was kind of interesting about the initial data due to higher conversion that we’re seeing. So, there’s potential that we actually make this accessible to more learners. So, that’s something that’s both, important to us from the perspective of being a mission-driven company that cares deeply about expanding access to education and tutoring specifically, but it’s also helpful from the perspective of lowering that barrier to actually trying. So, right now, we’re still in the early days of experiment the data, promising [ph] this early. So, we’re going to continue to use those miles. And as we see traction on memberships to increase the proportion of customers that are offered over time and in which audience segments, but I’d say it’s too early to answer that question specifically. But there are customers that are committed to longer periods of time and the relationship on, which we think is really promising.

And then, I guess, just kind of trying to put together your new full year guide. Do you plan on introducing the membership model to your entire active learner base by the end of the year? And should I read into that maybe 2Q is more of an impactful macro and the back half of the year, kind of lower revenue growth there is more a result of the membership model?

Well, it’s a sequential rollout. I think it would be too early to say it will be fully rolled out by the end of the year. But as we thought about the guide and forecasting for the remainder of the year, we factored in the fact that an increasing percentage of prospective customers are being offered the membership model. As that number goes up, the amount of revenue that is kind of subject to the new membership revenue recognition, which is linear and occurs sequentially over time, of course, [Technical Difficulty] front-loaded package model increases. So you have more customers that are going into what is effectively a J-curve with those units with rev rec. And after X months, we believe it can be better off. But that relationship is still early. So, promising data, certainly Q3, with sequential rollout would be most impacted simply because that’s a big quarter for us. And so, to the extent you’re pushing out some of the revenue couple of months in terms of much higher life time value relationships patiently, that is where you see the most effect. So, as we thought about the guide, we did assume that there is increasing proportion of memberships over the next couple of quarters. And eventually, that J-curve should catch back up. But that kind of pushes out some of the short-term revenue recognition, sort of long-term economics.

And certainly, while we think that the membership model is more conducive to more customers being able to surpass that high-cost entering into package model, there are components of the business that it’s unlikely that we would offer the membership. And a couple of examples would be like the professional certification business, where people trying to just pass an exam or similarly in the test prep space where people are looking to pass some newer tests, we believe the package model is still worth there. But early days. We’ll also continue to see the effects of the summer, heightened summer travel. During the summers, that will also depress Q3 to a greater extent than we previously guided.

Next from the line of Mario Lu with Barclays.

You mentioned recently that roughly 2% of the American Rescue Plan dollars have been spent thus far. So just wondering if you could help us identify what you believe are the main factors that is holding up spend and how you think this could be marked [ph] in the near-term?

Good question. So this past year, schools focused on safely reopening and staffing issues. So, that included all of the national debates you saw around masks. It also included issues with getting kids to school with school buses and also extended teacher shortages where you have major school districts that are shutting down a day, a week. And so, one of the things that we’ve seen is that schools focus initially there and are now starting to think about whether they -- how to best leverage these funds. So, in some cases, you’re seeing school districts that are trying to get creative and see if they can use it for, say, new HVAC systems, which are quite expensive. But in other cases, they’re actually saying, wait a second, this money is earmarked for COVID-related learning loss. We need to be really thoughtful about how we deploy it, and we need to start moving. So, you’re seeing pressure from the Department of Education. You’re seeing pressure from state education agencies that school districts should kind of pick up the pace because the reality is that the data that is coming out on student results relative to historical standards is really poor. And it’s really sad, and people are increasingly realizing that actually needs to be taken out. So I think you’re going to see the pace pick up as we head into this next back-to-school and that the pressure will be on school districts to thoughtfully and intelligently deploy different learning solutions that have a high degree probability of remediating the severe learning loss that you’re now seeing in some of these state-level results for standardized testing. So, I can’t speak to everything that has slowed down schools initially. But I think the realization that it’s unlikely that funding time lines will be extended considerably is now putting real pressure on school districts to act and move quickly. But our pipeline continues to grow, and we feel really good about the potential to solve large problems for large school districts we’re seeing agencies in the year head.

The next question is from the line of Greg Gibas with Northland Securities.

I was wondering if you could maybe talk a little bit more about how much of a decline in bookings that you saw in March and April relative to the strength you saw in January and February?

Well, -- so, one of the things -- so we are actively rolling out this membership. And so, you’re shifting people from what had been a bookings model where people would prepay for north of $1,000 to what -- and as we think about bookings, we actually are accounting as just one month upfront. So, we’re only getting the first month of that bookings number. So, it’s a little bit of apples and cucumbers to some extent. But, we did see a sequential slowdown as we’ve approached summer with particular areas that would have been driven by summer-related academic activities, kind of disproportionately seeing that slow down. So, it’s kind of tough to break the two apart, but it was enough that we felt it was important to highlight and be transparent about how some of the repurchase trends, in particular, just on the like average order value side could be related to some of the macro pressures. But, what we’re hearing, as Jason mentioned, is people are purchasing a little bit closer to when they expect to consume, which then lends itself towards a little bit of a smaller package throughout the school year and then purchasing again, the back-to-school period as opposed to doing it all at once. So, I think we feel good about the long-term trends related to people focusing on the GPA is to a much greater extent that, of course, spans high school and college. We had really strong K-5 bookings, in the first quarter, 57% bookings growth. That’s an area where we would expect a little bit of a slowdown in the summer given the less -- or just the less of a focus on enrichment activities, academic activities that we expect this summer with the height and leisure travel. But again, as we head back into back-to-school, I think we’re feeling good about the long-term consumer trends that relate to need state. The other thing I’d add is -- our institutional, it is kind of unrelated to those trends, and we’re kind of set up to -- in a way that we feel really good about for back-to-school as well. So, we expect, as I mentioned, to achieve the revenue goal that we set out for. And then, we have a couple of new products that we think allow for us to meet new and varying needs, and they can be bundled together in a way that’s really compelling. And these new products really lend themselves towards recurring relationships, recurring revenue in a way that we’re really excited about.

Great. And then, it looks like a really nice momentum in the institutional side. I wanted to ask maybe what your full year breakdown, I guess, between direct-to-consumer and institutional ones. And then, if you can remind us the gross margin differential between those two?

Yes. So, our initial guide at Varsity Tutors for Schools business is about 10% of the total guide, so that would infer $20 million. We still believe we’re on track to achieve that during the course of the year. And then from a margin perspective, we believe and have priced the products fairly consistently to achieve the blended margin that you saw during the first quarter at 70%.

Thank you, Mr. Gibas. There are no further questions. And this concludes today’s conference call. You may now disconnect.