Duolingo, Inc. (NASDAQ:DUOL) Q4 2024 Earnings Call February 27, 2025 5:30 PM ET Company Participants Deborah Belevan - Investor Relations Luis von Ahn - Co-Founder and Chief Executive Officer Matt Skaruppa - Chief Financial Officer Conference Call Participants Bryan Smilek - JPMorgan Aaron Kessler - Seaport Ralph Schackart - William Blair Ryan MacDonald - Needham Ross Sandler - Barclays Andrew Boone - JMP Justin Patterson - KeyBanc Mark Mahaney - Evercore Wyatt Swanson - D.A. Davidson Chris Kuntarich - UBS ...

User Engagement and Growth - As of December 31, 2024, Duolingo has over 100 million monthly active users and offers courses in over 40 languages[28]. - Approximately 9% of monthly active users are paid subscribers, with significant growth in subscriber penetration since the launch of the paid subscription in 2017[32]. - Duolingo learners complete over a billion exercises daily, creating the world's largest learning dataset[31]. - As of December 31, 2024, Duolingo had approximately 32 million daily active users with a 7-day streak or longer, and about 10 million daily active users with a 365-day streak or longer[38]. - The Duolingo App offers courses in over 40 languages to more than 100 million monthly active users, making it the top-grossing app globally in the Education category[42]. Financial Performance - Total revenues for the year ended December 31, 2024, reached $748,024 thousand, representing a 40.9% increase from $531,109 thousand in 2023[397]. - Gross profit for 2024 was $544,379 thousand, up 39.9% from $389,004 thousand in 2023[397]. - Net income for 2024 was $88,574 thousand, compared to a net income of $16,067 thousand in 2023, marking a significant increase[397]. - Total current assets increased to $1,101,588 thousand in 2024, up from $897,798 thousand in 2023, reflecting a growth of 22.6%[395]. - Deferred revenues rose to $372,884 thousand in 2024, a 49.8% increase from $249,192 thousand in 2023[395]. Product and Service Expansion - Duolingo launched a math course in 2022 and a music course in 2023, expanding its platform beyond language learning to additional subjects[36]. - Duolingo Max, launched in 2023, is a premium subscription tier that provides additional features powered by generative AI technology[44]. - The company aims to expand its addressable market by diversifying its product offerings and leveraging its scalable technology platform[36]. Market and Competitive Landscape - The online language learning industry is highly competitive, with low switching costs and constant innovation from competitors[19]. - Consumer spending on online and offline language learning is projected to reach about $123 billion by 2027[27]. Technology and Innovation - Duolingo's focus on data analytics and AI aims to enhance user engagement and learning efficacy, supported by a strong roadmap for future feature improvements[33]. - The company capitalized $9.0 million in software development costs during the year ended December 31, 2024, bringing total capitalized software development costs to $35.7 million[381]. - The company’s technology platform focuses on AI, machine learning, and data analytics to enhance the learning experience and optimize user engagement[40]. Regulatory and Compliance - The company is subject to various data protection regulations, including GDPR in the EEA and U.K., which impose strict compliance requirements[63]. - The company has implemented age-gating procedures for its Duolingo App to comply with COPPA regulations for users under 13[62]. - The company is subject to evolving laws and regulations regarding consumer protection and data privacy, which may impact its business operations[61]. Cash Flow and Investments - Cash and cash equivalents at the end of 2024 were $785,791 thousand, up from $747,610 thousand in 2023, showing a growth of 5.1%[395]. - The company reported a net cash used for investing activities of $217,330,000 in 2024, significantly higher than $13,584,000 in 2023, primarily due to purchases of investments[403]. - The company’s cash, cash equivalents, and restricted cash at the end of the period totaled $788,526,000, up from $750,345,000 in 2023, reflecting a strong liquidity position[403]. Stock-Based Compensation and Equity - The total stock-based compensation expense for the year ended December 31, 2024, was $110,477, an increase of 16.1% from $95,221 in 2023 and up 49.6% from $73,820 in 2022[509]. - The intrinsic value of options exercised was approximately $365,484 for the year ended December 31, 2024, compared to $192,456 in 2023 and $140,884 in 2022[500]. - As of December 31, 2024, there were 1,802 restricted stock units (RSUs) outstanding with a weighted average grant date fair value of $143.96 per share[500]. Acquisitions and Strategic Growth - The company completed two acquisitions in July 2024 for a total consideration of $7,500,000, with $6,600,000 paid in cash[464]. - The company’s acquisitions of companies net of cash acquired amounted to $6,595,000 in 2024, indicating strategic growth through acquisitions[403]. Risks and Challenges - The company has experienced operating losses in the past and may face challenges in achieving or maintaining profitability in the future[19]. - The company relies on third-party platforms for product distribution and payment collection, which poses risks to its business[21]. - The company has not entered into any hedging arrangements regarding foreign currency risk, which may affect its operating results due to fluctuations in exchange rates[370].

User Engagement Metrics - Daily Active Users (DAUs) increased to 40.5 million in Q4 2024, a 51% year-over-year growth[4] - Monthly Active Users (MAUs) reached 116.7 million, reflecting a 32% year-over-year increase[4] - Monthly Active Users (MAUs) and Daily Active Users (DAUs) are key metrics for measuring user engagement, with MAUs defined as unique users engaging monthly[57][58] Financial Performance - Total revenue for Q4 2024 was $209.6 million, up 39% year-over-year, while FY 2024 revenue was $748.0 million, a 41% increase[4] - Net income for Q4 2024 was $13.9 million, compared to $12.1 million in Q4 2023, marking a 15% increase[4] - Adjusted EBITDA for Q4 2024 was $52.3 million, a 49% increase year-over-year, with a margin of 25.0%[4] - Total bookings in Q4 2024 reached $271.6 million, a 42% increase year-over-year, driven by a 50% rise in subscription bookings[4] - Free cash flow for Q4 2024 was $87.8 million, an 84% increase year-over-year[4] - Revenues for Q4 2024 reached $209,550, a 38.7% increase from $150,985 in Q4 2023[69] - Net income for Q4 2024 was $13,907, compared to $12,117 in Q4 2023, reflecting a 14.8% growth[69] - Free cash flow for 2024 was $274,937, up from $144,273 in 2023, representing an increase of 90.5%[81] Subscriber Growth - Paid subscribers grew to 9.5 million at the end of Q4 2024, a 43% increase from the previous year[4] - The introduction of Duolingo Max contributed to significant user growth and accounted for 5% of paid subscribers by year-end[4] Future Projections - For Q1 2025, the company expects bookings between $252 million and $255 million, representing a year-over-year growth of 27.6% to 29.2%[49] - For FY 2025, the company projects revenues between $962.5 million and $978.5 million, with a year-over-year growth of 28.7% to 30.8%[49] - On a constant currency basis, FY 2025 bookings growth is estimated at 26.2% to 28.1% and revenue growth at 30.1% to 32.2%[50] Expense Management - In Q4, GAAP R&D expense decreased from 33% to 32% of revenue year over year, and in FY 2024, it decreased from 37% to 31% of revenue[42] - In Q4, GAAP S&M expense decreased from 13% to 12% of revenue year over year, and in FY 2024, it decreased from 14% to 12%[43] - In Q4, GAAP G&A expense decreased from 24% to 22% of revenue year over year, and in FY 2024, it decreased from 25% to 21%[44] Adjusted EBITDA - Adjusted EBITDA in Q4 increased by $17.1 million year over year to $52.3 million, representing a 25.0% margin; for FY 2024, it increased by $98.3 million to $191.9 million, with a 25.7% margin[46] - The adjusted EBITDA margin improved from 23.3% in Q4 2023 to 25.0% in Q4 2024[75] Assets and Liabilities - Total assets increased from $953,957 in 2023 to $1,301,728 in 2024, marking a 36.4% rise[68] - Cash and cash equivalents rose from $747,610 in 2023 to $785,791 in 2024, an increase of 5.5%[68] - The company reported total liabilities of $477,178 in 2024, up from $298,456 in 2023, a 60.0% increase[68] - Deferred revenues increased from $249,192 in 2023 to $372,884 in 2024, a growth of 49.7%[68] Research and Development - Research and development expenses for 2024 totaled $235,298, up from $194,352 in 2023, a 21.1% increase[77]

Core Insights - Duolingo achieved record quarterly bookings, revenue, daily active users (DAUs), and net new subscribers in Q4 2024, reflecting the effectiveness of its product-led strategy and focus on user engagement [2] - The company plans to continue investing in product development and features like Video Call to enhance user engagement and drive growth in 2025 [2] Financial Performance - The fourth quarter of 2024 marked the highest performance in terms of bookings and revenue for Duolingo, indicating strong market demand and user adoption [2] - The company emphasizes its commitment to long-term growth through strategic investments in its platform and user experience [2] Company Overview - Duolingo is recognized as the leading mobile learning platform globally, with its app being the most popular for language learning and the top-grossing app in the Education category on major app stores [4] - The company focuses on leveraging technology to provide an engaging and effective learning experience, aligning with its mission to make quality education universally accessible [4]

Core Viewpoint - Wall Street analysts predict Duolingo, Inc. (DUOL) will report quarterly earnings of $0.50 per share, reflecting a year-over-year increase of 92.3%, with revenues expected to reach $205.27 million, a 36% increase from the previous year [1] Earnings Estimates - Over the last 30 days, the consensus EPS estimate has been revised downward by 0.8%, indicating a collective reassessment by analysts [2] - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock performance [3] Revenue Projections - Analysts estimate 'Revenues- Other (including Advertising, DET and others)' to be $35.80 million, representing a 45.4% increase from the year-ago quarter [5] - 'Revenues- Subscription' is projected to reach $169.02 million, indicating a 43.9% increase from the prior-year quarter [5] User Metrics - Total bookings are expected to be $62.69 billion, compared to $191.03 million reported in the same quarter last year [6] - Daily active users (DAUs) are forecasted to reach 41.09 million, up from 26.9 million a year ago [6] - Monthly active users (MAUs) are anticipated to be 110.08 million, compared to 88.4 million in the same quarter last year [6] Subscriber Estimates - The consensus estimate for 'Paid subscribers (at period end)' is 9.29 million, up from 6.6 million a year ago [7] - 'Subscription bookings' are expected to be $208.12 million, compared to $157.78 million reported in the same quarter last year [7] Stock Performance - Duolingo shares have increased by 17.3% over the past month, contrasting with a -0.5% change in the Zacks S&P 500 composite [7]

Core Viewpoint - The market anticipates Duolingo, Inc. (DUOL) will report a year-over-year increase in earnings driven by higher revenues for the quarter ended December 2024, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - Duolingo is expected to post quarterly earnings of $0.50 per share, reflecting a year-over-year increase of +92.3% [3]. - Revenues are projected to reach $205.27 million, representing a 36% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 0.77% over the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Duolingo is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -2.16% [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from the consensus estimate, with positive readings being more predictive of earnings beats [6][7]. - A positive Earnings ESP combined with a strong Zacks Rank significantly increases the likelihood of an earnings surprise [8]. Historical Performance - Duolingo has beaten consensus EPS estimates in the last four quarters, with a notable surprise of +36.11% in the last reported quarter [12][13]. Industry Comparison - Another player in the Zacks Technology Services industry, V2X (VVX), is expected to report earnings of $1.14 per share, indicating a year-over-year decline of -6.6%, with revenues projected at $1.09 billion, up 4.7% [17]. - V2X has an Earnings ESP of 4.85% and a Zacks Rank of 3, suggesting a higher likelihood of beating the consensus EPS estimate [18].

I remember when I saw my first iPhone. One of my college friends had bought the device and was gleefully showing it to everyone he could. At the time, most people thought it was nice… but not that nice. (Many felt that about our friend’s enthusiasm, too.) The 2007 iPhone was slow, chunky, and took forever to load webpages. Even Wall Street wasn’t that impressed. Apple Inc. (AAPL) shares were trading at a split-adjusted $4.35 on the iPhone’s launch date in June 2007 and rose just 15% over the following two m ...

The most recent trading session ended with Duolingo, Inc. (DUOL) standing at $432.69, reflecting a +0.55% shift from the previouse trading day's closing. The stock's performance was ahead of the S&P 500's daily loss of 0.01%. Meanwhile, the Dow lost 0.37%, and the Nasdaq, a tech-heavy index, added 0.41%.Heading into today, shares of the company had gained 25.9% over the past month, outpacing the Business Services sector's gain of 15.7% and the S&P 500's gain of 4.88% in that time.Market participants will be ...

Duolingo - Duolingo operates an online-learning platform and app, focusing on foreign language education and expanding into music and math education [2][3] - The company is leveraging generative AI to create personalized lesson plans, enhancing user experience and learning retention [3] - Duolingo Max, the top subscription tier, features AI-powered interactions, including real-time conversations with a character, simulating a tutor-like experience [4] - Revenue estimates for 2025 are projected at $744 million, representing a nearly 30% year-over-year increase [4][5] Spotify Technology - Spotify has transitioned from being unprofitable in 2022 to a strong performer, with shares increasing over 670% since the start of 2023 [6][7] - The company reported a year-over-year revenue growth of 16% for the full year 2024, totaling €15.7 million ($16.30 million) [8] - Spotify achieved an all-time high gross margin of 32.2% and free cash flow of €877 million ($910.59 million), both representing record figures [8]

Company Participation in Investor Conferences - Duolingo, Inc. will participate in several upcoming investor conferences, including the Morgan Stanley Technology, Media and Telecom Conference on March 3rd, the Citizens JMP Technology Conference on March 4th, and the KBCM Emerging Technology Summit on March 5th [1][3] Company Overview - Duolingo is recognized as the leading mobile learning platform globally, with its flagship app being the most popular method for language learning and the top-grossing app in the Education category on both Google Play and the Apple App Store [2] - The company emphasizes technology in its operations and has consistently invested in providing a fun, engaging, and effective learning experience, while aiming to develop the best education available universally [2]