Core Insights - Duolingo, Inc. will have CFO Matthew Skaruppa host a fireside chat at JP Morgan's Annual Global Technology, Media and Communications Conference on May 13, 2025 [1] - A live audio webcast of the session will be available on the company's Investor Relations website [1] Company Overview - Duolingo is the leading mobile learning platform globally, with its flagship app being the most popular way to learn languages and the top-grossing app in the Education category on both Google Play and the Apple App Store [2] - The company focuses on technology to enhance the learning experience, aiming to provide a fun, engaging, and effective education while making it universally accessible [2]

Core Viewpoint - JPMorgan analyst Bryan M. Smilek maintains an Overweight rating on Duolingo, Inc. with a price target of $500, indicating strong potential for user growth over the coming years [1]. User Growth and Market Potential - Duolingo has 130 million monthly active users, representing approximately 18% of global online language learners and about 7% of all language learners worldwide, highlighting significant room for growth [3]. - The motivations for language learning vary by geography and language, with education, social connections, entertainment, travel, and career advancement identified as common drivers in Duolingo's 2024 Language Learning Report [2]. Strategic Growth Initiatives - Duolingo is positioned to expand its global presence by broadening its content library, improving teaching effectiveness, investing in underpenetrated regions, and enhancing the overall learner experience [4]. - The company attributes around 90% of its user growth to organic channels and plans to scale through social-first marketing, influencer partnerships, and brand collaborations, alongside localized efforts with new country manager hires [5]. Monetization and Financial Outlook - Duolingo is successfully expanding its monetization efforts and growing its base of paid subscribers, with improvements in teaching effectiveness, particularly in advanced English learning, contributing to an expanded total addressable market [6]. - The company is on track to achieve its long-term adjusted EBITDA margin target of 30–35%, supported by economies of scale and disciplined cost management [7].

Core Viewpoint - Duolingo, Inc. (DUOL) shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise earnings estimates [1][2]. Earnings Estimate Revisions - Analysts' optimism regarding Duolingo's earnings prospects is leading to higher estimates, which is expected to positively impact the stock price [2]. - The Zacks Rank system indicates a strong correlation between earnings estimate revisions and stock price movements, with Zacks 1 Ranked stocks averaging a +25% annual return since 2008 [3]. - For the current quarter, Duolingo is expected to earn $0.52 per share, reflecting a +1.96% change from the previous year, with a 21.13% increase in consensus estimates over the last 30 days [5]. - For the full year, the expected earnings per share is $2.84, representing a +51.06% change from the prior year, with an 8.84% increase in consensus estimates due to five upward revisions against one negative revision [6][7]. Zacks Rank and Performance - Duolingo has achieved a Zacks Rank 2 (Buy) due to favorable estimate revisions, indicating strong potential for outperformance compared to the S&P 500 [8]. - The stock has increased by 66.7% over the past four weeks, suggesting investor confidence in its earnings growth prospects [9].

Group 1 - Duolingo reported better-than-expected first-quarter financial results, with revenue growth of 38% to $230.74 million, surpassing analyst estimates of $222.98 million, and EPS of $0.72 exceeding the consensus estimate of $0.51 [2][3] - The growth was primarily driven by subscriptions, with paid subscribers reaching 10.3 million, above the consensus of 10.12 million, and subscription bookings growing 43.8% year-over-year to $232.2 million, exceeding the consensus of $218.5 million [3][5] - Daily active users (DAUs) increased by 49% to 46.6 million, while monthly active users (MAUs) rose by 33% to 130.2 million, aided by a viral campaign [4][5] Group 2 - Duolingo raised its fiscal 2025 revenue outlook from $962.50 million-$978.50 million to $987.00 million-$996.00 million, compared to the previous estimate of $977.16 million [6] - The stock has performed strongly, up 23.4% year-to-date and 79.4% over the past year, with shares trading at $474.13, reflecting a premium multiple [7][8] - Analysts expect continued strong subscription revenue growth in the mid-40s range for fiscal 2025, higher than the current consensus of 38.3% [7]

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Financial Performance - Revenues for Q1 2025 reached $230,743,000, a 37.7% increase from $167,553,000 in Q1 2024[21] - Gross profit for Q1 2025 was $164,096,000, compared to $122,362,000 in Q1 2024, reflecting a 34.1% growth[21] - Net income for Q1 2025 was $35,135,000, up from $26,956,000 in Q1 2024, representing a 30.3% increase[21] - Total revenues for the three months ended March 31, 2025, were $230,743,000, a 37.7% increase from $167,553,000 in the same period of 2024[60] - Subscription revenue reached $190,987,000, up from $131,688,000, reflecting a growth of 45% year-over-year[60] - Net income (GAAP) for the three months ended March 31, 2025, was $35.1 million, compared to $27.0 million in 2024[98] - Adjusted EBITDA for the same period was $62.8 million, an increase from $44.0 million in the prior year[98] - Free cash flow for Q1 2025 was $103.0 million, up from $78.5 million in Q1 2024, representing an increase of $24.5 million[117] User Engagement - Monthly active users (MAUs) and daily active users (DAUs) metrics are tracked to assess user engagement, although specific numbers were not disclosed[15] - The Company reported approximately 130.2 million monthly active users (MAUs) for the three months ended March 31, 2025, representing a 33% increase from 97.6 million MAUs in the same period of 2024[101] - Daily active users (DAUs) reached approximately 46.6 million, a 49% increase from 31.4 million DAUs in the prior year[103] - Paid subscribers grew to approximately 10.3 million, marking a 40% increase from 7.4 million in the same period of 2024[105] Financial Position - Total current assets increased to $1,219,657,000 as of March 31, 2025, from $1,101,588,000 at the end of 2024, marking an 11% growth[18] - Cash and cash equivalents at the end of Q1 2025 were $883,996,000, up from $785,791,000 at the end of 2024, a 12.5% increase[18] - Stockholders' equity increased to $893,826,000 as of March 31, 2025, from $824,550,000 at the end of 2024, representing an 8.4% growth[18] - As of March 31, 2025, the company had $884.0 million in cash and cash equivalents and $115.3 million in short-term investments[147] Deferred Revenue - Deferred revenues rose to $415,023,000 in Q1 2025, up from $372,884,000 at the end of 2024, indicating a 11.2% increase[18] - Deferred revenue increased to $415,023,000 as of March 31, 2025, compared to $279,313,000 at the end of March 2024, indicating a 48.6% rise[62] - Deferred revenues amounted to $415.0 million, expected to be recognized as revenue in the next 12 months[151] Operating Expenses - Operating expenses for Q1 2025 totaled $140,502,000, compared to $105,923,000 in Q1 2024, reflecting a 32.6% increase[21] - Research and development expenses increased to $756,000 in Q1 2025 from $440,000 in Q1 2024, a rise of 71.8%[65] - Sales and marketing expenses increased by $6.7 million, or 34%, to $26.7 million, primarily due to higher personnel costs and technology expenses[141] - General and administrative expenses rose by $8.3 million, or 24%, to $43.5 million, influenced by increased personnel costs[143] Market Presence - The majority of revenue is derived from subscriptions and advertising, with Apple and Google accounting for 67.7% and 16.2% of total accounts receivable as of March 31, 2025[42] - Duolingo operates as a single segment, generating revenue through time-based subscriptions, in-app advertising, and the Duolingo English Test[43] - The company has locations in the U.S., China, and Germany, indicating a diversified geographical presence[31] - Duolingo offers courses in over 40 languages, showcasing its extensive product offering in the language learning market[31] Compliance and Risk Management - The company is evaluating the impact of recently issued accounting standards on its consolidated financial statements, indicating proactive compliance measures[48] - The company has not experienced any credit losses on its financial assets historically, indicating a strong credit risk management[45] - No impairment losses were recognized during the three months ended March 31, 2025, and 2024, reflecting stable asset valuations[44] Currency and Inflation Impact - The impact of currency exchange rates is significant for understanding period-to-period comparisons[118] - International receipts may be reduced during periods of a strengthening U.S. dollar due to payment providers translating local currency into USD[162] - Inflationary factors such as increases in costs may adversely affect the company's results of operations[163] - The company does not believe inflation has had a material effect on its business or financial condition to date[163] - Significant inflationary pressures could hinder the company's ability to offset higher costs through price increases[164]

Financial Data and Key Metrics Changes - The company expects a full-year gross margin decline of approximately 150 basis points year-over-year, with Q1 showing a better-than-expected decline of 200 basis points compared to the anticipated 300 basis points [10] - The average revenue per user is around $6, indicating a strong value proposition in the global market [20] Business Line Data and Key Metrics Changes - The company added 48 new language courses, significantly increasing content production speed due to AI, which previously took about twelve years to add the first hundred courses [31][32] - Duolingo Max now accounts for about 7% of subscribers, showing strong growth and retention rates [29] Market Data and Key Metrics Changes - Daily active users (DAUs) grew by 49% year-over-year, indicating robust growth across all regions, with mature markets growing the fastest [36][38] - The company has a total of 30 million active users, with significant room for growth as the global language learning market is estimated at 2 billion people [38] Company Strategy and Development Direction - The company aims to expand beyond language learning into subjects like math, music, and chess, with a focus on creating content that is beneficial for users and society [77] - AI is central to the company's strategy, enabling faster content creation and feature development, which is expected to enhance user engagement and retention [21][110] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the roadmap for 2025, noting no significant changes in trends due to macroeconomic factors [18][20] - The company is committed to being AI-first, focusing on automating processes and developing new features to enhance user experience [112][114] Other Important Information - The company plans to lower subscription prices in certain markets, such as India, to increase adoption [55] - Marketing efforts will continue to leverage social media for viral content, which has proven effective in user acquisition [94] Q&A Session Summary Question: Can you discuss the cadence of gross margin for the year? - The company expects a 150 basis point decline for the full year, with Q1 showing a better performance than anticipated [10] Question: What are the expectations for new language modules? - The company is excited about the addition of chess and other subjects, which are expected to increase user engagement [12][13] Question: Are there any macroeconomic impacts observed? - Management has not seen any significant changes in trends due to macroeconomic factors, maintaining confidence in growth [18][20] Question: How is the company leveraging generative AI? - AI is being used to create content more efficiently, allowing for rapid development of new features and courses [21][110] Question: What is the strategy for pricing and packaging? - The company is testing various pricing strategies and may adjust features across different subscription tiers [100][102] Question: How does the company view the competition in the AI space? - The company believes it is ahead of competitors in leveraging AI for language learning and content creation [111] Question: What is the outlook for subscriber conversion rates? - The company sees positive incrementality from Duolingo Max, contributing to overall platform lifetime value [127]

Financial Data and Key Metrics Changes - The company expects a full-year gross margin decline of about 150 basis points year-over-year, with Q1 showing a better-than-expected decline of 200 basis points instead of the anticipated 300 basis points [11][12] - The average revenue per user is in the $6 range, indicating a strong value proposition [21] Business Line Data and Key Metrics Changes - Duolingo Max now accounts for about 7% of subscribers, showing impressive growth and contributing to a strong Q1 performance [31] - The company added 48 new language courses in a year, significantly faster than the previous pace of course additions [32] Market Data and Key Metrics Changes - Daily active users (DAUs) grew by 49% year-over-year, with strong growth across all regions, including mature markets [37][39] - The company has 30 million active users, indicating substantial room for growth in the language learning market, which has an estimated 2 billion learners globally [39] Company Strategy and Development Direction - The company aims to expand beyond language learning into subjects like math, music, and chess, with a focus on creating content that is beneficial for users and society [79] - AI is a central part of the company's strategy, enabling faster content creation and improved teaching methods [114][115] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the roadmap for 2025, noting no significant changes in trends due to macroeconomic factors [20] - The company is committed to being AI-first, focusing on automating processes while investing in new AI features [116][118] Other Important Information - The company is testing pricing strategies and may adjust features across different subscription tiers [102][105] - Marketing efforts will continue to leverage social media for efficient user acquisition and engagement [96][98] Q&A Session Summary Question: Can you discuss the cadence of gross margin for the year? - The company expects a 150 basis point decline for the full year, with Q1 showing a better performance than anticipated [11][12] Question: What are the expectations for new language modules? - The company is excited about the addition of chess and other subjects, which are expected to increase user engagement [14][15] Question: Are there any signs of macro softness affecting the business? - Management has not observed any significant changes in trends due to the macro environment and remains confident in the business outlook [20][21] Question: How is the company prioritizing new content production? - The focus remains on language learning, but there will be significant improvements in math and music content due to AI [65] Question: What is the impact of Duolingo Max on subscriber conversion rates? - The company believes that Max has a positive impact on platform lifetime value and is seeing upgrades from Super subscribers [131]

User Growth - Daily Active Users (DAUs) increased to 46.6 million, a 49% year-over-year growth, while Monthly Active Users (MAUs) reached 130.2 million, up 33% year-over-year[4][11]. - Daily Active Users (DAUs) are projected to grow in the range of 40% to 45% for Q2 2025[45]. Financial Performance - Total revenue for Q1 2025 was $230.7 million, representing a 38% increase year-over-year, with subscription revenue growing by 45% year-over-year to $191.0 million[11][31][33]. - Net income rose to $35.1 million, a 30% increase compared to $27.0 million in Q1 2024[11][41]. - Adjusted EBITDA increased to $62.8 million, reflecting a margin of 27.2%, up from 26.3% in the prior year[11][41]. - Revenues increased by 37.7% from $167,553,000 in Q1 2024 to $230,743,000 in Q1 2025[65]. - Gross profit rose to $164,096,000 in Q1 2025, up 34.1% from $122,362,000 in Q1 2024[65]. - Net income increased by 30.4% from $26,956,000 in Q1 2024 to $35,135,000 in Q1 2025[66]. - Adjusted EBITDA grew by 42.6% to $62,804,000 in Q1 2025, compared to $44,005,000 in Q1 2024[70]. - Free cash flow reached $103,012,000 in Q1 2025, up 31.2% from $78,493,000 in Q1 2024[76]. Bookings and Guidance - Total bookings for Q1 2025 were $271.6 million, a 38% increase year-over-year, driven by a 44% rise in subscription bookings[11][31]. - The company is raising its full-year bookings guidance to a midpoint of 29% year-over-year growth[6]. - Duolingo expects Q2 2025 bookings to be between $243.5 million and $246.5 million, representing a year-over-year growth of 28.1% to 29.7%[43]. - For FY 2025, Duolingo projects total bookings of $1,117.5 million to $1,126.5 million, with a year-over-year growth of 28.4% to 29.4%[43]. Revenue and EBITDA Projections - Revenue guidance for Q2 2025 is set at $238.5 million to $241.5 million, indicating a year-over-year growth of 33.7% to 35.4%[43]. - The company anticipates FY 2025 revenues to range from $987 million to $996 million, reflecting a year-over-year growth of 31.9% to 33.2%[43]. - Adjusted EBITDA for Q2 2025 is expected to be between $58.4 million and $61.6 million, with an adjusted EBITDA margin of 24.5% to 25.5%[43][47]. - Duolingo is raising its full-year Adjusted EBITDA margin guidance to 28% at the midpoint, representing a 230 basis point expansion over the previous year[47]. - Duolingo anticipates a sequential Adjusted EBITDA margin expansion of about 200 basis points in Q3 2025, with further improvements expected in Q4[48]. Operational Metrics - Operating cash flow increased to $105.6 million, a 26% rise from $83.5 million in the prior year[11][41]. - Operating expenses increased by 32.6% to $140,502,000 in Q1 2025, compared to $105,923,000 in Q1 2024[65]. - The adjusted EBITDA margin improved slightly from 26.3% in Q1 2024 to 27.2% in Q1 2025[70]. Assets and Equity - Total assets increased from $1,301,728,000 in December 2024 to $1,403,146,000 in March 2025[64]. - Total stockholders' equity rose to $893,826,000 in March 2025, up from $824,550,000 in December 2024[64]. - Cash and cash equivalents increased from $785,791,000 in December 2024 to $883,996,000 in March 2025[64]. Subscriber Growth - Paid subscribers reached 10.3 million, marking a 40% increase from the previous year[11][31]. Product Development - A new Chess course will be launched, expanding the learning content beyond language[12][15]. - The Duolingo Max subscription tier is seeing increased adoption, with enhancements like 3D interactions and new features planned for the coming months[16][17]. Share Count - The fully diluted share count is expected to increase by about 1% in 2025[49]. Margin Expectations - The company expects a year-over-year decline in gross margin of approximately 150 basis points for FY 2025, an improvement from previous guidance[46].

Core Insights - Duolingo reported an outstanding first quarter for 2025, achieving the highest number of Daily Active Users in its history, indicating strong product and brand performance [2] - The company surpassed 10 million paid subscribers and experienced a 38% year-over-year revenue growth, driven by user momentum and increased adoption of premium subscription tiers [2] - Duolingo Max is anticipated to drive innovation and growth, with ongoing investments in AI enhancing content creation capabilities [2] Company Overview - Duolingo is recognized as the leading mobile learning platform globally, with its 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 [4] - The company is committed to providing a fun, engaging, and effective learning experience while striving to make high-quality education universally accessible [4]