Duolingo 2025 Investor Day Summary Company Overview - **Company**: Duolingo (NasdaqGS:DUOL) - **Event**: 2025 Investor Day - **Date**: September 16, 2025 Key Points Industry and Market Position - Duolingo aims to provide access to language education for everyone, regardless of financial status, addressing educational inequality [3][2] - Over 130 million active learners on Duolingo, with 90% learning for free [3] - Duolingo is used globally, with the most commonly learned language being English in most countries [4][5] Educational Approach and Features - Introduction of the **Duolingo Score**, a numerical representation of language proficiency ranging from 0 to 160 [8][9] - The score correlates with the Common European Framework of Reference (CEFR), with specific ranges indicating different proficiency levels [10][11][12][13] - Courses are designed to help learners reach a score of 130, enabling them to qualify for knowledge jobs in the language learned [14][15] - Learning duration to reach various scores: - Score 30: 93 hours - Score 60: 192 hours - Score 100: 397 hours - Score 130: 550 hours [16][18] Learning Tools and Engagement - Features like leaderboards and friend streaks are implemented to motivate learners [19] - Different lesson types evolve with the learner's score, including adventures, Duo Radio, and stories [20][21][24] - Research indicates that Duolingo's teaching effectiveness has improved over time, with learners achieving better results in recent years [26][28] Certification and Partnerships - The **Duolingo English Test** offers a certified score for language proficiency, accepted by 99 of the top 100 U.S. universities [30] - Aiming for the Duolingo Score to become a global standard for language proficiency, with integration into platforms like LinkedIn [49][52] New Features and Innovations - Introduction of **video call** feature with a conversational agent named Lily, designed to provide real-time speaking practice [34][35] - Ongoing enhancements to the video call experience, including personalized support and feedback mechanisms [41][43] - Launch of **Duolingo Math**, expanding the platform's educational offerings beyond language learning [72] Chess Course Launch - Duolingo has introduced a chess course, emphasizing strategic thinking and problem-solving skills [80][87] - The course includes lessons, mini matches, and a capstone experience against a character named Oscar [90][92] User Testimonials and Impact - Personal stories highlight the transformative impact of Duolingo on learners' lives, including success in higher education and career opportunities [74][76][78] Additional Insights - The focus on gamification and personalization in learning experiences is a key strategy for maintaining user engagement [43][44] - Continuous A/B testing is employed to refine app features and improve user experience based on data-driven insights [64][66][70] This summary encapsulates the core themes and developments discussed during the Duolingo 2025 Investor Day, highlighting the company's commitment to accessible education and innovative learning solutions.

Financial Data and Key Metrics Changes - The company reported a 40% year-over-year growth in Daily Active Users (DAUs) for Q2, which is a decrease from the 60% growth in the same quarter last year [10][11] - The company raised its full-year guidance due to record profitability and strong top-line growth [5] Business Line Data and Key Metrics Changes - The percentage of subscribers using the Max subscription increased from 5% to 8% over the past few quarters, indicating growth in this segment [20][21] - The Super subscription is performing better than expected, contributing to the slower growth of Max [21] Market Data and Key Metrics Changes - The Chinese market is identified as the fastest-growing market for the company, with successful partnerships, such as with Luckin Coffee, enhancing brand visibility [15][16] - The company has not yet launched its Max feature in China due to regulatory constraints [16][17] Company Strategy and Development Direction - The company is investing in new areas such as chess, math, and music, which are expected to drive long-term growth [5] - The company plans to start spending on marketing in the U.S. to counteract slower growth rates compared to other markets [120][122] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a temporary slowdown in DAU growth due to social media sentiment issues but expressed confidence in future recovery [12][96] - The company is optimistic about the impact of new features like the energy system, which has shown positive effects on user engagement and revenue [66][78] Other Important Information - The company is testing a web purchase flow to bypass the App Store, which could significantly increase profit margins [25][27] - The energy system has replaced the previous hearts mechanic, leading to increased daily active users and time spent on the app [66][78] Q&A Session Summary Question: Can you break down the primary drivers behind DAU growth moderation? - Management noted that DAU growth was 40%, slightly lower than expected due to negative social media sentiment, which has since improved [10][12] Question: Can you provide an update on the Max subscription? - The Max subscription has grown to 8% of total subscribers, but its growth was slower than expected due to challenges for beginner users [20][21][22] Question: What are the early learnings from the energy system? - The energy system has increased DAUs and revenue by rewarding users for correct answers rather than penalizing mistakes [66][78] Question: How is the company addressing engagement issues in the U.S.? - Management plans to start spending on marketing in the U.S. to improve engagement, as historical growth has been strong without marketing efforts [120][122] Question: What is the outlook for the Duolingo English Test? - The company expects lower demand for the Duolingo English Test due to macro trends affecting international student applications [95][96] Question: How is the video call feature performing? - The video call feature is seeing increased engagement, particularly among English learners, and improvements are being made to enhance user experience [90][108]

Investment Rating - The investment rating for the company is "Buy" with an expected relative return of over 20% within the next six months [10]. Core Insights - The company reported Q4 revenue of $210 million, a year-over-year increase of 39%, slightly exceeding Bloomberg consensus estimates of $205 million. However, net profit was $13.9 million, which fell short of the expected $23.7 million [1]. - The growth in performance is primarily attributed to the high adoption rate of Duolingo Max and strong demand for family plans [1]. - The company has a total booking volume of $272 million, up 42% year-over-year, surpassing the Bloomberg consensus of $247 million [1]. - Daily active users (DAU) reached 40.5 million, a 51% increase year-over-year, slightly exceeding expectations [2]. - The company plans to drive more users towards family and Max plans to enhance average revenue per user (ARPU), which is expected to be a key growth driver in the coming years [2]. Summary by Sections Financial Performance - Q4 net cash provided by operating activities was $83.3 million, compared to $49.2 million in the same period last year [1]. - Subscription bookings reached $237 million, a 50% year-over-year increase, exceeding expectations [1]. User Engagement - The company’s family plan accounts for 23% of the overall subscription business, showing higher user retention and lifetime value (LTV) compared to individual plans [2]. - Duolingo Max currently covers a majority of DAU, accounting for about 5% of total subscribers [3]. Future Outlook - The company expects Q1 total revenue to be between $221 million and $224 million, representing a year-over-year growth of 31.6% to 33.4% [3]. - For 2025, the company anticipates total revenue of $963 million to $979 million, with a year-over-year growth of 28.7% to 30.8% [3]. - The company is increasing investments in AI to enhance user experience and content production efficiency, which is expected to support long-term growth [4].

Investment Rating - The report gives a "Buy" rating for the stock, expecting a relative return of over 20% within six months [10]. Core Insights - Duolingo's Q4 revenue reached $210 million, a 39% year-over-year increase, slightly exceeding Bloomberg consensus estimates [1]. - The net profit for Q4 was $13.9 million, up from $12.1 million year-over-year, but below Bloomberg consensus expectations of $23.7 million [1]. - The total bookings amounted to $272 million, a 42% year-over-year increase, surpassing Bloomberg estimates [1]. - The company is focusing on increasing the adoption of family plans and Duolingo Max to drive average revenue per user (ARPU) growth [2]. Summary by Sections Financial Performance - Q4 revenue: $210 million, up 39% YoY, slightly above expectations [1] - Q4 net profit: $13.9 million, up from $12.1 million YoY, below expectations [1] - Operating cash flow: $83.3 million, up from $49.2 million YoY [1] - Q1 revenue guidance: $221-224 million, a YoY growth of 31.6%-33.4% [3] User Metrics - Q1 daily active users (DAU): 40.5 million, a 51% YoY increase [2] - Q1 monthly active users (MAU): 117 million, a 32% YoY increase [2] - Paid users: 9.5 million, a 43% YoY increase [2] Product Development - Duolingo Max currently covers a majority of DAU, accounting for about 5% of total subscribers [3] - The introduction of video call features has improved user engagement [3] - The company is investing in AI to enhance user experience and expand course content [3] Future Outlook - The company expects significant growth in bookings from Duolingo Max by 2025, despite initial AI cost pressures on gross margins [3] - Long-term growth is supported by the efficiency revolution driven by AI in content production [4]