Duolingo, Inc. (NASDAQ: DUOL), the world’s leading mobile learning
platform, announced results for the third quarter ended
September 30, 2023 in a shareholder letter that is posted at
investors.duolingo.com.
“We exceeded our own high expectations this
quarter, accelerating user growth and delivering impressive
bookings and revenue growth,” said Luis von Ahn, Co-Founder and CEO
of Duolingo. “Last month, we announced an important strategic shift
toward becoming a multi-subject product, with our Math and Music
courses being added to the flagship Duolingo app. We believe this
offers great value to our users, and can unlock benefit to us over
time as we can apply the things that make our language app fun,
engaging, and effective to these new courses.”
Third Quarter
2023 Highlights
- Total bookings were
$153.6 million, an increase of 49% from the prior year
quarter;
- Subscription bookings were
$121.3 million, an increase of 54% from the prior year
quarter;
- Paid Subscribers totaled 5.8 million
at quarter end, an increase of 60% from the prior year
quarter;
- Monthly active users (MAUs) were 83.1
million, an increase of 47% from the prior year quarter and Daily
active users (DAUs) were 24.2 million, an increase of 63% from the
prior year quarter;
- Total revenues were
$137.6 million, an increase of 43% from the prior year
quarter;
- Net income totaled $2.8 million,
compared to a net loss of $18.4 million in the prior year
quarter;
- Adjusted EBITDA was
$22.5 million, compared to $2.1 million in the prior year
quarter, a 16.3% versus 2.2% Adjusted EBITDA margin,
respectively.
Financial and Key Operating
Metrics
The following table summarizes our financial and
operating highlights for the quarters ended September 30, 2023
and 2022.
|
Three Months Ended September 30, |
|
|
(In millions) |
|
2023 |
|
|
|
2022 |
|
|
% Change |
Operating Metrics |
|
|
|
|
|
|
|
|
|
Monthly active users (MAUs) |
|
83.1 |
|
|
|
56.5 |
|
|
|
47 |
% |
Daily
active users (DAUs) |
|
24.2 |
|
|
|
14.9 |
|
|
|
63 |
% |
Paid
subscribers (at period end) |
|
5.8 |
|
|
|
3.7 |
|
|
|
60 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
(In thousands) |
|
2023 |
|
|
|
2022 |
|
|
% Change |
Operating Metrics |
|
|
|
|
|
Subscription bookings |
$ |
121,342 |
|
|
$ |
78,858 |
|
|
|
54 |
% |
Total bookings |
$ |
153,556 |
|
|
$ |
102,738 |
|
|
|
49 |
% |
|
|
|
|
|
|
Financial Measures |
|
|
|
|
|
Total revenues (GAAP) |
$ |
137,624 |
|
|
$ |
96,065 |
|
|
|
43 |
% |
Net income (loss) (GAAP) |
$ |
2,807 |
|
|
$ |
(18,445 |
) |
|
|
nm |
|
Adjusted EBITDA (Non-GAAP) |
$ |
22,501 |
|
|
$ |
2,130 |
|
|
|
>100 |
% |
|
|
|
|
|
|
|
|
|
|
The following table provides revenues by product
type:
|
Three Months Ended September 30, |
|
|
|
|
(in thousands) |
|
2023 |
|
|
|
2022 |
|
|
Change |
|
% Change |
Subscription |
$ |
105,887 |
|
|
$ |
72,172 |
|
|
$ |
33,715 |
|
|
|
47 |
% |
Advertising |
|
11,678 |
|
|
|
10,619 |
|
|
|
1,059 |
|
|
|
10 |
|
Duolingo English Test |
|
10,612 |
|
|
|
8,192 |
|
|
|
2,420 |
|
|
|
30 |
|
Other * |
|
9,447 |
|
|
|
5,082 |
|
|
|
4,365 |
|
|
|
86 |
|
Total revenues |
$ |
137,624 |
|
|
$ |
96,065 |
|
|
$ |
41,559 |
|
|
|
43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Other is primarily comprised of in-app sales of
virtual goods
Financial Outlook
Duolingo is providing the following updated
guidance for the fourth quarter and the full year ending
December 31, 2023:
|
Fourth Quarter 2023 |
|
Full Year 2023 |
(in millions) |
Low |
|
High |
|
Low |
|
High |
|
|
|
|
|
|
|
|
Total Bookings |
$ |
167 |
|
|
$ |
170 |
|
|
$ |
598 |
|
|
$ |
601 |
|
Revenues |
$ |
145 |
|
|
$ |
148 |
|
|
$ |
525 |
|
|
$ |
528 |
|
Adjusted EBITDA |
$ |
28.7 |
|
|
$ |
30.7 |
|
|
$ |
87.2 |
|
|
$ |
89.2 |
|
Adjusted EBITDA Margin |
|
19.8 |
% |
|
|
20.8 |
% |
|
|
16.6 |
% |
|
|
16.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With regards to the Non-GAAP Adjusted EBITDA and
Adjusted EBITDA margin outlook provided above, a reconciliation to
GAAP net income (loss), the most directly comparable financial
measure presented in accordance with GAAP, has not been provided as
the quantification of certain items included in the calculation of
GAAP net income (loss) cannot be calculated or predicted at this
time without unreasonable efforts. For example, the non-GAAP
adjustment for stock-based compensation expenses related to equity
awards requires additional inputs such as number of shares granted
and market price that are not currently ascertainable, and the
non-GAAP adjustment for certain legal, tax and regulatory reserves
and expenses depends on the timing and magnitude of these expenses
and cannot be accurately forecasted. For the same reasons, we are
unable to address the probable significance of the unavailable
information, which could have a potentially unpredictable, and
potentially significant, impact on our future GAAP financial
results.
Dilutive Securities
Duolingo has various dilutive securities. The table
below details these securities (shares in millions; rounding
differences may occur):
(Amounts in millions, except share price) |
Price as of September 30,
2023 |
|
Weighted-averageexerciseprice |
|
|
Shares |
|
Share price |
$ |
165.87 |
|
|
|
|
|
|
|
|
|
Common stock outstanding as of September 30, 2023 |
|
|
|
|
|
|
|
42.0 |
|
Founder awards (1) |
|
|
|
|
|
|
|
1.6 |
|
Dilutive effect of stock options outstanding (2) |
|
|
$ |
15.52 |
|
|
|
3.0 |
|
RSUs outstanding |
|
|
|
|
|
|
|
2.2 |
|
Total estimated diluted shares outstanding |
|
|
|
|
|
|
|
48.8 |
|
________________(1) Includes 1.6 million
underlying performance-based Restricted Stock Units ("RSUs") where
performance criteria has not been satisfied.
(2) The Company has 3.3 million options outstanding
as of September 30, 2023. The estimated dilutive effect is
calculated as the number of shares expected to be issued upon
vesting or exercise, adjusted for the strike price proceeds that
are received by the Company and assumed to be used to repurchase
shares of Duolingo common stock.
Video Webcast Duolingo will
host a video webcast to discuss its quarterly results today,
November 8, 2023 at 5:30 p.m. ET. This live webcast and
related materials will be publicly available and can be accessed at
investors.duolingo.com. A replay will be available on the Investor
Relations section of our website two hours following completion of
the call and will remain available for a period of one year.
About Duolingo Duolingo is the
leading mobile learning platform globally. Its flagship app has
organically become the world's most popular way to learn languages
and the top-grossing app in the Education category on both Google
Play and the Apple App Store. With technology at the core of
everything it does, Duolingo has consistently invested to provide
learners a fun, engaging, and effective learning experience while
remaining committed to its mission to develop the best education in
the world and make it universally available.
Definitions
Subscription Bookings and Total
Bookings. Subscription bookings represent the amounts we
receive from a purchase of any Duolingo subscription offering.
Total bookings include subscription bookings, income from
advertising networks for advertisements served to our users,
purchases of the Duolingo English Test, and in-app purchases of
virtual goods. We believe bookings provide an indication of trends
in our operating results, including cash flows, that are not
necessarily reflected in our revenues because we recognize
subscription revenues ratably over the lifetime of a subscription,
which is generally from one to twelve months.
Monthly Active Users (MAUs). MAUs
are defined as unique Duolingo users who engage with our mobile
language learning application or the language learning section of
our website each month. MAUs are reported for a measurement period
by taking the average of the MAUs for each calendar month in that
measurement period. The measurement period for MAUs is the three
months ended September 30, 2023 and the same period in the
prior year where applicable, and the analysis of results is based
on those periods. MAUs are a measure of the size of our global
active user community on Duolingo.
Daily Active Users (DAUs). DAUs
are defined as unique Duolingo users who engage with our mobile
language learning application or the language learning section of
our website each calendar day. DAUs are reported for a measurement
period by taking the average of the DAUs for each day in that
measurement period. The measurement period for DAUs is the three
months ended September 30, 2023 and the same period in the
prior year where applicable, and the analysis of results is based
on those periods. DAUs are a measure of the consistent engagement
of our global user community on Duolingo.
Paid Subscribers. Paid subscribers
are defined as users who pay for access to any Duolingo
subscription offering and had an active subscription as of the end
of the measurement period. Each unique user account is treated as a
single paid subscriber regardless of whether such user purchases
multiple subscriptions, and the count of paid subscribers does not
include users who are currently on a free trial or who are
non-paying members of a family plan.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. We intend such forward-looking statements to be
covered by the safe harbor provisions for forward-looking
statements contained in Section 27A of the Securities Act of 1933,
as amended (the “Securities Act”) and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). All
statements other than statements of historical facts contained in
this press release, including without limitation, statements
regarding our business model and strategic plans, including the
anticipated release of, and the expected benefits and efficacy of,
new products, and our financial outlook are forward-looking
statements. Without limiting the generality of the foregoing, you
can identify forward-looking statements because they contain words
such as “may,” “will,” “shall,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential,”
“goal,” “objective,” “seeks,” or “continue” or the negative of
these words or other similar terms or expressions that concern our
expectations, strategy, plans, or intentions. Such forward-looking
statements are neither promises nor guarantees, but involve a
number of known and unknown risks, uncertainties and assumptions
that may cause our actual results, performance or achievements to
differ materially from those expressed or implied in the
forward-looking statements due to various factors, including, but
not limited to: our ability to retain and grow our users and
sustain their engagement with our products; competition in the
online language learning industry; our limited operating history;
our ability to maintain profitability; our ability to manage our
growth and operate at such scale; the success of our investments;
our reliance on third-party platforms to store and distribute our
products and collect revenue; our reliance on third-party hosting
and cloud computing providers; our ability to compete for
advertisements; acceptance by educational organizations of
technology-based education; our ability to access, collect, and use
personal data about our users and payers, and to comply with
applicable data privacy laws; regulatory and legislative
developments on the use of artificial intelligence and machine
learning; potential intellectual property-related litigation and
proceedings; our ability adequately obtain, protect and maintain
our intellectual property rights; and the other important factors
more fully detailed under the caption "Risk Factors" in our Annual
Report on Form 10-K for the fiscal year ended December 31,
2022, as any such factors may be updated from time to time,
including without limitation our Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2023 and in our other
filings with the SEC, accessible on the SEC’s website at
www.sec.gov and the Investor Relations section of the Company’s
website at investors.duolingo.com. All forward-looking statements
speak only as of the date of this press release. While we may elect
to update such forward-looking statements at some point in the
future, we disclaim any obligation to do so, even if subsequent
events cause our views to change.
Limitation of Key Operating Metrics and
Other DataWe manage our business by tracking several
operating metrics, including MAUs, DAUs, paid subscribers, and
subscription and total bookings. While these metrics are based on
what we believe to be reasonable estimates of our user base for the
applicable period of measurement, there are inherent challenges in
measuring how our platform is used. These metrics are determined by
using internal data gathered on an analytics platform that we
developed and operate and have not been validated by an independent
third party. This platform tracks user account and session
activity. If we fail to maintain an effective analytics platform,
our metrics calculations may be inaccurate. Because we update the
methodologies we employ to create metrics, our operating metrics
may not be comparable to those in prior periods. Other companies,
including companies in our industry, may calculate these metrics
differently.
Non-GAAP Financial MeasuresWe use
certain non-GAAP financial measures to supplement our consolidated
financial statements, which are presented in accordance with GAAP.
These non-GAAP financial measures include Adjusted EBITDA and
Adjusted EBITDA margin. Please refer to the definitions and
reconciliation at the end of this press release. We use these
non-GAAP financial measures for financial and operational
decision-making and as a means to evaluate period-to-period
comparisons. By excluding certain items that may not be indicative
of our recurring core operating results, we believe that these
non-GAAP financial measures provide meaningful supplemental
information regarding our performance. Accordingly, we believe
these non-GAAP financial measures are useful to investors and
others because they allow for additional information with respect
to financial measures used by management in its financial and
operational decision-making and they may be used by our
institutional investors and the analyst community to help them
analyze the health of our business. However, there are a number of
limitations related to the use of non-GAAP financial measures, and
these non-GAAP financial measures should be considered in addition
to, not as a substitute for or in isolation from, our financial
results prepared in accordance with GAAP. Other companies,
including companies in our industry, may calculate these non-GAAP
financial measures differently or not at all, which reduces their
usefulness as comparative measures.
Website InformationWe routinely
post important information for investors on the Investor Relations
section of our website, investors.duolingo.com and also from time
to time may use social media channels, including our Twitter
account (twitter.com/duolingo) and our LinkedIn account
(linkedin.com/company/duolingo/), as an additional means of
disclosing public information to investors, the media and others
interested in us. It is possible that certain information we post
on our website and on social media could be deemed to be material
information, and we encourage investors, the media and others
interested in us to review the business and financial information
we post on our website and on the social media channels identified
above, in addition to following our press releases, SEC filings,
public conference calls, presentations and webcasts. The
information contained on, or that may be accessed through, our
website and our social media channels is not incorporated by
reference into, and is not a part of, this document.
DUOLINGO, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS(Amounts in thousands)
|
September 30, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
701,737 |
|
|
$ |
608,180 |
|
Accounts receivable |
|
61,711 |
|
|
|
46,728 |
|
Deferred cost of revenues |
|
46,124 |
|
|
|
35,041 |
|
Prepaid expenses and other current assets |
|
9,533 |
|
|
|
7,234 |
|
Noncurrent assets |
|
51,609 |
|
|
|
50,164 |
|
Total assets |
$ |
870,714 |
|
|
$ |
747,347 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Accounts payable |
$ |
2,712 |
|
|
$ |
1,177 |
|
Deferred revenues |
|
208,888 |
|
|
|
157,550 |
|
Other current liabilities |
|
23,334 |
|
|
|
23,039 |
|
Long-term obligation under operating leases |
|
20,961 |
|
|
|
23,503 |
|
Total liabilities |
|
255,895 |
|
|
|
205,269 |
|
Total stockholders’ equity |
|
614,819 |
|
|
|
542,078 |
|
Total liabilities and stockholders' equity |
$ |
870,714 |
|
|
$ |
747,347 |
|
|
|
|
|
|
|
|
|
DUOLINGO, INC. AND
SUBSIDIARIESUNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)(Amounts in thousands, except
per share amounts)
|
Three Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
Revenues |
$ |
137,624 |
|
|
$ |
96,065 |
|
Cost of revenues |
|
36,254 |
|
|
|
26,302 |
|
Gross profit |
|
101,370 |
|
|
|
69,763 |
|
Operating expenses: |
|
|
|
Research and development |
|
50,305 |
|
|
|
41,976 |
|
Sales and marketing |
|
22,335 |
|
|
|
17,721 |
|
General and administrative |
|
33,400 |
|
|
|
30,228 |
|
Total operating expenses |
|
106,040 |
|
|
|
89,925 |
|
Loss from operations |
|
(4,670 |
) |
|
|
(20,162 |
) |
Other expense, net of other income |
|
(1,023 |
) |
|
|
(490 |
) |
Loss
before interest income and income taxes |
|
(5,693 |
) |
|
|
(20,652 |
) |
Interest income |
|
8,625 |
|
|
|
2,260 |
|
Income (loss) before income taxes |
|
2,932 |
|
|
|
(18,392 |
) |
Provision for income taxes |
|
125 |
|
|
|
53 |
|
Net
income (loss) and comprehensive income (loss) |
$ |
2,807 |
|
|
$ |
(18,445 |
) |
Net
income (loss) per share attributable to Class A and Class B common
stockholders, basic |
$ |
0.07 |
|
|
$ |
(0.46 |
) |
Net
income (loss) per share attributable to Class A and Class B common
stockholders, diluted |
$ |
0.06 |
|
|
$ |
(0.46 |
) |
|
|
|
|
|
|
|
|
DUOLINGO, INC. AND
SUBSIDIARIESUNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS(Amounts in thousands)
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
Net income (loss) |
$ |
3,950 |
|
|
$ |
(45,644 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
5,053 |
|
|
|
3,426 |
|
Stock-based compensation expense |
|
70,219 |
|
|
|
53,188 |
|
Gain on sale of capitalized software |
|
(100 |
) |
|
|
— |
|
Loss on disposal of leasehold improvements |
|
417 |
|
|
|
— |
|
Changes in assets and liabilities: |
|
24,882 |
|
|
|
31,078 |
|
Net cash provided by operating activities |
|
104,421 |
|
|
|
42,048 |
|
Net cash used for investing activities |
|
(9,436 |
) |
|
|
(9,229 |
) |
Net cash (used for) provided by financing activities |
|
(1,428 |
) |
|
|
13,226 |
|
Net increase in cash and cash equivalents |
|
93,557 |
|
|
|
46,045 |
|
Cash and cash equivalents - Beginning of period |
|
608,180 |
|
|
|
553,922 |
|
Cash and cash equivalents - End of period |
$ |
701,737 |
|
|
$ |
599,967 |
|
|
|
|
|
|
|
|
|
DUOLINGO, INC. AND
SUBSIDIARIESADJUSTED EBITDA
RECONCILIATION(Amounts in thousands)
Adjusted EBITDA. Adjusted EBITDA
is defined as net income (loss) excluding interest income, income
taxes, depreciation and amortization, stock-based compensation
expenses related to equity awards, transaction costs related to an
acquisition, acquisition earn-out costs, and loss on disposal of
leasehold improvements. Adjusted EBITDA margin is defined as
Adjusted EBITDA as a percentage of revenues. These non-GAAP
financial measures are used by management to evaluate the financial
performance of our business and we present these non-GAAP financial
measures because we believe that they are helpful in highlighting
trends in our operating results and that they are frequently used
by analysts, investors and other interested parties to evaluate
companies in our industry. The following table presents a
reconciliation of our net income (loss), the most directly
comparable financial measure presented in accordance with GAAP, to
Adjusted EBITDA and Adjusted EBITDA margin:
|
Three Months Ended September 30, |
(In thousands) |
|
2023 |
|
|
|
2022 |
|
Net income (loss) |
$ |
2,807 |
|
|
$ |
(18,445 |
) |
Interest income |
|
(8,625 |
) |
|
|
(2,260 |
) |
Provision for income taxes |
|
125 |
|
|
|
53 |
|
Depreciation and amortization |
|
1,657 |
|
|
|
1,482 |
|
Stock-based compensation expenses related to equity awards (1) |
|
26,007 |
|
|
|
21,123 |
|
Acquisition transaction costs (2) |
|
— |
|
|
|
177 |
|
Acquisition earn-out costs (3) |
|
113 |
|
|
|
— |
|
Loss on disposal of leasehold improvements |
|
417 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
22,501 |
|
|
$ |
2,130 |
|
|
|
|
|
Revenues |
$ |
137,624 |
|
|
$ |
96,065 |
|
Adjusted EBITDA Margin |
|
16.3 |
% |
|
|
2.2 |
% |
________________(1) In addition to stock-based
compensation expense, this includes costs incurred related to taxes
paid on equity transactions.
(2) Represents costs incurred related to an
acquisition, including integration costs.
(3) Represent costs incurred related to the
earn-out payment on an acquisition.
Contacts
Investor Relations:Deborah
Belevan, VP of Investor RelationsIR@duolingo.com
Press:Sam Dalsimer, Global Head
of Communicationspress@duolingo.com
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