Duolingo, Inc. (NASDAQ: DUOL), the world’s leading mobile learning
platform, announced results for the first quarter ended
March 31, 2024 in a shareholder letter that is posted at
investors.duolingo.com.
“We are pleased to report another quarter of
stellar performance, with strong bookings and revenue growth,
alongside record profitability,” said Luis von Ahn, Co-Founder and
CEO of Duolingo. “Our 54% year-over-year growth in daily active
users was driven by a record number of net daily user additions.
Our DAU-to-MAU ratio, a measure of user engagement, reached a
record high thanks to the thousands of product improvements that
have compounded over time.
We believe that we are still in the early stages of
our monetization journey, and discovering multiple avenues to
enhance bookings. We’re excited about the broader rollout of
Duolingo Max, our higher-priced subscription tier, and the strides
we’re making to improve our family plan, giving us the confidence
to raise our full year guidance.”
First Quarter
2024 Highlights
- Total bookings were
$197.5 million, an increase of 41% from the prior year
quarter;
- Subscription bookings were
$161.5 million, an increase of 47% from the prior year
quarter;
- Paid subscribers totaled 7.4 million
at quarter end, an increase of 54% from the prior year
quarter;
- Daily active users (DAUs) were 31.4
million, an increase of 54% from the prior year quarter and monthly
active users (MAUs) were 97.6 million, an increase of 35% from the
prior year quarter;
- Total revenues were
$167.6 million, an increase of 45% from the prior year
quarter;
- Net income was $27.0 million,
compared to a net loss of $2.6 million in the prior year
quarter;
- Adjusted EBITDA was
$44.0 million, compared to $15.1 million in the prior
year quarter, a 26.3% versus 13.1% Adjusted EBITDA margin,
respectively;
- Cash flow from operating activities
was $83.5 million compared to $29.6 million in the prior year
quarter, and free cash flow was $79.6 million compared to $28.8
million in the prior year quarter.
Financial and Key Operating
Metrics
The following table summarizes our financial and
operating highlights for the quarters ended March 31, 2024 and
2023:
|
Three Months Ended March 31, |
|
|
(In millions) |
2024 |
|
2023 |
|
% Change |
Operating Metrics |
|
|
|
|
|
Monthly active users (MAUs) |
97.6 |
|
72.6 |
|
35 |
% |
Daily
active users (DAUs) |
31.4 |
|
20.3 |
|
54 |
% |
Paid
subscribers (at period end) |
7.4 |
|
4.8 |
|
54 |
% |
|
Three Months Ended March 31, |
|
|
(In thousands) |
2024 |
|
|
2023 |
|
|
% Change |
Operating Metrics |
|
|
|
|
|
Subscription bookings |
$ |
161,466 |
|
$ |
110,122 |
|
|
47 |
% |
Total bookings |
$ |
197,452 |
|
$ |
140,054 |
|
|
41 |
% |
|
|
|
|
|
|
Financial Measures |
|
|
|
|
|
Total revenues (GAAP) |
$ |
167,553 |
|
$ |
115,661 |
|
|
45 |
% |
Net income (loss) (GAAP) |
$ |
26,956 |
|
$ |
(2,582 |
) |
|
nm |
Adjusted EBITDA (Non-GAAP) |
$ |
44,005 |
|
$ |
15,111 |
|
|
>100% |
Net cash provided by operating activities (GAAP) |
$ |
83,514 |
|
$ |
29,604 |
|
|
>100% |
Free cash flow (Non-GAAP) |
$ |
79,621 |
|
$ |
28,792 |
|
|
>100% |
The following table provides revenues by product
type:
|
Three Months Ended March 31, |
|
|
|
|
(in thousands) |
2024 |
|
2023 |
|
Change |
|
% Change |
Subscription |
$ |
131,688 |
|
$ |
86,185 |
|
$ |
45,503 |
|
53 |
% |
Advertising |
|
12,952 |
|
|
11,635 |
|
|
1,317 |
|
11 |
|
Duolingo English Test |
|
12,755 |
|
|
9,972 |
|
|
2,783 |
|
28 |
|
In-App Purchases |
|
9,924 |
|
|
7,852 |
|
|
2,072 |
|
26 |
|
Other |
|
234 |
|
|
17 |
|
|
217 |
|
>100 |
Total revenues |
$ |
167,553 |
|
$ |
115,661 |
|
$ |
51,892 |
|
45 |
% |
Financial Outlook
Duolingo is providing the following guidance for
the second quarter ending March 31, 2024 and updating its guidance
for the full year ending December 31, 2024:
|
Second Quarter 2024 |
|
Full Year 2024 |
(in millions) |
Low |
|
High |
|
Low |
|
High |
|
|
|
|
|
|
|
|
Total Bookings |
$ |
179.0 |
|
|
$ |
181.5 |
|
|
$ |
808.5 |
|
|
$ |
817.5 |
|
Revenues |
$ |
175.0 |
|
|
$ |
177.5 |
|
|
$ |
726.5 |
|
|
$ |
735.5 |
|
Adjusted EBITDA |
$ |
36.8 |
|
|
$ |
39.1 |
|
|
$ |
167.1 |
|
|
$ |
176.5 |
|
Adjusted EBITDA Margin |
|
21 |
% |
|
|
22 |
% |
|
|
23 |
% |
|
|
24 |
% |
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 ofMarch 31,
2024 |
|
Weighted-averageexerciseprice |
|
Shares |
Share price |
$ |
220.58 |
|
|
|
|
Common stock outstanding as of March 31, 2024 |
|
|
|
|
43.1 |
Founder awards (1) |
|
|
|
|
1.6 |
Dilutive effect of stock options outstanding (2) |
|
|
$ |
16.63 |
|
2.5 |
RSUs outstanding |
|
|
|
|
1.8 |
Total estimated diluted shares outstanding |
|
|
|
|
49.0 |
(1) |
Includes 1.4
million underlying performance-based Restricted Stock Units
("RSUs") where performance criteria has not been satisfied. |
(2) |
The Company has 2.7 million options outstanding as of
March 31, 2024. 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,
May 8, 2024 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 DuolingoDuolingo 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
Monthly Active Users (MAUs). MAUs
are defined as unique users who engage with our Duolingo App or the
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 March 31, 2024 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 users who engage with our Duolingo App or the
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 March 31, 2024 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.
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.
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 scaling of our user base and enhancement of bookings,
our anticipated monetization of our 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; changes in our
business and macroeconomic conditions; 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, 2023, as any such factors may be updated
from time to time, including without limitation in our Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
2024 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 Unaudited
Condensed Consolidated Financial Statements, which are presented in
accordance with GAAP. These non-GAAP financial measures include
Adjusted EBITDA; Adjusted EBITDA margin; Free cash flow, and Free
cash flow 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 SUBSIDIARIESUNAUDITED
CONDENSED CONSOLIDATEDBALANCE
SHEETS(Amounts in thousands) |
|
|
|
|
|
March 31, 2024 |
|
December 31, 2023 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
829,713 |
|
$ |
747,610 |
Accounts receivable |
|
76,421 |
|
|
88,975 |
Deferred cost of revenues |
|
60,397 |
|
|
53,931 |
Prepaid expenses and other current assets |
|
10,747 |
|
|
7,282 |
Noncurrent assets |
|
91,389 |
|
|
56,159 |
Total assets |
$ |
1,068,667 |
|
$ |
953,957 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Deferred revenues |
$ |
279,313 |
|
$ |
249,192 |
Accounts payable |
|
2,625 |
|
|
2,447 |
Other current liabilities |
|
21,784 |
|
|
25,723 |
Long-term obligation under operating leases |
|
53,893 |
|
|
21,094 |
Total liabilities |
|
357,615 |
|
|
298,456 |
Total stockholders’ equity |
|
711,052 |
|
|
655,501 |
Total liabilities and stockholders' equity |
$ |
1,068,667 |
|
$ |
953,957 |
DUOLINGO, INC. AND SUBSIDIARIESUNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)(Amounts in thousands, except per share
amounts) |
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Revenues |
$ |
167,553 |
|
|
$ |
115,661 |
|
Cost of
revenues |
|
45,191 |
|
|
|
31,492 |
|
Gross profit |
|
122,362 |
|
|
|
84,169 |
|
Operating expenses: |
|
|
|
Research and
development |
|
50,878 |
|
|
|
45,844 |
|
Sales and
marketing |
|
19,931 |
|
|
|
16,601 |
|
General and
administrative |
|
35,114 |
|
|
|
30,243 |
|
Total operating
expenses |
|
105,923 |
|
|
|
92,688 |
|
Income (loss) from operations |
|
16,439 |
|
|
|
(8,519 |
) |
Other (expense) income,
net |
|
(621 |
) |
|
|
182 |
|
Income (loss) before interest income and income
taxes |
|
15,818 |
|
|
|
(8,337 |
) |
Interest
income |
|
10,033 |
|
|
|
5,639 |
|
Income (loss) before income
taxes |
|
25,851 |
|
|
|
(2,698 |
) |
Benefit from income
taxes |
|
(1,105 |
) |
|
|
(116 |
) |
Net income (loss) and
comprehensive income
(loss) |
$ |
26,956 |
|
|
$ |
(2,582 |
) |
Net income (loss) per share
attributable to Class A and Class B common stockholders,
basic |
$ |
0.63 |
|
|
$ |
(0.06 |
) |
Net income (loss) per share
attributable to Class A and Class B common stockholders,
diluted |
$ |
0.57 |
|
|
$ |
(0.06 |
) |
DUOLINGO, INC. AND SUBSIDIARIESUNAUDITED CONDENSED
CONSOLIDATEDSTATEMENTS OF CASH FLOWS(Amounts in
thousands) |
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Cash flows from operating activities: |
|
|
|
Net income (loss) |
$ |
26,956 |
|
|
$ |
(2,582 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
2,074 |
|
|
|
1,762 |
|
Stock-based compensation expense |
|
24,985 |
|
|
|
21,073 |
|
Gain on sale of capitalized software |
|
— |
|
|
|
(100 |
) |
Changes in assets and liabilities: |
|
29,499 |
|
|
|
9,451 |
|
Net cash provided by operating activities |
|
83,514 |
|
|
|
29,604 |
|
Net cash used for investing activities |
|
(5,021 |
) |
|
|
(1,312 |
) |
Net cash provided by financing activities |
|
3,610 |
|
|
|
4,619 |
|
Net increase in cash, cash equivalents and restricted cash |
|
82,103 |
|
|
|
32,911 |
|
Cash, cash equivalents and restricted cash - Beginning of
period |
|
750,345 |
|
|
|
608,180 |
|
Cash, cash equivalents and restricted cash - End of period |
$ |
832,448 |
|
|
$ |
641,091 |
|
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, acquisition earn-out costs, and
gain on sale of capitalized software. 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 March 31, |
(In thousands) |
|
2024 |
|
|
|
2023 |
|
Net income (loss) |
$ |
26,956 |
|
|
$ |
(2,582 |
) |
Add (deduct): |
|
|
|
Interest income |
|
(10,033 |
) |
|
|
(5,639 |
) |
Benefit from income taxes |
|
(1,105 |
) |
|
|
(116 |
) |
Depreciation and amortization |
|
2,074 |
|
|
|
1,762 |
|
Stock-based compensation expenses related to equity awards (1) |
|
26,113 |
|
|
|
21,673 |
|
Acquisition earn-out costs (2) |
|
— |
|
|
|
113 |
|
Gain on sale of capitalized software (3) |
|
— |
|
|
|
(100 |
) |
Adjusted EBITDA |
$ |
44,005 |
|
|
$ |
15,111 |
|
|
|
|
|
Revenues |
$ |
167,553 |
|
|
$ |
115,661 |
|
Adjusted EBITDA Margin |
|
26.3 |
% |
|
|
13.1 |
% |
(1) |
In addition to
stock-based compensation expense of $25.0 million and $21.1 million
for the three months ended March 31, 2024 and 2023, this includes
costs incurred related to taxes paid on equity transactions. |
(2) |
Represents costs incurred related to the earn-out payment on an
acquisition. |
(3) |
Represents proceeds from a sale of capitalized software. |
DUOLINGO, INC. AND
SUBSIDIARIESFREE CASH FLOW
RECONCILIATION(Amounts in thousands)
Free Cash Flow. Free cash flow
represents net cash provided by operating activities, reduced by
capitalized software development costs and purchases of property
and equipment and increased by taxes paid related to stock-based
compensation equity awards as we believe they are not indicative of
future liquidity. Free cash flow margin is defined as Free cash
flow as a percentage of revenues. We believe that free cash flow is
a measure of liquidity that provides useful information to our
management, investors and others in understanding and evaluating
the strength of our liquidity and future ability to generate cash
that can be used for strategic opportunities or investing in our
business. Free cash flow has certain limitations in that it does
not represent our residual cash flow for discretionary expenditures
and our non-discretionary commitments. The following table presents
a reconciliation of net cash provided by operating activities, the
most directly comparable financial measure calculated in accordance
with GAAP, to free cash flow.
|
Three Months Ended March 31, |
(In thousands) |
|
2024 |
|
|
|
2023 |
|
Net cash provided by operating activities |
$ |
83,514 |
|
|
$ |
29,604 |
|
Less: Capitalized software development costs and purchases of
intangible assets |
|
(3,607 |
) |
|
|
(731 |
) |
Less: Purchases of property and equipment |
|
(1,414 |
) |
|
|
(681 |
) |
Plus: Taxes paid related to stock-based compensation equity
awards |
|
1,128 |
|
|
|
600 |
|
Free cash flow |
$ |
79,621 |
|
|
$ |
28,792 |
|
|
|
|
|
Revenues |
$ |
167,553 |
|
|
$ |
115,661 |
|
Free cash flow margin |
|
47.5 |
% |
|
|
24.9 |
% |
Contacts
Investor Relations:Deborah
Belevan, VP of Investor RelationsIR@duolingo.com
Press:Sam Dalsimer, Global Head
of Communicationspress@duolingo.com
Duolingo (NASDAQ:DUOL)
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