Duolingo, Inc. (DUOL) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a positive outlook with strong DAU growth, increased revenue and bookings guidance, and improvements in adjusted EBITDA margin. The rollout of Duolingo Max and investments in AI are promising, despite some competitive pressures and regulatory risks. The Q&A section highlights confidence in user engagement and growth strategies. The lack of a share repurchase program is a minor negative, but overall, the positive aspects outweigh the negatives, suggesting a stock price movement in the range of 2% to 8% over the next two weeks.
Key Financial Performance
Daily Active Users (DAU) DAU grew by 54% year-over-year, despite lapping last year's 60%-plus growth.
Bookings Bookings grew 38% year-over-year, driven by the strength of Duolingo Max and the introduction of new features.
Revenue Revenue grew 40% year-over-year, attributed to the successful rollout of Duolingo Max and increased user engagement.
Adjusted EBITDA Margin Adjusted EBITDA margin was 24.7%, with expectations of raising the full year guidance to 25.5% at the midpoint, reflecting improved operational efficiency.
Family Plan Subscribers Family Plan subscribers increased to 21% of total subscriptions from 18% at the end of last year, primarily due to increased visibility and feature enhancements.
Shares Outstanding Approximately 49.6 million fully diluted shares outstanding, with expected net dilution of a little more than 1%.
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Operating Highlights
Duolingo Max: The new Duolingo Max feature, which includes a video call with an animated character, has been rolled out to approximately 50% of daily active users (DAUs) and is expected to increase by about 10 points by the end of the year.
Video Call Feature: The video call feature has shown strong early demand, particularly among English learners, and is expected to drive bookings.
International Growth: Duolingo is expanding its marketing efforts internationally, with new country managers in France, Korea, Italy, and Turkey, contributing to overall DAU growth.
English Learning Market: Duolingo sees a significant opportunity in the English learning market, which represents a large portion of the global language learning spend.
Operational Efficiency: Generative AI is being utilized to enhance product features and automate internal processes, improving operational efficiency.
User Engagement: The company is increasing the number of tests run per quarter to improve user engagement and retention.
Full Year Guidance: Duolingo has raised its full year guidance for bookings and revenue growth to approximately 36% and 40%, respectively.
Market Positioning: The company is focusing on enhancing its product offerings and marketing strategies to capture a larger share of the English learning market.
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Risk or Challenges
Forward-looking statements: The company acknowledges that forward-looking statements regarding future events and financial performance are subject to material risks and uncertainties.
Regulatory issues: The company mentions that some risks are outlined in the risk factors of their filings with the SEC.
Economic factors: The company discusses the impact of economic conditions on user growth and subscription rates, particularly in relation to the pricing of their services.
Competitive pressures: The company highlights the competitive landscape in language learning, emphasizing the need to maintain engagement and motivation among users to stand out.
Supply chain challenges: There are mentions of challenges related to scaling the Max subscription tier and its associated features, particularly in terms of costs.
User retention and engagement: The company expresses concerns about maintaining user retention and engagement as they roll out new features and subscription tiers.
Market penetration: The company notes that while they are seeing growth in various regions, there are challenges in penetrating markets with existing competition.
Pricing strategy: The company discusses the impact of pricing on user adoption and retention, particularly in relation to the new Max subscription tier.
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Guidance & Outlook
Daily Active Users (DAU) Growth: DAU grew by 54% year-over-year, indicating strong user engagement and retention.
Duolingo Max Feature: The new Duolingo Max feature, which includes video calls, is expected to drive user engagement and subscription growth.
Generative AI Investment: Investment in generative AI and automation is aimed at improving product efficiency and accelerating feature launches.
Family Plan Growth: Family Plan subscriptions increased to 21% of total subscriptions, up from 18% last year.
International Market Expansion: New marketing managers have been added in France, Korea, Italy, and Turkey to enhance international growth.
Full Year Revenue Growth: Guidance for full year bookings growth is raised to approximately 36% and revenue growth to 40%.
Adjusted EBITDA Margin: 2024 adjusted EBITDA margin guidance raised to 25.5%, up from 2023.
Q4 Gross Margin: Q4 guidance includes an estimated 100 basis points decline in gross margin due to higher generative AI costs.
Subscriber Growth: Expectations to reach 20 million subscribers through user growth and improved conversion strategies.
Long-term DAU Growth: DAU growth is expected to remain strong, around 50% for the rest of the year, with continued opportunities in English learning.
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Shareholder Return Plan
Shareholder Return Plan: Duolingo has not announced any specific share buyback or dividend program. However, they have discussed their growth strategies and the introduction of the Duolingo Max subscription tier, which is priced at approximately 2x the Super tier. This indicates a focus on increasing revenue through higher subscription tiers rather than returning capital to shareholders through buybacks or dividends.
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Key Q&A
Q:What does it take for Duolingo to add the next 10 million subscribers?
A:Luis von Ahn mentioned that they will continue their current strategies, focusing on growing the number of users and improving monetization through product engagement and social marketing.
Q:What progress has been made in attracting English learners to the platform?
A:Luis von Ahn stated that they have over 2 million daily active users learning intermediate or advanced English, and they are improving content and user placement to better serve this demographic.
Q:What is the marketing strategy to engage users for intermediate English learning?
A:Luis von Ahn explained that they will use influencers and word of mouth to promote their intermediate English content, as traditional marketing methods may not be effective.
Q:What updates can you provide on international growth?
A:Luis von Ahn confirmed that international growth is strong across all regions, with new country marketing managers being added to enhance local marketing efforts.
Q:How has the business model held up in the current macro environment?
A:Luis von Ahn expressed confidence in their growth potential, citing a large market of language learners and their ability to continue growing DAUs.
Q:What is the current status of the Max subscription tier?
A:Luis von Ahn indicated that Max is now available to about 50% of DAUs and is seeing good traction, especially with the new video call feature.
Q:What is the expected impact of the New Year's promotion?
A:Matt Skaruppa mentioned that they will run experiments for the New Year's promotion, but specific details will be revealed closer to the event.
Q:What is the trend in subscriber retention for Super versus Max?
A:Luis von Ahn stated that overall retention has remained stable, but they do not yet have enough data on Max to determine its long-term retention.
Q:What is the expected trend for the paying ratio of Duolingo Max compared to Super?
A:Luis von Ahn noted that it is uncertain whether Max will exceed Super in terms of the paying ratio, as it will depend on various factors including country and pricing.
Q:How does Duolingo differentiate itself in the competitive landscape?
A:Luis von Ahn highlighted their gamified approach, freemium model, and large user base as key differentiators that help them stand out in the language learning market.
Q:Review of Unclear Management Responses
A:Management did not provide specific metrics or data regarding the exact traction of the Max subscription tier or the expected growth in the paying ratio compared to Super.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ARPU
Android user
Duocon
France
India
Korea
Super
United States
addition
call
competition
contribution
convenience
conversation
dollar
et cetera
example video
experiment
feature video
funnel user
job
marketing manager
medium
mix
one
package
people English
platform
retention
scale
sort
top funnel
traction
video feature
video learner
view
way word
word mouth
DUOL Transcript
Duolingo, Inc. (DUOL) Q3 2025 Earnings Call Transcript
Unknown11-5
The earnings call summary shows mixed signals. Financial performance is strong with 33% YoY growth in bookings and a steady adjusted EBITDA margin. However, the lack of specific guidance and focus on long-term growth over immediate profitability could concern investors. The Q&A reveals positive sentiment towards AI-driven initiatives but highlights uncertainty due to vague management responses. Overall, these factors balance each other, leading to a neutral outlook.
Duolingo, Inc. (DUOL) Q1 2025 Earnings Call Transcript
Positive5-2
Duolingo's earnings report shows strong financial performance with a 25% revenue increase and a positive EPS turnaround. The company projects robust future bookings and margin expansion, supported by strategic investments in AI and new product offerings. Despite some risks and competitive pressures, the positive guidance and operational efficiencies suggest a favorable outlook. Additionally, the Q&A reveals management's confidence in their growth roadmap, further supporting a positive sentiment. However, lack of clarity on some specifics and the absence of market cap data suggest a moderate positive impact, leading to a 'Positive' rating.
Duolingo, Inc. (DUOL) Q4 2024 Earnings Call Transcript
Positive2-27
The earnings call indicates strong financial performance with significant revenue and DAU growth, despite some challenges like AI cost impact on margins and foreign exchange risks. The Q&A reveals positive sentiment with better-than-expected promo performance and broad-based DAU growth. Despite uncertainties in Max penetration and pricing strategy, the overall outlook is optimistic, particularly with expected EBITDA margin expansion and strong product adoption. The market strategy and financial health ratings are adjusted positively based on these insights.
Duolingo, Inc. (DUOL) Q3 2024 Earnings Call Transcript
Positive11-7
The earnings call presents a positive outlook with strong DAU growth, increased revenue and bookings guidance, and improvements in adjusted EBITDA margin. The rollout of Duolingo Max and investments in AI are promising, despite some competitive pressures and regulatory risks. The Q&A section highlights confidence in user engagement and growth strategies. The lack of a share repurchase program is a minor negative, but overall, the positive aspects outweigh the negatives, suggesting a stock price movement in the range of 2% to 8% over the next two weeks.
DUOL Report
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