Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Duolingo Inc (DUOL, Financial) reported a 59% year-over-year increase in daily active users and a 41% increase in revenue.
- The company achieved a record adjusted EBITDA margin of 27% and marked its fifth consecutive quarter of being net income positive.
- Duolingo Inc (DUOL) surpassed 100 million monthly active users and reached 8 million paying subscribers.
- The Family Plan now constitutes about 20% of subscribers, showing strong growth and engagement.
- Duolingo Max, the highest-priced tier with AI-enabled features, is expanding and expected to be available in most countries by year-end.
Negative Points
- Duolingo Inc (DUOL) expects DAU growth to decelerate to about 50% in the second half of the year due to strong prior year comparisons.
- Gross margin is expected to decline slightly in the back half of the year due to increased amortization and AI costs.
- The company faces challenges in maintaining the extraordinary growth rates experienced in the previous year.
- There is uncertainty in the macroeconomic environment, although Duolingo Inc (DUOL) has not yet seen a significant impact.
- The rollout of Duolingo Max is still in progress, and its full impact on the P&L is expected to be seen in 2025.
Q & A Highlights
Q: Luis, some third-party data suggests that downloads have slowed. Can you help us understand new user growth and the opportunity to bring more users into the Duolingo ecosystem?
A: We don't comment on third-party data, but we feel good about our top of funnel, which includes both new and returning users. In more mature markets, returning users often outnumber new ones. It's rare for users to stop using Duolingo entirely; they typically return after some time away.
Q: Can you talk about the health of the product refresh cycle and social media strategies as you compare to last year's Barbie campaign?
A: We're excited about new social features like the friends streak, which encourages daily use with friends. Our social media impressions are in the billions, all organic, and we expect this to continue. We anticipate user growth to remain strong, around 50% year-over-year.
Q: Could you share some signals around monetization for Duolingo Max and when it might show up in the P&L?
A: Duolingo Max is now available to about 15% of our DAUs, and we plan to expand it further by year-end. We're adding new features like conversational practice with AI characters. We expect Max to be mostly rolled out by year-end, but we'll continue iterating on it for years.
Q: How do you view the potential impact of AI on the necessity to learn a foreign language?
A: We're not particularly worried about AI replacing language learning. Most of our users are hobbyists or need language skills for work, where AI translation isn't practical. AI has been good for translation for years, but it hasn't impacted our user base significantly.
Q: Can you discuss your international expansion strategy, particularly in Japan, and how you plan to replicate it in other markets?
A: We've developed a playbook for international markets, starting with performance marketing and local social media content. It takes about a year to establish in a new market. Japan has been a success, and we're applying this strategy to other countries, focusing on advanced English learners.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
