Duolingo (DUOL) 13 May 222022 Q1 Earnings call transcript

Good day. And welcome to the Duolingo First Quarter 2022 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to Investor conference Relations. like Belevan, to now of Head would turn over the Debbie I Please ahead. go

Thank you, released operator. which at XXXX with earnings investors.duolingo.com. And QX you welcome to Today, our our market Duolingo's can after find close, IR and we results a on letter call. shareholder remarks commentary, first website Today's and our our brief Skaruppa, Bob Meese, opening CEO; Chief with be Officer. before CFO; by begin von Luis to led will call Matthew call Ahn, Co-Founder We'll Business Q&A. our the and some quarter

everyone, forward-looking cause material could remind financial risks events to performance, during regarding our that uncertainties actual Just this results call, make and to and statements to we'll which differ subject are future materially.

forth periodic statements of no today, risk as a information or set update Some that and future in on the reports of these reasonable new undertake statements with forward-looking These of believe our these are SEC. based we of events. we the assumptions factors have be filed result to risks to obligation as been

results. or you today's performance. to present to when And isolation Additionally, on turn financial call from, measures I'll considered are the These substitute our to non-GAAP and over to Luis. measures a consider for non-GAAP all will both not GAAP in encourage GAAP our intended we And analyzing call. we be superior measures with that,

Debbie. you, And Thank welcome, everyone.

are by effective. our by work improving reminding As We and make usual, which innovating of this universally and call in to to that products achieve so mission you best it the want to education develop world they our and the fun I off kick is mission, continually the available.

brief metric. letter in-depth We our results. of and nearly quarter quarter's every Now remarks highs XXXX QX achieved Since of quarter some was then I and a first this on will right get new Q&A. contains provide on to into an shareholder performance, Matt best discussion our yet.

our performance us to surpassed our guidance. own we full expectations, led raise In fact, year which

and working. We full an to are behind projecting be profitable now year adjusted XX% our the is word-of-mouth make products this run The stellar subscriber on clear: growth, growth materializing conversion for EBITDA stronger in our of basis. reason are well also expect above better is performance that tests product-focused form bookings to of year we the strategy user overall higher rates A/B Thousands stronger paying retention. and

new growth we user of previous the previous We record Our retained of quarter. subscribers. from paid converted and accelerated a more our subscribers, number

this compared All last of for this XX% quarter resulted of will our to discuss year. of And QX now XXXX. in growth Matt outlook total bookings updated

Thank you, Luis.

As guidance. we announcing of tremendous Luis highlighted, raising are that because we are quarter, our just we that, and full a had year

are to in we total and of million. $XX adjusted million guiding EBITDA $X negative $XX million an to $XX $XX XXXX, QX in million For million to bookings, to million revenue $X negative

full to of million $X the XXXX, $XXX an we our $XXX in are to increasing year X million revenue to adjusted For million. $XXX bookings, $XXX and in EBITDA positive million to total guidance million

year-over-year XX% XX% XX% up bookings last growth, XX% to Our full growth call. guided the our to year-over-year year earnings guidance reflects to we from on

we bookings of other big out to seasonally QX. QX cost or in events and promotion point do continue don't and to We is our terms Year's QX, guidance, business because In strong New discipline. softest of this I'd plan in our QX capital that the terms our quarter have managing absolute marketing with like as we

historically. profitable expect R&D on we to we EBITDA even we be year, the an while adjusted basis as in continue done to For full invest have

roughly percentage a last that of non-GAAP flat revenue to be expect should compared year. We as R&D

primarily And driven see public as our I'll While and first non-GAAP marketing company. the spend, will non-GAAP expanded more year footprint is Luis. through our we some sales we in a by efficient G&A, leverage full now office XXXX get expect it to fact turn deleveraging continue and to to that in back

Thank you, Matt.

with I'd friends happy Before quarters. thank sharing entire mission. We dedication who the thank on our their their I'd will be forward now for and for I'd and products of look to family, this coming to our to learners like you, our your to to to the like delivering to our questions. to And shareholders, opportunity to your take team Q&A, going thank our like word we support. in more take spread you

go Your Instructions] Please [Operator question from Sachs. Goldman ahead. comes first Sheridan from Eric

on of the staying next that just months the opening the thinking couple remind so be for your product product on should we priorities the remarks. Thanks focused that much. beyond Thanks in Maybe the you're XXXX Can about of taking against and road you investing XX key the in but commentary investment how over some map question. us next years? side

Thank Eric. question, you for the

question. So thank the you for

understand it's mostly and majority to thing going the $XX billion learning our important are the opportunity. shifting to language a mean, our on about player which most think investing be of We resources we online. learning market, a largest massive app. I language that we're the is online is So is

[technical we in of mostly difficulty] are changes a which the redesign months, going said that's most the as of and for letter, years. of change app. the in going make be few to the that small is working of changes, that relatively home shareholder thing the our a on is next live the the large couple Also, we are next we we we're on pretty So be Hello? but language to learning metrics, app. main investing in There, kind run

sorry. I’m

you hear. Operator can

hear. I can Yes,

Please question Your Justin ahead. KeyBanc. comes go Patterson from from next

can and think hearts? Duolingo one you. should to have screen about and home this, for the users impact Super Great, new changes tack app thank Perhaps potential And the the to then and how versus from we to on past like Matt Luis follow-up. I monetization

Sorry, hear me you Justin, can okay?

cut little did a Eric. out although bit in you to response hear you, Yeah, I your can

bit having you Okay. Hopefully, out, hopefully think okay. if a little trouble, but phone cut again. I just ask I mean, But I can of we're

also home on screen the one we're I app. changes. Duolingo. So the the pretty making There's a some mean, big Super was biggest

Super In we by metrics. it of we're on think don't of with Duolingo, redesign our fits more impact is gamify product a looks really main have doing terms Super major the subscription pretty that, because in think what reason to Duolingo, the itself, our kind lot going a we brand. like of

do of the engagement better. terms think big and of terms of improvements app, of set redesign going mainly into In up that's the for in we us metrics, teaching screen really to our home the pretty

I the of every redesign of also, to -- done a done have screen, two for for. to And the pretty should say be so are things four couple home we say those A/B run So or things there's years, experience major of we're that this three redesign. roughly we We've going doing type some redesigns tests. there. looking we've of thousands

The screen first app. the a when looking people of the will to launch it. don't we one that will to is, change should that launch to this the everything metrics time really redesign, we're don't home pretty of By like metrics is change is major kind the at the I users we people we have of But increases to be thing our the have change, increased. going that and one confidence like mention that lot make sure a

we -- our know these about are sentiment that's know and in we So talked even see we something some we'll positive, we're changes metrics there, something but once here for. two But may major we launch are but that's that shareholder that letter. though negative the it, prepared else,

conversion on app features. that Okay, on love. I I'm perfect. there, those road. you're my app. for just Thank over having It users whether even are social spin wanted engagement probably sounds as to guess or curious a could Duolingo daily helping like the benefiting hit then as language just And the follow-up, down But time, less some churn to you love you. hear success it's social I the features KPIs, to how better find

often. the get The come they really. their often on users about beautiful do are features, thing more to help app. because they actually metric back and people is to They they pay more user and time they friends also come more is They social them Yeah. contact more Duolingo features What the also spend Duolingo the they retention users us every spend to get increase time more app, on single on learn subscribe social who get that and on because back more. users so more

investing we're -- metrics this why So increase the in is it really them. everything really and social

Thank you. Great.

you. Thank

comes from Mario Barclays. Your next Lu ahead. Please go question from

for Thanks question. taking Great.

above the is X this So on bookings guidance in you strong the believe your quarter. came I first points the midpoint. at number one

terms in to you provide led if could color curious the just So of outperformance. what more

anything else but to the guys point New that Thanks. kind You campaign, led this? to Year's mentioned to of

the the and our running mean, of comes and I Mario. compounding it paying I of the our effect. performance, basically, really to revenue, really I retention we've of of years, paying question, a is Great from also it's mean, been is that A/B couple actually, just of -- just look increased increased on mean, A/B you tests also result over -- tests been the running Yeah. we've that conversion thousands, outperformance last hundreds of increased result the if subscribers at that subscribers. outperformance users,

New just compounding just KPIs but campaign, Year's outperforming. basically, it from in that, to really the our So good is all [technical We that, are of And month continue a difficulty]. also up. it's the after had result addition effects

about follow-up the then any I from of you And we from think FX guess that impacts on or the the impact that's Russia that how can quarter peak? Luis. out? guide, year call guys a raise in And should Thanks, then great. context just embedded first Great. full

that. happy to I'm thanks. Yeah, answer

account really any into so thing improved of It's conversion Luis in outperformance it's the not user growth, as full retention. guide one about was and obviously, broad-based, QX just year The So talking that business. is the results rolls. takes we've the patch mentioned

the things. so into of all those guide takes And account

obviously Now just things. with want interest close rates and in world what's inflation, to obviously you I very on is to place, uncertain going that all we're paying those war Ukraine, mentioned attention do the and an the mention

taken so year, lot prudent out approach the uncertainty to And rest there. we've of that the for guide a of knowing is there the a just

Matt. Thanks, it. Got

there? Operator, are you

what to all you we like Anybody? us. to It do operator operator with figure for trying the can out think disappeared, hear essentially the so I now. are seems still

about This Sorry is that. Luis again.

just How tell kidding. think some lost jokes? operator. the about I I'm we I

go like Mario X looks Excuse We'll ahead moment. question the Q&A and And here. with have me, proceed we queue. still within currently it but Lu

Mario, you us? hear can

them. can I hear Yeah,

think in the now. I’ll for good I’m jump queue. I just back

experiencing Appreciate Schackart sir. it. from queue, It Lu, And we'll then William like apologize, we Blair. the of Okay. technical take you difficulties. Mr. were I next, do Ralph everyone. we looks will remove

you have you wanted joke if Luis, for Thanks But a first taking feel free. question. the to say, that

do many got but I this. let's

just talked Just in in you're And of curious product in I subscription zeroing you of have users. anything obviously, Maybe kind paid you letter, paid then change side back side? testing how Did renewing about the So new a kind on maybe terms users. the renewing previous growth revenue the of bringing on shareholder or just subscribers. follow-up. and

tests try subscribers. I running Yeah. A/B of increasing we're to to mean, continue always our number

things good Duolingo is you and if to you're have is because is for is Family main you're that the going continue using the child if really and using Family increase using you're Duolingo, go renewal the and increasing it, Plan Duolingo of other have -- One as you a is that your about people also also as rates retention Family Plan. fraction to doing been The it, long into our of paying. anybody think still using your significant we Plan if

we rates. the that, renewal continue and just that making we've fact, more year, of But us and keeps something subscribe are that really fraction that's It's, people that's the to doubled more and people on app with since more beginning Family up. and helped of more -- So in the the other engaging been and just Plan gets subscribed. that than going stay the

Great. follow-up. Maybe a

and user continues Just kind is to and base. the of case? sort Just impacting how that's as that just curious how growth. use and that of Is the sub subscriber quarter primary a impacting travel return, engagement curious

not little places, in It's keeping than of Travel a do And having case, is not for it and the a don't I depends terms primary on really, one a case. of the geography use having that major Duolingo. many use it, others, bigger some cases on. use we're think but course, -- we it's on that's impact but in it's minority the eye see something an of

think we I had on And that's just see are our more. do don't So traveling we it, know numbers. but a people major impact

Luis. Okay. Thanks,

JMP And next, we have Andrew Boone of Securities.

Can update the start, about questions. four letter, on testing in taking have secondly, you local And Hi, doing were you talk fact countries? just more how an XQ, about, expanding you through I accelerate thanks to learning Thanks Duolingo? the just that bring so the the can going the more users think we was saw around, that about of much. pricing, be the top just my then given language it we into of market. and are kind users for talked funnel inclusive you just expanding To

question. Great Yeah.

of the we Let me in States, is language users something markets. XX% noticed first many United our market learning the before not learning we've Actually, were Duolingo. in when talk the our the this United our in States about language mean, market. that expanding in approximately of I users, asked

before language a learning us. not were they So

certain just brand happens talk just like, reason which question. was have a -- way And we basically And have it's through we about. And the market. mean, main I easy. learn with in -- that And just things question? we're mouth is easy that countries, are word to people It's a expanding I other lot Duolingo? I really What have of each Duolingo. each just think other in really people people say to we the the how one and the tried iconic that's really really think the you to expanding That was is other. grow the tell are also market. so And of we that that it's

pricing. Regional

Regional regional pricing, question. progress. pricing. we making so Yeah, Yeah, regional with continue pricing

prices changing during and for pricing more just We countries. the way, are in we about talked IPO. more By regional reference, the

one in that had Before country. the not We optimal. just single understand IPO, really price every we is

that United countries, States, price the the countries. the changing of the have because kind but had we of means the sense majority States reducing United lot Over In price made of in in the one of last few the we a prices the countries been months, is that the wealthier world. for

been want it's doubling we're some prices, dozens or but is the impact a an that it's it's about the But revenue It's just mature. countries, massive in that's impact, impact. anything oh, are pricing having like majority price modest not -- And impact. we've I in is and it digital it the countries cheaper is where like, like of a because And the to not the testing literally modest have. very one levers of of countries been subscriptions that. emphasize And not is impact thing So reason reducing countries, suddenly a price, these that regional happening. that's most that an we we're are really changing having our also it's is because these of

subscription. people sense makes sometime digital become probably price we pass to to the now used to So but still for pass really

condition not penetration to of subscribers condition. a that -- the these that but is So regional see a increase so really countries sufficient something necessary in we it's it's pricing way -- the our

you. Thank

from question come Mark next ISI. of have we Evercore The Mahaney will

Two questions. thanks. Okay,

you breakthrough little So really that or brought color I users. -- of particular starting of MAUs more them And number maybe them this first helped you. retain about and you place? where more color, where that? Just or talk record in to new the number Thank new Could from? it you're markets A/B like bit something a users helped India like had testing you and how record in them. was came the markets on you understand just could But all this provide convert

Yeah, hi, Mark.

okay. So

in that to every we're The first thing is single region. growing say

certain growing in a are regions. little We faster

is course, the fast also our pretty Asia, in and in we're States. of one but growing countries, fastest-growing of United particular, India,

So you it's through we're organic pretty region. and been majority historically, in mouth much growing in The that's of And in. growth. in. how of they're how for Duolingo, vast every our case asked coming that's they come came And the word users

ton some but have like pretty had have us. influencers efficient. that, for paid particular, We And really countries, influencers Asian have been money spent really found not -- that a we has good work. been of in on campaigns we've In that it's marketing that

with good in thing growth has media, least social for us good UK, of that bringing of use has But been like been, our countries getting and out. word comes in mouth. at word our TikTok The the other the from the TikTok users majority particular, our really for the are of new English-speaking has pretty been U.S. at vast still,

then -- been you've than you're And is learning talking of broader goal here education. that date, question, and app a really obvious And just a Okay. much about state one. kind to interesting your language when the you've

about of more Duolingo coming out, math let's and to set when talk a the to and education obviously lot product. Math Math And language. timeline us just Remind there's the some So just expectations. then is

-- just what see So what else we it? when Thank and we see should else you. we could could

do Yeah, question. I of pretty that's do to ambitions education. true, really large. mean, do our want And we all a a of want great to it's things. are I couple say

The getting and just still market lot learning and we are we're in We're there's is still getting in language the started of penetrating monetization humongous, first runway there. our market. the is started just -- a

learning. and see our foreseeable you majority So revenue growth our will the of future, from certainly for the of language come

are other literacy. for ABC, on already working We We these launched apps. is Duolingo which

public Math grow beta to We are our happen. app to that's there. going going from And year going that's this to later a of have and

time reason to much our some become that is main next product -- learning this to catch growing or any, be should majority to contributions going to for that just so take that for anything minimal. will meaningful. up it's it even And And there's terms you In language revenue, year if of think the the expect is I year. don't

Okay, much, you that makes sense. Thank Luis. very

you, Thank Mark.

I Piper. Arvind everyone, delay The of apologize Instructions] question technical from next do we for Again, comes [Operator the earlier. Ramnani have

for of facing Yeah, are of many on got my of I you look them a sort haven't I at very And learning question. some of the of models various sort wanted of you different haven't firms, of post-pandemic clearly, kind Hi, all headwinds. any kind thanks taking but just -- digital sort and memo other got ask, it when to like slowdown. looks the business

growth. In seeing fact, pretty kind of you're good

sense a Or you're perspective, the Just slowdown of the is unique wanted expect slowdown. seeing quarters. any three not model a a so high-level in -- maybe from what about should get it to is or where like next or two we

We have reason there's to a believe to slowdown. no going be

In growth numbers just -- fact, just We our now. a our user things. accelerating number of are -- for

first we The is thing say that not. to are really

of, when I particularly story. education really see a they a were COVID think you lot things,

We not. are

look kind If had numbers, before growth our you to user May, growth our kind of lockdown the numbers, organic back early rate we did see demand. of rates. around Then and at But were of basically, COVID. we we that, the increase after an March through pre-COVID XXXX growth an in

So was COVID us, just for was not some That's for it what I one of think just kind thing. companies. other

thing results better. at majority just spend lot We better goes other the lot of A/B are that spend on a excellent if I is making product they cetera. or thousands word I making think these And think a a just showing. the product-driven you that is are et of a the resources basically, the to work, tests the so vast look and mean, I education compounding of really product we another our mouth. marketing, of it mainly companies, companies say, of to that And of just on of important resources is company. many

then -- And Perfect.

but also I huge, -- thing, only I to the not other -- just huge we are just interesting. just say monetization. getting a market, we're this with is is want we mean, that also which with language it market. the really with with And fact user started just growth learning additionally, one

growth. a continue we're in seeing of you just that point the think I curve just

Is learning, just not is from ancillary like of you'll have the like product -- able in the in like future. perspective, a sort other Terrific. Math, And kind tangential line nature, near there of like for you're things that's time some that ancillary, example, of to repetitive Math. a Or share? not it

I’m showing one user. [multiple speakers] more

you hear Sorry, me? can

We can do I hear you. apologize.

okay. -- can Sorry, you

going release release not see I -- should app the public So going Math say, probably, year. was later to with beta to we Math, this version -- we probably to so are a we're of going

wanted So over you to few learning come meaningful or mainly it'll Math of just from so there. one that's where because app be the is these the the should other things, language any But revenue the is again our going that contribution years, I is that things from next emphasize from expect not mainly. to just growing much that contribution

very you much. Thank Terrific.

you. Thank

have question we from of next, Bank of Nat And a America. Schindler

I guys. language do life. an looking to and life. on what thoughts? a People Duolingo. lot for your been lot people, people monetize historically sit -- but of Most do a to don't you're see users and don't I geek, who not I a math been in I not see There've -- and Hi, and more learning their later I'm of learning of can adult engineer Yeah. wanted Math up follow that that understand just are children. And your comment. subscribers you quickly. have very whole

there is paying a real So math learning? market for for adults

think going the adults, to children. it's majority be not of it we be mainly to although think question. going this this first But market that we great on to is and much I going -- math is to brain some related there's be very that new think to training. everybody say for The them. thing using we're learn. needs mean, people develop adults a to bullish to That's are going is these are we because products are pretty something probably the so that We're

the and the idea our that that, children the our is be thing we're Now what bundle be that We're is of of plan, Plan. to Family this about increasing successful. we users reasons this so that's -- into to in a think why Family addition subscribers lot of to Duolingo. in is that the we excited very to is of the this multiple have about say And products going something And are Plan. fraction family learning will the one

you. Thank Great.

then to conference this we're further like over questions. I Well, the the no Q&A. team plan Sir? time, hand conclude for showing I'd any remarks. to back time, today's this to at At management will closing

very thank you. you Just everybody, Thank look the questions. yeah, the got forward sorry off. again for to great next about and and addicted operator dropping we to much, quarter, speaking And They probably went Duolingo.

you care, Everyone, of your now we we I rest patience. do thank today time team. and you. day. have thank the call The your concluded. management sir, thank wonderful And you, for Take to a for Again, and conference the has