Duolingo (DUOL) 7 Aug 242024 Q2 Earnings call transcript

Good evening, everyone, and welcome to Duolingo's Second Quarter 2024 Earnings Webcast. I'm Debbie Belevan, Head of Investor Relations. Today after market closed, we released this quarter's shareholder letter, a copy of which you can find on our IR website at investors.duolingo.com. On today's call, we have Luis von Ahn, our Co-Founder and CEO; and Matt Skaruppa, our CFO. They'll begin with some brief remarks before opening the call to questions. [Operator Instructions] And please note, this event is being recorded. we'll which statements risks are reminder, and future and a performance, financial subject Instructions] Just make regarding forward-looking events uncertainties. [Operator to material

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

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

We you, net report to growing daily users I'm consecutive growing Debbie, XX% quarter being marked quarter EBITDA our and that fifth this positive. we year-over-year. a everyone. and revenue with Thank another strong margin of active had of excited and XX%, income record adjusted welcome, delivered XX%

particularly time achieved considering years had XXX X milestones: is active only and million monthly and that XX X of just the our also MAUs million IPO, subscribers. ago, million This million at reaching X paying X subscribers. We users, surpassing impressive we under

strong, by both having users penetrated new across remains both less and to driven and funnel for away been after markets. growth over the and returning Our app top a of more that's those month,

and we are LTV. progress substantial that Family both our our subscription perform And offer our only iteration. better DAU-to-MAU priorities at fun various and record and through optimizing on and initiatives. testing increase time learners DAU we making points monetization that's business and price plans did choices high a in also free, our our so not app XX% why but gets QX, tiered ratio. And reached can well over more Our year, Plan growth our This long-term we're effective growth accelerated continuous

growth rolled members, We Family we're individual to discover more see Plan We've often. our between Family family existing also increase subscribers helping to continue excellent and Plan. and to convert improvements in out engagement

AI-enabled these result XX% makes progressed subscribers. At has -- features. so covering in as DAUs. of we efforts, began now tier available our The Max with courses up XX now, end of see about X of in our X in Family about of of that a the of Duolingo highest-priced of the it's Plan in countries, to our countries rollout the impact As sorry, XX% Max, QX,

you will QX, we set countries on see is see us in of to of During be year-end, fully expect both iOS. XXXX. number the to by This available available Max in it us impact up Max in. the and And more will most countries Android expand

of talking this will well We most We of our our serve resonate Duocon believe last billion for conversational advanced for English over the content will conclude aren't we experience. I courses September course new us that also X.X English as to at learners. learners the intermediate features better practice, about approximately learners, advanced us stand-alone more Duolingo reach on years. effectively XX features Join all English initiative to a in unveiling requested which XX of on to allow the will today. immersive the be who have advanced includes This English with now one Max to AI-powered introducing XX new by want magical learners. as more

place also of learners they challenged hurting without how We engagement. more so feel we improving these courses. proficiency have for of prior exciting adequately the the Stories plans their and with addition that but levels to We're DuoRadio advanced

expect to the we learners English our medium reminder, long term. to a As monetize is effort over that initiative multiyear a

can both drive current you long-term and we in growth. As to believe innovation in investing see,

believe and business ambitious to We options our Duolingo achieve that very more Max for ever our them. more content goals than have before and give advanced us English

Of growth opportunity huge that, over And course, linear, excited will not with but be by Matt. turn path we're this to ahead. we the see I'll it

To and of provide our strong in Thanks, and additional Luis the Luis. is XX%, I'll XX% a remarks, reaccelerated respectively. of some results and update the said quarter for us. on remainder We our his MAU color then QX growth QX guidance DAU what year. for emphasize

We to more strong QX, to lessons. In their and mentioned, a posted quarter. XX% are back focused EBITDA revenue being on fifth was year-over-year, our users margin. and adjusted we Luis top continue it XX a year-over-year, them saw we seasonal consecutive who bookings quarterly platform in reminding highest to and positive. All away, grew users funnel to as of grew growth, healthy this days feature launched around, income resurrected our after than the quarter see do come EBITDA adjusted XX% who we particular thanks strength is net And that

we forward we business back about the in the Going saw second we the even good the of half last of as half lap feel into year, year. the strength incredible

year-over-year For and of that respectively. about XX.X%, the and raising are so our full guiding year, at revenue the we we to XX.X% midpoint, bookings are guidance growth

we about into would points growth rate were growth rates X the guidance bookings FX year the year second our about our rate growth To that would year-over-year, of year-over-year about in about higher came point rate X of constant grew we of half an and XX%. A the half grew extraordinary our bookings materially is as of acceleration set XXXX. In Our XX% our if which though, up Note accelerated be full QX bookings rate of a XX%. second be line same the put for bookings year-over-year tailwinds. in roughly implies higher. half context, year-over-year growth meaningful to bookings this year, the at from first the that XXXX, of growth of first part half about top

feel brand our the summer growth Barbie decelerate about half same incredible to rates year, marketing many than that user monetization, bookings growth an tailwinds. expect revenue the year. our user about in presence some indicative homerun was the ways, was and helped Lapping why expect exchange we decelerate also in Our last and but boost, today. This accelerating good and DAU That we XX% well. providing extraordinary in one-off see expect zeitgeist as and monetization, our favorable we we last coupled don't in second movie, year's growth campaign is to was of why growth to deliver to the It QX user especially in improvements featured growth. more onetime with commanding and signature "ding" in

costs income the the with of be back statement, down of down as amortization margin expect the Moving will Max. gross and rollout we AI slightly our half the increase in year

midpoint, feel to We EBITDA about the XX.X% adjusted XX%. at an ability full margin higher margin XXXX is to continue has X to our drive incremental confident our and points than guidance profitability a raising increasing are which of and XXXX

adjusted For about quarter last higher is roughly guide EBITDA $XX XX% or million year. than QX, our the same

profitability the quarter As typically throughout a to from bit quarter varies year. a reminder, our

hiring also R&D the expect margin and midpoint. a portion G&A points quarter. to For marketing the see increased as spend in we of seasonally revenue. guiding at deleverage as QX. of driven product sales in new by QX, and of XX.X% add are This this to relatively X a higher significant design see is mainly quarter-over-quarter about engineering our percentage flat and should remain hires We'll in we

compared from For leverage expansion of point about the QX. to expense second expect across resulting year. overall, of X that into quarter-over-quarter in QX margin QX, to about half we shifted million see the we slight of categories, all OpEx Note $X

similar Finally, we the expect with price. end shares diluted about had to it million last year. in to net to back the we And to which dilution XXXX, employees, from quarter using we with the equity Luis. end fully the I'll to ended quarter And with X% X.X% XX.X approximately issued turn dilution closing that, outstanding year is

you, Thank Matt.

about would questions. back ability goals. our can take it I'll and our Debbie to ahead happy now in to your the confident I'm the excited you queue. to manage As turn be we achieve road to long-term And tell,

from Luis. Thanks, first Andrew Instructions] at our Securities. Okay. question comes Boone [Operator And JMP

funnel the of Luis, as returning you new users. for healthy defined and being just top

sources understand bring as us that what have But the downloads that Maybe about about. slowed. can is think is more guys ecosystem? suggest exactly Matt this user Some the help talking opportunity you we into comp growth to third-party is the data Duolingo new there anything and users

Yes. Thanks Andrew. question, for the

third-party data. first we don't So comment all, on of

it, to want we say, or what the world. watch But in general, country every have in you users see you do in single we'd it to like If you.

more are countries for because there mature than longer. in we've Some been much others

In fraction days. that long users just users, which a users, the XX typically more more is are coming downloads also people about users. But we've the people mature, think we been of way which at period more inactivity the look number the while, around than countries it is that the of they're is penetrated, who and we brand-new for app a brand-new of a higher after are because back funnel, of than much touched returning haven't top internally are good usually longer country. So brand-new

back they this Duolingo. very stop do is later months X people that, top back then of about at, or rare what come just it's good they see generally, funnel pretty to and people stop using later. they feel a come of So -- looking we're because is we that they and completely year What

funnel And good. feels top so that pretty of

think is are up opportunity? do users learners that guys follow If about we the for you of there number billion a think about that about Duolingo, touched learning a that that think to within have question, the X language, right? to how cumulative people So we actively on way

track That's so we of the not we don't It's not it's my know something a off really head. good top Yes, track. it really something really question. I

Okay. Bryan question of And next Smilek JPMorgan. comes from Thanks, Andrew. the

results across at social media So doubling impression record acceleration, were and strong almost is engagement highs DAU year-on-year. growth quite

about comp health as just stuff like talk Barbie So just can you media of last into you refresh social the the cycle year? half strategies and the overall from back product

your that we're features. keep friends. talked new the we we a testing shareholder Streak, in product-wise, with about the very mean, either putting is or you letter, about of stuff streak There's which about lot -- I to our a Friends Yes. social out. of talked about already basically excited mean, we're that a lot I

Duolingo. regular a with So streak is a steak just

Now you the And both day. you have Streak. friend, use streak friend X of app one Friends you and you friends, you it's do your and can up it, have a if and a lose to a but every to doesn't

gives it really good a not you disappoint your friends. incentive So to

great a out. an of social that's features that a But example So there's lot feature. are coming of

our We're monetization lot a features. expanding have also of a We lot teaching features.

being continue strong. And pretty that. I So we expect because the to good feel that, about of growth

we As lapping said, year. very strong Matt are a

So impressions we social we're impressions. going XX%, for our while, the expecting to be is terms of that's that not remind user media our a what measure in these We're about to at. And social impressions, and media we're growth looking organic. this is of for And way, paying you, billions. this, by kind in

of to So we're we getting billions social and continue. that impressions expect

follow-up there around expect monetization? When Awesome. Could the anything DAUs And just we I a guess up could And P&L, understanding now. I XX% show share endeavor? the Max. curb half? guess a you should back multiyear of to as we is of to right signals enter on just Max rollout in then that the it's Available pace some

Yes.

that's XX of in and So about out now you It's we've as countries, X DAUs. -- XX% courses said, rolled our available Max. that's

not giving our out, to most that it we of We're feel going adding new have is at rolling out be practice I'm of we're more characters, And one because about it year, -- going it the by through for our end we is to more also about only to it. We're the features good to to the feel that Lily. rest it. year. users least. expectation and it. excited more than access that about majority because conversational of X the with And will good reason the The rolling it of Our actual continue users we're the is

If that girl the not is that impressed purple-haired don't know all that's you anything you at which about is, do. one

to able experience. going awesome talk you're to So to it's her. be And a really

are users it. our that is sense our love to going So

about we but Of to also iterating haven't probably ago. on exactly is we is Duolingo, still to without out out feature we are said it. And very a X put know what course, reiterate excited that that which something Super you really we're hard years put

going Max least will years. the just to out. we're end on be So for iterating the of year, by many rolled be mostly It's at it

Bryan. Thanks,

William at Schackart Ralph from Blair. comes question Next

product. Luis, just the curious Max on

there, opportunity new second out get sort often, of and those if that sort test tiers ask asked and the an your to see products guess sort to I you paying subs over of, I could time question. And do I sort opportunity. of As you think an opportunity know that innovation of so of from question, guess, as eventually time? So time you the about lower you're first this platform, it. to develop is what I'll question some for But you an of see percent roll

well. I last you asked think that, kind if sort the of as us have or just curious Max in is scale. But an of now update maybe of can give were you maybe wrong, maybe fold, time before I'm Max that that pre-Max sort with on you

Okay.

we if sure seeing Basically, put can question your about we is is testing committed that we're way to tiers. first the That's for Max X-tier are for ground a maybe the strategy. different in true. then is So features

even we because where lot have ones we features the it the have of is decision sense what's price cost to some be the at doesn't features will lower we'll so And Max. see cost Right either time, features to calls, you tier. But just down. that the on that or language price serve can belong. money highest in -- belong features down for we Super many to AI down, put in anything My costs will remain going they're require That's LLMs use come or we're the those look tier. Over Super, the time, in heaviest of most to the and a free, that that is the large then are time, happen. sorry, because AI-based exactly calls us, we're will in those them hard of that some probably to have what those it it's us free of probably model in that least at say that to the the Max, AI, now, a that cache going happen. make features if we for expecting happening going is tiers. expect over At going We that we a Max may of what's of come will

-- to for any paying either Now of terms get question how Max in We or every don't Max. for penetration, point either of terms the percentage kind -- is think increasing know. for or I in I were penetration Max subscribers your about or like above either overall, what's Super just mean were high penetration, year. number of paying can paying we happened latest be X%. We subscriber That's historically. X seem

know. just be I to XX%? numbers, But people to that will us don't it clear some Is the what know I it it but where happening XX%? it think don't know expect if end. ask, exact not We now. We it's don't is I mean, continue will is higher it than and I

Okay.

we Curt Nagle up, have Next from BofA.

think Family progressing time a right, nicely, on I we the bit First, spoke. since last up maybe Plan,

the in a in works guess in rates we are go just have year-end? I do increase of actual of where by subs product? number terms adoption. You the fulsome could total think And of you to now they how see -- initiatives

We are number touch. their We're Family kind of there seeing the starting and started this of few Family expect getting already, they've we've really about made team that to of The was put by much something we awesome. a was remind and our so behind changes for growing. the more -- But so by grew left not of of it we years we're ago months it to they're And been that subscribers we Plan, Plan. Plan more it XX% Family a it. it, stride. penetration which built long. just It's that and team didn't Family a Yes. few point, Plan. At was continue number and paying people a we itself, paying growing Once there, the -- realized so itself, has just built

can is than to high how lot do question, answer. But we get? on people expect know get. Some similar I don't a previous Again, it get the just adding we're XX%. it's And high question going ask which features. to can higher that because are more how a us it same

lot For of know even example, them only Family Plan. each a families a Family not we lot we're things Many with known where there's other that features, adding the subscribers. well making among more. And can our engage are Plan a don't also more

So we're it often. front more just putting of the in people right

number on end of know to don't the I can the just And fraction higher be is say the it expect by that we Family be I so subscribers the -- now, higher. what Plan what year, than of is how the much but to

the last, then funnel to Makes on in users? conversion coming define of some top to sense. rates however paying Is back back, of just of want terms terms users those it average? in And look of like do going what or points existing than for it, higher users you

I think Matt than knows that me. one better

comes they it slightly rates. free start trial kind -- convert similarly, relatively the returning at users conversion When of free different rates, slightly Yes. They the different and trial to the users. new actual

we opportunity those to so rates types actually continue for users higher see both of And to over drive nice time. a

good opportunity there's there So for both.

sense spent we've users a resurrected Just X in to it but that. new do we're starting time last more work lot makes users, than color. users more optimizing because Historically, to resurrected just

of Next Raymond question Alex James. Sklar from comes

curious from notable your of free I'm availability terms base new in base? as on Max Can of Bryan's Super subscriber looks today. how if from any adoption you're percentage your about users you or existing Matt, earlier just following that Luis Max difference talk versus a availability that up paid And adoption disclosure. seeing on question Max

pretty think know? it's I do to Matt, paying similar you subscribers.

pretty it's to it's think terms in probably availability. I of similar XX% DAUs,

Yes.

they'll I of close next think little over quarters, it couple the so definitely, over for next it bit, converge -- the will will be sure.

And now and there's appetite -- from subscribers. Max in -- of current paying free from users also terms we for both

free working for the both. on the from offers but So seeing we're uptake we're putting cross-creating And users both, out the also subscribers. from paying

Okay. X really subscription bigger then, to total now you. bookings and maybe nicely up a making follow-up Matt, color. of piece for bookings. I just trend continue that appreciate And The

buckets. and X on the the in I bookings non-subscription comment for just you flag to anything the you there bookings, outlook? was So the on saw curious just other so trends Can what

Yes. the to we business, lines. absolutely right continue see business subscription No, and you're a start to subscription that to faster with the fact you're other are than our going grow

you a so trends time, experience think better we us. it's is identified the economic And and vehicle better over by for will the subscription that's -- a continue. product design. And We just just that user

think I continue. those you'll So expect trends to

of Each makes of up less XX% of lines the revenue. other than business

is DET X%, this. is IP like something X%, X%, is ads So

So slower in ton working them. year, we of grown don't they of have has little grow so those Both a to as have for trends been, have this resources a those. Ads, far IP. example, so

probably you business half faster we'll testing in a the a That as little been ads back think slower has the resources and know, they devote grow is than nicely. of our bit subscriptions. DET, might growing but product. I both still year, bit to so IP more little

higher. which year of kind I expect issue industry-wide slower focused bit subscription test-taking in really going growth. to it it's of some back last the grow like slowed And been are the little has be down did Again, movements because year, on half growing going it an we're again, to think than there's a and on, the we pretty visa But nicely. the of said, margin. growth all small driving on you of these

at question Khajuria Wolfe comes Okay. Research. The from Shweta next

I softening resilience just ask wanted the about macro in to environment.

the past piece, the the you remind and now. you've maybe increasing piece, us as seen what spend perhaps macro the have subscription there's advertising on but environment consumer You just have right just in concern

say anything. in the anything. mean, we're had seem our in situations of the of external uncertainty why we've to we've we're good really we anything. And what is. consumers know mean, never recession-proof. good don't seeing gone And I see really can't where there's terms we world. say to a they're But numbers, free you're not that consumers, seeing look in a know that is we a free for tier. There's just at I they're because are a just not When paying we recession. there's we the past, nothing world. that don't to money, is that's world. through I'm just that will our I seeing is There's at $X tier, of the We don't going we external our Yes, question. In because because who what have just happening the be look -- worrying. whom us uncertainty what's reacting using similar not lot a when month a -- lot such people

So we and them, just don't whenever for cetera, are much et there's usually recession not consumer who down, because lot. is the a paying us, like $X cutting a maybe just is people it month the very see

just like we haven't So that. seen anything

Okay. question at MacDonald Ryan The comes from Needham. next

nice Congrats quickly for the shareholder in when -- just, started to one, those made in you international other, us been that how marketing you sort wanted sort I for those into it targeted about languages investing I the that returns? what remind efforts. expect on countries sense to a the the as do in of about start and environment? on in And being that or English quarter. returns give two, from was Japan you Japan replicating of think of mentioned us advanced playbook generating expansion. period XX to international payback impressive the letter, the Japan you you've sort Can talk you've and playbook efforts investments of a And a the Luis,

Yes.

different then country. Basically, TikTok look And account, TikTok one we've give a to to And context, take. accounts we for across about pretty playbook and Japan now get well. country. for I We've is new good letter like it's about an number are worked done markets -- has terms ago, very penetrating one we together of Brazil more an you mean, So adapted it popular. And these in about it years the takes mentioned heavily country. at the you to in start with they're of that et growth more international all ones, France social one investing we playbook. is act bit a a popular, that the in popular. other all give adapted marketing a cetera, Germany and idea, and it's was content example. have markets X works But we but to year Instagram you shareholder or Germany feel more different our beginning the where that and that account starts to market in one time. this maybe the France, our little countries, well. The or while than worked X little probably playbook is actually The pretty every that there was we the takes a And country little all idea before. Then seeing usually if a been the our what single manager in X.X you what the probably a kickstart is similar of is is It very usual at than markets. a start making popular, pretty that popular, Japan a performance start Japan hire returns Japan, marketing now.

about act a get So for is our my to together. it year given takes country, a us sense

feel for maybe bring think of get sort that then And your give get act just many to sort of progression start to -- those sense so -- how are a learners you learner that to advanced you targeted countries content languages onto about as do the you as That's where platform, investment. maybe a trying that, and on the and you today or together, to follow-up of of helpful. speak, those countries to XX the like us of as English

Yes.

XX base that you just clarify English. is What learn have So have XX we English languages that different we which means so to from courses. can something

So which Spanish, speakers Spanish baseline, English. be learning could

speakers cetera. are Another one's Chinese, et Chinese English, learning

not for and Latin for it's So Spain except countries example, Spanish America because, covers of all exactly Brazil.

on are So these the that that's language are people courses -- based speaking.

We monolingual. English that have XX, And XX languages. to English. in countries another speak That to from those. means have those these ones all learning other which is cover addition course, we don't or of That's XX the

able -- we'll to with be be be we'll to basically, and this, them. whole think we'll pretty world I cover able the much so able penetrate And

outside Now there's in number much typically, them that the U.S., pretty we're terms of just than we're different maybe we're the countries not even Western we're in in highly Korea, Japan, Asia. then et that, penetrated Europe. Japan, just of mean, that But of at stages. just the beginning I cetera. This that geographies, penetrated Even includes all in penetrated a currently. we're less in

Okay.

Sandler. Next question at comes Piper Arvind Ramnani from

couple I quick questions. guess Yes. of a just

using shared, you have they're terms XX% of stat your been XXX-day that -- users streak... at of the In

longer. Or

we we stat. I moved a mean, interesting some So like I And at nice that? that when up look do provide mean, or should of what How number? historical can it's we out make you at, that context? look has what

put share a it what from excited like Page you Can you just gets perspective? to chose X. You on historical

us the very pretty so, for X.X not kind mean, every million active similar a have have mean, I that, because just people it's X streak it have to same least at and year was year million number, these a missed it means and or -- year X growing Duolingo longer a -- used ago out for XX%, I I daily it's fast. that years for a they X think or of That, back day day there's million we that Yes, then. impressive. put find a step that's keeps we of a growing or like pretty meaning longer. That stat put in maybe than XXX, users that's exciting it's longer. number perspective, a like about single

number that that an product So it's how of pretty -- just gives sticky fast you keeps and just the going is. up idea because

like unpaid but when other paid can not guess, to I a people number the end having And users of number share here these or Do necessarily they disproportionate compared you Yes. users specific are up sticky. a XX%?

you a sense. in use you likely the you course, off or you It's everybody. I general, more the out Yes. us or And to streak, that just turn mean, and use point, either And you it of of to at that subscriber. subscribe. something it are have that's, is long general, support But get like if makes you're a the more likely some Duolingo, more in true ads more not for that. want

then mean, just X get it. line guidance year, for raised certainly metrics was a the question. guide like raised feels I very last XQ of lot print. the But in the it perfect. performance. impressive the with Okay, you And I And through

mean, the or like at kind just raised as it? a the of like this there's momentum, look momentum little guidance it Because business. given at bit feels like how we I conservative should we So in really good should look

growth momentum was that XX% there growth in in had but business in XX% we're terms year remind guiding which in good turn and lapping good of have that growth good to I we're is like, bookings, another in to year Yes, momentum more what had it. lapping XX% in than a bookings, bookings. year this looks just the we But about you feel

just we're growing just fast. So really -- it's

And strong so that's, feel pretty We that. that. about

was and we Now because about out feel year, so we particular, strong of we that we the saw last good guidance raised . in it. strong slightly but lapping put it quite a HX year such we're

back to XX%, you've late this again Like acceleration. I conservatively growth. number like it like last the And like acceleration of of over feels a couple last sustainable how DAU the your a I of in of And right? back DAU were but is it's it's in like defying just kind right? quarters, mean, comfortable past to this Is feels this, talking mean, should with Then constantly question. next sort bit gravity. just back years? is growth like year, get is just it you're like this -- you to couple like little like gravity, we XX% defying of kind Yes.

Matt's it's in growth. while, about that quite belief stay prepared at remarks, this a is our we but not Yes, our a say, around going good for to, XX%, XX%, while. for will feel is I

belief which think kind going to and year-over-year, be. we how So XX% growth, that's and that's our exponential it's is of

Next question Seaport. comes Kessler from Aaron at

think Anything replacing I don't of I in the talked highlight that. learn a think verticals, necessity the math, et potentially of still AI foreign other language. cetera? much to concern to other about maybe just around Maybe the some verticals just on on adoption. little you And then bit market a there's

AI, get the replacement, I on just your that, learning term. good be potential thoughts it'd Just need foreign your guess, longer on maybe thoughts to for language Luis,

Sure, okay.

They're other for learn So growth. to small verticals, First you the question on going and be small the We about months. in They're iOS. in compared to particular, while. on Duolingo. a on about was can still them little very music next languages good We're put they're couple math feel now Android and only to of about

we But more. growth. make that to the will see You're grow Android and them them good feel about pretty on going

With each In terms of than French have X cases, probably content them, adding content. working we order for less we both Spanish. have working in like a we're Math, of or really, would lot an more on of we're magnitude what on

to need So same we And more Music. just add with content.

so more we're engaging. the and also about I that. of results on them content pretty working good And adding making more And on feel

for this AI, reasons. we're of not this people say -- is of something this terms number not but a particularly worried is In about

because good been translation is and care a learning good. has The to well, language language app been kind about XX also you and don't translation while, who Google my any that, and there of years. use has you works been go one, really like for it's phone, and for on if and speak French France The really you Translate. can For really mean, immediate English, for use voice-to-voice is I main you it somebody automatic our the for find well, really app doesn't like to Most either like user. hobbyists and users has they're at you for are are we really whatever. just most turns just learning replace that. interested just, or who Similarly AI they're just XX is Swedish been that in years. going they find good AI don't and users people are XX of that not that our to are can that And think but out communicate been of has years. It people true

big some who phone group. And headphone your to also purpose a is to English or. group have people That's at you're work want use are or in of big the for learners. the X device. other particularly then not and English actually to work sort is learn either hobbyists have language -- carry company So a These not to going go

seen not about, users. problem worried our and we're any just So we it's kind just something haven't for be that of particularly

at comes question Eric Goldman Next Sachs. from Sheridan

line. to fall of in potential of an return to continues about you're investing one. And longer incremental tease an Matt updated can follow spend views more and on content you the I That as then engagement to just spend mature. bottom little two, that versus the called you've and dynamics continue duration just return longer invested deeper updated and folks be for Street that and Would on how and would to of the be surprising maybe about and incremental of with how the point. Maybe love the how investment drive business ask some you're margins, the a sessions thinking to of little out in that margins continue know letting always on just margin a the can I I out extend to that continues this, sort area that view, in incremental portfolio. business dollar upside on incremental bit grow broader where number think or up that bit number content But go but on back

the first content. or take -- with we've for we mean, -- to part, generally, the XX adding app I ago whatever. app years the we can content are I the been Matt, ever launched since

the entirely. not of lot can it AI, content we do we've an with of of amazing in that acceleration last to seen the add. has A terms X.X years, Over speed

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with we're one excited that's So of that the content. about main things

on Eric, was point we [ XX margins. A -- fact XX% the We we X of adjusted great that at proud higher points and definitely EBITDA are the extra guiding is point, the X incremental margin. years in year a then incremental to had when full of requires points XX.X our And minor and margin about again, margin we're now XXXX, ] in it QX. incremental so margin on Yes.

XX% prepared incremental adjust for to were that probably so time in our than lower. remarks, it's you target. my Still margin, shift If higher I the mentioned long-term

year the bit margins we're high can incremental that of really full you the notwithstanding, half we your the the point If guide, scaled margins. down has obviously, year. trend look do nicely. It's both. in But we back think a at business gross little projecting got to The

to in in foremost, growth in drive drop is, organic strategy, bottom to and line. business portion a the that and allocation So flywheel we which can capital first down achieve our investing good R&D the

the of happy it. we're near term that updating don't in any I So it changing see or with but target, long-term

Eric. Thanks,

caller read is Chris -- questioner next He right now cannot he Kuntarich Zoom Our me from on question. Two-part UBS. our next get question. to his asked so

XX on the product accomplished perspective we XX months that English First, the from on it housekeeping focus relates learning your XX% about to last his the Was months? and low opportunity monetization what the think second areas as English learning a And should a next question how opportunity over talk bit DAU comment. you you've mid-XXs? growth to over about previously can is,

Okay.

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And so that's great.

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step to once these monetize Duolingo thing first happy people to placing there is, right that. this, the is let English we've to yet. know to is because to the start we're things the we're don't with in, my them next so marketing really to good do able users. not once users lot on And going And is sense then worked most that get to know for come just we're And that of world that's which to the there, they're these advanced But place. be a going

Okay.

comes Next question Sandler from at Ross Barclays.

you AI, using topic of the it question a had are follow to I app. up guys the how Great. on like in

Luis, faster, and performant, much multimodal. So are more the models more getting foundation

models? down that is And layer see or guys either the road interaction map? the more AI of engaging up consumers your So whatever how you product informing context with using Lily with in you these a how come multimodal do road your

about language very previous content of you're to to that what to creating create and AI users. we're in where the of the able it's listening in the general. excited X That's Yes, premade kind that question, talking was I in about big X-minute served the are is we're kind like then I a mini learning. podcast mean, uses experiences

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lot. helps a that so And

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pretty it's So magical, actually.

Okay, great.

Next at question Mahaney Mark from comes Evercore.

love data try of high your learning are the That's think in to languages I have Two in people and kind think language learners I the even U.S., of that Are to you you come who markets close percent and international in of any that questions. languages. potential and anywhere interested maybe high that Japan the I point of learning out that's language penetration single-digit kind digits Japan One, figure that is want where got market? own it's to penetration single -- you've double there digits work. or

Japan the probably are a close is country U.K. for Europe yet. penetrated to the U.S. for Actually, countries, as China U.S. example, Europe is us. is you sense to Western than is is is The I X/XX My are penetrated And the mean, similar the close as less U.S. much at to But not look others U.S. Asian highly same penetration other the Japan about is is U.S. the There the U.S. U.S. of Western relatively if that the there about the

So generally markets. more the U.S. and Western penetrated are Europe

haven't on there's but not AI you're Duolingo in how And on to the want AI with I the focus using the a intrigued to create people by up for I by content, dramatically time. I'm this use more know Ross future app period follow in app infrastructure of in companies, X And enough really the Okay. and the companies, app then you the the and sector. and AI it AI both are could long investors I on the how sector disrupt it's deployment just sector question. of asked so and so time. you Street not mean, by focused more Eric there been and sector in you involved like companies content derivatives in chip -- like not and sector are the sorry, could how chip -- focused I mean, engaging

think you do engaging, when little hallways be and you glass, just you've up? how just that years? that So can like could the how you about visibility on quarter and Luis. So like like how like riff dramatically much more, you could much Duolingo then change looking and Do really more tools next about of a a got you over open whole better there's just make bit, new have peer talk of think it a gen bunch how AI visibility the much through couple think that product

about generally for I'm what extremely AI do us. could excited

down going is unless hard to gets that that a you've and really another these pretty think because to because see because you of practicing it's care. than a to This memory. And of be no I your I an the few to impactful the front lot human, usually thing you actually conversational mean, the that than are for a with that extreme kind can has to models. if are you to don't pretty learned it's language, able be of practice learning. -- hard And have human really They're language the AI, you going to with course, with you're the you're in think shy people somebody nice of front is a practicing be she good supposed Of other and the conversational if more is going you're person. level to easiest language, your practice just practice. problem large that's really much you're out words already get extrovert. But in really about language better have language in in It's an there.

excited But there's things. very think other going many we're So be I to that. about

X or concept some to any I than models thing math Another Language training, will is -- sort I'm almost to either you that math being clever you diagrams. a think, reading to I paragraphs explanation. pretty with quite it's explain with of able about be there concepts are excited to of able to diagram. not fine-tuning with yet much better but specific explain think going That's

So I'm about very excited that.

of effectively because math we'll think significantly to that. teach I more able be

Thanks, Mark. And comes from last question Swanson at D.A. our Wyatt Davidson.

platform? give users to on a color out. you initiatives could changed your are called users I users engagement back how the how about much had driving? that bit you resurrected a question as And you some these to maybe on resurrected Could talk have driving

I many so X time, people months that and Duolingo and before for over there's from seen we've more of back. lapse shifting just work are them Yes. more come because mean, we to then that

that. we just because on So of effort have a think lot And on we're there's room spending not much. worked them as I

room on them experiences is monetizing better. back. better coming getting them think have to there's I There room So on

I better I it's think on say. can over what and that's time. it working We're getting

enrolled know advanced see but basic enough. in the is now I intermediate just primarily platform that already they're users the is early, it X the Or and to they out users are it's on intermediate English on really of are new there's moving enrolling, then that had in up? And English, Okay, that fair coming course. I it terms that find English? users

advanced We're but next, At years. both. doing have more of because users, I tell more to very call It's current there's people partly the that's we done think moment, going be the content. to it, over the that little X.X it's more

both getting the we're So but ones. it's current more

Okay.

just no I'll to it have questions turn We more so back Luis.

Debbie. you, you like to forward Duocon Well, next to I'd joining thank everyone thank for seeing at just and month. look we us,