Duolingo (DUOL) 27 Feb 252024 Q4 Earnings call transcript

Company Profile

Participants

Deborah Belevan	executive
Luis von Ahn Arellano	executive
Matthew Skaruppa	executive
Bryan Smilek	analyst
Aaron Kessler	analyst
Ralph Schackart	analyst
Ryan MacDonald	analyst
Ross Sandler	analyst
Andrew Boone	analyst
Justin Patterson	analyst
Mark Stephen Mahaney	analyst
Wyatt Swanson	analyst
Christopher Kuntarich	analyst
Georgia Anderson	analyst
Curtis Nagle	analyst
John Colantuoni	analyst
Alexander Sklar	analyst
Eric Sheridan	analyst

Call transcript

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Deborah Belevan

Good evening, everyone, and welcome to Duolingo's Fourth Quarter and Full Year 2024 Earnings Webcast. 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 that this event is being recorded. Instructions] [Operator

that which statements risks are reminder and future and make performance, financial subject we'll a regarding forward-looking events uncertainties. Just 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 in of result the with in our or that SEC. as of The these set risk we

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

turn And it Luis. over to now I'll

Luis von Ahn Arellano

Look, we've remind and we've which to and and the I in users. bookings, was tripled all before we a EBITDA X.X years Debbie, XX.X% it. results to to We've wonderful nearly get broader our adjusted monthly added XX XX a Since you, IPO, million over welcome, wanted XXXX, margin you show daily I had and from active breakeven users Thank gone our But context. of the XXXX. active million details, ago, everyone.

free year-over-year. and EBITDA. revenue our highest All social-first our more subscribers adjusted And bookings, marketing, improve of this outstanding into growing monetization. of users with XX record added strong an shows relentlessly XXXX, improved social the and reach, quarter. subscribers, new and the features XX% and maintained active ended we more before approach. hit to quarterly Through delivered year converted ever profitability. Daily million, than our in experiment We we users We power learning user our gamification, experience outcomes and scaled

conversation traction our and days engagement to seeing super during outperformance grown Since Max Max. GenAI-powered and of our meaningfully. first from represents few Plan, feature, user with QX DAUs Max especially I'm Call, continued particularly our of Family including available X% Year's about the stronger-than-expected the driven promotion. about momentum subscribers. New by has total Duolingo our excited by largely of now current we're subscriptions, subscribers Duolingo was the Our majority launching in Video is upgrades

individual still our continues room of show and monetization believe XX% Family in strong higher early We're very I subscribers and like LTV is makes now driving said, results. also there is lot to grow. than Max retention plans. Plan a And to of It delivering up total and

This we have priorities. X year,

to conversion feel growing Max We'll subscription around continue by world. do each quarter, how very improving learners we drive about good and by are we'll I users, moving. experiments quickly subscriber hundreds bookings First, Duolingo running to and this of the promoting more

which to generative describe to content in Video leverage language, it improve faster. we AI across even Second, Call use GenAI moment. more a will I'll math scale experience, music the courses and We'll our also

with profitability disciplined remain investments, with strong long-term measured growth we'll our progress top line Finally, targets. balancing toward our

Call our our scaling are more make go an into more with it even us. conversation is for and little I believe detail and especially Duolingo Call, AI key content. to better Users work for teach priority We want Video to we'll a help more experience. advanced Max on a us better, Video engaging will learners.

these based that means over costs down not costs prioritizing deliver experience. and is a come We're subscriber we're they tied scale Max on even cost using are will models Video that AI on Most to What optimization we're the to time. AI latest growth. of though concentrating high-quality right our Call, now, confident

and Music, X though I've lot Today, showing room scaling our and more are DAUs, see to this strong reach said will learners ever a than includes as have Math faster to combined for which We of before. content adoption. tools these automation subjects expand help courses take allowing also us courses us million are and AI believe also we grow, before, globally. a early will and This time. this

and learning The order language for market now and growth opportunity other years come. both subjects in strategic remains making we're to substantial, fuel to investments in

While we're a delivering this building on the even profit levels bigger. more just means still expansion, margin of X an past of eye with to exceptional pace moderate growth compared something the years,

Skaruppa it walk for over outlook the turn through And of with that, to XXXX. Matt our financials to I will Mr.

Matthew Skaruppa

Luis, Thanks, everyone. evening, and good

Duolingo. results capping increased As XX% Luis XX% year These our business we for grew points. and our EBITDA full X exceptional expanded our mentioned, about into adjusted off total momentum we closed year with bookings we a quarter, by year-over-year, Duolingo model QX, the and reflect another record our by Revenue demand We In strength adoption strong out execution for Plan. XXXX our Max year-over-year. of fueled margin going by feel about Family great XXXX. and

guidance. our to Now

bookings, has or XX% bookings at year XX% the to guidance driven subscription will Our on This midpoint expect we primarily around growing grow basis. currency which constant by a full be year-over-year growth XX%.

us Our year. to bookings surpass track billion $X in this on guidance puts

strength in For the we mid-XXs expect we projected to expect continued is guide XX% primarily subscription growth, about in year-over-year. bookings be to currency, year-over-year QX, or bookings due which our to in continued bookings XX% XX% grow that approximately grow DAU by for QX. to constant supported This strength are in

foreign outside half exchange from Our of a bookings as our And prevailing reminder, come rates. U.S. over the assumes guidance

about million total year So increase or our full tailwind, or currencies $XX value decrease on respectively, versus dollar in bookings. every X% of the headwind has of the basket a

percentage to margin lower compared Call, guide offsets Our drive increased margin. gross and to gross EBITDA impact bookings, adjusted but incurs these and AI you marginal Video dollars than want lifetime pricing to driving costs its profit, includes all cash on Max remind value features costs, and I of its like Max free higher Super. bookings more Max' and flow a

prioritize margin, XXX the on as the In drive of In rapid year-over-year half point Max. innovation to to we adoption. a primarily basis XXXX, temporary we product a roughly be expect there basis will due year-over-year gross year, first impact point Max impact XXX

to We in of second the costs. year to work expect AI improve half we improve the as margins

scale, reflect we years we this committed remain both more exceptional and gains. moderate pace as of a X will to year delivering margin discussed, following and growth we profitability, As of expansion

For XXXX, the to expect And of expand between EBITDA adjusted by be categories our XXX margin continue as we we incremental all we points margin to expect OpEx. XX% year. leverage to XX.X% across our for basis gain to and XX% nearly

full EBITDA margin we out adjusted outlook. call items few to into that a are There want the are baked year

investment The become and we that AI more automation and Luis the had mentioned, is in throughout our which first efficient year. I expect to

we're as up same the faster Second, even to plan to and to and more we contribute now create than the us and bit year, in hires R&D hire last less efficiently. tools year sooner. spend that we've at expect capitalizing finally, that content we hire enable new year, Max launched though And ramp a allowing earlier a to about significantly ago level several our internal

the of of margin these the will be first most XXXX. investments in The pronounced on adjusted half quarterly EBITDA impact

to an adjusted EBITDA for XX%. QX, guiding margin we So are of

expense, will mentioned I marketing than based before, to the year front loaded of more addition marketing be time items QX on last includes which In campaigns. shift a also planned

profitability trend year. and throughout bookings how discuss will I'll Now the

And throughout points. bookings bookings. the to quarter down in be rate should as in QX terms step bookings of QX we Year-over-year from QX, our revenue about growth before our the in by rate growth expect down dollar in be QX stepping same which biggest step will We QX growth again down X.X about our year. to expect

As cost we QX efficiencies and million, percent target, may QX be EBITDA as manage lower for XXXX in are QX timing of marketing currently with AI down. as XX.X with we diluted revenue expecting and of we fully spend around and adjusted realize of share XXXX, QX meaningful a margin expect a count to we variability ended annual to and our But dilution an on reminder, X margin as We profitability expansion based see X%. costs. comes a particularly expenses, approximately of points we than quarterly AI

And with that, it turn over I'll to Luis. back

Luis von Ahn Arellano

Thank you, Matt.

I want we to something acknowledge up, Before wrap incredible.

thanks faking of time he the to XX to learners death, keep doing bring come our around pestering in just he's from lessons. back. their him what mascot, XP does the to Our completed billion own everyone back Duo, dedication beloved has who back world his best, to And up

back would we Debbie now be manage queue. turn And to happy to your questions. I'll the take it to

Deborah Belevan

Instructions] do we questions [Operator can of through a in We have time, All And Thanks, if [Operator minutes, lot follow-ups. take Instructions] we Luis. XX to have right. get

Smilek at JPMorgan. comes question Bryan first Your from

Bryan Smilek

on the Congrats quarter.

or language from us us much are growth of geo? thinking paid just Just are versus you exhibiting cohorts the can shifting these Max Super? understand maybe which understand subscribers. help gross strongest subscribers by of about X% you And adds how of at help Can

Matthew Skaruppa

Yes.

about of I'll more that it Japan do -- the it look higher we looks they let similar subscribers, to from, of for point see pretty because couple and than Max or markets, in Duolingo engagement Super they the to example, our around Like share is where markets, between a less come come markets X% Max. others learners from has exceptions. English but So of But Super with subscribers consistent. Super and different the talk Luis the your some

also upgrades adoption we in then to existing Super from cohorts, subs. saw And nice for terms of brand-new and really subscribers subscription the

So those both up of of we X%. excited played prominently the the growth subscribers to are that in

Luis von Ahn Arellano

Yes.

that translating we really, slightly that, Max, as I'll the Lily. I English for a for learners. app that in the to learners that twice by particular, believe, as key have we is And last put buy really is English is Video thing the propensity in is non-English English like this ever Call learners versus feature learners other Super. than with call, feature actually used in only add This higher much in which The mentioned gets

Deborah Belevan

Okay.

at Seaport. question from comes Aaron Next Kessler

Aaron Kessler

we are follow-up paid sell versus Max. pricing on or Or voice -- within there developed for for Should the English Maybe Maybe expect on some areas is is pricing should this maybe less -- that to higher on the and regions? just question. we Max about just Duo how learners to maybe what AI think some year just these there? higher investment, the about AI -- trying well thinking strategy expecting then you maybe of And rates your mainly conversion other calls? investments Max is you then AI? as for And as a just

Luis von Ahn Arellano

Okay.

here. So a say to of bunch there's things

creation. content in First that costs. were does That's of company. We're all, is go particularly good. things automate coming AI. and -- the they're What definitely inside to -- AI to They're parts. And basically decreases AI way us allows faster, X it investing in actually in in expenses. The investments that basically coming also

So content of the compared or ago I mean, that. way is X to generate like we're years more. than amount it's able XXx to more

thing. that's So one

for We're because these of seeing just that part it other is in language experimentation know every time. query like, Call generating not be the as or kind as will large in down coming a we're of adds just cost The The costs. We That in in best big models go possible language fast the for we're live do kind month. example, querying large expenses trying because be to feature. to of the Video even way nothing, of optimized even we the if have is of optimized now, costs ways. optimize the trying kind feature we And is, can real cost model to lot possible features. features those

we're is this way throughout the possible probably of the really about unique an think AI whole AI, history year, cost a want there's to develop opportunity, So to where because best a will over in time. which kind but be going unique for in time to features it's happen it upfront we

So with that's AI.

probably pricing, at. At of about AI where we the Duolingo packages. every particularly you it's couple a country. There's moment, put the asked have Now not most for really -- Max in countries kind of

cannot not things serve simply in we it's example, OpenAI China. in because from For China

that basically it's is going too we're there, the not and lose some our good. what But price money doing truth, it it's on never high Max, pricing we're but In So that's so every is we're countries, there of country. in is the but poorest because it have so we to yet.

money and sense that, for for India with countries, know that $XX India, And to it. we expect we lose and down, with that that's we're not But going sense. it believe, time, is that year, price -- makes most that a we're the over that be expensive for that. I makes example, bring to always price, to caveat But is in a too a going able and

Deborah Belevan

William comes at next from Our question Schackart Blair. Ralph

Ralph Schackart

DAU to sense how of of sense margin, give to just there is sort you And a temporary that rate? you term, that growth, longer be just overall Maybe broad to on was? is the would can advantage is Any then this us based great. sounds be sense international here relative to how a in doing on reported nature like of on gross it market that Matt, think back you take just that won't margins? anything But opportunity. able historic structural get Just

Luis von Ahn Arellano

Yes.

about active me Let talk daily growth. user

growth. really very the So active region -- every quarter year-over-year. I daily with growing. happy user ended user mean, with we're we daily It the active is growth XX%

region but Now of is region not growing. is true growing every equally, every course, it's that

really is region how say correlated not growth thing One per is that is. really the that to region each with rate mature interesting is

for it's XX% growing very actually growing our is That's -- probably most our America, also So like at mature region example, fast. but Latin year-over-year.

is Matt the -- talk that saturating about of far in tells margin So or all of our -- just profitability pretty We're we fast I'll we're any from what are expansion. let us really growing we're markets. our markets. that

Matthew Skaruppa

comparable more just prepared So of because it It going half year, back so past. as said. in the that, year, mentioned roughly we're I temporary, gross can mentioned, fast be is you and Luis first they've as half. of as back as margins return been to remarks, Because in Ralph, it in we'll as back half we my where in the they're the the expect optimize of will the I that noticeable the by

It's belief, is cost be the such down and that won't come right? don't in already, a But fact that seen cost. that understate just the structural There's that, is we've to want I it there that market different. marginal that our this difference, a will AI

up where about gross margins good very our will feel we I those So optimize end as costs.

Luis von Ahn Arellano

market lower a years. to have previous And -- margin than just lower we're expansion. It's in still going rate -- at

Deborah Belevan

And next question comes Needham. from at Ryan MacDonald

Ryan MacDonald

content hear about, on curious, quarter. a terms scale should the to or use updated maybe for in maybe now, categories? Music about, great one, on million Congrats AI to Luis, users. area? of think over active we X daily interesting of sort then of the a X further Family Matt, I'm in given think beyond how was it and the those we how monetization enhance Plan Math disclosure another second, And time

Luis von Ahn Arellano

the for question. you Thank

Okay.

very excited Like we're Music. we about about X studying Math users we said, Math So have and and now million daily active Music.

and also by question our learning than -- your -- X should growing faster are those For language AI courses the way, say, for are I courses. those

will larger expect of do and being we larger that pie. fraction a So these our whole continue

content we going uses for amazing. of of is, particular, terms in lot to Math happens in with our be What is AI, Math really the for Math at moment, Now in have AI course. a don't

of to But in even roughly K-XX the of want content. We put. of more want to there's We have to have maybe and grade all probably math third equivalent course, some lot college of we the fifth there. a

of of Now new content to been pretty the math every slow because have topic. kind historically make has exercises for generation you

for different, So because make look look and completely of these really system, all for et probability teaching help for they kind we much teaching all don't for that example, teaching much you but logic, that amazing you that those just cetera. the all don't exercises help coordinate they you

you So types exercises. to have make different of kind of very

very different -- math. the a the large late, large Somebody the bunch things. good added were is reasoning. language not we But version a first models have And models of like at combination just subjects. here really said, language X,XXX It's historically, of math of of

really good So that's put and they're actually think we now, pretty going math in I there. how at to accelerate content much

that, will so uses. So lot which see year is Math you'll bit. adding we to pace a improve or a of over have the to And the more content at course, quite the us next course going help that are

you probably monetization don't in going if now mean, when the lesson, a language And you monetized. can way do mistake, if rid be to buy for you Also, Basically, you Music, also get transformative a we're Super at you And ad. that. want you but being you it at being moment, our for of also of an want Math. lose a and see they they're terms same can the I end, math content, have as adding ads, every the you to is -- of For subscribe. see in that, you not a AI to we courses. pay are lot these, to make life that time for monetize as monetized is

monetized So they're same in the being way.

the we the the I being, monetization think time to expect for same. remain

Music way It's about daily Math making and that So the of one not about proportion thinking is one is roughly but of to way much money how think users. of that. kind are active precise,

Deborah Belevan

our Ross at Barclays. question Sandler comes And next from

Ross Sandler

quick ones. X Just

you Going there X%. corridors are penetration? penetration, there terms there? are yet non-English are talk about Lily their like the And the back of and the Or corridors a like working Max in Video like Could the to the English all Calls? same watermark high that is for about within

new subs how the think ramp published, on to business interesting. we how And KPIs out that's but How the business translating correlates units term think cool of investors is, your talking back should you -- in chart metrics? about. chart, shows other then longer or that's second the just course with question like engagement or the put content that like a that Kind pretty about about should the you're of

Luis von Ahn Arellano

Great.

yes, correlated Super penetration, pretty is penetration. correlated. every it's even Like It's Matt Max in of but it's not X%. of country. not with it precise, So pretty It course, in said, terms is,

more countries. wealthier are you see So countries than less that penetrated generally, wealthy

There's English which one little a learners up difference, to Super. boosted are is compared

is learners, the for pretty that's X%. prime by the pretty is and So penetrated. Japan but than English it there, digits country highly I wealthy so example, highly is both in higher we're has -- still single and penetrated, a that mean

turns that's than are just we're would what really of language. for English see not So learners little seeing. learners English mean, it's a every that just of higher we it you seeing It's kind But what I are learners. Super. out

way automated now can faster. KPIs that we In going terms about of because excited that going and -- of more pipeline, content we're our the not units We've is published, are content just super to to AI. course we're courses. and we we publish just adding it fact translates only are How faster, have is way basically

is the content So each what the shows amount to basically that previous able we've publish years. been in graph of of

goes that of advanced to more sections. content to That's Some usually existing courses.

of courses. Brand-new content some increase usage. our to is brand-new And courses that

had So we a for speakers, not may not course. have have just example, we -- Spanish Korean have course a had for Korean speakers. But example. for Spanish may we That's now an

now learn who that English. they Korea, learn be needed wants to So used Spanish case the anybody to it to through from

know So already in of to they Spanish. learn English kind order needed to

they learn just it can Now from Korean.

So that increase advanced because our -- total it get also there. the users should get learners should then should advanced increase And should the more our more users. total sections

we've a that very bit. opportunity -- about English quite more A the for learners. publishing large chunk for is advanced excited content in But more And about the we're advanced we've that's English talked that learners. something more of been advanced

Deborah Belevan

Citic ] Edison [ Kai Next Bank. question comes at from

Unknown Analyst

Congrats an the past growth users to And quarters. quarter. new users on the the I mentioned in and you've quarters, resurrected of growth few for past have how about the question excellent such related --

for think those are about we events we're back users? you quarter ] calling users? [ this you're are calling So new marketing what right like more do the they resurrected Or having? what So of doing campaign

growth like the And for Latin mentioned you the Japan America, from, guess, users markets I and new we resurrected see users. and

grow And X think you will one of be growth these to few think do boost X of next in you -- what quarters? So which effective regions? do like the user more way the like like

Luis von Ahn Arellano

a our months how that they back. they people that's people stop then year, never order -- is Duolingo in it to works. really rare and come using understand back. Duolingo, a for This Typically, Yes. using is stop business or Most they for come good when the question few important of stop who and stop a

a around at resurrecting, we for and So of least have lot who XX are we resurrecting, they been people days. mean haven't

more course, no had funnel was of fraction the get mature, top launched and to kind as we the there we gets resurrect. Duolingo, that higher of for because, of is higher when users Of resurrected example, just

more were back. are people So And higher more a people all get of users that mature, we new. and fraction are as coming

that country. pretty And we are each how is consistent mature with in

to that been would users country a country we've a start for resurrected we U.S., new where you higher couple the really time, years India India, longer, lot ago. in versus didn't for when like fraction until example we've been less of much a operating So of in operating again, a see users up in a compared where effort spending

So seeing users. there, way than we're resurrected new still seeing we users more are

Instagram, or user we at from. comes or really came users, social our you what YouTube we look into more resurrects new users in, users. new And kind if both bringing and or are these the of you've ask marketing media we're of seeing than those just most similar. top the slightly goes resurrected of But kind they of cetera. actually the in at our somebody and of numbers that funnel. that where those like at campaigns both. TikTok It's good doing know general, our slightly pretty whenever know a et are seen good new users more campaigns users resurrecting them on resurrected we And whenever marketing are for And because moment, At overall, kind

doing we're that. So

as users, work that terms we is users to for piece work them, need not the and know that. on of we of that to the for retention improve still new do retention in of one is work need Now we as good resurrected the

happens is gone, -- been been when they've thing that should they've long that. a for time. everything. lot on assume they've If We working of do been we're assume a somebody what X Part that they've gone should should of for we gone everything. very we not. is years, we We're the forgotten times, should has So forgotten

something that's just do better. that could we so And

Deborah Belevan

Okay.

Boone Next up at is Andrew JMP.

Andrew Boone

does of want Luis, you first testing, I and And about much seeing in your derivation more Ross' content. XXXX? subscriber your of like the Help is, terms back that to a accelerated in so terms in guys go relate priority, out talked testing of users, to what How doing then it. understand generative us [ to are to you like velocity so through you AI? growing guys put Are question. right? you relates Max ] cadence It's as improving question conversion, okay, there? testing it guys promoting content

Luis von Ahn Arellano

not on the concentrate to question. you're have tests types number we of these getting basically, this run, I of to XXX% are your I metrics. asking sure. we think In understand But Max. metrics. A/B about subscribe more on core case, I tests we try improve to just that core And usually our a if concentrating I'm mean, users to we to run

experiment we tests we advertise do things do found to it when vectors advertise a say advertise some us How advertise to Max. of What them? advertise have to? types it And subscribers?? do run we to The lot. often that are when like to we do we we Who subscribers? really we allow that Do we

Video main looks effective We for Call, Max example, what getting to ad show the Call. an do and Video subscribe for of is people with to ways is people it getting to one kind to we're at subscribe. like very that So of

we year -- run of We're ever feel the good. And more XXXX. I than tests, going that, tests in before. than in of we've tests in believe terms more we're these done And XXXX, well, -- way I in really this velocity ran XXXX, to

So for and Yes. we road that good really have really that. a question. Hopefully, is answers your our looking velocity good map

Deborah Belevan

Great.

Next Justin Patterson KeyBanc. at question comes from

Justin Patterson

bootleg to But going a a building on more a make you question maybe question Jack Ross' have a more. and wearing It's the ask to little Antonoff fitting education I'm just bootleg bit T-shirt. Andrew's affordable masses. a Duolingo mission Luis, to

to Max. it with earlier You alluded

to want bad You don't be internationally. economics pricing unit at

where get might the into those think just this as we you provide environment that some dropping, do of pace how So to about users? savings costs inference you continue back

can the just And engaging Video then done additional about thinking hard Calls. since the people you you've of about part. already there just share Any secondarily, learnings proficiency

to the how You've category. you're gotten doing advanced I'm casual converting proficiency. users more usage say, curious to jump into well from, casual them

Luis von Ahn Arellano

around -- what sorry, The Yes. question first was again? your Just proficiency?

Justin Patterson

question just do [indiscernible]? of First as value about drop, think continue the costs you to how was inference

Luis von Ahn Arellano

Yes, generally, we have these X tiers.

tier. free the have We

lower be and have gets of free. Call have cheap give we Call, highest tier, not That's always Video We to it the inference be necessarily for for the the Super, even may case. have to able At tier. the put particularly highest Max. in some we it enough to for a costs, We point, because of in the us tier. It may be moment, case going that, some at to have the Video

best the cases, we And for is our free And LTV but that, our just giving is best in general, actually know not health app. long many in whatever we'll for app. for be term, the long-term things thing of testing the

we're just lot. be So definitely just to moment, a -- testing costs a features. these too because At going will hands are be testing bit we tied to where but high, the our have high the are

for it's before effective. we Thank is the And -- really Video didn't getting way we really with that are teaching, know with we now Antonoff. I better mean, to of have this, conversation you proficiency, working. we're practice much We terms in really do. me bootleg Call. particularly great how conversation Now a that happy users and now it's calling

Justin Patterson

another I'm going for to day. Mr. save Skaruppa

Matthew Skaruppa

be That's to going thing. a

Deborah Belevan

right. All

Next Mahaney at question comes Mark Evercore. from

Mark Stephen Mahaney

Okay.

low letter, me. Lily You a and dynamic seems to pretty interactive. bar in making talked about, That more the like

what So about? are thinking you

revenue average revenue of Family should we've assume full we've average per you guidance sub, Secondly, inflection for relatively like because seems subscription in and Max it's like that, so per that the sort gave -- subscription of greater we that Matt, grow this that hit to continues adoption? -- the I year, subs assume point.

guess, ad that have third, a now bit. and was Is in company. for little then -- the And you because a a came lower gross margins I the pressured little just revenue, of less a focus little it's

don't Or ad is problem dollars. need just a to know, you don't solve? You the I need that

Matthew Skaruppa

Mark. take Thanks, I'll one. one. the other you Luis, Yes, the take first can

Luis von Ahn Arellano

what other it wanted by to to that general, the for yet. really And effectively, that Yes, by best in particular, Duolingo. be really want Lily is thing. yes. talk want to happen. want to is Lily, I actually actually mean, also And to necessarily want to want in your thing Lily. us the at every meant that case to have use We that want the friend we talk you that is, her. moment, to not we but we we -- people people teach Not only do learning from differentiates the to way, We

getting your time how on them last express And we're interesting you that mean, go cetera. remember Yet them of people well. that you. to fine life. there, tell Lily's hard who are so that. be ask means to And able you these not want to be the is we're every told what ask lives themselves able to that about one may because she'll we balance you things about all and their something is I working problems, her a She'll She'll et just have time. something tell it's

what working we're to be going that's So on.

lot is a I of see going of But Even her. to much we're think to be there. feel current pretty numbers with though the -- year, with going by the we're Lily, what's I about there's going see much numbers. work to end engagement higher just happen done to numbers just -- of kind better our there's engagement And engagement already they're good

Matthew Skaruppa

the ads. then And question the on ARPU on and

is be On we to the just years we ARPU, Family running flat we're the shift We experiments. Max. ended up, expect call to all chance swing. you're it we effective it'd time. remind more and at larger larger them the And me pricing, to up, will people gives and next to great. a and which the run thought absolutely be right, continuing about to over we to ARPU that experiments was shift you price pricing several talk told a We're That point the Plan it But folks shift now, last up, Mark. lot that everyone

For guide positive year, we you're ARPU the see assumes rest year-over-year The the that throughout the year. right. of

absolutely in Super then we're a running story experiments and is subscriptions. of volume to subscription ads, a Duolingo business, get to folks was is showing And you're us and Max. news lighter because optimize on more right. The combination our QX. to It's ads Ads RPMs. of volume -- for our or We're energy most take a our good so

So to shift I focused don't expect ads fundamentally We're a gear. on subscriptions. up

Deborah Belevan

D.A. Davidson. question from And Wyatt next at comes

Wyatt Swanson

a here. had I quick just one

-- you where avenue? what And the massive you TAM given are Like areas? of Just now? you next? up to to early, are those in Like achieve where the yourselves underpenetrated potential what you really consider user base growth right from see user Can or you have. that are clearly, you billion demos next growth the of setting about like like you still X learners, how get growth it's language maybe guys markets do talk coming

Luis von Ahn Arellano

thanks Yes, for question. the

Okay.

So essentially least what's the fast it's a a me, that the in is -- is geography -- in how how amazing, at identical geography. the correlated seeing answer, to penetrated not growth mature in geography not There growth a I is, we're at how They're or with every growth growing. really previous is seeing every every geography. -- one in we're the things but geography, moment, said of

So some we're fastest ones, just most our tapped near out. -- our which are Latin also some really like nowhere means there's of some of -- we're -- geographies America mature

good. So that's

penetrated, are where more Now we're where we or less are place Asia is the least what generally, of started -- because there. much in simply later terms penetrated we

but so setting clear, to lot don't the a we're that that, doing which mean, market in work marketing think Japan, Places opportunity similar opportunity there. we're we've up, very little stuff more less what marketing. U.S., and marketing, there's there. of media I mean, a What we're up like marketing see just of bunch up is Korea, by you a anything, or And But mean China, it's think it I is huge here in huge well. I setting developed there's mature India, to markets. of our really our And social I essentially some already like marketing. than a performance stunts set there be a

our his as Japan, turns in out about the way, it faked is that we Fun had death single kosher. fact, joking owl, not Duo, by market death in every for that because except Japan

Japan, dead. was not in just he So

Deborah Belevan

right. All

got from we've Moving Kuntarich Chris on UBS. -- to

Christopher Kuntarich

kind in hear mix you we And just the wanted X and a adoption stronger as period I promo period? seeing how the to just Super promo days the out expectations Max versus for uptake did for does zoom and at period? larger during second just how Max of of that your ask about maybe look promo Are of that look plan? perform kind you a versus about

Matthew Skaruppa

Luis Yes, I'm a to and in. can take happy come shot

as both better So year. the X kind forecast. our in you on And surpassed promo also then better to. Plan overall Max it Family period last those the of the so Max, alluded did and days did did of

So outperformance well-rounded days. it in kind of last X a those was

quarter, differentially I throughout monetization was paid the bunch do last It days the and bread-and-butter the know X user quarter wasn't our We had performance really that period. above important or a quarter the even that in throughout bit think of strong just though. the that off and growth a it's promo expectations. other strong, to the experiments

So New just Year's promo. the it wasn't

Deborah Belevan

Shweta. from for comes Wolfe Georgia Next Anderson at question in stepping

Georgia Anderson

talk wondering Max bit if tier. could on on you that a was Duolingo app, about languages I are available the little the the

of of of kind couple I are of ideal an were difficult as the romantic most if been, that number more available or rollout easier kind wondering think ago, has languages of of languages a the what add. languages, to of was but there's I of months kind

those be would helpful. along lines anything Just

Luis von Ahn Arellano

available to available. is French, have cetera. Japanese Spanish, we languages in take demand by available, Chinese available. so largest is that. English Happy our Max, Generally, et for example, already Sure.

is to thing pretty demand. the Now understand there about a our lopsided languages is that

So learning XX% users and French. learning are under a A about under English. are XX% our for Spanish, example, are little learning half little

or X So those just take. And give languages. like that's is XX%, X combined

about And All account other then other total, all we, only for XX-some languages. languages, in XX, XX%. call -- teach combined it, languages

we cover at So we big the cover Max, least bulk. -- with

cover the top X. It harder that add -- is We to have it languages. true is we it to non-romance

a to -- So we it so countries, put, Call Western is it's them for -- Chinese. example, people for for -- to example, for languages languages that harder learner, what's an difficult those add to of when learning Video hard part much harder understand for Japanese learning is that from Japanese it's there on particularly it's just or those they really early And very anything.

U.S. people, if haven't a put Whereas the like Call of Spanish, we in whereas Video Video harder that, in even much can Japanese and Like them you're put if a in people Call that Language]. we language anything, a majority taught understand a -- we if Spanish most do is kind in vast [Foreign like of for respect.

That's down to. put do. -- them than make stuff have of kinds either later type of to to we to the things all things more Video dumb it need Call, So even we would it we start to really do have or like

Deborah Belevan

Curt Next at Nagle up BofA. is

Curtis Nagle

me this. you. Maybe, Matt, I forgive misread for if one guess, I And

do is related Just then maybe as down question, bit Kind your a expand terms revenue on expected could think -- in aspirations for Max is year-end? What penetration the rate growth, step And are where of maybe of Luis. to guidance? little of for growth why embedded think end you that? a up Max do ramping. the what's Where in right? Max you you, by

Matthew Skaruppa

just the bookings of Thanks, on math revenue of the Yes, a that's factor Curt. the guide, rate.

X rate. just any bookings quarters essentially of a quarter composite is in growth revenue given So last of the

outcome So mathematical bookings a guidance. the just that's of

think all there. I So much that don't there's

out would just well. that have felt revenue a also the bookings year, be lay FX the as time out So pretty over as impact, guide that guide the sizable does right? I call we will for that through

So had And are both of play. of question. think things Luis at second the part the those I then

Luis von Ahn Arellano

can because grow on seeing we're know that how I Max know it penetration -- general, is basis. Just it mean, really where look, get high kind don't we daily in X% of can than get, higher a we

the So it don't will grow the will year, high model. in get we know how is. but sure have we something it -- I'm throughout really it

Matthew Skaruppa

of growth the days. our material mean, that early bookings rapid I surface what XXXX that features to how a of Yes. ton we think amount penetration in on But Luis that we're for really and and how it's costs. expectation -- There's because it. in in a as out, it's nice seeing innovation is then price do Max we those and pointed I think AI we we're

and very we're So just it early, that for reason. it's about excited

Deborah Belevan

from Next question at Colantuoni comes Jefferies. John

John Colantuoni

you on Duolingo one reinvestment. into relative and I interact flexibility wanted English how to When your intermediate ask expect product focus to English typically dollars to a intermediate evolve reinvest about back and with growing marketing comparing users innovation? approach to to learners, do today how learners

Luis von Ahn Arellano

Yes.

a little of think step more remind terms In take -- so people, I the to back. just intermediate

It's mostly We for of huge much We that were because have not had for couple market decided that years to reason ago. a is courses concentrate part were as recently. pretty really on they that is more the but English relatively intermediate English a of of The beginners. learners serving. we

advanced courses. really So in more we started English investing

We the have there. now content

of a So app. how and mouth. interacting the people our Duolingo people Duolingo is to basically, grown. fun has That's the there, way about is of the that decade, now to a come mainly the to learn for time that of a so this the it's one content for content. and of last language have of we've around kind word way growing start than with And more gotten matter word a is main And things is

even advanced but for In English speaking non-English learning in for good wasn't the beginners there. around learners countries, the word markets, so we're not got content that also because

there. go that's English, you, is you're at they're that where the You're them you pick beginner, any If will moment, in your you not and if to the -- learn content know country to tell many should yes, if talk trying of So they don't use the -- because a that's what case Duolingo. person more average advanced,

expect the through will the they Because course, that of of that have of mouth, most sure our is what make word it job is, mouth, to It there. content get that we have do content. we we of word out

some that will is it take problem with time for Now that. the that

some will do our maybe one challenge that the world marketing is thing is the and We to so marketing help. that But whether throughout a to get like effective, does or advanced Duo not. That's effective but just for that people that, things It's convincing will out. most we're that for deciding just good very his good about word at fake more death. nothing English is

that. seeing have So tactics But some it. we're and basically is and do us our what see more so more do content marketing on you'll we for -- more we're advanced getting is that learners working for My that, to interaction. -- of change the English

So more English advanced we're getting learners time. over and more

the year end number that of have growing even more. by -- is sense way my And and of quite the we'll that so that, the the we'll is bit, then by year, And the a end have more. after year

So growing it's pace. just in nice pretty

Matthew Skaruppa

in And this English spending John, just the learners, are in but are absolute leverage just not getting we than revenue. last growth did are And we're we marketing S&M more still line, year smaller because on it's right, on we dollars those year. just -- spending to rates -- than

reinvestment And in comfortable very rate with. still We're a to nice I spend our don't lucky spot yet pretty So marketing be that's in. increasing be getting -- I spot think -- and marketing, I to feel leverage.

Deborah Belevan

Sklar And James. next Alex question Raymond at comes from

Alexander Sklar

Luis the just early Max that it. commented LTVs big the I'm Super? over thinking has Max like Video you called Obviously, piece you is Call to some Max of how pricing curious, medium about out, or of are relative features given a that so how term? Xx you higher observed Matt, usage But far. just on you've of retention then the higher And retention

Matthew Skaruppa

-- But looks your it's out, pointed days. you early far point good. as The retention Yes. so

estimate the really So we we LTV And we strong. and is don't good have actually ways we it. have on, full about the but that feel

we up more the highest the as well the as Hopefully, undeniably retention shift features. our So Max we better. and goes tier, there, is improve over LTV can time

Deborah Belevan

Okay. We've got Eric Sheridan at Sachs. Goldman

Eric Sheridan

incremental two-parter. back the maybe you Maybe, way wanted ask a XXXX, to framed Matt, margins coming to for

you, you remarks, see hiring the as team, the have as better critical a out prepared that a around incremental called somewhat put scope First, to that of bit put pressure think I but in want little that. do on would made be what investments I sort margins? a to

margin you proved margin you been to the in go the And could guidance in where line prior conservative years, expectations it's as could outperform areas you and or coming exceeded with there's more business guidance, more be have opposed What the as outperformance. deeper to into in be year? it the

Matthew Skaruppa

No, Yes. great it's Thanks, question. a Eric.

I in faster. we're said right? reiterate the to and just bit So marketing, about items, And the sales the is less spending prepared one what important earlier a spend more hiring remarks on we're the money

helpful. to are because see that's things an do want we and opportunity, those you So mentioned. We what those

of biggest, investment cost cost important to XXX basis Max. marginal the leading But of is and our the most expansion points margin increased that's

platform And top is great for the believe now on optimization. not focus on call cost will as shareholder the again, so driver just we've in we is that and we great time And means Max this said costs important letter, nicely. but the the for because, time a of ultimate to for going that's teams that's the said it over come it's margins, down Max. But those to really of line. that LTV And grow the

team going of is that the as to focus tier. to that on now focus the as It's fast time the grow possible -- adoption

puzzle come the And But it costs. Eric. long-term piece range. margins are So that's about again, They're where our really could incremental to costs side, our the the upsides good AI feel are. on in faster still on down margin margin the biggest really of I

as margins comfortable how I top rapidly we're on very so with the And feel we're balancing growing line. really

Deborah Belevan

Schindler And at like Okay. final from Nat looks Scotiabank. question is

Luis von Ahn Arellano

hear Matt. not and on you your because now are headphones We No. can't mute Maybe before. you were you,

Deborah Belevan

right. All

no questions, Got we I'll go back up. it to I'm ahead that. it turn further and right? so showing technology, can Sorry wrap about love to Luis.

Luis von Ahn Arellano

you I'd and for just call. on everyone us, look thank Thanks, to forward we to next seeing like joining Debbie. the

Deborah Belevan

everyone. Bye,

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