Duolingo, Inc. Q4 FY2024 earnings call

Key Points

• Since IPO 3.5 years ago, Duolingo added 30 million daily active users and over 80 million monthly active users, tripled bookings, and moved from breakeven to a 25.7% adjusted EBITDA margin in 2024.
• Q4 outperformance was driven by stronger Duolingo Max subscriptions (including upgrades from current super subscribers) and momentum in the Family Plan, especially during the New Year’s promotion.
• Priorities for 2025: Continue driving subscription bookings by growing users, improving subscriber conversion, and promoting Duolingo Max; leverage generative AI to enhance Video Call experience and scale content across language, math, and music courses; remain disciplined with investments while balancing growth and profitability.
• AI and automation tools are enabling faster content scaling, with Math and Music courses showing strong early adoption, having a combined 3 million daily active users.

In the Fourth Quarter and Full Year 2024, Duolingo saw strong performance. Daily active users hit 40 million, growing 51% year-over-year. Duolingo Max subscriptions contributed to the quarter's outperformance, with Max representing about 5% of total subscribers. The Family Plan makes up 23% of total subscribers. In Q4, total bookings grew 42% year-over-year, revenue increased 39% year-over-year, and the full year adjusted EBITDA margin was 25.7%.

Full Year 2025

• Bookings growth midpoint 25% year-over-year (27% constant currency), expected to surpass $1 billion in bookings.
• Q1 2025 bookings growth ~28% year-over-year (32% constant currency), driven by subscription bookings growth of ~35% year-over-year.
• 2025 adjusted EBITDA margin expected to expand by nearly 200 basis points to 27.5%.
• Q1 2025 adjusted EBITDA margin guided at 25%, with margin expansion expected in Q3 and Q4 as AI cost efficiencies are realized and marketing spend as a percent of revenue comes down.

• Impact of foreign exchange rates on bookings, as over half of bookings are from outside the U.S., with a 2% change in the dollar vs. basket of currencies having ~$10 million impact on full year total bookings.
• Temporary 170 basis point year-over-year impact on gross margin in 2025 due to Max, with first half having ~300 basis point impact as priority is given to rapid product innovation for Max adoption.

Q: Bryan Smilek at JPMorgan asked about which cohorts are exhibiting the strongest growth for Max by language or geo and if it's from gross adds vs shifts from Super.

A: Matt Skaruppa said markets for Max are similar to Super markets with some exceptions like Japan having higher Max share than Super, and Luis von Ahn added English learners particularly like Video Call in Max, which has slightly higher propensity to buy for them.

Q: Aaron Kessler at Seaport asked about AI investments and pricing strategy for Max.

A: Luis von Ahn said AI investments are in automating company processes (decreasing costs) and live features like Video Call (adding expenses), and pricing for Max is in most countries but adjusted for affordability in poorer countries while ensuring no loss of money.

Q: Ralph Schackart at William Blair asked about DAU growth breadth and long-term gross margin.

A: Luis von Ahn said daily active user growth is broad with every region growing, and Matt Skaruppa said the gross margin impact from Max is temporary and will return to historic levels as AI costs optimize over time.