Language-learning app Duolingo (NASDAQ:DUOL) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 40.6% year on year to $178.3 million. The company expects next quarter's revenue to be around $188.2 million, in line with analysts' estimates. It made a GAAP profit of $0.51 per share, improving from its profit of $0.08 per share in the same quarter last year.
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Duolingo (DUOL) Q2 CY2024 Highlights:
- Revenue: $178.3 million vs analyst estimates of $177.1 million (small beat)
- EPS: $0.51 vs analyst estimates of $0.32 (57.9% beat)
- Revenue Guidance for Q3 CY2024 is $188.2 million at the midpoint, roughly in line with what analysts were expecting
- The company slightly lifted its revenue guidance for the full year from $731 million to $734.8 million at the midpoint
- EBITDA guidance for the full year is $180.1 million at the midpoint, above analyst estimates of $174.3 million
- Gross Margin (GAAP): 73.4%, in line with the same quarter last year
- EBITDA Margin: 27%, up from 17.6% in the same quarter last year
- Free Cash Flow of $54.87 million, down 30.1% from the previous quarter
- Monthly Active Users: 103.6 million, up 29.5 million year on year
- Market Capitalization: $7.12 billion
"We achieved significant milestones in the second quarter, surpassing 100 million MAUs and reporting 8 million subscribers,” said Luis von Ahn, Co-Founder and CEO of Duolingo.
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ:DUOL) is a mobile app helping people learn new languages.
Consumer Subscription
Consumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to, what movie they watch, or even finding a date, online consumer businesses are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have further increased usage and stickiness of many online consumer services.
Sales Growth
Duolingo's revenue growth over the last three years has been impressive, averaging 45.2% annually. This quarter, Duolingo reported impressive 40.6% year-on-year revenue growth, in line with analysts' expectations.
Guidance for the next quarter indicates Duolingo is expecting revenue to grow 36.7% year on year to $188.2 million, slowing from the 43.3% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 31.2% over the next 12 months.
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Usage Growth
As a subscription-based app, Duolingo generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the last two years, Duolingo's users, a key performance metric for the company, grew 42.9% annually to 103.6 million. This is among the fastest growth rates of any consumer internet company, indicating that users are excited about its offerings.
In Q2, Duolingo added 29.5 million users, translating into 39.8% year-on-year growth.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Duolingo because it measures how much the average user spends. ARPU is also a key indicator of how valuable its users are (and can be over time).
Duolingo's ARPU growth has been subpar over the last two years, averaging 1.1%. The company's ability to increase prices while steadily growing its users,however, shows that users still find value in its platform. This quarter, ARPU grew 0.6% year on year to $1.72 per user.
Key Takeaways from Duolingo's Q2 Results
We were very impressed by Duolingo's user growth in Q2. We were also excited it beat analysts' revenue and EPS estimates while raising its full-year revenue and EBITDA guidance in a stellar "beat and raise" quarter. Overall, we think these results were strong and should satisfy shareholders. The stock traded up 6% to $171.50 immediately following the results.
Duolingo may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.