Duolingo's longer-term forecast gets brighter, but short-term outlook disappoints

By Bill Peters

'We're excited about the broader rollout of Duolingo Max, our higher-priced subscription tier, and the strides we're making to improve our family plan,' CEO says

Duolingo Inc. on Wednesday said it saw a jump in demand in the first quarter, but investors appeared more concerned about the second, even as the language-learning app offered up more optimism further out.

The company on Wednesday nudged its full-year forecast higher for sales and bookings. However, its outlook for the second quarter came up a bit shy of estimates. Shares tumbled about 12% after hours.

The forecasts arrived as Duolingo (DUOL) continues to add users and keep them engaged, and as it tries to find ways to upsell them on new features. The company is using AI to tailor instructions to each user, trying to attract more people seeking to learn English, and looking to expand into new instruction areas like music and math.

The company said it expected sales this year to land between a range of $726.5 million to $735.5 million. That's a bit higher than the expectations it laid out in February for $717.5 million to $729.5 million.

As for bookings - a measure of the money Duolingo brings in from subscriptions, advertising, in-app purchases and purchases of its English test - Duolingo said it expected between $808.5 million and $817.5 million. In February, the company said it expected $790 million to $802 million.

"We believe that we are still in the early stages of our monetization journey, and discovering multiple avenues to enhance bookings," Chief Executive Luis von Ahn said in a statement.

He continued: "We're excited about the broader rollout of Duolingo Max, our higher-priced subscription tier, and the strides we're making to improve our family plan, giving us the confidence to raise our full-year guidance."

Nearer-term, the forecasts were less upbeat. Duolingo said it expected second-quarter sales of between $175 million and $177.5 million, with the midpoint slightly below FactSet forecasts for $176.9 million. The language app said it expected bookings of $179 million to $181.5 million, with the midpoint also just short of FactSet forecasts.

During the first quarter, total bookings jumped 41% year over year to $197.5 million. Subscription bookings were 47% higher, and paid subscribers rose 54% to 7.4 million. Duolingo had daily active users of 31.4 million during the quarter, a 54% gain.

Thanks to those increases, Duolingo's first-quarter results beat estimates. The company earned 57 cents a share, above the 27 cents that analysts expected, on revenue of $167.6 million, above analysts' forecasts for $165.6 million.

"We believe our user growth will stay strong because of word-of-mouth appeal, our ability to increase engagement through continuous product improvements, our international growth opportunity and our creative marketing," von Ahn said in the company's letter to shareholders.

-Bill Peters

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05-08-24 2041ET

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