On November 8, 2023, Duolingo Inc (DUOL, Financial), the world's leading mobile learning platform, released its earnings for the third quarter ended September 30, 2023. The company reported a robust performance with substantial growth in both user engagement and financial results, surpassing its own expectations for the quarter.
Performance and Challenges
Duolingo Inc (DUOL, Financial) experienced a surge in user engagement, with Daily Active Users (DAUs) increasing by 63% and Monthly Active Users (MAUs) by 47% compared to the prior year quarter. This growth can be attributed to the company's strategic shift towards becoming a multi-subject product, as highlighted by Co-Founder and CEO Luis von Ahn. The addition of Math and Music courses to the Duolingo app is expected to further enhance user value and engagement.
Financial Achievements
The company's financial achievements were equally impressive. Total bookings jumped to $153.6 million, marking a 49% increase from the previous year, while subscription bookings rose by 54% to $121.3 million. The number of Paid Subscribers also saw a significant uptick, reaching 5.8 million at quarter's end, a 60% increase from the prior year quarter.
Income Statement and Balance Sheet Highlights
Total revenues for Q3 2023 reached $137.6 million, a 43% increase from the prior year quarter. The company's net income totaled $2.8 million, compared to a net loss of $18.4 million in the prior year quarter, reflecting a remarkable improvement in profitability. Adjusted EBITDA was $22.5 million, compared to $2.1 million in the prior year quarter, with Adjusted EBITDA margins expanding significantly from 2.2% to 16.3%.
Revenues by product type showed growth across the board, with subscription revenue up by 47%, advertising revenue increasing by 10%, and Duolingo English Test revenue growing by 30%. Other revenues, primarily comprised of in-app sales of virtual goods, saw the highest percentage increase at 86%.
Financial Outlook and Dilutive Securities
Looking ahead, Duolingo Inc (DUOL, Financial) has raised its guidance for the fourth quarter and the full year ending December 31, 2023. The company expects total bookings to be between $598 million to $601 million and revenues to range from $525 million to $528 million for the full year. Adjusted EBITDA is projected to be between $87.2 million and $89.2 million, with margins anticipated to be between 16.6% and 16.9%.
The company also provided details on its dilutive securities, with total estimated diluted shares outstanding at approximately 48.8 million as of September 30, 2023.
Conclusion
Duolingo Inc (DUOL, Financial)'s third-quarter results demonstrate the company's successful execution of its growth strategy and its ability to significantly improve its financial health. With the expansion into new subject areas and a strong user base, Duolingo is well-positioned to continue its upward trajectory. Investors and potential GuruFocus.com members can find more detailed information and analysis on the company's performance by accessing the full earnings report and shareholder letter on Duolingo's investor relations website.
Explore the complete 8-K earnings release (here) from Duolingo Inc for further details.
