Just got permission to post again because I have gone back and reviewed Duolingo as a possible investment. They only just recently IPO’d, and there wasn’t much I was super interested in with no public track record at the time. We are finally doing a couples trip internationally, so both of us are back to using the App again.
I really liked the app while I was testing it way back when, but with no set purpose, I kinda wandered off to other short term interests.
This is the one other post about Duolingo (DUOL) if found on the board. (WE CAN NOW SEARCH!!!))
Link to IR page - Investor Relations - Duolingo, Inc. (gcs-web.com)
First the numbers I can remember to look at, they look like decent SAAS type numbers for a young public company. (Percentages are yoy numbers it seems.)
Paid subscriber growth
Thoughts – These margin numbers are pretty darn good and show that they are more like our SAAS companies on this board. They do not have “hardware” or anything that needs to sell with low margins (ie – TOST). They are growing both overall subscribers and paid subscribers each quarter they’ve been public. It is not blistering growth, but it looks solid. They even pointed out that negative impacts like the war in Ukraine have led people to the platform to learn Ukrainian. Interesting.
I find all of these numbers intriguing and with their share price coming back down from the heady IPO days, it seems like a decent price to start a small position to watch this one.
Now a few details I like from their presentations
- Sub = 74%
- Advert = 13%
- English Lang Test (DET) = 10%*
- Other = 3%**
*The DET is now used for international admissions by more than 3,600 higher education programs worldwide.
**Other primarily includes in-app sales of virtual goods
We’re proud of this outperformance, especially in light of the uncertain macroeconomic environment. Taking both of these factors into account, we’re raising our 2022 full year guidance, which now reflects 38% year over year growth in total bookings.
This year, we’re focused on expanding acceptance in institutions in four strategically important countries: US, Canada, UK, and Australia. As of the end of Q2, over 3,700 higher education programs accept the DET
Thoughts – I have now learned that they are not a one trick pony. That was a concern before we had a few quarters of information. Now they are actively expanding to areas related to their expertise of online education. Advertising on the platform is a way to monetize free users like me when I am just practicing. Growing subscriber numbers, regardless of churn would help make this worth more to advertisers. They have that last bullet in their shareholder letter, and it shows they are actively trying to expand beyond just the app, but using IP they already have and own. So they can get two income streams of that one instance.
Lastly, they raised guidance in this period, a period when everyone is so worried about spending slowdowns, inflation and interest rates. They are showing a lot of confidence here.
Wrap up – I am an investor that isn’t just focused on Sauldom stocks, so I have a few stocks in my smallest positions that don’t warrant conversation here. They are in my portfolio to make me follow the news and the earnings releases, but they are small enough that I could recoup that money on options (also not for discussion here) so it is money I am willing to risk. I think DUOL could be a Sauldom stock, but in a lower conviction level, and it might not grow at the blistering pace people got used to two years ago. I will open a test position, and I am (GASP) going to pull money out of Monday to do it. I have more confidence in DUOL level of execution risk than I do in one collaboration software to rule them all.