The jump in **cash and cash equivalents** in Q2 2024 was primarily driven by a **strong increase in operating cash flow**, notably through **higher net income** and **increased deferred revenue**. Despite higher cash outflows from investing activities, the robust performance in operating activities and modest contributions from financing activities were sufficient to boost overall cash levels.  **[0001562088-24-000203_q2fy24duolingo06-30x24pres.htm:5]** **[0001562088-24-000207_duol-20240630.htm:40]** **[0001562088-24-000207_duol-20240630.htm:8]** 

What drove the jump in cash and cash equivalents in Q2 2024?

The large increase in total assets in Q3 2024 was primarily driven by several factors. **Cash and cash equivalents** increased significantly, and the company introduced **short-term investments** of **$26,354 thousand**, which were not present in Q4 2023. Additionally, **accounts receivable** grew, reflecting higher revenues and bookings, while **deferred cost of revenues** also saw an uptick due to increased subscription bookings and associated costs. The growth in **noncurrent assets** played a key role as well, particularly through the expansion of **operating lease right-of-use assets**, **intangible assets, net** (mainly due to capitalized software development costs and acquisitions), and **goodwill**, which collectively contributed to the substantial asset increase.  **[0001562088-24-000248_q3fy24duolingo09-30x24shar.htm:7]** **[0001562088-24-000248_q3fy24duolingo09-30x24pres.htm:5]** **[0001562088-24-000250_duol-20240930.htm:6]** **[0001562088-24-000250_duol-20240930.htm:18]** 

What factors contributed to the large increase in total assets in Q3 2024?

The significant rise in total liabilities in Q3 2024 was primarily driven by increased deferred revenues and a substantial jump in long-term operating lease obligations. Specifically, deferred revenues increased by **$61,411 thousand** (from **$249,192 thousand** to **$310,603 thousand**) while long-term lease liabilities surged by **$33,557 thousand** (from **$21,094 thousand** to **$54,651 thousand**). Additionally, a new deferred tax liability of **$312 thousand** was recognized in Q3 2024, further contributing to the increase.  **[0001562088-24-000248_q3fy24duolingo09-30x24pres.htm:5]** **[0001562088-24-000250_duol-20240930.htm:6]** 

Why did total liabilities rise so much in Q3 2024?

The significant increase in **operating lease right-of-use assets** in Q1 2024 was primarily caused by **new operating lease liabilities**. Specifically, new right-of-use assets obtained in exchange for these liabilities amounted to **$31,358 thousand** during the quarter, boosting the asset value from **$19,103 thousand as of December 31, 2023** to **$49,785 thousand as of March 31, 2024**.  **[0001562088-24-000113_duol-20240331.htm:6]** **[0001562088-24-000113_duol-20240331.htm:7]** 

What caused the significant increase in operating lease right-of-use assets in Q1 2024?

The sharp rise in **Goodwill** in Q3 2024 was primarily attributed to **two acquisitions completed in July 2024** that significantly enhanced the company's portfolio. The increase involved adding **new talent**, **advanced technology**, and the overall value of a **going concern** from the acquisitions. In the preliminary allocation of the purchase price, **$6,488 thousand** was attributed to Goodwill—which includes intangibles like the assembled workforce and future technologies—and **$3,600 thousand** of this is expected to be deductible for income tax purposes.  **[0001562088-24-000250_duol-20240930.htm:6]** **[0001562088-24-000250_duol-20240930.htm:15]** 

What explains the sharp rise in goodwill in Q3 2024?

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The surge in operating cash flow in FY 2023 was primarily driven by a combination of factors. **Duolingo turned around its financial performance by shifting from a net loss of **$59,574K** in FY 2022 to a net income of **$16,067K** in FY 2023, which provided a strong foundation for cash generation.  **[0001562088-24-000048_q4fy23shareholderletter.htm:9]** **[0001562088-24-000050_duol-20231231.htm:115]** **[0001562088-24-000093_duolingodecember312023an.htm:110]**  Additionally, there was an increase in **non-cash stock-based compensation expense** (from **$73,820K** to **$95,221K**), and a significant boost in **deferred revenue** (increasing by **$91,642K** compared to **$59,283K** the previous year) due to higher subscription bookings and prepayments.  **[0001562088-24-000048_q4fy23shareholderletter.htm:9]** **[0001562088-24-000050_duol-20231231.htm:115]** **[0001562088-24-000050_duol-20231231.htm:101]**  Finally, **improved revenue growth**—which increased by 44%—along with better operating efficiency helped enhance cash flows further.  **[0001562088-24-000050_duol-20231231.htm:93]** **[0001562088-24-000048_q4fy23shareholderletter.htm:2]** **[0001562088-24-000093_duolingodecember312023an.htm:110]** 

What drove the nearly threefold surge in operating cash flow in FY 2023?

In Q1 2024, the operating cash flow jumped because Duolingo turned profitable—reporting a **net income of $26,956 thousand** compared to a **net loss of $2,582 thousand** in the prior year—which significantly boosted its cash generation. Additionally, the improved timing of payments from payment service providers and favorable changes in working capital, including an increase in deferred revenue from **$24,392 thousand** to **$30,121 thousand** and enhancements in accounts receivable, all contributed to the sizable increase in cash provided by operating activities.  **[0001562088-24-000117_q1fy24shareholderletter1.htm:8]** **[0001562088-24-000113_duol-20240331.htm:37]** 

Why did operating cash flow jump in Q1 2024?

The drastic increase in investing outflows in Q3 2024 was primarily driven by a **significant purchase of investments amounting to $81.7 million**. Additionally, higher spending on **property and equipment** and increased **capitalization of software development costs** also contributed to the overall rise in investing outflows.  **[0001562088-24-000250_duol-20240930.htm:44]** 

What caused the drastic increase in investing outflows in Q3 2024?

In Q3 2024, **net cash growth turned negative** because the **substantial increase in cash outflows for investing activities** outweighed the gains from both operating and financing activities. Specifically, investing activities saw a surge with an increase of **$97,529 thousand** driven largely by significant purchases of investments (including U.S. Treasury securities and corporate bonds) and higher spending on property, equipment, and software development, which more than offset the positive cash inflows from operations and financing—resulting in a negative net increase of **$33,831 thousand**.  **[0001562088-24-000250_duol-20240930.htm:8]** **[0001562088-24-000250_duol-20240930.htm:44]** 

Why did net cash growth turn negative in Q3 2024?

71fa2ca12c7680c4d6ba411a9311008e9975b1c83687982fd843b6f290f80049

Operating income turned positive in Q4 2023 primarily because **revenues increased by 45%**, with a notable **50% boost in subscription revenue**, which more than offset the **46% rise in cost of revenues** and the **12% increase in operating expenses**. This substantial revenue growth allowed Duolingo to reverse the previous loss and achieve a positive income from operations in Q4 2023.  **[0001562088-24-000048_q4fy23shareholderletter.htm:8]** **[0001562088-24-000048_q4fy23shareholderletter.htm:2]** 

Why did operating income turn positive in Q4 2023?

The spike in the Q4 2023 tax provision was driven primarily by the impact of the **capitalization of research and development expenses in accordance with Internal Revenue Code Section 174**, which affected both U.S. federal and state income tax calculations. In addition, the **increase in tax-deductible stock-based compensation** and the **generation of research and development tax credits** also played a role, although these were partially offset by an **increase in the valuation allowance for the company’s net deferred tax assets**.  **[0001562088-24-000050_duol-20231231.htm:100]** **[0001562088-24-000050_duol-20231231.htm:130]** 

What drove the spike in the tax provision in Q4 2023?

The substantial jump in pre-tax income in Q1 2024 was driven primarily by **robust revenue growth** (with total revenues increasing by **45%** and subscription revenue surging by **53%**), which in turn bolstered the **gross profit** and improved gross margins. Additionally, the growth in revenues outpaced the **14%** rise in operating expenses, resulting in a strong improvement in **operating income** (from a loss to **$16,439 thousand**). The company also benefited significantly from a **78% increase in interest income**, and although there was a net other expense, these combined factors reversed the previous pre-tax loss into substantial income in Q1 2024.  **[0001562088-24-000117_q1fy24shareholderletter1.htm:7]** **[0001562088-24-000117_q1fy24shareholderletter1.htm:2]** **[0001562088-24-000113_duol-20240331.htm:34]** **[0001562088-24-000110_q1fy24shareholderletter.htm:8]** 

How did pre-tax income achieve such a substantial jump in Q1 2024?

The sharp increase in **revenues** for Q3 2024 was driven primarily by a significant **49%** growth in **subscription revenue**, which rose to **$157,617,000** due to a **47%** increase in the average number of paid subscribers. Additionally, a **10%** increase in **other revenue**—including **advertising**, **Duolingo English Test**, and **in-app purchases**—supported overall revenue gains. Enhanced user engagement, with daily active users growing by **54%** and monthly active users by **36%**, along with product enhancements such as the new **AI-powered Video Call feature** in Duolingo Max, further contributed to the impressive performance.  **[0001562088-24-000250_duol-20240930.htm:41]** **[0001562088-24-000248_q3fy24duolingo09-30x24pres.htm:0]** **[0001562088-24-000248_q3fy24duolingo09-30x24shar.htm:2]** **[0001562088-24-000248_q3fy24duolingo09-30x24pres.htm:0]** **[0001562088-24-000248_q3fy24duolingo09-30x24shar.htm:0]** **[0001562088-24-000248_q3fy24duolingo09-30x24shar.htm:1]** 

What factors contributed to the sharp revenue increase in Q3 2024?

85a447389939d64fb4fb7c900d500e711ccd3c105f10cb040cc884011a57b19c

Revenues (USD, thousands)

Cost of revenues (USD, thousands)

Gross profit (USD, thousands)

Research and development expenses (USD, thousands)

Sales and marketing expenses (USD, thousands)

General and administrative expenses (USD, thousands)

Total operating expenses (USD, thousands)

Income (loss) from operations (USD, thousands)

Other income (expense), net (USD, thousands)

Income (loss) before interest income and income taxes (USD, thousands)

Income (loss) before income taxes (USD, thousands)

Interest income (USD, thousands)

Provision (benefit) for income taxes (USD, thousands)

Net income and comprehensive income (USD, thousands)

6e554927450302180bff7a5e78a0b60ff1f7263740006a625e3736caf477c538

Net income (loss) [USD, thousands]

Depreciation and amortization [USD, thousands]

Stock-based compensation expense [USD, thousands]

Net cash provided by operating activities [USD, thousands]

Capitalized software expense and purchases of intangible assets [USD, thousands]

Purchase of property and equipment [USD, thousands]

Net cash used for investing activities [USD, thousands]

Proceeds from exercise of stock options [USD, thousands]

Net cash provided by (used for) financing activities [USD, thousands]

Net increase in cash, cash equivalents and restricted cash [USD, thousands]

Cash, cash equivalents and restricted cash - Beginning of period [USD, thousands]

Cash, cash equivalents and restricted cash - End of period [USD, thousands]

4bd1b286292d92bcc36c033c6b510bc6130a3f5608fdf2235a25df4338f334ca

0441477570f870a45aa353497b7ebc73508141feb20b1b140b04016444fd3e17

Subscription

- Advertising

- Duolingo English Test

- In-App Purchases

- Other

Other

Total Revenue

f43975c3c612eed72052a05f40844231547f5ab9417e9fefd34cd6b8895507e4

United States

United Kingdom

Rest of World

98165b29951f3e34cc1ca68f95d55722542a0a2e1ba1eb6c5519af8c5bda0bc5

Current Assets (USD, thousands)

Cash and Cash Equivalents (USD, thousands)

Accounts Receivable (USD, thousands)

Inventory (USD, thousands)

Non-Current Assets (USD, thousands)

Property, Plant, and Equipment (PP&E) (USD, thousands)

Goodwill (USD, thousands)

Intangible Assets (USD, thousands)

Current Liabilities (USD, thousands)

Accounts Payable (USD, thousands)

Short-term Debt (USD, thousands)

Accrued Expenses (USD, thousands)

Non-Current Liabilities (USD, thousands)

Long-term Debt (USD, thousands)

Lease Liabilities (USD, thousands)

Deferred Tax Liabilities (USD, thousands)

Shareholders' Equity (USD, thousands)

Retained Earnings (USD, thousands)

Common Stock (USD, thousands)

Additional Paid-in Capital (USD, thousands)

0338f7453f226f5936a04de7a82c679cd2cf02ffc639e8336a44f8843a58b65b

Adjustments for Non-Cash Items (USD, thousands)

Stock-Based Compensation (USD, thousands)

Changes in Working Capital (USD, thousands)

Capital Expenditures (CapEx) (USD, thousands)

Proceeds from / Repayments of Debt (USD, thousands)

Share Repurchases (USD, thousands)

Dividend Payments (USD, thousands)

Net Change in Cash (USD, thousands)

a5f13c46b632c8b0d59b94946bb650c336b06bb29638514a2d53e06b06242d19

Number of monthly active users (MAUs) (millions)

Number of daily active users (DAUs) (millions)

DAU to MAU ratio (percentage)

Number of paid subscribers (millions)

Subscription Bookings (USD in thousands)

Total Bookings (USD in thousands)

5ba0ae4364700730ad16d4535102636462551d055342e289531f516edb9e6e81

Total Revenue (USD, thousands)

Cost of Goods Sold (COGS) (USD, thousands)

Selling, General, and Administrative Expenses (SG&A) (USD, thousands)

Research and Development (R&D) (USD, thousands)

Depreciation and Amortization (D&A) (USD, thousands)

Interest Expense (USD, thousands)

Operating Income (EBIT) (USD, thousands)

Net Income (USD, thousands)

Earnings Per Share (EPS) - Basic (USD)

Earnings Per Share (EPS) - Diluted (USD)

040902404406340850bcf576cdfec164275c56d6a9d8d4ff2821ce6d10bda542

Duolingo (DUOL)

Financials