Stephen Chen

About Stephen Chen

Stephen Chen, age 51, is Duolingo’s General Counsel (since March 2020), with prior senior legal roles at Proofpoint, VMware, Yahoo! and Marin Software; he holds a B.A. in History and a J.D. from Harvard University . During his tenure, Duolingo delivered strong operating performance: FY2024 bookings grew 40% to $870.6M, revenue rose 41% to $748.0M, and Adjusted EBITDA more than doubled to $191.9M; a $100 investment at 2021 IPO-end grew to $233.24 by 2024 year-end, underscoring shareholder value creation . Recent results and guidance remain robust: Q3 2025 revenue grew 41% YoY with 29.5% Adjusted EBITDA margin, and FY2025 guidance calls for ~38% revenue growth and ~29% full-year Adjusted EBITDA margin at the midpoint .

Past Roles

External Roles

Fixed Compensation

• Duolingo maintains a simple pay mix: base salary plus equity (no formal annual cash bonus program) .
• Stephen Chen’s base salary increased during 2024 from $530,000 to $570,000 (+7.5%) following peer benchmarking and contribution assessment .

Performance Compensation

• Equity vehicle: time-based RSUs vesting in equal quarterly installments over four years (standard double-trigger acceleration on CIC termination) . No PSUs for Chen; performance-based PSUs apply to founders only .
• 2024 annual grant: target value $2,000,000 (9,117 RSUs); ASC 718 grant date fair value $1,616,444 (granted May 15, 2024) .

Insider equity flow and potential selling pressure:

• 2024 option exercises: 37,797 shares exercised; intrinsic value realized $7,770,263 (typically associated with sell-to-cover or monetization) .
• 2024 RSU vesting: 9,758 shares vested; value realized $2,176,451 (tax-related selling often occurs on vest) .

Equity Ownership & Alignment

• Beneficial ownership: 21,672 Class A shares; <1% of outstanding; no Class B holdings; no pledging disclosed .
• Unvested RSUs at 12/31/24: 22,618 units (market value $7,333,434 at $324.23) .
• Options: 5,537 vested/exercisable at $14.42, expiring 3/10/2030 .

Employment Terms

• At-will employment; proprietary information and invention assignment agreements in place .
• Severance and change-in-control (CIC) economics (Other NEO terms apply to Chen):
  • Termination without cause/for good reason outside CIC: 6 months salary + 6 months company-paid healthcare .
  • Double-trigger (within 3 months pre-/12 months post-CIC): 12 months salary + pro‑rated bonus at target (if any) + 12 months healthcare + 100% acceleration of time‑based RSUs .
  • CEO/Founder PSU provisions are distinct and not applicable to Chen .

Estimated payout values (as of 12/31/24, stock at $324.23):

Other governance provisions:

• Clawback: Nasdaq Rule 10D‑1–compliant policy adopted in 2023; applies to current and former executive officers in the event of an accounting restatement .
• No tax gross‑ups; limited perquisites; 401(k) match available (fully vested when contributed) .

Compensation Structure Analysis

• Year-over-year mix: 2024 saw a 7.5% salary increase to maintain competitiveness; the bulk of Chen’s total compensation remains equity-based (time-vested RSUs), reinforcing retention but limiting explicit metric-based pay linkage .
• No cash bonus plan: reduces discretionary cash payouts; however, lack of PSU metrics for non-founders may dilute direct pay-performance sensitivity versus metric-weighted designs .
• Performance lens: Company identifies Bookings as its key performance indicator in pay-versus-performance disclosures; CAP rose alongside TSR and financial performance in 2023–2024, indicating alignment at the portfolio level even without individual PSU metrics for non-founders .

Performance Compensation Details (Company KPI emphasis)

Compensation Peer Group (Benchmarking context)

• 2024 peer set emphasized consumer/subscription software; new adds included Braze, DoubleVerify, Freshworks, GitLab; several enterprise names were removed to improve comparability .

Track Record, Value Creation, Execution Risk

• FY2024 performance: bookings up 40%, revenue up 41%, Adjusted EBITDA up to $191.9M, net income $88.6M; continued momentum into 2025 with raised guidance and expanding Adjusted EBITDA margin .
• Insider flow: 2024 option exercises (37,797 shares; $7.77M intrinsic value) and RSU vesting ($2.18M) may create periodic selling to cover taxes; policy mitigants include 10b5‑1 plans and trading windows .

Risk Indicators & Red Flags

• Hedging/pledging: Hedging banned; pledging prohibited unless approved; none by NEOs—positive alignment .
• Clawback in place; no tax gross-ups; no option repricing disclosed—low governance risk signals .
• Dual-class voting concentrates control at founders, but not specific to Chen; monitor governance dynamics separately .

Equity Ownership & Vesting Schedule Detail (as of 12/31/24)

Investment Implications

• Alignment: Chen’s compensation is predominantly equity via multi-year RSUs, with strict anti-hedging/pledging rules and a clawback—favorable for shareholder alignment and retention; lack of PSU metrics for non-founders modestly weakens explicit pay-for-performance linkage versus metric-weighted designs .
• Selling pressure: Quarterly RSU vesting and historical option exercises can produce predictable supply, often executed via 10b5‑1 plans; current unvested RSUs (~22.6k units, ~$7.33M at YE24) imply continued quarterly releases over the next 1–3 years .
• Retention risk: Double-trigger CIC protection (12 months salary and full time-based RSU acceleration) and competitive salary progression support retention; outside-CIC severance (6 months) is standard, not excessive .
• Company momentum: Strong bookings/revenue growth, expanding Adjusted EBITDA margin, and raised FY2025 outlook provide a constructive backdrop for equity-based compensation value realization, enhancing incentive effectiveness for senior executives including Chen .