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Duolingo CEO talks earnings, paid subscribers, and the stock's performance

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Duolingo CEO Luis von Ahn joins Yahoo Finance Live to discuss the company's quarterly earnings, new users, and how the tech company is resisting some of the downward pressure on startup stocks.

Video Transcript

- A rare success story from tech earnings season is Duolingo. The language learning software company saw first quarter bookings surge 55% from a year ago. Adjusted operating profits improved sharply as well. You're seeing the stock up there right now in this broader market sell off, shares up about 4%. Joining us for more on the company is co-founder and CEO Luis von Ahn Louise, good to see you here this morning. Look, we've been watching a real sharp sell off in the tech space, a lot of doom and gloom right now in the space, but we're not seeing that in your results. Why do you think that's the case?

LUIS VON AHN: Well, first of all, thank you for having me. Yeah, I think we had a really good quarter. We basically had records in all of our metrics. Our daily active users increased 31% to 12.5 million. We got to almost 50 million monthly active users. Our bookings increased 55% year over year. And so we had a really, really good quarter. We basically outperformed our own expectations. And because of that, we also increased our guidance. We now expect to be profitable on an adjusted EBITDA basis. And I think the reason for that is because we're a very product focused company. We spend most of our resources just improving our products. And over the last year, we've just made the Duolingo language learning app just significantly better. It is more engaging. It is more social. It teaches better, and all of that really turns into just basically better financial results.

- We also saw paid subscribers increased 56% from the prior year as well. When you think about the pricing tier, are there other methodologies that you look to unlock to essentially add on more of those acquired customers?

LUIS VON AHN: Yeah, so we monetized through the freemium model. The majority of our users are still using Duolingo for free. You can see the graph there it's a 6.8% of our monthly active users are paying subscribers. And that number keeps increasing. It's been increasing about a percentage point every year. Over the last year, that increase accelerated. It Increased about two percentage points. And the idea is we just get better and better at converting our free users into paying subscribers by basically adding more features to the premium subscription. And so we think that this will continue, that we'll continue getting more and more people to convert to paying subscribers.

- Hi, Luis. It's Julie here. I kind of want to ask what it feels like being a startup who came public in 2021, because it has not been an easy-- the class of 2021-- it's not been an easy ride for you guys. So how are you sort of thinking about this current environment here, where we are seeing a big pullback in basically everything, but certainly things that are tech forward?

LUIS VON AHN: Well, for us, I think it's been pretty great. Our stock has fared pretty well, considering everything that's been going on in the market. And ultimately, we're very long term focused. With Duolingo, we really want to develop the best education in the world and make it universally available, and we just want this to be a 100 year company. And there's going to be some temporary chop in the market, but that's been fine. We really have our sights on just making our products better. And I think because of that, our results are pretty good, I think.

- And Luis, the learning market has been challenging. I think back to Chegg's results last week. Not so good. Different company than yours, but still. What is it about learning a language that is allowing you to put up these results while someone in higher education services, like a Chegg, is not doing that?

LUIS VON AHN: I think the biggest difference is just our audience. We really-- our audience is extremely wide. We have users in every single age range, from age 7 to 100. We have users in every single country. So things like lower number of people going to college or stuff like that just does not affect us, because our user base is so wide. I think the other thing that differentiates us from most education companies is we really, really spend most of our efforts on making our products better, as opposed to on marketing or other things like that. And I think in the long term, that's just a better strategy. That's just our own philosophy.