Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2022 | May 11, 2022 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-40653 | |
Entity Registrant Name | Duolingo, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 45-3055872 | |
Entity Address, Address Line One | 5900 Penn Avenue | |
Entity Address, City or Town | Pittsburgh | |
Entity Address, State or Province | PA | |
Entity Address, Postal Zip Code | 15206 | |
City Area Code | (412) | |
Local Phone Number | 567-6602 | |
Title of 12(b) Security | Class A common stock, $0.0001 per share | |
Trading Symbol | DUOL | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001562088 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Common Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 27,566,643 | |
Common Class B | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 11,594,704 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 577,331 | $ 553,922 |
Accounts receivable | 28,573 | 33,163 |
Deferred cost of revenues | 27,780 | 24,219 |
Prepaid expenses and other current assets | 6,951 | 7,967 |
Total current assets | 640,635 | 619,271 |
Assets, Noncurrent | ||
Property and equipment, net | 10,254 | 8,211 |
Capitalized software, net | 5,488 | 4,566 |
Operating lease right-of-use assets | 27,093 | 28,369 |
Other assets | 1,041 | 894 |
Total assets | 684,511 | 661,311 |
Current liabilities | ||
Accounts payable | 2,018 | 7,818 |
Deferred revenues | 119,101 | 98,267 |
Income tax payable | 138 | 113 |
Accrued expenses and other current liabilities | 14,518 | 12,933 |
Total current liabilities | 135,775 | 119,131 |
Liabilities, Noncurrent | ||
Long-term obligation under operating leases | 28,022 | 29,124 |
Total liabilities | 163,797 | 148,255 |
Commitments and contingencies (Note 8) | ||
Stockholders’ equity (deficit) | ||
Common stock, $0.0001 par value; 2,000,000 shares of Class A common stock authorized and 27,479 issued and outstanding at March 31, 2022; 30,000 shares of Class B common stock authorized and 11,598 issued and outstanding at March 31, 2022; 2,000,000 shares of Class A common stock authorized and 16,645 issued and outstanding at December 31, 2021; 30,000 shares of Class B common stock authorized and 21,627 issued and outstanding at December 31, 2021 | 4 | 4 |
Additional paid-in capital | 703,778 | 683,966 |
Accumulated deficit | (183,068) | (170,914) |
Total stockholders’ equity (deficit) | 520,714 | 513,056 |
Total liabilities, convertible preferred stock and stockholders' equity (deficit) | $ 684,511 | $ 661,311 |
UNAUDITED CONDENSED CONSOLIDA_2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2022 | Dec. 31, 2021 |
Convertible preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares issued (in shares) | 16,645,000 | |
Common stock, shares outstanding (in shares) | 16,645,000 | |
Common Class A | ||
Common stock, shares authorized (in shares) | 2,000,000,000 | 2,000,000,000 |
Common stock, shares issued (in shares) | 27,479,000 | |
Common stock, shares outstanding (in shares) | 27,479,000 | |
Common Class B | ||
Common stock, shares authorized (in shares) | 30,000,000 | 30,000 |
Common stock, shares issued (in shares) | 11,598,000 | 21,627 |
Common stock, shares outstanding (in shares) | 11,598,000 | 21,627 |
UNAUDITED CONDENSED CONSOLIDA_3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Income Statement [Abstract] | ||
Revenues | $ 81,220 | $ 55,360 |
Cost of revenues | 21,490 | 15,019 |
Gross profit | 59,730 | 40,341 |
Operating expenses: | ||
Research and development | 29,781 | 22,529 |
Sales and marketing | 14,940 | 19,773 |
General and administrative | 26,856 | 11,453 |
Total operating expenses | 71,577 | 53,755 |
Loss from operations | (11,847) | (13,414) |
Other expense, net of other income | (279) | (41) |
Loss before provision for income taxes | (12,126) | (13,455) |
Provision for income taxes | 28 | 17 |
Net loss | (12,154) | (13,472) |
Net comprehensive loss | $ (12,154) | $ (13,472) |
Net loss per share attributable to Class A and Class B common stockholders, basic (in usd per share) | $ (0.31) | $ (1.04) |
Net loss per share attributable to Class A and Class B common stockholders, diluted (in usd per share) | $ (0.31) | $ (1.04) |
UNAUDITED CONDENSED CONSOLIDA_4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Convertible preferred stock beginning balance (in shares) at Dec. 31, 2020 | 19,074,000 | |||
Convertible preferred stock beginning balance at Dec. 31, 2020 | $ 182,609 | |||
Convertible preferred stock ending balance (in shares) at Mar. 31, 2021 | 19,074,000 | |||
Convertible preferred stock ending balance at Mar. 31, 2021 | $ 182,609 | |||
Beginning balance (in shares) at Dec. 31, 2020 | 12,794,000 | |||
Beginning balance at Dec. 31, 2020 | (80,691) | $ 1 | $ 30,087 | $ (110,779) |
Increase (Decrease) in Stockholders' Deficit [Roll Forward] | ||||
Stock-based compensation | 2,551 | 2,551 | ||
Stock options exercised (in shares) | 347,000 | |||
Stock options exercised | 2,030 | 2,030 | ||
Common stock repurchased and retired (in shares) | (23,000) | |||
Common stock repurchased and retired | (868) | (868) | ||
Options repurchased | (7,335) | (7,335) | ||
Net loss | (13,472) | (13,472) | ||
Ending balance (in shares) at Mar. 31, 2021 | 13,118,000 | |||
Ending balance at Mar. 31, 2021 | $ (97,785) | $ 1 | 26,465 | (124,251) |
Convertible preferred stock beginning balance (in shares) at Dec. 31, 2021 | 0 | |||
Convertible preferred stock beginning balance at Dec. 31, 2021 | $ 0 | |||
Convertible preferred stock ending balance (in shares) at Mar. 31, 2022 | 0 | |||
Convertible preferred stock ending balance at Mar. 31, 2022 | $ 0 | |||
Beginning balance (in shares) at Dec. 31, 2021 | 38,272,000 | |||
Beginning balance at Dec. 31, 2021 | 513,056 | $ 4 | 683,966 | (170,914) |
Increase (Decrease) in Stockholders' Deficit [Roll Forward] | ||||
Stock-based compensation | $ 14,586 | 14,586 | ||
Stock options exercised (in shares) | 756,000 | 756,000 | ||
Stock options exercised | $ 5,226 | 5,226 | ||
Release of restricted stock units (in shares) | 49,000 | |||
Net loss | (12,154) | (12,154) | ||
Ending balance (in shares) at Mar. 31, 2022 | 39,077,000 | |||
Ending balance at Mar. 31, 2022 | $ 520,714 | $ 4 | $ 703,778 | $ (183,068) |
UNAUDITED CONDENSED CONSOLIDA_5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Cash flows from operating activities: | ||
Net loss | $ (12,154) | $ (13,472) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 774 | 600 |
Stock-based compensation | 14,586 | 2,551 |
Changes in assets and liabilities: | ||
Deferred revenue | 20,834 | 10,470 |
Accounts receivable | 4,590 | (2,897) |
Deferred cost of revenues | (3,561) | (2,474) |
Prepaid expenses and other current assets | 66 | 1,929 |
Accounts payable | (5,800) | 1,584 |
Accrued expenses and other current liabilities | 1,265 | 6,267 |
Noncurrent assets and liabilities | 27 | 565 |
Net cash provided by operating activities | 20,627 | 5,123 |
Cash flows from investing activities: | ||
Capitalized software | (1,117) | (939) |
Purchase of property and equipment | (1,327) | (839) |
Net cash used for investing activities | (2,444) | (1,778) |
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | 5,226 | 2,030 |
Repurchases of stock options | 0 | (7,335) |
Repurchase of common stock | 0 | (868) |
Payments of deferred offering costs | 0 | (203) |
Net cash provided by (used for) financing activities | 5,226 | (6,376) |
Net increase (decrease) in cash and cash equivalents | 23,409 | (3,031) |
Cash and cash equivalents - Beginning of period | 553,922 | 120,490 |
Cash and cash equivalents - End of period | 577,331 | 117,459 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 0 | 0 |
Cash paid for income taxes | 3 | 1 |
Supplemental disclosure of noncash operating activities: | ||
Implementation costs for cloud computing included in Current liabilities | 153 | 0 |
Supplemental disclosure of noncash investing activities: | ||
Capitalized software included in Current liabilities | 14 | 67 |
Property and equipment included in Current liabilities | 178 | 0 |
Landlord incentives included in Prepaid expenses and other current assets | $ 1,102 | $ 0 |
DESCRIPTION OF THE BUSINESS AND
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION Duolingo, Inc. (the “Company” or “Duolingo”) was formed on August 18, 2011 and the Duolingo app was launched to the general public on June 19, 2012. The Company’s headquarters are located in Pittsburgh, Pennsylvania. On July 30, 2021, Duolingo completed its Initial Public Offering (“IPO”) of 5,872 shares of its Class A common stock at a price to the public of $102.00 per share, 4,466 of which were sold by the Company and 1,406 of which were sold by certain selling stockholders, which includes the exercise in full by the underwriters of their option to purchase from the Company an additional 766 shares of the Company’s Class A common stock. The gross proceeds to the Company from the IPO were $455,532, before deducting underwriting discounts and commissions and offering expenses payable by the Company. The Company did not receive any proceeds from the sale of shares of Class A common stock in the offering by the selling stockholders. Duolingo is a US-based language-learning website and mobile app, as well as a digital language proficiency assessment exam. The Company has a freemium business model: the app and the website are accessible free of charge, although Duolingo also offers a premium service, Duolingo Plus, for a subscription fee. As of the date of this filing, Duolingo offers courses in over 40 different languages, including Spanish, English, French, German, Italian, Portuguese, Japanese and Chinese. We have locations in the United States, China and Germany. Principles of Consolidation —The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and subsidiaries over which the Company has control. All intercompany transactions and balances have been eliminated. Basis of Presentation —The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) from the Company’s accounting records and reflect the consolidated financial position and results of operations for the three months ended March 31, 2022 and 2021. Unless otherwise specified, all dollar amounts are referred to in thousands. The Unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such SEC rules. We believe that the disclosures made are adequate to make the information presented not misleading. In our opinion, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. We consistently applied the accounting policies consistent with the annual consolidated financial statements elsewhere in this this Quarterly Report on Form 10-Q, in preparing these Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and the notes for the fiscal year ended December 31, 2021 included in the Annual report on Form 10-K and filed with the SEC. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESUnder the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards would otherwise apply to private companies. While we have not historically delayed the adoption of new or revised accounting standards until such time as those standards would apply to private companies, we have elected to take advantage of this extended transition period and, as a result, our operating results and financial statements in the future may not be comparable to the operating results and financial statements of companies who have adopted the new or revised accounting standards. Accounting Principles —The Unaudited Condensed Consolidated Financial Statements and accompanying notes are prepared in accordance with GAAP. Use of Estimates— The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Unaudited Condensed Consolidated Financial Statements and accompanying notes. Significant estimates and assumptions reflected in the Unaudited Condensed Consolidated Financial Statements include, but are not limited to, useful lives of property and equipment, valuation of deferred tax assets and liabilities, stock-based compensation, common stock valuation, operating lease right-of-use assets and liabilities, capitalization of internally developed software and associated useful lives and contingent liabilities. Actual results may differ materially from such estimates. Management believes that the estimates, and judgments upon which they rely, are reasonable based upon information available to them at the time that these estimates and judgments are made. To the extent that there are material differences between these estimates and actual results, the Company’s Unaudited Condensed Consolidated Financial Statements will be affected. Cash and Cash Equivalents— Cash consists primarily of cash on hand and bank deposits. Cash equivalents consist primarily of money market accounts with maturities of three months or less at the date of acquisition and are stated at cost, which approximates fair value. The Company maintains cash deposits with financial institutions that may exceed federally insured limits at times. The following table shows the breakout between cash and money market funds. March 31, December 31, Cash $ 67,540 $ 44,165 Money market funds 509,791 509,757 Total $ 577,331 $ 553,922 The Money market funds are considered Level 1 financial assets. Level 1 financial assets use inputs that are the unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Advertising Costs — Advertising costs were approximately $10,954 and $12,066 for the three months ended March 31, 2022 and 2021, respectively, and are included within Sales and marketing in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. Income Taxes— The Company’s provision for income taxes is computed by using an estimate of the annual effective tax rate, adjusted for discrete items taken into account in the relevant period, if any. Each quarter, the annual effective income tax rate is recomputed and if there are material changes in the estimate, a cumulative adjustment is made. Concentration of Credit Risk —The Company’s concentration of credit risk relates to financial institutions holding the Company’s cash and cash equivalents and platforms with significant accounts receivable balances and revenue transactions. The Company maintains cash deposits with financial institutions that may exceed federally insured limits at times. Management believes that the financial institutions that hold the Company’s deposits are financially credit worthy and, accordingly, minimal credit risk exists with respect to those balances. The majority of our revenue comes through our subscriptions and advertising streams and payments are made to Duolingo through service providers. The top two, Apple and Google, accounted for 49.4% and 26.6% of total Accounts receivable as of March 31, 2022, respectively. The top three service providers, Apple, Google and Stripe, accounted for 51.1%, 27.9% and 10.1% of total Accounts receivable as of December 31, 2021, respectively. Two service providers, Apple and Google, processed 51.1% and 29.1% of total Revenues for the three months ended March 31, 2022, respectively. Three services providers, Apple, Google, and Stripe, processed 50.1%, 28.3%, and 10.3% of total Revenues for the three months ended March 31, 2021, respectively. Impairment of long-lived assets— The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the estimated undiscounted future cash flows expected to result from the use and eventual disposition of an asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset. No assets were impaired during the three months ended March 31, 2022 and 2021. Recently Issued Pronouncements Not Yet Adopted There are no recently issued accounting pronouncements that the Company has not yet adopted that they believe are applicable or would have a material impact on the financial statements of the Company. |
REVENUE
REVENUE | 3 Months Ended |
Mar. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | REVENUE The Company has three predominant sources of revenues; time-based subscriptions, in-app advertising placement by third parties, and the Duolingo English Test. Revenue is recognized upon transfer of control of promised products or services to users in an amount that reflects the consideration the Company expects to receive in exchange for those services. The Company does not enter into contracts with a customer that contain multiple promises that result in multiple performance obligations. Revenue is recorded net of taxes assessed by a government authority that are both imposed on and concurrent with specific revenue transactions between us and our users. Revenue from time-based subscriptions includes a stand-ready obligation to provide hosting services that are consumed by the customer over the subscription period. Users can purchase Duolingo monthly or they can purchase a six-month or year-long subscription and pay for the subscription at the time of purchase. Under the year-long subscription, users can also purchase a single plan or a family plan. The family plan includes up to six users to be on one subscription. Such payments are initially recorded to deferred revenue. The user has the ability to download limited content offline. However, as there is a significant level of integration and interdependency with the online functionality, the Company considers the service to be a single performance obligation for the online and offline content. The Company enters into arrangements with advertising networks to monetize the in-app advertising inventory. Revenue from in-app advertising placement is recognized at a point in time when the advertisement is placed and is based upon the amount received. Duolingo English Test revenue is generally recognized once the tests have gone through the proctoring process and a certification decision has been made. This process usually takes less than 48 hours after the test has been completed and uploaded. Customers have 21 days from the date of purchase to take the exam or their purchase will expire and revenue will be recognized. Virtually all customers complete their exams prior to expiration. Sometimes organizations may purchase tests in bulk via coupons with a one year expiration date. The Company will defer revenue from all tests that haven’t been proctored nor expired. The Company’s users have the option to purchase consumable in-app virtual goods. The Company recognizes revenue over the period in which the user consumes the virtual good, which is generally within a month. Principal Agent Considerations —The Company makes its application available to be downloaded through third-party digital distribution service providers. Users who purchase subscriptions also pay through the respective app stores. The Company evaluates the purchases via third-party payment processors to determine whether its revenues should be reported gross or net of fees retained by the payment processor. The Company is the principal in the transaction with the end user as a result of controlling, hosting, and integrating the delivery of the virtual items to the end user. The Company records revenue gross as a principal and records fees paid to third-party payment processors as Cost of revenues. Contract Balances —Deferred revenue mostly consists of payments we receive in advance of revenue recognition, and is mostly related to time-based subscriptions, which will be recognized into revenue over the course of the upcoming year (recognized over 12 months or less). Additionally, the Duolingo English Test has deferred revenue related to tests that have been purchased, but will not be recognized until the tests have been proctored. Disaggregation of Revenue In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , the Company disaggregates revenue from contracts with customers into source of revenue, which most closely depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Information regarding source of revenues: Three Months Ended March 31, 2022 2021 Over time $ 58,010 $ 40,055 Point in time 23,210 15,305 Total revenue $ 81,220 $ 55,360 Information regarding revenue by stream: Three Months Ended March 31, 2022 2021 Revenues: Subscription $ 58,010 $ 40,055 Advertising 11,748 9,275 Duolingo English Test 8,080 5,035 Other (1) 3,382 995 Total revenues $ 81,220 $ 55,360 ________________ (1) Other revenue is mainly comprised of in-app purchases of virtual goods. Changes in deferred revenues were as follows: Three Months Ended March 31, 2022 2021 Beginning balance—January 1 $ 98,267 $ 54,792 Amount from beginning balance recognized into revenue (40,474) (25,891) Recognition of deferred revenue (22,195) (15,741) Deferral of revenue 83,503 52,102 Ending balance—March 31 $ 119,101 $ 65,262 |
PROPERTY and EQUIPMENT, net
PROPERTY and EQUIPMENT, net | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY and EQUIPMENT, net | PROPERTY and EQUIPMENT, net Property and equipment consists of the following as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Leasehold improvements $ 12,058 $ 10,258 Furniture, fixtures and equipment 3,861 3,053 Total property and equipment 15,919 13,311 Less: accumulated depreciation (5,665) (5,100) Total property and equipment, net $ 10,254 $ 8,211 Depreciation expense was $565 for the three months ended March 31, 2022 and $452 for the three months ended March 31, 2021, and is predominately included within General and administrative, with nominal amounts in Cost of revenues, Research and development and Sales and marketing in the Company’s Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. |
CAPITALIZED SOFTWARE, net
CAPITALIZED SOFTWARE, net | 3 Months Ended |
Mar. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
CAPITALIZED SOFTWARE, net | CAPITALIZED SOFTWARE, net Capitalized software consists of the following as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Capitalized software $ 12,275 $ 11,144 Less: accumulated amortization (6,787) (6,578) Capitalized software, net $ 5,488 $ 4,566 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXESThe income tax provision for interim periods is comprised of tax on ordinary income (loss) provided at the most recent projected annual effective tax rate (“PAETR”), adjusted for the tax effect of discrete items. Management estimates the PAETR each quarter based on the forecasted annual pretax income or (loss). The Company is required to reduce deferred tax assets by a valuation allowance if, based on all available evidence, it is considered more likely than not that some portion or all of the benefit of the deferred tax assets will not be realized in future periods. The Company also records the income tax impact of certain discrete, unusual or infrequently occurring items including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. The actual year-to-date income tax expense is the product of the most current PAETR and the actual year-to-date pretax income (loss) adjusted for any discrete tax items. Items unrelated to current period ordinary income or (loss) are recognized entirely in the period identified as a discrete item of tax. The income tax expense for a particular quarter, except for the first quarter, is the difference between the year-to-date calculation of income tax expense and the year-to-date calculation for the prior quarter. Items unrelated to current period ordinary income or (loss) are recognized entirely in the period identified as a discrete item of tax. The inclusion of discrete items in a particular quarter can cause the actual effective rate for that quarter to vary significantly from the PAETR. Therefore, the actual effective income tax rate for a particular quarter can vary significantly based upon the jurisdictional mix and timing of actual earnings compared to projected annual earnings, permanent items, earnings for those jurisdictions that maintain a valuation allowance, tax associated with jurisdictions excluded from the PAETR calculation and discrete items. Annual Effective Tax Rate The PAETR was (0.2)% and (0.1)% as of the three months ended March 31, 2022 and 2021, respectively. The PAETR was lower than the US federal statutory rate of 21.0% primarily due to the impact of maintaining a US valuation allowance provided on US deferred tax assets. The Company continues to maintain a full valuation allowance on US federal and state net deferred tax assets for the period ending March 31, 2022 as a result of pre-tax losses incurred since the Company’s inception in early 2012. The Company is projecting pre-tax loss in 2022. Current and Prior Period Tax Expense |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2022 | |
Equity [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Prior to the IPO, the Company granted options to purchase shares of the Company’s common stock and restricted stock units in respect of shares of the Company’s common stock to employees, directors and consultants under the Company’s 2011 Equity Incentive Plan. In July 2021, Duolingo adopted the 2021 Incentive Award Plan (“2021 Plan”) and the 2021 Employee Stock Purchase Plan (“ESPP”), each of which became effective on July 26, 2021 in connection with the IPO. An aggregate of 7,946 shares and 1,119 shares of Class A common stock were made available for future issuance under the 2021 Plan and ESPP, respectively. On each January 1, the number of shares of the Company’s Class A common stock available for issuance under the 2021 Plan have been and through January 1, 2031 will be increased by the lesser of (i) 5% of the shares outstanding on the preceding December 31 (calculated on an as-converted basis) and (B) such smaller number of shares of common stock as determined by the Board or the Committee (as defined in the 2021 Plan). On January 1, 2022, the 2021 Plan and ESPP were increased by 1,913 shares and 166 shares, respectively. The Company’s stock options vest based on terms in the stock option agreements, which generally provide for vesting over four years based on continued service to the Company and its subsidiaries. Each option has a term of ten years. Stock options granted under the 2021 Plan must generally have an exercise price of not less than the estimated fair market value of the underlying Class A common stock at the date of the grant. No options have been granted under the 2021 Plan. A summary of stock option and RSU activity under the Plans was as follows: Number of Weighted- Weighted- average remaining contractual life (years) Aggregate intrinsic value Options outstanding at January 1, 2022 6,255 $ 12.53 6.92 $ 585,339 Granted — Exercised (756) 6.91 Repurchased — Forfeited and expired (64) 15.83 Options outstanding at March 31, 2022 5,435 $ 13.27 6.91 $ 444,754 Options exercisable at March 31, 2022 3,980 $ 11.79 6.52 $ 331,597 The total intrinsic value of options exercised was approximately $60,334 and $13,714 for the three months ended March 31, 2022 and 2021, respectively. Restricted stock units Weighted- Outstanding at January 1, 2022 730 $ 77.09 Granted 97 94.08 Released (49) 57.15 Forfeited (22) 62.09 Outstanding at March 31, 2022 756 $ 80.98 As of March 31, 2022, there was approximately $10,980 of unrecognized compensation cost related to stock options granted under the plan with a weighted-average period of approximately two years. The amount of unrecognized compensation expense for RSUs as of March 31, 2022 was $55,638 with a weighted-average period of approximately three years, for a total unrecognized compensation expense of $66,618. There were 9,656 shares available for grant at March 31, 2022. Performance-based RSUs In June 2021, the Company granted an aggregate of 1,800 performance-based RSUs (the “Founder Awards”) to the Company’s founders. The Founder Awards vest upon the satisfaction of both a service-based condition and a performance-based condition and generally are settled 1 year after vesting. The service-based condition is satisfied as to 25% of the Founder Awards on each anniversary of the completion of the IPO, subject to the continuous service of the founders through the applicable date. The performance-based condition will be satisfied with respect to each of 10 equal tranches only if the trailing 60-calendar day volume-weighted-average closing trading price of the Company’s Class A common stock reaches certain stock-price hurdles for each such tranche, as set forth below, over a period of 10 years from the date of grant. Any RSUs associated with stock-prices hurdle not achieved by the tenth anniversary of the date of grant will terminate and be canceled for no additional consideration to the founders. The stock-price hurdles and number of RSUs eligible to vest will be adjusted to reflect any stock splits, stock dividends, combinations, reorganizations, reclassifications, or similar events under the 2021 Plan. The Founder Awards will be settled in shares of the Company’s Class B common stock. Tranche Company Stock Price Hurdle Number of RSUs Eligible to Vest 1 $ 127.50 90 2 $ 153.00 90 3 $ 178.50 90 4 $ 204.00 180 5 $ 255.00 180 6 $ 306.00 180 7 $ 357.00 180 8 $ 408.00 180 9 $ 612.00 270 10 $ 816.00 360 The Company estimated the grant date fair value of the Founder Awards using a model based on multiple stock-price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the stock-price hurdles may not be satisfied. The weighted-average grant date fair value of the Founder Awards was estimated to be $61.56 per share and the Company estimates that it will recognize total stock-based compensation expense of approximately $110,817 over the derived service period of each of the ten separate tranches which is between 3.58 – 5.92 years. As of March 31, 2022, there is $86,336 of unrecognized compensation expense related to these awards. If the stock-price hurdles are met sooner than the requisite service period, the stock-based compensation expense will be adjusted to prospectively recognize the remaining expense over the remaining derived service period. Provided that the founders continue to provide services to the Company, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock-price hurdles are achieved. The stock-price hurdles for the first two tranches were met during 2021. No additional stock-price hurdles were met during the three months ended March 31, 2022. The Company recognized $8,019 of stock-based compensation expense related to these awards for the three months ended March 31, 2022, which is included within General and administrative in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. Total stock-based compensation expense was $14,586 for the three months ended March 31, 2022, and $2,551 for the three months ended March 31, 2021. Stock based compensation expense is included in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss as shown in the following table: Three Months Ended March 31, 2022 2021 Cost of revenues $ 6 $ 2 Research and development 3,632 1,111 Sales and marketing 348 68 General and administrative 10,600 1,370 Total $ 14,586 $ 2,551 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal Proceedings — From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. The Company is not currently party to any material legal proceedings Sales and use and value-added tax (“VAT”) — The Company determined that it was required to pay sales and use and VAT taxes in various jurisdictions. The Company is in the process of filing voluntary disclosure agreements with certain jurisdictions and remitting the estimated taxes. If these jurisdictions determine that additional amounts are necessary, the Company will be required to pay accordingly. Related Parties — The Company has determined that there were no transactions with related parties as of or during the three months ended March 31, 2022 and 2021. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 3 Months Ended |
Mar. 31, 2022 | |
Other Liabilities Disclosure [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following: March 31, 2022 December 31, 2021 Obligations under current leases $ 3,963 $ 3,336 Marketing related accruals $ 2,019 $ 1,078 Sales and VAT tax accrual $ 2,137 $ 2,319 Employee-related costs $ 873 $ 2,075 Other $ 5,526 $ 4,125 Total $ 14,518 $ 12,933 |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 3 Months Ended |
Mar. 31, 2022 | |
Postemployment Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | EMPLOYEE BENEFIT PLANThe Company sponsors a profit sharing plan with a 401(k) feature, the Duolingo Retirement Plan, (the “Plan”) for eligible employees. The current Plan, effective January 1, 2021, provides for Company safe harbor matching contributions of 100% of the first 4% of the employees’ elective deferrals and 50% of the next 2%, with vesting starting upon the first day of employment. The Company also has the option to make discretionary matching or profit sharing contributions. The Company made safe harbor matching contributions of approximately $983 for the three months ended March 31, 2022, and $702 for the three months ended March 31, 2021. The Company did not make any discretionary matching or profit sharing contributions during the three months ended March 31, 2022 or 2021. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. Prior to the automatic conversion of all of its convertible preferred stock outstanding into Class B common stock upon the IPO, the Company considered all series of its convertible preferred stock to be participating securities. Under the two-class method, the net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holders of the convertible preferred stock do not have a contractual obligation to share in the Company’s losses. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. The diluted net loss per share attributable to common stockholders is calculated by giving effect to all potential dilutive common stock equivalents outstanding for the period. Three Months Ended March 31, (In thousands, except per share data) 2022 2021 Numerator: Net loss attributable to Class A and Class B common shareholders $ (12,154) $ (13,472) Denominator: Weighted-average shares in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted 38,590 12,916 Basic loss per common share $ (0.31) $ (1.04) Diluted loss per common share $ (0.31) $ (1.04) The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 20 votes per share. Each share of Class B common stock is convertible into a share of Class A common stock voluntarily at any time by the holder, and automatically upon certain events. The Class A common stock has no conversion rights. As the liquidation and dividend rights are identical for Class A and Class B common stock, the undistributed earnings are allocated on a proportional basis and the resulting net loss per share attributable to common stockholders will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis. Since the Company was in a net loss position for the three months ended March 31, 2022 and 2021, there is no difference between the number of shares used to calculate basic and diluted loss per share. The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive are as follows: Three Months Ended March 31, 2022 2021 Convertible preferred stock — 19,074 Founder awards where performance has been met 180 — Stock options 3,980 4,136 Total 4,160 23,210 Founder awards where performance has not been met of 1,620 are excluded from the above table because the stock-price hurdles for those awards had not been met as of March 31, 2022. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation—The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and subsidiaries over which the Company has control. All intercompany transactions and balances have been eliminated. |
Basis of Presentation and Accounting Principles | Basis of Presentation —The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) from the Company’s accounting records and reflect the consolidated financial position and results of operations for the three months ended March 31, 2022 and 2021. Unless otherwise specified, all dollar amounts are referred to in thousands. Accounting Principles —The Unaudited Condensed Consolidated Financial Statements and accompanying notes are prepared in accordance with GAAP. |
Use of Estimates | Use of Estimates— The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Unaudited Condensed Consolidated Financial Statements and accompanying notes. Significant estimates and assumptions reflected in the Unaudited Condensed Consolidated Financial Statements include, but are not limited to, useful lives of property and equipment, valuation of deferred tax assets and liabilities, stock-based compensation, common stock valuation, operating lease right-of-use assets and liabilities, capitalization of internally developed software and associated useful lives and contingent liabilities. Actual results may differ materially from such estimates. Management believes that the estimates, and judgments upon which they rely, are reasonable based upon information available to them at the time that these estimates and judgments are made. To the extent that there are material differences between these estimates and actual results, the Company’s Unaudited Condensed Consolidated Financial Statements will be affected. |
Cash and Cash Equivalents | Cash and Cash Equivalents—Cash consists primarily of cash on hand and bank deposits. Cash equivalents consist primarily of money market accounts with maturities of three months or less at the date of acquisition and are stated at cost, which approximates fair value. The Company maintains cash deposits with financial institutions that may exceed federally insured limits at times.The Money market funds are considered Level 1 financial assets. Level 1 financial assets use inputs that are the unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. |
Advertising Costs | Advertising Costs — Advertising costs were approximately $10,954 and $12,066 for the three months ended March 31, 2022 and 2021, respectively, and are included within Sales and marketing in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. |
Income Taxes | Income Taxes— The Company’s provision for income taxes is computed by using an estimate of the annual effective tax rate, adjusted for discrete items taken into account in the relevant period, if any. Each quarter, the annual effective income tax rate is recomputed and if there are material changes in the estimate, a cumulative adjustment is made. |
Concentration of Credit Risk | Concentration of Credit Risk —The Company’s concentration of credit risk relates to financial institutions holding the Company’s cash and cash equivalents and platforms with significant accounts receivable balances and revenue transactions. |
Impairment of long-lived assets | Impairment of long-lived assets— The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the estimated undiscounted future cash flows expected to result from the use and eventual disposition of an asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset. |
Recently Issued Pronouncements Not Yet Adopted | Recently Issued Pronouncements Not Yet Adopted There are no recently issued accounting pronouncements that the Company has not yet adopted that they believe are applicable or would have a material impact on the financial statements of the Company. |
Revenue Recognition | REVENUE The Company has three predominant sources of revenues; time-based subscriptions, in-app advertising placement by third parties, and the Duolingo English Test. Revenue is recognized upon transfer of control of promised products or services to users in an amount that reflects the consideration the Company expects to receive in exchange for those services. The Company does not enter into contracts with a customer that contain multiple promises that result in multiple performance obligations. Revenue is recorded net of taxes assessed by a government authority that are both imposed on and concurrent with specific revenue transactions between us and our users. Revenue from time-based subscriptions includes a stand-ready obligation to provide hosting services that are consumed by the customer over the subscription period. Users can purchase Duolingo monthly or they can purchase a six-month or year-long subscription and pay for the subscription at the time of purchase. Under the year-long subscription, users can also purchase a single plan or a family plan. The family plan includes up to six users to be on one subscription. Such payments are initially recorded to deferred revenue. The user has the ability to download limited content offline. However, as there is a significant level of integration and interdependency with the online functionality, the Company considers the service to be a single performance obligation for the online and offline content. The Company enters into arrangements with advertising networks to monetize the in-app advertising inventory. Revenue from in-app advertising placement is recognized at a point in time when the advertisement is placed and is based upon the amount received. Duolingo English Test revenue is generally recognized once the tests have gone through the proctoring process and a certification decision has been made. This process usually takes less than 48 hours after the test has been completed and uploaded. Customers have 21 days from the date of purchase to take the exam or their purchase will expire and revenue will be recognized. Virtually all customers complete their exams prior to expiration. Sometimes organizations may purchase tests in bulk via coupons with a one year expiration date. The Company will defer revenue from all tests that haven’t been proctored nor expired. The Company’s users have the option to purchase consumable in-app virtual goods. The Company recognizes revenue over the period in which the user consumes the virtual good, which is generally within a month. Principal Agent Considerations —The Company makes its application available to be downloaded through third-party digital distribution service providers. Users who purchase subscriptions also pay through the respective app stores. The Company evaluates the purchases via third-party payment processors to determine whether its revenues should be reported gross or net of fees retained by the payment processor. The Company is the principal in the transaction with the end user as a result of controlling, hosting, and integrating the delivery of the virtual items to the end user. The Company records revenue gross as a principal and records fees paid to third-party payment processors as Cost of revenues. Contract Balances —Deferred revenue mostly consists of payments we receive in advance of revenue recognition, and is mostly related to time-based subscriptions, which will be recognized into revenue over the course of the upcoming year (recognized over 12 months or less). Additionally, the Duolingo English Test has deferred revenue related to tests that have been purchased, but will not be recognized until the tests have been proctored. Disaggregation of Revenue In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , the Company disaggregates revenue from contracts with customers into source of revenue, which most closely depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Cash and Cash Equivalents | The following table shows the breakout between cash and money market funds. March 31, December 31, Cash $ 67,540 $ 44,165 Money market funds 509,791 509,757 Total $ 577,331 $ 553,922 |
REVENUE (Tables)
REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Revenue Sources and Streams | Information regarding source of revenues: Three Months Ended March 31, 2022 2021 Over time $ 58,010 $ 40,055 Point in time 23,210 15,305 Total revenue $ 81,220 $ 55,360 Information regarding revenue by stream: Three Months Ended March 31, 2022 2021 Revenues: Subscription $ 58,010 $ 40,055 Advertising 11,748 9,275 Duolingo English Test 8,080 5,035 Other (1) 3,382 995 Total revenues $ 81,220 $ 55,360 ________________ (1) Other revenue is mainly comprised of in-app purchases of virtual goods. |
Schedule of Deferred Revenues | Changes in deferred revenues were as follows: Three Months Ended March 31, 2022 2021 Beginning balance—January 1 $ 98,267 $ 54,792 Amount from beginning balance recognized into revenue (40,474) (25,891) Recognition of deferred revenue (22,195) (15,741) Deferral of revenue 83,503 52,102 Ending balance—March 31 $ 119,101 $ 65,262 |
PROPERTY and EQUIPMENT, net (Ta
PROPERTY and EQUIPMENT, net (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property and equipment consists of the following as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Leasehold improvements $ 12,058 $ 10,258 Furniture, fixtures and equipment 3,861 3,053 Total property and equipment 15,919 13,311 Less: accumulated depreciation (5,665) (5,100) Total property and equipment, net $ 10,254 $ 8,211 |
CAPITALIZED SOFTWARE, net (Tabl
CAPITALIZED SOFTWARE, net (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Capitalized Software | Capitalized software consists of the following as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Capitalized software $ 12,275 $ 11,144 Less: accumulated amortization (6,787) (6,578) Capitalized software, net $ 5,488 $ 4,566 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Equity [Abstract] | |
Share-based Payment Arrangement, Option, Activity | A summary of stock option and RSU activity under the Plans was as follows: Number of Weighted- Weighted- average remaining contractual life (years) Aggregate intrinsic value Options outstanding at January 1, 2022 6,255 $ 12.53 6.92 $ 585,339 Granted — Exercised (756) 6.91 Repurchased — Forfeited and expired (64) 15.83 Options outstanding at March 31, 2022 5,435 $ 13.27 6.91 $ 444,754 Options exercisable at March 31, 2022 3,980 $ 11.79 6.52 $ 331,597 |
Share-based Payment Arrangement, RSU, Activity | Restricted stock units Weighted- Outstanding at January 1, 2022 730 $ 77.09 Granted 97 94.08 Released (49) 57.15 Forfeited (22) 62.09 Outstanding at March 31, 2022 756 $ 80.98 |
Share-based Payment Arrangement, Payment Award | Tranche Company Stock Price Hurdle Number of RSUs Eligible to Vest 1 $ 127.50 90 2 $ 153.00 90 3 $ 178.50 90 4 $ 204.00 180 5 $ 255.00 180 6 $ 306.00 180 7 $ 357.00 180 8 $ 408.00 180 9 $ 612.00 270 10 $ 816.00 360 |
Share-based Payment Arrangement, Expensed, Amount | Stock based compensation expense is included in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss as shown in the following table: Three Months Ended March 31, 2022 2021 Cost of revenues $ 6 $ 2 Research and development 3,632 1,111 Sales and marketing 348 68 General and administrative 10,600 1,370 Total $ 14,586 $ 2,551 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following: March 31, 2022 December 31, 2021 Obligations under current leases $ 3,963 $ 3,336 Marketing related accruals $ 2,019 $ 1,078 Sales and VAT tax accrual $ 2,137 $ 2,319 Employee-related costs $ 873 $ 2,075 Other $ 5,526 $ 4,125 Total $ 14,518 $ 12,933 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The diluted net loss per share attributable to common stockholders is calculated by giving effect to all potential dilutive common stock equivalents outstanding for the period. Three Months Ended March 31, (In thousands, except per share data) 2022 2021 Numerator: Net loss attributable to Class A and Class B common shareholders $ (12,154) $ (13,472) Denominator: Weighted-average shares in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted 38,590 12,916 Basic loss per common share $ (0.31) $ (1.04) Diluted loss per common share $ (0.31) $ (1.04) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive are as follows: Three Months Ended March 31, 2022 2021 Convertible preferred stock — 19,074 Founder awards where performance has been met 180 — Stock options 3,980 4,136 Total 4,160 23,210 |
DESCRIPTION OF THE BUSINESS A_2
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Details) $ / shares in Units, $ in Thousands | Jul. 30, 2021USD ($)$ / sharesshares | Mar. 31, 2022language |
Business And Organization [Line Items] | ||
Issuance of common stock in connection with the initial public offering, net of underwriting discounts and issuance costs | $ | $ 455,532 | |
Number of languages, more than | language | 40 | |
Common Class A | IPO | ||
Business And Organization [Line Items] | ||
Sale of stock, number of shares issued in transaction (in shares) | 5,872,000 | |
Sale of stock, price per share (in usd per share) | $ / shares | $ 102 | |
Common Class A | IPO | Stockholders | ||
Business And Organization [Line Items] | ||
Sale of stock, number of shares issued in transaction (in shares) | 1,406,000 | |
Common Class A | IPO | Duolingo | ||
Business And Organization [Line Items] | ||
Sale of stock, number of shares issued in transaction (in shares) | 4,466,000 | |
Common Class A | Over-Allotment Option | ||
Business And Organization [Line Items] | ||
Sale of stock, number of shares issued in transaction (in shares) | 766,000 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Cash and Cash Equivalents (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Cash and Cash Equivalents [Line Items] | ||
Cash and cash equivalents | $ 577,331 | $ 553,922 |
Cash | ||
Cash and Cash Equivalents [Line Items] | ||
Cash and cash equivalents | 67,540 | 44,165 |
Money market funds | ||
Cash and Cash Equivalents [Line Items] | ||
Cash and cash equivalents | $ 509,791 | $ 509,757 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Concentration Risk [Line Items] | ||
Advertising costs | $ 10,954 | $ 12,066 |
Compensation expense | $ 14,586 | $ 2,551 |
Accounts Receivable | Customer Concentration Risk | Apple | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 49.40% | 51.10% |
Accounts Receivable | Customer Concentration Risk | Google | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 26.60% | 27.90% |
Accounts Receivable | Customer Concentration Risk | Stripe | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.10% | |
Revenue Benchmark | Customer Concentration Risk | Apple | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 51.10% | 50.10% |
Revenue Benchmark | Customer Concentration Risk | Google | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 29.10% | 28.30% |
Revenue Benchmark | Customer Concentration Risk | Stripe | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.30% |
REVENUE - Narrative (Details)
REVENUE - Narrative (Details) | Mar. 31, 2022sourceOfRevenueuser |
Disaggregation of Revenue [Line Items] | |
Number of sources of revenue | sourceOfRevenue | 3 |
Number of users | user | 6 |
Number of hours to make certification decision | 48 hours |
Number of days to take exam | 21 days |
Expiration period to take exams | 1 year |
Minimum | |
Disaggregation of Revenue [Line Items] | |
Subscription period | 6 months |
Maximum | |
Disaggregation of Revenue [Line Items] | |
Subscription period | 1 year |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | $ 81,220 | $ 55,360 |
Over time | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 58,010 | 40,055 |
Over time | Subscription | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 58,010 | 40,055 |
Over time | Advertising | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 11,748 | 9,275 |
Over time | Duolingo English Test | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 8,080 | 5,035 |
Over time | Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | 3,382 | 995 |
Point in time | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, excluding assessed tax | $ 23,210 | $ 15,305 |
REVENUE - Deferred Revenue Roll
REVENUE - Deferred Revenue Rollforward (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Revenue from Contract with Customer, Liability [Roll Forward] | ||
Beginning balance | $ 98,267 | $ 54,792 |
Amount from beginning balance recognized into revenue | (40,474) | (25,891) |
Recognition of deferred revenue | (22,195) | (15,741) |
Deferral of revenue | 83,503 | 52,102 |
Ending balance | $ 119,101 | $ 65,262 |
PROPERTY and EQUIPMENT, net - S
PROPERTY and EQUIPMENT, net - Summary (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 | Mar. 31, 2021 |
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | $ 15,919 | $ 13,311 | |
Less: accumulated depreciation | (5,665) | (5,100) | |
Total property and equipment, net | 10,254 | $ 8,211 | 8,211 |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | 12,058 | 10,258 | |
Furniture, fixtures and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | $ 3,861 | $ 3,053 |
PROPERTY and EQUIPMENT, net - N
PROPERTY and EQUIPMENT, net - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 565 | $ 452 |
CAPITALIZED SOFTWARE, net - Cap
CAPITALIZED SOFTWARE, net - Capitalized Software (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Capitalized software | $ 12,275 | $ 11,144 |
Less: accumulated amortization | (6,787) | (6,578) |
Capitalized software, net | $ 5,488 | $ 4,566 |
CAPITALIZED SOFTWARE, net - Nar
CAPITALIZED SOFTWARE, net - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of capitalized computer software | $ 209 | $ 148 |
INCOME TAXES - Narrative (Detai
INCOME TAXES - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | (0.20%) | (0.10%) |
Provision for income taxes | $ 28 | $ 17 |
Provision for income taxes | 17 | |
Pretax income (loss) | $ (12,126) | $ (13,455) |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) $ / shares in Units, $ in Thousands | Jan. 01, 2022shares | Jun. 30, 2021shares | Mar. 31, 2022USD ($)trancheday$ / sharesshares | Mar. 31, 2021USD ($) | Jul. 26, 2021shares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Aggregate intrinsic value, exercised | $ 60,334 | $ 13,714 | |||
Unrecognized compensation cost, options | 10,980 | ||||
Unrecognized compensation cost | $ 66,618 | ||||
Closing trading price, specified calendar | day | 60 | ||||
Compensation expense | $ 14,586 | $ 2,551 | |||
Performance Based RSUs | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unrecognized compensation expense, excluding options | $ 86,336 | ||||
Performance Based RSUs | Share-Based Payment Arrangement, Founders | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Weighted average grant date fair value (in usd per share) | $ / shares | $ 61.56 | ||||
Performance Based RSUs | Minimum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award service period | 3 years 6 months 29 days | ||||
Performance Based RSUs | Maximum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award service period | 5 years 11 months 1 day | ||||
Performance Based RSUs | Tranche One | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Compensation expense | $ 8,019 | ||||
Performance Based RSUs | Founders | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unrecognized compensation expense, excluding options | $ 110,817 | ||||
Equity instruments other than options, grants in period (in shares) | shares | 1,800,000 | ||||
Settlement period after vesting | 1 year | ||||
Award vesting percentage | 25.00% | ||||
Number of tranches | tranche | 10 | ||||
Award service period | 10 years | ||||
Performance Based RSUs | Founders | Tranche One and Two | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of tranches | tranche | 2 | ||||
Stock options | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unrecognized compensation cost, weighted-average period of recognition | 2 years | ||||
Number of options available for grant (in shares) | shares | 9,656,000 | ||||
Vested RSUs | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unrecognized compensation cost, weighted-average period of recognition | 3 years | ||||
Unrecognized compensation expense, excluding options | $ 55,638 | ||||
Equity instruments other than options, grants in period (in shares) | shares | 97,000 | ||||
2011 Equity Incentive Plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting period | 4 years | ||||
Share-based compensation, term of award | 10 years | ||||
2021 Plan | Common Class A | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Common stock reserved for future issuance (in shares) | shares | 1,913,000 | 7,946,000 | |||
Share-based compensation, shares outstanding increase, maximum amount (in percent) | 5.00% | ||||
Employee Stock Purchase Plan | Common Class A | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Common stock reserved for future issuance (in shares) | shares | 166,000 | 1,119,000 |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2022 | Dec. 31, 2021 | |
Number of options | ||
Options outstanding, beginning balance (in shares) | 6,255,000 | |
Granted (in shares) | 0 | |
Exercised (in shares) | (756,000) | |
Repurchased (in shares) | 0 | |
Forfeited and expired (in shares) | (64,000) | |
Options outstanding, ending balance (in shares) | 5,435,000 | 6,255,000 |
Number of options exercisable (in shares) | 3,980,000 | |
Weighted- average exercise price | ||
Outstanding, beginning balance (in usd per share) | $ 12.53 | |
Granted (in usd per share) | ||
Exercised (in usd per share) | 6.91 | |
Repurchased (in usd per share) | ||
Forfeited and expired (in usd per share) | 15.83 | |
Outstanding, ending balance (in usd per share) | 13.27 | $ 12.53 |
Weighted average exercise price, options exercisable (in usd per share) | $ 11.79 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||
Weighted average remaining contractual term (in years), outstanding | 6 years 10 months 28 days | 6 years 11 months 1 day |
Weighted average remaining contractual term (in years), exercisable | 6 years 6 months 7 days | |
Aggregate intrinsic value, outstanding | $ 444,754 | $ 585,339 |
Aggregate intrinsic value, exercisable | $ 331,597 |
STOCK-BASED COMPENSATION - Sche
STOCK-BASED COMPENSATION - Schedule of Restricted Stock Unit Activity (Details) - Vested RSUs - $ / shares | 3 Months Ended | |
Mar. 31, 2022 | Dec. 31, 2021 | |
Restricted stock units | ||
Beginning balance (in shares) | 756,000 | 730,000 |
Granted (in shares) | 97,000 | |
Released (in shares) | (49,000) | |
Forfeited (in shares) | (22,000) | |
Ending balance (in shares) | 756,000 | |
Weighted- average grant date fair value per share | ||
Beginning balance (in usd per share) | $ 77.09 | |
Granted (in usd per share) | 94.08 | |
Released (in usd per share) | 57.15 | |
Forfeited (in usd per share) | 62.09 | |
Ending balance (in usd per share) | $ 80.98 |
STOCK-BASED COMPENSATION - Sc_2
STOCK-BASED COMPENSATION - Schedule of Payment Award (Details) - Vested RSUs | Mar. 31, 2022$ / sharesshares |
1 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 127.50 |
Number of RSUs Eligible to Vest (in shares) | shares | 90,000 |
2 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 153 |
Number of RSUs Eligible to Vest (in shares) | shares | 90,000 |
3 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 178.50 |
Number of RSUs Eligible to Vest (in shares) | shares | 90,000 |
4 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 204 |
Number of RSUs Eligible to Vest (in shares) | shares | 180,000 |
5 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 255 |
Number of RSUs Eligible to Vest (in shares) | shares | 180,000 |
6 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 306 |
Number of RSUs Eligible to Vest (in shares) | shares | 180,000 |
7 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 357 |
Number of RSUs Eligible to Vest (in shares) | shares | 180,000 |
8 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 408 |
Number of RSUs Eligible to Vest (in shares) | shares | 180,000 |
9 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 612 |
Number of RSUs Eligible to Vest (in shares) | shares | 270,000 |
10 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Company Stock Price Hurdle (in usd per share) | $ / shares | $ 816 |
Number of RSUs Eligible to Vest (in shares) | shares | 360,000 |
STOCK-BASED COMPENSATION - Sc_3
STOCK-BASED COMPENSATION - Schedule of Income Statement Location for Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ 14,586 | $ 2,551 |
Cost of revenues | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | 6 | 2 |
Research and development | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | 3,632 | 1,111 |
Sales and marketing | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | 348 | 68 |
General and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ 10,600 | $ 1,370 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Other Liabilities Disclosure [Abstract] | ||
Obligations under current leases | $ 3,963 | $ 3,336 |
Marketing related accruals | 2,019 | 1,078 |
Sales and VAT tax accrual | 2,137 | 2,319 |
Employee-related costs | 873 | 2,075 |
Other | 5,526 | 4,125 |
Total | $ 14,518 | $ 12,933 |
EMPLOYEE BENEFIT PLAN (Details)
EMPLOYEE BENEFIT PLAN (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, contributions by employer | $ 983,000 | $ 702,000 | |
Defined contribution plan, employer discretionary contribution amount | $ 0 | $ 0 | |
First 4% of Employee Elective Deferral | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Employer matching contribution, percent of match | 100.00% | ||
Employer matching contribution, percent of employees' gross pay | 4.00% | ||
Next 2% of Employee Elective Deferral | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Employer matching contribution, percent of match | 50.00% | ||
Employer matching contribution, percent of employees' gross pay | 2.00% |
EARNINGS PER SHARE - Schedule o
EARNINGS PER SHARE - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Numerator: | ||
Net loss | $ (12,154) | $ (13,472) |
Denominator: | ||
Weighted-average shares in computing net loss per share attributable to Class A and Class B common stockholders, basic (in shares) | 38,590 | 12,916 |
Weighted-average shares in computing net loss per share attributable to Class A and Class B common stockholders, diluted (in shares) | 38,590 | 12,916 |
Basic loss per common share (in usd per share) | $ (0.31) | $ (1.04) |
Diluted loss per common share (in usd per share) | $ (0.31) | $ (1.04) |
EARNINGS PER SHARE - Schedule_2
EARNINGS PER SHARE - Schedule of Antidilutive Securities (Details) - shares | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from the computation of earnings per share (in shares) | 4,160,000 | 23,210,000 |
Convertible preferred stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from the computation of earnings per share (in shares) | 0 | 19,074,000 |
Founder awards where performance has been met | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from the computation of earnings per share (in shares) | 180,000 | 0 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from the computation of earnings per share (in shares) | 3,980,000 | 4,136,000 |
EARNINGS PER SHARE - Narrative
EARNINGS PER SHARE - Narrative (Details) | 3 Months Ended |
Mar. 31, 2022vote_per_shareshares | |
Performance Based RSUs | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Founder awards where performance not met | shares | 1,620,000 |
Common Class A | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Voting rights, per share | 1 |
Common Class B | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Voting rights, per share | 20 |