Cover Page
Cover Page - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Feb. 27, 2024 | Jun. 30, 2023 | |
Document Information [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2023 | ||
Current Fiscal Year End Date | --12-31 | ||
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 Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Document Financial Statement Error Correction [Flag] | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 3,891,337,096 | ||
Documents Incorporated by Reference | DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement for its 2024 annual meeting of stockholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2023, are incorporated by reference into Part III of this Annual Report on Form 10-K. | ||
Entity Central Index Key | 0001562088 | ||
Document Fiscal Year Focus | 2023 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Common Class A | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 36,680,751 | ||
Common Class B | |||
Document Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 6,195,077 |
Audit Information
Audit Information | 12 Months Ended |
Dec. 31, 2023 | |
Audit Information [Abstract] | |
Auditor Name | Deloitte & Touche LLP |
Auditor Location | New York, New York |
Auditor Firm ID | 34 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Current assets | ||
Cash and cash equivalents | $ 747,610 | $ 608,180 |
Accounts receivable | 88,975 | 46,728 |
Deferred cost of revenues | 53,931 | 35,041 |
Prepaid expenses and other current assets | 7,282 | 7,234 |
Total current assets | 897,798 | 697,183 |
Property and equipment, net | 11,792 | 12,969 |
Goodwill | 4,050 | 4,050 |
Intangible assets, net | 15,995 | 8,497 |
Operating lease right-of-use assets | 19,103 | 22,508 |
Deferred tax assets, net | 766 | 633 |
Restricted cash | 2,735 | 0 |
Other assets | 1,718 | 1,507 |
Total assets | 953,957 | 747,347 |
Current liabilities | ||
Accounts payable | 2,447 | 1,177 |
Deferred revenues | 249,192 | 157,550 |
Income tax payable | 792 | 1,069 |
Accrued expenses and other current liabilities | 24,931 | 21,970 |
Total current liabilities | 277,362 | 181,766 |
Long-term obligation under operating leases | 21,094 | 23,503 |
Total liabilities | 298,456 | 205,269 |
Commitments and contingencies (Note 10) | ||
Stockholders’ equity | ||
Class A common stock, $0.0001 par value; 2,000,000 shares authorized as of December 31, 2023 and December 31, 2022; 36,311 and 31,899 issued and outstanding at December 31, 2023 and December 31, 2022, respectively Class B common stock, $0.0001 par value; 30,000 shares authorized as of December 31, 2023 and December 31, 2022; 6,215 and 8,462 issued and outstanding at December 31, 2023 and December 31, 2022, respectively | 4 | 4 |
Additional paid-in capital | 869,918 | 772,562 |
Accumulated deficit | (214,421) | (230,488) |
Total stockholders’ equity | 655,501 | 542,078 |
Total liabilities and stockholders' equity | $ 953,957 | $ 747,347 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Common Class A | ||
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Common stock, shares issued (in shares) | 36,311 | 31,899 |
Common stock, shares outstanding (in shares) | 36,311 | 31,899 |
Common Class B | ||
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 30,000 | 30,000 |
Common stock, shares issued (in shares) | 6,215 | 8,462 |
Common stock, shares outstanding (in shares) | 6,215 | 8,462 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Income Statement [Abstract] | |||
Revenues | $ 531,109 | $ 369,495 | $ 250,772 |
Cost of revenues | 142,105 | 99,431 | 69,186 |
Gross profit | 389,004 | 270,064 | 181,586 |
Operating expenses: | |||
Research and development | 194,352 | 150,444 | 103,833 |
Sales and marketing | 75,788 | 66,967 | 59,170 |
General and administrative | 132,123 | 117,848 | 78,590 |
Total operating expenses | 402,263 | 335,259 | 241,593 |
Loss from operations | (13,259) | (65,195) | (60,007) |
Other income | 590 | 131 | 318 |
Other expense | (645) | (807) | (288) |
Other (expense) income, net | (55) | (676) | 30 |
Loss before interest income and income taxes | (13,314) | (65,871) | (59,977) |
Interest income | 31,091 | 7,235 | 19 |
Income (loss) before income taxes | 17,777 | (58,636) | (59,958) |
Provision for income taxes | 1,710 | 938 | 177 |
Net income (loss) | 16,067 | (59,574) | (60,135) |
Net comprehensive income (loss) | $ 16,067 | $ (59,574) | $ (60,135) |
Net income (loss) per share attributable to Class A and Class B common stockholders, basic (in usd per share) | $ 0.39 | $ (1.51) | $ (2.57) |
Net income (loss) per share attributable to Class A and Class B common stockholders, diluted (in usd per share) | $ 0.35 | $ (1.51) | $ (2.57) |
CONSOLIDATED STATEMENTS OF CONV
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Convertible preferred stock beginning balance (in shares) at Dec. 31, 2020 | 19,074 | |||
Convertible preferred stock beginning balance at Dec. 31, 2020 | $ 182,609 | |||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (in shares) | (19,074) | |||
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering | $ (182,609) | |||
Convertible preferred stock ending balance (in shares) at Dec. 31, 2021 | 0 | |||
Convertible preferred stock ending balance at Dec. 31, 2021 | $ 0 | |||
Beginning balance (in shares) at Dec. 31, 2020 | 12,794 | |||
Beginning balance at Dec. 31, 2020 | (80,691) | $ 1 | $ 30,087 | $ (110,779) |
Increase (Decrease) in Stockholders' Deficit [Roll Forward] | ||||
Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs (in shares) | 4,466 | |||
Issuance of common stock in connection with the initial public offering, net of underwriting discounts and issuance costs | 426,192 | $ 1 | 426,191 | |
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (in shares) | 19,074 | |||
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering | 182,609 | $ 2 | 182,607 | |
Stock-based compensation expense | 40,804 | 40,804 | ||
Stock options exercised (in shares) | 1,882 | |||
Stock options exercised | 12,480 | 12,480 | ||
Common stock repurchased and retired (in shares) | (23) | |||
Common stock repurchased and retired | (868) | (868) | ||
Options repurchased | (7,335) | |||
Release of restricted stock units (in shares) | 79 | |||
Net income (loss) | (60,135) | (60,135) | ||
Ending balance (in shares) at Dec. 31, 2021 | 38,272 | |||
Ending balance at Dec. 31, 2021 | 513,056 | $ 4 | 683,966 | (170,914) |
Increase (Decrease) in Stockholders' Deficit [Roll Forward] | ||||
Stock-based compensation expense | 73,820 | 73,820 | ||
Stock options exercised (in shares) | 1,739 | |||
Stock options exercised | 14,776 | 14,776 | ||
Release of restricted stock units (in shares) | 350 | |||
Net income (loss) | (59,574) | (59,574) | ||
Ending balance (in shares) at Dec. 31, 2022 | 40,361 | |||
Ending balance at Dec. 31, 2022 | 542,078 | $ 4 | 772,562 | (230,488) |
Increase (Decrease) in Stockholders' Deficit [Roll Forward] | ||||
Stock-based compensation expense | 95,221 | 95,221 | ||
Release of performance stock units (in shares) | 180 | |||
Taxes paid related to net-share settlements of share-based compensation awards ( in shares) | (84) | |||
Taxes paid related to net-share settlements of share-based compensation awards | $ (11,482) | (11,482) | ||
Stock options exercised (in shares) | 1,396 | 1,396 | ||
Stock options exercised | $ 13,617 | 13,617 | ||
Release of restricted stock units (in shares) | 673 | |||
Net income (loss) | 16,067 | 16,067 | ||
Ending balance (in shares) at Dec. 31, 2023 | 42,526 | |||
Ending balance at Dec. 31, 2023 | $ 655,501 | $ 4 | $ 869,918 | $ (214,421) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Cash flows from operating activities: | |||
Net income (loss) | $ 16,067 | $ (59,574) | $ (60,135) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 7,095 | 4,870 | 2,726 |
Stock-based compensation expense | 95,221 | 73,820 | 40,804 |
Gain on sale of capitalized software | (100) | 0 | 0 |
Loss on disposal of leasehold improvements | 433 | 0 | 0 |
Changes in assets and liabilities: | |||
Deferred revenue | 91,642 | 59,283 | 43,475 |
Accounts receivable | (42,247) | (13,565) | (12,713) |
Deferred cost of revenues | (18,890) | (10,822) | (10,634) |
Prepaid expenses and other current assets | (48) | (1,415) | (4,048) |
Accounts payable | 1,261 | (6,655) | 5,622 |
Accrued expenses and other current liabilities | 3,444 | 8,720 | 3,708 |
Noncurrent assets and liabilities | (264) | (1,006) | 365 |
Net cash provided by operating activities | 153,614 | 53,656 | 9,170 |
Cash flows from investing activities: | |||
Capitalized software expense and purchases of intangible assets | (10,493) | (4,562) | (2,620) |
Purchase of property and equipment | (3,191) | (5,562) | (3,586) |
Proceeds from sale of capitalized software | 100 | 0 | 0 |
Acquisition, net of $0 cash acquired | 0 | (4,050) | 0 |
Net cash used for investing activities | (13,584) | (14,174) | (6,206) |
Cash flows from financing activities: | |||
Issuance of common stock in connection with the initial public offering, net of underwriting discounts and issuance costs | 0 | 0 | 426,191 |
Net proceeds from issuance of convertible preferred stock | 0 | 0 | 0 |
Proceeds from exercise of stock options | 13,617 | 14,776 | 12,480 |
Repurchases of stock options | 0 | 0 | (7,335) |
Repurchase of common stock | 0 | 0 | (868) |
Taxes paid related to net-share settlement of share-based compensation awards | (11,482) | 0 | 0 |
Net cash provided by financing activities | 2,135 | 14,776 | 430,468 |
Net increase in cash, cash equivalents and restricted cash | 142,165 | 54,258 | 433,432 |
Cash, cash equivalents and restricted cash - Beginning of period | 608,180 | 553,922 | 120,490 |
Cash, cash equivalents and restricted cash - End of period | 750,345 | 608,180 | 553,922 |
Supplemental disclosure of cash flow information: | |||
Cash paid for interest | 0 | 0 | 0 |
Cash paid for income taxes | 2,320 | 615 | 132 |
Supplemental disclosure of noncash operating activities: | |||
Implementation costs for cloud computing included in Current liabilities | 0 | 0 | 64 |
Supplemental disclosure of noncash investing activities: | |||
Capitalized software and purchases of intangible assets included in Current liabilities | 0 | 1,121 | 342 |
Property and equipment included in Current liabilities | 165 | 166 | 230 |
Landlord incentive included in Prepaid expenses and other current assets | 0 | 2,148 | 0 |
Right of use assets disposed or adjusted, modifying operating leases liabilities | 2,024 | 0 | 0 |
Deferred offering costs included in accrued expenses | $ 0 | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Statement of Cash Flows [Abstract] | |
Cash acquired during acquisition | $ 0 |
DESCRIPTION OF THE BUSINESS AND
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2023 | |
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. Immediately prior to the completion of the IPO, all convertible preferred stock outstanding, totaling approximately 19,074 shares, was automatically converted into an equivalent number of shares of Class B common stock on a one-to-one basis and their carrying value of $182,609 was reclassified to additional paid-in capital within stockholders’ equity. Additionally, on July 15, 2021, 6,930 shares held by our founders were exchanged from Class A common stock into Class B common stock. Duolingo is a US-based mobile learning platform, as well as a digital English 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 premium services 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 U.S., China and Germany. Principles of Consolidation —The 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 Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) from the Company’s accounting records and reflect the consolidated financial position and results of operations for the years ended December 31, 2023, 2022, and 2021. Unless otherwise specified, all dollar amounts (other than per share amounts) are referred to in thousands. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Principles —The Consolidated Financial Statements and accompanying notes are prepared in accordance with GAAP. Use of Estimates— The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Significant estimates and assumptions reflected in the 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 Consolidated Financial Statements will be affected. Revenue Recognition— The Company has four predominant sources of revenue; time-based subscriptions, in-app advertising placement by third parties, the Duolingo English Test, and In-App Purchases. See Footnote 4 for further discussion. Deferred Revenues— Revenue is recognized over the life of the subscription, or in the case of Duolingo English Test, revenue is recognized when the test is proctored. The Company classifies deferred revenue as a short-term liability on the consolidated balance sheets as the longest subscription plan is for twelve months, and Duolingo English Test purchases must be taken within 21 days. Cost of Revenues— Cost of revenue predominantly consists of third-party payment processing fees charged by various distribution channel and hosting fees. To a much lesser extent, includes wages and stock-based compensation for certain employees in the capacity of customer support, amortization of revenue generating capitalized software, and depreciation of certain property and equipment. Deferred Cost of Revenues— Deferred cost of revenue includes third-party payment processing fees amortized over the subscription terms in proportion to the revenue recognized. In situations where fees are charged for subscriptions that exceed one month, costs are deferred and recognized over the life of the subscription and are classified as a current asset. The Company classifies deferred cost of revenue as a short-term asset on the Company’s consolidated balance sheets as the longest subscription plan is for twelve months. 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. December 31, December 31, Cash $ 50,373 $ 91,189 Money market funds 697,237 516,991 Total $ 747,610 $ 608,180 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. Restricted Cash— Restricted cash consists of a collateralized letter of credit established in connection with a lease agreement for the Company’s Sub-Sublease in New York, which was signed in December 2023. Restricted cash is included in non-current assets for leases that expire in more than one year from the balance sheet date. Accounts Receivable —Accounts receivables are reported on the consolidated balance sheets at the outstanding principal amount adjusted for any allowance for credit losses and any charge offs. The Company provides an allowance for credit losses to reduce trade receivables to their estimated net realizable value equal to the amount that is expected to be collected. This allowance is estimated based on historical collection experience, the aging of receivables, specific current and expected future macro-economic and market conditions, and assessments of the current creditworthiness and economic status of customers. The Company considers a receivable delinquent if it is unpaid after the term of the related invoice has expired. Balances that are still outstanding after management has used reasonable collection efforts are written off. The Company reviews its allowance for credit losses on a quarterly basis. As of December 31, 2023 and 2022, the Company has not recorded a reserve given the Company’s lack of historical write offs. Property and Equipment —Property and equipment is stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method. Asset Class Estimated Useful Life Furniture, fixtures and equipment 4 to 6 years Leasehold improvements 5 to 7 years Leasehold improvements are amortized over the lesser of the life of the lease or the estimated useful life of the leasehold improvements. Costs related to maintenance and repairs that do not extend the assets’ useful life are expensed as incurred. Acquisition —The Company uses the acquisition method of accounting for business combination transactions, and, accordingly, recognizes the fair values of assets acquired and liabilities assumed in our Consolidated Financial Statements. Transaction costs related to the acquisition of the acquired company are expensed as incurred. The allocation of fair values may be subject to adjustment after the initial allocation for up to a one-year period as more information becomes available relative to the fair values as of the acquisition date. The Consolidated Financial Statements include the results of operations of any acquired company since the acquisition date. Goodwill —The Company recognizes the excess of the purchase price over the fair value of identifiable net assets acquired at the acquisition date as goodwill. Goodwill is not amortized but is reviewed for impairment annually and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company will review goodwill for impairment annually on October 1st of each fiscal year or whenever events or changes in circumstances indicate that an impairment may exist. The Company will first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. If the fair value of the reporting unit is greater than the reporting unit’s carrying value, then the carrying value of the reporting unit is deemed to be recoverable. If the carrying value of the reporting unit is greater than the reporting unit’s fair value, goodwill is impaired and written down to the reporting unit’s fair value. Intangible Assets —The majority of the Company’s intangible assets is capitalized software, with minimal other intangible assets during the years ended December 31, 2023 and 2022. The Company develops software for internal use and capitalizes the software development costs incurred during the application development stage. Costs incurred prior to and after the application development stage are charged to expense. When the software is ready for its intended use, capitalization ceases and such costs are amortized on a straight-line basis over the estimated life, which is generally three years. Relatively minor upgrades, enhancements and maintenance to the platform are expensed as incurred. Income Taxes— The Company provides for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities for financial reporting and for income tax reporting. The deferred tax asset or liability represents the future tax return consequences of those difference, which will either be taxable or deductible when the assets and liabilities are recovered or settled. A valuation allowance is established for any deferred tax asset for which it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized. The Company limits the deferred tax assets recognized related to certain officers’ compensation to amounts that it estimates will be deductible in future periods based upon Internal Revenue Code Section 162(m). The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not that a position will be sustained if examined by a taxing authority. The second step is to measure the tax benefit as the largest amount that is 50% likely of being realized upon settlement with a tax authority. There were no amounts recorded at December 31, 2023 and December 31, 2022 related to uncertain tax positions. Foreign Currency —The functional currency of the Company and its subsidiaries is the U.S. dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net loss for the year. The Company has not, to the date of these Consolidated Financial Statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. Fair Value of Financial Instruments —The Company accounts for certain assets and liabilities at fair value in accordance with the accounting guidance applicable to fair value measurements and disclosures. The carrying values of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses are deemed to be reasonable estimates of their fair values because of their short-term nature. Research and Development Costs —Research and development expenses are incurred as the Company maintains and enhances its software and evaluates and develops other potential applications. Such expenses include compensation of engineering, product design and testing personnel, including stock-based compensation, materials, travel and direct costs associated with the design and required testing of our platform and depreciation of certain property and equipment. Sales and Marketing —Sales and marketing expenses are expensed as incurred and consists primarily of brand advertising, marketing, digital and social media spend, field marketing, travel, trade show sponsorships and events, conferences and other employee-related compensation, including stock-based compensation for personnel engaged in sales and marketing functions, amortization of non-revenue generating capitalized software used to promote Duolingo, and depreciation of certain property and equipment. Advertising costs were approximately $52,969, $48,111 and $42,964 for the years ended December 31, 2023, 2022 and 2021, respectively. General and Administrative —General and administrative expense primarily consists of employee-related compensation (including stock-based compensation) for management and administrative functions, including our finance and accounting, legal, and people teams. General and administrative expense also includes certain professional services fees, general corporate and director and officer insurance, facilities costs, and other general overhead costs that support our operations, and depreciation of certain property and equipment. Contributors— On March 10, 2021, the Company announced that it was ending its non-employee volunteer program, which began in 2013 to build and improve language courses. As part of this change, those contributors who participated in the program became eligible to receive a one-time award, up to an aggregate amount of approximately $4,220, including fees paid to process payments of approximately $526. The Company accounted for this under Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”) 958-720, Not-For-Profit Entities - Other Expenses and ASC 720-25, Contributions Made , based on the nature of this contribution, which is an unconditional promise. This amount is included within Sales and marketing in the Consolidated Statements of Operations and Comprehensive Income (Loss). 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 three, Apple, Google and Stripe accounted for 65.2%, 20.7% and 10.7% of total Accounts receivable as of December 31, 2023, respectively. The top two service providers, Apple and Google, accounted for 56.2% and 27.5% of total Accounts receivable as of December 31, 2022, respectively. Three service providers, Apple, Google, and Stripe processed 58.5%, 25.6%, and 12.1% of total Revenues for the year ended December 31, 2023, respectively. Two services providers, Apple and Google, processed 54.2% and 28.1% of total Revenues for the year ended December 31, 2022, respectively. Three service providers, Apple, Google and Stripe, processed 50.5%, 29.0%, and 10.1% of total Revenues for the year ended December 31, 2021, respectively. Stock-Based Compensation —The Company accounts for equity-based compensation using the fair value method as set forth in the ASC 718, Compensation—Stock Compensation , which requires the measurement and recognition of compensation expense for all stock-based payment awards based on estimated fair values. This method requires companies to estimate the fair value of stock-based compensation on the date of grant using an option pricing model. The Company estimates the fair value of each equity-based payment award on the date of grant using the Black-Scholes pricing model. The Black-Scholes model determines the fair value of equity-based payment awards based on the fair value of the underlying common stock on the date of grant and requires the use of estimates and assumptions, including the fair value of the Company’s common stock, exercise price of the stock option, expected volatility, expected life, risk-free interest rate and dividend rate. The Company estimates the expected volatility of its stock options by taking the average historical volatility of a group of comparable publicly traded companies over a period equal to the expected life of the options; it is not practical for the Company to estimate its own volatility due to the lack of historical prices. The expected term of the options is determined in accordance with existing equity agreements as the underlying options are assumed to be exercised upon the passage of time. The risk-free interest rate is the estimated average interest rate based on U.S. Treasury zero-coupon notes with terms consistent with the expected life of the awards. The expected dividend yield is zero as the Company does not anticipate paying any recurring cash dividends in the foreseeable future. The Company accounts for forfeitures as they occur. Restricted Stock Units (RSUs) The Company began to grant RSUs in November 2020. The fair value of RSUs is estimated based on the fair value of the Company’s common stock on the date of grant. Each RSU award granted prior to the IPO vests based upon the satisfaction, during the term of the RSUs, of two requirements: length of service and a liquidity event defined as a change in control or a qualified IPO. The service-based vesting condition for the majority of these awards is satisfied over four years. The liquidity-based vesting condition is satisfied upon the occurrence of a qualifying liquidity event. The Company measures and recognizes compensation expense for all stock-based awards based on the estimated fair value of the award. Prior to July 30, 2021, no stock-based compensation expense had been recognized for RSUs because the liquidity-based vesting condition had not been probable of being satisfied. Upon the IPO, the liquidity-based vesting condition was satisfied and $2,035 of stock-based compensation expense was recognized related to these awards during the year ended December 31, 2021. Of that amount, $1,332, $210 and $493 was included within Research and development, Sales and marketing and General and administrative, respectively, in the Consolidated Statements of Operations and Comprehensive Income (Loss). Performance-based RSUs In June 2021, the Company granted 1,800 (one million eight-hundred thousand) performance-based RSUs to the Company’s founders (“Founder Awards”). The Founder Awards are divided into ten equal tranches with each tranche becoming eligible to vest upon achievement of the specified stock-price hurdles. The Founder Awards vest upon the satisfaction of both a service-based condition and a performance-based condition and generally are settled one 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 fair value of the Founder Awards is determined using a Monte Carlo simulation model. The associated stock-based compensation is recorded over the derived service period, using the accelerated attribution method. 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 us, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock-price hurdles are achieved. The first and second tranches were met during the year ended December 31, 2021. The third and fourth tranches were met during the year ended December 31, 2023. The Company recognized $26,622, $30,997 and $16,463 of stock-based compensation expense related to these awards, during the years ended December 31, 2023, 2022 and 2021, respectively, which is included within General and administrative in the Consolidated Statements of Operations and Comprehensive Income (Loss). Contingencies —The Company records accruals for contingencies and legal proceedings expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated. If a loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss, would be disclosed. Segment —The Company operates as a single operating segment. The chief operating decision maker of the Company is its Chief Executive Officer, who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated information of our revenue. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure, and operates as one reporting unit. Leases —The Company accounts for leases in accordance with ASC 842, Leases , which requires virtually all leases, other than leases that meet the definition of a short-term lease, to be recorded on the balance sheet with a right-of-use (“ROU”) asset and corresponding lease liability. ROU assets are periodically reviewed for impairment whenever events or changes in circumstances arise. During the years ended December 31, 2023, 2022 and 2021, the Company incurred no impairment charges on ROU assets. On the lease commencement date, each lease is classified as either finance or operating, depending on certain criteria. The Company determined that it only has operating leases as none of the criteria for finance lease classification were met. Operating lease expense is recognized on a straight-line basis on the Consolidated Statements of Operations and Comprehensive Income (Loss) in General and administrative expenses. On the Consolidated Statements of Changes in Cash Flows, payments for operating leases, are included in operating activities. As an accounting policy election, the Company has elected to not separate lease and non-lease components for all asset classes and made an accounting policy election for short-term leases which does not require the capitalization of leases with terms of 12 months or less at lease commencement. The discount rate utilized in calculating the lease liability is the rate implicit in the lease, if known; otherwise, the incremental borrowing rate (“IBR”) for the expected lease term is used. The Company’s IBR approximates the rate the Company would have to pay, on a collateralized basis, to borrow an amount equal to the lease payments under similar terms. 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 years ended December 31, 2023, 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. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which includes improvements to income tax disclosures. The standard is effective for public entities in fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements There are no recently adopted accounting pronouncements. |
ACQUISITION
ACQUISITION | 12 Months Ended |
Dec. 31, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITION | ACQUISITION On October 3, 2022, the Company completed the acquisition of the assets of Gunner Made LLC (“Gunner”), a wholly owned entity of PNG Holdings LLC, a design and animation studio based in Detroit, Michigan. The acquisition of Gunner added fifteen new designers, illustrators, and animators to Duolingo’s existing design teams. The total consideration was $4.5 million, of which $4 million was purchase price paid in cash upon closing and was allocated to Goodwill within the Consolidated Financial Statements as it was determined that no other separately identifiable assets were acquired. The remaining $450 was paid out in October 2023 after one year of continued service of certain Gunner employees, and was expensed over the period within General and administrative in the Consolidated Statements of Operations and Comprehensive Income (Loss). During 2022, the Company incurred $50 of acquisition costs related to due diligence and valuation, and they are included in General and administrative expense within the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company assumed a new lease for office space as part of the Gunner acquisition in 2022. The term of the newly acquired lease was 68 months beginning on October 3, 2022 and expiring on May 31, 2028. The Company has the option to extend the lease for one additional term of five years and one additional term of four years which the Company has not included in the lease term. The remaining payments related to this lease agreement as of December 31, 2022 were approximately $750. The Company reviewed the lease, and determined that the current terms were relative to current market conditions, and as such, no intangible asset was created. The Company also signed an agreement to sublease a portion of the acquired lease. The term of the sublease was 68 months beginning on October 3, 2022 and expiring on May 31, 2028. The remaining receivable related to this sublease agreement as of December 31, 2022 was approximately $358. |
REVENUE
REVENUE | 12 Months Ended |
Dec. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | REVENUE The Company has four predominant sources of revenues; time-based subscriptions, in-app advertising placement by third parties, the Duolingo English Test, and In-App Purchases. 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 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 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 have neither 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. The Company also recognizes revenue from Duo’s Taquería , a restaurant that opened during 2022, in the space adjacent to our headquarters in Pittsburgh. Revenue from Duo’s Taquería is recognized at a point in time when the sales are made. 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 ASC 606, Revenue from Contracts with Customers , the Company disaggregates revenue from contracts with customers into revenue streams, which most closely depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Year Ended December 31, (In thousands) 2023 2022 2021 Revenues: Subscription $ 404,684 $ 273,507 $ 180,698 Advertising 49,858 44,731 38,501 Duolingo English Test 41,212 32,718 24,658 In-App Purchases 34,673 17,914 6,836 Other (1) 682 625 79 Total revenues $ 531,109 $ 369,495 $ 250,772 ________________ (1) Other revenue is mainly comprised of revenue from Duo’s Taquería. Information regarding geography of revenues is based upon the location where the users are located or, in the case of the Duolingo English Test, where the tests are taken: Year Ended December 31, 2023 2022 2021 United States $ 238,759 $ 168,320 $ 109,163 United Kingdom 42,118 31,539 25,163 Rest of World 250,232 169,636 116,446 Total $ 531,109 $ 369,495 $ 250,772 Customers located in the United States accounted for 45%, 46% and 44% of total revenues for the year ended December 31, 2023, 2022 and 2021, respectively, and customers located in the United Kingdom accounted for 8%, 9% and 10% for the years ended December 31, 2023, 2022 and 2021, respectively. No other country accounted for more than 10% of revenue in the periods presented. Changes in deferred revenues were as follows: Year Ended December 31, (In thousands) 2023 2022 Beginning balance—January 1 $ 157,550 $ 98,267 Amount from beginning balance recognized into revenue (157,550) (98,267) Recognition of deferred revenue (287,429) (199,130) Deferral of revenue 536,621 356,680 Ending balance—December 31 $ 249,192 $ 157,550 |
PROPERTY and EQUIPMENT, net
PROPERTY and EQUIPMENT, net | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY and EQUIPMENT, net | PROPERTY and EQUIPMENT, net Property and equipment consists of the following as of December 31, 2023 and December 31, 2022: (In thousands) 2023 2022 Leasehold improvements $ 18,191 $ 15,983 Furniture, fixtures and equipment 5,869 5,204 Total property and equipment 24,060 21,187 Less: accumulated depreciation (12,268) (8,218) Total property and equipment, net $ 11,792 $ 12,969 Depreciation expense is included within the following financial statement line items within the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Year Ended December 31, (In thousands) 2023 2022 2021 Research and development $ 1,650 $ 1,500 $ 260 Sales and marketing 190 190 32 General and administrative 2,260 1,428 1,741 Total $ 4,100 $ 3,118 $ 2,033 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended |
Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS AND GOODWILL | INTANGIBLE ASSETS AND GOODWILL Intangible assets consist of the following as of December 31, 2023 and December 31, 2022: (In thousands) 2023 2022 Capitalized software $ 26,895 $ 16,809 Other intangible assets 117 18 Total intangible assets 27,012 16,827 Less: accumulated amortization (11,017) (8,330) Intangible assets, net $ 15,995 $ 8,497 The Company capitalized $10,394 and $5,665 of software development costs during the year ended December 31, 2023 and 2022, respectively. Amortization expense is included within the following financial statement line items within the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Year Ended December 31, (In thousands) 2023 2022 2021 Cost of revenues $ 2,020 $ 870 $ — Sales and marketing 975 882 693 Total $ 2,995 $ 1,752 $ 693 |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2023 | |
Leases [Abstract] | |
LEASES | LEASES The Company has entered into various operating leases for its office space expiring between fiscal 2024 and 2035. Certain lease agreements contain an option for the Company to renew a lease for a term of up to five years. The Company considers these options, which may be elected at the Company’s sole discretion, in determining the lease term on a lease-by-lease basis. The Company assumed a new lease for office space as part of the Gunner acquisition in 2022. The term of the newly acquired lease was 68 months beginning on October 3, 2022 and expiring on May 31, 2028. The Company has the option to extend the lease for one additional term of five years and one additional term of four years which the Company has not included in the lease term. The Company also signed an agreement to sublease a portion of the acquired lease. The term of the sublease was 68 months beginning on October 3, 2022 and expiring on May 31, 2028. The remaining receivable related to this sublease agreement as of December 31, 2023 was approximately $295. In December 2023, the Company signed an extension for the office space assumed in the prior year as part of the Gunner acquisition. The term of the amended lease is 73 months beginning on December 4, 2023 and expiring on December 31, 2029. The remaining payments related to this lease agreement as of December 31, 2023 are approximately $1,380. The following represents the components of lease cost for the years ended December 31, 2023, 2022 and 2021 along with supplemental disclosures of cash flow information, lease term and discount rate: Year Ended December 31, 2023 2022 2021 Operating lease cost $ 7,459 $ 7,076 $ 1,919 Short term lease cost 48 125 1,266 Variable lease cost 252 63 28 Total lease cost $ 7,759 $ 7,264 $ 3,213 Cash paid for amounts included in the measurement of lease liabilities $ 7,512 $ 5,168 $ 1,819 Right-of-use assets obtained in exchange for new operating lease liabilities $ — $ 909 $ 22,274 Right of use assets disposed or adjusted, modifying operating leases liabilities $ 2,024 $ (1,586) $ (235) Gain from termination of leases $ — $ — $ 31 Weighted-average remaining lease term 9 years 9 years 9 years Weighted-average discount rate 7.38 % 6.92 % 5.77 % Sublease income was immaterial for the years ended December 31, 2023, 2022, and 2021. The following table reconciles future minimum undiscounted rental commitments for operating leases to operating lease liabilities recorded on the Consolidated Balance Sheet as of December 31, 2023: Fiscal year 2024 $ 5,607 2025 3,386 2026 3,399 2027 3,463 2028 3,528 Thereafter 15,735 Total undiscounted lease payments $ 35,118 Present value adjustment (10,080) Operating lease liabilities $ 25,038 Current lease liabilities of $3,944 and $4,903 are presented within Accrued expenses and other liabilities On December 18, 2023, Duolingo, Inc. entered into an Agreement of Sub-Sublease, with Spotify USA Inc., as Sub-Sublandlord for 85,666 square feet of office space in the building located at 4 World Trade Center, 150 Greenwich Street, New York, New York 10007 for use as additional office space. The term of the Sub-Sublease commenced on January 8, 2024 and will expire on April 29, 2034 The initial base rent is $442 per month on a triple net basis, increasing to $478 per month at the beginning of the sixth year In lieu of a security deposit, the Company is obligated to provide an irrevocable stand-by letter of credit to the Sub-Sublandlord. This letter of credit acts as security for the faithful performance by the Company of all terms, covenants and conditions of the lease agreement. The cash collateral and deposits for the letters of credit have been recognized as restricted cash in the consolidated balance sheets and totaled $2,735 and $0 as of December 31, 2023 and December 31, 2022, respectively. As the lease’s commencement date is January 2024, it is not included within the Consolidated Balance Sheet for the year ended December 31, 2023. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES For the years ended December 31, 2023, 2022 and 2021 income (loss) before income taxes included the following components: Year Ended December 31, 2023 2022 2021 Domestic $ 16,501 $ (60,099) $ (59,737) Foreign 1,276 1,463 (221) Total $ 17,777 $ (58,636) $ (59,958) For the years ended December 31, 2023, 2022 and 2021 the Company recognized the following provision for income taxes: Year Ended December 31, 2023 2022 2021 Current: Federal $ 895 $ 302 $ — State 607 327 80 Foreign 341 524 97 Total $ 1,843 $ 1,153 $ 177 Deferred: Federal $ — $ — $ — State — — — Foreign (133) (215) — Total $ (133) $ (215) $ — Total provision for income taxes $ 1,710 $ 938 $ 177 The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for the years ended December 31, 2023, 2022 and 2021: 2023 2022 2021 Expected income tax expense at federal statutory rate 21.0 % 21.0 % 21.0 % State taxes, net of Federal income tax effect (35.1) 6.7 6.5 Section 162(m) limitation 56.5 (15.2) (13.5) Equity compensation (208.4) 28.4 53.8 Meals and entertainment 5.6 (1.2) (0.5) Foreign-Derived Intangible Income deduction (13.4) — — Other permanent adjustments 2.2 0.3 — Research and development credit (76.4) 11.7 15.9 Valuation allowance 257.6 (53.3) (83.5) Effective income tax rate 9.6 % (1.6) % (0.3) % The 2023 effective tax rate differs from the statutory rate as a result of an increase in tax deductible stock-based compensation and the generation of research and development tax credits offset by an increase in the valuation allowance for the Company’s net deferred tax assets. For 2022 and 2021, the effective tax rate is less than the statutory rate primarily as a result of the valuation allowance for the Company’s net deferred tax assets. The Company has the following deferred tax assets (liabilities) as of December 31, 2023 and 2022: 2023 2022 Net operating loss carryforwards $ 15,533 $ 42,861 Stock-based compensation 5,207 3,605 Research and development credits 38,146 22,386 Lease liability 5,739 6,487 Section 174 research and development capitalization 102,055 42,429 Marketing and advertising 766 633 Sales tax / Value added tax ("VAT") reserve 397 210 Other deferred tax assets 65 140 Valuation allowance (156,870) (108,504) Total deferred tax assets 11,038 10,247 ROU asset (4,354) (5,122) Property and equipment (2,164) (2,569) Capitalized software (3,716) (1,913) Other deferred tax liabilities (38) (10) Total deferred tax liabilities (10,272) (9,614) Net deferred taxes $ 766 $ 633 The Company has provided a full valuation allowance for its U.S. federal and state net deferred tax asset as it is not more likely than not that the asset will be realized. The movement in valuation allowance of $48,366 is primarily related to the: • increase to the deferred tax assets for the capitalization of research and development expenditures under Section 174, which was a change in tax law from the Tax Cuts and Job Acts of 2017, which went into effect in January 2022, • an increase in the generation of research and development tax credits, and • a reduction in the Company’s net operating losses. The Company has a deferred tax asset with respect to its China subsidiary, against which no valuation allowance has been recorded. The following table represents the activity in our valuation allowance for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Beginning balance—January 1 $ (108,504) $ (76,293) Valuation allowances established (48,366) (32,211) Release of valuation allowances — — Ending balance—December 31 $ (156,870) $ (108,504) The Company has approximately $48,866 in federal net operating loss carryforwards and approximately $71,422 in state net operating loss carryforwards. Certain of these loss carryforwards have an indefinite life and other amounts are available to offset future taxable income through 2043. The Company has approximately $38,146 in federal and state general business credits that are available to offset future taxable income through 2043. The Company has analyzed the impact of Internal Revenue Code (“IRC”) Sections 382 and 383 on these tax attributes and has determined that no prior ownership changes have occurred which would limit the Company’s ability to utilize the NOLs and research and development tax credits. The Company’s tax years through the 2023 tax year remain subject to examination by federal and state tax authorities. The Company utilizes a more-likely-than-not standard in recognizing a tax benefit in its financial statements. No uncertain tax benefits have been recorded in 2023, 2022, and 2021, respectively. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2023 | |
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 (“RSU”) 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 (ii) 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, 2024, the 2021 Plan was increased by 2,126 shares of common stock. The Board waived the 2024 automatic annual increase of shares available for future issuance under the ESPP and the Company intends to waive such automatic annual increase for all applicable future periods. 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 activity under the Plans was as follows: (In thousands, except prices and years) Number of Weighted- Weighted- average remaining contractual life (years) Aggregate intrinsic value Options outstanding at January 1, 2023 4,410 $ 14.04 6.25 $ 251,832 Granted (1) — Exercised (1,396) 9.76 Forfeited and expired (29) 14.09 Options outstanding at December 31, 2023 2,985 $ 16.04 5.60 $ 629,865 Options exercisable at December 31, 2023 2,817 $ 15.54 5.54 $ 594,157 ________________ (1) There were no stock options granted during the years ended December 31, 2023 and 2022. The total intrinsic value of options exercised was approximately $192,456, $140,884 and $194,513 for the periods ended December 31, 2023, 2022 and 2021, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: 2023 2022 2021 Risk-free interest rate n/a n/a 1.04 – 1.14% Expected life n/a n/a 5.90 years Expected volatility n/a n/a 48.90 – 49.12% Dividend yield n/a n/a —% Fair value of common stock n/a n/a $38.08 – $52.80 The risk-free interest rate is based on the U.S. treasury yield curve in effect as of the grant date. When establishing the expected life assumptions, the Company annually reviews historical employee exercise behavior of option grants and other economic data impacting the period the stock options are expected to remain outstanding. Expected volatility is determined using a benchmark index of similar public companies. The Company based the assumed dividend yield on its expectation of not paying dividends in the foreseeable future. Because the Company’s common stock was not yet publicly traded at the time the options were granted, the Company estimated the fair value of common stock. The Board estimated the fair value of the common stock at the time awards were granted based on factors such as valuations of comparable companies, the status of the Company’s development and sales efforts, revenue growth, and additional objective and subjective factors relating to the Company’s business. A summary of RSU activity under the Plans was as follows: (In thousands, except prices) Restricted stock units Weighted- Outstanding at January 1, 2023 2,036 $ 85.74 Granted 873 138.99 Released (673) 89.58 Forfeited (209) 96.23 Outstanding at December 31, 2023 2,027 $ 106.32 Prior to July 30, 2021, no stock-based compensation expense had been recognized for RSUs because the liquidity-based vesting condition had not been probable of being satisfied. Upon the IPO, the liquidity-based vesting condition was met and $2,035 of stock-based compensation expense was recognized related to these awards. As of December 31, 2023, there was approximately $1,393 of unrecognized compensation cost related to stock options granted under the plans with a weighted-average period of approximately seven months. The amount of unrecognized compensation expense for RSUs as of December 31, 2023 was $200,433 with a weighted-average period of approximately three years. Total unrecognized compensation expense as of December 31, 2023 was $201,826. There were 9,404 shares available for grant at December 31, 2023. 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 one year after vesting. The service-based condition is satisfied as to 25% of the Founder Awards on each anniversary of the IPO on July 27, 2021, 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 using the below inputs. Input Assumption Valuation Date June 28, 2021 Risk-free interest rate 1.48% Expected life 9.98 Expected volatility 51.67% Dividend yield 0.00% Fair value of common stock $95.00 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. 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. With respect to these two tranches in combination, the service-based condition was satisfied during the three months ended September 30, 2023. Of the 180 shares underlying RSUs released, an aggregate of 96 shares were disbursed to the founders in a net-share settlement, and 84 shares were withheld by the Company to cover the founders’ tax withholding obligations. The shares withheld by the Company were added to the shares of Class A common stock available for issuance under the 2021 Plan. The stock-price hurdles for the third and fourth tranches were met during the three months ended December 31, 2023. As of the date of this Annual Report on Form 10-K, no additional stock-price hurdles have been met. The Company recognized $26,622, $30,997 and $16,463 for the years ended December 31, 2023, 2022 and 2021 respectively, which is included within General and administrative in the Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2023, there is $36,735 of unrecognized compensation expense related to these awards. In February 2021, the Company initiated a tender offer which allowed employees to sell up to 10% of their vested options or shares back to the Company at a selling price of $59.77, which was above fair market value of $38.08. The Company paid $13,479 and incurred $5,275 of additional compensation expense related to this tender representing the difference between the aggregate selling price and fair market value of the options and shares sold, and a $7,335 decrease to Additional paid-in capital. As a result of this tender, 220 options were put back into the option pool and 23 shares were retired with an $868 decrease to Additional paid-in capital. Upon the IPO, vesting of stock option grants to certain executive officers were accelerated, which resulted in an additional $5,574 of compensation expense during the year ended December 31, 2021. This is included within General and administrative in the Consolidated Statements of Operations and Comprehensive Income (Loss). Total stock-based compensation expense was $95,221, $73,820 and $40,804 for the years ended December 31, 2023, 2022 and 2021, respectively. Stock based compensation expense is included in the Consolidated Statements of Operations and Comprehensive Income (Loss) as shown in the following table: Year Ended December 31, (In thousands) 2023 2022 2021 Cost of revenues $ 55 $ 38 $ 8 Research and development 45,119 26,373 9,298 Sales and marketing 3,908 2,540 881 General and administrative 46,139 44,869 30,617 Total $ 95,221 $ 73,820 $ 40,804 Nominal amounts of stock based compensation expense is capitalized into intangible assets for the years ended December 31, 2023, 2022 and 2021. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2023 | |
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. Related Parties — The Company has determined that there were no transactions with related parties as of or during the years ended December 31, 2023, 2022 and 2021. Letters of Credit |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2023 | |
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: (In thousands) December 31, December 31, 2022 Marketing-related accruals $ 4,732 $ 3,464 Employee-related costs 4,494 4,233 Sales and VAT tax accrual 4,365 2,396 Obligations under current leases 3,944 4,903 Hosting costs 3,079 2,102 Other 4,317 4,872 Total $ 24,931 $ 21,970 |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2023 | |
Postemployment Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | EMPLOYEE BENEFIT PLAN The 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 $5,908, $4,624 and $3,438 during the years ended December 31, 2023, 2022 and 2021, respectively. The Company did not make any discretionary matching or profit sharing contributions during the years ended December 31, 2023, 2022 and 2021. |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 12 Months Ended |
Dec. 31, 2023 | |
Earnings Per Share [Abstract] | |
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE Basic and diluted net income (loss) per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. The diluted net income per share attributable to common stockholders is calculated by giving effect to all potential dilutive common stock equivalents outstanding for the period. 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 income (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. Year Ended December 31, (In thousands, except per share data) 2023 2022 2021 Numerator: Net income (loss) attributable to Class A and Class B common stockholders $ 16,067 $ (59,574) (60,135) Denominator: Weighted-average shares in computing net income (loss) per share attributable to Class A and Class B common stockholders, basic and diluted 41,451 39,470 23,433 Effect of dilutive securities Founder awards where performance has been met 270 — Dilutive effect of stock options outstanding (1) 2,774 — — RSUs outstanding 2,027 — — Denominator for dilutive net income per common share - weighted-average shares 46,522 39,470 23,433 Basic income (loss) per common share $ 0.39 $ (1.51) $ (2.57) Diluted income (loss) per common share $ 0.35 $ (1.51) $ (2.57) ________________ (1) The Company had 3.0 million options outstanding as of December 31, 2023. The estimated dilutive effect is calculated as the number of shares expected to be issued upon vesting or exercise, adjusted for the strike price proceeds that are received by the Company and assumed to be used to repurchase shares of Duolingo common stock. Since the Company was in a net loss position for the years ended December 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: Year Ended December 31, (In thousands) 2022 2021 Founder awards where performance has been met 180 180 Stock options outstanding 4,410 6,255 RSUs outstanding 2,036 730 Total 6,626 7,165 Founder awards of 1,620, where the performance criteria has not been satisfied, are excluded from the above tables because the stock-price hurdles for those awards had not been met as of December 31, 2022 and 2021. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS In February 2024, the Company signed a lease for office space in Seattle, Washington. The term of the lease is sixty-three months beginning on March 1, 2024 and expiring on May 31, 2029. The expected payments related to this lease are approximately $1,728. |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Pay vs Performance Disclosure | |||
Net income (loss) attributable to Class A and Class B common stockholders | $ 16,067 | $ (59,574) | $ (60,135) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended | 12 Months Ended |
Dec. 31, 2023 shares | Dec. 31, 2023 shares | |
Trading Arrangements, by Individual | ||
Non-Rule 10b5-1 Arrangement Adopted | false | |
Rule 10b5-1 Arrangement Terminated | false | |
Non-Rule 10b5-1 Arrangement Terminated | false | |
Dr. Luis von Ahn [Member] | ||
Trading Arrangements, by Individual | ||
Material Terms of Trading Arrangement | On November 30, 2023, Dr. Luis von Ahn, Chief Executive Officer, and the Luis von Ahn Foundation, of which Dr. von Ahn is the Director and President, entered into a 10b5-1 sales plan (the “von Ahn 10b5-1 Sales Plan”) intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act, pursuant to which a maximum aggregate of 103,000 shares of the Company’s Class A common stock may be sold (up to 80,000 shares by Dr. von Ahn and up to 23,000 by the Luis von Ahn Foundation). The von Ahn 10b5-1 Sales Plan will remain in effect until the earlier of (1) December 15, 2024, (2) the date on which an aggregate of 103,000 shares of the Company’s common stock have been sold under the von Ahn 10b5-1 Sales Plan, or (3) such time as the von Ahn 10b5-1 Sales Plan is otherwise terminated or expires according to its terms. | |
Name | Dr. Luis von Ahn, | |
Title | Chief Executive Officer | |
Rule 10b5-1 Arrangement Adopted | true | |
Adoption Date | November 30, 2023 | |
Arrangement Duration | 397 days | |
Aggregate Available | 80,000 | 80,000 |
Amy Bohutinsky [Member] | ||
Trading Arrangements, by Individual | ||
Material Terms of Trading Arrangement | On December 4, 2023, Amy Bohutinsky, member of our Board of Directors, entered into a 10b5-1 sales plan (the “Bohutinsky 10b5-1 Sales Plan”) intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act which provides for the potential exercise of vested stock options and the associated sale of up to 15,000 shares of the Company’s Class A common stock. The Bohutinsky 10b5-1 Sales Plan will remain in effect until the earlier of (1) December 31, 2024, (2) the date on which an aggregate of 15,000 shares of the Company’s Class A common stock have been sold under the Bohutinsky 10b5-1 Sales Plan, or (3) such time as the Bohutinsky 10b5-1 Sales Plan is otherwise terminated or expires according to its terms. | |
Name | Amy Bohutinsky | |
Title | member of our Board of Directors | |
Rule 10b5-1 Arrangement Adopted | true | |
Adoption Date | December 4, 2023 | |
Arrangement Duration | 393 days | |
Aggregate Available | 15,000 | 15,000 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation |
Basis of Presentation and Accounting Principles | Basis of Presentation Accounting Principles —The Consolidated Financial Statements and accompanying notes are prepared in accordance with GAAP. |
Use of Estimates | Use of Estimates— The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Significant estimates and assumptions reflected in the 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 Consolidated Financial Statements will be affected. |
Revenue Recognition | Revenue Recognition— The Company has four predominant sources of revenue; time-based subscriptions, in-app advertising placement by third parties, the Duolingo English Test, and In-App Purchases. See Footnote 4 for further discussion. Deferred Revenues— Revenue is recognized over the life of the subscription, or in the case of Duolingo English Test, revenue is recognized when the test is proctored. The Company classifies deferred revenue as a short-term liability on the consolidated balance sheets as the longest subscription plan is for twelve months, and Duolingo English Test purchases must be taken within 21 days. Cost of Revenues— Cost of revenue predominantly consists of third-party payment processing fees charged by various distribution channel and hosting fees. To a much lesser extent, includes wages and stock-based compensation for certain employees in the capacity of customer support, amortization of revenue generating capitalized software, and depreciation of certain property and equipment. Deferred Cost of Revenues— Deferred cost of revenue includes third-party payment processing fees amortized over the subscription terms in proportion to the revenue recognized. In situations where fees are charged for subscriptions that exceed one month, costs are deferred and recognized over the life of the subscription and are classified as a current asset. The Company classifies deferred cost of revenue as a short-term asset on the Company’s consolidated balance sheets as the longest subscription plan is for twelve months. The Company has four predominant sources of revenues; time-based subscriptions, in-app advertising placement by third parties, the Duolingo English Test, and In-App Purchases. 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 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 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 have neither 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. The Company also recognizes revenue from Duo’s Taquería , a restaurant that opened during 2022, in the space adjacent to our headquarters in Pittsburgh. Revenue from Duo’s Taquería is recognized at a point in time when the sales are made. 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 ASC 606, Revenue from Contracts with Customers , the Company disaggregates revenue from contracts with customers into revenue streams, which most closely depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. |
Cash and Cash Equivalents | Cash and Cash Equivalents— |
Restricted Cash | Restricted Cash— Restricted cash consists of a collateralized letter of credit established in connection with a lease agreement for the Company’s Sub-Sublease in New York, which was signed in December 2023. Restricted cash is included in non-current assets for leases that expire in more than one year from the balance sheet date. |
Accounts Receivable | Accounts Receivable —Accounts receivables are reported on the consolidated balance sheets at the outstanding principal amount adjusted for any allowance for credit losses and any charge offs. The Company provides an allowance for credit losses to reduce trade receivables to their estimated net |
Property and Equipment | Property and Equipment —Property and equipment is stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method. Asset Class Estimated Useful Life Furniture, fixtures and equipment 4 to 6 years Leasehold improvements 5 to 7 years |
Goodwill | Goodwill —The Company recognizes the excess of the purchase price over the fair value of identifiable net assets acquired at the acquisition date as goodwill. Goodwill is not amortized but is reviewed for impairment annually and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company will review goodwill for impairment annually on October 1st of each fiscal year or whenever events or changes in circumstances indicate that an impairment may exist. The Company will first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. If the fair value of the reporting unit is greater than the reporting unit’s carrying value, then the carrying value of the reporting unit is deemed to be recoverable. If the carrying value of the reporting unit is greater than the reporting unit’s fair value, goodwill is impaired and written down to the reporting unit’s fair value. |
Acquisition | Acquisition —The Company uses the acquisition method of accounting for business combination transactions, and, accordingly, recognizes the fair values of assets acquired and liabilities assumed in our Consolidated Financial Statements. Transaction costs related to the acquisition of the acquired company are expensed as incurred. The allocation of fair values may be subject to adjustment after the initial allocation for up to a one-year period as more information becomes available relative to the fair values as of the acquisition date. The Consolidated Financial Statements include the results of operations of any acquired company since the acquisition date. |
Intangible Assets | Intangible Assets —The majority of the Company’s intangible assets is capitalized software, with minimal other intangible assets during the years ended December 31, 2023 and 2022. The Company develops software for internal use and capitalizes the software development costs incurred during the application development stage. Costs incurred prior to and after the application development stage are charged to expense. When the software is ready for its intended use, capitalization ceases and such costs are amortized on a straight-line basis over the estimated life, which is generally three years. Relatively minor upgrades, enhancements and maintenance to the platform are expensed as incurred. |
Income Taxes | Income Taxes— The Company provides for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities for financial reporting and for income tax reporting. The deferred tax asset or liability represents the future tax return consequences of those difference, which will either be taxable or deductible when the assets and liabilities are recovered or settled. A valuation allowance is established for any deferred tax asset for which it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized. The Company limits the deferred tax assets recognized related to certain officers’ compensation to amounts that it estimates will be deductible in future periods based upon Internal Revenue Code Section 162(m). The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not that a position will be sustained if examined by a taxing authority. |
Foreign Currency | Foreign Currency —The functional currency of the Company and its subsidiaries is the U.S. dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net loss for the year. The Company has not, to the date of these Consolidated Financial Statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments —The Company accounts for certain assets and liabilities at fair value in accordance with the accounting guidance applicable to fair value measurements and disclosures. The carrying values of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses are deemed to be reasonable estimates of their fair values because of their short-term nature. |
Research and Development Costs | Research and Development Costs |
Sales and Marketing | Sales and Marketing |
General and Administrative | General and Administrative —General and administrative expense primarily consists of employee-related compensation (including stock-based compensation) for management and administrative functions, including our finance and accounting, legal, and people teams. General and administrative expense also includes certain professional services fees, general corporate and director and officer |
Contributors | Contributors— On March 10, 2021, the Company announced that it was ending its non-employee volunteer program, which began in 2013 to build and improve language courses. As part of this change, those contributors who participated in the program became eligible to receive a one-time award, up to an aggregate amount of approximately $4,220, including fees paid to process payments of approximately $526. The Company accounted for this under Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”) 958-720, Not-For-Profit Entities - Other Expenses and ASC 720-25, Contributions 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. 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. |
Stock-Based Compensation | Stock-Based Compensation —The Company accounts for equity-based compensation using the fair value method as set forth in the ASC 718, Compensation—Stock Compensation , which requires the measurement and recognition of compensation expense for all stock-based payment awards based on estimated fair values. This method requires companies to estimate the fair value of stock-based compensation on the date of grant using an option pricing model. The Company estimates the fair value of each equity-based payment award on the date of grant using the Black-Scholes pricing model. The Black-Scholes model determines the fair value of equity-based payment awards based on the fair value of the underlying common stock on the date of grant and requires the use of estimates and assumptions, including the fair value of the Company’s common stock, exercise price of the stock option, expected volatility, expected life, risk-free interest rate and dividend rate. The Company estimates the expected volatility of its stock options by taking the average historical volatility of a group of comparable publicly traded companies over a period equal to the expected life of the options; it is not practical for the Company to estimate its own volatility due to the lack of historical prices. The expected term of the options is determined in accordance with existing equity agreements as the underlying options are assumed to be exercised upon the passage of time. The risk-free interest rate is the estimated average interest rate based on U.S. Treasury zero-coupon notes with terms consistent with the expected life of the awards. The expected dividend yield is zero as the Company does not anticipate paying any recurring cash dividends in the foreseeable future. The Company accounts for forfeitures as they occur. Restricted Stock Units (RSUs) The Company began to grant RSUs in November 2020. The fair value of RSUs is estimated based on the fair value of the Company’s common stock on the date of grant. Each RSU award granted prior to the IPO vests based upon the satisfaction, during the term of the RSUs, of two requirements: length of service and a liquidity event defined as a change in control or a qualified IPO. The service-based vesting condition for the majority of these awards is satisfied over four years. The liquidity-based vesting condition is satisfied upon the occurrence of a qualifying liquidity event. The Company measures and recognizes compensation expense for all stock-based awards based on the estimated fair value of the award. Prior to July 30, 2021, no stock-based compensation expense had been recognized for RSUs because the liquidity-based vesting condition had not been probable of being satisfied. Upon the IPO, the liquidity-based vesting condition was satisfied and $2,035 of stock-based compensation expense was recognized related to these awards during the year ended December 31, 2021. Of that amount, $1,332, $210 and $493 was included within Research and development, Sales and marketing and General and administrative, respectively, in the Consolidated Statements of Operations and Comprehensive Income (Loss). Performance-based RSUs |
Contingencies | Contingencies —The Company records accruals for contingencies and legal proceedings expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated. If a loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss, would be disclosed. |
Segment | Segment —The Company operates as a single operating segment. The chief operating decision maker of the Company is its Chief Executive Officer, who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis, accompanied by disaggregated information of our revenue. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure, and operates as one reporting unit. |
Leases | Leases —The Company accounts for leases in accordance with ASC 842, Leases , which requires virtually all leases, other than leases that meet the definition of a short-term lease, to be recorded on the balance sheet with a right-of-use (“ROU”) asset and corresponding lease liability. ROU assets are periodically reviewed for impairment whenever events or changes in circumstances arise. During the years ended December 31, 2023, 2022 and 2021, the Company incurred no impairment charges on ROU assets. |
Impairment of long-lived assets | Impairment of long-lived assets— |
Recently Issued Pronouncements Not Yet Adopted and Recently Adopted Accounting Pronouncements | 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. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which includes improvements to income tax disclosures. The standard is effective for public entities in fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements There are no recently adopted accounting pronouncements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Cash and Cash Equivalents | The following table shows the breakout between cash and money market funds. December 31, December 31, Cash $ 50,373 $ 91,189 Money market funds 697,237 516,991 Total $ 747,610 $ 608,180 |
Property, Plant and Equipment | Asset Class Estimated Useful Life Furniture, fixtures and equipment 4 to 6 years Leasehold improvements 5 to 7 years Property and equipment consists of the following as of December 31, 2023 and December 31, 2022: (In thousands) 2023 2022 Leasehold improvements $ 18,191 $ 15,983 Furniture, fixtures and equipment 5,869 5,204 Total property and equipment 24,060 21,187 Less: accumulated depreciation (12,268) (8,218) Total property and equipment, net $ 11,792 $ 12,969 Depreciation expense is included within the following financial statement line items within the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Year Ended December 31, (In thousands) 2023 2022 2021 Research and development $ 1,650 $ 1,500 $ 260 Sales and marketing 190 190 32 General and administrative 2,260 1,428 1,741 Total $ 4,100 $ 3,118 $ 2,033 |
REVENUE (Tables)
REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Revenue Sources and Streams | Year Ended December 31, (In thousands) 2023 2022 2021 Revenues: Subscription $ 404,684 $ 273,507 $ 180,698 Advertising 49,858 44,731 38,501 Duolingo English Test 41,212 32,718 24,658 In-App Purchases 34,673 17,914 6,836 Other (1) 682 625 79 Total revenues $ 531,109 $ 369,495 $ 250,772 ________________ (1) Other revenue is mainly comprised of revenue from Duo’s Taquería. |
Schedule of Revenue by Geographic Areas | Information regarding geography of revenues is based upon the location where the users are located or, in the case of the Duolingo English Test, where the tests are taken: Year Ended December 31, 2023 2022 2021 United States $ 238,759 $ 168,320 $ 109,163 United Kingdom 42,118 31,539 25,163 Rest of World 250,232 169,636 116,446 Total $ 531,109 $ 369,495 $ 250,772 |
Schedule of Deferred Revenues | Changes in deferred revenues were as follows: Year Ended December 31, (In thousands) 2023 2022 Beginning balance—January 1 $ 157,550 $ 98,267 Amount from beginning balance recognized into revenue (157,550) (98,267) Recognition of deferred revenue (287,429) (199,130) Deferral of revenue 536,621 356,680 Ending balance—December 31 $ 249,192 $ 157,550 |
PROPERTY and EQUIPMENT, net (Ta
PROPERTY and EQUIPMENT, net (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Asset Class Estimated Useful Life Furniture, fixtures and equipment 4 to 6 years Leasehold improvements 5 to 7 years Property and equipment consists of the following as of December 31, 2023 and December 31, 2022: (In thousands) 2023 2022 Leasehold improvements $ 18,191 $ 15,983 Furniture, fixtures and equipment 5,869 5,204 Total property and equipment 24,060 21,187 Less: accumulated depreciation (12,268) (8,218) Total property and equipment, net $ 11,792 $ 12,969 Depreciation expense is included within the following financial statement line items within the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Year Ended December 31, (In thousands) 2023 2022 2021 Research and development $ 1,650 $ 1,500 $ 260 Sales and marketing 190 190 32 General and administrative 2,260 1,428 1,741 Total $ 4,100 $ 3,118 $ 2,033 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets consist of the following as of December 31, 2023 and December 31, 2022: (In thousands) 2023 2022 Capitalized software $ 26,895 $ 16,809 Other intangible assets 117 18 Total intangible assets 27,012 16,827 Less: accumulated amortization (11,017) (8,330) Intangible assets, net $ 15,995 $ 8,497 |
Finite-lived Intangible Assets Amortization Expense | Amortization expense is included within the following financial statement line items within the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). Year Ended December 31, (In thousands) 2023 2022 2021 Cost of revenues $ 2,020 $ 870 $ — Sales and marketing 975 882 693 Total $ 2,995 $ 1,752 $ 693 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Leases [Abstract] | |
Summary of Components of Lease Cost | The following represents the components of lease cost for the years ended December 31, 2023, 2022 and 2021 along with supplemental disclosures of cash flow information, lease term and discount rate: Year Ended December 31, 2023 2022 2021 Operating lease cost $ 7,459 $ 7,076 $ 1,919 Short term lease cost 48 125 1,266 Variable lease cost 252 63 28 Total lease cost $ 7,759 $ 7,264 $ 3,213 Cash paid for amounts included in the measurement of lease liabilities $ 7,512 $ 5,168 $ 1,819 Right-of-use assets obtained in exchange for new operating lease liabilities $ — $ 909 $ 22,274 Right of use assets disposed or adjusted, modifying operating leases liabilities $ 2,024 $ (1,586) $ (235) Gain from termination of leases $ — $ — $ 31 Weighted-average remaining lease term 9 years 9 years 9 years Weighted-average discount rate 7.38 % 6.92 % 5.77 % |
Schedule of Future Minimum Rental Payments for Operating Leases | The following table reconciles future minimum undiscounted rental commitments for operating leases to operating lease liabilities recorded on the Consolidated Balance Sheet as of December 31, 2023: Fiscal year 2024 $ 5,607 2025 3,386 2026 3,399 2027 3,463 2028 3,528 Thereafter 15,735 Total undiscounted lease payments $ 35,118 Present value adjustment (10,080) Operating lease liabilities $ 25,038 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income (Loss) Before Income Tax, Domestic and Foreign | For the years ended December 31, 2023, 2022 and 2021 income (loss) before income taxes included the following components: Year Ended December 31, 2023 2022 2021 Domestic $ 16,501 $ (60,099) $ (59,737) Foreign 1,276 1,463 (221) Total $ 17,777 $ (58,636) $ (59,958) |
Schedule of Effective Income Tax Rate Reconciliation | For the years ended December 31, 2023, 2022 and 2021 the Company recognized the following provision for income taxes: Year Ended December 31, 2023 2022 2021 Current: Federal $ 895 $ 302 $ — State 607 327 80 Foreign 341 524 97 Total $ 1,843 $ 1,153 $ 177 Deferred: Federal $ — $ — $ — State — — — Foreign (133) (215) — Total $ (133) $ (215) $ — Total provision for income taxes $ 1,710 $ 938 $ 177 The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for the years ended December 31, 2023, 2022 and 2021: 2023 2022 2021 Expected income tax expense at federal statutory rate 21.0 % 21.0 % 21.0 % State taxes, net of Federal income tax effect (35.1) 6.7 6.5 Section 162(m) limitation 56.5 (15.2) (13.5) Equity compensation (208.4) 28.4 53.8 Meals and entertainment 5.6 (1.2) (0.5) Foreign-Derived Intangible Income deduction (13.4) — — Other permanent adjustments 2.2 0.3 — Research and development credit (76.4) 11.7 15.9 Valuation allowance 257.6 (53.3) (83.5) Effective income tax rate 9.6 % (1.6) % (0.3) % |
Schedule of Deferred Tax Assets and Liabilities | The Company has the following deferred tax assets (liabilities) as of December 31, 2023 and 2022: 2023 2022 Net operating loss carryforwards $ 15,533 $ 42,861 Stock-based compensation 5,207 3,605 Research and development credits 38,146 22,386 Lease liability 5,739 6,487 Section 174 research and development capitalization 102,055 42,429 Marketing and advertising 766 633 Sales tax / Value added tax ("VAT") reserve 397 210 Other deferred tax assets 65 140 Valuation allowance (156,870) (108,504) Total deferred tax assets 11,038 10,247 ROU asset (4,354) (5,122) Property and equipment (2,164) (2,569) Capitalized software (3,716) (1,913) Other deferred tax liabilities (38) (10) Total deferred tax liabilities (10,272) (9,614) Net deferred taxes $ 766 $ 633 |
Summary of Valuation Allowance | The following table represents the activity in our valuation allowance for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Beginning balance—January 1 $ (108,504) $ (76,293) Valuation allowances established (48,366) (32,211) Release of valuation allowances — — Ending balance—December 31 $ (156,870) $ (108,504) |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Equity [Abstract] | |
Share-based Payment Arrangement, Option, Activity | A summary of stock option activity under the Plans was as follows: (In thousands, except prices and years) Number of Weighted- Weighted- average remaining contractual life (years) Aggregate intrinsic value Options outstanding at January 1, 2023 4,410 $ 14.04 6.25 $ 251,832 Granted (1) — Exercised (1,396) 9.76 Forfeited and expired (29) 14.09 Options outstanding at December 31, 2023 2,985 $ 16.04 5.60 $ 629,865 Options exercisable at December 31, 2023 2,817 $ 15.54 5.54 $ 594,157 ________________ (1) There were no stock options granted during the years ended December 31, 2023 and 2022. |
Share-based Payment Arrangement, Option, Valuation Assumptions | The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: 2023 2022 2021 Risk-free interest rate n/a n/a 1.04 – 1.14% Expected life n/a n/a 5.90 years Expected volatility n/a n/a 48.90 – 49.12% Dividend yield n/a n/a —% Fair value of common stock n/a n/a $38.08 – $52.80 |
Share-based Payment Arrangement, RSU, Activity | A summary of RSU activity under the Plans was as follows: (In thousands, except prices) Restricted stock units Weighted- Outstanding at January 1, 2023 2,036 $ 85.74 Granted 873 138.99 Released (673) 89.58 Forfeited (209) 96.23 Outstanding at December 31, 2023 2,027 $ 106.32 |
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 Input Assumption Valuation Date June 28, 2021 Risk-free interest rate 1.48% Expected life 9.98 Expected volatility 51.67% Dividend yield 0.00% Fair value of common stock $95.00 |
Share-based Payment Arrangement, Expensed, Amount | Stock based compensation expense is included in the Consolidated Statements of Operations and Comprehensive Income (Loss) as shown in the following table: Year Ended December 31, (In thousands) 2023 2022 2021 Cost of revenues $ 55 $ 38 $ 8 Research and development 45,119 26,373 9,298 Sales and marketing 3,908 2,540 881 General and administrative 46,139 44,869 30,617 Total $ 95,221 $ 73,820 $ 40,804 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following: (In thousands) December 31, December 31, 2022 Marketing-related accruals $ 4,732 $ 3,464 Employee-related costs 4,494 4,233 Sales and VAT tax accrual 4,365 2,396 Obligations under current leases 3,944 4,903 Hosting costs 3,079 2,102 Other 4,317 4,872 Total $ 24,931 $ 21,970 |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings (Loss) Per Share, Basic and Diluted | 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 income (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. Year Ended December 31, (In thousands, except per share data) 2023 2022 2021 Numerator: Net income (loss) attributable to Class A and Class B common stockholders $ 16,067 $ (59,574) (60,135) Denominator: Weighted-average shares in computing net income (loss) per share attributable to Class A and Class B common stockholders, basic and diluted 41,451 39,470 23,433 Effect of dilutive securities Founder awards where performance has been met 270 — Dilutive effect of stock options outstanding (1) 2,774 — — RSUs outstanding 2,027 — — Denominator for dilutive net income per common share - weighted-average shares 46,522 39,470 23,433 Basic income (loss) per common share $ 0.39 $ (1.51) $ (2.57) Diluted income (loss) per common share $ 0.35 $ (1.51) $ (2.57) ________________ (1) The Company had 3.0 million options outstanding as of December 31, 2023. The estimated dilutive effect is calculated as the number of shares expected to be issued upon vesting or exercise, adjusted for the strike price proceeds that are received by the Company and assumed to be used to repurchase shares of Duolingo common stock. |
Schedule of Antidilutive Securities Excluded from Computation of Net 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: Year Ended December 31, (In thousands) 2022 2021 Founder awards where performance has been met 180 180 Stock options outstanding 4,410 6,255 RSUs outstanding 2,036 730 Total 6,626 7,165 |
DESCRIPTION OF THE BUSINESS A_2
DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||||||
Jul. 30, 2021 USD ($) $ / shares shares | Dec. 31, 2023 USD ($) language shares | Dec. 31, 2022 USD ($) shares | Dec. 31, 2021 USD ($) | Jul. 29, 2021 USD ($) shares | Jul. 15, 2021 shares | Dec. 31, 2020 USD ($) | |
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 | $ 0 | $ 0 | $ 426,191 | |||
Authorized (in shares) | 19,074 | ||||||
Carrying value of convertible preferred stock | $ | $ 0 | $ 182,609 | $ 182,609 | ||||
Number of languages, more than | language | 40 | ||||||
Common Class A | |||||||
Business And Organization [Line Items] | |||||||
Common stock, shares outstanding (in shares) | 36,311 | 31,899 | |||||
Common Class A | IPO | |||||||
Business And Organization [Line Items] | |||||||
Sale of stock, number of shares issued in transaction (in shares) | 5,872 | ||||||
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 | ||||||
Common Class A | IPO | Duolingo | |||||||
Business And Organization [Line Items] | |||||||
Sale of stock, number of shares issued in transaction (in shares) | 4,466 | ||||||
Common Class A | Over-Allotment Option | |||||||
Business And Organization [Line Items] | |||||||
Sale of stock, number of shares issued in transaction (in shares) | 766 | ||||||
Common Class B | |||||||
Business And Organization [Line Items] | |||||||
Conversion ratio | 1 | ||||||
Common stock, shares outstanding (in shares) | 6,215 | 8,462 | |||||
Common Class B | Founders | |||||||
Business And Organization [Line Items] | |||||||
Common stock, shares outstanding (in shares) | 6,930 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) shares in Thousands | 1 Months Ended | 12 Months Ended | |||
Mar. 10, 2021 USD ($) | Jun. 30, 2021 shares | Dec. 31, 2023 USD ($) sourceOfRevenue tranche reporting_unit shares | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Concentration Risk [Line Items] | |||||
Number of sources of revenue | sourceOfRevenue | 4 | ||||
Number of days to take exam | 21 days | ||||
Advertising costs | $ 52,969,000 | $ 48,111,000 | $ 42,964,000 | ||
Volunteer program, one-time payment to contributors | $ 4,220,000 | ||||
Volunteer program, fees paid | $ 526,000 | ||||
Compensation expense | $ 95,221,000 | 73,820,000 | 40,804,000 | ||
Number of reporting units | reporting_unit | 1 | ||||
Impairment | $ 0 | 0 | 0 | ||
Research and development | |||||
Concentration Risk [Line Items] | |||||
Compensation expense | 45,119,000 | 26,373,000 | 9,298,000 | ||
Sales and marketing | |||||
Concentration Risk [Line Items] | |||||
Compensation expense | 3,908,000 | 2,540,000 | 881,000 | ||
General and administrative | |||||
Concentration Risk [Line Items] | |||||
Compensation expense | $ 46,139,000 | 44,869,000 | 30,617,000 | ||
RSUs outstanding | |||||
Concentration Risk [Line Items] | |||||
Number of vesting requirements | tranche | 2 | ||||
Vesting period (in years) | 4 years | ||||
Compensation expense | 2,035,000 | ||||
Equity instruments other than options, grants in period (in shares) | shares | 873 | ||||
RSUs outstanding | Research and development | |||||
Concentration Risk [Line Items] | |||||
Compensation expense | 1,332,000 | ||||
RSUs outstanding | Sales and marketing | |||||
Concentration Risk [Line Items] | |||||
Compensation expense | 210,000 | ||||
RSUs outstanding | General and administrative | |||||
Concentration Risk [Line Items] | |||||
Compensation expense | 493,000 | ||||
Founder awards where performance has been met | |||||
Concentration Risk [Line Items] | |||||
Compensation expense | $ 26,622,000 | $ 30,997,000 | $ 16,463,000 | ||
Founder awards where performance has been met | Founders | |||||
Concentration Risk [Line Items] | |||||
Equity instruments other than options, grants in period (in shares) | shares | 1,800 | ||||
Number of tranches | tranche | 10 | ||||
Capitalized Software | |||||
Concentration Risk [Line Items] | |||||
Estimated useful life (in years) | 3 years | ||||
Accounts Receivable | Customer Concentration Risk | Apple | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (in percent) | 65.20% | 56.20% | |||
Accounts Receivable | Customer Concentration Risk | Google | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (in percent) | 20.70% | 27.50% | |||
Accounts Receivable | Customer Concentration Risk | Stripe | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (in percent) | 10.70% | ||||
Revenue from Contract with Customer Benchmark | Customer Concentration Risk | Apple | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (in percent) | 58.50% | 54.20% | 50.50% | ||
Revenue from Contract with Customer Benchmark | Customer Concentration Risk | Google | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (in percent) | 25.60% | 28.10% | 29% | ||
Revenue from Contract with Customer Benchmark | Customer Concentration Risk | Stripe | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (in percent) | 12.10% | 10.10% |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Cash and Cash Equivalents (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Cash and Cash Equivalents [Line Items] | ||
Cash and cash equivalents | $ 747,610 | $ 608,180 |
Cash | ||
Cash and Cash Equivalents [Line Items] | ||
Cash and cash equivalents | 50,373 | 91,189 |
Money market funds | ||
Cash and Cash Equivalents [Line Items] | ||
Cash and cash equivalents | $ 697,237 | $ 516,991 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Useful Life (Details) | Dec. 31, 2023 |
Furniture, fixtures and equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life (in years) | 4 years |
Furniture, fixtures and equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life (in years) | 6 years |
Leasehold improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life (in years) | 5 years |
Leasehold improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life (in years) | 7 years |
ACQUISITION (Details)
ACQUISITION (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Oct. 03, 2022 USD ($) term employee | Oct. 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2023 USD ($) | Dec. 04, 2023 | |
Asset Acquisition [Line Items] | |||||
Total undiscounted lease payments | $ 35,118 | ||||
Sublease term (in months) | 68 months | ||||
Sublease payments to be received | $ 358 | $ 295 | |||
Building | |||||
Asset Acquisition [Line Items] | |||||
Lessee, operating lease, term of contract (in months) | 68 months | 73 months | |||
Total undiscounted lease payments | 750 | ||||
Building | Office Lease, Five Year Renewal Term | |||||
Asset Acquisition [Line Items] | |||||
Number of extension options | term | 1 | ||||
Option to extend (in years) | 5 years | ||||
Building | Office Lease, Four Year Renewal Term | |||||
Asset Acquisition [Line Items] | |||||
Number of extension options | term | 1 | ||||
Option to extend (in years) | 4 years | ||||
Gunner Made LLC | |||||
Asset Acquisition [Line Items] | |||||
Number of design team members | employee | 15 | ||||
Asset acquisition, consideration transferred | $ 4,500 | ||||
Cash paid in asset acquisition | $ 4,000 | ||||
Asset acquisition, amount held back until one year of continued service | $ 450 | ||||
Continued service period (in years) | 1 year | ||||
Acquisition costs | $ 50 |
REVENUE - Narrative (Details)
REVENUE - Narrative (Details) | 12 Months Ended | ||
Dec. 31, 2023 sourceOfRevenue user | Dec. 31, 2022 | Dec. 31, 2021 | |
Disaggregation of Revenue [Line Items] | |||
Number of sources of revenue | sourceOfRevenue | 4 | ||
Number of users | user | 6 | ||
Number of hours to make certification decision (less than) | 48 hours | ||
Number of days to take exam | 21 days | ||
Expiration period to take exams (in years) | 1 year | ||
United States | Revenue from Contract with Customer Benchmark | Geographic Concentration Risk | |||
Disaggregation of Revenue [Line Items] | |||
Concentration risk (in percent) | 45% | 46% | 44% |
United Kingdom | Revenue from Contract with Customer Benchmark | Geographic Concentration Risk | |||
Disaggregation of Revenue [Line Items] | |||
Concentration risk (in percent) | 8% | 9% | 10% |
Maximum | |||
Disaggregation of Revenue [Line Items] | |||
Subscription period (in years) | 1 year |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Disaggregation of Revenue [Line Items] | |||
Revenue from contract with customer, excluding assessed tax | $ 531,109 | $ 369,495 | $ 250,772 |
Transferred over Time | Subscription | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from contract with customer, excluding assessed tax | 404,684 | 273,507 | 180,698 |
Transferred over Time | Advertising | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from contract with customer, excluding assessed tax | 49,858 | 44,731 | 38,501 |
Transferred over Time | Duolingo English Test | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from contract with customer, excluding assessed tax | 41,212 | 32,718 | 24,658 |
Transferred over Time | In-App Purchases | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from contract with customer, excluding assessed tax | 34,673 | 17,914 | 6,836 |
Transferred over Time | Other | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from contract with customer, excluding assessed tax | $ 682 | $ 625 | $ 79 |
REVENUE - Revenue by Geographic
REVENUE - Revenue by Geographic Area (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Disaggregation of Revenue [Line Items] | |||
Revenues | $ 531,109 | $ 369,495 | $ 250,772 |
United States | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | 238,759 | 168,320 | 109,163 |
United Kingdom | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | 42,118 | 31,539 | 25,163 |
Rest of World | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | $ 250,232 | $ 169,636 | $ 116,446 |
REVENUE - Deferred Revenue Roll
REVENUE - Deferred Revenue Rollforward (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Revenue from Contract with Customer, Liability [Roll Forward] | ||
Beginning balance | $ 157,550 | $ 98,267 |
Amount from beginning balance recognized into revenue | (157,550) | (98,267) |
Recognition of deferred revenue | (287,429) | (199,130) |
Deferral of revenue | 536,621 | 356,680 |
Ending balance | $ 249,192 | $ 157,550 |
PROPERTY and EQUIPMENT, net - S
PROPERTY and EQUIPMENT, net - Summary (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 24,060 | $ 21,187 |
Less: accumulated depreciation | (12,268) | (8,218) |
Total property and equipment, net | 11,792 | 12,969 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 18,191 | 15,983 |
Furniture, fixtures and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 5,869 | $ 5,204 |
PROPERTY and EQUIPMENT, net -_2
PROPERTY and EQUIPMENT, net - Summary of Depreciation Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Property, Plant and Equipment [Line Items] | |||
Total | $ 4,100 | $ 3,118 | $ 2,033 |
Research and development | |||
Property, Plant and Equipment [Line Items] | |||
Total | 1,650 | 1,500 | 260 |
Sales and marketing | |||
Property, Plant and Equipment [Line Items] | |||
Total | 190 | 190 | 32 |
General and administrative | |||
Property, Plant and Equipment [Line Items] | |||
Total | $ 2,260 | $ 1,428 | $ 1,741 |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL - Capitalized Software (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Capitalized software | $ 26,895 | $ 16,809 |
Other intangible assets | 117 | 18 |
Total intangible assets | 27,012 | 16,827 |
Less: accumulated amortization | (11,017) | (8,330) |
Intangible assets, net | $ 15,995 | $ 8,497 |
INTANGIBLE ASSETS AND GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Capitalized Computer Software, Additions | $ 5,665 | |
Goodwill | 4,050 | $ 4,050 |
Goodwill, tax deductible amount | $ 3,983 | $ 3,713 |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL - Schedule of Capitalized Software Amortization Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of capitalized computer software | $ 2,995 | $ 1,752 | $ 693 |
Cost of revenues | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of capitalized computer software | 2,020 | 870 | 0 |
Sales and marketing | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of capitalized computer software | $ 975 | $ 882 | $ 693 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) $ in Thousands | Oct. 03, 2022 term | Jan. 10, 2030 USD ($) | Dec. 31, 2023 USD ($) | Dec. 18, 2023 USD ($) ft² month | Dec. 04, 2023 | Dec. 31, 2022 USD ($) |
Lessee, Lease, Description [Line Items] | ||||||
Renewal term (in years) | 5 years | |||||
Sublease term (in months) | 68 months | |||||
Sublease payments to be received | $ 295 | $ 358 | ||||
Obligations under current leases | 3,944 | $ 4,903 | ||||
Total undiscounted lease payments | $ 35,118 | |||||
Operating lease, liability, current, statement of financial position, [extensible enumeration] | Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | ||||
Long-term obligation under operating leases | $ 21,094 | $ 23,503 | ||||
Area of office building | ft² | 85,666 | |||||
Initial base rent per month | $ 442 | |||||
Term before rent increase | 6 years | |||||
Number of months commencement of the sub-sublease | month | 20 | |||||
Restricted cash | 2,735 | 0 | ||||
Forecast | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Initial base rent per month | $ 478 | |||||
Office Lease, Additional Extension Term | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Total undiscounted lease payments | $ 1,380 | |||||
Building | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Lessee, operating lease, term of contract (in months) | 68 months | 73 months | ||||
Total undiscounted lease payments | $ 750 | |||||
Building | Office Lease, Five Year Renewal Term | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Number of extension options | term | 1 | |||||
Option to extend (in years) | 5 years | |||||
Building | Office Lease, Four Year Renewal Term | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Number of extension options | term | 1 | |||||
Option to extend (in years) | 4 years |
LEASES - Components of Lease Co
LEASES - Components of Lease Cost (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Leases [Abstract] | |||
Operating lease cost | $ 7,459 | $ 7,076 | $ 1,919 |
Short term lease cost | 48 | 125 | 1,266 |
Variable lease cost | 252 | 63 | 28 |
Total lease cost | 7,759 | 7,264 | 3,213 |
Cash paid for amounts included in the measurement of lease liabilities | 7,512 | 5,168 | 1,819 |
Right-of-use assets obtained in exchange for new operating lease liabilities | 0 | 909 | 22,274 |
Right of use assets disposed or adjusted, modifying operating leases liabilities | 2,024 | (1,586) | (235) |
Gain from termination of leases | $ 0 | $ 0 | $ 31 |
Weighted-average remaining lease term | 9 years | 9 years | 9 years |
Weighted-average discount rate | 7.38% | 6.92% | 5.77% |
LEASES - Future Minimum Rental
LEASES - Future Minimum Rental Payment (Details) $ in Thousands | Dec. 31, 2023 USD ($) |
Leases [Abstract] | |
2024 | $ 5,607 |
2025 | 3,386 |
2026 | 3,399 |
2027 | 3,463 |
2028 | 3,528 |
Thereafter | 15,735 |
Total undiscounted lease payments | 35,118 |
Present value adjustment | (10,080) |
Operating lease liabilities | $ 25,038 |
INCOME TAXES - Income Before In
INCOME TAXES - Income Before Income Tax, Domestic and Foreign (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |||
Domestic | $ 16,501 | $ (60,099) | $ (59,737) |
Foreign | 1,276 | 1,463 | (221) |
Income (loss) before income taxes | $ 17,777 | $ (58,636) | $ (59,958) |
INCOME TAXES - Provision of Inc
INCOME TAXES - Provision of Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Current Federal, State and Local, Tax Expense (Benefit) [Abstract] | |||
Federal | $ 895 | $ 302 | $ 0 |
State | 607 | 327 | 80 |
Foreign | 341 | 524 | 97 |
Current Income Tax Expense (Benefit), Total | 1,843 | 1,153 | 177 |
Deferred Income Tax Expense (Benefit), Continuing Operations [Abstract] | |||
Federal | 0 | 0 | 0 |
State | 0 | 0 | 0 |
Foreign | (133) | (215) | 0 |
Total | (133) | (215) | 0 |
Provision for income taxes | $ 1,710 | $ 938 | $ 177 |
INCOME TAXES - Effective Income
INCOME TAXES - Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |||
Expected income tax expense at federal statutory rate | 21% | 21% | 21% |
State taxes, net of Federal income tax effect | (35.10%) | 6.70% | 6.50% |
Section 162(m) limitation | 56.50% | (15.20%) | (13.50%) |
Equity compensation | (208.40%) | 28.40% | 53.80% |
Meals and entertainment | 5.60% | (1.20%) | (0.50%) |
Foreign-Derived Intangible Income deduction | (13.40%) | 0% | 0% |
Other permanent adjustments | 2.20% | 0.30% | 0% |
Research and development credit | (76.40%) | 11.70% | 15.90% |
Valuation allowance | 257.60% | (53.30%) | (83.50%) |
Effective income tax rate | 9.60% | (1.60%) | (0.30%) |
INCOME TAXES - Deferred Tax Ass
INCOME TAXES - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Income Tax Disclosure [Abstract] | |||
Net operating loss carryforwards | $ 15,533 | $ 42,861 | |
Stock-based compensation | 5,207 | 3,605 | |
Research and development credits | 38,146 | 22,386 | |
Lease liability | 5,739 | 6,487 | |
Section 174 research and development capitalization | 102,055 | 42,429 | |
Marketing and advertising | 766 | 633 | |
Sales tax / Value added tax ("VAT") reserve | 397 | 210 | |
Other deferred tax assets | 65 | 140 | |
Valuation allowance | (156,870) | (108,504) | $ (76,293) |
Total deferred tax assets | 11,038 | 10,247 | |
ROU asset | (4,354) | (5,122) | |
Property and equipment | (2,164) | (2,569) | |
Capitalized software | (3,716) | (1,913) | |
Other deferred tax liabilities | (38) | (10) | |
Total deferred tax liabilities | (10,272) | (9,614) | |
Net deferred taxes | $ 766 | $ 633 |
INCOME TAXES - Narrative (Detai
INCOME TAXES - Narrative (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Tax Credit Carryforward [Line Items] | |||
Increase in valuation allowance | $ 48,366,000 | ||
Unrecognized tax benefits | 0 | $ 0 | $ 0 |
General Business Tax Credit Carryforward | |||
Tax Credit Carryforward [Line Items] | |||
Business credits | 38,146,000 | ||
Federal | |||
Tax Credit Carryforward [Line Items] | |||
Operating loss carryforwards | 48,866,000 | ||
State | |||
Tax Credit Carryforward [Line Items] | |||
Operating loss carryforwards | $ 71,422,000 |
INCOME TAXES - Valuation Allowa
INCOME TAXES - Valuation Allowance (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Deferred Tax Assets, Valuation Allowance [Roll Forward] | ||
Beginning balance | $ (108,504) | $ (76,293) |
Valuation allowances established | (48,366) | (32,211) |
Release of valuation allowances | 0 | 0 |
Ending balance | $ (156,870) | $ (108,504) |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |||||||
Jan. 01, 2024 shares | Jan. 01, 2022 | Jun. 30, 2021 day tranche $ / shares shares | Feb. 28, 2021 USD ($) $ / shares shares | Dec. 31, 2023 USD ($) shares | Dec. 31, 2022 USD ($) shares | Dec. 31, 2021 USD ($) tranche | Jul. 30, 2021 $ / shares | Jul. 26, 2021 shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Granted (in shares) | shares | 0 | 0 | |||||||
Aggregate intrinsic value, exercised | $ 192,456 | $ 140,884 | $ 194,513 | ||||||
Compensation expense | 95,221 | 73,820 | 40,804 | ||||||
Unrecognized compensation cost, options | 1,393 | ||||||||
Unrecognized compensation cost | 201,826 | ||||||||
Closing trading price, specified calendar day | day | 60 | ||||||||
Fair market value of share price (in usd per share) | $ / shares | $ 38.08 | ||||||||
Payments for repurchase of stock options | $ 0 | 0 | 7,335 | ||||||
Options repurchased | 7,335 | ||||||||
Common stock repurchased and retired | 868 | ||||||||
Additional Paid-In Capital | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Common stock repurchased and retired | 868 | ||||||||
Tender Offer | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Compensation expense | $ 5,275 | ||||||||
Sale of stock, percentage sold, maximum | 10% | ||||||||
Sale of stock, price per share (in usd per share) | $ / shares | $ 59.77 | ||||||||
Payments for repurchase of stock options | $ 13,479 | ||||||||
Stock returned during the period (in shares) | shares | 220,000 | ||||||||
Common stock repurchased and retired (in shares) | shares | 23,000 | ||||||||
Common stock repurchased and retired | $ 868 | ||||||||
Tender Offer | Additional Paid-In Capital | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Options repurchased | $ 7,335 | ||||||||
Stock options outstanding | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Unrecognized compensation cost, weighted-average period of recognition (in years) | 7 months | ||||||||
Number of options available for grant (in shares) | shares | 9,404,000 | ||||||||
RSUs outstanding | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Vesting period (in years) | 4 years | ||||||||
Compensation expense | 2,035 | ||||||||
Unrecognized compensation cost, weighted-average period of recognition (in years) | 3 years | ||||||||
Unrecognized compensation expense, excluding options | $ 200,433 | ||||||||
Equity instruments other than options, grants in period (in shares) | shares | 873,000 | ||||||||
Performance Based RSUs | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Compensation expense | $ 26,622 | $ 30,997 | 16,463 | ||||||
Unrecognized compensation expense, excluding options | 36,735 | ||||||||
Performance Based RSUs | IPO | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Compensation expense | $ 5,574 | ||||||||
Performance Based RSUs | Minimum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Award service period (in years) | 3 years 6 months 29 days | ||||||||
Performance Based RSUs | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Award service period (in years) | 5 years 11 months 1 day | ||||||||
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 (in years) | 1 year | ||||||||
Award vesting percentage (in percent) | 25% | ||||||||
Number of tranches | tranche | 10 | ||||||||
Award service period (in years) | 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 | ||||||||
Release of performance stock units (in shares) | shares | 180,000 | ||||||||
Shares disbursed to founders in net-share settlement (in shares) | shares | 96,000 | ||||||||
Shares withheld for taxes (in shares) | shares | 84,000 | ||||||||
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 | ||||||||
Common Class A | IPO | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Sale of stock, price per share (in usd per share) | $ / shares | $ 102 | ||||||||
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 | 7,946,000 | ||||||||
Share-based compensation, shares outstanding increase, maximum amount (in percent) | 5% | ||||||||
2021 Plan | Common Class A | Subsequent Event | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Additional shares authorized (in shares) | shares | 2,126,000 | ||||||||
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 | 1,119,000 | ||||||||
2011 Equity Incentive Plan | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Vesting period (in years) | 4 years | ||||||||
Share-based compensation, term of award (in years) | 10 years | ||||||||
Granted (in shares) | shares | 0 |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Number of options | ||
Options outstanding, beginning balance (in shares) | 4,410,000 | |
Granted (in shares) | 0 | 0 |
Exercised (in shares) | (1,396,000) | |
Forfeited and expired (in shares) | (29,000) | |
Options outstanding, ending balance (in shares) | 2,985,000 | 4,410,000 |
Number of options exercisable (in shares) | 2,817,000 | |
Weighted- average exercise price | ||
Outstanding, beginning balance (in usd per share) | $ 14.04 | |
Granted (in usd per share) | ||
Exercised (in usd per share) | 9.76 | |
Forfeited and expired (in usd per share) | 14.09 | |
Outstanding, ending balance (in usd per share) | 16.04 | $ 14.04 |
Weighted average exercise price, options exercisable (in usd per share) | $ 15.54 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||
Weighted average remaining contractual term (in years), outstanding | 5 years 7 months 6 days | 6 years 3 months |
Weighted average remaining contractual term (in years), exercisable | 5 years 6 months 14 days | |
Aggregate intrinsic value, outstanding | $ 629,865 | $ 251,832 |
Aggregate intrinsic value, exercisable | $ 594,157 |
STOCK-BASED COMPENSATION - Sche
STOCK-BASED COMPENSATION - Schedule of Payment Pricing Model (Details) | 12 Months Ended |
Dec. 31, 2021 $ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate, minimum | 1.04% |
Risk-free interest rate, maximum | 1.14% |
Expected life | 5 years 10 months 24 days |
Expected volatility, minimum | 48.90% |
Expected volatility, maximum | 49.12% |
Dividend yield | 0% |
Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Fair value of common stock (in usd per share) | $ 38.08 |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Fair value of common stock (in usd per share) | $ 52.80 |
STOCK-BASED COMPENSATION - Sc_2
STOCK-BASED COMPENSATION - Schedule of Restricted Stock Unit Activity (Details) - RSUs outstanding - $ / shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Restricted stock units | ||
Beginning balance (in shares) | 2,027 | 2,036 |
Granted (in shares) | 873 | |
Released (in shares) | (673) | |
Forfeited (in shares) | (209) | |
Ending balance (in shares) | 2,027 | |
Weighted- average grant date fair value per share | ||
Beginning balance (in usd per share) | $ 85.74 | |
Granted (in usd per share) | 138.99 | |
Released (in usd per share) | 89.58 | |
Forfeited (in usd per share) | 96.23 | |
Ending balance (in usd per share) | $ 106.32 |
STOCK-BASED COMPENSATION - Sc_3
STOCK-BASED COMPENSATION - Schedule of Payment Award (Details) - RSUs outstanding shares in Thousands | Jun. 30, 2021 $ / shares shares |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
STOCK-BASED COMPENSATION - Sc_4
STOCK-BASED COMPENSATION - Schedule of Weighted Average Pricing Model (Details) - $ / shares | 12 Months Ended | |
Jun. 28, 2021 | Dec. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life | 5 years 10 months 24 days | |
Dividend yield | 0% | |
Founder awards where performance has been met | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 1.48% | |
Expected life | 9 years 11 months 23 days | |
Expected volatility | 51.67% | |
Dividend yield | 0% | |
Fair value of common stock (in usd per share) | $ 95 |
STOCK-BASED COMPENSATION - Sc_5
STOCK-BASED COMPENSATION - Schedule of Income Statement Location for Compensation Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 95,221 | $ 73,820 | $ 40,804 |
Cost of revenues | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | 55 | 38 | 8 |
Research and development | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | 45,119 | 26,373 | 9,298 |
Sales and marketing | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | 3,908 | 2,540 | 881 |
General and administrative | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 46,139 | $ 44,869 | $ 30,617 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 18, 2023 | Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Period of letter of credit | 6 months | ||
Initial base rent per month | $ 442 | ||
Letters of credit | $ 2,656 | ||
Percentage of letter of credit | 103% | ||
Restricted cash | $ 2,735 | $ 0 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Other Liabilities Disclosure [Abstract] | ||
Marketing-related accruals | $ 4,732 | $ 3,464 |
Employee-related costs | 4,494 | 4,233 |
Sales and VAT tax accrual | 4,365 | 2,396 |
Obligations under current leases | 3,944 | 4,903 |
Hosting costs | 3,079 | 2,102 |
Other | 4,317 | 4,872 |
Total | $ 24,931 | $ 21,970 |
Operating lease, liability, current, statement of financial position, [extensible enumeration] | Total | Total |
EMPLOYEE BENEFIT PLAN (Details)
EMPLOYEE BENEFIT PLAN (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Defined benefit plan, contributions by employer | $ 5,908,000 | $ 4,624,000 | $ 3,438,000 |
Defined contribution plan, employer discretionary contribution amount | $ 0 | $ 0 | $ 0 |
First 4% of Employee Elective Deferral | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Employer matching contribution, percent of match (in percent) | 100% | ||
Employer matching contribution, percent of employees' gross pay (in percent) | 4% | ||
Next 2% of Employee Elective Deferral | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Employer matching contribution, percent of match (in percent) | 50% | ||
Employer matching contribution, percent of employees' gross pay (in percent) | 2% |
EARNINGS (LOSS) PER SHARE - Nar
EARNINGS (LOSS) PER SHARE - Narrative (Details) shares in Thousands | 12 Months Ended | ||
Dec. 31, 2023 votePerShare | Dec. 31, 2022 shares | Dec. 31, 2021 shares | |
Performance Based RSUs | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Founder awards where performance not met (in shares) | shares | 1,620 | 1,620 | |
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 |
EARNINGS (LOSS) PER SHARE - Sch
EARNINGS (LOSS) PER SHARE - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Numerator: | |||
Net income (loss) attributable to Class A and Class B common stockholders | $ 16,067 | $ (59,574) | $ (60,135) |
Denominator: | |||
Weighted-average shares in computing net income (loss) per share attributable to Class A and Class B common stockholders, basic (in shares) | 23,433 | ||
Weighted-average shares in computing net income (loss) per share attributable to Class A and Class B common stockholders, diluted (in shares) | 46,522 | 39,470 | 23,433 |
Effect of dilutive securities | |||
Basic loss per common share (in usd per share) | $ 0.39 | $ (1.51) | $ (2.57) |
Diluted loss per common share (in usd per share) | $ 0.35 | $ (1.51) | $ (2.57) |
Options outstanding (in shares) | 2,985 | 4,410 | |
Founder awards where performance has been met | |||
Effect of dilutive securities | |||
Stock options and RSUs outstanding (in shares) | 270 | 0 | |
Stock options outstanding | |||
Effect of dilutive securities | |||
Stock options and RSUs outstanding (in shares) | 2,774 | 0 | 0 |
RSUs outstanding | |||
Effect of dilutive securities | |||
Stock options and RSUs outstanding (in shares) | 2,027 | 0 | 0 |
Class A and Class B Common Stock | |||
Denominator: | |||
Weighted-average shares in computing net income (loss) per share attributable to Class A and Class B common stockholders, basic (in shares) | 41,451 | 39,470 | |
Weighted-average shares in computing net income (loss) per share attributable to Class A and Class B common stockholders, diluted (in shares) | 41,451 | 39,470 |
EARNINGS (LOSS) PER SHARE - S_2
EARNINGS (LOSS) PER SHARE - Schedule of Antidilutive Securities (Details) - shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 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) | 6,626 | 7,165 |
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 | 180 |
Stock options outstanding | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from the computation of earnings per share (in shares) | 4,410 | 6,255 |
RSUs outstanding | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from the computation of earnings per share (in shares) | 2,036 | 730 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ in Thousands | Feb. 28, 2024 | Dec. 31, 2023 |
Subsequent Event [Line Items] | ||
Expected lease payments | $ 35,118 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Lessee, operating lease, term of contract (in months) | 63 months | |
Expected lease payments | $ 1,728 |