Duolingo, Inc.

Good afternoon and welcome to Duolingo's second quarter 2022 earnings webcast. Today, after market close, we released our quarterly shareholder letter with our Q2 results and commentary, which you can find on our IR website at investors.duolingo.com. With me today are Luis Van On, our co-founder and CEO, Matt Scarupa, our CFO, and Bob Meese, our chief business officer. They'll begin with some brief remarks before opening the call to Q&A. Analysts will be able to ask a question by using the raise hand feature and all other attendees are in listen only mode. please note that this event is being recorded. And just a reminder that we will make forward-looking statements regarding future events and financial performance, which are subject to material risks and uncertainties and have been set forth in the risk factors of our SEC filings. These forward-looking statements are based on assumptions that we believe to be reasonable as of today, and we have no obligation to update these statements as a result of new information or future events. And additionally, we will present both GAAP and non-GAAP financial measures on today's call. These non-GAAP measures are not intended to be considered in isolation from a substitute for or superior to our GAAP results, and we encourage you to consider all measures when analyzing our performance. And with that, I will turn the call over to Luis.

Thank you, Debbie, and welcome, everyone. So we went public just over a year ago, and as part of that process, I wrote a letter to lay out my vision for what this company will do. It was a short letter, and the whole thing said this. I'm just going to read it. The main thing you need to know is that I plan to dedicate my life to building a future in which, through technology, every person on this planet has access to the best quality of education. And not only that, but a future in which people want to spend their time learning. Duolingo is the platform for building that future, and we are just getting started. Since I wrote that letter, we have made a lot of progress towards that vision. We have increased our user base substantially. When we went public last year, we had about 9 million daily active users. Now, we have over 13 million. We had about 38 million monthly active users. Now, we have nearly 50 million. We had less than 2 million paying subscribers, and now we have 3.3 million. In the first half of last year, we had about $130 million in bookings, and in the first half of this year, we had nearly 200 million. As these numbers show, we've executed well and achieved or surpassed our targets. But the spirit of my IPO letter was that we are at the beginning of our journey, and I believe in that message now more than ever. We want to build a company that is iconic and durable. We want to build a company that lasts 100 years. So while we pay attention to the near-term macro environment, we always stay focused on the long-term and on the future. And with that, I'll turn it over to Matt to talk about our financial outlook.

Thank you, Luis. We delivered strong results in the second quarter, beating expectations. We grew the top line at over 50% and we were profitable on an adjusted EBITDA basis. It was also our fourth consecutive quarter with accelerating user growth. This gives us the confidence to increase our four-year guidance while remaining appropriately prudent given the current uncertainty in the macro environment. So our guidance for Q3 2022 is $94 to $97 million in total bookings, $93 to $96 million in revenue, and an adjusted EBITDA of negative 4.5 to negative $1.5 million. For the full year 2022, we are increasing our guidance to $404 to $410 million in total bookings, 361 to 367 million in revenue, and in adjusted EBITDA, a positive $4 to $7 million. Our four-year bookings guidance reflects 37 to 39% year-over-year growth, up from the 32 to 35% year-over-year growth that we guided to on our last earnings call. I also want to discuss foreign exchange rates and how they impact our guidance. we estimate that on a constant currency basis compared to Q2 of last year, our Q2 2022 bookings would have been just over 4% higher. This is a result of the dollar strengthening nearly 9% over the past year against the basket of currencies that make up our bookings and the fact that just over half of our bookings come from outside the US. Our updated guidance takes into account the strengthening in the dollar in the first half of the year and assumes current prevailing foreign exchange rates. Note that every 1% increase in the value of the dollar versus our basket of currencies would have about a $1 million impact on total bookings in the second half of the year. We continue to manage the business with fiscal discipline as we have since our founding. In the second half of 2022, we anticipate that R&D as a percentage of revenue will increase starting in Q3 as it does most years as we bring on new university hires. Sales and marketing will increase slightly as a percentage of revenue in Q3. And then in Q4, we'll settle back down to where it has been year to date. And we should start seeing some slight leverage in G&A in the back half of the year. Finally, I want to note that we are on track to hit our dilution guidance of 2% to 3% for the year. And then we ended the quarter with approximately 47.4 million fully diluted shares outstanding using the average G2 closing price. And now I'll turn it back to Luis.