6 ms·

Quick look at financials, they lost $25M in trailing 12 months, lost $14M in the previous year, lost $10M in the year before. How is Duolingo supposed to becom

Quick look at financials, they lost $25M in trailing 12 months, lost $14M in the previous year, lost $10M in the year before. How is Duolingo supposed to become profitable? How is a $6.5B valuation justified?

thiscatis 5y ago
You can just put a variable where you mention duolingo based on the recent market.
fny 5y ago
Discounted cashflows to infinity and beyond plus a massive user base. Add zirp to the mix and I'm surprised they're not worth $65B. I'm sure they'll be profitable in a decade... Also don't forget this is an IPO: ideally you want to overstate your value.
dazc 5y ago
'Following the IPO, the company will focus on improving its flagship app and getting more active users to switch to paying subscribers, von Ahn said.' I switched to being a paying subscriber once and the experience was more or less the same as being a free user with the aid of an ad-blocker. Enough said.
trainsplanes 5y ago
I think we're closing in on a point where you can't reach a multi-billion dollar valuation if your company is profitable. Just keep burning through investor cash until you're acquired by a bigger corporation. Then a year later they announce that they're killing your company because, surprise, it couldn't turn a profit. Somewhere a rich stock owner makes a huge profit. Everyone's happy.
bpodgursky 5y ago
Those are pretty small numbers in an absolute sense. Growth is all I would worry about.
paxys 5y ago
Why is this always the comment whenever any startup or IPO is discussed on this site? Every company at this stage loses money. It would be stupid to chase profits over user or revenue growth. They have 40 million monthly active users. Registrations grew 67% YoY. Their revenue doubled in a single quarter. Expenses are mostly stock comp. They have nearly $200M cash on hand. The numbers are all solid.
- selectodude 5y ago
  >Every company at this stage loses money The company is ten years old. I would have to imagine almost zero companies lose money ten years in because they literally do not exist anymore.
  - paxys 5y ago
    Average time to IPO for tech companies is 7-8 years, so ten years without a profit for a VC-backed company is not at all unusual. Palantir is coming up on 20.
    - selectodude 5y ago
      >Palantir is coming up on 20. Palantir is a dumb shitty company that will file for bankruptcy. Unfortunately the VCs have already dumped it on to the dopes on Wall Street bets.
      - captn3m0 5y ago
        https://www.macroaxis.com/invest/ratio/PLTR/Probability-Of-Bankruptcy https://www.macroaxis.com/invest/ratio/PLTR/Probability-Of-B... says Current Palantir Technologies Probability Of Bankruptcy = 24%
        jpgvm 5y ago
        That analysis seems to be full of shit. When plugging in companies with much better financials than PLTR I end up with higher % of bankruptcy.
jtsiskin 5y ago
growth rate. low customer acquisition cost. the expenses weren't from marketing, which is good. My biggest concern would be how much of the growth was from people having free time at home due to covid. And if deep learning will make language learning less relevant in the future. You may be less likely to learn a new language if audio can be translated in real time almost perfectly
- dstick 5y ago
  Babelfish! Sign me up
jonas21 5y ago
1. So it looks like they lost $14M on revenue of $71M in 2019, and $16M on revenue of $162M in 2020. Revenue more than doubled YoY, which is impressive. Costs also grew (by a smaller percentage), but they're presumably spending a lot to chase after the growth opportunity and can dial back later. 2. They had positive free cash flow of $14M in 2020, which may be a better metric to look at when assessing their financial health.
- jgalt212 5y ago
  40X 2020 (Covid bump revenues). That's a pretty healthy valuation--bordering on extreme. But with so much cash washing around, it's really hard to say what is correctly priced these days.
yobbo 5y ago
> How is a $6.5B valuation justified? The hope is to make a locked-in user base and a captive audience. They are probably hoping to create various sorts of "attachments" between users and their "achievements" to drip revenue from users through either premium accounts or ads.
candyman 5y ago
Duolingo is already cash flow positive and if you back out some non-cash costs can say they are profitable. However some of these non-cash costs should be included but that's another story. Their target model is for 35% adjusted earnings margins which is aggressive. I did publish a post with our "present future value" model that goes out to 2026 and discounts things back. I only see them getting to 22% operating margins at this point but there are some areas like testing fees that could push that higher. Using the model I get to a $145 stock price that I'd say puts a full value on the next several years of growth. It's just a preliminary model now. After they report a few quarters we can put a finer point on it. Details here: https://ipocandy.com/2021/07/making-sense-of-duolingo-duol/ https://ipocandy.com/2021/07/making-sense-of-duolingo-duol/
sudhirj 5y ago
"lost $25M" doesn't necessarily mean they set it on fire. If the wording is changed to "invested all their revenues and a further $25M of raised or borrowed capital", wouldn't that make more sense? The way these arguments are usually phrased doesn't do the company justice. Amazon "lost" money for decades because they were building giant and ambitious infrastructure, not setting burning in on executive parties.
Graziano_M 5y ago
They are pushing 'plus' HARD. Plus is basically the feature set everyone had for years, so it's basically, "Pay to keep features or we'll take them one by one". I have an > 2000 day streak, so I have seen it change a lot over the years and I have 0 urge to pay, I will just stop playing.

thiscatis 5y ago

You can just put a variable where you mention duolingo based on the recent market.

fny 5y ago

Discounted cashflows to infinity and beyond plus a massive user base. Add zirp to the mix and I'm surprised they're not worth $65B. I'm sure they'll be profitable in a decade... Also don't forget this is an IPO: ideally you want to overstate your value.

dazc 5y ago

'Following the IPO, the company will focus on improving its flagship app and getting more active users to switch to paying subscribers, von Ahn said.' I switched to being a paying subscriber once and the experience was more or less the same as being a free user with the aid of an ad-blocker. Enough said.

trainsplanes 5y ago

I think we're closing in on a point where you can't reach a multi-billion dollar valuation if your company is profitable. Just keep burning through investor cash until you're acquired by a bigger corporation. Then a year later they announce that they're killing your company because, surprise, it couldn't turn a profit. Somewhere a rich stock owner makes a huge profit. Everyone's happy.

bpodgursky 5y ago

Those are pretty small numbers in an absolute sense. Growth is all I would worry about.

paxys 5y ago

Why is this always the comment whenever any startup or IPO is discussed on this site? Every company at this stage loses money. It would be stupid to chase profits over user or revenue growth. They have 40 million monthly active users. Registrations grew 67% YoY. Their revenue doubled in a single quarter. Expenses are mostly stock comp. They have nearly $200M cash on hand. The numbers are all solid.

selectodude 5y ago
>Every company at this stage loses money The company is ten years old. I would have to imagine almost zero companies lose money ten years in because they literally do not exist anymore.
- paxys 5y ago
  Average time to IPO for tech companies is 7-8 years, so ten years without a profit for a VC-backed company is not at all unusual. Palantir is coming up on 20.
  - selectodude 5y ago
    >Palantir is coming up on 20. Palantir is a dumb shitty company that will file for bankruptcy. Unfortunately the VCs have already dumped it on to the dopes on Wall Street bets.
    - captn3m0 5y ago
      https://www.macroaxis.com/invest/ratio/PLTR/Probability-Of-Bankruptcy https://www.macroaxis.com/invest/ratio/PLTR/Probability-Of-B... says Current Palantir Technologies Probability Of Bankruptcy = 24%
      - jpgvm 5y ago
        That analysis seems to be full of shit. When plugging in companies with much better financials than PLTR I end up with higher % of bankruptcy.

jtsiskin 5y ago

growth rate. low customer acquisition cost. the expenses weren't from marketing, which is good. My biggest concern would be how much of the growth was from people having free time at home due to covid. And if deep learning will make language learning less relevant in the future. You may be less likely to learn a new language if audio can be translated in real time almost perfectly

dstick 5y ago
Babelfish! Sign me up

jonas21 5y ago

1. So it looks like they lost $14M on revenue of $71M in 2019, and $16M on revenue of $162M in 2020. Revenue more than doubled YoY, which is impressive. Costs also grew (by a smaller percentage), but they're presumably spending a lot to chase after the growth opportunity and can dial back later. 2. They had positive free cash flow of $14M in 2020, which may be a better metric to look at when assessing their financial health.

jgalt212 5y ago
40X 2020 (Covid bump revenues). That's a pretty healthy valuation--bordering on extreme. But with so much cash washing around, it's really hard to say what is correctly priced these days.

yobbo 5y ago

> How is a $6.5B valuation justified? The hope is to make a locked-in user base and a captive audience. They are probably hoping to create various sorts of "attachments" between users and their "achievements" to drip revenue from users through either premium accounts or ads.

candyman 5y ago

Duolingo is already cash flow positive and if you back out some non-cash costs can say they are profitable. However some of these non-cash costs should be included but that's another story. Their target model is for 35% adjusted earnings margins which is aggressive. I did publish a post with our "present future value" model that goes out to 2026 and discounts things back. I only see them getting to 22% operating margins at this point but there are some areas like testing fees that could push that higher. Using the model I get to a $145 stock price that I'd say puts a full value on the next several years of growth. It's just a preliminary model now. After they report a few quarters we can put a finer point on it. Details here: https://ipocandy.com/2021/07/making-sense-of-duolingo-duol/ https://ipocandy.com/2021/07/making-sense-of-duolingo-duol/

sudhirj 5y ago

"lost $25M" doesn't necessarily mean they set it on fire. If the wording is changed to "invested all their revenues and a further $25M of raised or borrowed capital", wouldn't that make more sense? The way these arguments are usually phrased doesn't do the company justice. Amazon "lost" money for decades because they were building giant and ambitious infrastructure, not setting burning in on executive parties.

Graziano_M 5y ago

They are pushing 'plus' HARD. Plus is basically the feature set everyone had for years, so it's basically, "Pay to keep features or we'll take them one by one". I have an > 2000 day streak, so I have seen it change a lot over the years and I have 0 urge to pay, I will just stop playing.