00:00We're going to talk about the quarter and the outlook in a minute, but I want to start big picture
00:04with AI because, I mean, you've been thinking and researching AI for decades at this point.
00:09You're a recipient of a MacArthur Genius Foundation grant back in the year 2006 for working on AI.
00:16This is nothing new to you, what's happening right now.
00:19But answer the question for investors, is AI a threat to your business?
00:24Well, first of all, thank you for having me.
00:27You know, I think that we're in a unique point in time where, because of AI, we're going to be
00:33able to teach significantly better.
00:37And, you know, Duolingo is by a wide margin the largest app in education in the world.
00:43And I think because of that, we're going to be able to really take advantage of this, you know, AI
00:48boon to be able to teach significantly better.
00:51And our sense is that within the next few years, we're going to have an app that teaches us well
00:56as a one-on-one tutor, but also is as fun as a mobile game.
01:00And if we're really able to do that, I think there's just so much more that we can capture.
01:04So that's what we're doing.
01:05We're really shooting for that.
01:08So jumping on the AI bandwagon, I mean, I guess what investors want to know is what is Duolingo's advantage
01:14over potential new AI learning apps?
01:20Well, you know, at the moment, we're not particularly concerned with competition in terms of, you know, other education apps.
01:28We have, for example, for language learning, we have about 85% of the market share of all daily active
01:33users of people who are learning a language.
01:35So we have huge scale.
01:36And what differentiates us is that because of that scale, we just have more data into how people learn than
01:43anybody else.
01:44And we can use that to train our own specific models.
01:47So we just have the advantage of scale of being able to watch literally billions of exercises every day by
01:53people who are learning different things.
01:55But as you know, this is going and this is moving pretty quickly, the AI impact, it seems.
02:00And to be fair, you are right.
02:02Like, we'll see.
02:03Many say this is, you know, we're kind of early in on this process and the impact.
02:07But what does Duolingo offer that can't easily be replicated by a large language model?
02:12And how do you kind of view that competitive landscape evolving?
02:17Yeah, I mean, there's a number of things.
02:20I mean, for one, with Duolingo, what we do is we try to build a habit of learning.
02:27I mean, for example, 15 million of our daily active users have a streak of longer than 365 days, meaning
02:33they have been using Duolingo for a year or longer and haven't missed a day.
02:37So we're really trying to build a habit for that.
02:41And this is why Duolingo is part game, part education.
02:44And that's, you know, I think that's just the right thing.
02:47It just turns out the hardest thing about learning something by yourself is staying motivated.
02:51But actually, the content to learn has been there for a long time.
02:56So, for example, it's, you know, you've been able to learn a language by just reading a book for hundreds
03:00of years.
03:01That has been there.
03:02It's just what we do differently is we motivate people to continue doing it.
03:06And that's hard to get right.
03:08So what are investors not getting right, in your view?
03:11Carol mentioned some of the stock moves.
03:14And now, you know, down at a point that you haven't seen since February of 2023, what are investors missing
03:20here?
03:21I think it's a matter of timing.
03:24You know, on our end, we are trying to build a company for the very long term.
03:28We're trying to do something that, you know, for example, in our in our shareholder letter, we said that we
03:34are we're shooting to have a double the daily active users that we have now.
03:38I mean, at the moment, we have a little north of 50 million daily active users worldwide.
03:41We're trying to have more than 100 million.
03:44But we're saying that that's going to take some time.
03:46And so we're concentrated in the long term.
03:50And, you know, what we're doing is we're trading off this year's, you know, financial metrics for a much larger
03:57thing in the long term.
03:59Yeah, go ahead.
04:00Well, I get that, right?
04:01You know, companies have to invest in order to provide growth going forward.
04:04And I think it's fair to say that we understand why investors, I mean, they're not loving your forecast for
04:11first quarter adjusted EBITDA.
04:12That's missing the mark from what the street was expecting.
04:152026 revenue.
04:16Also, that forecast missing.
04:19Same story for 2026 adjusted EBITDA overall.
04:22So you talk about building this to double your daily active users to 100 million.
04:29How much will how long will that build actually take?
04:33And what kind of visibility do you have on that to kind of maybe reassure investors that this isn't something
04:39that takes longer while the AI world continues to challenge established players?
04:46Yeah, I mean, we're the way we're seeing it is we're going to spend this year really working on three
04:53things, really teaching better, improving the free user experience and also expanding to other subjects.
04:59I mean, by now we are we already teach math, music and chess.
05:03And, you know, we've been growing quite a bit.
05:05About 15 percent of our of our active users are learning things that are other than languages.
05:11Our chess course has grown quite significantly.
05:13So these are the three things that we're working on and we're going to be working on that for the
05:17rest of the year.
05:17And we're we're expecting that towards the end of the year, we're going to see some improvements in our in
05:24our year over year growth rate.
05:26We're still growing.
05:27I mean, we've had five years of really phenomenal growth.
05:30We IPO in 2021.
05:31And since then, we've more than five X our active users.
05:36So, you know, we expect that we'll continue growing pretty, pretty strongly.
05:39Luis, is the idea in making changes to the free tier, is it to get more people who don't use
05:45Duolingo now to use the free tier or is to get those free free tier users to upgrade to a
05:52paid tier?
05:55Historically, what we have done is we have tried to, you know, the way the way we generate value on
06:01Duolingo is there's two parts to it.
06:03One is how many active users we have.
06:05That's kind of like the size of the pie that has grown quite significantly.
06:08And then there's how many of these people are paying us because we have this freemium model that's, you know,
06:15like the fraction of the pie that our payers.
06:17Historically, we have worked on both.
06:19We have worked on on growing the pie and also growing the fraction of the pie that is paying, which
06:24is why our bookings have grown really significantly over the last five years.
06:28This year, we're mainly concentrating on just growing the pie.
06:31That is the number of people that are actively using Duolingo, because it is our belief that because of the
06:39moment that we're in, we really want to have as many people as possible actually learning something meaningful in Duolingo.
06:46And once we're able to do that, I mean, one of the main advantages that we have, certainly against new
06:50entrants, is scale.
06:52There's just no other education app that has the scale that we have.
06:56All right.
06:57Hear.
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