Q2 2022 Duolingo Inc Earnings Call

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.

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.

Not only that but a future in which people want to spend their time line.

Dwelling was the platform for building the 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.

In the first half of last year, we had about $130 million in bookings and in the first half of this year, we have 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're at the beginning of our journey and I believe in that message now more than ever.

We want to build a company that if iconic and durable.

We want to build a company that last 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.

Through the topline 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 full year guidance, while remaining appropriately prudent given the current uncertainty in the macro environment.

So our guidance for Q3, 2022 is $94 million to $97 million in total bookings nine.

<unk> $93 million to $96 million in revenue and an adjusted EBITDA of negative $4 five to negative $1 5 million.

For the full year 2022, we are increasing our guidance to $404 million to $410 million in total bookings three.

$361 million to $367 million in revenue and an adjusted EBITDA positive $4 million to $7 million.

Our full year bookings guidance reflects 37% to 39% year over year growth up from 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 U S.

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.

And then in Q4 will 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 Q2 closing price.

And now I will turn it back to Louis.

Thank you Matt.

Before we take your questions I'd like to express my gratitude to our talented group of employees with their collective hearts into our mission every day.

In order to serve our learners and changed their lives through education.

Oh, I guess I'm also supposed to remind everyone to do their duolingo lessons today.

<unk>.

Got it I got it okay, we're going to do our lessons okay.

Okay.

<unk>.

I'd also like to remind everyone to watch Duke on August 26, which is our annual conference for all things Duolingo and now we would be happy to take your questions I'll turn it back to Debbie to manage the queue.

Alright, Thanks Luis.

Your first question comes from Andrew Boone of JMP Securities.

Hi, guys. Congrats on the strong results and thanks for taking my questions.

Can we just start with the outperformance in MAU and DAU I'd love to understand that and then just stepping back as we think about kind of growth on a go forward basis, and we start to look at 2023 with a little bit finer point, a pencil is it fair to think about 20%, 25% per DAU growth and kind of 10% to 15% per MAU growth.

Which I think was kind of the soft guidance at the point of the IPO.

Okay.

Well, thank you Andrew for your questions.

I'll talk a little bit about our current our performance and then I'm going to let Matt talk about our guidance so for the outperformance.

It's a number of factors, but I think if you asked me that the main factor is just something we've said from the time, we IPO, which is we're still in the early days of our journey.

We're still we're still in the early days of PAA.

<unk> growth was still in the early days of our revenue growth.

So we're still in a nice part of the curve.

And so so theres not I should say, one thing which is that.

The macro environment is pretty crazy as you know so far we have seen no weakness in our numbers whatsoever and we expect.

We expect a pretty strong numbers, but.

Things things like Crazy and.

I can't tell you that that we're going to be immune forever to whatever is going on in the macro environment, but so far no weakness in our numbers.

I don't know Mark if you want to talk about the guidance yeah for sure. So yeah. So Andrew we don't guide to <unk>.

Are you explicitly.

When we went public we did mentioned that historically looking back.

<unk> grew between 10%, 15% and you grew between 20% and 25%.

And as you've seen earlier this year, we've outperformed those numbers.

But those numbers are pretty long dated time series data so.

I don't think that those numbers are fundamentally change we've had nice outperformance here.

But.

Again, we're not going to guide formally to it but if you just look at the long time series of data those numbers are certainly in the range.

And then.

You guys now are live again in China can you just speak to the opportunity there and what that could possibly mean for the business over many.

Three to five years right.

Near term.

Thanks, So much yes. Thanks, thanks for the question about China.

No.

We said in the shareholder letter we're back live in China. So what happened in China was that we were taken down from the App stores, a few months ago and.

And what that meant was that current users could still use dwelling what new users couldn't downloaded.

We are back in the App stores, and we're back to the <unk> and revenue levels that we had before we had been taking down now China's incentives.

It's an interesting countries.

There's a lot of potential in China, but it's still a small market for us and it's about 1% to 2% of our <unk> and <unk> and a little under 1% of our revenue.

Aye.

I think the thing to say about China is the largest language learning market in the world in particular for learning English.

It is very hard for western companies to do well there. So the way we see it as we're investing in it we're not betting the company on it and.

My guess is as good as yours about what's going to happen with the with the Chinese.

Chinese landscape.

Okay, Great and your next question comes from Eric Sheridan of Goldman Sachs.

Thanks, So much for taking my question and great to see everyone I'm always intrigued when you put the stuff in the letter around the testing anything to highlight there where you've seen elements of the <unk> testing moved out of testing mode and into the App that you are the most excited about in there driving on the usage side of the monetization side.

Can we get a better sense of some of the bridging from testing implementation in the business that'll be number one.

Any update on math as a product both on the investment cycle behind it and how you think about once you get more widely.

Future quarters. Thanks, so much.

Thank you. Thank you Eric for the question is okay. So first of all in terms of AB testing.

As we mentioned in the letter we run about 500 EBITDA per quarter. So we're really testing all kinds of things.

Some things are pretty timing some of it <unk>, just like one where to changing some button and some are pretty large features.

Two that we highlighted in the letter that I'm, particularly pretty excited about one is the quest tab. So it's a whole tab in the App, that's basically going to.

Induced users to do certain actions and generally gets them to use the app more and the thing about using the more they use it.

No more days in a row every day that they use it they spend more time on it and we know that people who use the app more also are more likely to subscribe.

So we really like that.

It's one that we're really excited about another another one that we mentioned in the letter that also I'm, particularly excited about is the sprinkled sidequests, which are in the new home screen of the App youre going to be able to tap on the animated characters and thats going to give you kind.

This is fun little mini games, obviously, the practice or language now to play them youre going to have to pay with gyms.

And the German economy, and dealing with something that we're very excited about because it's going to help us with in App purchases, which is something that we're going to be investing on for the next in the next few years right now our revenue for in App purchases is relatively small at just a couple of percentage points, but we think we can grow that quite a bit and we think that's pretty interesting, particularly in certain geographies where people don't love.

Paying for recurring subscriptions.

So, let's kind of maybe Thats now you asked about math and thank you for the question that's something that we're very excited about but and when people ask us about math or the or drilling <unk>, which is our literacy app.

I'd like to remind everyone that for the for the foreseeable future I mean, certainly this year next year and even the year. After that we're primarily a language learning company Alright language learning is a massive opportunity.

We're still really only scratching the surface on the majority of our investments and the majority of our revenues are going to come from language learning for the next call. It three years to five years.

Now with a mass app.

I have it on my phone I use it every single day it turns out it's pretty fun.

Right.

Turns out practicing third and fourth grader map is pretty fun at least for for nerds like me.

But so we have it we're likely to do.

The plan is still going according to plan and we're going to put it out put a beta version of the app to the whole world This year.

So it should start going according to plan and I'm, particularly excited about it.

Okay, Great and your next question comes from Ralph Ralph Shakur of William Blair.

Alright, Thanks for taking the question and also good to see everybody just two if I could just in terms of the home screen and they talked about the excitement there to really improve engagement, maybe just an update what you're seeing there with the testing and then.

Just an additional question on regional pricing how is that effort going.

You can see.

Okay.

Okay.

Yes.

Yes.

Yes.

Yes.

Thank you Ralph Okay. So you ask the first question was about the home screen.

So the homescreen just to remind everyone. We are we are completely changing the homescreen of dwelling, which is a pretty large change so the home screen used to be.

This thing that we call the tree, where users had a lot of options about what to learn next to a linear path that where users we're basically going to be guiding users want to learn next.

And we've talked about this this is something that we're currently it's currently being field tested we're being very careful with such large changes usually a pretty careful with them. So we're testing. It is currently live for a fraction of our users on iphones androids and web so on all our platforms. It's currently like the results. So far are great in that it is.

Exactly what we expected and just to remind everyone with what we expected with these results.

This is a brand new version of the home screen. The previous Homescreen was therefore years I don't know how many years five six years or something like that and it was hugely optimized.

This new version is a brand new version that Hasnt been optimized and all we were looking for when we put this there is parity of metrics. If we're able to achieve parity of metrics with an unoptimized homescreen versus the highly optimized sort of.

Local maximum thing that we had before then this is a really good position to be in because we can take the unoptimized, one and then optimize it like crazy.

And so far it's looking like that so far it's looking like the metric that we are pretty pretty much parity and metrics and such exactly what we wanted.

My estimate is that we're going to be rolling it out to all our users like really basically there will be no users that don't have it by the end of the quarter.

That's my estimate and so we're looking pretty good with the home screen.

The regional pricing again this is something else just to remind everyone. When we IPO Ed we had the same price.

Every single geography.

And that really was the price that was a good price for the United States and maybe western Europe , but it was not a great price for most countries in the world.

Over the last year, we've we've basically changed the prices in most countries. We've regionalized prices are it took us a while to do this because when we run the experiment that changed the prices. We really are trying to measure what that's going to do for our long term bookings and kind of we've been looking for lifetime value of users and we're trying to see what it does for Ria.

<unk> of the subscription so renewals and everything so it took us a while to do this but by now the prices are pretty good for most countries and they are they are what you would expect given the given the GDP of each country for example.

Now what that did this.

For countries like the U S. The prices didn't change all that much. So that's good and then most of the big changes we're usually.

More countries the prices went down quite a bit.

And we see that as a first step of many that need to be taken to monetize the poor countries.

Obviously monetize countries like the U S or western Europe , we monetize a lot better there than we would monetize in a country like Brazil, or like Peru, or Vietnam or something like that.

And in order to really monetize well in those countries and in the poor countries. I think just a number of things need to happen. The first step is that your price needs to be right. We did that and so that was a win and it increased it was an increase in bookings, but it wasn't like a 10 X like sometimes people think Oh now you have the right price or you're just going to tax bookings in Brazil.

Something that's not what happened and that we didn't expect that to happen because a number of other things need to happen in places like Brazil, or like in India or something like that for example.

Just people are not as used to paying for recurring digital subscriptions. So another thing that we need to do is probably we need to work on kind of more ala carte in our purchases.

To improve that we also need to probably improve forms of payment sometimes people just don't have the right form of payment. So this is just a number of things that we need to do and this was step number one.

Thanks Luis.

Thank you Rob.

And your next question comes from Ryan Macdonald of Needham.

Hi, Thanks for taking my questions.

I wanted to first start with drilling of English test, obviously, some really strong growth that accelerated out of Europe year basis, Im curious what youre seeing there between what our system mix of stronger international enrollment back in IRI domestically or if this is a result of US wanted to increase the number of universities that you have on the platform.

Yes. Thank you for asking about the dual Ingo English test because it's something it's a project that is very near and Dear to my heart and it's something that we're very excited about just again to set the stage to remind everyone because not as many people know about the dwelling linguist I. So this is our second largest product most people know us for a language learning the dueling languished as it's our second largest product it's a standardized English proficiency.

Sam So you.

We'll go to our website and you take assessment and it tells you how good hearing wishes.

It turns out those are used for a lot of things being standardized English exam. One of the main uses not the number one use but one of the menu this or standardized English exams.

University admissions for foreign students that when people want to come to the U S to study.

Alright, sorry, Stanford, Duke or something they have to apply and they have to prove that they can speak English. So they can take the dueling winglets test to prove that they can speak English.

That business is growing really really nicely for us and the main place where that's growing it's just we're just getting a lot more adoption of institutions accepting our test so it means and it's mainly universities.

Historically, we started with U S universities and by now depending on how you measure it but about 80% of U S universities or something like that.

We are we are increasing our efforts in the U S. Obviously to get to a 100% that's where we'd like to get but also we are increasing our efforts in other big markets of English proficiency exams.

Canada, the UK, Australia, and those were increasing again and so the combo just a lot more institutions accepting our test is what has led to more people taking the test. The other thing that has led to that.

Because now in the U S. We just have quite a bit of acceptance. If you apply to the US for example.

The top 25 universities in the U S. In terms of international student enrollment of 100% of them 25 of the top 25 accepted dwelling English. So by now if you're applying to the U S. It is likely that the.

That those universities will take the dwindling English so the other thing that we're doing is just getting the word out that this is the case and this has helped quite a bit in countries like India, or China, which is where most of the test takers are.

Just getting the word out that we are accepted as the other test and that's helped quite a bit and I think that that will continue happening.

Very helpful color and then maybe has shrunk from a follow up perspective on the core language learning App, obviously, it's great to see no macro negative impacts thus far but as do we think about potential recession or tightening up to consumer discretionary budgets.

You too much research on where your users are coming from and I ask the reason or is there a potential here of seeing an acceleration in the shift from offline language learning to online given that.

It's 30 to 60 Bucks an hour for a language junior Emerson versus you know obviously, that's nearly the price of an annual subscription I'm just curious your thoughts there. Thanks.

Yes.

Really good hypothesis, one that I wish were true.

And I don't know if its going to be true or not I mean, because we just haven't haven't really hit the recession.

At least for that but what I think.

We believe that we believe that not just not just the recession I actually think over time, we believe that the market is going to shift to more online and just to remind you in terms of the language learning market language learning market is about $60 billion a year.

Vast majority of it is still offline where people are basically paying to take nightclub <unk> in Brazil to learn English or something like that like the majority of the market over the years, we've seen a slightly shift online and by the way. We've basically helped a lot with the online shift.

We're hoping that this that this will continue happening and it's a good question about whether the recession is going to help with that just because offline language learning is a lot more expensive. The honest answer is I don't know if that will be the case, but it stands to reason that it will but I'm just I don't know.

Thanks for the color Congrats again.

Thank you.

And your next question comes from Justin Patterson of Keybanc.

Right. Thank you very much for us as a very intense eric's question. It looks like Theres been a lot more iteration on more products consumer user facing features recently I'd love to hear about how the pace of innovation has improved.

<unk> base as it facilitated more details.

Secondly.

You mentioned duo Con Luis anything you're particularly excited about coming up thank you.

Okay. So first in terms of the pace of innovation, so two things affect our pace of innovation one if the number of users that we have to experiment with as they increase we can run more experiments at a time that helps the other thing that helps of course, if the number of people working on the product and so you know.

The number of engineers, the number of product managers and the number of designers that we have working on the product help us run more experiments.

And so that's basically what's happening.

We're hiring more and more people of course, we are hiring prudently you know youre not going to see us.

Yeah.

Layoffs or anything like that where we're hiring pretty prudently as we have for the whole time.

But that's basically what increases the pace of innovation.

And so you are right. We are running more tests every every quarter, it's pretty much the case that every quarter, we run more AB test from the previous quarter.

And it's just we have more people working on them.

So that's that's the AB testing and in terms of <unk> you should you should just tune in their space.

Lot of really cool stuff coming in are coming up.

And it's a great opportunity to Purdue just lock in behind you again.

Duo.

Have a very hard job, it's like Santa Claus. So he has to be everywhere at once reminding everybody to do their lessons. So I don't know where he is.

Thank you.

Alright, and the next question comes from Aaron Kessler of.

Raymond James.

Great. Thank you one you showed some nice marketing leverage in the quarter can you just talk about that should we expect a little bit of deleverage in the back half on the marketing side and maybe with kind of AD rates are apparently coming down a bit just wondering if that's something you're on the marketing efficiency side on the other hand are you seeing any negative implications on your advertising revenues from a couple of our.

<unk> based advertising that we've seen this quarter. Thank you.

Now I'm happy to take that so.

Part of the advertising leverage this quarter was driven by just the shift in spend so we were going to spend at this quarter, we're going to spend on next quarter. That's about it will shake out to be between around $1 million to $2 million. So there is some of that but in the back half of the year, we would expect to see.

Some deleveraging in Q3 because of what I, just said that shifted but then in Q4, it should be right back to kind of where it was this quarter ish. So.

Nothing kind of a seminal are crazy going on in the <unk> line.

The second part of your question is.

It is true we did see.

Average revenue per day, you go down on the marketing side of the business.

Just like I think other folks.

Who are taking and marketing dollars saw the good news for US is that if that went down in the order of 10% because <unk> went up.

So much the net effect turned out to be.

Advertising dollars still grew relatively nicely for the quarter.

So we're still monitoring that that does seem to be something that could persist throughout the rest of the year is that.

Average revenue per year, youre going down but.

As I said with user growth, we can offset that.

Average revenue per <unk> on advertising on advertising, yes exactly.

Great. Thank you.

And your next question comes from Mario Lu with Barclays.

Great. Thanks for taking questions. So the first one is on <unk>.

The bookings in the second quarter.

The ATP your guide by 11% at the midpoint.

So just wondering if you could provide some color into lower the main drivers for the outperformance.

User acquisition channels, you can call out.

Yes, yes.

Yes.

<unk>.

The beat on the guide was driven in part by the fact that when we issued that guidance. We were early on in the quarter. There was a lot of macro uncertainty and so we're being appropriately prudent.

There was also outperformance even over internal expectations on.

Certain metrics like user growth, we performed really well on conversion and retention and so those are really the core components of what led to the.

So the bookings beat.

And so.

Then when we look to guidance going forward.

We're taking all of those outperformance into account for the rest of the year, but then also we're still layering on a prudent outlook given there is so much uncertainty as Luis mentioned.

Got it. Thank you and then just a follow up on the sidequests in class.

Let's say exciting I guess just at a high level, you said sized classes increased revenue request.

Engagement.

But I guess in terms of language App.

Can you remind us what incentive users has in order to kind of stay more Jan sorry is that still being tested.

In terms of spending more it's just the whole gamification of duolingo people really get into it.

It's a pretty complex ecosystem. So one of the things that happens is the usual user journey would be something like this.

User.

Using duolingo and they get really into the leader boards. The leader boards by the way are these kind of groups of people or 50 random people you are there and if youre in the top.

30 random people and if you are in the top 10 U you increase the next league et cetera, they get really into that and then really trying to figure out how to get more and more XP per minute more points per minute and then it turns out that things like sidequests give a good number of XP. So people try try them and then they really enjoy that and so they enjoy.

And also gives them a lot of expertise so that we will get them to spend Genesis and stuff like that gets people to really do this.

So it's basically a kind of a gamification loop.

Just don't make it too much HLA latest game.

I don't worry we spend a lot of effort on that we really we really do want to make sure that everything that we do is really good for learning and the <unk>. I mean this is we spend a lot of effort, making sure that the five West Bay.

Basically when you're when you're earning XP, we try to make it. So that you are learning proportional to how many extra youre getting.

Great. Thank you.

Alright, and the next question comes from Arvind <unk> at Piper Sandler.

Thanks, guys.

Just a couple of questions.

First time, you are talking about.

The impact of.

Macro.

And I'm not sure it's going to seem described macro cycles and maybe then you were different companies.

Yes.

But assuming that we see some impact on the business from a macro perspective.

Do you think the impact would be more on the mid teen top of the funnel growth.

More on that conversion to paid subs.

When do you anticipate kind of the first hit.

<unk>.

Yes.

Great question, I don't know I mean.

Thanks.

Hard to know I mean, so far we are seeing no weakness in our numbers.

And so it's hard to know.

To think about it in your eyes about it for example, my guess is that free users are not going to like basically a free user growth is going to continue equally and then probably.

If people are having real tough time economically they may be less likely to subscribe now one thing that I should say that this is this is this hypothesis by the way about why we are a little less immune by this.

But I don't know if this is true or not.

But the.

The fact that we are.

Our freemium model and that our <unk> product is so good what that means is that already that people that are that are paying.

Or the people that are not paying a lot of them are the people that are having trouble sorry, paying a lot of them anyway, we're just using the product for free.

And that may be the case, and we have users everywhere in the world in poor countries, a country like India or something just very few people are paying us and they are just using duolingo for free now we don't mind that because.

That's actually good for us because people tell their friends and this is how we grow and also when people use duolingo, we have more users and we can run more a b test and make the whole product better et cetera. So we don't mind that.

But ultimately it's just very hard to know what's going to happen. So far we have seen no weakness in our numbers.

And then from a pricing perspective.

Thank you and go back to <unk>, Brian .

One pricing model.

It's starting to introduce more pricing models I think under the family plan is.

Probably the newest pricing model.

How should we think of your pricing models.

Are there going to be.

Additional ones coming about.

Anticipate potentially some macro headwinds are you being a little bit more creative on pricing should we expect some of that over the next six months or so.

So the first thing to say about pricing is that we're always experimenting not only in terms of pricing and in different geographies and in terms of pack.

Packages, what is the relative price of the family plan versus the individual plan versus the year leaves us to the monthly we're always experimenting so youre going to see US continue experimenting on if we see something that wins and by the way wins means not just short term, but long term. So whenever we do the experiments, we really tried to see that they actually increase the lifetime value of users whenever something wins youll see us change it.

But it's very hard to say what will happen in the next six months I don't think Youll see anything I don't think youll see any new fundamentally different packages because we are not working on anything like that I mean, the actual packages that we have the monthly the yearly and annual plan, which could be monthly or yearly I don't think youre going to see any fundamentally new thing.

But you may see kind of different prices and it's just very hard to say what will happen because we are just going to continue experimenting.

Great.

Last question you have suddenly I have I think 450 580 <unk> testing.

Which one do you think has the biggest potential impact here.

Revenue in our margins.

Out of all the 500 tests that we're running which do you think the single one has the most potential I don't know.

[laughter].

The two that I'm. Most excited about are the ones that I've put in our shareholder letter I am most excited about those two sidequests and request that.

But I I am sometimes good at predicting what's going to be really big and sometimes I'm actually really bad at predicting what's going to be really big so right.

Those are the ones that I that I put there that I like.

Alright perfect.

Okay.

Turning into Neocon net credit.

He is going to be good.

Sure.

Thanks.

Yeah.

Alright, and next question comes from Mark Mahaney at Evercore.

Two questions. Please one on where you think penetration rates can go PERS subscribers as a percentage of that may use I asked the question because I think at the time of the IPO a couple of years ago, maybe you thought it could looking at some of the dating apps, maybe you could get to double digits. I don't know if you said that or the market certainly thought something like that if you look at that chart that you have and your shareholders.

That curve looks pretty darn good.

I don't know my guess is that it may even be going faster than you would've thought so I don't know just new thoughts you may have on where that penetration could go long term and then secondly, just want to ask about two markets, China and India I know somebody already asked you about India, but I want to phrase. The question. This way that the risk reward there seems so asymmetric to me I don't think you <unk>.

You've talked about country launches before not necessarily being dramatically capital intensive you've had viral growth in so many markets with a number of potential.

Using subscribers out of China, just would seem to be dramatic, especially for what youre offering and so I wanted to just ask you to.

Talk about that a little bit I understand all the volatility about being allowed or not allowed in but just seems so asymmetric the opportunity there and just give us a quick update on India, where things are because I think that's been one of your better markets, but I also think growth markets, but I also think you may have had some regulatory issues. There. So any update on that so those are the three questions. Thank you.

Great Okay, so penetration.

So.

Youre right I would say our penetration of the fraction of paying subscribers two meus <unk>.

Definitely outperformed what I thought would happen when we IPO Ed we had been seeing kind of a one percentage point growth per year. So each year. It would go from like 3% to 4% from 4% to 5%. The last couple of years since IPO. It seems we're up to about two percentage points per year. So it is it is more than I expected.

And I think that.

We're very happy with that.

And your question is how high can we still don't know.

I don't see a reason why this can't get to the mid teens I don't see a reason why this can happen, but it's very hard to say now I will say one other thing, which I think a lot of people concentrate on this metric.

Percentage of paying subscribers versus <unk>. This.

This is not a metric that we inside the company operate against where we don't have a team trying to improve this metric we're not trying to do that and part of the reason is because what we're really trying to improve its kind of long term bookings.

And for some stuff.

Z wave to increase that metric for example, with lower our price significantly.

That metric would go up quite a bit, but we probably we may be making less revenue. So it's not clear exactly what will happen.

There are some experiments certainly when we did our regional pricing that probably made it go a little faster because we lowered our price in many countries and that maybe go a little faster so it's stuff like that.

But it's just it's not something that we that we necessarily obsess about.

It is something that it seems like certainly wall Street seems to care about so we talked about it.

Matt.

Yes, one second on the on that penetration rate tomorrow as part of that acceleration that youre seeing in it as an acceleration.

Came from the fact that we have a higher mix of annual plans now so over the past four quarters. We've increased the annual plan mix because of what Luis mentioned, which is we view that as a two times.

Awesome.

A two times as big LTV as the monthly plan and so part of that penetration rate going from 1%, 2% was the natural impact of that mix shift and so over time since were now almost a 90%.

Annual plan.

You would expect that to trend back towards the middle of that 1% to 2% range. So I think thats.

An example of what Luis is talking about which is the metric we care about is LTV and it has these derivative effects, which are increasing the pay.

Penetration, but the metric is LTV.

Great. So then your next question was about China, and India, Let me talk about India first because I think it's a little easier. So we haven't had any regulatory issues in India that is just not something that we've ever had India, India has been very nice to us.

So India is a very interesting market for us. It is one of our fastest at times. It is the fastest I don't know if to date. It is the fastest but at times. It is the fastest growing country in the whole world for us in terms of daily active users. It keeps growing it is now one of our top five markets a while ago. It wasn't even in the top 20, and there's just a ton.

Of people in India now.

The thing with India is that it is it.

It has been great for.

User growth free user growth.

User growth in particular for revenue, we have not monetize and in fact for a while we actually had revenue turned off in India and we are.

In the process of turning it back on and I'll tell you. The reason why we have turned it off it just turns out that the Indian consumers are just not very used to freemium models and so when we would give them the offer to subscribe. They thought that it was a hard paywall and they would stop using duolingo that like we were getting out of here. So what we did is temporarily turned that off and so we were making no money from India for a while.

Back.

Either either like either were already back we're about to be back. This is one of those things, where we're experimenting on to be making money in India, but so far I think it's a lot of users. There's a lot of great opportunity I think but I think the challenge within the ice just.

Getting people to pay its I think a lot of companies have a hard time with that.

So thats India.

China.

China.

So we have we have a we have an office in China, we have an office in Beijing. They are they are very high performing the reason we originally opened that office was to grow in China.

And they did a really good job I mean, we really started growing quite a bit in China.

Before we got turned off in the App stores, China was our fastest growing market.

The nice thing about China is that consumers actually also pay.

And it is the largest English learning market in the world. So it is something we're going to continue investing but.

<unk>.

It would be foolish for us just to just having seen what has happened to all.

The majority of western companies that invest a lot in China, I think it would be foolish for us to suddenly invest $200 million to grow in China. It's just that's just.

Unlikely to happen, but we're going to continue investing in it will continue growing now the nice thing about dwelling goes back to growth organically.

So we haven't needed to go and spend 50 million Bucks in a given market to grow or anything. It just we do something where we spend maybe $1 million on some influencer marketing or something and then from then on the flywheel takes over so the nice thing is we don't have to spend that much and then we're going to see it.

You're going to see it grow.

So I think it's a pretty nice we're very excited about China, but we're cautious about it.

And I think it would be foolish not to be cautious about it.

Thanks Mark.

Thanks, Louise Thanks, Matt Thanks, Debbie.

Great and it looks like there are no other questions. So I'll just turn it back to Luis.

Well I think that's it. Thank you so much. Thank you for all the questions and I know you just once again, please watch to Alcon on August 26th and remember to do your lessons otherwise do is going to come back here and given that my family.

Yeah.