Duolingo (DUOL) and Flywire (FLYW) Report
It’s nice to see Duolingo (DUOL) responding well to another very solid earnings release. The company reported that Q2 revenue grew 43.5% to $126.8 million (beating by $3.1 million) while adjusted EPS of $0.08 improved from -$0.38 in the year-ago quarter and beat by $0.27. Net income was helped by a noncash tax benefit and EPS is still expected to be in negative territory for the next couple of years, so let’s not get used to this. Daily Average Users (DAUs) and Monthly Average Users (MAUs) rose by 62% (to 21.4 million) and 50% (to 74.1 million), respectively. Both hit all-time highs. Total paid subscribers rose by 59% to 5.2 million.
Management also raised revenue guidance for the full year, to a range of $510 to $516 million from $500 to $509 million. Management continues to sound very positive on conference calls and talks freely about what they are doing and plan to do. On the topic of AI, they’re using the technology to speed up the creation of Duolingo Stories, add content (especially in really popular courses like English) and the higher priced Duolingo Max product, which is still being tested for features and pricing before being rolled out to the entire user base. No surprises there. Management is still not embedding any Max revenue in its guidance.
Bottom line, it was a good quarter and I liked what I heard on the call. Keeping at buy and looking for an opportunity to add the second half of our position. BUY HALF
Flywire (FLYW) is also acting well today after beating expectations in Q2. Revenue rose 50.3% to $84.9 million (beating by $5.8 million) while adjusted EPS of -$0.15 met expectations. Management raised full-year revenue guidance to a range of $392 to $408 million (consensus was $392 million) from $380 to $398 million. Management talked about margin expansion of about half a percentage point on an adjusted EBITDA basis.
In terms of details from the conference call, there was a lot of discussion about how strong education, business-to-business (B2B) and luxury travel was (especially in Europe for travel). Travel carries lower margins given a high mix of credit card payments, and this impacted the quarter. B2B is growing the fastest but off a small base. Apparently, healthcare has been weak, but management sees that improving in the back half of the year.
Stepping back, Flywire continues to put up good numbers and it’s a fairly defensive business. It’s also not the lone performer in the fintech space, which is somewhat comforting. Sticking with it. BUY
Sell Remaining Half of EverQuote (EVER)
I don’t love how EverQuote (EVER) has acted after reporting after the close on Monday. Shares had a great day Tuesday, gave it back Wednesday, and traded lower yesterday (when most of the rest of the market was rallying). Today, shares of EVER slipped below their 50-day line. This relative weakness, in the face of a rebounding market and after a big Q2 beat, suggests to me that there is more concern about the reliability of the revenue trend in the back half of the year and about the impact of the regulatory changes discussed when I reviewed the company’s quarter. It may also be that the recent storms on the East Coast are reminding investors that hurricane season will be here soon, and that might cause insurance carriers (EverQuote’s biggest customers) to pull back on their auto insurance marketing spend to “save up” for any losses. Either way, we’ve done well here (EVER +60% since we jumped in in February). Let’s call it good and book the gain. SELL
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