Good morning,
Can you say initial public offering in multiple languages?
If not, Duolingo’s language-learning app may teach you. The Pittsburgh-based edtech company had a successful Nasdaq debut on Wednesday under the ticker DUOL.
On Tuesday, Duolingo announced it would offer 3.7 million shares of Class A common stock at $102 per share, an uptick from the company’s initial expected range of $85-$95. “We had a lot of investor demand, and it just naturally led the price up,” Duolingo CFO Matt Skaruppa told me on Wednesday morning.
But it actually opened at $141 a share. The stock price landed at $139.01 at the end of Duolingo’s first day of trading. So, its shares soared about 36%. By selling about 5.1 million shares, Duolingo earned approximately $521 million through the IPO, garnering a valuation of $6.5 billion, Reuters reported.
Duolingo was founded by Luis von Ahn and Severin Hacker in 2011, and von Ahn serves as the CEO. The two engineers met at Carnegie Mellon University in Pittsburgh. von Ahn, who is from Guatemala, was a professor in the computer science department and Hacker was his Ph.D. student. The company filed its IPO with the Securities and Exchange Commission on June 28. The underwriters include Goldman Sachs, Allen & Company, BofA Securities, and Barclays Capital Inc.
Going public was a natural progression, Skaruppa says. “Luis and Severin knew that they wanted to create a really impactful, long-lasting, and durable business,” he says. “And in their minds, they always knew that probably ran through an IPO.”
“We reached a certain scale of revenue and size and then a maturation of the business processes; we felt like we were ready to go in,” he says. “We wanted to make sure that we had capital for the long term to hit all of our growth targets.”
The founders’ mission is to “develop the best education in the world and make it universally available,” according to the IPO prospectus. Duolingo offers courses in 40 languages to approximately 40 million monthly active users. So, what makes the company so appealing to investors?
“They told us what they like is, it’s a founder-led business where the founder is going to continue to drive the mission, the product, and the business forward,” Skaruppa says. “We did have a good scale last year, almost 200 million bookings … so they liked the growth profile. The investors also really liked the margin profile of the business. We have 70% gross margins and nice, free cash flow as well.”
The Duolingo app launched in 2012. “Our core language learning app is free to use for as long as you’d like,” Skaruppa explains. “There’s no content behind a paywall. We want the app to be amazing and to draw users back day after day to learn languages. And then we asked people to pay us a subscription fee.” That’s the company’s primary source of revenue, he says.
It surpassed one million paid subscribers for its Duolingo Plus subscription product in March. In 2019, paid subscribers rose 200% year-over-year, according to the company. Duolingo was valued at $1.5 billion in December 2019.
Skaruppa joined the company as its first CFO in February 2020. He was previously a senior member of Goldman Sachs Investment Partners. He prepped for Duolingo’s IPO by “making sure that the business processes and systems are ready to go, to withstand the public markets; you have tight timelines, and accuracy is paramount.” But many of those processes were already in place, Skaruppa says. “It was just fine-tuning,” he says. “So, I was very lucky.”
Any IPO advice? “Choose a company that has a great mission, a great business model, and a great leader,” Skaruppa says. “Those things are going to shine throughout the process, regardless of the bankers, lawyers, and advisors you hire.”
See you tomorrow.
Sheryl Estrada
sheryl.estrada@fortune.com
****
Fortune’s CFO Collaborative in partnership with Workday, “The Promise and Pressure of ESG Measures,” takes place on Wednesday, August 11. The event, created just for CFOs, will feature Brian T. Moynihan, chairman and CEO, Bank of America; Claus Aagaard, CFO, Mars Inc.; Ann Dennison, CFO, Nasdaq; Giulia Siccardo, associate partner, McKinsey & Company; and Emma Stewart, sustainability officer, Netflix. CFOs can join their peers in learning more about embracing ESG while attracting new investors and cutting borrowing costs and operating expenses. CFOs can apply here. For more information, email CFOCollaborative@Fortune.com.
Big deal
The global 5G infrastructure is expected to expand at a compound annual growth rate (CAGR) of 49.8% from 2021 to 2028, according to a study released on July 28 by Grand View Research, Inc., a U.S.-based market research and consulting company. mmWave pertains to higher-frequency bands of radio spectrum, which dominated the market for 5G infrastructure with a share of 91.4% in 2020, the report found. And Sub-6GHz pertains to mid-and low-frequency bands.
Courtesy of Grand View Research
Going deeper
Many job switchers received an upgrade in pay, according to the ADP Research Institute Workforce Vitality Report (WVR) released on July 28. Since June 2020, U.S. wage growth among job switchers increased 5.8%. "The increase in wage growth for job switchers could be driven by employers struggling to find talent and are willing to offer competitive compensation to secure employees," Nela Richardson, chief economist at ADP, said in a statement.
Leaderboard
Julie Bimmerman was named treasurer and interim CFO at Rollins, Inc., a global consumer and commercial services company. Bimmerman joined the Rollins family of brands in 2004. Most recently, she served as VP of finance and investor relations at the company. Previous positions include managing director of Rollins Independent Brands and VP of finance/corporate controller of HomeTeam Pest Defense.
Bill Wafford was named CFO at Next Frontier Brands, an international consumer packaged goods company. Wafford's experience includes CFO at JCPenney, EVP and CFO of Vitamin Shoppe, a partner in the advisory practice group of KPMG LLP, and VP of finance at Walgreens.
Overheard
"People think they’re the next Warren Buffett because the currency has gone up."
—Peter Klein, a psychotherapist in London, on the increasing number of individuals being treated for cryptocurrency addiction, as reported by Fortune.
Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.