Duolingo (DUOL) FY2025 10-K Risk Factors: 9 New, 11 Dropped

What the changes say

Duolingo highlights new risks around profitability maintenance, international data security breaches, and potential share dilution from stock options.
Tax liabilities and complex multi-jurisdictional regulations are emphasized more strongly.

What changed since the prior 10-K

New

NewRisks Related to Our Business and Industry
We may not be able to maintain or increase profitability in the future
We cannot guarantee that we will maintain profitability as we increase operating expenses and marketing investments.
NewRisks Related to Our Business and Industry
The occurrence or impact of any or all of the events described above could materially adversely affect our international operations, which could in turn materially adversely affect our business, financial condition and results of operations
Cyber incidents or data breaches of our IT systems and third-party networks could compromise confidential user data.
NewRisks Related to Our Business and Industry
attractive target for such attacks, including from highly sophisticated, state-sponsored, or otherwise well-funded criminal actors
Retaliatory cyber attacks and inadequate data security practices by third-party partners could expose us to legal liability.
NewRisks Related to Our Business and Industry
banks and the payment card industry, including PCI-DSS, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could materially and adversely affect our business
Data security breaches involving payment cards may result in fines or unobtained user payment card information.
NewRisks Related to Legal and Regulatory Compliance
result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business
We are subject to numerous domestic and foreign laws covering broadband, advertising, user privacy, and university admissions.
NewRisks Related to Legal and Regulatory Compliance
technology to, or otherwise transact or deal with, certain countries, territories, governments, and persons, absent U.S. government permissions or exemptions
Providing services in countries targeted by U.S. sanctions may lead to substantial penalties and fines.
NewRisks Related to Ownership of our Class A Common Stock
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur in large quantities, could cause the market price of our Class A common stock to decline and could impair our ability to raise capital through the sale of additional equity securities
Outstanding stock options and RSUs could result in significant share issuances that depress our Class A common stock price.
NewRisks Related to Ownership of our Class A Common Stock
vesting requirements, compliance by affiliates with Rule 144, and other restrictions provided under the terms of the applicable plan or the award agreements entered into with participants
Future share issuances in financings or acquisitions could dilute existing stockholders and lower our stock price.
NewRisks Related to Ownership of our Class A Common Stock
Our income tax expense and effective tax rate may fluctuate due to changes in tax laws, operating results and the realizability of deferred tax assets
Changes in U.S. or international tax laws could increase our income tax expense and effective tax rate.

Dropped

DroppedRisks Related to Our Business and Industry
We have had operating losses in the past and we may not be able to achieve or maintain profitability in the future
DroppedRisks Related to Our Business and Industry
our products, security breaches or the loss of data or functionality, leading to a negative effect on our business, financial condition or results of operations
DroppedRisks Related to Our Business and Industry
Our employees, consultants and third party providers could engage in misconduct that materially adversely affects us
DroppedRisks Related to Our Business and Industry
An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products and services
Recent achievement of profitability may be unsustainable.
DroppedRisks Related to Our Business and Industry
Confidential Information related to our business and expose us to liability, which could harm our reputation and materially adversely affect our business
DroppedRisks Related to Our Business and Industry
could, some users’ new payment card information may not be obtained and some pending transactions may not be processed, which could materially adversely affect our business, financial condition and results of operations
DroppedRisks Related to Legal and Regulatory Compliance
their Personal Data is processed, impose obligations on our ability to share Personal Data with others, limit the geographic locations in which we can store Personal Data, and potentially subject us to fines, lawsuits, and regulatory scrutiny
DroppedRisks Related to Legal and Regulatory Compliance
There is no assurance that we will not be subject to claims that we have violated applicable laws or industry standards, that we will be able to successfully defend against such claims or that we will not be subject to significant fines and penalties in the event of non-compliance
DroppedRisks Related to Our Intellectual Property
party partners may also discontinue their relationships with us as a result of injunctions or otherwise, which could result in loss of revenue and adversely impact our business operations
DroppedRisks Related to Ownership of our Class A Common Stock
All shares of Class A common stock sold in our initial public offering (“IPO”) are freely tradable without restrictions or further registration under the Securities Act except for any shares held by our affiliates as defined in Rule 144 under the Securities Act (“Rule 144”)
DroppedRisks Related to Ownership of our Class A Common Stock
Changes to tax laws could impact our financial results and operations
Reliance on broadband providers to access the internet.

Reworded

88% rewrittenRisks Related to Legal and Regulatory Compliance
Our failure to comply with U.S. and foreign export controls, sanctions and other trade laws and regulations could have a material adverse effect on our business
Removed the specific reference to Syria as a target of U.S. sanctions.
74% rewrittenRisks Related to Our Intellectual Property
From time to time, we may be party to intellectual property-related litigation and proceedings that are expensive and time consuming to defend, and, if resolved adversely, could materially adversely impact our business, financial condition and results of operations
Updated to clarify potential expenses and adverse impacts from intellectual property litigation.
60% rewrittenRisks Related to Legal and Regulatory Compliance
Regulatory and legislative developments on the use of AI and machine learning could adversely affect our use of such technologies in our products and services as well as our operating results
Removed specific references to the UK government's July 2024 AI legislation announcement.
60% rewrittenRisks Related to Our Business and Industry
We are subject to certain risks as a mission-based company
Maintained the mission-based risk language regarding high user expectations.
59% rewrittenRisks Related to Our Business and Industry
We are subject to a number of risks related to payment cards, including data security breaches and fraud that we or third parties experience or additional regulation, any of which could materially adversely affect our business, financial condition and results of operations
Added explicit references to potential service provider non-compliance with payment card security standards.
50% rewrittenRisks Related to Our Business and Industry
We operate in various international markets, including certain markets in which we have limited experience. As a result, we face additional risks in connection with certain of our international operations
Added legal differences to the operational and compliance challenges of international markets.
43% rewrittenRisks Related to Ownership of our Class A Common Stock
We are subject to a series of risks associated with scrutiny of environmental, social, sustainability, and related corporate responsibility matters
Added specific risks of activism, media campaigns, and litigation from both advocates and opponents of ESG matters.
43% rewrittenRisks Related to Our Business and Industry
Our future success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled personnel and senior management
Retained key personnel dependence on founders Luis von Ahn and Severin Hacker.
35% rewrittenRisks Related to Our Business and Industry
We may experience operational and financial risks in connection with acquisitions
34% rewrittenRisks Related to Ownership of our Class A Common Stock
The market price of shares of our Class A common stock may be volatile or may decline regardless of our operating performance, which could cause the value of your investment to decline
33% rewrittenRisks Related to Legal and Regulatory Compliance
Online applications are subject to various laws and regulations relating to children’s privacy and protection, which if violated, could subject us to litigation and regulatory actions
28% rewrittenRisks Related to Our Business and Industry
If we are unable to manage our growth effectively, our brand, company culture and financial performance may suffer
Was: We have grown rapidly in recent years and have limited operating experience at our current scale of operations. If we are unable to manage our growth effectively, our brand, company culture and financial performance may suffer
27% rewrittenRisks Related to Our Business and Industry
terms and conditions of its platform, or if any of these platforms loses market share or falls out of favor or is unavailable for a prolonged period of time, our business will suffer
27% rewrittenRisks Related to Our Business and Industry
Unfavorable media coverage could materially adversely affect our business, brand image or reputation
25% rewrittenRisks Related to Our Business and Industry
Changes to our existing brand and products, or the introduction of a new brand or products, could fail to attract or keep users or generate revenue and profits
23% rewrittenRisks Related to Legal and Regulatory Compliance
Our development, implementation and use of AI and machine learning technologies, including third-party technologies, may not be successful, which may impair our ability to compete effectively, result in reputational harm and have an adverse effect on our business
22% rewrittenRisks Related to Ownership of our Class A Common Stock
We may issue preferred stock whose terms could materially adversely affect the voting power or value of our Class A common stock
20% rewrittenRisks Related to Our Business and Industry
The online language learning industry is highly competitive, with low switching costs and a consistent stream of new products and entrants, and innovation by our competitors may disrupt our business

All 55 risk factors

Headings as the filing states them, in filing order.

Risks Related to Our Business and Industry

01If we fail to keep existing users or add new users, or if our users decrease their level of engagement with our products or do not convert to or remain paying users, our revenue, financial results and business may be significantly harmed
02The online language learning industry is highly competitive, with low switching costs and a consistent stream of new products and entrants, and innovation by our competitors may disrupt our business20% rewritten
03Changes to our existing brand and products, or the introduction of a new brand or products, could fail to attract or keep users or generate revenue and profits25% rewritten
04We may not be able to maintain or increase profitability in the futureNew
05If we are unable to manage our growth effectively, our brand, company culture and financial performance may suffer28% rewritten
06Our costs continue to increase, and some of our investments have the effect of reducing our operating margin and profitability. If our investments are not successful, our business and financial performance could be harmed
07Our operating results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict
08Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our results of operations
09Our user metrics and other operating metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may negatively affect our reputation and our business
10terms and conditions of its platform, or if any of these platforms loses market share or falls out of favor or is unavailable for a prolonged period of time, our business will suffer27% rewritten
11We derive a portion of our revenues from advertisements. If we are unable to continue to compete for these advertisements, or if any events occur that negatively impact our relationships with advertising networks, our advertising revenues and operating results would be negatively impacted
12If we are not able to maintain the value and reputation of our brand, our business and financial results may be harmed
13other penalties and have a material adverse effect on our business, financial condition and operating results
14We are subject to certain risks as a mission-based company60% rewritten
15Unfavorable media coverage could materially adversely affect our business, brand image or reputation27% rewritten
16Our future success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled personnel and senior management43% rewritten
17We operate in various international markets, including certain markets in which we have limited experience. As a result, we face additional risks in connection with certain of our international operations50% rewritten
18The occurrence or impact of any or all of the events described above could materially adversely affect our international operations, which could in turn materially adversely affect our business, financial condition and results of operationsNew
19attractive target for such attacks, including from highly sophisticated, state-sponsored, or otherwise well-funded criminal actorsNew
20We are subject to a number of risks related to payment cards, including data security breaches and fraud that we or third parties experience or additional regulation, any of which could materially adversely affect our business, financial condition and results of operations59% rewritten
21banks and the payment card industry, including PCI-DSS, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could materially and adversely affect our businessNew
22Our success depends, in part, on the integrity of our IT Systems and infrastructures and on our ability to enhance, expand and adapt these systems and infrastructures in a timely and cost-effective manner
23We may experience operational and financial risks in connection with acquisitions35% rewritten
24Foreign currency exchange rate fluctuations could adversely affect our results of operations
25Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all
26We are subject to risks associated with the physical impacts of climate change

Risks Related to Legal and Regulatory Compliance

27result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our businessNew
28These U.S. federal, state, and municipal and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change
29Our failure to comply with U.S. and foreign export controls, sanctions and other trade laws and regulations could have a material adverse effect on our business88% rewritten
30technology to, or otherwise transact or deal with, certain countries, territories, governments, and persons, absent U.S. government permissions or exemptionsNew
31Online applications are subject to various laws and regulations relating to children’s privacy and protection, which if violated, could subject us to litigation and regulatory actions33% rewritten
32Our development, implementation and use of AI and machine learning technologies, including third-party technologies, may not be successful, which may impair our ability to compete effectively, result in reputational harm and have an adverse effect on our business23% rewritten
33Regulatory and legislative developments on the use of AI and machine learning could adversely affect our use of such technologies in our products and services as well as our operating results60% rewritten
34We are subject to litigation and adverse outcomes in such litigation could have a material adverse effect on our business, financial condition and results of operations
35We are subject to taxation related risks in multiple jurisdictions

Risks Related to Our Intellectual Property

36From time to time, we may be party to intellectual property-related litigation and proceedings that are expensive and time consuming to defend, and, if resolved adversely, could materially adversely impact our business, financial condition and results of operations74% rewritten
37We may fail to adequately obtain, protect and maintain our intellectual property rights or prevent third parties from making unauthorized use of such rights
38substantially similar or superior to ours and we may not be able to stop such parties from using such independently developed technologies to compete effectively with us
39may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license
40Our use of “open source” software and materials could subject our proprietary software to general release, adversely affect our ability to sell our products and services and subject us to possible litigation

Risks Related to Ownership of our Class A Common Stock

41The market price of shares of our Class A common stock may be volatile or may decline regardless of our operating performance, which could cause the value of your investment to decline34% rewritten
42If securities or industry analysts do not continue to publish research or reports about our business, or if they downgrade their recommendations regarding our Class A common stock, our stock price and trading volume could decline
43The dual class structure of our common stock has the effect of concentrating voting control with a limited number of affiliated stockholders, which will limit or preclude your ability to influence corporate matters or transactions that require stockholder approval
44We cannot predict the impact our dual class structure may have on the market price of our Class A common stock
45We may issue preferred stock whose terms could materially adversely affect the voting power or value of our Class A common stock22% rewritten
46Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur in large quantities, could cause the market price of our Class A common stock to decline and could impair our ability to raise capital through the sale of additional equity securitiesNew
47vesting requirements, compliance by affiliates with Rule 144, and other restrictions provided under the terms of the applicable plan or the award agreements entered into with participantsNew
48We do not intend to pay dividends for the foreseeable future. Consequently, any gains from an investment in our Class A common stock will likely depend on whether the price of our Class A common stock increases
49Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt
50These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management
51Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law
52Our directors’ and officers’ liability insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability that may be imposed
53Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our operating results and prospects
54Our income tax expense and effective tax rate may fluctuate due to changes in tax laws, operating results and the realizability of deferred tax assetsNew
55We are subject to a series of risks associated with scrutiny of environmental, social, sustainability, and related corporate responsibility matters43% rewritten

Other Duolingo 10-Ks

FY2024 10-K risk factors
57 risks
Duolingo relies heavily on user growth, mobile app store distribution, and continued monetization of its language learning platform.
Filed Feb 28, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.