Cricut (CRCT) 15 May 222022 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Cricut Q1 2022 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Stacie Clements with Blueshirt Group. Please go ahead, ma’am.

Thank you, operator and good afternoon everyone. us first joining call. XXXX for you on quarter Cricut’s earnings Thank note being the section is today’s company’s on Please call Relations webcast that the Investor website. of call. also replay available A webcast will the following of today’s be

with For your reference, of the data slides used the to company’s have posted Relations investor.cricut.com. the call, been on sheet, Investor supplemental today’s accompanying along section website at

Shill, Dea, today Joining Ashish Arora, Finance. Kimball the VP Officer; Jason and call are Chief on Officer; me Executive Financial of Chief

today’s uncertainties, Form like section remind including will materially. also statements, operations upon forward-looking may those business, identified everyone would regarding prepared we that expectations contain to most contains could forward-looking management risks XX, results as our and to the in management time-sensitive do and strategies, guarantee begin, Actual and is remarks This make or of XX-K. your recently differ we call inherent undue Before to of of to expenses performance of or any information date Factors and assumes and made projection results Cricut’s our including release of only Ashish. These now that I in no that response are involve statements future May forward-looking not statements additional Cricut call. statements based on These the them. statements turn be company’s update the current maybe reliance over events obligation accurate questions. placed in therefore this the XXXX. Risk filed broadcast, should call not

tough was last decline, $XXX.X everyone. exceptionally Revenue welcome year-over-year the benefited comp million, a the year, from which from significant a QX pandemic. an Stacie quarter first strong reflecting you, and Thank in

in and January to we began slowing Starting additional March, pre-pandemic As to trends. consumer a impacts typical demand. of February see reversion seasonal more anticipated, followed

our XXth profitability. our model consecutive ability operationally execute business sound quarter of and Our to continued, delivering

the balanced with of are these persisting the QX executing ahead approach. pressures term enter disciplined look and year, As in a we the and to remainder on we and focused near anticipate highly

to control. continue long-term a through optimizing within our levers We business the view many our lens,

focused more profitability. new that the first us XXX,XXX to position users business added platform and We long-term medium quarter. on are growth than in We to well the fundamentals the for

Our over subscription margins strong, business QX. users have We our the with gross and of work we being of stabilize XX% subscribers streams was on total reflecting basis, promotions. our a end done paid sequential to diverse and revenue improved the pricing our at

all we of brand significantly given agility Cricut and mainstream to levels sheet continue profitability. growth hyper with and retailers balance ecosystem to more remain and products connected is and inventory a materials. our operate attractive and more growing Coming the healthy Our period discipline, while off X-year space have shelf delivering

base, passionate have many We for fuel will monetization which user engagement our strong and years come. a flywheel increased of user and to

of ago days. influencers had driving invested have last more We million XXXX, of users X growth than platform, our nearly customer total and end in with on the X the QX million adding of over more from the partners across globe. retail XX% users we a X users engaged XX acquisition, years At significant

our investments greater Adversely to do customer acquisition focus engagement energize low-cost strong which creating a we profitability in fuels to on need engine, operate ultimately engine influence. short-term, the the growth in trade-off everything to to continue between on and building and We also flywheel, focus robust leads long-term This opportunities. current our through optimizing monetization. word-of-mouth

before revenue contribution. We of will market in to continue playbook markets international seeding the against invest a proven long

engagement significant a Materials growth user Accessories experience. and businesses, and as further we have and as Looking opportunity at we drive a our strengthen Subscriptions to in the whole, base onboarding user our

robust. is roadmap Our product

on focused the of are subscription proposition enhancing products. our value We

We content X more our next will functionality to new excited months quick-access enable for X the we are that the that and over things launching subscribers. are by

the We’re the an the that robust also Ultimately, making expand have significant term, our these ecosystem. investments to user long in our in Cricut drivers we Accessories where will products, result and are growth grow continue to opportunity Materials in as base. we

market for driven connected key Cricut looking never business consumers user. time For are forward our four our there in since ecosystem a a for be trends alternative. projects, demonstrate their resilience no a Underscoring better been confidence It’s and seamless the have is XXXX. that to

for enter market. looking internationally opportunity mature the Similar bode like international key of growth to have we the technology door has of and digitization and that third, for that value new others existing exist for easy seamless; where the new desire of These second, social true the and Australia. personalization; significant fourth, markets. drives First, media generation entrepreneurs; a and the challenges community across also opened trends UK to tools makes markets proliferation personalization a entry in more environmental our the significant

newer our markets. and stores user to continue expand at new retail with retailers things Google brand levels, engagement add thrive, search a rate have as and add all Our we and which Germany markets success and existing new partnerships. e-commerce like like of terms, in high look France contributed and these familiarity, to at We

business. same a utilize of markets, – As same on strong we drivers same we enter fundamental Cricut focus the with the fundamental playbook, the new

We retailers. our recently drive level, with At continued market and fostering launched months. over and next local the by are upcoming Korea about growth Turkey South and excited identifying voices, launches have we partnering the few key Japan just in influential in community very

in We delight setup how onboarding a in the them and When process registration are our users. great driving the process long-term engagement engagement, receives first-time first goal is machine, a turn, monetization. that user plays their be a We at to we onboard believe investing and role strong like user should it starting with every heavily also seamless.

help believe smooth which the out. just path also users, and we product will learning bundles for are who We’re developing experiences, starting

and in more user onboarding, help engagement. improving significantly recently dynamic content user bringing investing on unique Space editable This launched We our to amount we drive for discovery, Design foster a to homepage to more content and across where a we our app social on with have are This Cricut of experience the our starts year, a new more of we expanding with opportunity engagement. diverse both are along creating media versatile focused and feeds. Space, user our platform Design In addition content. focus within

Space also desktop April, Android iOS a focused launched in for recently mobile improved are between last of our following parity and on can end experience all app new Design at so the across We users greater and We launch consistent experiences, have apps. a year. delivering of the our

of are Our our strategy efforts. key overall a critical community and engagement mobile apps pillar to our

All and ultimately Cricut the Access more nearly subscribers QX, of XXX,XXX of paid prior engagement at on these around onboarding opportunities platform. our paid drive million to X.X subscribers monetization end A QX. compared more over efforts little year

Our expansive further to to and beyond content roadmap services strategy more Investments software functionality of with our personalized now adding be One in is software create designs subscriptions an to in wide exclusively are subscribers. will value Access our and popular our and them. enhanced expand monograms Access users Cricut releasing subscribers. Monogram beautiful, resulting bring to include simply user from delight we additional offering soon new template base This variety tool for allows The for is our to example use of Maker and forms. quickly and that a tool Cricut further addresses our case.

beta from call, Additionally, our received last Artist the users. which earnings Program, our great has Contributing I feedback in mentioned

bringing have more We the and to to made audience significant a to next artists the platform our broader users. steps of wide content a range the extend month, diverse program over to

Space been inside Space. for have messaging ability, those feature inside Cricut and upsell Cricut and of measure effectiveness We have the of to different now capabilities placements increasingly advertising Design Access to Design each Access the and offers

Materials as The Another opportunity more a through with driver. and monetization for make need. key materials the engagement Accessories users they more is

we software advantage means Machines differentiate and ecosystem. This within competitive are compatible X area Accessories the an where mind. us, seamlessly Connected for materials specifically the from we and competitors. designed in is significant be materials Our to that opportunity design our with of Cricut in This that is Materials can

bring with continue consumer. will seamless partner who retailers will work experiences end these the and to help We to those

story to We leverage and differentiate and materials. continue will compatibility drive our to demand innovate for Cricut

current Although of the uncertainty confident there are about our macro in we for environment, ever is long-term and growth. opportunity a as as lot medium-

nearly into new We continue million retailers. to over as markets see to large grow users we and expand opportunity time, a our X

Materials, we the continue focus is that future in innovation easier board opportunities it for to to onboarding in growth will engagement, turn Subscriptions invest on Driving user new their through Our including with process, deliver the beginning profits financials. engagement now more and monetize improving and journey. our more turn, call Accessories making for and base users users extend to driving turn our currently our and platform. leads continue deeper Connected continued to the and to I will squarely our road, the of growth. to still on this world. details foot delight the around the bumpy Notwithstanding expand enable the pedal accelerator is long-term In over Kimball on will us

and Ashish afternoon you, everyone. good Thank

who X supply and you for led haven’t chain met I of those last yet, operations Cricut’s me For the years. have

purpose-driven lives inspires every me and help is our creative what mission day. to people lead teams Our

the revenue consumers excited a today compared a decline streams look around lens. forward year to the wellbeing, QX, $XXX.X here in of prior growth and to profitability our proven and health I’m long-term community track a all us mental we year-over-year of our globe. through coming foster The operate quarter, pandemic-related Cricut you XXX%. products meeting Our from to to benefited which of revenue quarters. of of delivered record In entrepreneurship XX% of be rate allow diversity strong and million, the to and first millions

growth QX from to expectations to In comparative term, we continues demand, macroeconomic pandemic. historical pre-pandemic up the call, momentum softness the as emerge quarter believe we talked In to our we see also March, long about factors. revenue a over started relates reversion in Looking consumer seasonality last of That XX% at which current quarter-to-date. softening our we QX for was over the XXXX.

was quarter impacted by higher First revenue inventory. also channel

As our $XX a in some inventory higher-than-normal took inventory. we more with entered approximately last their million QX to call, retailers approach on and discussed proactive channel manage

to continue basis, build but while down a decreased current continue stocks. process During retailers may worked – by estimate conditions, their levels On inventory the channel given higher-than-normal net this inventory quarter, these levels, that QX. approximately we inventory some market into these worked others levels XX%, these

nature. additional factors, and at view to due demand no tough own managing uncertainties, have year-over-year is We move inventory. to levels as inventory proactive macroeconomic inventory a in for result approaches plans We promotional fill channel and consumer these primarily softer this short believe higher to of comps, activity retailers term retailers, higher

subscriptions revenue was entering to and impacted million Revenue over our X-year durable fundamentals continue revenue QX March, period. on trajectory. up as a and further, XX by a margins continued delivered We same XXX% $XX.X began nearly well quarter, that trends Operating in the Connected reduced business of believe of focus demonstrating strong Machines points channel held that as long-term positions profitability. We operating down were despite business basis in income model increase inventory retailers from growth the the the net in Machines first our from demand user our XX% quarter. Connected higher-than-normal expenses XXXX to was some nearly Revenue Breaking year, down our investments in up consumer grew last on million, high QX revenues Access. down Cricut X-year $XX.X on X-year a on was made by increase growth XX% year-over-year, grew value Accessories XXXX, pre-pandemic the million, a Accessories XX% compared from from in nearly Materials pre-pandemic seasonally basis, sales QX our Materials year, in to engaged in driven revenues Connected compared $XXX.X and XXXX XXX% reflecting and over a was Machine basis, to and last and basis. the X-year XX% machine prior $XX.X over million, a Revenue base. QX XX%

international with QX about in year. most breakdown, grown our percentage basis, of by QX X-year geographic X%, XX% increased have basis international newer a business the to year-over-year UK, revenues On of markets Revenues a total revenues, offset by representing XXXX. as compared total to softness terms growth compared mature of of the on markets XX% like prior in international from XXX% in grew the geographies. a In

was X.X users our and fuel to In added quarter up number continue We with million long-term March our total engaged new over we period growth. flywheel to users. of quarter, first million the climbing year-over-year The for users X.X than platform XXX,XXX the for monetization XX-day engaged ending XX% ended the on more users.

was in time engagement QX first when Typically, As in of a prior seasonal down benefited conditions. total broaden This use user this the cases. is we XX% mind, XX% stay-at-home on XX%. the from percentage was with base pandemic and users, from will from we year a our user into basis and in and quarter, sequential seasonality expand keep and calculation our high as fluctuate new over verticals down

We an their our engagement for time. long-term, Zs drive crafting opportunity medium are us the us the for at beginner appeal products less increasingly broaden will Gen opportunity we to crafters, with significant and beginner crafters Typically, journey, be of start of higher platform. as over attracting our creating and the in engaged to

this the As top the onboarding one Ashish company engagement priorities is area. pointed in and for out, and continue of we invest to driving

a subscribers Cricut year-over-year paid subscribers. growth consistent mid-XXs. over the our about over XXX,XXX fueled up base larger the rates our in quarter me. when level momentum adds – strong by Attach in significantly against Subscriber of base, to a rose quarter by offset prior growth grew base subscriber rates ending from saw now by and million user historically also basis, quarter. lags excuse user by with new subscriber Machine the of Access. typically just The in much new attach user Paid a number a sales Connected the periods on additions pre-pandemic X.X We XX%, with quarter, churn were is

subscription end transition free pay users As a trials and use to plans.

levels $X.XX, $XX.XX. relates This on and are the user to and subscriber Materials Accessories Accessories of slightly As was channel materials, was environment new in period. quarter subscriptions through demand QX in last QX those XXXX our depleted engagement first heavier per to particularly closely the in by also first to slower COVID ARPU as down pressure year, expect short-term dividing monetization XXXX. from due ARPU reflects from restocked and of of and in through the for by user and rest inventory. inventory $XX.XX, at engagement they measure that average ARPU retailers, $X.XX higher look user user We proved revenue we within high during Materials which subscriptions and the navigate QX both segments the buying of in entire and revenue unusually growth, year. we as was QX, from user the accessories we consumer our and quarter compares trends to in adds. base beginning

and We user million have our base XXXX. strong a growing in Materials. our grew QX focus on users user Keep we monetizing by X.X through Subscriptions base since and Accessories mind

strategies. new revenue Moving in and improvement last of as QX to QX the associated greater an over was XX from to percentage gross from leverages in our compared with in margin and the promotional our gross up quarter XXXX model This XX.X%, quarter Subscriptions margin, points derived in XX% year. streams, first with revenue business represents total diverse of the a

result machine basis, Connected sales. volumes. was XXXX, compared end-of-life the of elevated cost and recall the we on partnerships. significantly saw strategies margin to efforts us business improve during new was On to QX our manage basis, give The further, at the unit Connected to when quarter were a a pandemic our from will us comments down enabling to of impact and Connected was greater promotions on Breaking XX.X% overall Machine policies, of the our in margin year-over-year regarding down Machine the machines flexibility lower X.X%. margin height including gross Machines was You the support margin fixed in lower and pricing last retail go-forward gross call

handling warehousing freight, a on year-over-year impact costs. saw addition, XXXX and QX basis, of In elevated

was as anticipate as Materials first As selling Connected costs. took quarter QX. of higher through of year-over-year. Gross to was through the from impact began we XX.X%, year, XX%, we down flat QX, which labor increases primarily price and negative also and by quarter we to average is margin margins prior the from On implement from a and increases. commodities driven lower challenges including in prior sequential during higher handling, the Starting we in promotional XXXX, in in essentially well prices. Subscriptions the from basis, corrective Accessories freight XX.X% Gross move margin costs, quarter the Machine as actions improved X.X%,

retail We are partners mitigate out process the distribution Connected of and in these cost the with Accessories Machines, help recent to escalations. and of rolling across the impact Materials, the

the material later a second in of We actions begin expect in margins year. to half the impact benefiting these with QX

XXXX, Moving than the on improvements compare, operating basis while in the margin points, expenses. million operating On million increase focus, X-year outlined. margin. XX operating we with disciplined for of first quarter reflecting quarter $XX.X revenues continued year we over income $X.X million business XXXX, of more that This an long-term by lower stock-based in in primarily first to operating as from revenue significantly was continue by a for invest increased from quarter doubling of Operating making XX% and or increase a expenses, percentage in the expenses QX revenues driven revenue XX% primarily ago, Total million XX.X% in and improved Total was compensation. investments. $XX.X $XX.X $XX.X revenue, a an or of included compared XX% to while the operating was in were to in the million operating quarter. QX, expenses the investments in Ashish lower a to QX due

headwinds operating though in continuing long-term on they we short-term, managing range below likely remain be our healthy Even the to XX% in will the target the focused resources to As we margins. and navigate short-term, XX%. of deliver

consecutive million Diluted year. QX a first the of quarter to in net healthy our XXXX. income. was Net positive profitability profile. down from the prior share, $XX.X quarter with earnings compared XXth durable in per in million, of $X.XX was $XX.X QX remains $X.XX Our business income delivered We

sheet the inventory through Turning us levels. enables ended $XXX.X the equivalents to and periods navigate and healthy balance cash cash in now sheet of strong to flow, quarter our balance – and $XXX and volatility. million million We with cash is market

levels credit to was higher of lead line quarter We to for supply times untapped. Our materials. chain we $XXX million. generated for remains as plan mitigate Cash $XX.X continue the inventory long a carry positive million see operations risks, from and components to

inventory risks to as We risks are and match levels monitoring down on to carefully manage plan unwind.

me Let rest look about year. of the see what to minutes few the spend a we we ahead as talking

As quarter typically of reaching Also, we will on total QX million X subscriber previously impact is year likely likely starting users March, continues that a saw in this, target reminder, prove our we a this more in which thought mentioned, to than we us. growth. softness far be softer QX. for significant Based as in and consumer challenging so will

of As platform. QX paid I Therefore, the expect growth. in subscriber to to new lags user added the adds mentioned subscribers typically number or be user possibly decline, primarily QX new earlier, flat growth we related to and fewer

see this consistent subscribers will the as in are continue short-term remain increase that maximize historical monetization. to nature. flat to We decline the We value churn with in trends. which rates user’s and journey, We believe view user proposition focused we on

over the our remain the that we Looking have believe trends X at last business intact. years long-term, the driven

The we also millions further strongly are opportunity proposition to last user a monetization opportunities millions that significant in in world to base our more brings larger engagement over the and over to of platform. We base unique of users. the to have an years Cricut that the drive growth users the bring and Cricut provides confident X the value around to

over for the and the we are while this our growth below driving with year. impact, Cricut levels including and We drive margin as range the and invest, annual points likely to operating managing business. XX% are to profitable focused to and will platform we our We highest in committed In Access innovating on higher our focused onboarding, profitability few to on XX% of this Materials be in Accessories growth long-term. engagement, improving target of remainder areas our remain continue by percentage a short-term, fostering investing of on the

solid enables uncertain We and times to sheet, have cash long-term a business that opportunities. balance model position our on strong navigate these focused us and unique remain

a of have consistent record while profitability, driving financial managing track We resources. our

we’ve ever I’ll and even has we in as and Our over our business foundation tremendous grow are to been achieved, disciplined call and business truly optimizing us cultivated as scale operator the turn operate on ingrained lays that will how focused model. XXXX the the for is and we our to since the approach drive for that, further, manage questions. things The growth With forward.

[Operator Instructions] line the question Your from of Mark from first comes Altschwager Baird.

open. is line Your

types you X this projects in Hello. To with This saw on give summer. is of off, now start [indiscernible] Do expect out afternoon. seasonality we user a you are you bit more were this us some versus color And ago? could engagement, on for months play Mark amplified year? what similarly consumers seeing engaging to what last that

Yes.

that, could in. me take jump and Kimball Let

that So back the make percentage. we how – the calculate we I want sure think what to and look engagement I when define we engagement, at go

When we So from the base, is entire In look at that total our number because the at user kind graduate QX right? number typical at that that divided engagement – we And users in engagement that have slowdown engaged right? the engaged we are calculate we seasons, holidays. way we user. last like tandem, of XX any two cut also so the people in we at the base, look So QX, look percentage all number, actually don’t user users see a the QX, of are to in by time. we of days percentage metrics

last the that, the same engaged compared basically X.X quarter XXX,XXX is about repeat So at end which we QX, that and to year. users, kind million had just just give of to of number to

are and mean, projects a engagement we I The range from Valentine’s to don’t clearly, They still kind Day are are And we think what more T-shirts right? we had tell. people are and in the stories an on recently, – of big expect labels. perspective. I of go and a people Mother’s of we and doing down So see cards we projects seasonality that doing also a lot this Easter, depends doing, difference had

Kimball engagement. about to focus is of onboarding one of our I mentioned and drive core talked As briefly, areas and

will are drive again, up. we on company a working a for initiatives numbers So those of help But important it’s and believe on focused we very number it. hyper that metric the we’re

you thank the then bringing Are a some that. Great, Gen for you You any you crafters pressures younger seeing And have about differences your to customers into and as between how talked inflationary particular? Z network. follow-up, in those respond seen significant more heavy beginner crafters customers? and users the newer,

Yes.

So that’s a really good question.

our strategy, enthusiast, and influencers, partnered to And engaged less And believe where in bring with creativity core and platform, and beginners the the to everybody, things. out strategy been has by have so it’s we right? partnerships, broaden want launched of easy people we our go we the by beyond in have this retail make fact the company and we as for super somewhat create has time more One that as are that design been consuming right? it to goals to joining intermediates

they they simpler looking bring occasions, but special creativity home, not organize life. whether are The want of would do kind to you projects to to guess So everyday just on projects. we their in want that

to over engaged, We bring them helping in things then engagement X they have of curve get the kind time. up on And minutes focus of people or a do as less. lot

users in software a I innovation, where about, as can of talked bring board. see our on will lot we these We

our reduced example. one-dimensional of Cricut recently We launched driving multi-dimensional have, of basically have right? is will for one from we now projects platform as homepage community. And feature well as give where as more engagement. kind platform the I launched itself featuring Learn We significant more will homepage, amount the our are a with education, a we

our to particularly members, featuring engagement we beyond projects beginners rich which connecting – think I we community projects, And And we that think of new beginners. driving is that very, We projects, that’s very in saving platform, that for early bookmarking see something etcetera. the people and are even is on for days cutting. with helpful are

said, and So that. focused bringing with platform our on then life, complementing on we stay and very expanding drive to that in as I everyday will the creativity help infrastructure

that. you chasm, go. what think we focused and talk crossing we’re long have teams if done, ways the on we our And have proud So really about of are I to

it on. pass will I you. Thank Alright.

from next line comes Erik Woodring question from Stanley. Morgan of Your the

line is open. Your

road you to then we points I come to the with does their out Hey, Thank the the questions. Maybe expanders giving you’d be many be these without fit good beyond follow-up. excites details And to to or on sharing. with start products what meaning way map come what can my afternoon, think have so about adding launch TAM for maybe within taking you And kind or a I’ll product demand thinking about ecosystem? products how price then can map, that guys. just you bit Ashish, much would your product Obviously, just are or about that, the consumer too out what Maybe of one a elaborate with? you you. comfortable X X-months road environment the impact

How much Erik? time you have do

want. as much As you

You road in a go CEO, the and map, product ask what’s on he forever. can

a of is number there proud exciting think that things I I’m of.

line, launched a launched upgraded can Press the Auto have just ability consumer and talk we gave as number a Easy heat team Press Our We as products launched at tons We our product have of we hats. innovation personalize Press, focused well which we that the in coming. $X,XXX to press of Hat and about a the category. people

Space. And is what that I thing app. our me Design our X think platform. next the is platform to Cricut again, excites I the the X mobile mean the most months over by It’s

massive make of to I is of there share we be amount track on connect that Cricut projects help doing just that easier thing really with of in would monetization. other, drive that doing foundation with will things each helping going we things effort next other. community And to the As to that said, on are I The lay a onboarding. to a Access. improve it number that have the is, I will number for each for is think There say, all are inspired, we building of

about also that of expand will and content, library U.S. Contributing massively not talked the within genres we the So just globally. the the of Artist the content of Program content, but diversity

We I the that manipulate easier as I Well, that matching this Monogram able a to briefly expanding to do perfect by complementing what content what is will are to map. they word a can a example content. Maker – be we mean today. in than with is such people Monogram library editable addition services content the that Maker. that exponentially tools as content are road And software mentioned such of

beginner for they As of love they a them do monogram. make doing, which have how come that we it making clicks. can couple to do you And easy a do within that something in, crafters is really

more So enrich machines. are road the us desktop, products that’s us in of beyond the not the platform, new as examples kind allow also – to the mobile enable that of a that few but really only of new will products categories market between are achieve parity but introduce of I in we the cutting think think and that today, I to

what have a we the expand but cutting been is technologies to product really little bit on that cycle innovations So means beyond can and that life machine. working longer, Cricut people

hope most questions. things I those all the your about I that So answered and of excited am are I

obviously, follow-up, of dynamics Maybe lot no, as moving no, a market. lot there No, the in pieces, on going is perfect. a of a Yes. just that’s

the we there sure kind from we’re low about is So last level June help fairly pandemic quarters been over look where strong. up kind Obviously, of seasonality up digits. few a just of it the and were thinking during we XQ correctly to – make perspective. past years, year, correctly is If set back single

Given of the net best about of provided, guidance commentary we for expectations you all on kind new that sequentially? of just maybe total the be of to ability? where might your should any set you down June think again, And we being the both provide that, can magnitude users so can just revenue level and kind

have we question. kind the of any hopefully some not we’re about about but your guidance, of talk it talked and Obviously, me addresses providing aspects the quarterly that of specific number let

million we’ve can we we XXXX. in see higher And from users, we earnings is you the at XXX,XXX expected. QX, added of which call, users than said about As basically the talked end last even as X

growth talk about kind our probably thing giving drivers. sentiment, prepared of we is by confidence and into head was of seen remarks we QX, sell-through of Halloween And are previous Mother’s QX down our users that see week, years, that to with about satisfied from go will a March, and and while couple of Day, the a lot at Starting year, for least for is number believe I the excitement year. a and brand, factors again, every searching driven in pandemic those Christmas or that One fairly – inflation, month was similar opening, and brought you that where Mother’s in perspective, very we that didn’t that home me a decoration, have aware from over over Day level So people how excitement gift January February in as into the saw kind a as and of thing that gives things we etcetera. we that it quarters, month, same of are slow brand that. it continued week and last looked slowed growth to a the which whether strong as was performed. and will be strong drives a typical we in we months the seasonality of there next holidays Cricut

enough growth in to for platforms, not may lot unlike a is categories, unlike is other of is highlight like that QX. creativity that an want from thing I a alternatives us believe perspective. and people, offset where One to there platform there don’t slower other QX the Now be expansive that I

because We people demand asked specifically shorter guests believe confidence. that’s when know everything platform go T-shirts choice, away. be will that that’s on And awareness so about that think trends said have early fact do are to haven’t sell always address to optimistic going as you long-term, question marketplaces, why we media am I they I on I the our before, on and very people are back, this don’t and the medium me I gives going does in come again, the term, of what me changed. make to they So, to but and personalization, brand the want familiarity. want and and to do social in because confident else, the things

we of we make it think word we as as mouth. drive improve for engagement projects, people will So, help

macroeconomic to in to challenges, we with medium-term. So, strategy and past need have going the get we fairly we what to but growth drive confident the just short-term our remain do again, forward

I for you Thank Alright. appreciate color, that. the Ashish.

from question comes the next line Jim of Your Suva from Citigroup.

Your open. line is

going And world because historically maybe of would a of looking soft if I be coming I that basis meeting just you followed heard it’s actually since mentioned are going you Kimball. I down, a deceleration they QX right. so, out back a likely not there Thank your an absolute the abnormality very past because to don’t quarter you. I we time COVID Thank recall like for of of are subscribers kind a that and going should or to periods of much. numbers subscribers people now with And more, is probably you growth deceleration, X.X company normally actually down? first the or think going that normal when for down, on down, of out an the subscriber in basis, lived be society see of that’s years. subscribers and not I mean if that And have But back COVID of we question, IPO down.

for the Jim. question, Thanks

factor that that important And is machine leads three to subscriber user is and sell-through there factors first really, into go So, new adds subscribers. drives the most growth. that overall

with is the couple period, subscriber put the which on quarters subscribers lower opposed pressure rate and the factor then we will talking clear, out and where been drop the natural has as largest that fairly consistent next we go back as just about consumer subscribers total during of subscription. churn demand long-term. in. are the will through of come just be growth. And And Second to to just the And churn, is level of reactivations over

Our remains attach rate high. very

our XX% attach compared rate attach mid-XXs in point over with We our slightly at highest to a are rate. pre-pandemic

to more growth that Looking into pick our forward, in to needle and subscription as are are the and just sales seasonal it’s machine demand we reactivations, Access our not QX, that’s about. do rates manifested impact up. drop to on normal attach we move overcome expect But to also but talked and In the we in return to reinforce with of and the move I value that. to invest high the the continuing we meantime, I the want starting consumer Cricut just products enough in of

pretty been just is not Right. that the But thing down, should subscriber periods like of to going be consider abnormal pre-IPO have and a there we going kind of works this historically, or forward? normal bump normal, past an

– This I bump. a call is it, it’s

Okay.

And kind is it part churn. level of of I about natural talked that of

it of our near-term, have this have hasn’t subscriber but the rate increased, in works And out churn. near-term expect consistent as but QX. resume that a just churn way, to than And in moderates did we still – growth we much right. ago, larger a in we base We X years growth fairly level

for to X you more more your your mentioned of is excitement to new a your then the excitement? products on months on think next software like enhancements we about that for your and physical months. Okay. on question comments, Ashish X prepared enhancements as And in or that ecosystem, strategy, Is

Yes.

users I about to am new engagement onboard talk Access, So, talked But focus next three months types we – on think is of amount fair drive our that innovations of subscription a for leverage driving of the about the to Because Cricut I higher platform. there about technologies a is months, six platform. talking significant the building and a will really levels better, when which I product. have and opportunity think to mostly I

we so been of variety And have a working software. on

have working contributing program. We the with been artists

say three because efforts we it we what users that’s I accelerated have, of So, all our in drive kind engage they higher are of would things, more related. level definitely driving subscribers. The have will those

months, six be months the in will will to primarily things couple lot publicly share three exciting and working that So, technologies will next new a be I new years. But able for this I to I we the on all software we what arena. mean longer, as share hardware be at clearly, would what software we platform – say, able is our the of we some point, about platform. talking next in feverishly are am take launching

Cricut drinking and details Great. Mug Thanks right hot cocoa. actually the so my I’m of for now, much out some

figured much. the you out so I So, at least. onboarding user experience and Thank

you. Thank

Your next Hall of question Rod Sachs. comes line from Goldman from the

is Your line open.

in too. elaborate want questions. is users, actually Hi. guess Thanks bit for for my a Bala March. taking you maybe start softness come with Could guidance. looks I year it? This of also, And like you lowered like weakness engagement I terms seeing looks It on are Rod. on the demand user in both new full in to down given consumer has it you adds that that more

the a So, engagement terms user new board, onboarding? both across I less in is of have or it also follow-up. more And and a

Yes.

machine as Bala, right. think by we driven like sell-through, are mentioned, adds I new So user

that off November, So, stuff come December, a lag people trial that that subscriptions. their has in we stored time October, certain

compared impact of which and in didn’t adds we sell-through, So, in our in user March, will expectations. a we a see saw then to slowdown necessarily slowdown What number QX. the was QX machine

I said, we think we similar I and saw engagement from typical January off perspective, like seasonality to coming see an February the QX.

of user intentions specifically and maybe we our have are and remarkably that puts not what return to is, insight feedback we the time, out different. talked even we they consumer One we we we base, about they on research talk attribute anything life, stresses about the effects engaging, when see engagement to all that think office just right. have the clearly So, we necessarily that saw, I that And get spending, etcetera. is of inflation, didn’t of

stayed fairly the slow with in we adds I manifest months. in the the and that have that down few we sell-through XXX,XXX healthy that on maybe somewhat expectations. engagement are then for as It’s user said, some why added will something QX. heavily That’s consistent time-consuming and make But do to itself easier it’s So, users – we we to focusing do it of and saw the less next as and things. again, how people March, in

to to to on continue guess for weakening. wondering, makes promotions new in Do or after doing like follow-up, I consumer and And this. go I I am understand just a like in an users be by better demand is wanted plan I focus more – guess your do plan chasing environment to where I disciplined environment better this especially That sense. you profitability? you strategy, an

Yes.

So for a And our machines. I differently it slightly materials really our answer accessories question. and versus will Bala, good that’s

our a the table. it What I and we easier, about and So, make we think both the significantly challenging people strategy. like as talked that do can it’s dilute kind for also and the do before, products would money don’t value been environment. enhance on that of functionality things very we our believe long-term also promotional have brand. right thing some promotional business It’s destroys have very the about the like, spending And consumer highly to our be it of right. to thoughtful And we terms to degree, value, in of the with is, leave

on we to to know know even approach, we and and their these short-term gun do our and the see it have sound help we you demand grew our less for when very friends current our projects improve in And hand-in-hand. is that because X company the go core have drive again, a strategy, will So, million of some on profitable platform, world, a will have to we they execute strategy those engaged, and engagement make overall a promotional And a need we as factors that would the up. we value being go with long-term users that we how that our right way. brand as major of in our drive we just continue of us. ethos are what we taken not that’s are will for and short and goal our always And What is experience, and we right. product. like pricing That’s macroeconomic that is, more though help is more it’s family, typically, we can strategy talked and view help – and they think think to goal the all users to and brands about overall very tell is away, disciplined

On how expenses, of materials, users our giving materials, but about worried them and are improve the food value. material Because in both everybody etcetera. of of hard side, is terms in to their their the we value the bills working also very perceive our value gas

It’s So, are on – pretty a basics, of of and versus machines. promotional of thing think now, a category we less kind stay at our strong materials being for basics really the And least accessories we back little the for do. business. think being for on promotional right strategy us the more on are is to, to in us the time sound bit and that I we to going focusing to really get just and

Very Ashish. Kimball, I for I if helpful, a may. got And follow-up

were Clearly, margins. lot. Just Mix the want quarter. gross they to better on helped in base touch a

we be year, consumer gross color through think helpful, margins Any demand environment? Kimball? weakening should Going there how the about would and a

Yes.

revenue. the margins do of few And We prepared committed from rest will our in XX% quarter we remarks, mentioned a you a we points as think we margins below this operating benefited, as So, XX%. mix that. long-term called the year, out, of gross of be remain to to our for

the that actually revenue usually was quarter. margins the Overall, subscriptions a were the materials, and part to of about – XX%, usually accessories the larger our So, helped that in and gross when mix, the in it’s using low-XXs. machine extent

at – current the – continue to gross so expect continue up. And machine we we margins I pick guess sell-through see until rates

gross how get machine highest highest that’s we to quarter, we typically looking season fourth quarter for And as which is so are at margin. our – sell-through, the our especially

drive And to a as our growth. is continue to goal profitable company

And else. want commodity in costs it’s But want said, on lot of give of be as value. and to is just machines. our uncertainty there to the We promotional to strategy on and a want access drive less lot everything we inflation clearly, continue just Now more world I going product, a depend subscription is, out and we to to there.

at predict how happens out, but So, question standpoint XX%, is it’s the strategy XX% that general shorter when plays from margin an our to back really term, is but a hard everything this to operating point. get in to of

Got much. it. Thanks very

Barclays. of next question Kearney Paul comes line Your from from the

Your line is open.

in quarter-to-date user engaged of I you question. we trends Hi term, absolute wondering if your to also, grow everybody. my longer you taking can And engaged users. comment on on for an engaged track should growth? was how of Are sequentially number terms targets for users? then Thanks about think of

Yes.

We guidance number users. the of really specific haven’t on engaged given

As I where is by each again, we total the two users. is One with at look the numbers said, we tandem other. the the the number engaged of percentage base. in which is divided engagement, second And installed total

So, focus of for our part and the we some I themselves the going – think year. these initiatives that – to manifest are will towards I later of we it’s year, given the see think

of is right. richer that, that probably provide to variation look more number as a goal at Our even –

drive we engagement. continue today, a engagement specific So, very define narrow to way, our to but in goal is

you standpoint, we to graduate again, don’t number continue – we will base user the like Now grow. same see from so a obviously base, see of will users user

starting then And connected in channels And detail I it was Is you how kind in XQ. wondering Understood. you initiatives is well? think on that pricing reconcile the place – machines that And both recent it of with promotional provide all there also, can in that. and just promotions activity? mentioned, you are more I if is accessories? in as the do

rolling we of segments. physical out process price increases in the our are across all So, of

machine and a both and work-in-process. that’s still So, accessories machines, – And materials.

some of that second QX, in that’s will but half mostly the And so year. going to we benefit the of see impact

Understood. through And new or is it increases, this products? is in like-for-like price innovation

– repeat so you Sorry. so your Well, the question price could increases again?

Price am price from new as increases innovation are same and last like-for-like, so more I you. right? they introducing are – year, product just price are products? the through or am Thank in I you increases, wondering,

Yes.

So, there a I of think, is couple going on. things

mix the increases, For – across the our we rolling board. going are price is to are all therefore, products actually the – when products. of is change What out we

products are mostly will have that are implemented actually of end a We products inventories. that on impact we as gross we are across margins, of a to year, but positive through go some will And go of but the through couple that work some have just away, of increase the life. pricing board, the trying those the we

you. Okay. Thank

line the from comes Erik question of last from Morgan Woodring Stanley. Your

is line open. Your

guys. Hey

Sorry, sequential Jim’s XQ, are basis? trajectory and decline one are question talking or to about subscribers. and was ask that flat year-over-year wanted basis, the growth comments Those question I about when a follow-up just of we earlier, in those a to on correct, not to

is correct. that Yes,

was That Okay. Thanks. just clarification. a

a have day. wonderful questions Ladies and today’s concludes conference. There gentlemen, you at are time. no this for further participation, this your and Thank

disconnect. all may You