Cricut, Inc. (NASDAQ:CRCT) Q3 2023 Earnings Conference Call November 7, 2023 5:00 PM ET Company Participants Jim Suva - Senior Vice President, Finance Ashish Arora - Chief Executive Officer Kimball Shill - Chief Financial Officer Conference Call Participants Maya Neuman - Morgan Stanley Paul Kearney - Barclays Amy Teske - Baird Asiya Merchant - Citigroup Operator Good day and thank you for standing by. Welcome to the Cricut Quarter Three Earnings Conference Call. At this time, all participants are in a list ...

Accessories and Materials We generate Accessories and Materials revenue from sales of ancillary products, such as Cricut EasyPress, Cricut Mug Press, hand tools, machine replacement tools and blades, project materials such as vinyl and iron-on and sales of à la carte digital content purchases, including fonts, images and projects. Accessories and Materials 24 revenue is recognized for sales of such items, net of sales discounts, incentives and returns and includes amounts allocated to the material right for ...

NASDAQ : CRCT Financial Q2 2023 August 8, 2023 cricut. 1 Safe Harbor Statement This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical o ...

Cricut, Inc. (NASDAQ:CRCT) Q2 2023 Earnings Conference Call August 8, 2023 5:00 PM ET Company Participants Jim Suva - Senior Vice President, Finance Ashish Arora - President & CEO Kimball Shill - CFO Conference Call Participants Erik Woodring - Morgan Stanley Paul Kearney - Barclays Mark Altschwager - Baird Operator Good day, and thank you for standing by. Welcome to the Cricut Q2 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After speakers' presentation, there wil ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-40257 Cricut, Inc. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (Address, including zip c ...

Financial Data and Key Metrics Changes - In Q1 2023, the company reported revenue of $181.2 million, a 26% decline compared to the prior year [6] - Net income for the quarter was $9.1 million, down from $23.5 million in Q1 2022, resulting in earnings per diluted share of $0.04 [14] - Operating income was $10.5 million, representing 5.8% of revenue, compared to 12.8% in Q1 2022 [14] - Total gross margin improved to 42.3% from 40.5% in Q1 2022 [28] Business Line Data and Key Metrics Changes - Revenue from connected machines was $34.1 million, down 45% year-over-year [6] - Accessories and materials revenue was $72 million, down 39% compared to Q1 2022 [6] - Subscription revenue increased to $75.1 million, a 16% increase year-over-year [6] - The company ended the quarter with 2.7 million paid subscribers, a 17% increase year-over-year [4] Market Data and Key Metrics Changes - International revenue was $33.5 million, down from $36.5 million in Q1 2022, but as a percentage of total revenue, it increased to 18% from 15% [6] - The total user base grew to over 8.2 million, a 19% increase year-over-year [10] Company Strategy and Development Direction - The company is focusing on new user acquisition and platform expansion to drive engagement and subscriptions [3] - There is an emphasis on improving the consumer purchase journey and enhancing user engagement through new tools and content [3][4] - The company plans to leverage international markets for growth, with over 1.1 million international users outside North America [3] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of softer consumer discretionary spending on connected machines and accessories [5] - The company remains optimistic about subscription resilience and international opportunities despite current challenges [5] - Management expects typical second-half seasonality to improve year-over-year comparisons [29] Other Important Information - The company implemented cost reductions, including an 8% reduction in force, resulting in a $1.2 million charge in Q1 [14] - The company generated $95.2 million in cash from operations and remains debt-free [14] Q&A Session Summary Question: Clarification on connected machines and material sales trends - Management indicated that demand for connected machines and materials has been softer than expected, continuing into Q2 [16] Question: Sell-through rates with channel partners - Management noted that sell-through rates are healthier than sell-in, and promotional strategies are helping maintain market share [18] Question: Marketing strategies for new customer acquisition - Management discussed focusing on digital media and influencer marketing to attract new users, emphasizing the importance of building the marketing funnel [19][25]

Digital content is an important element of the overall content that we make available to our users. To secure the rights to use certain fonts, images, ready-to-make projects, patterns and other digital contents that are used on or with our products and services, we enter into agreements to obtain licenses from rights holders such as copyright owners or their agents. We pay royalties to such parties or their agents around the world. In other instances, we enter into agreements with various third parties to p ...

Revenue Performance - Revenue for the year ended December 31, 2022, decreased to $886.3 million, down 32% from $1,306.2 million in 2021[210] - Accessories and materials revenue decreased by $190.8 million, or 35%, to $361.4 million for the year ended December 31, 2022, from $552.2 million in 2021[190] - Connected machine revenue decreased by $295.6 million, or 54%, to $252.6 million for the year ended December 31, 2022, from $548.2 million in 2021[213] - The company is experiencing declining revenue growth rates compared to the COVID-19 pandemic years of 2020 and 2021, with current economic conditions adversely affecting demand for its products[274] Subscriber and User Engagement - The number of paid subscribers could remain flat or decline in the short term due to declining user engagement[186] - Subscription ARPU and Accessories and Materials ARPU have declined in recent periods and may continue to decline, adversely affecting revenue[186] - The company regularly reviews user metrics, including the number of active users and paid subscribers, to evaluate engagement and growth trends[272] - As of December 31, 2022, Cricut had 2.6 million paid subscribers, representing approximately 33% of its total users[377] Market and Competitive Landscape - The top seven brick-and-mortar and online retail partners accounted for 37% of total revenue for the year ended December 31, 2022, down from 52% in 2021[217] - The company faces competitive risks in attracting and engaging users, which could adversely affect growth rates[184] - The company aims to tap into a large untapped market opportunity beyond its current user base, emphasizing inclusivity in creativity[380] Operational Risks - The company relies on Amazon Web Services for a substantial portion of its services, and any disruption could adversely affect its financial condition[203] - The company relies on a limited number of distributors for domestic sales, which could adversely affect operations if key distributors are lost or unable to meet demand[222] - The company relies primarily on a single contract manufacturer, Intretech, for the production of connected machines, which poses risks if manufacturing is disrupted[285] - The company is vulnerable to economic downturns, which may reduce consumer discretionary spending on its products and subscriptions[242] Supply Chain and Manufacturing Challenges - Manufacturing operations are significantly affected by social, political, and economic developments in Malaysia and China, potentially impacting revenue and gross margins[289] - The company faces supply chain risks due to reliance on a limited number of suppliers, which may lead to shortages and increased lead times[290] - There are ongoing shortages in global electronic component supply, which could materially affect the performance of connected machines[293] - Increased shipping costs and potential disruptions in logistics could adversely affect the company's financial results[298] Financial and Credit Risks - The company's debt is secured by a substantial portion of its assets, and variable interest rates could increase financial costs in a rising rate environment[244] - The New Credit Agreement may limit the company's ability to obtain additional financing and could expose it to risks associated with increasing interest rates[245] - The company is subject to financial covenants under the New Credit Agreement, which may restrict its operational flexibility and ability to respond to changes in the business environment[276] Regulatory and Compliance Issues - Compliance with new privacy laws, such as the CCPA and CPRA, may require the company to incur substantial costs and modify data processing practices[348] - The GDPR imposes penalties of up to €20 million or 4% of annual global revenue for noncompliance, affecting the company's operations in the EU[360] - The company is subject to numerous federal, state, local, and international laws regarding privacy and data protection, which are subject to change and could create compliance challenges[359] Brand and Reputation Risks - The company's brand value is crucial for maintaining a loyal user community, and failure to protect it could lead to decreased user engagement and revenue[226] - Negative publicity regarding suppliers or labor practices could harm the company's reputation and user loyalty, potentially resulting in decreased revenue[227] Management and Leadership - The company relies heavily on the services of its CEO, Ashish Arora, for strategic direction and future vision, which is critical for business growth[256] - The management team has limited experience managing a publicly traded company, which may affect the company's ability to comply with regulatory obligations[281] Product and Service Offerings - Cricut offers a subscription service, Cricut Access, which includes a library of over 300,000 images and thousands of ready-to-make projects[377] - Cricut's products empower users to create professional-looking homemade goods, expanding opportunities beyond the traditional craft market[382] - Approximately 25% of Cricut users create projects to sell, indicating a significant entrepreneurial engagement within the user base[379]

Financial Data and Key Metrics Changes - Full year revenue was $886.3 million, a 32% decline over 2021, primarily due to the high growth in 2021 during the pandemic [101] - Net income for the year was $60.7 million, or $0.28 per diluted share, compared to $140.5 million, or $0.64 per diluted share in 2021 [104] - Operating income for the year was $80 million, or 9% of revenue, reflecting lower revenues compared to 2021 of $192.4 million, or 14.7% of revenue [20] Business Line Data and Key Metrics Changes - Subscriptions revenue for the year was $272.3 million, a 32% increase over 2021, driven by targeted investments in Cricut Access [4] - Revenue from Accessories and Materials for the year was $361.4 million, down 35% over 2021, influenced by heavy channel inventory and lower engagement [18] - Gross margin from Accessories and Materials was 26.5%, compared to 37.9% in 2021, impacted by increased promotions and fixed operating costs [5] Market Data and Key Metrics Changes - International revenue was $142.3 million, compared to $148.5 million in 2021, representing 16% of total revenue, up from 11% in 2021 [4] - The company ended the year with nearly 7.9 million total users, a 23% growth over 2021, with 2.6 million paid subscribers, up 28% year-over-year [75][69] - The number of engaged users who cut on the platform increased sequentially in Q4, with over 4 million users cutting a project within the last 90 days [75] Company Strategy and Development Direction - The company plans to focus on acquiring new users globally, driving increased engagement and subscriptions, and structuring the Accessories and Materials business for long-term success [100] - A two-year journey is anticipated to re-accelerate growth in Accessories and Materials, with strategies to drive engagement and subscriptions [16][91] - The company is increasing its focus on accessories and materials, believing it has the right to play and win in this segment [41] Management's Comments on Operating Environment and Future Outlook - Management expects softer consumer spending patterns in 2023 and is taking a conservative approach in planning, anticipating small incremental operating margin improvements [21][22] - The company entered 2023 with healthier channel inventory levels, expecting revenue to be more directly linked to consumer demand [7] - Management acknowledged that Q1 2023 will be a tough year-over-year comparison, with expectations for improvement starting in Q2 [7][128] Other Important Information - The company generated $117.7 million in cash from operations, ending with a balance of $299.2 million, allowing for flexible capital allocation [6] - The gross margin for subscriptions for the full year was 90.3%, up slightly from 89.3% in 2021 [42] - The company repurchased 2.35 million shares at a cost of $18.5 million and paid a special shareholder dividend of $77 million [77] Q&A Session Summary Question: What is the outlook for gross margin compression in the Machine and Accessories segments? - Management indicated that compression is influenced by cost inflation and promotional strategies, with expectations to rebase gross margin expectations for the medium to long term [8] Question: Can subscription attachment rates continue to increase with more beginner crafters entering the platform? - Management expressed optimism that subscription attachment rates could edge higher as more beginner crafters engage with the platform [10] Question: What changes are being made to the supply chain? - Management clarified that changes involve reconfiguring product bundles and distribution strategies to better serve the market and reduce inventory [30][37] Question: How is the company managing cash flow and inventory? - Management confirmed that they are working through inventory levels and expect to be cash flow accretive for the year [38] Question: What is the company's strategy for user engagement? - Management highlighted the importance of increasing user engagement through community projects and improved onboarding processes [95][123]

NASDAQ : CRCT Results cricut. Safe Harbor Statement Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements including, but not limited to, risks and uncertainties associated with: our ability to attract and engage with our users; competitive risks; supply chain, manufacturing, distribution and fulfillment risks; international risks, including regulation and tariffs that have materially increased our costs and the potential ...