CRCT - Earnings call transcript Q1 2021

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Operator

Good day and thank you for standing by. Welcome to the Cricut Q1 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will a question-and-answer session. [Operator Instructions]. to Barker, conference Group. Investor like speaker to now Jessica today, Relations will hand over the your I at Blueshirt Ms. please go Jessica, ahead.

Jessica Barker

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

today’s and the remarks also accompanying prepared call reference, on investor of have posted used section your company’s the to For been slides investor.cricut.com. relations website,

today Ashish and Officer, the me Joining Financial on call Arora, Chief Officer. Chief Petersen, are Executive Marty

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

Ashish Arora

team thanking off and to Petrus world, mission around most want and lives. we continue hard have to all completed importantly years, company. our passionate shareholders. to organization, for We to Thank users to Welcome culture. thanks call investment continued continued IPO and their our Asset as public over special a and family early the want as sharing you start earnings Jessie. dedication for Perot to their support, Cricut Management the help In journey supported you, us my our first our by to I creative work our new those entire of and our our the investment fulfill their to mission and forward I our community look lead our and with welcome March, grow people we that

will help multiple very strategic be IPO the While in approach. growth to we investment will our disciplined across initiatives, support continue

business in because had growth. product Cricut COVID, growth our addition saw international XX% connected XXXX, user have history a year-over-year, first of X just the beginner significant users we Joy increase solid faced expansion, under delivering while expand In million, the quarter, penetration. quarter total of over a us $XX.X a first over EBITDA of We our putting in and broaden more in year this the all retail Cricut of users, few QX quarter growth forward. growing and we a then first footprint, few growth I’d of XXX% like was a of as am well talking our highlights minutes by bringing the to was our platform from continuation quarter, was quarter, drivers to growth engagement. the spend passionate $XXX to going model, XXX% year. QX experienced community, and last of last $X drove start of us as a at the trailing Joy a run family. million, our rate acquire helped acquired or introduction going Revenue the about users growth million sharing XXXX our billion. in We long efficiently in to in new I XX-month as the and in we machine increase excess first power shortages.

large are XXXX, and users we ways sharing of that For is Cricut we with Keeping subscriptions. influx of and accessories, users and we more the with the those from and journey User engaged are with the family. The user more benefitted important creating in flywheel. Cricut. acquired of monetization them acquisition the projects and acquisition is friends start they fuel the talking engaged, one just materials, users users’ monetizing about our

XXXX, end of over QX the up created machines from XX-day period, trailing our XX% with in users of XXXX. As of QX the their Cricut XX%

machines, their connected revenues as XXX% As recurring to year-over-year. with materials, accessories our subscriptions create our that Ending across as have drive are nature. well we an opportunity users paid grew in subscribers and

Let the about me talk platform.

finished We different have our create to seamlessly include across from connected machines, that to highly as apps our accessories of discover built our a to types define to and inspiration a project. materials work user and We as well designed of of machines. hundreds are design platform software and connected accompany products platform projects, versatile a that

our For those user journey. to that Cricut reinforce the business me of and some a the let key new story, shape trends typical

media. of long-term of of new generation secular from tools, entrepreneurs, We proliferation include trends digitization major that technology enabling personalization, social and a are benefitting

Our connected typically design first platform, plays their the journey. starts our the purchase registers makes box, key of machines. opens our a the user of role that From user project, and on time journey with in the one

access user and every and a projects, user well Our some own are selection device on images. on touch cloud-based, we Users apps as Every goal because images, and a as up Android, their free and it and project can pick PC, start another. a on gets can design iOS, upload one free ready-to-make Mac, is our to for purchase, wow at of users fonts, point. some

XXX,XXX our Through get subscriptions, Premium. and images priority well to Cricut.com Cricut Access Member Care. as and on Access as users discounts over two subscription these access have We of library offerings; Cricut content

Cricut As QX nearly subscribed users XXXX, end of the of of our XX% Access. were to

which other into community share allow our platform to love a that users mission. our projects, Cricut in on features several platform Our their brand, our create users users’ gives products, and from us valuable projects data and preferences each insights contributions follow share The users other the Many the community, shared. have offers behaviors. our of and of

tips, personal passionate users and about more. Our Cricut are tricks, sharing stories

community loyal All users helps with a engaged who this of foster Cricut. deeply are of

community reinforcing a Our effect. creates network

number by projects made As This users grow our and us efficiently This to that physically by turn projects or the of and shared number helps has complimented marketing to word-of-mouth acquire community. of network targeted and the referrals, effect in generates drive digitally. so word-of-mouth grow, community our our more shared sales users sales and does allowed new efforts. even

I to We the media regularly visit pages media our you of have over creativity showcase all relevant X social where our million platforms. encourage social followers across we users.

hashtag We also have are X organic. billion TikTok, entirely Cricut on on over views almost which

have creating breadth also community a a on content deep offer. users the We diverse focus of we of and and depth improving

with creative content, genres, needs. offering supports We and all causes, styles, that new goal inspiring the content seasonal of are constantly

celebrated creators favorite in example, Month, our within our projects. shared History some Black For of February, we community and during

expand Space diverse content to the in plan of the also further reflect Design to We community. interests our

have have machines create in their or We created serviceable to continue huge we our their opportunity scale use projects user base. addressable our users many our sell We and of measure of SAM. to a to believe own businesses. opportunity a to XX% terms market, Finally,

existing project we least creatives the alone, includes U.S. France, in with total four one our Germany have roughly SAM million in active SAM and that X% we at the opportunity months XX with of estimate our international who is created user Our our have penetrated portfolio. and that than SAM. product about Canada less base individuals. top individuals. of We million in With Combined in is the categories our already address Australia, XX our five markets approximately SAM a XXX international our UK, last million,

believe our creative everyone more be anyone significant. continue As of to that grow opportunity beyond innately is the we become a to is community. and Cricut and Fundamentally, SAM expand the we part mainstream, can

is our and join believe creatives products new As there for opportunity we platform. greater and creatives Cricut the to make expand anywhere even potential reach, we

believe and the Germany, opportunity began for We significant international internationally. to Canada, a Kingdom. Australia, is our also grow France, Cricut in United there expansion We by launching

We Spanish. and localized languages in our several apps Portuguese, have also French, design such German, as

believe will in We by creatives truly first with in to proposition helped drive in quarter. user North international will value acquisition that trends the targeting global growth grew are believe expansion Cricut large continue the of nature. XXX% pursue countries resonate. and that revenue populations we International where the We America a active disciplined

future, strategically passionate continue a markets and expand similar have of In expect we we addition, users In launched. effects to drive are we in seeing of new into the each emerging markets the growth. network to to community

Our enables release to cloud-based and of seamlessly and and products us the update features to platform. existing new functionality products with digital integrate physical our software that

for extensible, content, through greater new innovation and from growth functionality software and allowing and Our tools platform and increased our is products, available accessories, apps.

accessory use, for easily Infusible materials. now QX our Press, results for Ink peel-proof, a users create launched can that get personal For example, selling. with Mug allows gifting, dishwasher for we personalized the to machine safe Cricut professional-looking, in mugs Users and our

new infusible ink our transfers. have software library new example these use for Press makes launch for are and notes As infusible with that also make of possible extensibility mugs. ink capabilities, and part it ink transfer of with mugs this and to designed infusible infusible ink the blanks. coating added our compatible launch, that great mugs in a is special customized sheets, They coupled Mug The the a platform. our These mugs of we drawings mug can handwritten that pens on designs

with It making only been and time our users occasions apps our see being Our users’ not cloud-based friends gift creativity inspired the they making and mugs for. but software. are to they also they gifts ideas and amazing new in mugs are use the every are in has

with the greater increase users, step of to functionality spend experience. Design and right added user tos” lot and far. great have and to Space We sales step to help ease pleased built listening We so inside use time some tutorials engagement. a “how We educational improving been drive software, by our our of adding

creative designs their search text, add to requested groups decorative organize make Offset help their and work, also images project feature to allows to and or functionality, to enhanced our users users shadowing which highly We outlines of pop. the launched collections shapes, added

going Software our is you area continue us invest to platform this in forward. and core to see will

proven well extremely many I’m so long-term. and years. of and humbled which been able we us accomplish experiences positive We a ability to to able great demand, the what over profitable strong by quarter enter to how believe continued positions delivering keep teams enrich the lives users users we to over innovating for second been have drive community the growth have our we’ve the with momentum. With our

to Although taking medium-term, more now we Marty our financials. are the turn a executing focused community. approach details to and are over continuing on on the platform very build call I’ll our judicious and the well enriching we for long-term to

Marty Petersen

Thank call. today Ashish afternoon, everyone. you, good first be on It’s here to earnings and our good public

the proven growth XXXX. to results, has strong strength track growth. into detailed engine back our stretching revenue a of touch been on move of we Before has demonstrated which the of our to business want I rapid profitability the record model and financial Cricut

are give Our categories predictable. largely across streams us that and diversified sales revenue are

and of generally journey in ongoing XXX% and year Connected quarter was Income growth the revenue purchase Accessories XXX% a XXXX a sales of QX the from purchase from in and last Strong in new-user Materials. turn user QX drives starts our with XXX% Subscriptions million, cost. which and Net $XXX the driver revenue engagement machine discussed, in of growth primary Connected and from delivering grew last an EBITDA. in in customer year. and drive The purchase acquisition Machine. materials. throughout over covers QX over profit subscriptions that this flywheel The in the triggers then growth of Ashish mostly Revenue XXX% year acquisition Revenue accessories and significant gross was the Machines quarter and helped As increase

increasing America, same In breakdown, first in in over in quarter terms the of international growth the North geographic revenue outpaced growth quarter XXXX. XXX%

business will brand and internationally. the of and continue XXXX, XXXX with XX.X% to significantly we of to first XXXX. We revenue, As future from their of at way base to Cricut XX% community expected, in engagement create investments, The margins. in anticipate is as one is and user a International up QX growth compelling engagement sustainable total on drives our quarter, something the of user in up in In entire our seasonal the all from represented of in XX% percentage be of year. it given expand long-term engagement to awareness X.X% entire look quarter, is measure in using typically and we ongoing quarter users of at X.X% was consumer strong XXXX. reach to investments a XX-day our first building what our our healthy given than percentage QX, the high The machines lower made and base, keys is platform a QX period. in Sequentially which is remained

the be in engagement from ways that which emerge expect COVID we with may levels, engage change. As though line will generally overall users the historical environment, our we in with us

them fewer outside home, more other back-to-school, of types and improvement spending begin vacations. projects home we like to see doing t-shirts family back turning may users as weddings, instance, time for parties, For and projects the

also We paid million, quarter up paid in total X total higher also We grew over to both users, subscribers QX year-over-year ended year-over-year subscribers. quarter million just XXX% in XX% with saw growth under and growth. first which Ending XXXX. X.X users represents the

and of of This user materials. average we’re our the engagement our and similar ARPU We to and revenue through subscription each for subscriptions on calculate that segments. user and monetize through those revenue total experiences our segments business our product from the accessories monetization of per engagement Mug able our remains our measure quarter. margin where period. and launch As increase to subscriptions for flywheel, materials from platform, monetization in also dividing that by Materials XXXX. to and not was first by accessories $X.XX, period. patterns Press increases materials an our healthy compared ARPU ARPU QX that in We this entire increase rate Subscribers in user Paid is by the typically The attached to average Users. revenue QX. three QX overall by in driven of was subscriptions QX line ARPU calculate in just by by dividing was was Accessories our XXXX. total of quarter that base, in All $X.XX seasonality the within $XX.XX in driven $XX.XX, portion of strongest ARPU the to QX product gross for quarter by in base compared increase year. subscribers experienced typical accessories We

XX% Our margin bulk XXXX. our in associated the We of was quarter total China gross lower from first benefited of Machine from up Malaysia. XX%, tariffs from the to with production moving Connected

high Machine result, we in an primary to this manufacturing will XXXX Malaysia, we ability closer a to As unusually increase in demands. the strategy Connected to and as returned needed. meet capacity production tariffs. levels prior to remain China margins flex successful XXXX proved as in production were XXXX, In the able in to increase help effort Strategically, saw in early to in what with

expect address as for leverage tariffs help continued continue demand we to forward, we Connected in capacity China production to Machines. to Going some incur

how the be upon in second margins. put have more been disciplined the priority we may to plays normalize, half as for Profitability supply spending approach a always demand the promotional us. to year depending pressure and post-COVID could and addition, which out, In of on a environment choose

increase charge were reorganization over corporate expenses of was $X.X associated to the related strong driven with network leverage a structure word-of-mouth operating and investing Total Sales fixed XXXX the $XX.X Marketing QX in cost million R&D our million, things: effects, for an in growth, IPO. quarter efficient first $XX.X adoption one-time and our by is of million. spend, Our increase this costs. by the characterized three and in

into products, those initiatives, will engagement. content move in we continue international business, all and growth users including support and marketing revenue new future invest community, platform, drive XXXX, to increased to carefully that As our global support we new our our to

invest grow We top the long-term, solid durable continue have us deliver to profitability. for business and on focused to future, always building just our as allows line, model that importantly a

period from to Cricut ninth a same the to up earnings year, income. the positive history pleased was that did EPS prior $X.XX. a consecutive Note million, and are quarter of reorganization time at the was income We net XXX% $XX.X last not have report IPO. the per net of share QX diluted comparable

expense to including expense, to margin stock-based corporate XX.X% to Turning or stock-based XX.X% the in charge million delivered $X.X reorganization. recurring million one-time EBITDA, $XX.X margin related stock-based in of compensation first an million XXXX. includes was million, $X.X we which in quarter, first total IPO compared million compensation the or EBITDA expense and compensation the QX quarter $XX.X $XX.X

approximately stock-based expect the to over we forward, quarters. be compensation million three quarter expense $XX next Going per

to with a overallotment from and cash, cash quarter and to liquidity. the sheet $XXX the now in Subsequent million end, option, million. IPO. portion underwriters proceeds securities equivalents, million the marketable the which quarter balance the $XXX proceeds approximate the total We Turning to $XXX ended exercised includes of bringing in

QX. also $XXX We of Connected especially demand, levels we inventory credit million the as higher operations as with for end quarter to up untapped Cash payments of in Machines. first reflecting line million, of keep $XX the of on to for continue was used an work have

the are as during not to some discussed That process, we provide this is normal want and guidance the our declined a seasonally said, slightly As we in QX quarter providing color I year. to at look time. low Typically, quantitative rest IPO of from QX our we year.

mid-way QX. QX a quarter, the revenues will through to current range second are that be suggest we in only trend While similar

supply inventory challenges occur. to maintain of different year, view and the we several navigate we the half As that related the dynamics second a possible as we careful pandemic look to might

XXXX. typical to aggressively user also sequentially expect QX It’s in the typically year expected QX new XXXX we year. machines as user have growth growth and would lower benefits for years be least note last that due to calendar of pandemic. users in holiday seasonality, user growth weeks year full important later the to season. And many at the QX, the in of in the However, new many as from grown with we to that preceding the did increased number picking back full remember we in Please add few prior sold the consistently up the currently in business

We behaviors drive built have then and and viral We macro users growth durable drove our that trends, that of the the remain acquisition. a intact. and model passionate business the a new-user fundamentals, our community believe

the made and our targets and have the We significant Cricut so we what more we progress over we’ve achieved reach Longer-term, growth, to acquisition around years and bring engagement, continue to drive the invest user globe. new proud ecosystem long-term are to far. for of will millions

Our model long-term XX% in the the margins to to margins range includes XX% and EBITDA in XX% XX% gross range.

to We questions and to back it our have. we turn it and the committed execute we’ll the are continue operator job the long-term, way on focused to always With is that for

Operator

Thank your with Instructions]. Goldman comes Sachs. of line you. [Operator the Rod Hall first And from question

Your line is open.

Rod Hall

follow-up, I… I if can ask guys, do Hey mind you guys a

Ashish Arora

Sure.

Rod Hall

assume numbers on looking I this follow-up. you're and of sure that user double was I good then Marty, in I given obviously, into normally not that end first thinking my isn't that lockdown year, back-end good conditions good the wanted expect, the users the commentary normally are and would quite in So and you assuming growth? growing year things but kind here user growth what question phasing we've your guess, expectations, to but growth of -- you maybe would of also a you been than I the then you're year. to QX faster so back through then user assume at have as would beginning in here just of of the terms just as your I'm there, check well. and as I'm

Marty Petersen

normal Yes, shift in there's so seasonal thing users is new seasonal to one just that are how about -- talked comments in that re-highlight a prepared acquired. a we my

picks users New new users quite as new then, the QX. higher in up later year. growth through are than bit in progress user QX the we a in year, And

year to see we're But happened pandemic. the directed to that And new and are to that year so some we that see pretty And I users XXXX as exceptional normalization that have a we a number minimum, prepared comfortable for was We always last we they match we emerge comments, back the expected of from will year this feel pleased on my brought us. think so far. at year. hasn't that last

top on our So year. strong expectation users is of to grow that

Rod Hall

Okay. [Multiple Thanks. Speakers]

Ashish Arora

add, because just a want of it apt. said, what thanks kind question, color business. to add more flavor you I the I Marty of the bit gives just wanted to for to really overall the

still as while COVID, wanted many several of number we that I Marty subscriptions, into some so we expect XXXX we users currently at And right. XXXX. from of into go prior many first, as know we've year, mentioned behaviors What materials. significantly least of strong about grown did changing, users the at new And talked everyone from right. being we but in larger going right. ARPU, XXXX, than accessories as the we is we remain CAGR benefit XXXX second these to we to And, for of that behaviors will and that half intact, So in half was our we in of remind remarks, from engaged add users that a prepared those year, a a engagement mentioned means then, that, second to XX% did from have I years the

So people to school. have back still

In Thanksgiving fact, Halloween, use bigger right. still products emotional wellness, Holidays, People this still for people year. be they will want our to crowd for

just I way to highlight some in to our reinforce tried we prepared want in few things a So remarks. that

the users in remain and and our intact. fundamentals trends community strong passion and the so model, vital business durable a have We of

Marty Petersen

that ARPU. touched is XXXX that new on users came generate in Ashish on XXXX, thing just add that on, large one And number have we in to that there and of that and QX

they XXX,XXX came XXXX, that the half on for there there the so pick you second in users just that in if you QX, And does the and users new to of came from user future. in that on and And to for a but another will number, same. base all just half of back another years want in of ARPU were a the addition not that that's of generate million continuing of those years history, -- through put in users you the our that QX, just the plug we rest came know quantify XXXX,

And so in creates as the not near-term, well. but for that tailwind a just us, the long-term for

Rod Hall

ask Yeah. you Hey could mind a up guys follow or I if I…

Ashish Arora

Sure.

Rod Hall

The subscription on time ARPU IPO. increase continuing you maybe of progression goals the you've -- end some curious of kind of for the strategic the to now the increase talk that about moves And look has what that as that? the been value those to towards through of had is, around just the us that is know But guys for plan continue I year I'm planned great around Ashish here. the got subscription, And attempted you to I that. make or one to to you know

Ashish Arora

But we as subscribers. to as value us content, as of -- a subscriptions the subscription to that part content. and addition try has a services. out, are -- And will Yeah, significantly and of our breadth to and to are value the I services we as both other one subscriptions. launched see of to to engagement driven so in we've think pointed Today, Rod, our few proposition been focus try doing as so you by to subscriptions that you the of we that is is only And the -- continue value to drive software, well areas our content add software the of enhanced with available key part adding enrich overall the portfolio. that, are diversity of

excited really you'll see future. I work I'm And think is doing. of about that in the So the team the more

Rod Hall

thanks lot Appreciate guys. Great, okay, it. a

Ashish Arora

Thanks, Rod.

Operator

the next Morgan with of from line Katy question your And comes Stanley. Huberty

Katy Huberty

Thank the incremental March I see we that drove from Press acceleration was growth, should traffic what the a just retailers have revenue. about in of to Any I December help in quarter. think growth starting the to you, about It When the color, as there even growth other about was see acceleration? the to March end think generally launch, on $XX of channel growth about tail that thinking they afternoon. stores, XXX% incremental lapping the related year-on-year for COVID inventory are good acceleration million in start at more XXX% impressive increased speaking that's factors And largely Mug prepare revenue drive are that in then follow-up. build it you as base, their we to

Marty Petersen

things, Yes, Katy. a couple of

So items. One top on inventory constraints fill is back We're I our correctly think getting identified machines. you machines. our or of two channel supply of with

QX And so strong as part in over that in replenishment from is demand of carried what well inventories machines, channel in is continues particular, of you're seeing XXXX. as just

than that our Mug line has press faster a whole. well segment As in as entire accessories as well as and materials, our grown Press is doing easy well

those think -- I as subscription. as so And well

look our driven So attach and users. well, by if increased of rate subscriptions increased, to ARPU subscribers at as largely has you can that's

the of of our kind three all to really So growth. contributed segments have

Katy Huberty

is up to the it do channel on take and to How the you appropriate And Marty, just think get some in quarters catch backlog levels many the a inventory with that. more would mean happens follow-up I you of to I it quicker environment business, it but that with or depends it a appreciate supply that? levels inventory normal in than what get normal to on supply channel multiple is quarters

Marty Petersen

in second correct, half demand, of That's containers, beyond. the that more There's there's But it's able other some go chain. on multiple facets that supply is the One of because -- the the on components. chain. it. logistical tricky on question answer constraints does are a shipping, that's to where supply importantly, issues number to and commodities, factors to you're year on where be affecting And there's a there's on Yes.

of will back But is will a in comfortable the a of we it's be our little least be at year. these machine end inventory. be on so through present, some to when to And that chain top on our in form, lot constraints and the position say plan supply tricky think able I a

Now we've to of I to try mitigate possible, through done think as that. those of we the look some of much that through see number as that at a year the least things should to end

Now side, the we're materials a position back into accessories and on on pretty those. comfortable

So we're the really, the machine supply-constrained at more where areas moment.

Katy Huberty

Helpful... Okay.

Ashish Arora

think, few than a in of We're better just six the were and quarters the But the to consistent we're year. has Marty time definitely better a we QX or think QX and highlighted add as we continues were year think next three I the but very I'll I frame months and Marty position rest in said. that in Katy, I definitely QX last than months challenges today exist, the ago. for comment, and

Katy Huberty

then, just I ask follow-up. And a if Ashish Okay. you can

hard boost post business tracking the be providing the behavior big across base? user that that a run a investor that how metrics quantitative you not how some that overall high this what year. management as us understand CEO leading about stocks Can at it's to business level, world the pandemic, all consumer You're debate consumer last is in and a changed guidance saw just you talk and because of what might as know are normalizes what and consumer business the we behavior are will normal to helps should within your understand your and evolve indicators the the rate team of think their early

Ashish Arora

Yes.

the very to we so is further our about one TAM. how of size, So are penetration we like how then that or things SAM and start the focused market understanding constantly saying, we consistent, just by we on I'd estimate get are on in our right. overall obsess I And focused we think off

but about is look We're believe I these the you just know here looking trends, let kind at the are of seasonality KPIs, me that. drivers, we leading talked are to these of get -- macro to Some I of constantly mainstream. level trends, stay at, which like are trends, indicators, and the what the they

we the like are as trends our those sure look and media prosumers at like of at at make and more assumptions to more as that personalization, our So we and we that none look broad have business digitization right, changed. happening, about look social trends indicators

new user growth net at, also big we would is that As our one, clearly, a far I but metrics as engagement, specific right. look say,

that or the drives it of drivers is of word mouth. of only our drives are that and drivers engaged the but One users the not growth of engagement also our ARPU, fundamental one

the tell we that And important they the can continue -- the space. in we'll projects more And we'll make, a for be people we about so think if engagement more it physical make or us, stay sure that, drive it's very they digital healthy place. more make, in the high. people the to And to stays that

Katy Huberty

you, strong the congrats on Thank quarter.

Ashish Arora

Thank Katy. you,

Operator

with comes Citigroup. Your from next line Suva of James question the

James Suva

your Thank that and on about gave the you. congratulations subscribers. qualitative outlook And you results

for your for exceeding supplies and your earlier is include semiconductor Following product wife sold equilibrium like up on say the year been of It my questions be restocking to sounds which out, as progresses, that, supply. of account about situation of some and calendar a for online you've end not buy stuff the for of mentioned good the it the supply, some that by the to but year does also equipment, I've shortages, like trying channel? continues and this demand and you does did and that

Marty Petersen

prevalent things It's be be in of we'll that So the to of to least the at but just intended hard normal or least back stock themselves too a just about facing a of and end at make the end able back through comment of be end we're levels. the the was in end point at that be not year that will necessarily I'm supply my saying manifest year. year clarification, think lot of to I the judgment through the Jim, year. in of the the the chain

longer-term done shortages components, we've least and going And of out terms to mitigate by year. with the those of us but components, are there manufacturers. in much those the shortages of securing at Now agreements carry end in agreements many through the

just see point And in is so to machine growth XXX%. at of shortages you the what other despite able some been we've I still QX to would in that grow industries,

manufacture So as would want still able moment. demand to not able machines. not at -- the just we're of We're as a we're to number still manufacture many

James Suva

just don't your metals, about Thank aggregate, to but raw in they and uses? of all thoughts plastic. changes follow-up, to plastic all do there's up not Great. margins I is and let of but then there's machine plastics meaningful metal some in going it note world, semiconductors, inside apart And it or these as and Is And wife see add take wife to be won't any my that enough, tools, you. both but hurt knives, been the materials, me her what's cutting metal that my costs. things my

Marty Petersen

we Yes, issue We would of seeing these supply/demand increase those We're -- now we that's a Jim. seeing prices, that now. etcetera, resin, polymers, sheet glue, most it's really commodities transitory. the believe Yes, expect. in metal, commodity are and you

some that but impact think So comes supply/demand have into back think the term, short-term, line. over balance in margin will -- that impact that we it medium some we the

Ashish Arora

add Jim, there's increase Marty, to I'll clearly, that as out, costs. you there's commodity is, And just pointed which comment from rightly in --

team behalf One bring that we I'm that on supply supply is of chain, things competition supplier as additional to contract side. of proud broaden have of the some with -- mitigate continued more on very the our we will that about on manufacturers, our just the we as

taking steps them. some definitely we proactive increases when make cost see those of to we're offsetting some you're sure So

James Suva

and you for Thank appreciated. details much so clarifications. Its the greatly

Marty Petersen

Thank you Jim.

Operator

from of Your Barclays. Adrienne the next comes question with line Yih

Adrienne Yih

nicely I will year. my afternoon. Good start was congratulations. to It add the very done, great

push like guess go-to-market how do prep first based have question to you And question on for I a my Ashish, and That's order want are and I I And your my it you forward you with do uncertainty? the stay the market? in you that inventory bit geography, a have is question. wholesale in customized have you the thank to then Marty, much the one little is second in for off strategy then you. what a advertising new kind I software, on new -- market my of do issue able the want what or channel, stay books to is, are meet demand to

Ashish Arora

constrained think I QX. Well, Okay. Adrienne were on in the inventory side, we

some So for having to we -- promotions didn't strategy our fact to we're the our that to inventory cadence regular promotional it sense be us shortages. adapted follow when of accommodate make

situation, much gone QX, in and the have we demand. we I but say supply a I as to think we definitely we'll better would into we've we'll and position well we'll it -- situation think we an fairly quarter, think be through when As in QX not do and are healthy what -- the mix go That's be oversupply comes that. between to a I

that -- let the that because of excited everywhere. me really front, actually really creative helps us one I'm international the people things about that On is are

So of in drove of behaviors markets the in we motivation what today, the and the in are they're global. growth and our some intrinsic the U.S.

have that, not gone are may countries, One is so that seen channel though. in, retail found some is there. specialty not demand and not country of different, in and is the the developed, we've behavior We user we've us, nuances that allowed a there may has yet the be the be and that they as need some but

to electronics working So actually to our have stores retailers, we retailers, been those solutions in mass base. bring successful of been office with user we've -- some

formula of changing our in driving using paths. the what marketing Our but higher countries. actively, some But basically is to and very engagement, creating somewhat entails be social is higher, sales raving will really and not that not go-to-market go international of seeding and products, formula in these and spend digital user dramatically kind

up are experience, also ultimately awareness So sure network and we from that then model. drives off We and word-of-mouth a create very we marketing. which ground great that engagement, make effects building providing but definitely are we it's a that,

consumer I channel both core the think and the marketing the a perspective, formula remains same. from from So a of perspective

Adrienne Yih

so loaded this it. a many components little question to helpful. Very is bit And for of Marty, a because got it's

up, cost economies is new raw you're what that the far, breakpoints, on countries unit shifting are going have of are but manufacturing. materials sort of scale, hearing I'm you which So of side

question And take expansion points the XXX margin guess so my basis I of quarter. is, in just the let's gross

maybe would mix, there's question on materials the Thank take in will full going start out margin higher-margin me to did maybe manufacturing and subscriptions because you one of the the the of from accessories about there versus as country on say you would give of IMU loaded that's If much so product myself that China how easiest you. when so any super the and so the I helpful? to and ways Malaysia why shift or there, perhaps help baseline? be shift the quarter we help that mix is and a initial And a think

Marty Petersen

Okay.

first, last that to talk is question and machine your our production I'll shift. So

mid-XXXX. tariffs So on in increased we the began that XXXX in and shifting machines

there didn't was a see you So while tariff, early XXXX, you -- didn't XX% much. as

hit, a manufacturing The by manufacturing and for other saw had part second the more. our we, And Malaysia early you gotten half, countries the their XXXX. of all lot But to Malaysia most then doors. began pandemic closing

to And so China. manufacturing we shifted some back

we been really strong. our as And of had order in non-tariffs has because been demand, machines so haven't we back a manufacturing to meet of demand some well so China quarter have because full in

and China. back of flexed a So so out we today, have quarter even we haven't full had

I'm your other and was sorry, -- terms what In question?

Adrienne Yih

that maybe of the year-on-year example, XXX an just would I and other improvement, question basis costs, other points, and -- easier to of way, guess, a that as that's mix margin gross be accessories maybe the categories, the manufacturing was materials? versus much itself Yes, costs use shift subscriptions let's manufacturing how and

Marty Petersen

related. Yes, most tariff that of was

You and margin QX they're this related. X%, can our tariff quarter, that's see that carried XXXX gross a really and in XX% machines of

so when it that. a you the But do was that subscriptions margin. essentially full And for gross at time, higher carry most of example, a XX% point subscriptions, same percentage was see

as majority we tariff-related of cost to new the manufacturing as but we others. negotiate supplier well expand some -- because able some to so it manufacturers of is and with reductions have our And base been really as our

Ashish Arora

were promotions in We promotions. we that and is In just that are constrained, promotional contributed did another general, QX. promotional are activity. that more also probably QX, some. I'll so in just more less say And we -- just to add area people

Adrienne Yih

Yes, makes hear of Well, strong to glad best as and sense. is start QX to luck a well. I'm off

Ashish Arora

Thank you, Adrienne.

Operator

of question line comes Mark from Altschwager And your with last the Baird.

Mark Altschwager

quarter the as congrats question on for and first me public my my let and call your Thanks offer company. a afternoon. taking good here Great,

as any out, frame, time the you the trended know how maybe metric start nice perspective XX-day engagement wanted to to I I can up is ask provide April, for so maybe understand we're about I'm a trying seeing here picked metric, engagement. to on has begun user kind and that -- that of demand and May provide behavior distributions So outlook see March, key year-over-year, in you to forming Really lockdowns vaccine of the your for we've that's your year? really out-of-home qualitatively, just to of learnings more remainder recently up activities the any just as the kind

Ashish Arora

Sure.

the were our really new as users on-boarded of are about you're takes particularly majority joining platform. one we're and time done and are at fact, how with bringing in better so than get while meaningful stayed consistent, engagement actually excited in get the -- in and it users our really it's the we Mark, it things And the that -- time users, familiar them platform our So who because first to and same of last year. a same

So really it has, a good stayed the thing. is that as healthy it as fact

of we've few clearly Day even weeks the types gone last seen had and as the a healthy strong throughout on more haven't changes into like in really and noticed in very QX. engagement But recently, engagement, we engagement. many even Mother’s We months. So we've the

go through go of hypothesis of into summer, we change. there's the the patterns some second that we may engagement year, that a as half As

gift kind is one thing of and for But very Back-to-school patterns patterns consistent. be they'll less programs. much home and be our So content bigger, beautiful will we're yes, maybe and there projects t-shirts category our also platform and emphasize, of there plan cruises, that be keeping matching will doing -- handle a and there engagement want will we're engagement be wear people there festivals be that keeping be are will doing the I people is DIY all lot and People trips will a about will people same so some and want as to that have will there the prepare a of but weddings, before, will holidays, our -- engagement I -- be that to stay is will one but is that, t-shirts. said of change lots sudden, on, things will there matching they'll still people gifting. people of of

be to our engagement. monitor been So situation, point final investing think excited very I'm not how understand really about healthy. will able but making user our in that behavior only dedicated really to proactive continue adapt that we continue One is the because I and is we'll and we engagement engagement changing, I'll team, add that be to we've sure in actually that, stays

Marty Petersen

one particularly in comment engagement. in Engagement and Christmas. on general have lots seasonality quick on it, just people both and of QX Thanksgiving does the holidays, making for a some engagement, comment Mark, when are things

seasonality patterns you do engagement. in some And so see

Ashish Arora

platform Mark final are we engagement time, we a because that one is because in had I'll last point, right. real see we we -- can this like are make and connected, And

can real But I not to programs that daily, what's forward that. having of a some just platform benefit offset kind we we downturn, react So see have a and only basis. of also we And to weekly at driving wanted some actually look this try but that can this is to understand planning, in if are really of can that also behavior time. programs place say in a cloud-based you put we of that

Mark Altschwager

mean international. you. I Maybe That's great more on I wanted color, a to And growth also -- follow-up great there. thank bit just then

new year? Thank the you you on more in differences can versus existing would you're seeing sales sales on relationships And expect color level, the any partners the provide to markets? your accessory that your and to any for XX% the drivers, or sustain materials, Just penetration notable then versus what subscription just of retail ARPU, is something domestic you.

Ashish Arora

Thanks Mark. but questions good are all ones. about Those five

we are the So business where say, future, in whether we these it's achieve. look learning are and the we're to markets. right like not a some what we -- excited, lot we'll needless of into on now go as But will really commenting

in focused on the now launched As markets we've came total about, revenues of so in you Europe, we the additional saw several Italy. in talked And countries from four in we we've very that while are are XX% of our Spain, countries, the international. business QX Nordics, that driving including

We East, Africa. have Middle South added

Singapore, -- a go-to-market core already that. as we're not before, as some are the countries Malaysia, said We we countries retail, team had and But many in of specialty of strategy. and call up these of our I Asian it benefit have And we that, well. we in and in the concentric understand building they're markets,

working we've bringing retailers solutions -- like electronics retailers so with retailers been and the to And been retailers we've mass office successful those consumer and and in market. other very

of I we about highlight earlier that strategy, One the prosumers. is go-to-market difference, will encounter Our markets some I international which will what we these in remains still same. I think call talked

while started when upselling example, we So off made also as initially in we -- really then our focused on we for the things and for products. our America, of market we North hobby saw not users noted, XX%

and these very early situations hobbies into are first be and overall, more the we great going some enter market the innings. we where building As I we stages, said, prosumers will the in in on But as are we businesses market. again, focused place, in a small that of there and will and of it's countries, kind then team the have on

Mark Altschwager

you. best of thank And Great, luck.

Ashish Arora

Hey, Mark. you thank

Operator

no showing I'm time. speakers, this me at questions Excuse further

continue. may You

Marty Petersen

you. us then. these we to We today it look that's to want more think calls. and I joining of for everybody thank Thank forward many

Ashish Arora

Thanks everyone.

Operator

you today's conference Thank concludes participating. call. for This

You may now disconnect.

Cricut (CRCT) 14 May 212021 Q1 Earnings call transcript