Earnings call transcript Q2 2023

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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 will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please

hand over to would now [ph]. conference to like ahead. I Cricut the Please go

Jim Suva

operator call. today's A the be Investor call Relations everyone. replay afternoon, being webcast on of XXXX and of on for following is Call. available you, the recorded Earnings that us Quarter Cricut's also the Thank note webcast Please section will and joining today's Second Thank you good company's website.

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

and Joining and will Q&A. today Kimball call prepared host are Officer; Financial Chief Chief Ashish Officer. Today's Executive recorded, me Kimball on Shill, been remarks live Ashish the have Arora, which after

to strategies, we forward-looking results make expenses may remind that begin, and forward-looking our our additional of contain in we to would regarding prepared business, statements, statements everyone your remarks Before questions. response management operations and statements, including like

obligation Form contains this call. of broadcast, XX-Q. materially. time-sensitive update differ only release made statements on those These or upon Actual also forward-looking Factors of events Cricut are in any and may involve including future statements risks undue the the date therefore, in most of be These them. August no or This be and based should inherent performance, not section expectations information assumes company's reliance of accurate management call to results projection placed as uncertainties, could the today's filed XXXX. and not Risk Cricut's recently as identified current that that is X, do guarantee

to Ashish. now will call turn I the over

Ashish Arora

expectations. quarter with our We in finished the Thank you, Jim. line

eye innovations accomplishments detail. business team we has we and We with will even the spend. important consumer made, discuss that towards to as continue launched the I'm proud I of in the profitability, manage softer some navigate an

sales machine down and income QX year-over-year were was total operating revenues Looking down X%, highlights, basis, a on QX X%. up at were X%

how we are to We to return striving spend. remain disciplined with growth, but

also also excited to largest innovation the Venture, very strengthening connected launched We July our Cricut focused and the platform. are Cricut on on machine share cutting on we XX, and that platform. fastest I'm

Cricut occasions Venture machines Cricut connected T-shirts custom commercial up well to at commitment demonstrates in that architecture innovation. fourth history Venture, From images. Cricut Venture precision sizes bags. as bigger cuts feet decals variety require and and all with new of for able Cricut or wall tote to the rights is represents of of makers custom as foils. With our repeated of our batches create Venture scores quantities. XX a cut wide can to materials larger speeds, large and to

as introduced Cricut XX-inch our platform millions materials It share works and seamlessly space with well and and art support focus new discover, projects and lend to including batch large makeable the enhanced that ability to education, make. quantities, parties, features to much for this compatible our XX Venture make and with content events Thanks projects, all powered is machine. and helps width weddings, software Cricut themselves of expands their more. large We on as by sports smart that apparel, our inch featuring newly projects, existing design users design space, users

Venture to our community with customer around XXXX. with to launched other Cricut see event events in We person new are products within community generate events person in are XX use platform. July planning more these do on our and first consumer Venture energy the since in love Cricut members. Cricut We to share create will We and projects excited makers how them our

early sales with We are pleased performance.

detailed review these commentary four engagement, on and I the provide some subscriptions, user are accessories platform users approximately new added expectations. will acquisition, and that with in in and priorities, materials. line new which quarter, over Recall our our user innovations. briefly We have also we XXX,XXX new items

on monetization. We focus user and continue drive ultimately increase and our acquisition to new subscriptions engagement, platform expansion

previously an financial consumers through consumers our we their opportunity funnel shared recent And have to purchase. survey decisions. pausing to a is confirmed pull holiday see We are the key healthy. funnel that in who been Cutting Cricut barrier purchase A that the have the in in among funnel current Machine situations

make capabilities fits ends consumers of the level. of at a that a lives. Cricut the personal it are are struggling and in of machine Cricut third stated funnel their the most in Consumers into how understanding the meet About the they top funnel on to interested

As a third the About number a consumers say they purchase. is the special becomes consumers one get of affordability saving these Among a deal. the half closer to money a are affordability to consumers constraint. that those purchase funnel, of about Cricut, or purchasing at barrier sale for are a to a while bottom Cricut, waiting

our strategy a marketing be the more into holiday the through funnel. fourth to with pull shorter inform season. promotional XXX-degree the to plan We insights promotions in with quarter, including consumers XXX adding deeper over of to more these influencers using combined time, heading are plan, for We periods paid

We is ended million QX which engaged with X.X roughly flat nearly year-over-year. users,

discovery sharing. our from We members drive efforts are making encouraging assisting, and pursuing inspiration to onboarding stimulating to and journey along engagement to

in homepage driving have enhanced important make improvements an role to plays Space We Design more platforms we ongoing inside launched on interactions. an basis. highlighted XXXX As July in an continue and on before, mobile mobile

the the homepage half For interactions XXXX, devices. Space over from half on Design came mobile first of

platform. makes Shop heat This accessible new We have also from Learn easily inside on the navigation also greatly & desktop the simplified plans, guide, Cricut for platform learning users. navigation

users to will instructions video enhancements the and the inside We're points platform Access integrate friction where more and alleviate learning always increase our more itself, spend Cricut value aids the of that time. and our Increasingly, prioritizing their and majority content, we customers and of pain subscriptions. listening

materials functionality and cut color outline of the Cut Cut. In gives in printed their Then designs without gives different of enhancements for color them users ability image different to design. their an launched Print print colors. the QX, then printer we having This to use Then on layers Print

our shared creative effects In we will These call, images, that Warp, of coming creative possibilities. how we match two Last giving our community effects months, text. on the the with subscribers, which mentioned those quarter, with million community content feature, on version Warp and In library reinforcing help We the greater quarter-over-quarter users year-over-year paid where be search and their last can essentially and users. users. increase inspire them with projects projects introduction which releasing platform QX, we to of flat of shared other the our in we the can XX% will mutually quarter way enables a over in for notable the was X.X create our ended value in projects. can within and of engagement At platform all expectations. members end improved line was members up saw

AI point AI, user in We learning Space. and valuable out using to add examples and especially the some much complementary Cricut impact AI benefits for learning platform the throughout journey search exciting is Design design the we of machine around strategy. make and and models our of would are to is machine potential discovery opportunities like AI both subscribers. and generative Cricut see within area the for and experience are to how news. AI I to to more an

capabilities. a time powered these been we've development several delivered AI We capabilities machine in and working I have learning active on and on long and some and recently machine others. for give AI into to learning you are AI want insights

our make Automatic and design one features of a the On across model site, learning Remover access Background custom popular and our apps. desktop most machine Cricut and mobile is uses

On machine tuned model that learning on is for our a the search the vector images. on Images we Search, and also search trained Similar powered developing Images functionality by techniques. and leverages richer machine modern discovery a capability Similar foundation, that side, Semantics are learning is Building

testing We are with both Semantic internal currently and users. external Search

We our Design techniques and to engagement of to richer also algorithms. Search Semantic our capabilities the continue refine be the marketing, expect will content by drive we to on the used Space see homepage AI personalized search display personalization and in future. in actively powered

AI already nearby. users to such it great excitement actively natural capabilities Dolphins Generative content language We're AI offering. great of sailboat holds in Design on unique images an prompts the generative as to access promise and create allow with that Cricut is interest with waves area augment detailed the rich experimenting a Software in and based jumping

generative A unique in will art challenge for for cutting optimized building Cricut are functionality and images that area generative machines. is that ensure of we differentiation

our Our which journey to our value AI teams with the on investigating in will members other focus add making. facilitating inspiration and between platform, meaningful for a are ways

the At does human will generative enhances in enhance that positive as it. strategy AI same believe way. and but see and We not a our time, complementary meaningful it content creativity, replace we being

We are this artists. ensuring responsibly while focused our doing on and protect we copyrights

new the we about inch Venture materials excited Cricut speeds are XX ecosystem to Venture, scale that Cricut and support developed new width enables. all We the markers materials including launch of and alongside

for are we price with continue comments, journey on this year two we promotional a competitive before, prior category highlighted transform remain we've this consumers. cadence to Consistent a As to will business. in

the that are get price share. our our see competitors, fair we in range when We of we

seamlessly creating have better that while we for a costs with improved in focus still compete our products so strong market a machines offering with and We can our the on works platform. optimizing lower margins, differentiated

and experience, that motivated for ecosystem. customer both we the overall retailers the those and us shelf on usage focused to on are a help intensely are with create of great our experience We work actual

Cricut this to remaining exhibiting still and innovate excited while platform. of never so early while I've transformation both in are discipline. the felt and focus current profitable, the about continue days to we encouraged We're long-term driven

financial With will to into over the go the to Kimball that, call transition I details.

Kimball Shill

million machines from income, our $XX.X welcome, QX over XXth income delivered compared $XXX.X Ashish, X% We down year. as revenue to in continue of quarter positive net was we net further, you, X% of consecutive the key up we revenue a Thank second generated priorities, quarter, and million, in million, revenue to $XX invest XXXX. Connected decline everyone. breaking prior In our

QX user line the new expectations acquisition mentioned, to of effects in our in in discretionary Ashish continued As softness spending. we experience was as consumer with

encouraged where machine are still year-over-year revenues be. far we to see growth, to to we aspire we from back While turn are positive

benefited from materials and Press. Note million, quarter QX accessories down channel the fill AutoPress XX% XXXX, launch in was we from Revenue Hat QX and over XXXX. for the of that $XX.X for

X% from last year. revenue have been QX and this, accessories to would down materials Excluding approximately compared

for As in a Ashish here. to improvements more the QX over do investments over the referenced, quarters. revenue $XX.X million, Access expansive targeted reflecting Cricut work was the and XXXX, several quarter made have increase last Subscriptions we XX%

XX% international QX in million was geographic $XX.X to breakdown, In terms of XXXX. revenue compared million, $XX.X up

total a As XX% of compared of percentage revenue, is revenue XX%, to QX in international total XXXX.

am pleased or XXXX. the quarter users, I engagement, million flat XX% the over X.X and growth over to share total Turning users, QX million nearly engaged ended we quarter users with to with last ended year. with QX essentially X.X We

quarter over subscribers, QX the flat sequentially. X.X XXXX We million ended with from up paid and XX%

XX% Our subscription QX in year. attach rate to XXXX last declined XX% from

there natural some As subscriber calls, discussed is in attrition. earlier

will growth pace subscriber acquisition. the So and until new we sales of machine be user muted increase

Moving a a in X.X% further, the percentage This XX.X% margin XXXX, maker of was to gross machine and due a our total of QX in gross to primarily product last machines end-of-life Total in of margin machine from higher year. down second to improvement a margins. XX.X%, as was the gross to and quarter was X.X%. The increase promotional less connected sales. of mix was compared to of breaking percentage revenue as greater QX when a compares activity favorable in reflects margin QX subscription an percentage revenue XXXX, amount margin gross revenue, compared

Subscriptions for to of gross QX quarter compared margin XX.X% XXXX the was XX.X%.

driven Second materials XXXX. of This activity margin manufacturing products. The along an as of promotional a and and percentage in components winddown for was associated in by impairment with was margin XX.X% gross operations and the accessories revenue, and with cost compares to warehouse of XX.X%. unused of decline certain increased quarter QX equipment

from pressures Looking half through and into margin levels. reduce the will warehousing accelerate and machines especially second on both connected half, fixed expenses we accessories and costs QX inventory amortizing as operations capitalized in the for materials, second

are other margins lower sales higher in and naturally Also, the percentage QX that quarter. which holidays, machines than of a margins higher since will is typically our carry with quarter. Machine lowest gross will products gross margin represent revenue pressure seasonally

million QX $XX.X expense Total $XX.X Total operating compensation were in nearly the was included for X% expenses based expense. up And quarter XXXX. $XX.X from million. million stock operating in

increased to primarily an administrative professional related While personnel development and debt increase research year-over-year, in services. and increased, declined increase due bad and general allowance, sales for an expenses marketing and expense and

or million, Net to to $XX Operating QX last QX revenue, of XX.X% compared million, compared quarter per quarter in We XXth year. revenue diluted of $X.XX $XX or income our the $X.XX income share, in or share consecutive or XXXX. delivered positive of was income. for $XX.X per million, $XX.X XX.X% net was diluted million,

operations Turning and we healthy now Year-to-date, have flow, generated investments cash continue to growth. needs the to balance basis, we on $XXX.X sheet an cash and flow inventory which long-term funds annual million for generate $XXX.X in and compared million in year cash dividend ending July cash equivalents balance cash the we from $XX free. debt with a remained to million a before of ago, paying and

next late focus year the to line quarters, strategies, we our to as COVID with norms. could bringing mitigation recall, ensure levels few during our pandemic. last built customers Starting risk historical of inventory you part on our continuing began intentionally and onhand As we for supply inventory we up the in

As considerations, our through that to or evaluation more shareholders. adequate to company of part has our acquisitions, seek invest returns, in and long-term capital drive potential opportunities whether returning balance ensuring organically and capital liquidity than flexibility, we to business including evaluating to ongoing shareholder the allocation, company's of the multiple financial

Given dividend. the with QX, paid special we this, vesting $XXX.X to shareholder July, remainder upon an announced shares. be additional distributed was which million $XXX.X in million restricted of in Of

post our comes into a dividend This inventory of as and balance right converting result sizing sheet, cash. COVID

as of we repurchase we special were our considering price. of as During a on were as repurchases dividend used XXX,XXX million well constrained the quarter, stock cash the higher stock We stock. $X shares to

but have million in a to in outlook do communicated our remaining repurchase I Much items. highlight We of $XX.X the call, want what additional few with prior consistent program. I is earnings our

of flow balance from in During which QX and cash income paid and operations year year, the continue will lower and generating interest end to lower to the result half cash we dividend, with substantial special specifically in cash expect the a in debt. July, we the and second no healthy

soft look retailers prudent last half Consistent to approach planning ahead consumer see spend in taking commentary our and with quarter, taking thus as commitments are to second inventory XXXX. to a of approach and we our continue we a prioritized conservative and the

We expect to operating our expectations. down relative original margins for the to slightly full-year be

XX% Given in first half second of half. seasonality the the revenue year performance, is typical

full-year softer to macro a environment, as second current Given half expect the we revenue be slightly of percentage revenues.

add of year. user fewer we growth, XXXX than terms did new expect users new to In we still in last

users rate throughout While positive growth we put have a outlook subscriber be on or subscriptions, if our paid pressure attach rate current year worsen. for the down the and even new will may trends flat and lower year, on subscribers

concerns execute we consumer combined Leveraging to for machines, with plan our analytics, to consumer marketing consumer and spend. address QX reluctance deeper plans comprehensive affordability to about promotions

throughout of a and competitive. continue a in Accessories also On QX factor levels materials and XXXX a to Gross remain expense as promotional fixed be and percentage physical margins as in pronounced to inventory will will continue will decrease. pressured. warehousing operations have capitalized cadence be price products, to costs revenue higher more

As accessories a similar to be gross full-year QX XXXX's margins materials result, margin. expect and we will

We investing on remain the Should as macro areas make continue while we needed. worsen, our adjustments focused highest will in managing profitability with conditions to impact.

our continue from of in flow expect Just long-term to operations and to remain XX% to demonstrated as XXXX, we generating targets margin committed healthy cash we operating XX%.

when achievable. that operate these we line drive demonstrated growth, has model proven Our and margins scale at top are

over With the the questions. turn that, operator to for I'll call

Operator

[Operator Instructions]. the conduct Thank time, we'll you. question-and-answer At this session.

Woodring Our of Stanley. Erik comes first Morgan question from

line Your is open. now

Erik Woodring

handful. have here, guys small a you my questions. for handful Thank I a taking Awesome.

it few hobby so of Cricut a to kind Venture been the or long product. but then TAM you. it's maybe on any Obviously, a speak Thank helpful off, So, start point, and versus of your to Ashish, takes ramp bit opportunity you to you that have feedback have kind with prosumers you've long, would obviously just your ago. just for new be TAM early I follow-up. that super elevated a Can I towards the But relatively your just and kind you any gotten the launched maybe realize weeks of be the more there color targeted you to think crafters. hasn't any this seems color Obviously, then product? price it on opportunity professionals a how

Ashish Arora

Thanks, Erik for as I'm deem question. question the probably of my the this going to favorite call.

all, So we first of product. the excited really really, about are

architecture to time a and an schools, wife projects actually for geared towards who they geared are a identified in price today you the at it for just for on projects creative working it's where vested want is she make been were entities. long projects. event enthusiasts more product exciting want makes a and schools, We and an we operator's years lot and is a for be to to as say. is it's going have We on these of It $X,XXX it's to larger et The that here projects point. these number organizations, coordinator religious They earlier for school also for the actually large time make cetera. actually make phone

So of are are kind that looking the for. users think I we those

an upgrade an So effectively existing it's product. of

in break individual again, solid pleased we with at really products had Since sales. different points. on that then We but HSN, very are excited. will users price believe We XX. those customer person the had in of Super an We also first excited, then lots some subsequently launched product engagement. in to right? a our event, sales we July been have out of few We customer for don't products, happen event added we years. performance. the a Overall, we've sell, Now numbers

of very are launched how little inventories. product. terms We terms a again, it we careful bit in think of we it'll upgrade be And in good a

e-commerce retailers on cetera. et on cricut.com websites, partners, our it's available So

will consumers a launch. and the find store. So But phased scale to product. market approach we'll in drive better, actually to we as understand the continue growth not it And that's the

So overall, very, product. of very this pleased with the early results

Erik Woodring

that's helpful. that, that And But almost on handful back first nice in we because kind you for that, of account super Connected of time if fill, follow-up kind that last for if Connected Okay, see Machines Thank the to just normalize if to the point margins made. year-over-year of growth maybe Connected impact of basis? it for Thank you. Machines takes into look maybe a get growth channel a quarters. we declines what to well. Ashish. And Machine revenue were Obviously to exclude the and any as impact, Venture helpful any you could outline or Venture would from like launch of on gross would be you that

Ashish Arora

margins So One about think a talk Then we improving. and about two And in parts. I'll gross just overall maybe, take international. I'll clearly you is how talk can overall, I again, portfolio is mix jump acquisition and question talk right? our in about can Kimball,

terms kind let higher of talk a acquisition. just at So me level of in

user our new fewer with we in We expectations. expect talked that was our line in acquire acquisition on So compared about users much to the year in to XXXX. early this pretty quarter XXXX

somewhat fact being as this promotional, are especially coupled we're average given higher products, less cetera. on with spending, consumer that the And pointed you that fact, the year, out, was inflation, et rooted in discretionary prices

So with expectations. I very this new line I in was said, think, user as quarter much our acquisition

healthy. funnel funnel, overall, Now, the look our is at when pretty we

continues to Our build. awareness

things. money I'll a few And months funnel, about different the later. just They kind okay, defer They sales say, for at are saving a of bottom it talk event. few or will you of waiting a coming of hear they the as people buy kind talk funnel. They through about the

QX we in basically that and little are prepared talk we more given to we remarks, we bit as this our that want promotional. about a decided into be Now, going

funnel it's convert we we running can building generate help can basically think we been can some short going help, deeper of ways are promotions consumers to money. how one those spurts. the how planning So we lot exciting so a and for actually in that, actually the of actually content, really of to opportunity And And users. save that to is we've we unlock us that a do we're consumers

having So that by making to things than rather those buy things.

So doubling with marketing help along when look we going to in I'll is we acquisition. we all say long-term that are think the at finally, our down healthy. trends, how message, just And that they're really

able our of the and being our demographic at look are We penetration. customers of think attract, in our We a including broad significant the we're we that stages TAM to are percentage beginners. early very

the portfolio on you Kimball, don't why talk impact both gross perspective? a from margins, about

Kimball Shill

and is a things pointed quarter. we up margins our and on year be machine gross were that Yes, for less we're going couple than all. revenue in doesn't that. the so There's actually about of were influence going we overall the about And at One out, Venture we're as we've this really of Erik, we're excited last seeing talked promotional you that. machine to benefit year,

The that other of benefit gross products is mix newer machines of we've tilt our seen some towards more margins. carry our the higher

we sold And though units, say but we that ago, we revenue even higher units profit in the disclose and got than a quarter them. we year so more from fewer I'll marginally did don't

chose it's it's an a expensive a to heavy sell Venture was no because product. that in big it's QX And related we an in online of product, do product. product, the launch and to entirely so there's that and launch,

its offerings. launch first in it's to launch, our on we're how pleased so will of retail online with DXC in demand. be all on we've conservative consumer and and several what as engage And as weeks I overall our for we of wanted sale the channel, say partners we own seen well

and basis. with, I sell a of just most product, point all the had all least highlighted because reinforced or through inventory We Venture. you a at to sales, the think limited the kind effectively are of specifically I of begin impact on

Even a a it's our is drove not loading machines DSV recognizing are growth. and additional sell the channel up partners, the only we're products sold and revenue retail with through. most that connected basis. on of on This all they're through So sales the being the impact, recognizing basis,

Erik Woodring

color. really Congrats. for that you all guys, helpful. That's Thank

Ashish Arora

Thank you.

Operator

And Thank you. next our moment question. one for

Our from of next question comes Barclays. Adrienne

open. is line Your

Paul Kearney

Paul Hey, Adrienne. one question. for My good segment. afternoon. Kearney Accessories first taking on This on my is the is Thanks for

So or like better bit we expected. segment while year-over-year, had Accessories it had a margin, than little we down all was looks the still anticipated

How are more think connected year? promotions, in materials. they machines in the Your of to should we the or you the remainder about and for still are one. having accessories That's Thanks. that promote

Kimball Shill

Thanks what down and there. Okay. for because of to question. happened tough I is the kind partly year-over-year, There's questions One two A&M of the for with want answer a were quarter comp. because XX% we that's

if we year channel $XX Hat million So QX you revenue fill. a represent of sales at AutoPress about look ago, channel had to that related Press and

comparable in products And any sell benefited of end that so we didn't have channel from fill. this QX launching

and if that, X% When we about the us how gross overall, what's margins on segment there's quarter. was we that kind year-over-year year. down adjust at And guiding for we as look at think about for four we A&M look things so for the of going

million had smart that's going we an we affect talked longer smart of material lengths margins. full-year And write specifically. QX, material down is, to First our to $X and related about

costs capitalized our that to have procuring inventory we Secondly, in inventory. related

pricing. we inventory during that peak of in And much COVID brought

we've flow those more make win being as and our But inventory margins. And we're levels our bring have as the share. this levels, to P&L pressure in cadence machines. a about continued when how through and fair be down our about will talked Ashish then that And sure prominent we we lower so capitalized costs QX competitive will and we materials deeper accessories primarily price talked and about he's promotional to talking on promotions, inventory

on then will of may year. of that there's that possibility And velocity our kind continue those some the maybe to And we either a are That year. couple of outlook the QX look reserves. year. affecting even for have products, as Based are the throughout A&M next factors of we promotional the cadence finally, the or QX

Paul Kearney

Thank you.

the it's market, provide wanted international. markets? Maybe It KPIs of and bright kind subscribers, the number engagement Second, I growth than can earlier dimensionalize ask that spot so maybe in but understand mature it? it to seeing you of looks international help metrics about could we that you're of or was users, the any like

Kimball Shill

So but metric we the give as we we milestones, kind shared commented But of that hit X.X key update will. of we last every as wouldn't crossed time. users internationally, million we an on that milestone time, we that

excited are year-over-year see of market, overall business. we're about not the is the headwinds we emphasize now that we will any see in to and to we about International fact similar larger while in our represents in markets, that that XX% what grew What continue we Ashish our We see mature XX% U.S. in international

helping But we're in we're where that's that over distribution continuing growth. so and countries there drive are additional and space many XX countries and around the get world, to shelf

our growth. and year, and that's The propel influencing late launched other factor countries multiple that's international growth we is helping our DXC in channel last

Ashish Arora

I couple comments. add to a of to just would like So

you engagement all and a referred You overall rate and like briefly talked feel actually have to very bit, very and subscriptions. comparable at look of engagement a we markets. little country-by-country, at It's we but to across subscriptions -- very healthy kind

across the the a markets the like group of team I but with of consumer awareness the there's U.K. countries, proud lot larger a of lot of think a and headwinds. some a very said, as international of varied going events marketing, of some Kimball such lot specifically, similar I'm market world, on excitement, that's in Australia,

in few in early in we're of stages. world especially But there going Europe. then a there weeks some just are the are the around of doing to But in again world, such markets even markets relatively be cycle. we very in early the other that actually But the soon I'm around parts the a trip

international on about And And I think last we make are comment also the I'll the we're excited is markets. again platform. in what seeing really

adding and particularly investments effects network our projects, significant adding that marketing and that's influencers, our have are adding localizing We great for approach so unique driving in international. to is markets, playbook we a content, playing role

Paul Kearney

you. Thank Excellent.

Operator

One question. [Operator Instructions]. you. our for moment Thank next

Altschwager of comes question Baird. from next Our Mark

open. Your line is

Mark Altschwager

you talk can book of sustain inflection through my year getting confidence back I about sell the from Thanks your levels order partners? partners from you're to the afternoon. you was curious positive the half looks I like channel retail can with question. off, in that for what rates? and for the inventory current hearing and first your machines Good of based feedback level on you're taking what connected respect guess

Ashish Arora

thanks the for question. Mark,

half back So as year, inventory channel we to look comfortable with we are the our the levels. of

on let Sorry, that me one. restart

that or So think two Mark, I of let provide. kind there's three different perspectives, me talk I can

conservative retailers first still One is, I in look gone the clearly, second excited of as But particularly half we've for year, and as orders the excited at am continued the very year, taken the a our QX of early and approach think and we look now, half we're think year. Right have one destocking we've about of at in as we go really as I through we is seen I into team it's about the QX. strategy that QX. the things the on promotional the

promotion on working calendar. are a We deeper

with good, a funnel been As go to as there's we over we time, a QX opportunity an and I up building solid that's we funnel that promotion. have into the pretty deeper think that said, unlock

create as we to would to I opportunity have be couple of hundred other actually going are saying, influencers about create, adding The is a we content.

us work And together that that keep about. we is opportunity to talking to a this funnel this for we basically unlock think retailers wonderful our and

Mark Altschwager

that you in get of near-term rates of approach that might as to too unlock that sell or the an focus, beginning that but that funnel I'm there of kind some rate? you just terms a is at season, engagement not machines of be back-to-school the convert higher would Yes, on funnel, seeing give you're anything curious, as we look kind to through indication to

Ashish Arora

say done would I'll little job. we've to talk a date, have second. about is we I good bit what in a And a engagement

this look at to people effective right? the from of our top people we being As lot a funnel And the know in overall, We a bring that of seen where the at lot funnel. research basically the of is there's we've the been able we've top people. funnel, of

which funnel, were ownership the them talked good is which I've helping questions the of there what job are understand is and The machine middle about asked doing the previously a that buy second thing people of is. that not that to in cost we

saying, excited is sale, Now, QX you that has when the our very ask which tell convert? intent, telling. particularly for is people about, for really of them a a majority actually kind I'm us that when we are waiting of to well, which basically is significant data Or going conversion what are strategy they that influenced your

improve put and led we ultimately are to they convert Or that purchase, promotions anecdotally to the not Right, it. of the nine third to kind the not say we've to opportunity is date, want some some a driven for second will of of had first months. To they in our is have money six That's events. they'll to that economy see buy product. on tremendous those really going right. into numbers just I see in saving We decision deeper schools.

education some attended our and events. marketing teams team sales Our

I are over see We we that. time. talk early really demand lot and to around those quickly, a channels programs of want of But kind and Mark. on again, struck marketing very in

mentioned word we to and You the engagement, as are a to seeing. talk engagement you want about to what I bit little

data huge good this million and there's share. being some flat And to clearly quarter-over-quarter. engagement to for I is year-on-year, lot priority that's are is the see flat on right. company. like And we points Obviously, that we One want quarter, higher, a number users X.X that a

them, XX% say will engaged, Cricut, over like ask want onto use over have for platform Now, four, is their platform they months not five really not more three, often. the right, them using when people who to this come are we they of the which is the last the are news, users they and XX% good why of

content, And effectively the reminded that's them helping that content to make find they focused and a our what and lack a on couldn't reasons lack that they of cite in something of that time, platform. that them trigger that or nudge the make we or platform terms discover share on our content are project, a of

they're today because that if at last even have look have the cut strong to cut at people conviction was Now, look as engage, won't XX cost more cutting People our often, to we the come platform they a days, maybe we it worried when metric. more materials. in engagement, that who we of about the

come cut. our behaviors devices, with the will have be to we mobile likely engage drive onto platform, But them back to they platform, the our our to come more more

that Now, one cuts data a more point last that, the trend, a was saw. but it again, I'm compared to we project July not going to call reversal that July year saw in happened and we

a engage more the headwinds platform, believe on these to to point consumers some as network platform it doesn't more itself effects platform. will ultimately economic the data month's away and swing But more one of the huge we engaging lend to on our people driving again, start on that and as back. go and And

as the move there's and to so that holidays. will out into engagement up seasonality holidays, that move we pick the into call as also naturally I'd we

Mark Altschwager

Maybe really It's for me. last one one helpful color.

Cricut moment. the Just Venture back a to for

creating think still selling. to then there? price would give the of your up any Pro think users. it the base trying that capabilities said of do the percent or users that Venture base, user that a I done your of the call thinking good sort you. subset or of past what about you a be projects Is the are would even would user Venture to our the at ultimately have any kind sort you studies the surveys value of Thank and And segment you we if opportunity Have point there? metric and size consider you've in that of $X,XXX that around sense of that a updates of, of quarter more they're

Ashish Arora

a that Yes, research do on we basis. periodic obviously

of the We would as XX% it'll Prosumers, have was haven't I That that number, revised ballpark are that right. be they that sale. of say a primarily that. people made still are people XX%, themselves The in that selling identifying mean but doesn't

people of category. just have in the so we is that kind number the are multiple at data they other looked have that engaged machines, and of The

was machines. right. have people is multiple just we've buy summarize if we to single ever right, buy One launched, There who enthusiasts, again, every I people machine there's So, are again, two audiences for who this product.

that decals the projects mat who large call or machines, our that's anybody So they off or platform what projects schools one. our is onto more making anybody comes primary has number religious for audience, that are that two or or making weddings organizations, off

of to tumblers Secondly, XX also or those of a large XX audience. Also sell. happen projects. T-shirts make or strong set a They either do badges

I to to build think time market. we're this take going our

have We inventory. limited

how to We given that inventory, we'll goes want platform this phase flexibility. more time this we but super we on, are is given our felt As that early product, have are about. we the pricing in stages, excited a

that next lend over I It's a years many, time build think of will platform and there's for room the itself that lot a ecosystem. many to

very So very approach cautious taking phased take a to to we again, a wanted least at this.

So product product are going put and good but really go it's and about this to not not Gunko like in and every we're we very platform. confident channel, feel

Mark Altschwager

Thanks again. Great.

Operator

completes you. will Jim? That closing Thank Suva remarks. for Jim over I now our Q&A this segment. turn to

Jim Suva

us you, afternoon. Chris, Thank and this for joining you everyone thank

user our users. continues the returns strengthen, long-term the opportunity the large engagement. to Cricut spend and will We well believe drive only now initiatives consumer new us over growth and platform to to but a provide have not position are when We for deploying value we increased

will and healthy manage cash generate growth flows. continue to profitable for We the business sustainable,

the of excited us. I'm ahead about opportunities

Conference on then. Citigroup's September in at forward New X Global everyone Communacopia look will to in be seeing Goldman We September the X Francisco and Sachs and Conference York and Technology on San Technology

email and call, you our please may at disconnect. now me This additional If you concludes earnings jsuva@cricut.com. questions, have

Operator

thank Thank conclude to free disconnect you. program. That and does again. our Feel you

Cricut (CRCT) 8 Aug 232023 Q2 Earnings call transcript