CRCT - Earnings call transcript Q4 2023

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Operator

Thank you for standing by, and welcome to Cricut Inc.'s Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Jim Suva, Senior Vice President of Finance. Please go ahead.

Jim Suva

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

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

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

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

performance, and undue current guarantee is the Form and inherent Exchange should statements broadcast, These recently reliance be and have only them. X, Cricut's with contains most we management not on uncertainties, are those Factors placed in based statements company's involve do and the therefore, the upon filed Risk Form call These identified section could risks information of including that of of this XXXX. materially. future XX-Q Securities also time-sensitive that or or expectations as This Actual the differ date events Commission. of XX-K results accurate March filed not

today's release Ashish. I obligation any to may call. update forward-looking made no or to in assumes now that call Cricut turn projection will over the be

Ashish Arora

our obsolete generated $XX.X even of year positive and the focus charges. income, million Thank XXXX dynamic even asset impairment discretionary as reserves consecutive you, profitability with of we of on was a XXXX We consumer net $XX.X fixed excess Jim. income. moved navigated inventory environment. net million through We seventh

operating in XX% in positive from the uplift by year-over-year increase QX. our are encouraged promotions QX and our income We

XX% XX%, we sales and respectively. full were by quarter fell that the year and However, disappointed in

aggressive and expected to to to our interest smaller But and We more Our throughout funnel. we retail than inventory. hindsight, promotions is and XXXX we in marketing spending lower more part intend attributable uplift the in generate was marketing conducted promotions. in in have efforts demand boost could

our pricing focusing strategy while continue discipline. will deeper great maintaining on We promotional

concentrating We and generation. and keep on acquiring will that engagement users enhancing new revenue

be like would engagement went The enthusiasm on I to user better. we accessories XXXX, and our among and need areas increased need do to do reinject more over new look focus X.X on our buy increased these to In back XX% total days We effective where better more could in trends engage we million to and last We the our and $X.XX competitors in paid straightforward. users materials. what XXXX will X% today connected could are XX base X% to machines. to weakening priorities. users. in million. million decreased users, of reverse $X.X well Much We attract subscribers users to discussion our need what to

smaller to was to a retailers our We aggressively several significant miss saw out in weaknesses concerns. inventory. and retailer it could given for discounts were sales Now hindsight, have positive looking more deeper We QX consumer worsened machines. by address lower affordability due on channel These insufficient inventory uplift more our QX, expected. than QX. promotions saw from although In at we advertise

to on be commitments. are adequate inventory seen we conservative those have and to to QX, continue some we restart we far improvement thus retailers more to inventory expect retailers with levels, While working some in

In affordability for addition, the making opportunities overall making are addressing experience and consumer accessible significant more us.

coverage marketing and spend, team. marketing and significantly both in size we leader, the are talent of category As expanding our media a increasing our

consumer is goal category. reaccelerate for the excitement Our brand and to

user new priorities. our new our on X on provide I priorities: subscriptions and commentary user will detailed acquisition, briefly platform update an to and these and on some review that have items engagement, innovations. Now materials. accessories Recall we

expectations. quarter in We with our approximately the XX% million over ended X.X year-on-year total users, with line up and

to growth We on and focus acquisition which ultimately flywheel. monetization drive new our platform, engagement on our user continue

that We supports have funnel is previously healthy recent shared our more conclusion. and their data

to While to products and old. particularly our have on platform of all and women are appeal focused demographics, universal ages creative we years XX XX

we years reduction investment our for spend, as After marketing of holiday prepared we accelerated several season. the in

of to of efforts in marketing new and role full-funnel an of plan to new XX back accelerated the front marketing more the is than strategy. the in adding half in half Our half. XXX XXXX influencers the number onboarding X-fold Influencer excitement. back increased year drive investment further to important influencers increase in influencers our in plays We adding by the and the from XXXX

reach work also We increase and Beta expanded YouTube. social our organic TikTok, and paid Pinterest, content to on on

and broadcast guides investment gift our reviews. $XXX Finally, $XXX segments off to a in through media total of million paid million with potential product and reach relations

During Kelly category. the brand the Clarkson giveaway also holiday in excitement partnership segment drove our our interest Show holidays, in and and

more promotions integrated QX including plans, retailer marketing to supported the the programs and were editorial and deals were coverage. compared incorporating of planned, social marketing by As promotional we influencers, content rest in year. strategies, The

did our uplift, we meet expectations. see it an While not did

we awareness the funnel. continue enter and XXXX, on to bad focus pulling driving people through As we

and digital in lifestyle focus on investment marketing, accelerated influencer include marketing coverage. product and plans Our

off marketing can In around with on this example partnership that be Pinterest addition, life our focus One our wedding platform. the different are we year's stages. expanding by play role will trend, in Pinterest content is machines on and Cricut the messaging which campaigns supported through

Our the motivation key personalizer make higher integrated year, moments to for marketing things. is include throughout there plans where programs also

Their X meaningful to retailers. and compared to example Valentines from sales XXXX. Cricut through We which held leverage saw XX and North plan event, throughout serves Make in February a We in America weeks introduced promotions of Day was and the we uplift an how prior consumers as excitement

carry leverage these expect instill we and promotional better with marketing to year, opportunities. confidence more in the us to to retailers through move we inventory our integrated As and partner

days, ended to who X% XXXX, up at million made a who as made with of We project the Engage X% million, past defined of users XXXX end least XX cutting last at days declined the from in a using end year-on-year X.XX ago. their users one XXX machine users the project $X.XX the XXXX. in year below

to remains most focus impactful subscribers. and maximize of onboarding which on-boarders users' our new Our engagement onto platform access are or the cohorts,

on our to members to as enabling to on our stimulate of for content, look well visualization. reach focus depth make users as marketing content platform. it breadth want action space outside we As share and great through design our easier to projects capabilities increase remains and priority our an the discover, them return to to expanding our find make engagement XXXX, that to to inspire We and easily

talk Let and how projects increase images. growth first me depth we and about as We content breadth. of think

them You and ingredients. can as of think recipes

showcase photos new layout. we likelihood have saw how and one better When the photos a initiated to based project of that a finished did project the user holidays, Over relative those projects projects, layout and our a higher not to instructions, of that a holiday holiday we help. good have cut on design to instructions projects,

images one library our of our of continuing to seek. main benefits choice the addition, of A grow images subscribers a is In wide priority. remains

we the Artist Contributing with coming now QX, majority from Program. of Cricut a these XXX,XXX In surpassed Library images our Access in

us. important search As we mentioned is before, to personalization

so As image search our and library grows, has capabilities. our navigation

example, we showing images user projects on We are results. higher personalized click and ribbons when testing show see For search personalize based that a history. rate

uploaded library of quantity measure the year-on-year. library versus of in our share images is success also by with ratio the We projects increasing and images, this made tracking from our favorably the

let comment on Now me visualization. briefly

image of $XX,XXX as a XXX,XXX tote We blanks visualization our and bag Paid T-shirt, also in launched that Paid Subscribers. inspire with were allows on with series a cap, in experience or such a year-on-year and increased X.XX QX, expectations to increased to ending mockup sequentially action. million redesigned line Subscribers members any a

purchases Our bear terms subscription converting into in new subscribers. to machines continue of efforts of fruit

steady end, repeat XXXX. to fluctuations puts prior growth our had Alas, adds rates the subscription on year will attrition likely lower our XXXX pressure user compared and curve declines quarterly some in create At other that new engagement. and in remained in attach despite subscriber

proposition the the rich premium described subscribers at design to strategies with increase Here suite including content of tools, ever-growing along for an value continually above. roadmap

image In raw finished January, easy steps. turning we like in Create few a of into Sticker, which a a dramatically the simplifies process sicker

as services. Our up software goal is to to make it a incredibly compelling our subscriber leverage sign to and

to As and to in a a subscriptions. Accessories fruit, we see QX. XX% engaging given sales boost and consumers key materials result. role are as Affordability plays buying Materials year-on-year efforts sentiment, current consumer less a materials in declined our and engagement overall less bear expect

with feel business share face we in our continued part platform. past in our pressure entry addition, lower cutting to not puts over competition our the our the machines than has digital Even business. stiffest barriers of so, changed year. market we the significantly materials This this on of In

focused driving are business. We on out of costs relentlessly this

So Cricut make. materials to choice when users obvious want are the

this efficiencies. reengineered product, improving through accomplish ultimately will reengineered and We chain packaging supply

been some achieve current with in, creating differentiated our materials work business over cost the seamlessly that a We while more capturing to platform. this time with and improvements coming works incrementally have reductions to products take to machines time in but inventory will new we through roll us as It in quarters. our margin come over expect still offering

on details progress in XXXX. area move as more provide through this to expect We we

we in for the segment begin prior higher category share. fruit. competitors, our comments, when our in competitive Growth get should this remain acquisition new range this Consistent engagement consumers at We customer we a rate our to we're of we to our on in cadence see bear successful and in are move driving with promotional focus share. price that efforts with continue will as fair a price winning

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

are It's fundamental to that lift them to things will more make a we and affordably, our to easier reasons when make to it give consumption. that appealing things see we and belief people materials inspiration make we

continue while current We are both to and to long-term exhibiting discipline. driven innovate focus

transition Kimball. now to call the will I

Kimball Shill

million key sales. Full year selling positive you, million, as below $XX.X year-over-year approach compared to inventory and a an in Thank $XXX.X XX% everyone. was for a commitments even as the decline We the in continue we $XXX.X an average revenue higher retailers increase generated Ashish, machines fourth we net the income X% In year quarter invest XXth fourth XX% revenue in consumer and dampened quarter. income, for consecutive fee measured XXXX of million, decline over of to priorities. delivered quarter, net prices our expectations prior more welcome, our and to XXXX our took

a became leverage machines We part mix. offered experienced expensive unable inventory larger higher average newer, prices because to as our were promotions fully retailers of positions. selling we lighter the more Also, of

So machines fewer planned. and XXXX further, QX we down decreased from full had $XX.X million, QX promotional Breaking dollars year-over-year. down was than spent XX% XXXX XX% revenue sales driving over year revenue revenue connected we

commitments retailers, and some impacted retailers below causing machine which miss the selling accessories of Remember, selling were machines sales. along sale. initial to miss out go when on they stock negatively out out of Retailer materials also that with demand, the our basket consumers,

efforts promotions are excitement. restock to expanded levels of continue adequate marketing our deeper generate We XXXX with inventory our and in retailers to working as more strategy we to

Accenture down XX% XXXX. QX the million, $XX.X from for and quarter Materials over was Revenue

was XX%. revenues quarter Subscription made For the quarters. reflecting over million, Accessories targeted Access several revenue last an $XX.X in for and X% Cricut the full decreased investments over the year, improvements expansive XXXX, the increase Materials QX and

revenues compared in full XX% XXXX the subscription to XXXX. increased For year,

compared due was year-over-year define X% Middle In East, Australia and million down terms $XX.X Turkey Africa. QX of million to international which revenue a in in and in the we XXXX. geographic Meta, to was QX slowdown breakdown, or The $XX.X U.K., as decline

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

revenues. total For the full year company XXXX, XX% of represented X% international and revenue increased

over users We ended was X% our We the quarter total paid is of XXXX. compared which full million basis, QX decline cut launch metric. Explorer with extent, of X.X limitations user quarter acquired to whom with subscribers, a users years. and compared Turning quarter the of last growth ended ended users XX% some or the of million with total have this XXXX, sequentially. up in in To It some to XX% XX,XXX from users, account during a XX% the engaged X.X to engagement. year QX and from since not million in year. XXXX the engaged QX XXXX On We X% reflects up XXXX. total X.XX we over users had

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

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

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

gross margin. an of The machine the total gross improvement QX quarter reflects amount a percentage XX%, further. in gross margin subscription Breaking revenue to fourth Moving was margin XXXX. in a down revenue to margins. the of Total as higher and improvement higher compared XX.X%

machines to compared a sales, prices Gross in to a year was QX a margin year selling percentage On year due compared average continue primarily to margins XX% to legacy from to favorable represent machine smaller margins higher machines mix of connected XXXX a full to from product in coupled gross increase was compared increased machine The basis, connected X.X%. X.X% XX.X% gross ago. QX as ago. a with

to not QX we XX.X% compared the of full the basis, XX.X%. XX on Also to XXXX subscriptions a promotions On gross fully did QX planned. gross selling was fewer-than-expected had utilize decline margin Subscriptions retailers XX.X%, benefited which for margins Fourth The higher for spending as decreased and QX promotional margins capitalized we costs, quarter amortization units year in points. to subscription XX.X% of related was expect quarter XXXX. which continue. software gross in basis margins compares primarily margins, gross XXXX in Materials to was Accessories QX both and for

XX.X% per XXXX XX.X% impairments. materials in XXXX. year in in segment These increase Recall, improved offset unit accessories were this impairments resulting Accessories driven and by the cost larger in to compared Full had some We decrease and margins some lower costs. throughout QX to freight The we more primarily year year, to line was margins, pressured for which Materials margins and margins with full in expectations. gross than

expenses XXXX. in were as increased expenses we our million machine our an in equipment operating development more to stock-based due included on product impairment $XX.X resulted efforts our unused costs QX decision terminate from for increase million of in connected stock-based total The million to expenses quarter to in a and future careful impactful projects $XX.X XX% largely new $X Total of compensation on was machines, opportunities. $XX.X operating compensation. operating a efforts and the and higher capitalized million expense further certain map focus focus assessment Total road

with in to operating was $XX.X X.X% we wrote to the QX, $XX.X year capitalized and last the income QX increase increased compared sales X% revenue the off million XXXX. or income, the a decline development which This million Operating impairments X% revenue XX% In $XX.X Full expenses year. of reserves operating was for or of XXXX of referenced. that in from discontinued quarter despite compared we projects. are and Ashish in encouraged million

to as compared year XXXX, full of was income X% percent operating XXXX. in X.X% a For sales

the Excluding been the impairments equipment, of have income unused for would million $XX.X quarter. operating

rate in to year lower higher R&D Our tax tax higher than delivered full positions. rate credits The or to $X.XX due QX QX $XX.X was of XX% XX.X% was positive normal XX.X% in of in the compared XXXX, diluted year. XXth million was uncertain tax was to XX.X% consecutive XXXX. compared Net In rate income $X.XX net XXXX. compared $XX.X last and income. XXXX share tax an diluted million increase our per to We per QX in share in or mainly quarter

in in million $XX.X diluted from For and of the share XXXX. per net full we income earnings million net diluted $XX.X per earnings $X.XX, $X.XX and generated down of year, income share

to now flow. Turning balance cash and sheet

million of XXXX we cash million $XXX which and from operations million. with continue XXXX. inventory We XXXX, on cash compared a and for generated annual growth. to investments cash cash $XXX We needs an equivalents in ended generate healthy to flow long-term basis, balance in $XXX In funds

bring with We of ago million debt-free. $XXX higher are year we the more in work million cash of by generating as decreased norms. levels to we Recall, inventory inventory remain to line pre-pandemic the end at Accordingly, $XXX year. a from

completes the our stock additional and cash end we shares million million approved of we repurchase stock. million our $XX.X was XXXX. August authorized our of of shares that quarter $XX X.X through cash of After used which March to stock, QX, program During used to repurchase million million repurchase effectively X.X in X, of the $XX.X

offer or do do our quarterly give XXXX. want we for not on annual to Recall, detailed some we but outlook color guidance,

to on focused excitement are category. bringing our We

are focus promotions an deeper continued We of and marketing strategy doing our Materials on continuing increased machines through on this to and affordability. a on drive Accessories and cutting cadence

During the below first the of sales few quarter, expectations. we saw weeks

in retailers several missed significant saw Accordingly, positive expect growth positive that combined year-over-year even deeper Unfortunately, we first QX QX marketing, topping not do revenue uplift on-hand year-over-year. we saw we promotion demand, In machine promo on inventory with a for our with sales out the inadequate consumer demand. week. integrated

generate We point, even under our given belt, to year. see will call decline continue may soon consumer the only sales ongoing a hence, excitement. accelerate it major retailer marketing is conservatism too full But one event to to for inflection and we an

expect subscriber company slightly and new QX on of pattern growth rates total subscriber in attach pressure profits. sales a XXXX to could larger of and to growth become put and following pattern portion growth in QX user QX, subscription to paid grow similar We and flat will declining count and result subscriber QX. a paid but a and revenue our Lower and seasonal in rates

more to XXXX affordability revenues promotional machine XXXX will to with connected see in Our as selling concerns. consumer pressure address prices lower are we average compared

Material engagement and and will XXXX to pressure sales XXXX. and QX see in weaker-than-expected lower Accessories a sales machine Our XXXX following due

for Materials is We XX% see Typical the seasonality half the the year. and half to incremental expect We first revenue improvement in and Accessories XX% XXXX. in in of margins second

where the half. XX% XXXX, like lot XX% in revenues a in look will half and seasonality second XXXX first were anticipate the we However, distributed

in year, XXXX expect new growth, XXXX. and did to of we users a XXXX holiday slower-than-expected given we QX new than terms last start to user performance add In fewer

in In category. will XXXX, we our spend increase to marketing our operating expenses excitement as reinvigorate modestly increase the

about year-over-year. total be operating to We flat margins expect

expect to profitable cash significant flow during be positive We each XXXX. and quarter generate

Our XX%. unchanged long-term of financial targets to margin operating model XX% with remains

demonstrated model that achievable. which top billion approved define Our as are drive we we growth, scale, margins line has above at operate these $X revenue when and

almost public for Cricut years. a been X has company

we redesign go segments Cricut view to increasingly We transparency provide reporting our package are preparing platform a package quarterly After developed XXXX. and information planning with products. evolution, information of of to XXXX as years meaningful During physical a to we for our including business investors, X KPIs. quarterly for and aspects business of public,

way we forward, the be our to are changing Going and we platform report segments products.

will update indicators operations. public our for our focus most also We KPIs current future on to and the meaningful

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

Operator

Our first Barclays. of question Adrienne line comes from from the Yih

Angus Kelleher-Ferguson

Could the Angus of This into you outlook the retail craft specialized status segment provide on on for color any, due partners? your hard one of the impact, regarding going the if goods And you is Kelleher I follow-up. to have of a quantity have that concern Adrian. factored some your then

Kimball Shill

Angus, the thanks question. for

would about There's that eventually, be. and talking reserves a has to the been retailer continues following we to closely, have just adequate expect in a don't dynamic to that important an and say is a you're impact very So material part financials. It us. our we that I situation we're

Jim Suva

about also to XX%. diversification want how a little like you looks like Do and all less Ashish, than our are retailers talk about bit

Ashish Arora

of just more any XX% represent And retailers don't in business it, have Angus, revenue. point. I'd our that we than terms good a Yes, call of

Angus Kelleher-Ferguson

and influencer how like my do of long-term to go line it marketing leverage What forward fact for balance with your against affect your one And might that? the against the follow-up, you look fiscal furthest Okay. there how the And goals? to items beyond? opportunities to invest marketing that be the plans do for appears the 'XX behind

Kimball Shill

mean XXXX I back a -- an mean think bit area I too when with So I we we marketing. hindsight, much. marketing by is where that, look pulled discretionary little have And

category the sales those kind including much. there, stuff there's you subscriptions, But the We our in leader discretionary we where in think turn, So and and all retailers. marketing our if have opportunity back category generate and lots marketing area of think P&L, is in an pulled at of marketing look bank consumers enthusiasm for our too reinvigorate total we charges things. bucket as to we in a discretionary

expect that. And an where to lean in precisely to so it's area do we

Ashish Arora

So to me let add that.

research large us So for our to globally. and opportunity show very continues conviction our the that is

market. being the So funnel talked we a large We've healthy. there's basically, think about

of we learned Now promotion, from our marketing obviously, is kind an needed. the plus ramping that in end QX, uplift we that we're of that what but we up the as towards uplift deliver didn't had year, the QX

to significant that week, combine promotions, especially we ramp our like pleased a Now as had a in as that data. well and for Valentine's marketing saw we're pretty during QX, major continue we sales as and very with uplift,

that go Mother into including Day to year, as other some of marketing I the lever. rest we want the back-to-school think moments, is and and we So Easter the area throughout

types So and our to deploying strategy, a marketing as shared -- basically up prepared in we remarks, ramp of different kind continue is vehicles. which lot we our we're of of have

we're in think done history. we've more marketing doing ever I our than

I to because funnel. being about is the think coupled drive months. investment to going we excited want full. with strategy, through the X frequent But That in a the X help marketing. growth deeper think, funnel right to promotional the and more really see next We we're we people pull it's

the -- We significantly actually we added tripled have to team. double the basically

and Our in conclude to details about our kinds just ramp and and of that it. different goal up color be some do continue I'll prepared those is to we of remarks. marketing excited

Kimball Shill

how we clarify, may point Ashish do about. talked want that right? to to a of excitement be term are quarters, for inflection drive the we investing but it few long focused just X I Ashish on mean an I and X months, calling

Operator

next comes of Woodring from Our from the Stanley. Instructions] Eric line question [Operator Morgan

Unknown Analyst

Eric. ] [ Ann This for is on

could efforts of higher? to you us and when do near move the XX% Where December to engagement all-time out? And quarter users engaged lows. your a low will percentage help So dropped you understand think start remains bottoms engagement

Ashish Arora

the you for Thank question.

one top of before, priorities pointed kind the So is as the of company. engagement we've of out

is credibility, we're We has a QX, and declined that efforts. in actual by of this lot of those In leadership to sorry, continue to ramp X%. the -- users numbers, number engagement have going QX and our

let of and some give some you me tailwinds the So kind what color were. of headwinds on

as and people through typical levels a XXXX we we in that those those stabilizes graduation engagement going Now we 'XX, curve, levels, are cohort a and those And graduate massive as as acquired people. down see over of as that to come people -- normal more time, curve see the a headwind.

Now on the to people flip we creates tailwind. continue side, as as a we that onboard people, acquire

are is we in those not users So engagement offset improve much the is but been people how enough question graduating. But acquiring overall, more focused. can then have are where efforts we our much, not engaged, more -- to which are that the users

just couldn't inspiration to more reliable, them. I that the they there really to of we that right come tell can have for that controllable use, not the Right? spend they people a XX% us hey, to goal we on ran inspiration. platform. gave basically of right good easier product last them lot the so news the reasons the those, people, of when think, to want over to is are the make cite factors. And use people to ask proactively make find is the reason So the out our or actually Cricut it we time. platform X And are, who X And months, I

remarks, expanding actually people search for more making content, and easy about talked the that making to it it So prepared content personalized. in inspirational much, our we much

-- will we over time. have continue very even see some XXXX/'XX strong headwinds the team point because again, some will worse at So to I the confidence cohort, that though in this of

driving got it. just and to stay So focused keep we on

Operator

the Asiya Merchant of And Citigroup. from from our next question line comes

Asiya Merchant

margins cetera. The et write-downs and impairments, masked have by significant been

a So these if have you through and us end wouldn't are -- And mind 'XX this of kind all follow-up. we an margins? to then write-offs like is walking expectations, I

Kimball Shill

million. -- $XXX question. Thanks having mean were of up total write-downs, And those important our XXXX, for end write-downs an but of and for income the $XX.X have of that, story we part we in would I write-downs operating million. for

buckets. both business, down profitable we're my that and Ashish X that. referenced going that represents for of about into prepared The impairments is break to comments in bucket write-down the So that XX% really overall did and of very asset proud The year. I

And that impairment. more focused make on some that's going as focused on going hardware business platform opportunities cutting resulted to that's really, cut be hard to impactful on could thing to the projects, more most had think as decisions in ultimately, and our I some be the But around to machines. our we've most we're become the be right We've impactful. for what

sheet. will us process on But as required the really The early inventory ordering most X,XXX as consumables what of this goods had versus on the going second adjusted also, smaller have high-volume through year SKUs, our portfolio, much had many reduce of going where fewer active of in balance we Materials fair which and have back on hand? be current higher we're And of the XXXX to how tail, some that piece to smaller so of in had if -- the that inventory look segments a SKUs these and much our requires excess say, and risk. as past is look is around on velocity -- finished we've GAAP materials, we do we the 'XX, we're back inventory we expectations. And historically with we business, that when we business. And Accessories across a the you we're a much much rate with focused higher rationalizing than run adjustments our most take

get products, new some of right, them some we to So going always we there's as launch get be bets wrong.

be but impactful So there will we than expect go as can been forward some, it less has always this year. you it to be

Asiya Merchant

if then for I And one Great. may, Ashish.

you the long-term in us well. for as say, your impact. you don't revenue X gives see guidance that, of line and I fiscal your of you're you model, rate long over Ashish can margin towards sort bit you guiding model prepared of for exit which little you're if think guys This But your the maybe model of the walk you some years, medium let's presentation a 'XX. the a guys your confidence in is can through pressures are over guys in to you medium-term reiterating as expecting walk because term? remarks you sort kind reiterate margin fiscal sight are that tough my that 'XX

Ashish Arora

Asiya, let jump Kimball and for then start, love in. me I'd

the So we've lot to want around a reiterate that I do to think, market diligence again, of I size. continued

market We our a segmentation us. done the continue to global research, opportunity category. that for is more and see our product and we believe for And in huge that we've and there's believe

are very business. we excited about the So

Now internally us it to when what there's does talk about a that things market. go couple for of mass after I that take

we a little pretty et to universal, bit XX- Having that, compete product many talked right, cetera. on said segment. focusing So the the XX-year-old about is across demographics,

to machine the our of to things. and is get only the Kimball areas content started, affordable, those want it the buy usage right? is ongoing affordability, machine for focus, to is materials, all talk the not about then of So -- our affordable make want the but of long-term initial drive So We and also we sure model right? to the

of really thing that The use is to second platform. is, the have most we ease which the the aggressively drive is I of think

to but I We to done. easy be have think use. progress, lot more significant made there's to a make incredibly it We've

believe to long-term think there expected, that's bit we is path leads that's the a we had on, that us team longer than that model while focused the get a to So is and is valid. there's what where

financial I'll let piece. from about Kimball talk the

Kimball Shill

Yes.

about to prepared revenue. I'll going we operating the And to year flat we so our our for of that XX% but XX% call percent a income in is mentioned as goal, remarks, be is think out

are on our year. that We But we plus that's last be really, year. we're sales be we target need year. billion given which this where calling below at And that QX expect to weren't scale. for this are softer, not And we being revenue when we $X means operating in to that

about growing $X billion margins. need be to just Again, we back our hit we where get operating but that's of operating we to get business we to want to call kind scale, growth those to as think we and out and

Ashish Arora

had we trends were right? -- one we And XXXX, focusing at consumer, think where we the of comment, making sure that at basically and just but we very model. were income. look of state on mind focus operating on a the look I'll I profitable as strong we in add maximizing hindsight we And XXXX, a run last as

those talked think than -- and business this to marketing drive we to approach growth more that those that in margins are some about of to closer we into promotion as model. definitely Kimball's our I gets we point, the we full when to But start more as margins scale, back we leaning see year. long-term

Asiya Merchant

Okay. if more. in Great. squeeze And with one It's allocation. I your capital just can

completed you've that mentioned you authorized. now was what think I

dilution. should how -- any what to buybacks offset about So one and think shares impact further

Kimball Shill

are ultimately, plays So in an those management about that decisions think obviously important how that. we role

investments inventory right sufficient sure make that continuing So we sure opportunities. in to and -- days we but of do let our we so making the the framework how our we're we road have hardware includes And we're we're to After term and to platform, medium think business. making that, long early as of about mean it. well the platform. that have growth product the want both that very that kind map me about I operate our invest for first, in as talk which

to that, as seen capital acquisition shareholders. would for programs. strategic share And consider dividends last repurchase as efficient growth, means both of as well a opportunities used look accelerate as you've we've also do year, would special especially in we as return ways initiatives. But the it We beyond to

is those are And portfolio. the and to again, our tools up the deployment all in board. But timing so

Operator

from question Goldman the Eric next line of comes Sachs. our from Sheridan And

Eric Sheridan

term. I One X, more Maybe short if could.

called You know in QX. more QX in or you're marketing on versus That's the had quantification but qualitative out in terms shorter-term is there to to can of an longer not what improved marketing a term, give to that guiding of relative yield of that you really QX, little color spend a I QX. what saw you in output coming return QX might step-up be on one. And might some LTV annualized more should on the than marketing topics about that spend higher ROI think around if able influencer think as quarter-to-quarter to longer term efforts on today a influential we influencer already. back about But more have yield build get them some performance you're of broadly, marketing marketing marketing rather duration about to efforts maybe the of spend. that talked we've how you

Kimball Shill

Yes.

So comp thanks that units year-over-year where machine of mean to question. around a had for we we talked saw I the -- Day, single sales. Valentine's the we event commercial actually about

we in that we're we and and encouraging. -- was expecting that found uplift the that got that, Now

kind year. entered as data one of baseline we a of kind the of But lower against point demand

comments, So of was of QX a point back and saw softer kind behaving our some we if bit little in QX. I how consumers Demand then than expected. we just can to

real a seen events. thus in haven't promotional in our the outside of change quarter consumers far We

that of point And have encouraged are but that so kind we year, those do this the single a have point. planned we number throughout by data that we of we at

Ashish Arora

part a talk me And of we second very to and think question. your observation around let astute it's And is the question, a marketing. which

So minutes me just me a of -- let a let it. couple take on say couple

of about agree So as some in that you category deploying our stuff our such that and and we we marketing of media, that lends to talked itself a very social with of with itself there's of right? mouth especially have, Pinterest, we our the marketing, lot in product effects, actually word partnership PR, network influencer leverage well

And share lot to people et to right? with cetera. such as in make million acquisition, about lot tend think it, and our they of tend platform, we're made we've X-plus that really people which it, in media. plays as itself on good critical platform engaged I role make think they projects, to of our And feel you -- building a that to social people of They X and a some inspiration, is even that project, why a close capabilities a engagement share or if those million about to drive

have right? in looks marketing, marketing cut demographic, about influencer we platforms, that way the heavily say actually think brands, influencers, have, think right? at XX- communicate to much are that revamped the to we we you on performance a XX-year-old segment role. a they focusing And all The with partner good particular plays like scale influencer very they the we I year, on shop, down, way really if social are they would we So share way leaned demographic advertising. specifically target we messages, we the that. Last which some in too significant as And degree, now with things where way in not there's

a The their it's X money X, to about that of several second is just a us getting the spent you the briefly tells and about laws read people play all having time X a stages, or where all amount It's to not point in home, events. about which lead things -- those married right? up not is the price mother to on life And If of to, kind that There's bash first asset, think right? alluded getting moms. or kind role like a a that the life around involved that the right, pass is of decision all wedding. married, to things which the brightest wedding baby, buying personalization, parties think arise the from like you people it's just you as huge things of make web,

think up network brand basically right messaging drive effects. and the heavily XX us I the leaning in on So with coming to XX, helping

that the what things optimistic forward. see. going actually, again, marketing social reinforce role that we really again, of team, the looking creativity in at think play I I I'll some we our very think and will those media, about are in are will in I'm the you'll marketing excited about things PR, acquisition

Operator

Morgan Woodring Erik a from follow-up is question next Our Stanley. the line from of

Unknown Analyst

was around I out you trending QX international how of help of a know it's has U.K. kind bit understand been over for you us big the weaker Can year-over-year. a years. that growth X% few And International been little I that. About you guys called driver a of date? to down know past

how we you about XXXX? So as segment look international into are thinking the

Kimball Shill

out, of And down me let -- were for X% up follow-up. the for correctly as bit. No kind was And then down We break pointed QX little X% you that year. full thanks the a year-over-year.

we've So in consumer some like markets seen around U.S. of experiencing and concern as the been in same the affordability our we've U.K., pressure larger

in markets East, have QX -- was difficult comps. large QX related Australia of is there that factor. so sorry, it's region, channel didn't a was and clearly for orders Middle fill kind And there and those Turkey our some Africa a new which, of where situation to Meta were again, simile In in distribution us, that where more 'XX, comps,

We've kind and U.S. of this opportunity a year. huge in larger we the about market. think already softness to that in again, so have on some really excited it. talked time, growth our And markets we're us pressure our international similar in QX vector QX, we about put That we've said, for again seen, over in what

hasn't turned and about we growth. around. But long-term for prospects international the So of of excited medium that are piece it

Ashish Arora

actually just about to I'll And week, to heading add Europe. I'm just that. Yes. away a X.X weeks from

event a factor. think in We that, is a global. X as again, lined have The then including several Netherlands. of and reinforce, Kimball was in our of going meetings markets. on up affordability opportunity, rest right, the I'll Germany, large We have most we affected Europe, factors It said,

We consumer. cycle, especially are in that affordability was more on actually obviously world, pronounced It's Europe. some the the parts earlier something a in but in challenge for of

to work think I to So got some that. we've do resolve

and The ramp in thing second about up. the we right? awareness is are to same we're So that driving that America, North acquisition, talked we going

to the the investment of buy users I'll on see to talking tons making. our marketing. and I'm some of Cricut think be stage, who a that these fact, benefits we them. I'll up again, and in Germany tons people again, And Cricut ramping we're are And has want and be of you events will that I going in to or efforts other In

global the we're our early So in of think I stages again, platform. very

Operator

to hand Thank you. back program. the program further I'd the today's session This for conclude of question-and-answer any to does remarks. Jim Suva like

Jim Suva

you, Thank for us this afternoon. joining everyone,

but only new We continues also engagement. users. value term have not a to user growth The to strengthen provide Cricut large to platform increased long drive opportunity and our over increase the

about will us. business the future continue flows. of profitable growth the ahead healthy sustainable, manage cash to excited generate and We for opportunity I'm

San be the California Morgan Francisco, at Media will the ROTH and Conference tomorrow, in in X Conference, Telecom We Nagal MKM Technology, March XX Laguna California. Stanley March and Wednesday, Monday,

jimsuva@cricut.com. disconnect. additional me please Thank have you now now concludes This at earnings questions, e-mail and this call, may you If you.

Operator

Thank participation you, gentlemen, does conference. your ladies This for in program. conclude today's and the

may disconnect. You Good now day.

Cricut (CRCT) 5 Mar 242023 Q4 Earnings call transcript