Cricut, Inc. Q4 FY2024 earnings call

• 2024 was the eighth consecutive year of positive net income, with $62.8 million in net income, a 17% increase from 2023. Disappointed with 7% decline in total sales and soft engagement metrics.
• 2025 priorities: new user acquisition, user engagement, subscriptions, and accessories/materials. Accelerated investments in hardware product development, materials, and engagement. Launched new cutting machines (Cricut Explore 4 and Cricut Maker 4) with positive initial feedback.
• Increased marketing spend in 2024, plan to be more promotional in 2025. Initiated IP litigation to protect intellectual property.
• Focus on simplifying design experience, improving onboarder engagement, scaling a customer engagement platform for retention campaigns. Launched Cricut value line materials, optimistic about future innovation in accessories/materials.

In Q4 2024, Cricut, Inc. reported revenue of $209.3 million, a 9% decline year-on-year. Full-year 2024 revenue was $712.5 million, a 7% decline from 2023. Platform revenue in Q4 2024 was $79.4 million, up 2% year-on-year, with full-year platform revenue up slightly over 1% and ARPU at $53.12, up 2% year-on-year. Products revenue in Q4 2024 was $129.9 million, down 15% year-on-year, with full-year products revenue down 12%. Connected machines revenue decreased 13% due to fewer units sold and promotional activity, while accessories and materials declined 18%. International revenue in Q4 2024 was $52.9 million, a 3% increase year-on-year, representing 25% of total revenue, and full-year international sales increased 1% (22% of total revenue). Paid subscribers in Q4 2024 were 2.96 million, up 7% year-on-year, with full-year paid subscribers at 2.96 million, up 7% year-on-year.

• Expect operating income to decline year-on-year in 2025 due to accelerated investments in hardware, materials, and engagement.
• Total company sales expected to decline in the first half of 2025 compared to the first half of 2024, but at a slower rate than in 2024 first half.
• Platform sales expected to increase year-on-year on paid subscriber growth.
• Operating income dollars and margin percentage to be lower in 2025 compared to 2024, by approximately 2-3 percentage points. Expect profitable quarters and positive cash flow in 2025. Continue with the $50 million stock repurchase program, with $22.9 million remaining.

• Continued softness in engagement metrics despite efforts, due to post-COVID user cohorts and lower new user cutting activity.
• Pressure on accessories/materials sales from loss of share to private label brands, requiring cost-competitiveness.
• IP litigation actions may impact general and administrative expenses.
• International markets have varying performance, with some markets (e.g., Australia) continuing to be challenged.

Q: Concern about declining engagement despite past efforts.

A: Pressure from post-COVID user cohorts (who go through engagement curves) and lower new user cutting activity. Focus on improving onboarder engagement, implementing user workflows, and scaling a marketing platform to drive users back to Design Space.

Q: What gives confidence in an inflection point in the second half of 2025?

A: Confidence comes from platform growth, marketing spend impact on machines (intermediate data shows spend is having an effect), positive initial feedback on new machine launches, and promotional efforts in accessories/materials showing uplift.

Q: Thoughts on international revenue growth?

A: International revenue grew for a third quarter, with markets like France and Latin America performing well, and the UK turning around in Q4, but challenges in Australia. Focus on building brand awareness in key international markets.

Q: Explanation for margin decline guidance?

A: Driven by higher marketing spend, R&D investments in hardware and platform enhancements, and IP protection actions. Investments will bear fruit in future years but impact margins in 2025.

Q: Alternative market pathways and capital allocation?

A: Focus on broadening demographics via content and experience enhancements to drive virality. Capital allocation includes ongoing stock buybacks, dividends, and considering strategic acquisitions while maintaining inventory and investing for long-term growth.