Cricut, Inc. Q3 FY2025 earnings call

• New user acquisition: Adjusted marketing strategy with target expansion (broadening audience to address purchase barriers) and increased marketing investment, seeing higher engagement and Google search interest for 'What is Cricut'.
• User engagement: Engagement erosion moderating, active users flat YTD, 90-day engaged users down 3% YOY. Simplifying user experience with AI-driven features like Create AI, launched beta guided flows for popular use cases, and brought in more visitors to Design Space via engagement marketing.
• Subscriptions: Paid subscribers up 6% YOY to over 3 million, with win-backs from promotional offers and plans to introduce more AI-driven features for subscribers.
• Accessories and materials: Decreased 17% YOY, but efforts to reclaim market share with new products (e.g., printable temporary tattoos, new iron-on types) and cost reductions, including optimizing supply chain.

In Q3 2025, revenue was $170.4 million, a 2% increase year-on-year. Platform revenue was $82.8 million, up 7% YOY, with over 3 million paid subscribers, up 6% YOY and ARPU at $54.96 (up 4% from $52.86). Products revenue was $87.7 million, down 3% YOY. Connected machines revenue increased 12% due to higher unit sales and ASP. Accessories and materials revenue decreased 17% YOY. International revenue was $40.5 million, up 5% YOY, making up 24% of total revenue in Q3 2025 compared to 23% in Q3 2024.

• Platform sales expected to increase sequentially in Q4 and full year on paid subscriber growth.
• Higher tariff costs will negatively impact margins in Q4 and accelerate in 2026, with platform revenue not impacted by tariffs but cost of goods sold for 75% of it exposed to tariffs in 4 Asian countries.
• Continue physical products and platform investments for future growth while managing business through a long-term lens.

• Tariff uncertainty and potential impact on consumer discretionary spending, with 75% of cost of goods sold exposed to tariffs in 4 Asian countries.
• Competitive pressure in accessories and materials with low barriers to entry leading to loss of market share to white label brands and new entrants.
• Consumer concern about tariffs affecting household spending, as indicated in internal surveys.

Q: Erik Woodring from Morgan Stanley asked about spending trends and revenue seasonality.

A: Ashish and Kimball responded on sell-out units, marketing efforts, and how tariffs impact margins. Ashish highlighted innovation and growth focus, while Kimball mentioned sell-out of machines is up and cautioned on consumer concern about tariffs.

Q: Michael Cadiz from Citi asked about AI strategy.

A: Kimball discussed Create AI as a generative AI offering optimized for cutting-ready images, complementing content strategy, and AI's role in search algorithm and software development.

Q: Angus Kelleher from Citi asked about channel inventory and 2026 margins.

A: Ashish responded that channel inventory is balanced going into holiday, and there will be margin pressure in 2026 due to tariffs, with efforts to manage mix of price and promotional strategies and drive cost out of supply chain