Cricut, Inc. (NASDAQ:CRCT) Q4 2024 Earnings Conference Call March 4, 2025 5:00 PM ET Company Participants Jim Suva - Senior Vice President Finance, Treasurer and Investor Relations Ashish Arora - President and Chief Executive Officer Kimball Shill - Chief Financial Officer Conference Call Participants Asiya Merchant - Citi Angus Kelleher - Barclays Eric Sheridan - Goldman Sachs Operator Good day, and thank you for standing by. Welcome to the Cricut, Inc. fourth quarter 2024 earnings conference call. At this ...

Revenue Trends - Revenue for the year ended December 31, 2024, was $712.5 million, a decline from $765.1 million in 2023 and $886.3 million in 2022, indicating a downward trend in revenue growth [102]. - Connected machine revenue decreased by $5.9 million, or 3.0%, to $192.4 million for the year ended December 31, 2024, down from $198.3 million in 2023 [107]. - Accessories and materials revenue decreased by $50.7 million, or 19.7%, to $207.1 million for the year ended December 31, 2024, compared to $257.8 million in 2023 [108]. - The company anticipates a decline in revenue growth rates compared to prior years due to increased competition and changing consumer preferences [102]. - Revenue peaked at $1.3 billion in 2021, declining to $886.3 million in 2022, $765.1 million in 2023, and $712.5 million in 2024 [136]. Subscriber Metrics - The number of Paid Subscribers could remain flat or decline, reflecting challenges in user engagement and retention [99]. - The number of Paid Subscribers may remain flat or decline in the short term due to declining user growth rates [140]. Retail Partnerships - The top seven brick-and-mortar and online retail partners accounted for 30% of total revenue for the twelve months ended December 31, 2024, down from 33% in 2023, indicating a slight decrease in revenue concentration [111]. - The company relies heavily on brick-and-mortar and online retail partners, and any loss of key partners could adversely affect financial performance [110]. - The company relies on brick-and-mortar and online retail partners for sales, and any financial distress among these partners could adversely affect revenue and profitability [115]. - Top seven retail partners accounted for 33% of total revenue in 2023 and 30% in 2024, indicating reliance on a few key partners [150]. Supply Chain and Manufacturing - Supply chain conditions have improved during 2023 and 2024, but any future challenges could pressure margins [109]. - The company relies on three contract manufacturers for production, and any disruptions could negatively impact the supply of connected machines and revenue growth [197]. - Manufacturing operations are primarily based in Malaysia, China, Thailand, and South Korea, exposing the company to risks from political, social, and economic developments in these regions [202]. - The company faces risks related to a limited number of suppliers, which may lead to supply shortages and long lead times for components, potentially disrupting the supply chain [204]. - The global availability of critical components for connected machines remains constrained, with no alternative suppliers for several key components, which could materially affect the business if suppliers fail to meet demand [207]. Competition and Market Challenges - The company faces intense competition in the accessories and materials market, which could negatively impact revenue and results of operations [123]. - Economic conditions, inflation, and changes in consumer spending could impact sales through retail partners [115]. - The company faces challenges in managing growth and complexity, which could strain existing resources and affect financial performance [136]. Marketing and User Engagement - The introduction of new products is critical for maintaining user engagement, and delays in product launches could harm business performance [104]. - Advertising and marketing spending as a percentage of revenue increased from 15% in 2022 to 20% in 2024 [137]. - The company's marketing strategy relies heavily on word-of-mouth referrals, and any decline in this could lead to increased marketing expenses [175]. Financial Risks and Debt - The company has a credit agreement with JPMorgan Chase Bank for a five-year senior secured revolving credit facility with aggregate lender commitments of $300 million, which can be increased to $450 million [179]. - The company's debt is subject to variable interest rates, which may increase borrowing costs in a rising rate environment [186]. - The company may require additional capital to support business growth and objectives, potentially leading to stockholder dilution if funding is not available on reasonable terms [188]. Regulatory and Compliance Issues - The company is subject to various federal, state, and international regulations, including the Consumer Product Safety Improvement Act, which imposes significant requirements on manufacturing and labeling [171]. - Compliance with privacy laws, such as the GDPR, could result in penalties of up to €20 million or 4% of annual global revenue for noncompliance [235]. - The company faces significant risks related to compliance with privacy laws such as GDPR, LGPD, and CCPA, which may lead to increased costs and operational burdens [244]. Cybersecurity and Data Protection - Cybersecurity risks are a major concern, with potential impacts on financial accuracy and operational efficiency due to transaction errors and data breaches [246]. - The company has experienced past cyberattacks and security breaches, which could lead to unauthorized access to sensitive information and significant liability [247]. - The company maintains cybersecurity insurance, but there is uncertainty regarding coverage adequacy and availability, which could affect financial stability [252]. International Operations and Currency Risks - The company is subject to potential fluctuations in currency exchange rates, which could impact financial performance in international operations [259]. - International distributors purchase products in U.S. dollars and sell in local currencies, making them vulnerable to currency fluctuations that could impact their profitability and ability to buy products [154]. - The company faces risks from limited control over contract manufacturers and suppliers, which could affect product quality and timely delivery [218]. Workforce and Personnel - Employee headcount decreased from over 775 in 2022 to over 690 in 2023, and further to over 640 in 2024, reflecting a workforce reduction of approximately 8% in March 2024 [136]. - The company is highly dependent on key personnel, including the CEO, for its strategic direction and future success, with potential risks associated with losing any key employees [155]. - Competition for skilled personnel is intense, and the company may face challenges in attracting and retaining qualified employees, which could harm future growth prospects [157].

Cricut, Inc. (CRCT) came out with quarterly earnings of $0.06 per share, beating the Zacks Consensus Estimate of $0.04 per share. This compares to earnings of $0.05 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 50%. A quarter ago, it was expected that this company would post earnings of $0.07 per share when it actually produced earnings of $0.05, delivering a surprise of -28.57%.Over the last four quarters, the company has s ...

NASDAQ : CRCT Financial Results Q4 2024 March 4, 2025 Q4 2024 Financial Results 1 Safe Harbor Statement This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate ...

Financial Performance - Net income for FY 2024 was $62.8 million, representing an 8.8% margin, a 17% increase from FY 2023[1] - Revenue for FY 2024 was $712.5 million, a 7% decline compared to FY 2023[1] - Operating income for FY 2024 was $76.1 million, or 10.7% of revenue, compared to $70.0 million, or 9.1% of revenue in FY 2023[5] - Gross profit for the year ended December 31, 2024, was $352.8 million, an increase of 2.2% from $343.3 million in 2023[26] - Net income for the year ended December 31, 2024, reached $62.8 million, up 17.2% from $53.6 million in 2023[26] - Total revenue for Q4 2024 was $209.3 million, a decrease of 9.5% compared to $231.2 million in Q4 2023[26] - Q4 2024 revenue decreased 9% to $209.3 million compared to Q4 2023[5] Subscriber and Revenue Metrics - Paid subscribers increased to 2.96 million, up 7% from FY 2023[1] - Platform revenue for FY 2024 increased 1% to $313.0 million, up from $309.0 million in FY 2023[5] - International revenue for FY 2024 was $157.5 million, or 22% of total revenue, a 1% increase from FY 2023[8] Cash Flow and Assets - The company generated $265 million in cash from operations in FY 2024[6] - Cash and cash equivalents at the end of 2024 were $232.1 million, up from $142.2 million at the end of 2023[29] - Total assets decreased to $693.0 million in 2024 from $750.1 million in 2023, primarily due to a reduction in inventories[29] Expenses and Investments - Research and development expenses increased to $60.4 million in 2024, compared to $65.0 million in 2023, reflecting a focus on innovation[26] - Operating expenses for the year were $276.7 million, slightly up from $273.3 million in 2023[26] Shareholder Returns - Cricut repurchased $38.5 million of common stock in 2024, compared to $20.3 million in 2023, indicating a commitment to returning value to shareholders[31] - The company declared dividends totaling $110.0 million in 2024, a decrease from $294.1 million in 2023, reflecting a strategic shift in capital allocation[31] Product Development - New product launches included Cricut Explore 4 and Cricut Maker 4, with positive initial feedback[2] Interest Income - The company reported a significant increase in interest income to $11.0 million in 2024, compared to $8.0 million in 2023[26] Gross Margin - Gross margin for FY 2024 improved to 49.5%, up from 44.9% in FY 2023[5]

Core Insights - Cricut, Inc. reported a net income of $62.8 million for FY 2024, representing an 8.8% margin and a 17% increase from the previous year [1][6] - The company generated $265 million in cash from operations in 2024 and ended the year with cash and cash equivalents of $337 million, remaining debt-free [1][5] - FY 2024 revenue was $712.5 million, reflecting a 7% decline compared to FY 2023 [1][6] Financial Performance - Fourth quarter revenue decreased by 9% to $209.3 million compared to $231.2 million in Q4 2023 [6] - Platform revenue increased by 2% to $79.4 million in Q4 2024, while products revenue decreased by 15% to $129.9 million [6] - Gross margin improved to 44.9% in Q4 2024, up from 42.0% in Q4 2023 [6] Subscriber and User Metrics - Paid subscribers grew to 2.96 million, a 7% increase over FY 2023 [1][12] - Active users at the end of 2024 were nearly 5.9 million, while 90-day engaged users decreased by 3% to over 3.8 million [12][9] - The platform's average revenue per user (ARPU) increased to $53.12, up 2% from the previous year [12][14] Management Commentary - The CEO expressed confidence in the market potential but acknowledged challenges in execution and the need for improved competition [2] - New product launches, including the Cricut Explore 4 and Cricut Maker 4, received positive initial feedback [2] Cash Flow and Investments - The company plans to remain active with its $50 million stock repurchase program, with $22.9 million remaining [5] - Cricut continues to generate healthy cash flow to fund inventory needs and long-term growth investments [5]

Core Insights - Cricut, Inc. is scheduled to present at the Morgan Stanley's Technology, Media and Telecom Conference on March 5, 2025, in San Francisco, California [1] - The presentation will be available via live webcast on Cricut's investor relations website, with a replay accessible afterward [1] Company Overview - Cricut, Inc. is a creative technology company that provides a connected platform for consumers to create high-quality DIY projects easily [3] - The company offers a range of products, including the Cricut Maker® series, Cricut Explore® series, Cricut Joy™, and Cricut Venture™, along with tools like Cricut EasyPress® and the Infusible Ink™ system [3] - Cricut has built a community of millions of dedicated users worldwide, enhancing its brand presence and customer engagement [3] Investor Relations - Cricut utilizes its investor relations website and the Cricut News Blog to disclose material non-public information and comply with Regulation FD [4] - Stakeholders are encouraged to monitor these platforms, along with press releases, SEC filings, and public conference calls for updates [4]

Core Viewpoint - Cricut, Inc. will report its financial results for the fourth quarter ended December 31, 2024, on March 4, 2025, after U.S. markets close [1] Group 1: Financial Reporting - The earnings call will take place on March 4, 2025, at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time) [1] - A live webcast of the earnings call will be available on Cricut's investor relations website [2] - Pre-registration is required to access the audio call, and participants are advised to register at least one day in advance [3] Group 2: Company Overview - Cricut, Inc. is a creative technology company that provides a connected platform for DIY projects, including smart cutting machines and design software [4] - The company offers a range of products, including the Cricut Maker series, Cricut Explore series, Cricut Joy™, and Cricut Venture™, along with unique tools and materials [4] - Cricut fosters a community of millions of dedicated users worldwide [4] Group 3: Disclosure Practices - Cricut uses its investor relations website and the Cricut News Blog to disclose material non-public information and comply with disclosure obligations [5]

Core Insights - The investment philosophy emphasizes avoiding errors of commission in favor of errors of omission, as the latter are less costly [1] - The focus is on identifying clear and obvious investment opportunities that warrant a concentrated position, typically 5-10% of the portfolio [1] - The approach suggests that smaller investments may not justify the effort, advocating for index fund investments instead [1] Investment Strategy - The strategy involves prioritizing significant investment opportunities that stand out as obvious choices [1] - The intention is to issue fewer buy theses, making those that are suggested more meaningful [1] - The company seeks to learn from the investment community when mistakes are made, indicating a collaborative approach to investment education [1]

Financial Data and Key Metrics Changes - Total sales in Q3 decreased by 4% year-on-year, with revenue of $167.9 million [26] - Platform revenue was $77.7 million, up slightly year-on-year, while product revenue was $90.2 million, down 7% [26] - Gross margin decreased to 46.1% from 46.8% in Q3 2023, with platform gross margin at 87.1% compared to 89.3% a year ago [30][31] - Net income was $11.5 million or $0.05 per diluted share, down from $17.2 million or $0.08 per diluted share in Q3 2023 [34] Business Line Data and Key Metrics Changes - Revenue from connected machines decreased by 11%, driven by higher promotional activity planned for Q4 [27] - Accessories and materials revenue declined by 3% on favorable comparisons [27] - Paid subscribers increased by 5% year-on-year, totaling over 2.8 million [29] Market Data and Key Metrics Changes - International sales grew by 2% year-on-year, with international revenue at $38.5 million [27] - International sales benefited from foreign exchange rates, contributing just under 2% to the growth [28] Company Strategy and Development Direction - The company is focused on improving user engagement, particularly among new users, to counteract declining engagement from older cohorts [11][23] - A deeper promotional strategy during key selling times is being implemented, with positive results observed from recent promotional events [20] - The company plans to continue increasing marketing spend to drive user acquisition and engagement [19][75] Management's Comments on Operating Environment and Future Outlook - Management expects continued sales pressure on the product segment, with total company revenue likely down year-on-year in Q4 [39] - There is confidence in the ability to improve engagement metrics and subscriber growth despite current challenges [51] - The long-term financial model remains unchanged, with operating margin targets of 15% to 19% [40] Other Important Information - The company generated $70 million in cash from operations, ending Q3 with a cash balance of $247 million [35] - A special one-time dividend of $0.40 per share was paid, along with a recurring semi-annual dividend of $0.10 per share [37] - The company remains debt-free and does not anticipate the need for debt in the near term [38] Q&A Session Summary Question: Active users are declining while paid subscribers are growing - Management explained that engagement pressure is coming from older user cohorts, but they are seeing healthy signs in new user onboarding and engagement metrics [44][51] Question: Long-term margin levels in the platform segment - Management indicated that while there are pressures on platform margins due to increased costs, they expect to maintain a focus on investments that will support long-term growth [58] Question: Trends in accessory revenues and connected machines - Management noted that accessory revenue decline is due to easier comparisons, while connected machines' decline is driven by promotional strategies for Q4 [65][66] Question: Promotional intensity in the crafting category - Management acknowledged increased competition on price points and emphasized their promotional strategy to drive demand during the holiday season [67][68] Question: Key learnings from higher marketing intensity - Management highlighted improvements in traffic to their website and ongoing adjustments to marketing strategies based on performance metrics [73][74]