Cricut, Inc. (CRCT) Earnings Call Transcript & Summary

Let me just introduce everyone. Good morning. It's still good morning. I can't believe it. This seems like I've been working all night, but day 2 of Citi's Tech Conference here. Very pleased to have Cricut here with us today, we have the CEO, Ashish, the CFO, Kim.

Kimball.

Kimball. And then, of course, we have Jim here from who's -- I'd be [ remissed ] to say my ex-boss here from Citi Research, but he's now here at Cricut as their SVP. So we'll kick it off. I think Jim had some comments, opening remarks to make, and then we have a bunch of questions that I'm going to walk through with Cricut and we'll get started. So thank you, everyone. And just for those on the webcast, this is an event that's only for Citi investors, no media, no press. If you are from the media or press, please disconnect at this point.

Thank you, everyone. I would like to reference our safe harbor comments. And first of all, welcome to the Citi Group fireside chat here at our technology conference in New York City. A few housekeeping items. This fireside chat is being live broadcast, and a replay will also be available on the Investor Relations portion of our website. We encourage you to read our safe harbor statements, which are shown here on this slide as well as please reference our risks and also our recent 10-Q and 10-K and other SEC filings. I do want to note that please make sure if you do have a question to please raise your hand and we will get to you with the microphone as this is being webcast. Joining us here on stage from my side or from left to right is, of course, you know Asiya Merchant, the senior analyst here at Citi covering Cricut. Also then in the middle of the stage is Ashish Arora, our Chief Executive Officer; and to the far right is our Chief Financial Officer, Kimball Shill. So with that, let me turn it over to Asiya to go ahead and kick off the fireside chat. Asiya

Okay. Jim, would you like to sit down. No. Go ahead.

Okay. So Ashish, maybe I can start with you first to just talk about most people think of Cricut as maybe a nifty crafty cutting machine. And when we were talking -- when you were giving me a teach-in about the company, maybe you can a little bit talk a little bit about what data that you have that really, if you think about the connected engagement platform, how do you guys think about the Cricut, the installed base, the growth drivers a little bit if you can dig into that.

Sure, sure. Let me just kind of start with a quick introduction. We are a creativity platform that helps people make personalized goods or personalized everyday items. And our users make items that are everyday items like the customized and personalized t-shirts, custom mugs, vinyl decals, cards, paper crafts and everything, right, that again, I go back to the word every day. We have 8 million users on our platform and over 2.7 million subscribers on the platform. Now the user journey starts with the purchase of a connected machines and it kind of that relationship and the engagement happens on the platform. And so let me kind of take a minute to talk about what the platform is. First and foremost, our app, we have a suite of apps across all the different OSs and users use these apps to design projects. So they design projects on their apps and they send it to the machine to cut similar to a printer. In addition to that, our platform has users discover content and inspiration similar to what they do on Pinterest with the exception that all the content that they see on our platform is actually makable because we have the design files under. So they use our platform to discover content, they design and make projects. And then ultimately, when they made a project, they share their creativity back on the platform. The way we monetize the platform is threefold. We have connected machines which is, again, where the user journey starts, we have our materials and accessories business, and these are all kinds of materials from key transfer vinyls to permanent and temporary vinyl to custom to mugs, papers, leathers, fabrics and pretty much a lot of these. And all of these are designed to work with our platform. And then the final piece of our modernization model is our subscriptions, which is a combination of content, software and services that are part of the subscription. Asiya, you talked about the growth strategy, a lot of the trends that drove our growth prior to COVID prior to March 2020, which are around personalization, proliferation of digital tools, marketplaces are still intact, and we believe these are long-term secular trends. People are still always want to personalize every day item, they still want to make shirts. And the second is, we believe we are working in expense of SAM, a massive SAM. When we ask people about what -- if they have made a project that they could use -- make with a Cricut, we estimate that to be about 85 million people in the U.S. and Canada and about 129 million people when you include just the top 6 markets. We've seen the trends that exist in the U.S. worldwide. So we're really excited, and we feel that we're in the early days of our company's growth trajectory.

And when you talk about AI because that seems to be a topic that everybody is really focused on. So I would be remiss if I don't mention anything about AI, maybe you can just -- when you look at your growth drivers, is this a growth driver for your company? And how do you think it manifests itself, whether it's on the machine side, on the platform side? If you can just maybe talk about that?

Sure. So we've actually been investing in AI for many years. We've done both. We already have in our platform, a lot of applications that are built around what's called predictive AI, right? And I'll give you some examples, and then I'll talk about something that's been talked about a lot in the press, which is Generative AI and how it actually is very complementary to our business and also our platform. So from a predictive AI standpoint, and machine learning, today, when users come on to our platform, it's sometimes very hard for them to describe what they're looking for. So we're able to visually find images so they can kind of look at something and say, "I want to find something that looks like that". So we use what's called similar images to visually identify images that they may want to work with. We have other things that we are working on semantic search, which is, again, sometimes very hard for users to describe what specifically they're looking for. For example, they're looking for girls playing soccer, right? And if the image is not tagged with that or if a project is not tagged, it's really hard to find it, but our engine is trained to look for things that would look like girls playing soccer, even though there is no keywords attached to it. So again, we are able to leverage these technologies, automatic background removal is another one where a user can quickly clean an image, and these are all very high-end technologies. They're using our AI and machine learning engines. From a Generative AI standpoint, which is where a lot of the recent presses, which is you see a lot of innovation around coming up with graphical images. So I describe an image, a cat climbing up a tree and you can actually generate a graphics image with full color. But there hasn't been a ton of development is vector-based images, which require what's called SVGs, which require lot of precision to be able to cut accurately on our machines. So we are using -- we haven't launched anything yet, but we have been building this technology for the last many years, actually. And what that will allow the user to do -- so again, somebody comes into the platform and they say, dolphin jumping over a boat with a little boy standing very specific thing. If a library doesn't have anything like that, we can actually generate an image that actually matches that description, again, built around how we have trained our models around other images. So we see a lot of applications in Generative AI that we plan to launch over the next couple of years, we think it's very complementary to our business model. We see applications of AI in helping generate instructions to help people complete a project. I want to do a glass etching project. We have enough learning that we can actually help the user get from the point of inspiration all the way to creation. So again, we're really excited. We just have to make sure that -- as we launch these technologies, we are very cognizant about copyright laws. We are very respectful of artists, and again, we are really, really excited about many of the applications of AI going forward.

Yes. What about AI internally, whether it's in your sales chat box, on your -- you talked a little bit about training your own inspirational models, et cetera. But even when it comes to -- because we heard from some of the vendors who provide the technology for Generative AI to really talk about applications such as productivity improvements, sales chat bots, e-commerce, automating IT. Those were some of the killer applications that they initially saw Generative AI going to be impactful. Any comments that you can provide as it relates to internal to Cricut, but you've deployed these and have had success.

Yes. I think we are, again, partnering with some world-class vendors and providers who are integrating and customizing building their own models around some of these applications, right? So you think about customer service, lots of applications and customer service, we collect lots of data that we can then leverage internally to streamline our operations, right, and streamline many of the orders. All the steps are required in order taking, et cetera. So yes, we think it's a very promising technology. But I think in that domain, rather than trying to build everything ourselves, we see working with world-class partners, we are actually integrating anything from sales functionality to customer service applications to streamlining operations, et cetera. So again, I think we're in the very early days of a tremendous amount of innovation that's coming.

Another -- I don't know if I my mic's on. Another place we're using it is in how we match content with users, right? We have millions and millions of projects. We have hundreds of thousands of images and being able to match something that is matching someone's interest, along with their skill set and capability to make on their platform is an opportunity for us that we are pursuing.

Okay. Recently, you launched a product called Cricut Venture. Maybe you can just update us on -- it is a larger machine than what you consider generally your home base, your printer that sits on a little table somewhere, nicely tucked [indiscernible]. This is a pretty large machine. Maybe you can talk about what's the driver behind this as you look at your SAM that you talked about, both domestically and including the global creative population, how that fits in with. And what was some of the driver behind going beyond just the smaller machines to something which is much more large format.

Yes. First of all, we actually see a continued opportunity in coming of different form factors to go after different segments because, again, we're in the very early stages of penetration per SAM. So Cricut Venture was actually conceived about a few years ago, specifically focused on what we call a creative enthusiasts. So a lot of our users have multiple machines. They are making lots of projects. They make projects for schools, for organizations for religious institutions and name it, right? They make -- and they make some time lots of projects, right? I'm basically, I'm doing stuck for a dance studio, and I have 25 kids that I want to make stuff for, PTA and I'm often being requested by parents to make like 30 t-shirts at a time. So Cricut Venture is a 24-inch large format, a wide-format cutting machine, it can cut up to 75 feet of repeated images and it's blazingly fast. Of course, you're talking to product guys, I'm going to drool on what we've built. We design in -- even though it's a large format machine, we actually design and this is where a lot of our innovation comes in. We design Cricut Venture to be used in the home. So we actually create what's patented a 45-degree angle so that instead of needing 48 inches of space in front and behind the machine it actually uses the space in below the table and above the table. So you can actually put it in the kitchen table. So it's designed for creative enthusiasts who make lots of projects. Now some of these users also happen to sell their creations, right? So which is a secondary audience for us. Again, Cricut Venture leverages the same platform that we have for all our cutting machines. And we -- this is a first in-person launch event that we did a few months -- a couple of months ago. We are very pleased with the initial results, but it's still very early days, right? We see a tremendous amount of growth opportunity. And like I said, we have so many -- we have such a massive user population to go after that we believe that it's an opportunity to continue to proliferate different form factor in different channel than customer segments.

Okay. We have a question in the audience, if you don't mind getting the mic to him.

Thanks, Asiya. So I just want to follow up on two things. More about distribution. So can you talk a little bit about what's the channel. And I see you put up 40% of our users heard about a word of mouth. But talk about the channel you have to go to market, both in the U.S. and non-U.S.

Let me actually first talk about -- good question. Thank you for asking. Maybe first talk about the channels -- and then I want to talk about the 40% number that you mentioned. So we have a fairly good mix and I think Kimball the last you published was 40% of our revenues come from bricks and mortars and [indiscernible]

Bricks and mortars [ content ] online. Right.

Yes. Back when we've been IPO, it was 50-50, today it's 40-60. We are 40% of our businesses done on bricks and mortar and 60% is done in e-commerce. Depending on the country, right, what's amazing is the diversity of channels we have, especially as we think about globally, right? So obviously, we work with craft specialty retailers in the countries that those exist, right? So we have a couple of leading retailers in the United States. We have a few of them in different parts of the world. So we work with those specialty retailers to go to market. We also work with as we've continued to broaden our SAM or at least penetrate our SAM, we work at mass retailers, right? So you can think about the biggest mass merchants in the United States. We have similar partnerships in other parts of the world, like Australia, in some countries, we work with consumer electronics stores, office stores, right? So the diversity and depth of our retail distribution is pretty amazing because, again, it goes back to the use cases that we have. So in addition to that, obviously, most of the large e-commerce partners around the world, we work with them, and that's where we are proliferating our products and our platform. I want to go back to -- does that answer your question? I want to go back to the 40%. What's actually very unique about our brand and our platform and how our users engage with our platform. If you think about -- there's millions and millions of projects that are being done on our platform. And every time you create a project, there's an opportunity to create a marketing conversation in the digital or the physical space. So if I -- Jim has -- Jim made a mug for me in the office. And every time I -- anybody sees that mug, people ask me, how did you make it? Well, I have a Cricut machine, Here's how I did it, et cetera. So every time somebody wears a t-shirt, it's an opportunity to create a conversation. So over 40% of our marketing come from word of mouth, which is very organic and very sustainable. In addition to that social media platform like Pinterest, Instagram, TikTok, Facebook, YouTube, play a massive role. And we think it's an incredible way of going to market. So when we go into a country, we literally have thousands of people that will come and start helping us and they start becoming brand champions. And we believe it takes us a little bit longer. We don't go and spend like tens of millions of dollars in a country, it takes us a little bit longer, but it actually really creates a marketing flyway the network effects going which makes it a very scalable way of expanding our market and our population. But we believe that friends and family, word of mouth, network effects are an incredible way of going to market for us. And view this playbook over and over again in many countries.

Yes. Maybe you can talk a little bit about now that you have the new product out. Just new user acquisitions. You obviously referred to it in terms of word of mouth, et cetera. But how do you guys think about the engagement post-pandemic people are in this demand normalization scenario as it relates to consumer hardware. Just if you can talk a little bit about how you've seeing your engagement trends over this time period. And then as you guys talk about bringing more people onto the Cricut platform.

Sure. So Asiya, I'll break your question into two parts. Let me first talk about acquisition and then I'll talk about engagement. Right. So we're in the early days of penetrating our SAM. And as we -- we obviously were growing pretty healthy all the way from 2014 to '19, we saw a massive increase and spike during the COVID years 2020 and '21 and some part of 2022. And as you came into this year, we basically expected to add fewer users, right? So in Q2, we added 200,000 users. And there is a couple of reasons for that. One is we didn't have the tailwinds. In fact, because of inflation, consumer sentiment, we had the consumer clamping down on discretionary spend. So we expected to add fewer net users this year than we did last year. In addition to that, our average prices were much higher because they wanted to revert back to -- or grabbed it towards a long-term model of mid-teen margins for machines, which Kimball can talk about later. So we had lack of tailwinds, a few headwinds there was inflation, and we felt that it was best for the brand strategy for the long term not to be discounting and buying that customer because the best thing for our business is to monetize our existing installed base, continue to penetrate our SAM and build the brand over time. And that's we are on track for that. When it comes to the funnel and I'd love to talk about the funnel. The marketing funnel is very healthy. We have a lot of people who are in the awareness stage, we have data for that. We have people that are coming to the middle of the funnel where they start researching the product, considering the product. But then when they come down to converting hitting that buy button, we hear users saying, well, I still -- I want to save money. I'm kind of worried about my expenses, I'm just going to wait. All I'm going to wait for a sale. So as we go into Q4, we do plan to be more promotional to help convert those users. Back in 2020, what happened -- in March or April 2020, what happened was there was a massive funnel that had developed. What COVID did was not create awareness and actually converted the funnel in the first 12 months. So where all of these people in the funnel, people did not go on the web and say, but let me find a home machine that I can use. They're all of these people waiting in the funnel convert it. We see the exact opposite happening today, which is the funnel is building, it's healthy. They are going through the research process. We've done a lot of things to help answer user questions. but they're right before the conversion state they stop. And we think that funnel will convert over time. So we're actually, again, taking a very long view on the business. So I feel really good about the fundamentals of our marketing, the fundamentals of the brand. And we think that, again, as some of these headwinds go away, we will see that growth spike again. On the engagement front, we had over 3.7 million users last quarter that cut which is flat year-on-year. And I want to talk just for a second about how we define engagement. I think there's a nuance that people don't understand. When a user actually sends a cut command to the machine, in the last 90 days, we counted that as engagement, right? So that's 3.7 million people in the last quarter that engaged. But internally within the company, we look at engagement in a much broader way, right? We spend a lot of time helping people discover inspiration on our platform. We want them to use our mobile app. So even if you -- let's say, you're in New York and your machine is back home in Toronto, right? You could be using your apps to design things for your family, but we don't count any of that as engagement, right? So I always said my team saying, the more we get people to engage right? The more opportunities we have to create different forms of modernization, it is also our belief that the more users that will actually spend time on our platform, ultimately, those users will be inclined to cut. I'll just leave you with one last example. My wife a couple of years ago, came back from a doctor's office like, "Oh my god, I finally understand why you've been investing so much in mobile apps." She was like, I knew that I was going to run late and I didn't have enough time to finish my kids school projects. So I was able to use that hour in the doctor's office to design everything and then it just took me a minute to cut. So today, we give ourselves credit for that 1 minute of cutting. Whereas the opportunity is that somebody spent 3, 4, 5, 6 hours when they're away from their machine. And that's where we are able to show them ads on Cricut Access, which is our subscription product. We are able to show them different types of materials. So there's a lot of opportunity. So over time, we expect to evolve that metric to be more expensive because we believe that the more time people spend time discovering projects the more time they will ultimately land up cutting and the more opportunities we have for modernization. So that's our engagement strategy.

Okay. Kimball, I'm going to shift a little bit to you because Ashish talked a lot about engagement. And then when we look at, hopefully, that drives accessories and accessories revenues for you guys. So maybe in the second quarter, it was nice to see the machine sales now starting to inflect positively up year-on-year. But then on the accessories side, we were still down I think double digits down 20% in the reported quarter. Maybe if you can just talk to us about the dynamics, what's going on there? And then how does it correlate with what Ashish was just saying, where engagement is as the way you guys measure it is still flattish year-on-year?

Yes. I appreciate it. There's couple of things on it. First of all, we're very excited to see growth resume in our machine sales. And that's partly as Ashish mentioned, because we have higher prices. And so even though we sell -- we don't disclose units, but we sell marginally fewer units, but at higher prices. And so machine revenues were up. On the accessory materials side, a year ago, we had a couple of products that we are launching, and so there was sell-in to the channel for channel fill for auto press and our hand press products. There were no releases in the same quarter this year. And so if we adjust for a channel fill of new products last year, we were still down, but we're down 4% instead of 20%.

Okay. And then as you kind of roll it forward with the new connected machines now inflecting positively. What's your outlook for both on the machine side and the accessory side, just broadly speaking, for the remainder of the year.

Well, so Ashish mentioned that we see our consumers under pressure. But I mean, our consumers look very much like the U.S. population. And so there's no new news there. But as we look at the year unfolding, we're a seasonal business. And so typically, we would sell 40% in the first half and 60% in the second half. We do see the first step being stronger than the -- second half being stronger than the first half, but it's going to be slightly less than the normal seasonality for us this year as we see consumer behavior.

Okay. Maybe on the long-term model, you guys have sales and marketing. I mean I think a lot of your consumer peers would be very envious of that S&M expense line as a percentage of this revenues. Maybe you can just talk to us about your long-term target model, where you guys have been in the first half of calendar '23 as you guys kind of look at your gross margins. And as you look at your operating margins? And just remind us like what kind of revenue run rate level perhaps you need to be to kind of get to those operating margin levels?

So thank you for the question. We are focused on achieving operating margins of 15% to 19%. That's kind of our north star. We also manage our business with a medium to long-term focus. And so in the current environment, we've been very focused on maintaining profitability and protecting that in even as we're making the right investments to drive long-term growth in our business. We have our subscription business that is very robust and helps us have a very high gross margin even in the current environment. But as we look to resume growth in coming quarters and as we bring in more users into our ecosystem by selling the machines, we would see gross margins kind of revert back to more historical norms as we resume growth. The other point I wanted to make is we -- even though we are operating below our long-term targets on operating margins today, we do see that as achievable as we hit scale. And for us, that's kind of growing and $1 billion plus in revenue is where we think we can achieve those operating margins going forward.

Actually, let me just add a couple of qualitative comments in each of the categories. G&A, obviously, we have warehousing expenses, head count expenses and the like. But as a brand, that's just how we grew up. We are an incredibly frugal, cautious brand. And we really want to make sure that we invest in the right areas. So G&A have always generally very proud of how stringent we are, how focus we are in terms of how we decide to make those investments. On the R&D front, we're clearly an innovation company. And one of the things that we talked about is that the majority of our focus is going to be in building connected machines and these are intelligent machines that are hard for competitors, et cetera. So there's a lot of innovation happening, and we will continue to see similar levels of R&D expenses. And you use the word envious, from a sales and marketing standpoint, even though some of the percentages have gone up because that's mostly because of the sales being under pressure, overall, our sales and marketing strategy hasn't changed. We've built a massive company with 8.5 million users, and most of that has been in the incredible eye towards efficiency of our marketing. And like I said, when we go into a country, we are just in South Korea, Taiwan, Japan and hundreds and hundreds of users will start building and helping build the brand. And in a typical country, actually, we don't even have people in every country, we'll have, in fact, I'll give you an example. We have -- for our entire Meta region, which is Middle East, Turkey and Africa, we have 2 people, we have a head of sales, and we have a head of marketing. The head of market is in Turkey, the head of sales in South Africa, and we have yet 2,000 people plus that are the army of people that are helping them do store demos, go on live TV.

Unpaid ambassadors.

Yes. These are just brand ambassadors. They literally have -- there's an entire organization that mostly just -- they just want to build the brand. So there's an incredibly organic, which you say envious, people say, if you go on TikTok, at the top 3 hashtags of Cricut, 99% that we haven't paid for it's like 20 -- it's a massive billions and billions of impressions where as you compare to like some of the world's largest brands, we kind of compete right up there. And all of that is organic. And again, it goes back to building a brand that's positive, that's inspiring, that's empowering and ultimately generates network effects. . I was at a similar investor conference in San Francisco a couple of days ago, and our portfolio manager walked up to me and introduced himself saying, "Hey, I just saw your name and I wanted to introduce myself as he had a disabled sister." And basically he said, this is the only thing that kept her positive. And he said, every single time we go somewhere, we can't stop talking about how powerful your brand is and how creative it makes people feel. So there are very few brands in the world that actually make people feel great about themselves, right? I think -- and that's how the company is built. That's how we run the company. And it goes back to it ultimately, where [indiscernible] financials is that we believe that we have a very scalable effective way to go to market and drive sales and marketing. So we just believe there's a lot of leverage there over time.

Yes. Fair enough. A little bit on capital allocation. You guys paid out or you do have a special dividend that you paid out. I think it was [ $1.01 ] per share in July. You followed up and there was something prior to that in February. So I know you're a growth company. I know there's a long runway for growth. And typically, growth companies don't pay dividends. So maybe you can talk a little bit about -- are you guys planning to become a regular dividend-paying company? Kind of what's the strategy behind the special dividends that you guys announced?

So we do very much consider ourselves as a growth company. We also are a company that produces cash. And so periodically, as we have excess cash, we will find an efficient way to return that to shareholders. And that's where you saw 2 special dividends this year. But we think of these dividends really is rightsizing our balance sheet coming out of COVID. So think of it as a COVID dividend really because one of our strategies, as we navigated all the supply chain uncertainty during the pandemic is we intentionally held more finished goods inventory than we normally would. And as we've come out of that and started to work to bring inventory levels back in line with historical norms, that's producing more cash than we typically would for our business. And so our capital allocation strategy is, first, making sure we can fund organic growth. Secondly, we're looking at R&D to make sure we're protecting growth in future years. And then looking -- are there any acquisitions that we think would be synergistic with our business. But after we've fully accounted for all of those, we're looking for what's the most efficient way to return capital to shareholders. Our first preference would be share buybacks. And we have a program that's been in place for over a year. but we also trade it's in the safe harbor provisions and given just some of the volumes on our stock, we're not able to place as much capital as we'd like in that approach. And therefore, periodic dividend makes sense for us.

Okay. Jim, you've been waiting patiently. So I can ask you that. As you moved from the sell-side brokerage world to working within the company, what is -- what's been some of the more surprising dynamics that you've observed when working within the company versus observing it from outside?

Thank you, Asiya. And since being on the inside, I would say there are 3 specific things that my eyes have really been open to. The first one is the platform of the company, not necessarily just a product, but really a platform. And it comes down to what I'm showing you on the slide here of discover making share. this flywheel of a platform that keeps people coming back to the Cricut platform. And there are some examples on this slide. So the platform strength really is underappreciated and something that I really got a lot more better understanding since joining Cricut. The second thing is the early innings of the adoption and growth. I knew that products, our family had been using it for years and years and years, but the adoption and growth is so much at the early innings. And the third and final point is all of this, whether it be the innovation, the platform, design make share, the early innings and growth is being done so at a profitable time, 18 consecutive quarters of profitability. There's a lot of tech companies out there who can't boast that but the profitability of the company is very impressive. But to summarize your question, Asiya. I'll say, first, the strength in the platform; second, the early innings of growth, and finally, third, profitable growth.

Now that we're on the platform, maybe I don't know if you have a slide on that or not on the slide show, which talks about your subscriptions, your paid subscriptions that are quite impressive. And so maybe you can talk about Ashish or Kimball or Jim, about the paid subscription platform, what keeps people in that platform? What's kind of your outlook for those subscription users because those are the most obviously margin accretive to your portfolio they're above average.

I'm actually really glad that you asked that question. So as we said before, we have over 2.7 million subscribers. And I want to talk about the nuances that I think make it a very compelling product. I'm super excited about just our road map and everything we are doing. So first of all, the subscription product is about access to over 0.5 million images, plus software and services. So we have premium tools that allow people to design things that if you're a subscriber, you basically have access to those tools. One thing that actually is not very well understood. I'm going to try to explain it because there's a lot of stickiness in our subscription product. So let's say I'm a school teacher, and I'm a subscriber today, and I have done 200 projects this year for my kid's school, and I were subscribing 8 or 9 months in the year, if I stop subscribing, so I'll probably subscribe for 8 months, I've done 200 projects. I've spent 300 hours subscribing and making those projects. If I stop subscribing next year, I can still see all of those things that I created, but in order for me to go back and cut them again, I need to go and subscribe to Cricut access. So now the more users engage, the more they are committed to subscribing because they're not only getting access to our content, they're actually having to pay to subscribe to get access to the content that they have created on top of our content. So there's -- the more things people make, the more they are likely to subscribe. So we see people, we have both monthly and annual subscription. We see people going in and out of subscriptions over time -- so they may subscribe in the first 2 months of the year, then they may go back and subscribe again. And I always talk about switching costs, right, which is I can switch from 1 ride share platform to the other, who has not invested in that platform. In our case, everything that you've ever done, all the photos you've uploaded, all the community projects you bookmarked, all of those things exist in the cloud, but if you stop subscribing that you don't have access to those anymore. You can't cut those on those machines. So we think that our subscription product by design is incredibly fundamental. The second thing that I think also not appreciated, unlike a home printer, which gets disintermediated, right? A user can use any software with the home Cricut work. It is -- you can create a lot of things in other platform -- in other software, but the machine only works with our platform. So you have to interact with our platform. And every time you interact with our platform to use the machine we have an opportunity to intermediate you. We can sell you a subscription. We can sell you other things. I think those are very, those are nuances, both of our subscription and our platform that people don't understand. So there's a lot of stickiness. We measure metrics like the number of users that are subscribing, the attachment, et cetera. But again, as I can say, we are in the very, very early stages of first subscription product -- and I think there's a lot of innovation coming, including some of the things that we talked on the AI front.

Yes. Great. Any other questions from the audience? Oh, there is a question.

I don't know your company or any of your background. But the fact you attracted a professional person like Jim, it intrigues me, and I really appreciate later on, I will connect with you whoever I need to connect with the investor contact. And I would like to learn more about you, sir. That's all I want to say.

Sure. We really appreciate. We're very fortunate and grateful that Jim towards our team and I couldn't think of a better investor in the world that has a Cricut user and is passionate about our platform. So again, we always tell Jim, he just -- he's starting with the company. He always tells me, "Oh, I wish I joined many years ago. I know he loves it as well. But we -- I always tell him saying, Jim, we are still building the ground level. You're joining us at the right time.

He didn't mess the upside yet.

I have been customer for 20 years and I'll [indiscernible].

Thank you for the comment.

Awesome. So that's a wrap. I appreciate Ashish, Kimball and of course, Jim for making it to the Citi's Conference. I hope -- I know you guys have a very packed schedule with investors. So excited for you guys to communicate your story to the investor base.

Thank you.

Thank you.