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

All right, Perfect. So let's get started here. Good morning, everyone. My name is Erik Woodring. I lead the Hardware Research here at Morgan Stanley. Before I introduce everyone on stage, I just want to read off the Morgan Stanley disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So, delighted to be joined this morning by Ashish Arora, CEO of Cricut; Kimball Shill, CFO of Cricut; and obviously my good friend, Jim Suva, over here. Why don't I stop. You have something to read, and then we'll get going.

We just want to remind investors that this is being webcast and also recorded on the Cricut Investor Relations website. We also want to point you to our safe harbor statements as well as our recent filing of our 10-K and 10-Qs for risks and uncertainties that may be associated with this.

Perfect. So, Ashish, Kimball, Jim, thank you very much for joining us this morning. I think maybe the most helpful way to start is, I think most people in the audience know what Cricut does, but maybe start with a bit of a postmortem, you just reported 4Q earnings yesterday, can you touch on some of the most important points from the report and how we think about kind of '24 versus '23. What's the kind of the message you're going into 2024 with?

Sure. Thank, Erik, for having us. So, I think we highlighted a couple of key things in our earnings call yesterday. One is our operating income, which is kind of was our main focus for last year. Our operating income in Q4 grew about 40% -- maybe up pretty significantly, I think about over 45%, 49%? 49%.

49%.

Right. And then, that was despite some significant impairment charges. I'll talk a little bit about impairment charges in a second. The second was, we continued to ramp up marketing and drove promotions. We got a lift in Q4, but not as significant as we wanted. So we're going into 2024 with a much deeper promotions plan and a more frequent promotions plan to address some of the key affordability concerns that the consumers have. I think those are some of the things, and obviously, we are disappointed in our sales, which were down year-on-year, but we feel good about going into 2024. We've seen some early good results of combined ramped up marketing and affordability. So we're excited about that.

Good. So, we'll get into all of that, obviously. So, maybe if we first start very big picture and think about the macro environment and its impact on kind of consumer demand and purchasing intentions as well as retailer behavior. What is structural? What is cyclical? What are some of your kind of KPIs and signals, what are they telling you right now?

Yes. So I think some of the things that we keep looking at and we focus a lot on is just the overall size of our funnel. Our data tells us that our funnel is full. We also hear from the consumer that they're concerned about affordability, ongoing use of the machine and how much they're going to use the machine and if it's going to be easy enough for them to use. So that's something that we are very focused on, is to make sure that we understand and address the affordability issues. The consumer is hesitant, and -- but we think that there's an opportunity to overcome that hesitancy by focusing on showing them the value of the machine, addressing affordability. Now, one thing that we felt what we missed out on some demand that was not fulfilled was, there was a level of conservatism from retailers that obviously, consumers walked into the store, couldn't find the product and some of them shifted online, some of them just bought something else, right? So we're working with our retail partners to address some of those -- that conservatism. We shared a little bit of feedback from our Valentine's promotions that we did. It was the first time as we continued to ramp our marketing and our promotions, we were very pleased with the lift we comped year-on-year, and we are hoping to kind of continue to build confidence in the retailers as we go into Easter Mother's Day, Back-to-School, et cetera.

Okay, perfect.

And Erik, if I can just add.

Please, please.

One of the surprises for us in '23 was that continued conservatism from retailers. So, we were expecting, frankly, that they would be restocking more to historical norms, they didn't. We even highlighted in our Q3 comments that we thought some retailers were at risk of suboptimizing holiday demand that we saw the potential for. And as that played out, that indeed happened because they didn't have -- they were stocked on the shelves in certain instances, as Ashish talked about. And so, we're working with retailers, so they understand the opportunity we see, and hopefully, we'll get on the same page, and they restocked them to historical norms.

Perfect. Before we get into a lot of the specifics, I want to talk about the long-term drivers of the model, because we've talked about this a lot, but the world has obviously changed across the board for everything and everyone in the last handful of years. And so, I imagine a lot of the long-term drivers that you guys have talked about have remained the same. But what are the most important ones as you sit here today, and has there been any change in that and kind of impacted things such as kind of competition in the industry? Just help us think about that?

So, I think some of the things, let me kind of start with, as we've continued to resize the market, even for ourselves, right, what is the size of the market? We've hit the data a number of different ways. We've commissioned more studies. We continue to believe that we are in a mass-market product opportunity. So we believe in the serviceable, addressable market and the size of the opportunity we have, we've also looked at our funnel, our marketing funnel, and it continues to tell us that it's healthy or we're going to continue to add to that. The key drivers are -- again, I talked about affordability and ease of use being the 2 main barriers to purchase. So we have to address those. But the overall drivers, which are, again, the trends more or less have stayed the same. I mean, these are macro-level secular trends, right? The people's need for personalization, people wanting to make gifts for other people, people using it for therapy; all of those things remain the same. The actual financial model is clearly the journey of the machine -- the journey of the platform starts with the purchase of a machine. Our job is to make sure that we do a great job onboarding that user, getting them engaged on the platform, and that ultimately drives monetization and network effects. So, I think, again, the model is built around, get the user to purchase a connecting machine, get them onboarded and engage and help monetize with Accessories and Materials and Subscriptions, and we are highly, highly focused on that.

Okay. And unfortunately, if you can -- there's no video, but obviously, we can see the personalization firsthand here each one of you got [indiscernible].

[ We should ] think you're the next net mug mixer.

So, let's talk about -- as we dive into some of the details and specifics, maybe first, just customer engagement metrics, percentage of users creating in the last 90 days, kind of ARPU, both expanded through the pandemic. We've seen those return the other way over the last few years. The question is, what are -- what is Cricut doing to kind of stabilize engagement? And when do you expect these actions to begin to pay off, and why do you expect them to pay-off?

Yes, yes. So I think engagement is one of the top priorities. If you'd ask me to prioritize the 4 things that I mentioned in terms of our priorities. Acquisition of new consumers and engagement are the 2 biggest initiatives in the company. Kimball talk about materials at some point. So that's what we are focused on. Now some of the headwinds and tailwinds that I talked about yesterday. Now, we acquired a lot of users in 2020 and '21. And like any product, there's a graduation curve where engagement kind of declines and then stabilizes over time. We're seeing -- we acquired close to like 4 million users in that time frame, and those users are coming down and the curve is yet to fully stabilize, but it will. We see nothing atypical about those curves. That creates a massive headwind, right? Because as those graduation curves come down. Now on a tailwind side, a lot of -- similar to Subscriptions, a lot of the new users, when they come on board and as we make the platform better and better, they are highly engaged, and that creates a positive or a tailwind, and we saw that not enough to offset the decline from the graduating 2020 and '21 cohort. So, we think that, that will continue for the next few quarters. Now, having said that, what can we do to improve the overall engagement? What can we do to improve onboarding? Now, I've shared this stat before and I'll share it again. When we poll users who have not been on the platform for the last 3 to 6 months, 80% of them will tell us that basically they love you, the intrinsic drivers of why they bought a Cricut still remain. They want to use the platform. They want to come more often. But they cite a couple of reasons. One is lack of time, and the other is, I couldn't -- I didn't think of a reason or I couldn't find the project, right? Or I couldn't find something to make. And our job so that we can impact engagement across the board is to address those issues, which is, how do we make the platform easier to use so that instead of taking 25 minutes to make something, it takes 5? How do we give them inspiration that's relevant to them and create triggers to bring them back to the platform, right? I always give the example of, if you have a reservations app for restaurants, it's one thing to have a great database of restaurants and reviews, but reminding the users saying, "Hey, you like Italian food. Here are 2 restaurants that open up." So we have to bring people back to the platform. We have to serve them the right inspiration base that's personalized to them. So the areas that we are focusing on are clearly onboarding, making the product easier to use, creating tons and tons of inspiration, leveraging a lot of personalization, visual and semantic search to help surface the right ideas for people and then make us more relevant and top of mind. So we think that we have the right team working on it. As I said, we are going to continue to have some headwinds for the next few quarters because of the '20 and '21 cohorts. But I think there's an opportunity to lift all boats as we improve our engagement efforts.

Okay. Okay. So, I guess I maybe should have asked these questions in the opposite, but well now let's talk about new customer acquisition. So, you added just over a million net new users in 2023. You did talk about this metric being a bit more challenged in 2024. Can you just maybe talk about the customer acquisition model and how it's changed? And really, maybe beyond that, it's just when the macro does improve and we're not in such a challenged kind of discretionary spending environment, what that longer-term kind of new user opportunity really can be as we look down the line.

Sure. So, I'll go back to -- we think it's a broad demographic of people that use our products, right? And the need -- it's a very simple need, right? People want to be able to cut some things. They want to be able to make all kinds of different things with it. And so we think that the need is very generic. So in 2023, we had -- we maintained our marketing to some degree. We had some promotions, although much were -- somewhat exaggerated in Q4. But for the most of the year, our general approach was -- let's not scream into an empty room. So let's focus on maximizing operating income. Let's focus on continuing to build the funnel to some degree. Now, as we went into Q4 and ramped our marketing efforts, we have actually continued to ramp those efforts. We are being much, much more defined about our target audience, and we are focusing on people's life stages to get to them. I gave the example of, we have a partnership coming out with Pinterest to talk about the whole -- when she gets married from 25 to 44, and there are 5 or 6 events that happen leading up to the marriage. There's a lot of money that's spent on weddings. There are other life stages like having a baby, buying a new home, and we are basically being much more targeted and using those life stages to trigger the event. The other thing that we are doing is, we did a lot of performance advertising in 2023, and really kind of -- when you look at our marketing expenses overall, the discretionary part of marketing, we had actually pulled back far too much. That doesn't reflect in our overall sales and marketing number because it includes Subscription revenue, it includes expenses related to Subscriptions and stuff. So as we look at that discretionary spend, our focus is to make sure that we continue to invest in vehicles such as influencer marketing, PR, social media, and I think you'll see some of the best marketing Cricut has ever done. We saw some early good results, too early to call it a win. But we think that as we go through the next few quarters, our acquisition will improve.

Okay, perfect. Let's maybe shift gears. And today, kind of $4 of every $5 that come in this business come from the U.S. That's down because, obviously, you've had success expanding internationally. That's been a focus, a growth focus for you guys. In your last quarter, international revenue was down 5% year-over-year. So, can you just maybe better help us understand the level of saturation of international markets? Are there unique growth challenges in international markets that maybe we hadn't considered? Or is this kind of just like a, let's call it a blip on the radar, and you can return to expansion? And underlying that kind of bigger picture, it's just like, where are we in that inning of international expansion?

Let's actually get into the numbers directly. Why don't you start first and then I'll give context.

Yes. Okay. No, appreciate it. So, I mean, Erik, we were down 5% Q4 year-over-year, and there are a couple of things going on there. But I want to call out, we did grow 9% for the full year, and we think the opportunity still is massive. We're in over 50 countries at various stages of development, but we're not close to saturation in any of those markets. In some of the markets where we are a little bit bigger, like the U.K., we've seen the same kind of consumer headwinds that we've seen in the U.S., and that did weigh on the quarter. We also had other factors in, like Australia and our Meta region, which for us is Middle East, Turkey and Africa, where in Q4 of '22, there were some large sell-in channel fill orders as we expanded distribution in those markets that didn't have comparable sales in Q4 this year. And so, obviously it was some pressured consumer in larger markets, plus some of those tough comps and some of the more nascent markets that didn't overcome the kind of headwinds that we saw in those markets.

Yes. And, let me just add color to that. I'll go back to -- we strongly believe the need is very universal. And I think across the board, all our international markets are relatively immature, where we're in the very early stages. Having said that, there's fewer markets that are less immature, like for example, the U.K., Australia would be 2 examples, right? And I think what we saw there was something similar to the U.S., where affordability challenges are more exaggerated. I think our pullback on marketing started to show an impact. So our goal is to just really kind of do what we've been doing in the U.S. or what we plan to do in the U.S. is to address some of those affordability challenges that are even more exaggerated in those countries, build on our awareness and marketing plans. But I'm actually heading to Germany and Netherlands in the next week, 1.5 weeks. And the level of enthusiasm across the board or you know a few days ago, I think about a week ago, I was on a Zoom call with 25 ambassadors in Japan and there we are just about to launch, like we hired a country manager. So, again, I think we need to go back to the basics and just continue to do. Would we have wanted to see more growth in Q4? Absolutely. Do we think it's -- is our confidence shaken or we think structurally differently about international? No, we're not.

Right, Okay.

No, but we do think we have an opportunity. The same awareness and focus that we have on the U.S. applies to our international markets as well, right?

Right. Okay. Okay, and are there any specific countries or regions that you're kind of mainly focused on where you see a lot of opportunity, whether it's the funnel or whether it's -- when you do a lot of market research, you say, "Wow, this is maybe a greater opportunity than perhaps we thought 3, 6, 9 months ago or a year ago?" Anywhere you'd point to?

So, we're available in over 50 markets today, right? And obviously, if you have to move the needle on the numbers and show the kind of growth that we're expecting, you obviously go after the markets like Germany and the Central Europe, for example. I think there's a huge opportunity. We just launched. We were in India for a while. We just kind of ramped up our efforts there. So I think you'll see some of the Asia Pacific markets to increase. But I think, across the board, we think there's an opportunity. Clearly, we have different sized teams. It's a very small team of people that's focusing on international just because we have such a good model of leveraging ambassadors and influencers and people who are passionate with the Cricut brand. But I think I would say, the dollar numbers will obviously come from the larger regions; Japan, Australia. We have to get U.K. and Australia back on track, but then also, countries like Germany will be expanding distribution now.

Okay. So, kind of to-date, we've talked a lot about the consumer opportunity. What is the opportunity outside of just the pure consumer? And what I mean by that is, there might be shifting kind of spending priorities amongst consumers, but designers or Etsy store owners, event planners, these all feel like -- and we somewhat alluded to them, but kind of the perfect target user for you, regardless of the market backdrop. And so has the -- I don't know, it felt like the value proposition for that professional user has that changed at all? Or how do you think about that cohort of targeted customers?

Yes, yes. So I think one other thing that you probably -- I could have talked about when you asked me about what are the key highlights to be drawn from the call or going to 2024? And I think the words that I'll use is we're maniacally focused on focus. I think that applies to us basically saying there's so much headroom in the current category that we don't need to expand into other verticals. So, some of the impairment charges that you saw basically were related to us saying, "You know what, let's just double down on our platform and our connected machines as they exist today." I think we took a similar approach to within the cutting machine market, what type of consumer do we want to focus on? And we think that basically, we want to focus on the mass consumer market. We've identified -- again, our appeal goals is universal. It goes across a variety of demographics. But the target consumer that we are targeting is 25 to 44 year old. Like one of the sites I recommend, if you look at trends.pinterest.com, and you type in the word Cricut, you'll see that demographic spike in terms of people who are searching on Cricut. That doesn't mean that we won't attract Gen Zs and other demographics. As far as professionals are concerned, I would say we probably have lesser focus on prosumers today than we had a year ago, just given where we want to go, if you want to drive affordability and ease of use; there, within that segment, you will see -- we see, for example, teachers and schools as a focus area, right. The teachers buy the product for themselves. They also land up using it in schools. So if you think there's a good overlap, we see folks like health workers using it to decorate hospitals and pediatrics wards and things like that. But again, I think those are on top of what our focus is in the consumer market. But I would say the focus on prosumers is less today than it was a year ago.

Just to clarify. We do have -- we do attract prosumers and we've disclosed it for roughly 24% of our user base ends up making something that they want to sell.

Right, Okay. Last night at earnings, you talked about terminating certain machine projects to focus on products, again, that have more mass appeal than something that might be a bit more specialized. I love, again, focus on focus. It makes total sense. Can you elaborate a bit on what's kind of changing under their hood when it comes to the connected machine kind of product rollout and how you think about new product launches, not just in '24, but beyond? What is that new focus for you guys there?

Yes. So I think I'll actually kind of do a multi-pronged answer. About 12 months ago is maybe roughly around then, we basically said, "Hey, we're going to be focusing less -- we're going to focus on connected machines rather than -- we'll continue to have accessories as in hand tools and other things, but we're going to focus on connected machines. We've since then, basically, given the impairment charges, we've said, there's so much headroom in the markets we are in today. We don't -- the vision of the platform hasn't changed, but we don't need to launch into other verticals that are beyond what we have today. Within that cutting machine market, we are basically focusing on driving more affordable price points. So, our innovation is going to be on simplifying, making it mass market, getting to more consumers. And if you think about other products in history, like -- just take the iPod shuffle. What Shuffle did was basically bring in massive amount of consumers into the market and then subsequently upgrade it to the iPod. We have a very similar strategy and focus. So a lot of our innovation is going to be around creating excitement for the brand with introducing new price points, simplifying our product road maps, et cetera. And a big part of that, even though I know you talked about machines and new launches, a big, big, big part of that is really our focus on the platform, and just obsessing about the initial 1-day journey, the 7-day journey, how do we get people to make a number of projects in the first few days so that they can then basically -- their engagement curve actually starts at a much higher level.

Okay. So, I know we just talked about connected machines a fair amount. A lot of value, though, for Cricut does accrue in the form of aftermarket sales. That's either Subscriptions or that's Accessories and Materials. Over the past few years, A&M ARPU has declined double digits. You do expect to decline further in 2024. Maybe, can you unpackage the kind of headwinds that this business faces and then what you're doing to stabilize Accessories and Materials? And are there any examples of actions that you've taken, even if it's for a short period of time where you may be found some success that you could then roll those initiatives out further in for a longer period of time?

Yes, a couple of things. First of all, you talked about Subscriptions and A&M. I just want to call out, we grew subscribers for the full year. I know in Q3, we had an inflection point where we dipped below, but I want to just make sure everyone understands that we grew subscribers and Subscription revenue for the year. A&M is more challenged, right? There are a number of dynamics going on there. One is, consumers are engaging less. They're cutting less. We have the vast majority of cutting machines, so we see what people are cutting. And it's not just Cricut materials that are suffering. It's overall engagement there, and Ashish touched on this earlier in his comments on affordability, right? Consumers are concerned about how much is this going to cost me. If I'm going to make a t-shirt, can I make a t shirt for $5 or is it going to cost me $20 and what materials do I need? We're focused on addressing affordability for consumers. We're doing that in the short term with frequent promotions right? And we've had that cadence of promotionality in the Accessories and Materials space going for a while. Our team has done a great job of driving cost out of that business. There is much more to come on that side of it. And some of that goodness was masked by all the E&O that we had in the year. But we're focused on how do we give consumers a great experience but addressing affordability. And so you'll see enhancements to our portfolio in the second half and as we move through '25, that will even help us move further down that path. But we think it's about cost to serve and cost for consumers to engage as they make.

Let me just add to that. I think Kimball hinted at it. We've actually been on a pretty rapid path to driving costs out. They just kind of get lost in all the other things that are going on. So we've seen massive amounts of improvement in product cost as the inventory flows through. The second, as we talk about yesterday is the SKU rationalization. We had a lot of ongoing E&O materials because of what -- the decisions we made back in 2020, '21, '22. And as you rationalize the portfolio to almost a third of what we used to have, we think that E&O. while -- some of it will continue, will be less exaggerated. But I think our focus on creating value, and we talked about it yesterday, but it's a little bit of a virtuous cycle, right? Engagement drops, people use less But people are also using less because materials are not as affordable as they'd like. So if the materials are expensive, they don't want to make as much. So if we can drive both those things, there's a symbiotic effect on both those things.

You know, you don't have to worry about the chicken or the egg, you get them together.

Yes.

Right, exactly. I know this is something that you love to talk about, and you talked about the focus on the platform. So just, what I want to talk about is software, right? Your software makes it easy for users to create anywhere, any device based in the cloud, what opportunities do you see to expand kind of features and functionality of the software? Again, you talked about ease of use. How does software play into that?

I mean, it's huge, right. I always tell at the end of the day, we make incredible physical products, but the soul of the company is software, content and the platform, right? And our opportunity to monetize that platform in Subscriptions continues. I think there's a number of things we're focusing on, which is, first, let me start with onboarding, right? We want to make sure that when the users come in, they're able to really set up the product with an incredible amount of ease and then we can launch them the right way. So, just giving them the right experience. So we are leveraging technologies like personalization, search, ease -- how do we make the design process a lot easier. The second is, because everything is in the cloud there is a massive amount of inspiration that we provide. But on top of that, the inspiration is as much driven by the projects and the recipes that other people make. So we have designers who actually work with us who are publishing those recipes. So if you wanted to come in and you said, "Hey, I want to make a birthday card for my daughter or my niece, basically, that -- instead of having you go through the design process, you can access the work that I may have done very quickly so that I can effectively save you 30 or 60 minutes of time. So, expanding the amount of inspiration, whether it's in terms of ingredients like images or recipes, like projects, how do we then take that vast majority, I think, this is -- I'm talking millions and millions of things get done. How do we kind of find the right things, and when you come onto the platform, leverage things like personalization to give you the few things that you would be interested in, right? So, I think there's a lot of innovation around expanding inspiration, onboarding, bringing users back to the platform. So, making sure that we can send notifications, we can provide the right, relevant inspiration to bring people back to the platform. Once they come to the platform, there was a massive amount of inspiration. That inspiration is mapped to the skill set of the user, and ultimately, they're able to quickly design and make something. So, I would say we'll make a lot of progress in the next 1 year, but I'll be sitting here 10 years from now, and I'll still say, "Oh, my God, there's so much work to be done." right? So I think that that's the soul and the backbone of the company and we're going to continue investing in it.

And I was going to add on, Erik, also because this is a technology conference. You think about artificial intelligence and machine learning, they're complementary to our software. Things -- you've already started to see these publicly when you start to be on the subscriber base, things like automatic background remover, taking text and being able to warp it and curve it and do some really good features and things like that. we can now create stickers really easily. Do you want a background? Do you want additional layers and things? But artificial intelligence and machine learning is actually complementary to our platform.

Right. Okay, no, that's helpful. Let's quickly touch on margins. I want to make sure we have a handful of minutes. I want to touch on a handful of topics here. So touch on margins, you did mid-40% gross margins in 2023, record for the company. Given your comments on Accessories and Materials in connected machines and kind of the strategy around using promotions to spur demand, how do we think about margins over the next 12 months in the longer term? I know you set some targets, but help us understand kind of the moving pieces behind all of that.

Yes. Thanks for the questions. So, first, let's talk about the impact that Subscriptions have on gross margins, because as we've matured over the last several years, Subscriptions revenue and contribution profit is a much bigger piece of the pie. And so that helps us with our gross margins and we see that continuing. You saw a little bit of decline in that gross margin in the year from 90%, I think, to 89% and that's really around amortization of software development costs, that as we invest more in the platform, you can expect a little bit more amortization to hit that. But essentially, that will be the same year-over-year as you go forward. On the A&M side, E&O was such a big part of the story in 2023, where it will be less exaggerated. There is some goodness that we've seen in getting cost out. And so even though we intend to be promotional in that category, we do expect incremental improvement in A&M gross margins in '24. On machines, we had very high gross margins for us in Q4, approaching 18%. And don't consider that structural, don't project that forward [ because ] as we succeed in our promotion strategy and drive the volumes we expect to drive, I'd be looking closer to kind of mid-single digit for gross margins on machines.

Okay, And, again, to kind of layer into this topic of promotions, you did talk about last night, some positive read-throughs from promotional activity you took around Valentine's Day. Maybe just elaborate that, again, Ashish, you talked earlier about some of the holidays coming up and how that can help kind of spur engagement and demand, do you intend to utilize some of these read-throughs and knowledge that you've gained from Valentine's Day to take those actions as we move forward?

Yes. So, actually, let me kind of go back to a higher level and I'll talk about integrated marketing and promotions together, right. So, if you look at our -- when we look at our discretionary marketing from 2021 to 2023, we feel that -- and it kind of hides a lot of things, but there's a lot of things going on in that number. But if you look at discretionary marketing, we think we pulled back far too much, right. We're ramping that back up. And the way we are looking at our media mix is really focused on what I call perpetual marketing content, right, which is the good thing about performance advertising is, it ramps up very quickly, but the moment you stop, you're done, whereas if you deploy vehicles like what particularly work well for us, like influencer marketing, social media, right, driving network effects, PR, all of these organic vehicles which don't ramp in very quickly, they take some time, but they're very perpetual, once you have content out there. Our partnership with Pinterest, right. So all of those things are really helpful for the brand. What we saw in Valentine is everything just come together, right? We had excellent marketing, which is still ramping up. Our promotions plan was very effective. And we think with the funnel that we've always talked about converted and converted well, we lost out some pretty significant sales because retailers are caught off guard. Again, some of them -- some of that went to online, but we think that we believe we lost a lot of sales opportunity. I personally myself went to 4 stores looking for one of our models for a teacher friend of mine couldn't find it, right? So I'm just putting myself in consumer's shoe, what happened? So, our cadence is going to be deeper and more frequent throughout the year. We have something coming up for National Craft Month, we have Easter. We have -- we already talked about -- we were in a meeting earlier this morning on Mother's Day, Back-to-School. So I think I'm just super excited about -- and optimistic about our marketing. Again, still won't call it a win. But we think the combination of all this because, again, we believe in the market, we believe in the funnel. We think we'll start to turn the corner at this point.

Okay. Perfect. Kimball, I'll shift to you very quickly before I give you the last word, Ashish, which is you paid 2 special dividends in 2023. You repurchased about $20 million of stock. I believe that authorization has now wrapped. And so how should we all be thinking about Cricut's capital allocation priorities going forward?

So, it's kind of a 4-part allocation strategy. One, we want to make sure we have enough inventory to run our business. 2, we're focused on making sure we're doing the right investments to drive medium and long-term growth, both from a hardware product road map as well as on our platform. And as Ashish mentioned, we're in the very early stages still there. Then we're open to acquisition, especially if it accelerates key strategic priorities. But beyond that, it's how do we return capital to shareholders efficiently? And if you've seen active in the last 12 months, we've had both buyback programs and special dividends. Both of those are tools in our toolshed. But ultimately, we make our recommendations to the Board and those are Board decisions.

Okay. We've talked a lot about the different underlying factors of this business, of the evolution of this story. I want to end on a positive note by pointing out, obviously, despite the challenges that Cricut has faced, this is a consistently profitable business that generates cash. Obviously, both very important in this industry that we all work in. What is the kind of message that you want to leave everyone with today before we wrap?

So I think, again, internally inside the company, we don't talk about the economy. We don't talk about consumer spending. And we basically believe that everything that we are doing is at our control. And the way we are approaching it is, again, we go back to that strong conviction in our market, going back to the basics, simplifying our thinking, being very, very clear on what we need to accomplish and being incredibly execution focused, right? So we talk about 30-day impact, 60-day impact, 90-day impact. And I think, again, like I said, we don't need to reinvent something. We don't need to go find a dish or markets. We don't need to do something exotic. We just need to do the basics and do them really, really, really well and have a team that prioritizes execution. And one of the things I always say is, keep your vision fuzzy and keep your execution crystal clear. So we are focused on executing.

Okay. That's perfect. We just ended. So, Ashish, Kimball, Jim, thank you very much for joining us this morning.

Thank you, Erik.

Thank you.