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

Thank you. Okay. Okay? Yep, good. Hi, everyone, and welcome to the Cricut Fireside Chat at the Goldman Sachs Communacopia + Technology Conference. I have the privilege of hosting Kimball Schill, CFO, and Chris Belfiore, Head of IR, here at our conference. We have about 35 minutes today, and we'll open it up to Q&A if there's any. But my name is Kat Murphy, and I cover Cricut and the hardware sector here at Goldman Sachs. It's a privilege to have you both here.

Excited to be here. Thank you, Kat. We're excited to be here.

So to start it off, over the last several quarters, you've focused on a few key initiatives around investing in new products, simplifying the user experience, broadening brand awareness, and introducing some new ways to monetize the Cricut platform. As you look across those various initiatives, what are two or three milestones that would tell you that this strategy is translating into sustainable, profitable growth?

So there's four things I'll highlight. First is consistent platform growth. So we have grown every single quarter. I think since 2021. We expect to grow every quarter this year. And so we're very pleased with our platform business. And it's worth highlighting that it represents 80% of our profitability, and it's the part of the flywheel that lets us monetize the users that we bring into our ecosystem. Second really is the green shoots of improvement we're seeing in engagement. So engagement's been a bit of a headwind for us for the last couple of years. And this last quarter, we saw active users, which are users who have engaged in the last 365 days, increase on a year-on-year basis. That's the first time in a while. We also have a shorter term engagement metric for 90-day engaged users, so that's someone who's made a project in the last quarter, and we held that, while that's been under pressure, we saw that hold flat. And so, really kind of green shoots of engagement in the engagement area. And then we've had a number of new product launches this year. We just last week announced the launch of our new Maker 5, which is our flagship cutting machine. We launched two machines earlier in the year with Joy 2 and Explorer 5 in Q1. And then we've also introduced a number of heat press products. So really, the refresh of the product portfolio that we continue to execute on. And then even despite some of the hedges we've seen in the platform side of the business, the sustained profitability that we've been able to drive in the business. So really kind of those four things.

Great. You made reference to the sustained platform growth, and you've talked about expectations for that to carry on into the back half of the year, also expecting to see growth in the product part of the business in the back half of calendar 2026. What's driving your confidence in that outlook for both segments? And I'm sure we'll go into each segment in more detail. But what are some key drivers investors should be watching for as we work through the back half of calendar 2026?

So on the platform side of the business, we've been very consistent in being able to drive incremental growth. There's an element of price leverage that we're able to pull at this point that we've been experimenting with. And let me kind of break some of those down now and go into detail in a minute. But, we're having price increases not across the board, but capturing more area into the curve. A couple of examples I'll break down. So a portion of our subscriptions come through the iOS App Store. And as we were able to introduce an in-app pay option within the App Store, we saw a number of probably the majority of people go towards that because it kept the same legacy pricing. But we also made available continue with Apple Pay, but you paid a marginally higher price. And we see a number of people just choosing the convenience of the Apple Pay. The good news is we haven't seen any drop-off of subscriptions in that as we've introduced a new higher price with Apple Pay. So that told us there's some room for pricing actions. The second thing that we've introduced this year is a new premium monthly plan. So our standard pricing plan is $9.99 a month, $99 on an annual basis, we introduced a premium plan that is $14.99 a month, and we're seeing a significant portion of our subscribers choose for that better plan. The key differentiator there is the number of AI credits and some shop benefits, but it's a couple of examples where we're seeing an opportunity to pull the pricing lever where customers are willing to pay for that.

That's very helpful. And we can definitely dig into it more. But first I do want to talk about the launch of the Cricut Maker 5 last week, which as you mentioned, your flagship program or flagship platform. It's also coming in at a lower price point relative to history. How are you thinking about managing the mix of some of these new product introductions with the impacts that it could lead to on the profitability perspective, the appropriate marketing behind putting some of these new platforms out, and what are some considerations on platform mix that inform both the revenue and margin outlook for that segment?

A couple of things I want to highlight. One, again, 80% of our profitability comes from our subscriptions business. The flywheel starts for us when someone buys a connected machine and that gives us to monetize them through subscriptions and accessories and materials. And so when we talk about our cutting machines, it's really about having the balanced portfolio. So we have an entry price point of $99 for our smallest machine, and we introduced the newest incarnation of that in Q1, that's Joy 2. We have kind of a mid-price point with our Joy Extra, which we introduced. That was a couple of years old. We haven't refreshed that one yet. But then we also have our Explorer 5 and then our Maker 5. And so we have price points based on what consumers want to do. And the other thing that is new this year is our bundle-only strategy. So in history, you would buy a bare machine, and then the consumer would have to figure out what bundle of materials and tools I need to buy in addition to be able to go make projects. And as we've launched our next generation of machines, we only sell them packaged with bundles. And we have five different configuration bundles for each machine type. So that lets us have a compelling open price point as well as, you know, high value in the box for the larger bundles and so it depends on what the consumer is looking for, how much they have to spend and what they're looking for and so it's really about having that balanced portfolio and letting consumers select and then we then once they are inside the wall we have the opportunity then to monetize them through accessories materials.

Correct me if I get these numbers wrong, but $350 for the entry-level Maker 5 bundle, and then starting price for Maker 4 at the time was initially $400. How are you driving cost out of the appliance and still able to capture value with these bundles? What's happening inside the business that is allowing you to do that?

So we've done an excellent job in re-engineering these products. The prior generation Explorer 4 and Maker 4 that we launched a year ago in Q1 was just kind of a refresh of the existing architecture. The Explorer 5, Maker 5 is the first time we've fundamentally reengineered the architecture since 2014. In that reengineering, we were able to drive significant cost out of the manufacturing cost of the product. It has half as many parts and still produces a better result than prior generation machines. So we're really excited about that. What that enabled us to do is without sacrificing margins, put a lot more value in the box for consumers. And that's important for us because we know through our research that affordability is the single biggest objection that consumers have. We're in a discretionary product, we know we're an expensive discretionary product, and most of our consumers are in the $100,000 or less consumer households. That's those are consumers that have been under pressure for a number of years now. And so we're focused on affordability, even as we've navigated tariffs over the last, you know, 18 months, you haven't seen us raising our prices, right? We've been focused on that affordability. And so we're really excited about the value we're able to put in the box, and make it compelling. So either same or lower price points of prior generation machines with a lot more value in the box with these bundles.

That's very helpful. We talked about the hardware appliances being the introduction, or the cutting machine being the introduction to the flywheel that you're then monetizing through the subscription offering, through the accessories and materials business. But one of the ways you're looking to drive user acquisition is through your rebranded Think It, Make It Cricut campaign. Can you talk about some of the early learnings of that campaign and what success you're seeing in expanding the aperture of the type of customer who engages with your platform?

No, very good. So let me talk about the genesis of Think It, Make It Cricut. We've been spending a lot of money in the last couple of years as we've accelerated marketing to drive awareness. And last year we learned we were doing a good job of filling the top of the funnel. We weren't doing, we needed to do a better job of pulling people through the funnel and help them understand how we drive conversion. And as we understood how consumers think about the brand, people were aware of Cricut, but they also had a view that, oh, it's for my really crafty friend, it's not for someone like me. And yet there's lots of capabilities that are available through our creative platform and you can make with our machines that many people do. And so the intent behind the idea, the new Think It Make It Cricut branding, is to expand the prism through which people view Cricut and, oh, it is for something like me because it does something that I'm interested in doing already.

How are you measuring the success of these marketing campaigns and ensuring that you're attracting high-quality users who may be sticky long-term users of the platform as opposed to anyone benefiting necessarily from promotions or any short-term pull forward in demand?

So it goes back to the funnel I talked about, where we were doing a great job of bringing of making people aware, but we weren't doing a great job of pulling people through. And so part of it is getting people to actually get to it, purchase decision, and convert. And then in terms of the overall quality of user, we are looking for, you know, a broader set of users that come in. Well, and one of the things that we've learned with our research on consumers is, and this has been kind of a change that we've seen over the last few years, before COVID and during COVID, you had people that had a lot of time. They were focused on doing crafting. They were hardcore crafters, and they would spend a lot of time doing it, and they were willing to go through. You know, the time investment required to learn a fairly complicated software experience, but it was very powerful and let them make what they want to make. As we have started to go to a broader, more casual consumer, it's much more focused on time efficiency. I don't have two hours that I want to spend making something. I want to do something in 20 minutes. A theme that we've talked about throughout different parts of our business is, how do we remove friction? How do we make it simpler? And how do we make it approachable so that new people who come into the brand, who have something related to the many things that you can do, it's easy for them to get up to speed and do it.

Can you talk more about that guided flow investment that you're making that you alluded to in making easier the use of the platform for customers? Yes. Is that resonating both with the existing customer base and keeping them engaged or re-engaging existing customers or is this primarily to make easier that first project and the initial engagement of a new user?

It's it's really both. And so, you know, kind of break it down for you is, um, you know, when we researched with our when we interviewed our consumers who who hadn't engaged in a while. We'd ask them, you know, why haven't you engaged? And we got kind of three answers back. It's, well, I couldn't think of anything to make, so no inspiration. I didn't have a reason to make, right? Oftentimes people engage around a birthday, an anniversary, a holiday, right? And, and so, you know, nothing, there wasn't that motivation and then it was life got in the way. And we were drilled down and what was life got in the way mean? It's it's it's that I don't have an afternoon to spend, I have 20 minutes to spend and I how can I make something in 20 minutes? And so, you know, it was probably a year and a half, two years of investment that really came to fruition as we closed out 2025, where we were able to launch a dramatically simplified user experience in the platform. And that's the guided flows that you're talking about. So we took the most popular use cases, right? And this is all data-driven decisions because we have the connected platform lets us see what kind of projects are creating, what materials are doing, the types of projects. And so we took the most popular use cases and dramatically simplified them. And then we leveraged AI throughout that making process with instructions and guided steps all the way through. The way that synchronizes with what we're doing this year with new products is with our bundle-only strategy, we're putting the materials and the hand tools in the box that sync with the guided flows that new users are seeing. So I get my new machine. I'm excited to do something. I can find the instruction and the guided step-by-step flow in the software, and it correlates with everything I have out of the box in my experience. And so it's kind of an integrated way we're trying to remove friction for consumers and make it simpler. Why does that matter? We see that the way someone socializes with their platform in the very early days is predictive of how they've socialized with it over time. So if someone comes in and has a good experience, and they make a couple of projects successfully, that builds their confidence. And they're going to be more active over time if someone comes in and they get couldn't figure out how to connect the machine or they couldn't figure out how to make the project they couldn't they couldn't figure out how to cut it or design it or then assemble the project they get frustrated and they may just put the machine back in the closet not get it out again so we we believe this ultimately gives us a more productive consumer by making it simpler for them.

It's very helpful. You talked about this investment that you were making over a year or two in simplifying these guided flows. You also talked about reengineering the newest generation of platforms to pull out costs. Should we think about the expense related with those investments as one that should be ongoing on a go-forward basis, or is the majority of that OPEX step up now behind us? Is there more room to go to make more efficient both the platform and the hardware appliances?

So we continue to accelerate investment in hardware investments. Hardware development. We have a long roadmap that we're working against. You know, we just announced the Maker 5 launch. We have more to come that will happen this year before holiday. I won't talk any more about it other than to say there's more to come. And there's more to come in the quarters ahead that we're working on. And so we continue to drive innovation in the business and even as we are looking at adjacent spaces beyond on just our traditional cutting machines. And so that's something that folks can look for in the coming quarters, not all necessarily this year. And then, you know, we continue to invest heavily in the platform. We're constantly evolving the experience and to make it better. And that's one of the reasons that I think we've been so successful in driving consistent growth in the platform is is making sure that we have the right value proposition for consumers and it's an improving value proposition over time.

That's very helpful. You mentioned monetizing opportunities outside of just the traditional cutting machines. Can you talk about that? You have talked about offerings like direct-to-film and patterns as being new ways in which you're looking to engage with and monetize the customer outside of necessarily just that engagement on the cutting machine. What success are you seeing there? And maybe at a high level, could you talk to the types of characteristics of what some of these adjacent opportunities could look like that you would deem as successful or adjacent to the core kind of crafting motion?

So on the services and just the content play that you talked about. I mean, it's a small team, small investment, really some tests that we're doing. The primary goal there is to keep engaged subscribers more engaged. We know that our users do other things and have other creative outlets than just making something on their cutting machine. And we want to become the platform of choice. And so with crochet patterns, with paint by number, with coloring pages, and some of those things that you mentioned, we're giving an opportunity to do things they're going to go find, they're already finding how to do those things other places. We want to bring more value to our subscription and keep them engaged. The single biggest reason people stop subscribing is they're not seeing the value in that subscription. So we're looking at bringing the value in the subscription. The dollars we've invested so far, are very small as we test this and figure out how we want to scale it. Ultimately, we think it becomes an opportunity to bring creative people into our platform that may not have a cutting machine or may not be interested in that, but they're interested in some of these other things that we offer. So we'll learn with that over time. But today, today it's small. The early data suggests that our subscribers who use it, use it on a repeated basis and they see value there. And so we're encouraged by that.

You mentioned earlier the three reasons why customers were not engaging as often, being no inspiration, no reason, or life got in the way. Does that adjacent opportunity that you just talked about address the no inspiration and finding more reasons for a customer to stay engaged with the platform? Or are there other ways in which you're looking to help customers find more use cases for your products?

There are a number of ways that we're helping people find that inspiration and become engaged, right? Yes, some of these services offerings and is part of that. But also, even within our platform, we have millions of images that that that are often wise for high quality cutting to be used in projects. It can be really difficult to sort through a couple of million images and figure out what do I want to put in my project. And so we have AI in our search algorithms to help understand user intent, user interest, and we're serving up images that they would be interested in. So that's part of the inspiration. We also have generator AI. So if I don't find an image I want, I can use text prompts and I can generate an image. And then and then more recently we've introduced Project Designer that where it will not just give you an image that you then put into, think of an image as an ingredient in a recipe and a project is your complete recipe. And so we can generate just that one ingredient for you or we can generate the whole project for you including all your instructions and how to give you a finished design tell you how to cut it out, give you instructions on how to assemble it. And so there's a range of things that help the consumers find what they're looking for.