Cricut, Inc.

Good day, and thank you for standing by. Welcome to the Cricut Q1 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. please be advised that today's conference is being recorded. I would now like to turn it over to our speaker today, Jim Suva, Senior Vice President of Finance. Please go ahead, Jim.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us on Cricut's first quarter 2023 earnings call. Please note that today's call is being webcast and recorded on the investor relations section of the company's website. A replay of the webcast will also be available following today's call. For your reference, accompanying slides used on today's call, along with a supplemental data sheet, have been posted to the Investor Relations section of the company's website, investor.cricket.com. Joining me on the call today are Ashish Arora, Chief Executive Officer, and Kimball Schill, Chief Financial Officer. Today's prepared remarks have been recorded, after which Ashish and Kimball will host live Q&A. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements, and management may make additional forward-looking statements, including statements regarding our strategies, business, expenses, and results of operations in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These statements are based on current expectations as of the company's management and involve inherent risks and uncertainties, including those identified in the risk factor section of Cricut's most recently filed Form 10-K. Actual events or results could differ materially. This call also contains time-sensitive information that is accurate only as of the date of this broadcast, May 9th, 2023. Cricut assumes no obligation to update any forward-looking projection that may be made in today's release or call. I will now turn the call over to Ashish.

Thank you, Jim, and welcome, everyone. As we mentioned last quarter, we expected Q1 revenue to be materially below prior year. Even with that, revenue in the first quarter was softer than we expected for connected machines, down 45% year-on-year, and accessories and materials down 39% year-on-year, as retailers continue to take a conservative approach to inventory commitments and softer consumer spend. These trends continue quarter to date. Subscriptions revenue, on the other hand, grew 16% year-over-year and 6% sequentially. Despite these mixed results, the strength of our financial profile allows us to deliver positive profits and strong cash flow. We will continue to operate in a fiscally disciplined way, making focused investments that will deliver increased user engagement and growth over the medium term. The Cricket platform now has over 8.2 million total users, up 19% over Q1 last year. 3.7 million users, or 45% of total users, have cut a project at least once within the first quarter. This creates a tremendous opportunity for us to build deeper user engagement on our platform. Our goal is to bring a majority of our users into design space monthly to be inspired. We believe increasing visits to design space and improving our ability to serve relevant, makeable content that matches the interests of each user will lead to higher engagement and an increase in paid subscribers. We also want to broaden user engagement activities such as liking, bookmarking, and sharing projects. As users increasingly drive growth in shared community projects and our platform more effectively matches content tailored to each user, These mutually reinforcing effects will create value in our platform for all users. As we outlined last quarter, we have intensified our focus around new user acquisition and platform expansion in order to drive engagement, subscriptions, and increase monetization. We also laid out a two-year path to re-accelerate growth in accessories and materials. These investments are also leveraged across international markets where the opportunity for growth has never been stronger. In fact, as of the end of Q1, we have crossed a milestone with over 1.1 million international users outside of North America. We continue to simplify and streamline the consumer purchase journey. Last quarter, we rolled out several new creative assets and tools that bring relevant information to consumers more quickly across all channels. We will continue to iterate on these experiences and add to the growing content on our website and social media channels. We previously launched a new homepage along with comparison tables to help users compare various machines. By way of example, we have since seen an increase of time on our pages for our machine comparison tool of over 50%. Last month, we also added a new simple machine quiz to help consumers decide which machine is right for them. Given the success and positive feedback from these assets, we plan to leverage them broadly across all consumer touchpoints, including several retail and e-commerce destinations. We have already begun to roll out improved in-store retail merchandising to enhance the consumer shopping experience. For example, we work with Target on a redesign planogram that has been deployed across 80% of store locations. This new redesign will improve in-store branding and better communicate the value of the cricket ecosystem. We're also better optimizing our marketing efforts and audience targeting. As part of this, we are rebalancing some of our investments over the year from bottom of funnel to top of funnel activities, such as digital and influencer marketing across proven channels, as well as increased PR coverage. For example, we're very excited about the PR coverage we are receiving going into Mother's Day, as cricket being the perfect gift for moms in our lives. We believe this strategy will bear more long-term fruit and have greater lasting branding effects than what our promotional plans during the course of the year. We're also focused on creating greater upfront value for consumers. One way to do this is through more machine bundles, which can include digital content materials, and accessories. These bundles enhance the out-of-box experience and ensure users have all the things they need to make initial projects and get them quickly on the path towards user engagement. As I mentioned last quarter, we are putting a great deal of focus on user engagement, which starts the moment we acquire a user. Our data shows that the first few weeks of a new user's experience are often indicative of their engagement over time. Our current focus includes improving our onboarding process and driving users to design space early in their user journey. We are seeing early signs of success and are expanding our onboarding initiatives, like expanding lesson plans over the coming quarters to cover a broader set of machines. Content drives inspiration, which drives engagement. We think of content both in terms of images and makeable projects. which include images plus design layout work, photos of the finished project, and can include instructions and lists of materials. We are creating more effective ways for users to find relevant content while further reducing friction between designing and cutting projects. For example, we recently introduced visual-based search, which lets users find similar images. We're constantly increasing our image library. A contributing artist program also known as CAP launched just one year ago. The CAP program represents an increasingly significant portion of new images on Design Space. Sourced from diverse artists around the world, CAP also helps meet the need for localized content in many markets around the world. Community projects will increasingly be a fresh source of inspiration and makeable content for our subscribers. These projects are created and designed by our community of users, and in addition to the design layouts and photos of the finished project, may also include instructions and a list of materials to use, making it easier for others to create. These projects can be shared inside the platform and on other social media using links, thus inspiring other users to make and creating network effects. This user-generated content drives incremental value to design space and is becoming an increasingly important way to add content to the platform. As we grow our library of makeable content on our platform, we are also improving the ways we deliver personalized and curated experiences to our members to find the most inspiring and relevant content to them. We are beginning a number of projects across our marketing technology, commerce, and design platforms to significantly improve this experience. We see this as an important pillar in our journey to drive greater engagement. We ended the quarter with 2.7 million paid subscribers, a 17% increase year over year. We benefit from strong attach rates and are increasingly leveraging design space touchpoints to better communicate the benefit of our subscription services. We continue to execute against our roadmap of Cricut Access exclusive software features. Warp is our latest addition. Warp enables creative effects on any text object. This is an impactful tool, given that over 50% of projects made on our platform contain text. In many new cases, new features we launch coincide with increased subscriber growth, highlighting our visibility to develop valuable, highly sought after features. Our priority is to ensure subscribers continuously discover and use the content, features, and functionality available to them. We have an opportunity to increase user awareness of our many features through touch points and advertising on and off our platform, which will help us attract and retain subscribers. We're still in the very early days of our roadmap. Subscribers are our most valuable customers. The primary reason subscribers stop subscribing is that they don't use Design Space often enough to justify the cost. So one of our highest engagement priorities is to drive subscribers to engage more frequently. Closely related is gaining more subscribers. We capture more subscribers early in their quicker journey, making our onboarding improvement another source of future value. Turning to accessories and materials. As I mentioned, we are in the early days of rebuilding this business. We continue to hold market share when we compete on price, but overall, users are cutting fewer projects and therefore needing less material, which we believe is influenced, at least in part, by softer consumer discretionary spend. Longer term, we believe that accessories and materials will re-accelerate as we focus on cost reductions over time, sound promotional strategies for increased market share, more machine and materials bundles across more diverse channels, and increased user engagement. We acknowledge the pressure that muted discretionary consumer spend continues to put on connected machines and accessories and materials. Subscriptions continues to be resilient, and we are excited about our international opportunities. We are more focused than we've ever been and are taking the right steps to grow our business for the long term. Our focus on new user acquisition, which starts with the purchase of a connected machine, and platform expansion to drive engagement, subscriptions, and increase modernization, will help us navigate the current uncertainty and position as well for when consumer spend returns. I will now turn the call over to Kimball for the financials.