Cricut, Inc.

Good day and thank you for standing by. Welcome to the Cricut Q2 2023 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 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'd now like to hand the conference over to Cricket.

Please go ahead. Thank you, Operator, and good afternoon, everyone. Thank you for joining us on Cricket's second 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 of the company's management and involve inherent risks and uncertainties, including those identified in the risk factors section of Cricut's most recently filed Form 10-Q. 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, August 8, 2023. Cricket 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. We finished the quarter in line with our expectations. We continue to manage the business with an eye towards profitability, even as we navigate softer consumer spend. I'm proud of the accomplishments the team has made, and we launched some important innovations that I will discuss in detail. Looking at Q2 highlights, on a year-over-year basis, Q2 total revenues were down 3%, Machine sales were up 5% and operating income was down 4%. We are striving to return to growth but remain disciplined with how we spend. We are also very focused on innovation and strengthening our platform. I'm also excited to share that on July 18th, we launched Cricut Venture, the largest and fastest connected cutting machine on the Cricut platform. Cricut Venture represents the fourth all-new architecture of connected machines in our history and demonstrates our commitment to innovation. Cricut Venture cuts a wide variety of materials with precision at commercial speeds as well as writes, scores, and foils. With Cricut Venture, makers can create for occasions that require larger sizes and quantities, from bigger custom wall decals to large batches of custom T-shirts or tote bags. Cricut Venture is able to cut up to 75 feet of repeated images. It works seamlessly with Design Space and is compatible with all our existing 13 and smart materials, as well as our newly introduced 25-inch width. Powered by Cricut Design Space, our platform helps millions of users discover, make, and share their projects, and Cricut Venture expands the ability for users to make, thanks to enhanced software features that support this new machine. We focus on makeable content featuring projects and art that lend themselves to large projects, including education, parties, weddings, sports events, and apparel, large batch quantities, and much more. We are excited to see how makers will use Cricut Venture to create projects and share them with other community members. We launched Cricut Venture on July 18th with our first in-person consumer event since 2020. We love the energy these events generate within our community and are planning to do more in-person customer events around new products and our Cricut platform. We are pleased with early sales performance. Recall that we have four priorities, which are new user acquisition, user engagement, subscriptions, and accessories and materials. I will briefly review these items and also provide some detailed commentary on our new platform innovations. We added over 200,000 new users in the quarter, approximately in line with our expectations. We continue our focus on new user acquisition and platform expansion to ultimately drive engagement, subscriptions, and increase monetization. We have shared previously that our funnel is healthy, and we see an opportunity in holiday to pull consumers through the funnel who have been pausing in their purchase decisions. A recent survey among consumers in the cricket cutting machine funnel confirms that the current financial situations are a key barrier to purchase. About a third of consumers in the cricket funnel stated that they are struggling to make ends meet on a personal level. Consumers at the top of the funnel are most interested in understanding the capabilities of the cricket machine and how it fits into their lives. As consumers get closer to purchasing a cricket, affordability becomes a constraint. Among these consumers, at the bottom of the funnel, affordability is the number one barrier to purchase. About half of those consumers say that they are saving money to purchase a cricket, while about a third are waiting for a sale or a special deal. We are using these insights to inform our strategy heading into the holiday season. We plan to be more promotional in the fourth quarter with deeper promotions for shorter periods of time combined with a 360-degree marketing plan including adding over 200 paid influencers to pull more consumers through the funnel. We ended Q2 with nearly 3.7 million engaged users, which is roughly flat year over year. We are pursuing efforts to drive engagement along our members' journey from onboarding to stimulating discovery and inspiration to assisting making and encouraging sharing. As we have highlighted before, mobile plays an important role in driving more interactions. We launched an enhanced homepage inside Design Space on mobile platforms in July 2022 and continue to make improvements on an ongoing basis. For the first half of 2023, over half the interactions on Design Space homepage came from mobile devices. We have also greatly simplified navigation on the platform for desktop users. This new navigation also makes learning plans, heat guide, cricket learn, and shop easily accessible from inside the platforms. Increasingly, we will integrate more and more video content, learning aids, and instructions inside the platform itself, where users spend the majority of their time. We're always listening to our customers and prioritizing enhancements that alleviate pain points and friction and increase the value of our Cricut Access subscriptions. In Q2, we launched enhancements for Print and Cut. Print and Cut functionality gives users the ability to print an image on their color printer and then cut the outline of their printed design. This gives them color designs without having to use layers of different materials in different colors. Last quarter, we shared the introduction of Warp, which enables creative effects on text. In the coming months, we will be releasing version two of that feature, where users can warp their images, giving them greater creative possibilities. In our last call, we mentioned how community projects shared on our platform can help inspire and match content to other users. These mutually reinforcing effects will create value in our platform for all users. At the end of Q2, we improved the way members can search within the library of community projects and saw a notable increase in members' engagement with those projects. We ended the quarter with over 2.7 million paid subscribers, which was essentially flat quarter over quarter. and up 15% year-over-year and was in line with their expectations. AI, machine learning, and especially generative AI models are much in the news. I would like to point out some examples of how we are using AI and machine learning to add more valuable benefits to Cricket subscribers. AI is an area of exciting potential for the Cricket platform and is complementary to our strategy. We see opportunities for AI to impact the experience throughout the user journey around both search and discovery and design and make within design space. We have been working on machine learning and AI for a long time, and we've recently delivered several AI-powered capabilities and are in active development on others. I want to give you some insights into these AI and machine learning capabilities. On the design and make side, Automatic Background Remover uses a custom machine learning model. and is one of our most popular Cricut access features across our desktop and mobile apps. On the search and discovery side, our similar images functionality is powered by a machine learning model that is trained on and tuned for vector images. Building on the similar images foundation, we are also developing semantic search, a richer search capability that leverages modern machine learning techniques. We are currently testing semantic search with both internal and external users. We expect to see richer search capabilities powered by semantic search in the future. AI techniques will also be used to drive the display of personalized content on the Design Space homepage and in our engagement marketing, and we continue to actively refine our personalization algorithms. Generative AI is an area of great interest and excitement in design software, and it holds great promise to augment the already rich Cricut Access content offering. We're actively experimenting with generative AI capabilities that allow users to create unique images based on detailed natural language prompts, such as a sailboat with dolphins jumping in the waves nearby. A unique challenge and area of differentiation for Cricut in building generative art functionality is that we will ensure that generated images are optimized for cutting machines. Our teams are investigating other ways in which AI will add meaningful value to our platform with a focus on facilitating the journey for our members between inspiration and making. We see generative AI as being complementary and will enhance our content strategy in a meaningful and positive way. At the same time, we believe that it does not replace human creativity but enhances it. We are focused on doing this responsibly while ensuring we protect copyrights and our artists. We're excited about the new ecosystem of materials we launch alongside Cricut Venture, including 25-inch width materials and all new markers developed to support the scale and speeds that Cricut Venture enables. As we've highlighted before, we are on a two-year journey to transform this business. Consistent with prior comments, we will continue a promotional cadence in this category to remain price competitive for consumers. We see that when we are in the price range of our competitors, we get our fair share. We have a strong focus on optimizing our products for lower costs so we can compete better in the market with improved margins while still creating a differentiated offering that works seamlessly with our machines and platform. We are intensely focused on the overall customer experience, and we are motivated to work with those retailers that help us create a great experience both on the shelf and for actual usage of our ecosystem. I've never felt so encouraged and excited about the Cricut platform. We're in the early days of this transformation while still remaining profitable. We are driven to continue to innovate while exhibiting both long-term focus and current discipline. With that, I will transition the call over to Kimball to go into the financial details.