Cricut, Inc.

Good day and thank you for standing by. Welcome to the Cricut Q2 2024 earnings conference call. At this time, all participants are in 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 that 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 hand the conference over to your first speaker today, Jim Suva, Senior Vice President of Finance and Treasurer. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us on Cricut's second quarter 2024 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-K or Form 10-Q that we have filed with the Securities and Exchange Commission. 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 6, 2024. 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. We are pleased with strong Q2 profitability and early signs that our acquisition and marketing strategies with retailers and consumers are starting to bear fruit. Connected Machines revenue grew for the second consecutive quarter from increased sell-in to retailers while sell-out to consumers was about flat in the quarter compared to a decline in Q1. Remember, our flywheel begins with the purchase of a connected machine, which then presents the opportunity to monetize our customers through subscriptions and accessories and materials. Operating margin dollars grew significantly, up 37%, or $7 million, driven by higher platform revenue as a percentage of total revenue. and benefits from inventory impairment-related items, despite a 6% year-on-year drop in overall sales. International sales grew 3% year-on-year. In Q2, platform revenues increased slightly on paid subscriber growth. Products revenues declined 10% as connected machines units and revenue growth were more than offset by a decline in accessories and materials. Paid subscribers grew 3% to over 2.8 million. We ended the quarter with over 5.9 million active users who cut in the past year, slightly up from a year ago. Our 90-day engaged users declined 3% year-on-year, and I would like to give you some examples of our efforts to improve this important KPI. Engagement is a key focus for our company, both in terms of onboarding as well as stimulating ongoing engagement for all users. Onboarders are a particular focus because the more they interact with our platform early, the more likely they are to interact with our platform over time. We made progress in delivering a simpler, more delightful experience to our onboarders. We introduced several improvements during the quarter. Starting with the out-of-box experience, we made it simpler to connect to your machine and work through guided steps to connect with the platform. Along with other improvements, this led to a year-on-year increase in the share of members who complete a project during their first day and who complete several projects in their first week. These are leading indicators for longer-term engagement. In Q2, we further expanded our content library, which has now surpassed 1 million high-quality makeable images within Cricut Access. We continued with our increased investment in marketing. Some highlights include a partnership with the Jennifer Hudson Show to support Teacher Appreciation Week, a featured story on the evening edition of CBS News on Mother's Day, additional broadcast segments focused on seasonal themes throughout the quarter, an expansion of our digital marketing campaigns to reach consumers on streaming television, and a continued focus on the expansion of influencer marketing partnerships. Initial results are promising, measured by driving traffic to Cricut.com, which plays a central role in pulling consumers through the funnel, regardless of where they purchase their machine. Our deeper promotional strategy that we started in late 2023 is working. In Q2, we saw growth in connected machines selling to retailers, as well as improving trends in sell-out to end consumers. This is a healthy positive indicator, and this is despite retailers holding below optimal inventory levels, which resulted in missed sales opportunities. Our discussions with retailers regarding our planned deeper promotions and their on-hand inventory levels are constructive. with the goal of returning to total sales growth. Accessories and materials decline 27% year on year. Our materials are engineered to work seamlessly with our machines to create the best user experience. We launched the Cricut value line of materials in late Q1, which we designed to compete in online marketplaces. And we are optimistic about this product, but it's still early at a small portion of our portfolio. We have additional innovation, products, and cost reductions coming in the quarters ahead. The areas where we could do better are straightforward. We need to attract more new users to buy our connected machines. We need to reverse weakening engagement trends and re-inject enthusiasm among our users. We need to be more effective competitors in accessories and materials. 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 shelf and for actual use of our ecosystem. It is our fundamental belief that when we give people more reasons and inspiration to make things that are appealing to them, and we make it easier to make things affordably, we will see a lift to materials consumptions. We are driven to continue to innovate while exhibiting both longer-term focus and current discipline. I will now turn the call over to Kimball.