Cricut, Inc. (CRCT) 2025 Q4 法說會逐字稿

Good day everyone and welcome to Cricut, fourth quarter 2025 earnings conference call. (Operator Instructions) Please note this conference is being recorded.

Now it's my pleasure to turn the call over to the Senior Vice President, and head of investor relations, Jim Suva. Please proceed.

Thank you, operator, and good afternoon, everyone. Thank you for joining us on Cricut's fourth quarter 2025 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.Cricut.com.

Joining me on the call today are Ashish Arora, Chief Executive Officer, and Kimball Shill, 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, tariffs, capital allocation, 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 10k or Form 10Q 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, March 3, 2026. 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 While we are pleased with increased profitability and growth in paid subscribers and global machine sellout units, we are disappointed in the lack of total company sales growth for both Q4 and 2025. We are working with tremendous urgency and focus to drive a mass market experience, accelerate our development cycles, and compete better.

I would like to look back on 2025 on what went well, what we could do better, and our priorities for 2026. Kimball will go through much of the financial details and how we look at 2026. We are pleased with our increased profitability and the over 4% increase in paid subscribers in 2025, along with positive machine sellout units. This was our 9th consecutive year of positive net income, as we generated $76.7 million of net income, which increased 22% or $13.9 million compared to 2024.

In 2025 we launched two new cutting machines, a new mini heat press, several new materials, including greatly enhancing our Cricut value line, and significant improvements in our software platform that includes compelling AI offerings and easy to use project guided flows. We are disappointed we did not post positive full year revenue growth. Total company sales decreased less than 1% for the full year and decreased 3% year over year in Q4. We believe Cricut is a growth business, and we are intent on proving it. Last year, I mentioned we were fundamentally simplifying our user experience.

We are delivering on this commitment with our new project guided flows which are in the process of being rolled out to our entire user base. While it is still early, we are pleased with the initial results and feedback. We are relentlessly focused on increasing our speed of execution and on accelerating investments that will help drive future revenue growth. These accelerated investments are in hardware product development, materials, and engagement.

You can see the early fruits of these efforts from our 2025 launches that are summarized above. Thus far in 2026, we have already launched two next generation cutting machines, new heat presses, a new direct to film or DTF service, and I'm excited about our future roadmap. We will continue a similar cadence of marketing and promotional spend as the prior year. We are focused on 4 main priorities new user acquisition, user engagement, subscriptions, and accessories and materials.

We continue to focus on new user acquisition and engagement growth on our platform, which ultimately drives our monetization flywheel. In Q4, we amplified our marketing reach by strengthening our visibility during this key shopping period. We continued with increased marketing investment and activated several high-profile partnerships alongside new advertising opportunities. These efforts led to increased marketing engagement and an increase in Google searches for what is Cricut, which we have historically watched as a leading indicator.

We believe these efforts will continue to bear fruit in 2026. While we did not grow revenue in the quarter, we did see a continued improvement in sell-out of connected machines, which we believe is a result of our ongoing marketing efforts. Quarter to date in 2026, we continue to see positive connected machine set out. In 2026 we are leaning even more into our bundle first strategy with a cohesive out of the box experience that includes tools and materials with the machine along with a tightly integrated guided software flow. With that, we are excited to announce the introduction of two next generation cutting machines with all new architectures, Cricut Joy 2 and Cricut Explore 5.

The overall consumer experience embedded in these new machine bundles represents the start of a new era at Cricut. Recall last year I mentioned we would fundamentally simplify our user experience. We delivered on this commitment as we introduced guided project flows for our most popular use cases. These include vinyl decals, iron on t-shirts, folded cards, card stock cut-outs, insert cards, and stickers and labels. While it is too early to see a material change in engagement from these improvements, as they were only recently rolled out, we are pleased with early feedback, especially for on boarders.

Engagement erosion continues to moderate as we held active users about flat for the year at just under 5.9 million active users. 90 day engaged users who cut during the quarter declined 3% year on year. Our ability to hold active users above flat is the result of multiple efforts. The performance and reliability of our platform continued to increase, which made this holidaymaking season a more frictionless experience for our users.

We've introduced several improvements to the core functionality of our design experience. Our AI-driven features, both user facing such as create AI or behind the scenes, such as search algorithms, continue to drive positive impact. For example, Create AI lets users take their personal images, easily add complementary text, and choose an output style to create unique designs ready to cut, draw, or print.

This dramatically improves the likelihood of user success. Create AI lets users generate ready to make images using credits as part of their subscription plan and is an acquisition driver to attract non-subscribers to sign up for Cricut access. We see the use of AI assisted images and project creation as complementary to our growing image library from a contributing artist program and our curated guided flows and associated templates for the most common project types.

Beyond these continued improvements within our app, we have continued to improve our engagement marketing efforts to drive returning visits to design space. As a result of all our efforts, we have seen our net promoter score improve meaningfully in the past 12 months. Despite the continued pressure on our engagement metrics, we are confident in our efforts to simplify our design experience.

By assisting users based on their project intent, selling more of our connected machines and bundles configured to work seamlessly with these new guided flows, and continuing to grow the number of images, fonts, editable templates, and AI features available to users, we look forward to 2026, which will be the 1st year of our cohesive consumer experience that integrates our bundle for strategy. Coupled with our new simplified project workflows that leverage AI throughout the making experience, in Q4, our paid subscribers increased by over 4% year on year to just over 3.09 million.

Paid subscribers continue to be a big positive for us and increase 132,000 year on year in Q4. We are also seeing positive trends on win backs, where our promotional offers are driving increased signups from prior subscribers. We believe our new platform enhancements, including new project guided flows, templates, and create AI enhancements will continue to provide benefits and value to our subscribers. We have a rich roadmap to continually increase the value proposition for subscribers. As I previously mentioned, we launched Create AI for our Cricut Access subscribers, and we will continue to introduce more AI-driven features.

Our goal is to make it incredibly compelling to be a subscriber to leverage our content and software tools. Accessories and materials sales decreased 13% year on year in Q4 and declined 9% for the full year. We realize that over the last several years we have lost ground in competition in material types where there are low barriers to entry. We continue to see competitive pressure increase, manifesting in white label brands and retailers, as well as new entrants in online marketplaces and in retail. We have embraced the challenge of providing refreshed and cost competitive materials and accessories offerings. As these offerings continue to roll out, we intend to reclaim market share and by doing so enhance the making experience of our users.

I'm pleased to report that we have seen share improvements globally within online channels and at select large retailers across the category. For example, we see our value line continue to accelerate in online marketplaces. We continue to regain share in heat presses, and we continue to make progress with driving costs out of our supply chain as we fight to counteract tariffs and address affordability for our consumers.

In Q4 we launch a new Easy Press mini-LT that addresses affordability concerns and is available in four attractive colours. During Q1, we launch a new heat res, Cricut Easy Press SE, which comes in 2 sizes and a variety of colours. These machines provide a professional quality heat transfer experience without the complexity or large size of an industrial press. They support a wide range of materials including Iron-On, infusible ink, sublimation, and DTF.

I'm also excited to share that in Q1 I relaunched a DTF service. DTF lets users create in design space vibrant, full colour personalized artwork that is printed onto a special film, coated with adhesive powder, and then pressed onto fabric or other substrates. DTF gives us the opportunity to leverage our design space platform and guided flows that we have been investing in over the past year.

This is an example of new opportunities we are exploring to monetize our platform and content beyond cutting machines. As you can see, our team has been very busy with R&D, innovation, and new products. We are not done. And we have a great line of new products on our future roadmap.

We also continue in our relentless focus to drive costs out of this business. We are intensely focused on the overall customer experience. It's our fundamental belief that when we give people more reasons and inspiration to make things easily and affordably, we will see a lift in materials consumption. We are driven to continue to innovate while exhibiting both long-term focus and current discipline.

With that, I'll turn the call over to Kimball.

Thank you, Ashish, and welcome everyone. In the fourth quarter we delivered revenue of $203.6 million a 3% decline compared to the prior year. Full year 2025, revenue was $708.8 million less than a 1% decline from 2024. We generated $7.8 million in net income, or 3.8% of total sales in Q4, and $76.7 million or 10.8% of total sales for the year.

Breaking revenue down further, Q4 2025 revenue for platform was $83.9 million up 6% year on year. We ended the year with just over 3.09 million paid subscribers, which is up 132,000 or more than 4% year on year, and up 87,000 or 3% from Q3.

For the full year, platform revenue was up 5%, and APU increased 5% to $55.77 from $53.12 a year ago. Platform revenue was up slightly more than paid subscribers, primarily due to the benefit of foreign exchange.

Q4 revenue from products was $119.7 million down 8% year on year. Connected machines revenue decreased 4% year on year in Q4, driven primarily by lower average selling prices as we were more promotional, preparing for new product launches in Q1.

Accessories and materials decreased 13% in Q4 for the full year, revenue from products decreased 5%, driven mostly by the 9% decrease in accessories and materials, while connected machines revenue was about flat. As Ashish mentioned, machine sellout units were positive for the year and continued to be up quarter to date. As a reminder, we don't have perfect coverage for sellout data in all channels, so treat this as directional.

As we shift to our bundle for strategy where we will only sell next generation connected machines bundled with materials, we will no longer provide the supplemental revenue breakdown of connected machines and assessor materials in our SEC filings and data sheet. We will continue to report platform and product revenues and costs as we currently do in our consolidated statement of operations and comprehensive income.

In terms of geographic breakdown, international sales were positive at $57.8 million an increase of 9% compared to Q4 2024. As a percentage of total revenue, international was 28% in Q4'2025 compared with 25% of total revenue in Q4'2024. For the full year, 2025 international sales increased 8% and represented 24% of total company revenues compared to 22% in 2024. Foreign exchange benefited international sales by 6% for Q4 and by 4% for the full year.

Our Australian business stabilized through enhanced pricing and marketing programs in the second half. Europe showed solid growth thanks to increased marketing investment and store expansion for the peak season. Our emerging markets also demonstrated strong performance, especially in our fledgling Japan and India markets. We continue to make progress in increasing brand awareness in international markets, which we expect to have a positive impact on member acquisition in 2026.

We ended the quarter with just over 3.09 million paid subscribers, up over 4% from Q4 2024, and up sequentially. This continues to be a bright spot for us, and as each detailed our efforts that are getting traction in this area. But I do want to mention, as discussed in earlier calls, there is some natural subscriber attrition, so subscriber growth may be challenging until we increase the pace of machine sales and new user acquisition. Recall this could result in a seasonal pattern of quarter-on-quarter paid subscriber growth in Q1 and Q4, but flat to declining quarter on quarter subscriber growth rates in Q2 and Q3.

Moving to gross margin, total gross margin in Q4 was 47.4%, an increase from 44.9% in Q4 2024. For the full year, total gross margin was 55.1%, also an increase compared to 49.5% for 2024. The full year improvement reflects higher product gross margins and a higher amount of subscription revenue as a percentage of total revenue.

Breaking gross margin down further, gross margin from platform in Q4 was 88.6%, an increase compared to 87.9% a year ago. For the full year, gross margin from platform was 89%, which increased from 88.1% in 2024. The increase in platform gross margin for the quarter and full year was primarily related to lower amortization of software development costs. We are excited about our AI investments. Recall, as we previously mentioned, there may be some gross margin pressure as we continue to ramp our AI features. Gross margin from products was 18.4% compared to 18.7% in Q4 a year ago.

For the full year, product's gross margin was 26% in 2025, which increased from 19.3% in 2024. The increase in gross margin for the full year was primarily due to selling previously reserved inventory and reduction in inventory impairments. Total operate expenses for the quarter were $82.5 million and included $7 million in stock-based compensation.

Total operating expenses increased less than 3% from $80.1 million in Q4 2024. For the full year, total operating expenses in 2025 of $294.4 million increased just over 6% from 2024, as Ashish mentioned, we are focused on increasing our speed of execution and are accelerating investments that will help drive future revenue growth for hardware product development, materials engagement, and marketing.

Operating income for the quarter was $13.9 million or 6.8% of revenue compared to $13.9 million or 6.6% of revenue in Q4 last year. For the full year, operating income increased to $96 million up 26% compared to $76.1 million in 2024. As a percentage of sales, full year operating income was 13.5% in 2025 compared to 10.7% in 2024.

Our tax rate in Q4 2025 was 51% due to the full year true up associated with our higher profitability, bringing the full year tax rate to 28.9% in line with our expectations. For the quarter, net income was $7.8 million or $0.04 per diluted share compared to $11.9 million or $0.06 per diluted share in Q4 2024. For the full year, we generated $76.7 million of net income and diluted earnings per share of $0.35, up from $62.8 million in net income and $0.29 diluted earnings per share in 2024.

Turning now to balance sheet and cash flow, we continue to generate healthy cash flow on an annual basis, which funds inventory needs and investments for long-term growth. In 2025, we generated $200 million in cash from operations compared to $265 million in 2024. We ended 2025 with cash and cash equivalents of $276 million. We remained debt free. Inventory decreased by $13 million from a year ago to $103 million at the end of the year. During Q4, we used $5.6 million of cash to repurchase 1.1 million shares of our stock. For the full year we used $24.6 million to repurchase approximately 4.6 million shares. As a result, $41.3 million remained in our approved $50 million stock repurchase program, which the board replenished in May 2025.

During the year we paid $202.1 million in dividends. After the close of Q4, we paid approximately $21 million for the declared $0.10 per share semiannual dividend on January 20th, 2026. Recall, we do not give detailed quarterly or annual guidance, but we do want to offer some color on our outlook for 2026. We are focused on bringing excitement to our category. We are doing this by accelerating our investments in R&D, new product launches, and marketing, including international markets, and continuing our promotional strategy to drive affordability. Thus far in 2026, we have already launched two next generation cutting machines, 2 new heat presses, and a direct to film service, but these have only been available a short time. We expect to see the benefit in 2026 and beyond.

Previously we talked about the headwinds that tariffs presented to our business. Given the recent Supreme Court ruling overturning IEPA tariffs and Associated dynamics, we are not providing any guidance on margin impact. We expect to be profitable each quarter and generate cash flow from operations for a full year 2026. We also expect to continue to be active with our authorized $50 million stock repurchase program, which has $41.3 million remaining. While tariff uncertainty is the reality of today's world, our team continues to be proactive and nimble with how we execute our strategy as we continue our investments to position the company for growth.

With that, I'll turn the call over to the operator for questions.

(Operator Instructions) Erik Woodring, Morgan Stanley - Analyst

Hey guys, thank you very much for taking my questions. I have two, if I may. Just first, Ashish, if we look back on 2025, if we exclude accessories and materials, the business grew year over year, revenue grew year over year. And then if I go back to the last time you shared. Connected machine versus accessories and materials gross margins, they were relatively similar margin rates. And so my question is, strategically, given the challenges that face the accessories and materials market, why do you need that business? I just love your thoughts on how it is, value enhancing for you and how you see it going forward. And then a quick follow-up please.

Erik, thanks for the question. So I think, first of all, as we recently announced, we've launched a bundle strategy which, really simplifies the experience for the user where they have all the materials that they need on day one to start the project. We also believe that. While we have competition and some copycats from various brands including private brands, our machines ultimately have to, satisfy the overall holistic experience. So, I think it's important from an experience standpoint that we offer these materials, test the compatibility. Take control of any whenever a customer uses our materials we see from our research that they have peace of mind. They know it just works, it's high-quality. So I think just from an overall expense it's really important. It's an important business to us.

The second is, we believe that as you know we are successful on our engagement initiatives. While we want to be cost competitive, while we want to compete in this, it's still a very lucrative business, and we believe that, with the value line with Easy Press, we are on the path of execution, and we think we'll be able to turn this corner and turn the business around, but you're absolutely right, if you look at the high-quality.

Aspects, if you look at connected machines and sell through you look at subscriptions, those are the leading indicators and it's our job to then monetize that flywheel with accessories and materials and subscriptions, so we think that it's an execution opportunity and an overall opportunity to provide a better experience to our members.

Okay, very fair. I appreciate the candidness, and just as a quick follow-up, just as we think about either 1 or 2026, are there any guardrails that you guys can provide behind, even directional user growth, revenue growth, margins, operating expenses, anything that just helps us understand how you're thinking about the year, is this, just maybe I'll leave it at that. Would love any color that you can, maybe provide and help us with. Thank you so much.

Yeah, Erik, this is Kim. Thank, thanks for the question. We're really optimistic about the year overall, even as we see some challenges in the first half. So let me kind of break that down a little bit. We're very confident in platform growth for the year, even as we expect some seasonal softness in Q2 and Q3, as we highlighted in our prepared remarks and as we've seen in the last couple of years, but overall we're confident that we'll grow platform for a full year.

When it comes to products, the, there's some challenges in the first half because remember last year we had some opportunity to pull forward some assessors and materials demand, especially in Q2 around uncertainty related to tariffs, and that sets up kind of a difficult call.

We've also launched some new machines this Q1 that are lapping, cutting machines that we launched a year ago. But a year, the year ago machines had generally higher prices than the machines that were launching this Q1, so that presents a little bit of a challenge. But that said, we're really excited about our roadmap. We've been investing heavily and there's more goodness to come in the quarters ahead. And so, as we, look to the back half of the year in particular, we think we will hit our stride and we're really optimistic for a full year.

Yeah, and, Erik, let me just add to that. So, I think about a few quarters ago we talked about how we're accelerating our innovation across the board. So, first and foremost, we just launched two new machines, just a few days ago, we're very pleased with the launches. They're part of our, holistic bundle strategy coupled with the platform. So we will continue to launch new products in our existing category.

The second thing I'll mention is that leveraging the platform, we also plan to launch new services in our existing category, and this is where the true benefits of the platform come to life and finally, new products in new categories. So I think you'll start to see that materialize, as you go through the year and into next year, all the engineering and innovation efforts that we've been investing in will come to bear, and I think this is. Underlies what Kimball shared in his comments overall.

All right, thank you very much for the color, guys. Best of Luck.

Thank you.

(Operator Instructions) Angus Kelleher-Ferguson, Barclays Services Corp - Analyst

Hi, this is Angus Kelleher on for Adrienne Yih. With the shift toward bundles, are retailers, needing to make any changes to shelf space or, in-store merchandizing and I guess just more broadly how are retailers responding to your bundle offering.

Okay, thanks, Angus, thanks for the question. We're really excited about this bundle for strategy, and it really is, as Ashish mentioned in his prepared remarks, a new era for Cricut users, and it kind of breaks down into two pieces. One is let's talk about ease of use for consumers, right, because with these new bundles we're going to have a tightly integrated user experience, and that starts with the new guided user flows that we've talked about and that we've spent the last. Couple of years investing in and creating and so it makes it simpler, faster, easier for users to make what they want to make, and these new bundles are designed to match those guided flows so the out of the box experience, a new user has everything she needs to succeed at the start and then.

On the affordability side we know that affordability has been one of the biggest concerns that someone researching the brand has been what is this activity going to cost them when they take it on and as we move into this next generation of machines, everything will come in a bundle. Now we'll have a range of bundle sizes so that we can have compelling opening price points, but also larger overall bundles that drive more value for consumers. But each of these bundles will provide that much better experience for consumers in a in a cohesive, integrated way that they have. Had in the past and so we're really excited about it. Our retail partners understand the strategy and we get positive feedback from them on it as well and so and you know the guided flows have only been available for a short time as we've been rolling them out but initial results that we've seen, this year, especially with on boarders is very positive response.

No, and I know, I will just add, specifically, just to further embellish what Kimball said from a retailer standpoint, we haven't seen any big impact, of our bundles on the placement strategy or whether they reduce our shelf space or things like that. If anything, as we have shared and demonstrated. With our retailers, what that this, these are not just like random materials that are thrown into the bundle, right? They're very over the last 12 months we've done a number of user studies carefully curated and orchestrated these materials to give that out of the box experience.

And so, I think it's, I would say without kind of speaking on their behalf as they've seen our research, as they've listened to the user feedback, we believe that a good out of the box experience will ultimately drive higher engagement. More trips back to the store and ultimately people buying more material, so you know I think overall both consumers and retailers have received this positively. We have not seen any impact to their merchandizing or shelf strategy, and you know it's. As we said, our initial feedback from the guided flows has been positive, and even as we launch these two new products, we've gotten a lot of positive feedback on, how many things we're including and how well orchestrated those things are, so we're pretty pleased with it overall.

Great, thank you for the color, and then just one quick follow-up, on DTF feels like a new monetization lever beyond your kind of classic offering, or kind of adjacent to your classic offering. How should we think about its role longer-term? Is it primarily. Incremental usage from existing users or is it a way to attract new consumers to the platform?

Angus, thanks for the follow-up. So, we're excited about our directed film offering, and it's really enabled by the infrastructure we've built around the guided flows as she mentioned in the earlier comments, and it's an example of where we're experimenting with ways to monetize our platform without the need to use a cutting machine. And so today it's focused on our existing users as we learn and primarily focused in North America to start. And today is only available on desktop, but, as we learn, we'll expand the audience and we'll expand the geography over time and you'll see other things like this where we're, looking for opportunities to monetize the platform, outside of just our traditional cutting machines.

Yeah, so, again, just reinforcing the points that Kimber made, we've launched, this is the initially we're launching this product for our existing members. So, as they come into design space, as they want to do these high color, full color fidelity high fidelity projects, this is a way to, monetize that user need. Second, just double click on what Kimball said.

This is a really good example where we have leveraged, our t-shirt guided flow that we had already built for our machines to basically provide another use case, right? So, the same guided flow that we use for making the t-shirt with the Cricut is the guided flow that is used as the basis to create a t-shirt flow, and you'll see, we'll continue to see us expand into those types of services. We've just started rolling out, it's still only on desktop. So, I think it's too early to tell, but we are pretty excited about it, and we feel that we'll continue to invest in the service.

Great, thank you.

(Operator Instructions) Eric Sheridan, Goldman Sachs - Analyst

Hi, this is Emma Hung on for Eric Sheridan. Thanks for taking the question. Just on the topic of your product roadmap and kind of AI offerings, can you talk about some of the key learnings so far as you continue to roll out these AI-driven features and products and how they're kind of informing your priorities for go to market strategy? Thank you.

Yeah, so we're really excited about AI, we think it fits very well with our content strategy and it's very complimentary to it, and just, reminder that. The one of the primary reasons subscribers subscribe is for the content that they brings to their projects and so while we have a large image library and we use leverage AI to drive search algorithms to serve that content, we also have a generative AI offering that we call Create AI. Which if a user can't find something that she wants to make already in the existing library, she can easily generate an image and then and then modify it quickly into a project that she wants to make and so you know we continue to invest heavily in that over time and expect that to continue. We also expect as we drive adoption over time. That might introduce some pressure in platform margins but we also see it with the early data that it also is a great acquisition tool for attracting new subscribers and so we see it as an important aspect of continuing to improve our overall customer experience but very complimentary to what we're doing today.

Great.

Thank you for the call. And this concludes the Q&A session. I will turn it back to Cricut for final comments.

Thank you, operator. We will be meeting with investors at the Morgan Stanley Technology, Media and Telecom Conference tomorrow, Wednesday, March 4th, 2026, in San Francisco, California, and we hope to see you there. If you have additional questions, please email me at jaysuva@Cricut.com.

This no concludes this earnings call, and you may now disconnect. Thank you.

This concludes our conference. Thank you for participating. You may now disconnect.