Cricut, Inc. (NASDAQ:CRCT) Q1 2023 Results Conference Call May 9, 2023 5:00 PM ET

Company Participants

Jim Suva - Senior Vice President of Finance

Ashish Arora - Chief Executive Officer

Kimball Shill - Chief Financial Officer

Conference Call Participants

Mark Altschwager - Baird

Operator

Good day, and thank you for standing by. Welcome to the Circuit Q1 Earnings Conference Call [Operator Instructions]. 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.

Jim Suva

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.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 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 Factors 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 9, 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.

Ashish Arora

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. Subscription 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 Cricut 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 interest 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, book marking and sharing projects. As users increasingly drive growth in shared community projects and our platform would effectively matches content cater to each user, these mutually reinforcing effects will create value in our platform for all users.