Q2 2023 Cricut Inc Earnings Call
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Good day, and thank you for standing by and welcome to the Cricket Q2, 2020 Free earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question.
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I'd like to hand, the conference over to cricket. Please go ahead.
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Thank you.
Thank you operator and good afternoon.
Thank you operator, and good afternoon, everyone. Thank you for joining us on crickets 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 Doc cricket Dot com.
Joining me on the call today are Ashish era, Chief Executive Officer, and Kimball Shell 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.
Spencers 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 crickets. 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 eight 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.
<unk> tote bags.
Click adventure 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 inspired materials as well as a newly introduced twenty-five inch words powered by cricket design space R platform helps millions of users discover make and shared their projects and cricket VJ expands the ability for you.
Users to make thanks to enhance software features that support this new machine. We focus on makeup of content featuring projects and art that lend themselves to large projects, including education parties weddings sports events in a parallel lodge vast quantities and much more.
We are excited to see how makers will use cricket venture to create projects and share them with other community members pediatric adventure July 18th with our first in person consumer events in 2020.
We loved the energy these events generate within our community and are planning to do more in person customer events around new products and I cricket platform.
We are pleased with early sales performance recalled that we have for priorities, which are new user acquisition.
User engagement subscriptions and accessories and materials.
I will briefly review these items and also provide some details commentary on a new platform innovations. We added over 200000, new users in the quarter approximately in line with our expectations.
Continue our focus on new user acquisition and platform expansion to ultimately drive engagement subscriptions and increased modernization. We have shared previously that are funneled as healthy and P. C. 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 confirm that the current financial situations are a key barrier to purchase about a third of consumers and the cricket Trunnell stated that they are struggling to make ends meet on a personal level consumers at the top of the final are most interested in understanding the capabilities of the ticket machine.
And how it fits into their lives.
Consumers get closer to purchasing a cricket affordability becomes a constraint. Among these can do both 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 ah waiting for a sale or a special deal.
Using these insights to inform our strategy heading into the holiday season.
Glad to be more promotional in the fourth quarter.
Deeply promotions for shorter periods of time combined with a 360 degree marketing plan, including adding over 200 paid influences to pull more consumers through the funnel.
We ended Q2 with nearly 3.7 million engaged users, which is roughly flat he had over a year.
We are pursuing efforts to drive engagement along members journey from Onboarding to stimulating discovery and inspiration to assisting making an encouraging sharing as.
As we have highlighted before mobile plays an important role in driving more interactions.
We locked and enhanced homepage inside design space on mobile platforms in July 2022.
And continued to make improvements on an ongoing basis for the first half of 2023 over half the interactions on design space homepage came for 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 platform.
Increasingly will integrate more and more video content learning AIDS and instructions inside the platform itself where.
Whereas users spend the majority of their time, you'd always listening to our customers and prioritizing enhancement that alleviate pain points and friction and increase the value of a cricket access subscriptions in queue to be locked in half since were printed cut pendant got functionality gives users the ability to print an image on the color printer and then.
Cut the outline of their printed design. This gives them colored 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.
Users can walk their images, giving them greater creative possibilities and our last call mentioned, how community projects shed 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 Q to.
Improve the way members can search within the community within the library of community projects and saw a notable increase and 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 our expectations.
AI machine learning and especially generative AI models are much in the news I would like to point out. Some examples of how you're using AI and machine learning to add more valuable benefits to cricket subscribers as an area of exciting potential for the cricket platform and is complementary to our strategy VC 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 act in active development on others I want to give you some insights into these AI and machine learning capabilities on the.
The design and make site automatic background remover chooses the customer machine learning model and is one of our most popular cricket access features across a desktop and mobile apps.
The search and discovery side are similar images functionality is powered by a machine learning model that is trained on and tuned for vector images building or the similar images Foundation. We are also developing semantic search richer search capability that leverages modern machine learning techniques.
We are currently testing semantic search with both internal and external users.
Expect to see Richard search capabilities powered by semantic search in the future.
Yeah I 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 of personalization algorithms.
<unk> is an area of great interest and excitement and design software and it holds great promise to augment the already rich cricket access content offering.
They're actively experimenting with generative capabilities that allows 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 in need of differentiation for cricket and building generative art functionality.
Is that we will ensure that generated images are optimized for cutting machines.
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 in making B C. Generally b as being complimentary 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.
Very excited about the new ecosystem of materials relaunched non cyclic adventure, including twenty-five inch with materials and all new markers developed to support the scale and speeds that cricket 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 promotion located 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.
Have a strong focus on optimizing our products for lower costs. So we can compete better in the market with improved margins.
Still creating a differentiated offering that work seamlessly with our machines and platform.
Intensely focused on the overall customer experience that'd be a motivated to work with those retailers that help us create a great experience Portland, the shelf and.
And for actual usage of our ecosystem.
I've never felt so encouraged and excited about the cricket platform where.
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 to call over to Kimble to go into the financial details.
Thank you Ashish and welcome everyone in the second quarter, we delivered revenue of $177.8 million, a three per cent decline compared to prior year regenerated $16 million in net income or a 10th consecutive quarter of positive net income as we continue to invest in key priorities breaking.
Revenue down further revenue from connected machines was $37.3 million five per cent over Q2 2022 is Ashish mentioned new user acquisition was in line with your expectations and Q2 as we continue to experience the effects of softness and consumer discretionary spending.
Courage to see year over year machine revenues turned back deposit growth, we are still far from where we aspire to be <unk>.
Revenue from accessories and materials for the quarter was $64.4 million down 20 per cent over Q2 2022 note that in Q2 2022, we benefited from channel fell for the launch of auto press and half price.
Excluding this revenue from accessories and materials would've been down approximately 4% compared to Q2 last year is.
Sheesh referenced we have more work to do here.
Subscription revenue for the quarter was $76.1 million or 30 per cent increase over Q2, 2022, reflecting targeted investments and cricket access and the expansive improvements made over the last several quarters in terms of geographic breakdown International revenue was $32.6 million up 34%.
Compared to $24.3 million in Q2 2022, as a percentage of total revenue international is 80% compared to 13% of total revenue in Q2 2022.
Turning to use it as an engagement.
I am pleased to share we ended the quarter with over 8.4 million total users or 70 per cent growth over Q2 2022, we ended the quarter with nearly 3.7 million engaged users essentially flat with two two last year. We ended the quarter with over 2.7 million paid subscribers, a 15% from Q2 2022 and flat sequential.
Lee.
Our subscription attach rate declined to 32% in Q2 2023 from 33 per cent last year.
As discussed in earlier calls, there's some natural subscriber attrition so subscriber growth will be muted until we increase the pace of machine sales and new user acquisition.
Moving to gross margin total gross margin in the second quarter was 49.3% and improvement compared to the 46.5% and Q2 2022 and reflects a higher amount of subscription revenue as a percentage of total revenue brick.
Breaking gross margin down further gross margin from connected machines was 9.4%. This compares to 1.6% in Q2 of last year. The increase in margin was primarily due to less promotional activity as a percentage of revenue and a favorable product compared to Q2 20 twenty-two when our end of life, making machine was a greater percentage of machine.
Sales.
Subscriptions gross margin for the quarter was 89.6% compared to Q2 2022 of 99 per cent second.
Second quarter gross margin for accessories and materials was 24.7%. This compares to 29.1% in Q2 2022.
Client and margin was driven by increased promotional activity and warehouse and operations costs as a percentage of revenue along with an impairment of unused equipment and components associated with the wind down in manufacturing of certain products Lucky.
Looking into the second half for both connected machines and accessories your materials margin pressures from advertising fixed costs and warehousing and Capitalised operations expenses.
Will accelerate through the second half, especially in queue for as we reduce inventory levels.
Also Q4 is typically our lowest gross margin quarter machine sales are seasonally higher with the holidays, which will naturally pressure margins since machines carry lower gross margin and other products and will represent a higher percentage revenue in that quarter.
Total operating expenses for the quarter were $68.4 million and include at $11.2 million in stock based compensation expense.
Total operating expense was up nearly 5% from $65.4 million in Q2, 2022, while research and development and sales and marketing declined year over year General and administrative expense increased primarily due to an increase for bad that allowance increased personnel related expenses and an increase in professional services.
Operating income for the quarter was $19.3 million or 10.8% of revenue compared to $20 million or 10.9% of revenue and Q2 last year, we delivered our 18th consecutive quarter. A positive net income net income was $60 million or seven cents per diluted share compared to $13.8 million or six cents per diluted share.
You're in Q2 2022.
Turning now to the balance sheet and cash flow, we continue to generate healthy cashflow on an annual basis, which funds inventory needs and investments for longterm growth year.
Year to date, we have generated $159.6 million in cash from operations compared to $30 million, a year ago, ending with the cash and cash equivalents balance of $361.5 million before paying the dividend in July and we remain debt free.
As you recall as part of our covered risk mitigation strategies, we intentionally built up our unheard inventory to ensure we could supplier customers. During the pandemic starting late last year and continue for the next few quarters, we began to focus on bringing inventory levels in line with historical norms as part of the company's ongoing evaluation of capital allocation.
<unk>, we seek to balance multiple considerations, including ensuring that the company has more than adequate liquidity and financial flexibility.
Waiting opportunities to invest it our business to drive longterm shareholder returns, whether organically or through potential acquisitions, and returning capital to our shareholders. Given this and Q2, we announced an additional 234.6 million dollar special shareholder dividend.
Which $232.2 million was distributed in July .
With the remainder to repair it upon investing in restricted shares. This dividend comes as a result of right sizing our balance sheet post COVID-19 and converting inventory into cash during.
During the quarter, we used $1 million in cash to repurchase 140000 shares of our stock we were constrained our stock repurchases as we were considering the special dividend as well as a higher stock price, we have $27.3 million remaining and then repurchase program much of our outlook is consistent with what I communicated in our prior earnings call.
But I do want to highlight a few additional items during Q3 and specifically in July we paid the special dividend, which will result in a lower cash balance and lower interest income in the second half of the year.
We expect to continue generating healthy cash flow from operations and to end the year with substantial cash and know that <unk>.
Consistent with our commentary last quarter, we continued to see soft consumer spend and retailers, taking a conservative approach to inventory commitments and now that's taking a prudent and prioritized approach and are planning as we look ahead to the second half of 2023.
We expect operating margins to be slightly down for the full year relative to our original expectations given first half of the year performance typical revenue seasonality is 60% in the second half given the current macro environment. We expect second half revenue to be slightly softer as a percentage of full year revenues and.
In terms of the user growth, we still expect to add few hundred users in 2023 than we did last year.
While we have a positive outlook on subscriptions lower new users will put pressure on our subscriber growth rate and a church right throughout the year and paid subscribers may be flat for the year or even down if current trends worsen leveraging our consumer analytics, we plan to execute deeper queue for promotions for machines combined with comprehensive marketing plans to address consumer concerns.
About affordability and consumer reluctance to spend.
Gross margins will continue to be pressured on physical products higher fixed costs as a percentage of revenue and warehousing and capitalized operations expense will continue to be a factor throughout 2000, twenty-three and more pronounced in queue for as inventory levels decrease accessories and materials will also have a promotional cadence trillion price competitive as a result.
We expect for your accessories and materials margins will be similar to Q4 2020 twos gross margin.
We remain focused on managing our profitability, while investing in areas with the highest impact <expletive> macro conditions worsen we will continue to make adjustments as needed just to to be demonstrated in 2022, we expect to continue generating healthy cash flow from operations and remain committed to our long term operating margin targets of 15% to 19% are.
Proven model has demonstrated that when we operated scale and drive top line growth. These margins are achievable with that I'll turn the call over to the operator for questions.
Thank you.
<unk> conduct a question and answer session. As a reminder to ask a question we need to press star one one your telephone and wait for her name to be announced to withdraw your question Press Star One one again.
And by how we compile the Q&A roster.
Our first question comes from Eric would ring a Morgan Stanley . Your line is now open.
Awesome. Thank you guys for taking my questions I have a handful here a small handful. So ashish maybe just to start off obviously you launch the cricket venture a few weeks ago can you, maybe just speak a bit to kind of a tam opportunity to with this new product. Obviously, it's a relatively elevated price point. So it seems to be targeted more towards your kind of prefer.
Sessional or your pro Sumer versus your hobby crafters, but just just Ah any color on the Tam opportunity you think for that how long it takes to ramp and that any kind of early feedback that you've got on the product, obviously I realise it hasn't been super long, but any color you have there would be helpful. And then I have a follow up thank you.
Thanks for the question.
You know you'd probably I'm, probably gonna deemed this is my favorite question, where all the cough [laughter]. So first of all it really really excited about the product we've been working on for a number of years and it's exciting architecture that'd be rested and it's going to be here for a long time to say.
The plot to let you get as you identify with the thousand dollar price point.
<unk> was created enthusiastic who want to make a lot more projects at a time and also they wanna make larger projects, but they make these projects for schools for organizations religious entities.
Just add to your order.
Earlier today were you know actually the opposite his wife.
Event coordinator for school and she makes these large projects for schools et cetera. So I think those are the kind of users that we are looking for so effectively it's an upgrade of an existing product Ah. Some of those users will also happen to sell but.
Be lots of products in July 18th at in person customer Amanda first customer again in a few years Super excited lots of engagement. We then subsequently.
Added on HSN at a solid sales performance.
And so since then we've been very pleased with themselves overall, we're really excited we don't break out number is for individual products, but we believe that.
So again, we are products of different price plans, we think it will be a very good upgrade product and again.
Elizabeth cancel in terms of how we launched it into other inventory. So it's available on cricket Dot com on a retailer's websites E Commerce partners et cetera, So can give us a lot fight it and store, but that's a phased approach to the lodge and as we continue to understand the market that I will lastly.
Drive Jordan scale the product. So overall very very pleased with the results of this product.
Okay. That's super helpful. Thank you for that issue and then maybe if we just follow up on that.
It almost takes into account that last part and you made obviously dicey connecting machine is revenue get back to growth for the first time in a handful of quarters, but you know.
If we were to normalize for the launch of of venture and kind of exclude any of that channel, Phil and what would what would connected machines kind of growth or decline look like on a year year basis, and maybe if you could outline any any impact to connect your machine gross margins from the venture impact that would be helpful. As well. Thank you.
So.
I think I'll take a question in two parts why does I'll just talk about acquisition overall.
And again, we can clearly talk about international then maybe you can buy you can jump in and talk about gross margins in port.
Portfolio makes is improving.
So let me kind of just thought at a higher level in terms of acquisition. So.
The acquisition this quota was pretty much in line with our expectations.
We talked about earlier in the year that'd be expect to acquire pure new users in 2023 compared to 2022 and that is.
Somewhat rooted in the fact, given inflation because he was spending especially discretionary products are coupled with the fact that as you pointed it out you know average prices are higher this year.
Less promotional et.
Et cetera, So I think as I said I would expect our new year's the acquisition. This quarter was very much in line with expectations and we look at our former overall by the follow is pretty healthy right awareness continues to bell and as people are coming through the funnel you got up he had a few different things they stop the cut out before it at the bar.
The final.
They talk about waiting for a sales event.
Talk about saving money or they just say okay.
I'll buy it a few months later now given that you know as soon as we are going into Q4, and we talked about this with our prepared remarks.
We basically decided that we want to be a little bit more promotions will be running depot promotions.
Short spots and we think it's a really exciting opportunity for us to unlock the funnel that we had been pending so that we can actually convert some of those users.
And what are the new plans, we actually planning to do that and they're gonna you know basically generate a lot of content is how consumers can actually help.
How we can help can do save money, so that by making things rather than having to buy those things. So we think that that message along with having a doubling down in marketing is gonna really help the acquisition and finally I will just say that when they look at it a long term trends.
Healthy we look at our Sam at the broad demographic there'll be a being able to attract including you know a significant percentage of our customers are beginners.
We think about in the very early stages of Sam penetration, Okay, but why don't you talk about.
The impact on gross margins both of them a portfolio perspective, yeah. So so so are <unk> pointed.
<unk> pointed out we were up in our machine gross margins in action machine revenue for the quarter and they're really excited about that.
Throwing on that that venture doesn't influence at all one as we thought we talked about what are the less promotional overall this year than last year and we're seeing the benefit of that the other benefit is we've seen a mix of our machines jump more towards some of our newer products to carry higher gross margins and so even though we don't disclose.
I'll say that.
We felt marginally fewer units in the quarter limited a year ago, but we got more revenue in higher profit from them.
Uhm venture it was entirely in online launch and so there's no. There's no cell in Q2 related to the loss of that product and we chose to do that because it's a big product. It's a heavy product and it's expensive product and somebody wanted me conservative and how do we launch and engage overall consumer demand I will say, we're we're pleased with.
With what we've seen in the first several weeks of this launch and it's for sale on our own DDC channel as well as all of our retail partners online offerings.
Reinforce appointment was as I think you've got it highlighted specifically impact adventure.
Limited inventory to begin with and effectively all of the product to at least most of the sales are all on the sell through basis. So they're not loading up the channel and recognising additional sales that drove the connected machines growth. This is in fact is this is you know recognizing the revenue in a seltzer bases all the product.
<unk>, even with most of our <unk>.
<unk>.
That's really helpful. Thank you guys for all that color congrats.
Okay.
Thank you and one moment for our next question.
Our next question comes from Adrian a Barclays. Your line is open.
Hey, Good afternoon. This is Paul Pony on Frasier and thanks for taking my question. My first one is on the accessory segment. So it looks like the social segment margin, while still down year over year was a little bit better than we had anticipated.
How should we think about that for the remainder of the year. Your promotions are they more in the conduct of machines are you still having to promote and accessories and materials.
That's one place.
Okay. Thanks for the question.
This is kind of <unk> questions I want to answer that one is and what happened with and then for the quarter, because we were down 20% year over year.
And.
That's partly because of a tough time. So if you look into your two year ago. We had channel felt revenue related to auto present have pressed that represents about $1400 of channels and so.
So we don't have we didn't have any comparable products launching in this Q2 that benefited from from selling of channel fail and so if we just for that.
Segment was down about 4%.
Every year for the quarter.
When we look at at and overall.
Just kind of four things going on as as you look at what's guiding us how we think about address larges for that for the first is.
Q1, we had a we had a mondale right now that we've talked about related to describe material and longer length of our <unk> specifically.
That's gonna affect for your margins secondly, we have capitalized.
Cost in our inventory related to procuring.
Procuring that inventory and we brought it must have an inventory during peak time peak COVID-19 pricing and so as we bring our inventory levels down and disappear.
More prominent in queue for us with lower inventory levels, those capitalized cash flow through the P&L and will pressure margins.
And then.
When when she's talked about deeper promotions, he's talking primarily about machines, but we we've talked about how do we have a continued promotional cadence on our ancestors materials to make sure that we're being price competitive.
And.
When our fair share that promotional cadence will continue throughout the year and then finally, there's the possibility that we may have some reserves based on the velocity of a couple of products either as we'd like to queue for or even maybe Q1 of next year.
Those are kind of the the.
The factors that are affecting our N M L look for the year.
Alright.
Thank you second I wanted to ask about international and it looks like it was.
Bright spot of growth and understand it's earlier than mature market, but could you provide any kind of K P. Is so that we can help dimensionalize at the number of users subscribers or or maybe an <unk> metrics that you're seeing in the international markets.
So uhm have you come in at last time, we shared that they would cross the the milestone of 1.1 million users internationally, but that we wouldn't give an update on that that metric every time, but as we kind of hit key milestones goodwill. We are excited about the fact that that we grew 34 per.
<unk>.
Year over year and as an international now represents about 80 per cent of our overall business.
What we've seen international is while while Ashish will emphasize that we're not mature in any market in our larger markets. We continue to see headwinds similar to what we see in the U S.
But we're in over 50 countries around the world and so there are many countries, where we are continuing to get additional shelf space and distribution.
And that's helping drive that graph the other factor that's that's influencing.
Influencing international growth is we launched our D N C channel in multiple countries and late late last year and that's helped.
Helping propeller growth.
Yeah, So I'd like to just add to a couple of I'll just add some commentary cables comments.
You've talked to you they'll be kind of briefly to further engagement and subscription it's actually very completely I'll have to look at the country by country, but overall do you feel like engagement and subscriptions at a very healthy and very compatible across all markets.
I'm very proud of the team across.
Across the world, but specifically I think there's a lot of marketing a lot of excitement and a lot of good consumer.
Consumer awareness events going on in the international market, that's such a varied group of countries. As Kimble said you know some of the larger markets the UK in Australia.
Something similar similar headwinds, but even them and a relatively early part of the cycle. But then there are other markets around the world that we are just in such early stages, but again I'm actually gonna be doing a trip very soon in a few weeks and some of the markets around the world.
Especially in Europe , and I think we have.
Again.
Really excited about what they're seeing in international markets and the last coming out may cause also on the platform.
Difficult investments of the AD in contact localizing market, you know, adding projects look adding influences in our approach to driving network effects, so unique and that's particularly playing a great marketing playbook by international.
Excellent. Thank you.
Thank you one moment for our next question as a reminder to ask a question you need to press Star one one your telephone and wait for your name to be announced to withdraw your question Press Star One one again.
Our next question comes from <unk>, a bird your line is open.
Good afternoon. Thanks for taking my question I guess first off can you talk about the feedback you are getting from channel partners with respect to your current inventory levels and sell through rates.
Curious what the order book looks like for the back half of the year and your level of confidence that you can sustain positive inflection and connected machines based on what you're hearing from your retail partners.
Uhm.
Mark takes some questions so.
As we look to the back half of the year.
We are comfortable with with our 10 limitary levels Uhm.
And then I'm, sorry, let me restart on that one.
So.
Actually I think that'd be kind of thought well I think there's a two or three different perspectives model that I can provide.
I think it's you know as we look at a maturity retailers have taken a very conservative approach and the first half of the year and.
<unk> you know.
<unk> continued destocking.
Go on through the year.
Right now as we look at the second half of the year I think it's still early on for the orders include three but one of the things that I'm, particularly excited about in our team is I'm really excited about the promotional strategy.
You know as we go into Q3 and Q4 you know we are working on a deeper promotion calendar as I said, we have a pretty.
Good solid funneled, that's been building up over time, and we think that there's an opportunity to unlock that funnel as we go into the queue for with a deeper promotion.
The opportunity I would have is saying you know that'd be great.
We're actually going to be adding about a couple of hundred influences to create content and do you think that is a wonderful opportunity for us and our retailers to work together.
Basically unlock this funnel does it keep talking about so.
Yeah, and you look to unlock that funnel not to get too near term focus, but I'm I'm just curious as we kind of approached the back to school season is there anything that you're seeing in terms of engagement or sell through rate on some of the machines that would kind of give you an indication that that final might be.
Beginning to convert at a higher rate.
I think the <unk> I would say to date, what we have is done a good job, but I'll talk a little bit about engagement in a second.
Kind of you know as you look at the funding overall.
Basically we we've seen people be effective at the top of the final right and just.
Being able to bring a lot of people, we know from our research that there's a lot of people in the top of the <unk>. The second thing that I've talked about previously is the middle of the fund which is the question that people ask to be we're not doing a good job and helping them understand which machine to buy and what the cost of ownership is now the data that I'm actually particularly.
<unk>, which is kind of really influenced a strategy for Q4 is that when we ask people, saying you know well.
When are you gonna <unk>, what is your conversion intent, but a significant majority of them basically tell us that they are waiting for sale.
<unk> right second is saving money to buy the product or a third or did they just want to see the economy improve and it ultimately convert that into purchase.
That's kind of really led to our decision off going deeper and promotions that'd be path for six to nine months.
To date, we have bought driven some of those events.
Oh say anecdotally.
Not to put some numbers on it.
You see a tremendous opportunity in schools you would actually.
Our sales team in a marketing teams attendants on education events.
You see a lot of demand and those channels overtime, but again, we are very early on.
Structured and programs in marketing around that.
I wanted to talk quickly <unk> you mentioned the word engagement that I Wanna talk to you a little bit about an engagement as to what we are seeing and does some good data points that I want to share. What is you know clearly we are flat on engagement 3.7 million users this quarter and that is flat year on year quarter over quarter.
Cause obviously, we'd like to see that number being a lot higher right and that's a huge priority for the company.
When we ask users why they're not engaged over 80% of them and and this is the good news is or 80% of them are people, who are not come onto the platform for the last 345 months will say they'd really like using the cricket they Wanna use the platform would often.
And the reasons the site or lack of time lack of Ah Dodge or a trigger that reminded them to make something or they couldn't find the project.
That's what we are focused on in terms of <unk> com and helping them discover that content.
Effectively make that content and that sure that content to the platform.
Now you know it could.
It will be looked at engagement.
Today look at that as a cutting metric by people who have cut in the last 90 days, we have strong conviction that the more people come to our platform more often even if it wants to engage.
Maybe they won't cut because they're worried about the cost of materials, but the more behaviors, we drive to have them come back to a platform engage the platform come onto our mobile devices.
More likely they will be to cut my.
One day to find that again I'm not I'm not gonna call. It a thread but in July the saw bold project cuts happened compared to the July last year and that is a reversal there'll be Sol and again you know one data 0.1 month data doesn't point to a huge.
Swing back, but we believe that add some of these economic headwinds go away and as the consumer start to engage more on our platform. It will lend itself to a more and more people engaging on the platform and ultimately driving network effects on the platform.
Also call out of that as we move into the holidays we.
Seasonality to engagement and so that will naturally pick up as we move into the holidays.
It's really helpful color, maybe one last one for me just back to the cricket venture for a moment.
I I think in the past you've said that around a quarter of your users are creating projects that are ultimately selling is that still a good metro to be thinking of or if you have any updates there and and then if we think about that sort of subset of your user base. The more you know call. It pro users have you done any surveys or.
Studies that would give you a sense I guess, what what percent of that segment of our user base would value the capabilities of the venture and you know what would consider the venture even up a thousand dollar price point.
Trying to sort of size up kind of the the opportunity there. Thank you.
Yeah. So we have an app that maybe obviously do that research pay on a periodic basis, we have an app that could advise that number but I would say it would still be in the ballpark off that that you know and I.
The 25, 26% of the <unk> the.
<unk> people that are selling was people that have happened to that have made a <unk> that doesn't mean that they are.
<unk> identifying themselves as <unk> right.
The other kind of data that we have looked at is the number of people that have multiple machines right. In there just so engaged in the category. So it again, if I was to summarize again, we have two audiences for this product one is.
Just enthusiasm right, there's people who buy multiple machines there are people, who buy everything we have ever launched.
So anybody that has two or more machines anybody that comes onto a platform who is making off what they call off the bat large projects that are making projects for schools are you know weddings or decals religious organizations.
That's up primary audience number one.
Secondly, a set of doors also happened to sell right. They either do badges of twenty-five tee shirts, or 50, cobblers, albeit large project also a strong audience I.
I think we're gonna take our time to build this market, but we have we have limited inventory.
As time goes laundry headboard pricing flexibility.
That would give us inventory given how we want a phase of spot out there in the early stages, but this is a platform super excited about it as a platform that I think will lend itself with the next you know many many years, so and there's a lot of roof over time too.
Bill that ecosystem, so again, particularly a very cautious.
You wanted to take a very phased approach to that so it's not a slap like you know you're not gonna go Gung Ho and product and every channel but.
But we are very confident feel really good about this product and platform.
Alright, Thanks again.
Thank you that completes or two in a segment.
I will I'll turn this over to Jim Silver for closing remarks drew.
Thank you, Chris and thank you everyone for joining us. This afternoon, we have a large opportunity over the long term to drive new user grow and increased engagement. We believe the initiatives. We are deploying now will position as well for one consumer spend returns and the cricket platform continues to not only string.
Then we'll provide value to our users will continue to manage the business for sustainable profitable growth and generate healthy cash flows I'm excited about the opportunities ahead of US we will be at the Goldman Sachs Communica, <unk> and technology conference in San Francisco.
On September 5th and Citigroup Global Technology Conference in New York on September 7th.
Forward to seeing everyone. Then if you have additional questions. Please email me at <unk> at cricket Dot Com. This concludes our earnings call and you may now disconnect.
Thank you that does conclude our program feel free to disconnect and thank you again.
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