Q1 2026 Cricut Inc Earnings Call

May 5, 2026

Operator: Good day. Thank you for standing by. Welcome to the Cricut Q1 2026 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 will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand over the conference to your first speaker today, Michael Cadiz, Vice President of Finance. Please go ahead.

Speaker #1: 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 11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand over the conference to your first speaker today, Michael Hode, Vice President of Finance. Please go ahead.

Speaker #2: Thank you, operator, and good afternoon, everyone. Thank you for joining us on Cricut's first quarter 2026 earnings call. Please note that today's call is being webcast and recorded on the Investor Relations section of the company's website.

Michael Cadiz: Thank you, operator. Good afternoon, everyone. Thank you for joining us on Cricut's Q1 2026 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 a live Q&A.

Michael Hoade: Thank you, operator. Good afternoon, everyone. Thank you for joining us on Cricut's Q1 2026 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 a live Q&A.

Speaker #2: A replay of the webcast will also be available following today's call. For your reference, a company in 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.

Speaker #2: 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 a live Q&A.

Speaker #2: 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.

Michael Cadiz: 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 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, 5 May 2026.

Michael Hoade: 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 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, 5 May 2026.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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 5th, 2026.

Speaker #2: 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.

Michael Cadiz: 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.

Michael Hoade: 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.

Speaker #3: Thank you, Michael. In Q1, we began to see the early benefits of our platform-first strategy, with guided onboarding, bundles, guided flows in design space, and services working together for a simpler, more compelling user experience.

Ashish Arora: Thank you, Michael. In Q1, we began to see the early benefits of our platform-first strategy with guided onboarding, bundles, guided flows in Design Space, and services working together for a simpler, more compelling user experience. We successfully introduced our newest machines and launched Cricut's first service offering. Both reflect the strength of our platform in delivering a guided experience that helps users make what they want more easily. We are also encouraged by the positive response to the added value in our new machine bundles, which reinforces our strategy. We are pleased to see growth in active users year on year. Simplifying the user experience remains a key focus to drive engagement. We are pleased with profitability, growth in platform revenue, and growth in global machine sell-out units.

Speaker #3: We successfully introduced our newest machines and launched Cricut's first service offering, both reflect the strength of our platform in delivering a guided experience that helps users make what they want more easily.

Speaker #3: We are also encouraged by the positive response to the added value in our new machine bundles which reinforces our strategy. We are pleased to see growth in active users year on year.

Speaker #3: Simplifying the user experience remains a key focus to drive engagement. We are pleased with profitability, growth in platform revenue, and growth in global machine sellout units.

Speaker #3: However, those gains did not yet translate into total company sales growth. Which declined less than 2% year over year in Q1. We are moving with urgency to create a more compelling mass-market experience, accelerate our development cycles, and compete more effectively.

Ashish Arora: However, those gains did not yet translate into total company sales growth, which declined less than 2% year-over-year in Q1. We are moving with urgency to create a more compelling mass market experience, accelerate our development cycles, and compete more effectively. Today, I will discuss what went well in Q1 2026, where we can improve, and our priorities for the year. Kimball will cover the financial details and our outlook for 2026. We delivered solid Q1 profitability despite early headwinds. Platform revenue increased nearly 6% and strong machine sell-out units gave us a solid start to the year. During the quarter, we launched 2 new cutting machines, Joy 2 and Explore 5, offered exclusively in bundle options designed to improve user onboarding while delivering compelling price points and value.

Speaker #3: Today, I will discuss what went well in Q1 2026, where we can improve, and our priorities for the year. Kimball will then cover the financial details and our outlook for 2026.

Speaker #3: We delivered solid Q1 profitability, despite early headwinds. Platform revenue increased nearly 6%, and strong machine sellout units gave us a solid start to the year.

Speaker #3: During the quarter, we launched two new cutting machines, Joy 2 and Explore 5. Offered exclusively in bundle options, designed to improve user onboarding, while delivering compelling price points and value.

Speaker #3: We also launched the next generation of our handheld heat presses. EasyPress SE in the popular 9x9 and 12x10 sizes. To support these launches, we introduced several new materials and accessories.

Ashish Arora: We also launched the next generation of our handheld heat presses, EasyPress SE, in the popular 9-by-9 and 12-by-10 sizes. To support these launches, we introduced several new materials and accessories and continued to improve our software platform, including new AI capabilities and easy-to-use guided project flows. We are encouraged by the initial results and user feedback. We are proud to be the recipient of Michaels' Best New Product Launch Award. Michaels is the world's largest craft retailer and an important partner for Cricut. We are also focused on increasing our speed of execution and are accelerating investments in hardware development, materials, and engagement to support future growth. You can already see the early results of those investments in our 2026 launches so far. We plan to maintain a marketing and promotional cadence similar to last year. We are excited about the roadmap ahead.

Speaker #3: And continue to improve our software platform, including new AI capabilities and easy-to-use guided project flows. We are encouraged by the initial results and user feedback.

Speaker #3: We are proud to be the recipient of Michael's best new product launch award. Michael's is the world's largest craft retailer and an important partner for Cricut.

Speaker #3: We are also focused on increasing our speed of execution and our accelerating investments in hardware development, materials, and engagement to support future growth. You can already see the early results of those investments in our 2026 launches so far.

Speaker #3: We plan to maintain a marketing and promotional cadence similar to last year, and we are excited about the roadmap ahead. We remain focused on acquiring new users and increasing engagement across our platform.

Ashish Arora: We remain focused on acquiring new users and increasing engagement across our platform, which together drive our monetization flywheel of subscription and accessories and materials. We believe Cricut is a growth business, and we are intent on proving it. Let me talk about our priorities. At the top of the funnel, our goal is to broaden awareness and bring new consumers into the brand. Our research tells us that to do that successfully, Cricut has to feel relevant and approachable. Put simply, we need more consumers to believe that Cricut is for someone like me. That is the core objective of our influencer strategy today, and it will also be a central message in the broader marketing campaign we're preparing to launch this summer. As consumers move from awareness into consideration, we see two barriers that matter most. They need to believe that Cricut is easy to use and affordable.

Speaker #3: Which together drive our monetization flywheel of subscriptions and accessories and materials. We believe Cricut is a growth business, and we are intent to improving it.

Speaker #3: Let me talk about our priorities. At the top of the funnel, our goal is to broaden awareness and bring new consumers into the brand.

Speaker #3: Our research tells us that to do that successfully, Cricut has to feel relevant and approachable. Put simply, we need more consumers to believe that Cricut is for someone like me.

Speaker #3: That is a core objective of our influencer strategy today. And it will also be a central message in the broader marketing campaign we are preparing to launch this summer.

Speaker #3: Consumers move from awareness into consideration, we see two barriers that matter most. They need to believe that Cricut is easy to use and affordable.

Ashish Arora: Our strategy is designed to address both. We are continuing to invest in onboarding, guided flows, software and platform improvements, and bundle-only offerings. Together, these efforts help simplify the learning curve, improve affordability and perceived value, and make it easier for new users to get started and succeed early in their journey with Cricut. We saw encouraging signs of progress in Q1. We continued to invest in marketing to expand our audience and deepen engagement with the brand. We gained momentum across key channels, driven in part by strong results from our influencer activations, along with continued improvement in overall digital marketing performance. These efforts were further supported by the halo effect of our late Q4 campaigns and promotional activity. Altogether, that contributed to strength in connected machine sell-out in Q1, with particularly strong consumer demand early in the quarter.

Speaker #3: Our strategy is designed to address both. We are continuing to invest in onboarding, guided flows, software and platform improvements, and bundle-only offerings. Together, these efforts help simplify the learning curve, improve affordability and perceived value, and make it easier for new users to get started and succeed early in their journey with Cricut.

Speaker #3: We saw encouraging signs of progress in Q1. We continue to invest in marketing to expand our audience and deepen engagement with the brand. We gained momentum across key channels, driven in part by strong results from our influencer activations.

Speaker #3: Along with continued improvement in overall digital marketing performance. These efforts were further supported by the halo effect of our late Q4 campaigns and promotional activity.

Speaker #3: Altogether, that contributed to strength in connected machine sellout in Q1, with particularly strong consumer demand early in the quarter. While we did not grow product revenue in Q1, we did continue to see global machine sellout increase year over year, and quarter to date, trends remain positive.

Ashish Arora: While we did not grow products revenue in Q1, we did continue to see global machine sell-out increase year over year and quarter to date trends remain positive. At the same time, we are building the experience in a way that supports stronger adoption over the long term. In 2026, we are leaning into our bundle-only consumer experience as we launch the next generation of our cutting machines. These new bundles combine the machine, tools, and materials with tightly integrated guided software flows to create a more cohesive out-of-box experience and help users succeed from their very first project. In Q1, we began to see early benefits from this approach, which I'll speak to more when I get to engagement. We also made important progress in innovation during the quarter. We introduced two next-generation cutting machines built on all new architectures, Cricut Joy2 and Cricut Explore5.

Speaker #3: At the same time, we are building the experience in a way that supports stronger adoption over the long term. In 2026, we are leaning into our bundle-only consumer experience as we launch the next generation of our cutting machines.

Speaker #3: These new bundles combine the machine, tools, and materials with tightly integrated guided software flows, to create a more cohesive out-of-box experience, and help users succeed from their very first project.

Speaker #3: In Q1, we began to see early benefits from this approach. Which I'll speak to more when I get to engagement. We also made important progress in innovation during the quarter.

Speaker #3: We introduced two next-generation cutting machines built on all-new architectures: Cricut Joy 2 and Cricut Explore 5. We launched our direct-to-film service, Cricut's first service offering, which is another strong example of how we are reducing complexity for consumers.

Ashish Arora: We launched our direct-to-film service, Cricut's first service offering, which is another strong example of how we are reducing complexity for consumers. It combines the power of our creative platform with the simplicity of guided flows, enabling users to create vibrant full-color designs that are delivered directly to their doors. We believe this is the beginning of a new era for Cricut, one where we expand the top of the funnel, remove barriers to adoption, and deliver a more seamless end-to-end experience that helps more users create with confidence from day one. We continue to make progress stabilizing engagement trends, ending the quarter with active users up 1% and 90-day engaged users down 1%, representing improvements year on year and sequentially.

Speaker #3: It combines the power of our creative platform with the simplicity of guided flows, enabling users to create vibrant, full-color designs, that are delivered directly to their doors.

Speaker #3: We believe this is the beginning of a new era for Cricut. One where we expand the top of the funnel, remove barriers to adoption, and deliver a more seamless end-to-end experience, that helps more users create with confidence from day one.

Speaker #3: We continue to make progress, stabilizing engagement trends ending the quarter with active users up 1%, and 90-day engaged users down 1%. Representing improvements year on year and sequentially.

Speaker #3: We are encouraged by the early response to the initiatives we launched in late Q4 and into Q1, including guided flows for full-color stickers and insert cards, expanded vinyl decal use cases, our AI-assisted project designer tool, and improved project preview visualization.

Ashish Arora: We are encouraged by the early response to the initiatives we launched in late Q4 and into Q1, including guided flows for full-color stickers and insert cards, expanded vinyl decal use cases, our AI-assisted Project Designer tool, and improved project preview visualization. We now have six guided flows which cover our most popular use cases and dramatically simplify the user experience. In addition, we began rolling out AI Project Designer, which allows users to design and make a project through a conversational interface. Taken together, these launches reflect how our platform is evolving to become simpler, more intuitive, and more compelling for a broader set of consumers. A key leading indicator of future growth is how effectively we engage new users. In Q1, cut intensity among our 2026 onboarder cohort in their first few weeks reached its highest level for a Q1 in the past two years.

Speaker #3: We now have six guided flows, which cover our most popular use cases and dramatically simplify the user experience. In addition, we began rolling out AI Project Designer, which allows users to design and make a project through a conversational interface.

Speaker #3: Taken together, these launches reflect how our platform is evolving to become simpler, more intuitive, and more compelling for a broader set of consumers. A key leading indicator of future growth is how effectively we engage new users.

Speaker #3: In Q1, cut intensity among our 2026 onboarder cohort in their first few weeks, reached its highest level for a Q1 in the past two years.

Speaker #3: Users onboarding with our newly launched Joy 2 and Explore 5 machines are now guided through a broader range of projects that utilize the full set of materials included in their bundles.

Ashish Arora: Users onboarding with our newly launched Joy2 and Explore5 machines are now guided through a broader range of projects that utilize the full set of materials included in their bundles. We also introduced additional improvements late in the quarter to further reduce friction and drive repeat engagement. These include enhanced educational content within guided flows, improved accuracy for our AI assistant chatbot, and gamification designed to encourage exploration of machine capabilities and repeat visits. Among returning members, we are seeing early signs of progress as well. Members who joined in recent years and returned to create projects in Q1 demonstrated higher cut intensity compared to prior years. At the same time, as the large 2020 and 2021 cohorts continue to decline as a percentage of our active user base, we are seeing a moderation in overall engagement erosion.

Speaker #3: We also introduced additional improvements late in the quarter to further reduce friction and drive repeat engagement. These include enhanced educational content within guided flows, improved accuracy of our AI-assisted chatbot, and gamification designed to encourage exploration of machine capabilities and repeat visits.

Speaker #3: Among returning members, we are seeing early signs of progress as well. Members who joined in recent years and returned to create projects in Q1, demonstrated higher cut intensity compared to prior years.

Speaker #3: At the same time, as the large 2020 and 2021 cohorts continue to decline as a percentage of our active user base, we are seeing a moderation in overall engagement erosion.

Speaker #3: Our engagement marketing efforts, which focus on bringing users back into our platform, are also becoming more effective and efficient. For example, using AI to generate and personalize lifecycle campaign messaging, has consistently improved click-through rates.

Ashish Arora: Our engagement marketing efforts, which focus on bringing users back into our platform, are also becoming more effective and efficient. For example, using AI to generate and personalize lifecycle campaign messaging has consistently improved click-through rates. The product improvements experienced by returning users in Design Space are positively impacting perception among both members and independent influencers. Looking ahead, we are excited about our upcoming platform innovations, which we believe will continue to make the creative experience faster, more intuitive, and more delightful. In Q1, paid subscribers increased 104,000 or over 3% year-on-year to almost 3.08 million as we saw platform revenue increase nearly 6% to almost $84.8 million year-on-year. We did see a drop of 13,000 subscribers sequentially from Q4, 2025, reflecting lower promotional activity in Q1 as we emphasized revenue growth in the quarter.

Speaker #3: The product improvements experienced by returning users in design space are positively impacting perception among both members and independent influencers. Looking ahead, we are excited about our upcoming platform innovations, which we believe will continue to make the creative experience faster, more intuitive, and more delightful.

Speaker #3: In Q1, paid subscribers increased 104,000, or over 3% year on year, to almost 3.08 million, as we saw platform revenue increase nearly 6%, to almost 84.8 million year on year.

Speaker #3: We did see a drop of 13,000 subscribers sequentially from Q4 2025, reflecting lower promotional activity in Q1, as we emphasized revenue growth in the quarter.

Speaker #3: 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.

Ashish Arora: 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. We saw some of this pressure manifest in Q1. That said, we continue to see healthy sign-up rates from our new members and are achieving a higher revenue growth rate. Additionally, at the end of Q1, we started testing new subscription plans and pricing tiers on new signups using AI credits and shop benefits as differentiators. Early conversion signals and higher tier adoption are encouraging, but it is still early. We will continue to test new plans and price points as we add more value and benefits for our subscribers. Earlier, we also rolled out a price increase on new subscribers through the iOS App Store while simultaneously offering alternative payment options to purchase via Cricut at the lower legacy price.

Speaker #3: We saw some of this pressure manifest in Q1. That said, we continue to see healthy sign-up rates from our new members and are achieving a higher revenue growth rate.

Speaker #3: Additionally, at the end of Q1, we started testing new subscription plans and pricing tiers on new sign-ups, using AI credits and shop benefits as differentiators.

Speaker #3: Early conversion signals and higher tier adoption are encouraging, but it is still early. We will continue to test new plans and price points as we add more value and benefits for our subscribers.

Speaker #3: Earlier, we also rolled out a price increase on new subscribers through the iOS App Store, while simultaneously offering alternative payment options to purchase via Cricut at the lower legacy price.

Speaker #3: We have been watching this test and have seen positive results in shifting users to the Cricut payment options, or a higher price purchase via the App Store, without significant impact to overall expected sign-ups.

Ashish Arora: We have been watching this test and have seen positive results in shifting users to the Cricut payment options or a higher price purchase via the App Store without significant impact to overall expected signups. We have a rich roadmap to continually increase the value proposition for subscribers. Our goal is to make it incredibly compelling to be a subscriber to leverage our content, software tools, and services. This remains a highly competitive category, particularly in material types with low barriers to entry, where we continue to see pressure from private label offerings at retail as well as new entrants across online marketplaces and store shelves. We are not satisfied with our position in parts of this category, and we are moving aggressively to refresh the portfolio, improve value, and sharpen our channel execution. Those efforts produced mixed results in Q1, but there were encouraging signs.

Speaker #3: We have a rich roadmap to continually increase the value proposition for subscribers. Our goal is to make it incredibly compelling to be a subscriber to leverage our content, software tools, and services.

Speaker #3: This remains a highly competitive category, particularly in material types with low barriers to entry, where we continue to see pressure from private label offerings at retail, as well as new entrants across online marketplaces and store shelves.

Speaker #3: We are not satisfied with our position in parts of this category, and we are moving aggressively to refresh the portfolio, improve value, and sharpen our channel execution.

Speaker #3: Those efforts produced mixed results in Q1. But there were encouraging signs. We saw double-digit growth in value materials online, and we made share gains in iron, vinyl, and cutting mats.

Ashish Arora: We saw double-digit growth in value materials online, and we made share gains in iron, vinyl, and cutting mats. At the same time, share in heat presses was pressured as we moved through product line transitions. Overall, our view is clear. When we bring the right combination of innovation, quality, and affordability to market, we can improve our share position while enhancing the making experience for our users. Innovation remains central to that effort. For example, with the launch of Joy 2 and Explore 5, we introduced Omnipen, our new universal pen system, which has been well-received for its performance and compatibility. Across Q1 and Q2, we are expanding the portfolio with more than 200 new SKUs and executing a meaningful retail refresh with key partners. We are also continuing to invest in core categories such as Smart Iron and Vinyl with new colors, finishes, and a broader assortment.

Speaker #3: At the same time, share in heat presses was pressured as we moved through product line transitions. Overall, our view is clear: when we bring the right combination of innovation, quality, and affordability to market, we can improve our share position while enhancing the making experience for our users.

Speaker #3: Innovation remains central to that effort. For example, with the launch of Joy 2 and Explore 5, we introduced Omnipen, our new universal pen system which has been well received for its performance and compatibility.

Speaker #3: Across Q1 and Q2, we are expanding the portfolio with more than 200 new SKUs and executing a meaningful retail refresh with key partners. We're also continuing to invest in core categories such as smart iron and vinyl, with new colours, s, finishes, and a broader assortment.

Speaker #3: At the same time, we are advancing our full colour strategy through continued innovation in printables, across inkjet and sublimation, along with refreshed tools and accessories.

Ashish Arora: At the same time, we are advancing our full color strategy through continued innovation in printables across inkjet and sublimation, along with refreshed tools and accessories. In heat presses, we are broadening our lineup to address more price points and use cases. EasyPress Mini LT, which we launched in Q4, is helping address affordability and early results suggest much of that demand has been incremental. In Q1, we also launched EasyPress SE in the popular nine-by-nine and twelve-by-ten sizes, which expands our ability to compete more effectively across markets with a professional quality, easy-to-use heat transfer solution. We also launched Cricut’s first service offering with our direct-to-film or DTF service, which leverages our creative platform content and new guided flows. Customers create vibrant, full-color designs that we print and deliver to them, which they can then press onto fabric or other substrates.

Speaker #3: In heat presses, we are broadening our lineup to address more price points and use cases, easy press mini LT, which we launched in Q4, is helping address affordability and early results suggest much of that demand has been incremental.

Speaker #3: In Q1, we also launched easy press SE in the popular 9x9 and 12x10 sizes, which expands our ability to compete more effectively across markets with a professional quality easy-to-use heat transfer solution.

Speaker #3: We also launched Cricut's first service offering with our direct-to-film or DTF service. Which leverages our creative platform content and new guided flows. Customers create vibrant full colour designs that we print and deliver to them, which they can then press on to fabric or other substrates.

Speaker #3: While still a small experiment, this service is an important example of how we can monetize our creative platform beyond cutting machines. Early responses have been encouraging.

Ashish Arora: While still a small experiment, this service is an important example of how we can monetize our creative platform beyond cutting machines. Early response has been encouraging. Far, over 80% of orders are coming from subscribers, and around a third of orders have already come from repeat customers. Over time, we believe this can deepen engagement and further increase the value of our subscription offering. Stepping back, we are moving with urgency on both innovation and cost discipline. We have more product innovation ahead. We are equally focused on execution, improving the end-to-end customer experience, and driving greater efficiency across the business. Our conviction remains the same. When we make it easier and more affordable for people to create, we increase engagement, materials usage, and long-term value creation. With that, I will turn the call over to Kimball.

Speaker #3: So far, over 80% of orders are coming from subscribers, and around a third of orders have already come from repeat customers. Over time, we believe this can deepen engagement and further increase the value of our subscription offering.

Speaker #3: Stepping back, we are moving with urgency on both innovation and cost discipline. We have more product innovation ahead. We are equally focused on execution, improving the end-to-end customer experience, and driving greater efficiency across the business.

Speaker #3: Our conviction remains the same: when we make it easier and more affordable for people to create, we increase engagement, materials usage, and long-term value creation.

Speaker #3: With that, I will turn the call over to Kimball.

Speaker #2: Thank you, Ashish, and welcome, everyone. In the first quarter, we delivered revenue of $159.5 million, a 2% decline compared to the prior year. We generated $20.3 million in net income, or $12.7% of total sales in Q1.

Kimball Shill: Thank you, Ashish, and welcome, everyone. In Q1, we delivered revenue of $159.5 million, a 2% decline compared to the prior year. We generated $20.3 million in net income, or 12.7% of total sales in Q1. Breaking revenue down further, Q1 2026 revenue from platform was $84.8 million, up nearly 6% year over year. ARPU increased 4.8% to $55.65 from $53.10 a year ago. Platform revenue was up primarily due to the year-over-year increase in paid subscribers and foreign exchange.

Speaker #2: Breaking revenue down further, Q1 2026 revenue from platform was $84.8 million, up nearly 6% year over year. ARPU increased 4.8% to $55.65 from $53.10 a year ago.

Speaker #2: Platform revenue was up primarily due to the year-over-year increase in paid subscribers and foreign exchange. As mentioned in our last call, as we shift to our bundle-only 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 accessories and materials in our SEC filings and data sheet.

Kimball Shill: As mentioned in our last call, as we shift to our bundle-only 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 accessories and materials in our SEC filings and data sheet. We will continue to report platform and products revenues and costs as we currently do in our consolidated statement of operations and comprehensive income. Q1 revenue from products was $74.7 million, down 9.6% year-over-year. Product revenue was down primarily due to the lower average selling prices from increased promotional activity and mix as we cleared out end-of-life inventory in preparation for our Q1 product launches. As Ashish mentioned, global machine sellout units were positive in Q1 year-over-year.

Speaker #2: We will continue to report platform and products revenues and costs as we currently do in our consolidated statement of operations and comprehensive income. Q1 revenue from products was $74.7 million, down 9.6% year over year.

Speaker #2: Product revenue was down primarily due to the lower average selling prices from increased promotional activity and mix as we cleared out end-of-life inventory in preparation for our Q1 product launches.

Speaker #2: As Ashish mentioned, global machine sellout units were positive in Q1 year over year. As a reminder, we don't have perfect coverage for sellout data in all channels, so treat this as directional.

Kimball Shill: As a reminder, we don't have perfect coverage for sellout data in all channels, so treat this as directional. In terms of geographic breakdown, international sales grew over 16% year on year to $40.9 million. International revenue represented 26% of total revenue in Q1 2026, up from 22% in the prior year, reflecting continued progress in expanding our global footprint. Foreign exchange benefited international sales in Q1 by 10.3%. Our targeted pricing and marketing investments in Europe and Australia drove solid results, delivering year-over-year growth across these regions. We also saw strong momentum in our emerging markets, with our early-stage investments in Asia and LATAM driving strong year-over-year growth. In contrast, we experienced a challenging quarter in our MEFTA region, which declined year over year, partly due to the ongoing geopolitical pressures. Importantly, our exposure to this region remains limited.

Speaker #2: In terms of geographic breakdown, international sales grew over 16% year on year to $40.9 million. International revenue represented 26% of total revenue in Q1 2026, up from 22% in the prior year, reflecting continued progress in expanding our global footprint.

Speaker #2: Foreign exchange benefited international sales in Q1 by $10.3%. Our targeted pricing and marketing investments in Europe and Australia drove solid results, delivering year-over-year growth across these regions.

Speaker #2: We also saw strong momentum in our emerging markets, with our early-stage investments in Asia and LATAM driving strong year-over-year growth. In contrast, we experienced a challenging quarter in our META region, which declined year over year, partly due to the ongoing geopolitical pressures.

Speaker #2: Importantly, our exposure to this region remains limited. Looking ahead, we plan to accelerate our investments in our international markets, with a focus on increasing brand awareness and driving member acquisition throughout 2026.

Kimball Shill: Looking ahead, we plan to accelerate our investments in our international markets with a focus on increasing brand awareness and driving member acquisition throughout 2026. As Ashish mentioned, we ended the quarter with just under 3.08 million paid subscribers. We expect to see seasonal pressure on subscription rates in Q2 and Q3, which could result in flat to declining quarter-on-quarter subscriber growth rates. We remain focused on driving growth for the full year, supported by new product introductions, improved onboarding, ongoing investments in engagement, and promotional support. Regarding engagement, in our published data sheet, Q3 and Q4 2025 active users, 90-day engaged users, and platform ARPU were updated post-earnings to reflect immaterial corrections. Moving to gross margin. Total gross margin in Q1 was 58.1%, which was down 2.4% year-on-year.

Speaker #2: As Ashish mentioned, we ended the quarter with just under $3.08 million paid subscribers. We expect to see seasonal pressure on subscription rates in Q2 and Q3, which could result in flat to declining quarter-on-quarter subscriber growth rates.

Speaker #2: We remain focused on driving growth for the full year, supported by new product introductions, improved onboarding, ongoing investments in engagement, and promotional support. Regarding engagement, in our published data sheet, Q3 and Q4 2025 active users 90-day engaged users and platform ARPU were updated post-earnings to reflect immaterial corrections.

Speaker #2: Moving to gross margin, total gross margin in Q1 was $58.1%, which was down 2.4% year on year. Breaking gross margin down further, gross margin from platform in Q1 was 89%, a decrease compared to 89.2% a year ago.

Kimball Shill: Breaking gross margin down further, gross margin from platform in Q1 was 89%, a decrease compared to 89.2% a year ago. As we've mentioned previously, we are excited about our AI investments, and there may be some gross margin pressure as we continue to ramp AI features. Gross margin from products was 23.1% compared to 32.7% in Q1 a year ago. The decrease in gross margin for Q1 was primarily driven by inventory write-downs from end-of-life programs, lower monetization of previously reserved inventory, tariffs, and increased promotional activity. Total operating expenses for the quarter were $69.8 million and included $6.3 million in stock-based compensation. Total operating expenses increased just over 1% from $69 million in Q1 2025.

Speaker #2: As we've mentioned previously, we are excited about our AI investments and there may be some gross margin pressure as we continue to ramp AI features.

Speaker #2: Gross margin from products was 23.1% compared to 32.7% in Q1 a year ago. The decreasing gross margin for Q1 was primarily driven by inventory write-downs from end-of-life programs, lower monetization of previously reserved inventory, tariffs, and increased promotional activity.

Speaker #2: Total operating expenses for the quarter were $69.8 million, and included $6.3 million in stock-based compensation. Total operating expenses increased just over 1% from $69 million in Q1 2025.

Speaker #2: 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, so we expect to see greater increases in year-on-year operating expenses.

Kimball Shill: 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. We expect to see greater increases in year-on-year operating expenses. Operating income for the quarter was $22.9 million or 14.4% of revenue, compared to $29.3 million or 18% of revenue in Q1 2025. The Q1 2026 tax rate declined to 19% from 26.7% in 2025, primarily due to higher R&D tax credits from increased investments. For the quarter, net income was $20.3 million or $0.10 per diluted share, compared to $23.9 million or $0.11 per diluted share in Q1 2025. Turning now to balance sheet and cash flow.

Speaker #2: Operating income for the quarter was $22.9 million, or $14.4% of revenue, compared to $29.3 million or 18% of revenue in Q1 last year. The Q1 2026 tax rate declined to 19% from 26.7% last year primarily due to higher R&D tax credits from increased investments.

Speaker #2: For the quarter, net income was $20.3 million, or $0.10 per diluted share, compared to $23.9 million, or $0.11 per diluted share in Q1 2025.

Speaker #2: Turning now to balance sheet and cash flow, we continue to generate healthy cash flow on an annual basis, which funds our inventory needs and investments for long-term growth.

Kimball Shill: We continue to generate healthy cash flow on an annual basis, which funds our inventory needs and investments for long-term growth. In Q1 2026, we generated $26.9 million in cash from operations, compared to $61.2 million in Q1 2025. We ended Q1 2026 with cash and cash equivalents of $256 million. We remain debt-free. Inventory decreased by $8 million year-over-year to $106 million, reflecting improved inventory management and normalization as we exited end-of-life machines. As discussed on prior calls, inventory is now at levels that generally support the business, with normal fluctuations as products transition. Accordingly, we typically use cash in H1 and into Q3 to build holiday inventory, then generate cash in Q4.

Speaker #2: In Q1 2026, we generated $26.9 million in cash from operations, compared to $61.2 million in Q1 2025. We ended Q1 2026 with cash and cash equivalents of $256 million.

Speaker #2: We remain debt-free. Inventory decreased by $8 million year over year to $106 million. Reflecting improved inventory management and normalization as we exited end-of-life machines.

Speaker #2: As discussed on prior calls, inventory is now at levels that generally support the business, with normal fluctuations as products transition. Accordingly, we typically use cash in the first half and into Q3 to build holiday inventory, then generate cash in Q4.

Speaker #2: During Q1, we used $12.2 million of cash to repurchase $2.8 million shares of our stock. As a result, 29.1 million remain on our approved $50 million stock repurchase program.

Kimball Shill: During Q1, we used $12.2 million of cash to repurchase 2.8 million shares of our stock. As a result, $29.1 million remain on our approved $50 million stock repurchase program. During the quarter, we paid approximately $21 million for the declared $0.10 per share semiannual dividend on 20 January 2026. The board also approved a recurring semiannual dividend of $0.10 per share, supported primarily by our profitable operations. The dividend will be payable on 21 July 2026 to shareholders of record as of 7 July 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.

Speaker #2: During the quarter, we paid approximately $21 million for the declared 10 cent per share semi-annual dividend on January 20, 2026. The board also approved our recurring semi-annual dividend of 10 cents per share, supported primarily by our profitable operations.

Speaker #2: The dividend will be payable on July 21, 2026, to shareholders of record as of July 7, 2026. Recall, we do not give detailed quarterly or annual guidance, but we do want to offer some color on our outlook for 2026.

Speaker #2: 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.

Kimball Shill: 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. We remain optimistic about the year overall despite a more challenging H1. In Q2, we do not expect total company revenue to grow year over year, primarily due to a difficult comparison against Q2 2025, which benefited from revenue pull forward amid tariff-related supply chain uncertainty. That said, we expect platform revenue to grow each quarter while subscriber trends follow their typical seasonal pattern with softness in Q2 and Q3. With a strong roadmap ahead, we remain confident for growth in the H2. Previously, we talked about the headwinds that tariffs presented to our business. Given the recent Supreme Court ruling overturning IEEPA tariffs and associated dynamics, we are not providing any guidance on margin impact.

Speaker #2: And continuing our promotional strategy to drive affordability. We remain optimistic about the year overall, despite a more challenging first half. In Q2, we do not expect total company revenue to grow year over year.

Speaker #2: Primarily due to a difficult comparison against Q2 2025, which benefited from revenue pull-forward amid tariff-related supply chain uncertainty. That said, we expect platform revenues to grow each quarter while subscriber trends follow their typical seasonal pattern with softness in Q2 and Q3.

Speaker #2: With a strong roadmap ahead, we remain confident for growth in the second half. Previously, we talked about the headwinds that tariffs presented to our business.

Speaker #2: Given the recent Supreme Court ruling overturning AIPA 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 full year 2026.

Kimball Shill: We expect to be profitable each quarter and generate cash flow from operations for full year 2026. We also expect to continue to be active with our authorized $50 million stock repurchase program, which has $29.1 million remaining, and the board approved a recurring semiannual dividend of $0.10 per share, payable on 21 July 2026 to shareholders of record 7 July. While tariff uncertainty remains a reality, we are also navigating broader cost pressures, including input costs, supply chain dynamics, and a more cautious consumer environment in certain markets. Our team continues to operate proactively and with discipline, adjusting where needed while maintaining our focus on strategic investments to position the company for growth. With that, I'll turn the call over to the operator for questions.

Speaker #2: We also expect to continue to be active with our authorized $50 million stock repurchase program, which has $29.1 million remaining. And the Board approved our recurring semi-annual dividend of $0.10 per share, payable on July 21, 2026, to shareholders of record as of July 7.

Speaker #2: While tariff uncertainty remains a reality, we are also navigating broader cost pressures, including input costs, supply chain dynamics, and a more cautious consumer environment in certain markets.

Speaker #2: Our team continues to operate proactively and with discipline, adjusting where needed while maintaining our focus on strategic investments to position the company for growth.

Speaker #2: With that, I'll turn the call over to the operator for questions.

Speaker #1: Thank you. At this time, we will conduct the question-and-answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Erik Woodring with Morgan Stanley. Your line is now open.

Speaker #1: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Eric Woodring, with Morgan Stanley.

Speaker #1: Your line is now open.

Speaker #3: Hey, everyone. It's Dylan Liu on for Eric Woodring, and thanks for taking my questions. So first, 90 days ago, you did mention a difficult comp, as you mentioned in the prepare remarks, for product in the first half of this year.

Dylan Liu: Hey, everyone. It's Dylan Liu on for Erik Woodring, thanks for taking my questions. First, 90 days ago, you did mention a difficult comp, as you mentioned in the prepared remarks, for product in H1 of this year. You've posted a 10% of product revenue decline for Q1. How did that compare with your expectations? As we are now two-thirds of H1, has H1 had wind tracking better or worse than you had anticipated, and why? Also, I'm curious about why you're confident that H2 will be better.

Speaker #3: So you've posted 10% of product revenue decline for the first quarter, and how did that compare with your expectations? And as we are now two-thirds of the first half, has the first half had win tracking better or worse than you had anticipated, and why?

Speaker #3: And also, I'm curious about why you're confident that the second half will be better.

Kimball Shill: Dylan, this is Kimball. Thanks for the question. The story of H1 really is a story about average selling price declines on a year over year basis. Let me break that down for you in a second. First, I wanna highlight that we talked about machine sellout units continuing to be up year over year. I'll add that sell-in units are also up double digits in the Q1. Why that's important is that's the start of our flywheel. Our a consumer buys our connected machine, and then that gives us the opportunity to monetize them through subscriptions, accessories, and materials. We're very pleased with those results.

Speaker #4: Dylan, this is Kimball. Thanks for the question. So the story in the first half really is a story about average selling price declines on a year-over-year basis.

Speaker #4: And let me break that down for you. In a second. But first, I want to highlight that we talked about machine sell-out units continuing to be up year over year.

Speaker #4: And that I'll add that sell-in units are also up, double-digit in the first quarter. And while that's important is that's the start of our flywheel.

Speaker #4: So our consumer buys our connected machine, and then that gives us the opportunity to monetize them through subscriptions and accessories and materials. And so we're very pleased with those results.

Speaker #4: And it really is a story about lower selling prices this year versus last year. And as we launched two new machines—so we launched this year Joy 2 and Explorer 5.

Kimball Shill: It really is a story about lower selling prices this year versus last year, as we launched two new machines. We launched this year Joy 2 and Explore 5, and last Q1, we launched Explore 4 and Maker 4. The average selling price last year was much higher. Our Joy 2 machine has an entry point for US consumers of $99 to $129. That is comping against Maker 4 that had an entry price point of about $399 last year. Part of it is we're just selling less expensive machines in H1 than we did in H1 last year. Our continuing products in the market, Maker 4, for example, continues forward in the market.

Speaker #4: And last Q1, we launched Explorer 4 and Maker 4. And the average selling price last year was much higher. So our Joy 2 machine has an entry point of for US consumers of $99 to $129.

Speaker #4: And that is comping against Maker 4 that had an entry price point of about $399 last year. And so part of it is we're just selling less expensive machines in the first half than we did in the first half last year.

Speaker #4: Our continuing products in the market, so Maker 4, for example, continues forward in the market. And last year, when it was first launched, there was no promotionality.

Kimball Shill: Last year when it was first launched, there was no promotionality. As we move through the natural product life cycle, we are exercising pro-promotion on that machine, but that also puts further pressure on the margins. We also saw some continued erosion in our accessories and materials business. Now, as we move forward with our new bundle-only strategy on next-generation machines, there was some offsetting goodness that came from that where there's materials bundled with each machine in this next generation, but it wasn't enough to fully offset that trend. In looking to Q2, we expect to see these trends continue.

Speaker #4: And as we moved through the natural product lifecycle, we are exercising promotion on that machine, but that also puts further pressure on the margins.

Speaker #4: And then we also saw some continued erosion in our accessories and materials business. Now, as we move forward with our new bundle-only strategy on next-generation machines, there was some offsetting goodness that came from that, where there's materials bundled with each machine.

Speaker #4: In this next generation, but it wasn't enough to fully offset that trend. And then in looking to Q2, we expect to see these trends continue.

Kimball Shill: In addition, we also talked about our difficult comp in Q2 set up by last year, where we had a pull-in related to tariff uncertainty, and we had retail partners asking for support, and we saw an opportunity to accelerate revenue last year. That does set up that difficult comp. We don't expect to grow in H1. That said, as we move to the H2, we expect to reverse that trend, right? We have more new products to come. We're excited about those products. We're confident in our roadmap. While I'm not, you know, prepared to give more detail than that, we do have more confidence in the H2, and we do expect to grow platform revenue each quarter as we move through the year.

Speaker #4: In addition, we also talked about our difficult comp in Q2, set up by last year, where we had a pull-in related to tariff uncertainty, and we had retail partners asking for support, and we saw an opportunity to accelerate revenue last year.

Speaker #4: That does set up that difficult comp. And so, we don't expect to grow in the first half. That said, as we move to the back half, we expect to reverse that trend, right?

Speaker #4: We have more new products to come. We're excited about those products. We're confident in our roadmap. And so while I'm not prepared to give more detail than that, we do have more confidence in the back half.

Speaker #4: And we do expect to grow platform revenue each quarter as we move through the year.

Ashish Arora: Yeah. Dylan, this is Ashish. Let me kind of reinforce a couple of things that Kimball mentioned. First of all, I think the thing that, you know, we feel really pleased about is the continued sell out of machines, and that's a leading indicator. You know, it's up to us on how we monetize that. You know, we believe that that creates a healthy, you know, trend for our business. As we said, you know, we see that in Q1, and we continue to see that in Q2. The areas that we're gonna lean in on, I mean international is clearly one of them.

Speaker #5: And Dylan, this is Ashish. Let me kind of reinforce a couple of things that Kimball mentioned. First of all, I think the thing that we feel really pleased about is the continued sell-out of machines.

Speaker #5: And that's a leading indicator. It's up to us of how we monetize that. But we believe that that creates a healthy trend for our business.

Speaker #5: And as we said, we've seen that in Q1, and we continue to see that in Q2. The areas that we're going to lean in on, I mean, international is clearly one of them.

Speaker #5: We're going to continue to we have continued to lean in on international, continue to make marketing investments and other personnel investments. And we expect that to be a tailwind for the second half of the year.

Ashish Arora: We have continued to lean in on international, continue to make marketing investments and other personnel investments, and we expect that to, you know, be a tailwind for the H2 of the year. I also think that yeah, we've talked about this for some time now. We've been working very hard for the last, you know, several quarters on driving innovation and new product introductions. You'll see the impact of that in the H2. You know, we are focusing on a new brand campaign of really addressing, while we are addressing ease of use and affordability, we also want to make Cricut feel like that's, it's for someone like them. Hopefully that marketing campaign will deliver.

Speaker #5: I also think that and yeah, we've talked about this for some time now. We've been working very hard for the last several quarters on driving innovation and new product introductions.

Speaker #5: So you'll see the impact of that in the second half. We are focusing on a new brand campaign of really addressing while we're addressing ease of use and affordability.

Speaker #5: We also want to make Cricut feel like it's for someone like them. So we hopefully that that marketing campaign will deliver. And finally, as we go through the year, I think the availability of our higher-priced bundles will also have a positive impact.

Ashish Arora: Finally, you know, as you go through the year, I think the availability of our higher priced bundles will also have a positive impact. We think that, you know, it's the year of the two halves. H1 had some headwinds. Long as we continue to execute and we will see H2 to have some tailwinds behind us.

Speaker #5: So we think that it's the year of the two halves, the first half had some headwinds. As long as we continue to execute and we will see second half to have some tailwinds behind us.

Speaker #3: You got it. Thank you, Ashish and Kimball. Just one follow-up, if I may. So, on gross margins—product gross margins recovered almost five points sequentially to 23%.

Dylan Liu: Got it. Thank you, Ashish and Kimball. Just one follow-up, if I may. On gross margins. Product gross margins recovered over almost 5 points sequentially to 23%. What is your product gross margin outlook for the year? I do notice that, you know, at least for the international market, there were quite some tailwind from FX side in Q1. With that in mind, how should we think about 2026 product gross margins?

Speaker #3: What is your product gross margin outlook for the year? I do notice that at least for the international market, there are quite some there were quite some tailwinds from FX side in the first quarter.

Speaker #3: With that in mind, how should we think about 2026 product gross margins?

Kimball Shill: Dylan, thanks for the questions. Gross margins are falling in line with expectations and consistent with what we talked about last quarter. Just breaking it down. I mean, I think if you look at 2024 gross margins on average, that kind of sets where you expect. Let me kind of break it down into pieces. Because we do expect lower gross margins this year than last year, right? We are down as we have kind of 3 factors going. 1, we have some E&O impairments related to end-of-life machines as we transition from old generation to next generation. There is less monetization of existing excess and obsolete inventory this year than last year, and that's consistent with expectations we've talked about before.

Speaker #4: Dylan, thanks for the question. So, gross margins are falling in line with expectations, and consistent with what we talked about last quarter. And just breaking it down, I mean, I think if you look at year '24 gross margins, on average, that kind of sets where you expect.

Speaker #4: But let me kind of break it down just in pieces. Because we did expect lower gross margins this year than last year, right? And we are down, as we have kind of three factors going.

Speaker #4: One, we have some E&O impairments related to end-of-life machines as we transition from old generation to next generation. There is less monetization of existing excess and obsolete inventory this year than last year.

Speaker #4: And that's consistent with expectations we've talked about before. And there continues to be tariff pressures on margins. And that kind of breaks down into two pieces.

Kimball Shill: There continues to be tariff pressures on margins. That kind of breaks down into 2 pieces. You know, we have IEEPA tariffs that a lot of the inventory brought in have those built into our COGS, and that continues to flow through the P&L. We have applied for tariff refunds, so if and when those happen, we'll take credit for them kind of in a one-time accounting entry, but there's no adjustments so far in that. Even though the IEEPA tariffs have been overturned, the administration immediately put an additional 10% tariffs on everything. The way I think about flowing through our business is, you know, 25% of our business roughly is international, not subject to tariffs.

Speaker #4: We have AIPA tariffs that a lot of the inventory brought in have those built into our COGS. And that continues to throw P&L. Flow through the P&L.

Speaker #4: We have applied for tariff refunds, and so if and when those happen, we'll take credit for them, kind of in a one-time accounting entry.

Speaker #4: But there's no adjustments so far in that. And then even though the AIPA tariffs have been overturned, the administration immediately put an additional 10% tariffs on everything.

Speaker #4: And so the way I think about flowing through our business is 25% of our business, roughly, is international, not subject to tariffs. A little over half of the business this last quarter was platform.

Kimball Shill: A little over half of the business this last quarter was platform. That's not subject to tariffs. For the balance, it's subject to tariffs, and we had guided last time to about an average tariff impact of 20% going forward. That's closer to a 10%, once we get through the noise of the IEEPA tariffs. Tariffs will continue to be a bit of a headwind. On your question on international, you know, we are excited about the continued growth in international. It was 16% for the quarter, and about 10 points, as you called out, was related to foreign exchange.

Speaker #4: That's not subject to tariffs. But for the balance, it's subject to tariffs. And we had guided last time to about an average tariff impact of 20% going forward.

Speaker #4: That's closer to a 10% once we get through the noise of the AIPA tariffs. And so, tariffs will continue to be a bit of a headwind.

Speaker #4: On your question on international, we are excited about the continued growth in international. It was 16% for the quarter, and about 10 points, as you called out, was related to foreign exchange.

Kimball Shill: It's worth calling out that the benefit from foreign exchange started in Q2 last year in June, and so we'll lap that pretty soon. Even with that, we continue to have organic growth across our international segments. We called out in the prepared remarks, solid growth in Europe and Australia, New Zealand, and strong growth in some of our more nascent markets in Latin America and Asia.

Speaker #4: It's worth calling out that the benefit from foreign exchange started in Q2 last year, in June. And so we'll lap that pretty soon. But even with that, we continue to have organic growth across our international segments.

Speaker #4: And we called out in the prepared remarks solid growth in Europe and Australia and New Zealand. And strong growth in some of our more nascent markets in Latin America and Asia.

Speaker #3: Okay. Got it. Thank you.

Dylan Liu: Okay. Got it. Thank you.

Speaker #4: Yeah. Let me add one more thing. So we talked about average selling prices in my last answer. That's really a story about revenue. We haven't seen the lower average selling prices pressuring margins.

Kimball Shill: Yeah. Let me add one more thing. We talked about average selling prices in my last answer. That's really a story about revenue. We haven't seen the lower average selling prices pressuring margins. That's because we've largely offset the lower prices on machines and materials with supply chain efficiencies and cost out in re-engineering. It's those three factors I talked about pressuring gross margins, not the fact that we're selling different units at lower prices as we move to next generation products.

Speaker #4: And that's because we've largely offset the lower prices on machines and materials with supply chain efficiencies and cost out in re-engineering. And so it's those three factors I talked about pressuring gross margins, not the fact that we're selling different units at lower prices as we move to next-generation products.

Speaker #3: Got it. That's pretty clear to me. Thank you. Thank you.

Dylan Liu: Got it. That's pretty clear to me. Thank you. Thank you.

Speaker #1: Thank you. Our next question comes from the line of Adrian Yee from Barclays. Your line is now open.

Operator: Thank you. Our next question comes from the line of Adrienne Yih from Barclays. Your line is now open.

Speaker #3: Hi, this is Angus Kelleher on for Adrian Yee. I wanted to ask about retailers and your retail partners. Just given the recent uptick in energy prices and broader consumer pressure, are you seeing any change in retail or ordering behavior or demand signals, either in terms of caution on forward buys or shifts in mix toward lower-priced offerings?

Angus Kelleher: Hi, this is Angus Kelleher on for Adrienne Yih. I wanted to ask about retailers and your retail partners. Just given the recent uptick in energy prices and broader consumer pressure, are you seeing any change in retailer ordering behavior or demand signals, either in terms of caution on forward buys or shifts in mix toward lower priced offerings?

Speaker #4: Yeah. Angus, this is Ashish. So I think overall, and this as I speak, globally, right, I would say the headline is that our retailers are very excited about the roadmaps, the innovation that Cricut is driving, and I would say across the board, there's general enthusiasm for driving innovation in the category.

Ashish Arora: Angus, this is Ashish. I think, you know, overall, and this is I speak globally, right? I would say the headline is that our retailers are very excited about the roadmaps, the innovation that Cricut is driving. I would say across the board, you know, there's general enthusiasm for driving innovation in the category. That's kind of the overriding theme. The second is, you know, we, you know, obviously we changed our strategy from a standalone machine to bundles, and primarily all our retailers today worldwide, carry the bundles. Our goal in offering the bundles was to address ease of use so that people have everything that they need in the bundle as well as affordability. Those are the two things, and, you know, the retailers have been very pleased.

Speaker #4: That's kind of the overriding theme. The second is we obviously we changed our strategy from a standalone machine to bundles and primarily all our retailers today worldwide carry the bundles.

Speaker #4: And our goal in offering the bundles was to address ease of use so that people have everything that they need in the bundle as well as affordability.

Speaker #4: Those are the two things that—and the retailers have been very pleased. As we said, Michaels gave us the new product launch award for the launch of Joy 2 and Explore 5.

Ashish Arora: As we said, you know, Michaels gave us the Best New Product Launch Award for the launch of Cricut Joy 2 and Cricut Explore 5. Today that's what we hear from our retailers, is general enthusiasm for the category and general, you know, reception to the launch of bundles. They also see the platform improvements that we are making. I mean, I would say for the most part, we don't see a significant retailer shift in buying, at least in their buying behavior, from, you know, based on the economy or based on consumer sentiment today. Kimball, I don't know if you want to add anything to that, but I want to give a broader, you know, what are we hearing from retailers, and today it's enthusiasm for the category.

Speaker #4: So today, that's what we hear from our retailers is general enthusiasm for the category. And general reception to the launch of bundles. They also see the platform improvements that we are making I mean, I would say for the most part, we don't see a significant retailer shift in buying, at least in their buying behavior, from based on the economy or based on consumer sentiment today.

Speaker #4: I don't know if you want to add anything to that, but that's I wanted to give a broader what are we hearing from retailers today?

Speaker #4: It's enthusiasm. No, I agree. Retailers, it's enthusiasm, as we did mention in the prepared remarks. I mean, we have seen some consumer caution, but that's primarily in Europe.

Kimball Shill: I agree. Retailers is enthusiastic. We did mention in the prepared remarks, I mean, we have seen some consumer caution, but that's primarily in Europe. We haven't seen a pullback in US even as we're all watching oil prices and, you know, seeing how that evolves.

Speaker #4: We haven't seen a pullback in US, even as we're all watching oil prices and seeing how that evolves.

Ashish Arora: No, that's great. I would say if anything, you know, even though it hasn't manifested itself, if this, you know, if this was to continue, we could see disruptions in supply chain or cost of plastics or shortage of certain things.

Speaker #5: Now, it does create, I would say, if anything—even though it hasn't manifested itself—if this was to continue, we could see disruptions in supply chain or cost of plastics, or shortage of certain things.

Speaker #5: But today.

Speaker #4: Well, so let me add to Ashish's comments. So on the supply side, anything that is oil stock related—we've seen some runs on that material, but we have been locking in our supply to make sure that we have continuity of supply.

Kimball Shill: Well, so let me add to Ashish's comment. On the supply side, anything that is oil stock related, we've seen, you know, some runs on that material, but we have been locking in our supply to make sure that we have continuity of supply. We're managing that risk proactively.

Speaker #4: And so we're managing that risk proactively.

Speaker #3: Great. That's great color. Thanks very much. And then I just kind of have two housekeeping items. First, on the App Store dynamics, how meaningful has the shift toward Cricut direct payments been for subscriber economics so far?

Angus Kelleher: Great. That's great color. Thanks very much. I just kinda have two housekeeping items. First, on the App Store dynamics, how meaningful has the shift toward Cricut direct payments been for subscriber economics so far? Second, on the IEEPA-related tariff refunds, can you update us on the expected, like, magnitude of those? I ask that because we've seen some of our branded peers monetize those receivables, but it sounds like you have not sold your receivables there.

Speaker #3: And then second, on the AIPA-related tariff refunds, can you update us on the expected magnitude of those? And I ask that because we've seen some of our branded peers monetize those receivables, but it sounds like you have not sold your receivables there.

Speaker #4: Yes. Yes. Yeah. So let me take those down. So we actually have seen the as we launched the parallel pass on the iOS App Store, we've seen a majority of consumers choose the Cricut payment option.

Kimball Shill: Yes. So yeah, let me take those down. We actually have seen, as we launched the parallel paths on the iOS App Store, we've seen a majority of consumers choose the Cricut payment option, and where they're able to access the legacy price. That said, there's still a significant minority choosing Apple Pay. The good news across both is we haven't seen a significant impact to overall expected sign-up rates. We've learned that some consumers are willing to pay more for our offering without it really affecting sign-up rates. I'll just add to that.

Speaker #4: And where they're able to access the legacy price. That said, there's still a significant minority choosing Apple Pay and the good news across both is we haven't seen a significant impact to overall expected sign-up rates.

Speaker #4: And so, we've learned that some consumers are willing to pay more for our offering without it really affecting sign-up rates. And I'll just add to that, at the very end of the quarter, we started some other tests—not related to the iOS Store—where we're testing new plans and higher pricing across multiple tiers.

Kimball Shill: At the very end of the quarter, we started some other tests not related to the iOS App Store, where we're testing new plans and higher pricing across multiple tiers. There's multiple tests that we're doing where we're learning more about consumer behavior and pricing relative to our subscription offering and largely differentiated by quantity of AI credits and some shop benefits. It lets us learn on that without putting our entire installed base at risk with a across-the-board price increase. We're pretty excited about that. On the IEEPA tariffs, we aren't sharing the number. We have applied for refunds. You know, we had an ongoing duty drawback program, it was ordinary course for us to apply for those refunds.

Speaker #4: And so there's multiple tests that we're doing. Where we're learning more about consumer behavior and pricing relative to our subscription offering. And largely differentiated by quantitative AI credits and some shop benefits.

Speaker #4: But it lets us learn on that without putting our entire install base at risk with a across-the-board price increase. So we're pretty excited about that.

Speaker #4: And then on the AIPA tariffs, we aren't sharing the number. We have applied for refunds. We had an ongoing duty drawback program, and so it was ordinary course for us to apply for those refunds.

Kimball Shill: I will say it is material for us. We are not monetizing or factoring them because at this point we have $256 million in cash. We have no debt. We can be patient to get that money back when we get it. When we get it, we will make an accounting entry that credits COGS at the time, and then keep moving forward. At this point, we are waiting to see how that process plays out.

Speaker #4: I will say it is material for us. We're not monetizing your factory in them because at this point, we have 256 million dollars in cash.

Speaker #4: We have no debt, and so we can be patient to get that money back when we get it. But when we get it, we will make an accounting entry that credits COGS at the time and then keep moving forward.

Speaker #4: But at this point, we're waiting to see how that process plays out.

Speaker #3: Got it. Thanks very much. And good luck.

Angus Kelleher: Got it. Thanks very much, and good luck.

Speaker #1: Thank you. This concludes the question and answer session. And thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Operator: Thank you. This concludes the question and answer session, and thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.