Cricut, Inc. ((CRCT)) has held its Q4 earnings call. Read on for the main highlights of the call.
The latest earnings call from Cricut, Inc. painted a mixed picture of the company’s financial health and strategic direction. While the company celebrated strong net income growth and successful product launches, these positives were tempered by declining overall sales, particularly in accessories and materials, and ongoing challenges in user engagement. Cricut is making significant investments in marketing and R&D to address these issues, with an expectation of improvement in the second half of 2025.
Positive Net Income Growth
Cricut, Inc. achieved its eighth consecutive year of positive net income, reporting $62.8 million, which marks a 17% increase from the previous year. This financial success also led to a $0.05 increase in diluted earnings per share (EPS) for the full year, highlighting the company’s ability to generate profit amidst challenging market conditions.
Increase in Paid Subscribers
The company reported a 7% increase in paid subscribers, reaching a total of 2.96 million by the end of 2024. This growth represents an increase of 189,000 subscribers year on year and 121,000 sequentially in the fourth quarter, indicating a strong demand for Cricut’s subscription services.
Launch of New Cutting Machines
Cricut successfully launched the next generation of its popular cutting machines, Cricut Explore 4 and Cricut Maker 4. These new models are up to twice as fast as their predecessors and have received positive feedback from both retailers and end users, positioning the company well for future growth.
International Revenue Growth
International revenue saw a 3% increase in the fourth quarter of 2024, with international sales now accounting for 25% of total revenue, up from 22% in the same quarter of the previous year. This growth underscores Cricut’s expanding global footprint.
Continued Cash Flow Generation
Cricut generated $265 million in cash from operations in 2024, maintaining a debt-free status with cash and cash equivalents totaling $337 million. This strong cash flow provides the company with the financial flexibility to invest in future growth initiatives.
Decline in Total Company Sales
Despite some positive financial metrics, total company sales declined by 7% in 2024, with fourth-quarter revenue of $209.3 million reflecting a 9% decline compared to the prior year. This decline highlights the challenges Cricut faces in maintaining its sales momentum.
Decrease in Accessories and Materials Sales
Sales of accessories and materials fell by 20% for the full year, contributing significantly to the overall revenue decline. This drop indicates a potential area of concern that the company needs to address to stabilize its revenue streams.
Challenges in User Engagement
User engagement metrics showed continued softness, with a 0.7% decrease in active users and a 3.1% decline in 90-day engaged users year on year. These figures suggest that Cricut needs to enhance its user engagement strategies to retain and grow its customer base.
Pressure on Operating Income
Operating income is expected to decline in 2025 due to increased investments in research and development, marketing, and intellectual property protection actions. The company anticipates operating margins to be lower by two to three percentage points, reflecting the cost of these strategic investments.
Connected Machines Revenue Decline
Revenue from connected machines decreased by 13% in the fourth quarter, driven by fewer units sold and higher promotional activity. This decline indicates challenges in sustaining sales volumes for these products.
Forward-Looking Guidance
Looking ahead, Cricut anticipates a decline in operating income for 2025 due to increased marketing, R&D investments, and IP protection actions, with an expected 2-3 percentage point decrease in operating margins. Despite these challenges, the company remains optimistic about growth in the second half of 2025, driven by new product launches and marketing initiatives.
In conclusion, Cricut, Inc.’s earnings call revealed a company navigating through a complex landscape of growth opportunities and challenges. While the company has demonstrated strong net income growth and successful product launches, it faces hurdles in sales and user engagement. With strategic investments in marketing and R&D, Cricut is poised to address these challenges and anticipates improvement in the latter half of 2025.