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| Statement |
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| So again, even though we will continue to see headwinds because of the 2020, 2021 cohort, I have strong confidence in the team that this will at some point reverse over time |
| We will ultimately accomplish this through re-engineered product, re-engineered packaging and improving supply chain efficiencies |
| I’m excited about the future opportunity ahead of us |
| We saw a meaningful uplift in sales and excitement compared to prior weeks from consumers and retailers |
| The Cricut platform continues to not only strengthen, but also provide increased value to our users |
| We delivered our 20th consecutive quarter of positive net income |
| But we are excited about the medium- and long-term prospects of international growth |
| As we move through the year, we expect to instill confidence in our retailers to better partner with us and carry more inventory to leverage these integrated marketing and promotional opportunities |
| That said, we think we have a huge opportunity for us in our international growth vector over time and we’re really excited about it |
| In our first deeper promotion combined with integrated marketing, we saw a positive uplift in consumer demand, even comping year-over-year machine sales for the promo week |
| I’m actually, again, I’ll reinforce, really excited about the creativity in our marketing team, some of the things that we are looking at in PR, social media, and I think I’m, again, very optimistic about what role marketing will play in acquisition going forward |
| We are encouraged by our 49% operating income increase in Q4 year-over-year and the positive uplift from our promotions in Q4 |
| The improvement reflects a higher amount of subscription revenue as a percentage of total revenue and higher machine margins |
| We expect to see incremental improvement in Accessories & Materials margins for 2024 |
| So we’re very excited about the business |
| 2023 was our seventh consecutive year of positive net income |
| So very profitable business and we’re proud of that |
| We expect to be profitable each quarter and generate significant positive cash flow during 2024 |
| The Q4 increase in margins was driven primarily by improved costs per unit and lower freight costs |
| We generated $11.3 million in net income, a 4% year-over-year increase and our 20th consecutive quarter of positive net income, as we continued to invest in our key priorities |
| This was a 49% increase in operating income, which we are encouraged with despite the decline in sales and the reserves and impairments that Ashish referenced |
| Our proven model has demonstrated that when we operate at scale, which we define as revenue above $1 billion and drive topline growth, these margins are achievable |
| We have a large opportunity over the long-term to drive new user growth and increased engagement |
| We also measure success in the quality of our library by tracking the share of projects made with images from our library versus uploaded images and this ratio is increasing favorably year-on-year |
| We think we have an opportunity as a category leader to generate enthusiasm in the category and reinvigorate consumers, and in turn, our retailers |
| Growth in this segment should emerge as we are successful in driving new customer acquisition at a higher rate and our engagement efforts begin to bear fruit |
| We were very pleased with that data |
| During the holidays, our partnership with The Kelly Clarkson Show holiday giveaway segment also drove excitement and interest in our brand and category |
| It’s our fundamental belief that when we give people more reasons and inspiration to make things that are appealing to them and we make it easier to make things affordably, we will see a lift to materials consumption |
| We continue to generate healthy cash flow on an annual basis, which funds inventory needs and investments for long-term growth |
| Statement |
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| In the fourth quarter, we delivered revenue of $231.2 million, an 18% decline compared to the prior year and below our expectations for the fourth quarter |
| During the first few weeks of the quarter, we saw sales below expectations |
| We saw several retailers miss out on significant Q4 sales due to insufficient channel inventory of our machines |
| Unfortunately, we saw several retailers with inadequate on-hand inventory that missed out on significant Q1 demand |
| However, we were disappointed that sales fell in the quarter and full year by 18% and 14%, respectively |
| Breaking revenue down further, Q4 2023 revenue from connected machines was $77.4 million, down 24% over Q4 2022 and full year revenue decreased 21% year-over-year |
| Full year 2023 revenue was $765.1 million, a 14% decline over 2022, as retailers took an even more measured approach to inventory commitments and higher average selling prices for machines dampened consumer sales |
| Revenue from Accessories & Materials for the quarter was $77.3 million, down 28% over Q4 2022 |
| Retailer commitments were below demand, causing stock outs at some retailers, which negatively impacted our sales |
| Demand was a little bit softer than we expected |
| Also, retailers were unable to fully leverage promotions we offered because of lighter inventory positions, so we spent fewer promotional dollars driving sales than we had planned |
| Accessories & Materials sales declined 28% year-on-year in Q4 |
| This puts continued pressure on our business |
| We are obviously early on in the cycle, but affordability was a challenge for that consumer |
| I know things are a little bit tough in fiscal 2024 because you guys are guiding for some revenue pressures and margin impacts |
| These weaknesses were worsened by lower retailer inventory |
| Recall we had some larger impairments in this segment throughout the year, which pressured margins, resulting in the full year 2023 gross margins for Accessories & Materials to decrease to 17.5%, compared to 26.5% in 2022 |
| Our Accessories & Materials sales will see pressure in 2024 due to lower engagement and machine sales following a weaker-than-expected 2023 and Q1 2024 |
| Our subscription attach rate declined to 31% in Q4 2023 from 33% last year |
| Alas, lower new user adds compared to prior years puts pressure on our subscriber growth and attach rates and created some quarterly fluctuations in 2023 that will likely repeat in 2024 |
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