Cricut (CRCT) Q4 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Tuesday, March 3, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ashish Arora
• Chief Financial Officer — Kimball Shill

TAKEAWAYS

• Net Income -- $76.7 million for the full year, increasing 22% compared to 2024 and marking the ninth consecutive year of positive net income.
• Q4 Revenue -- $203.6 million, a 3% decline year over year, with full-year revenue at $708.8 million, down less than 1%.
• Platform Revenue -- $83.9 million in Q4, up 6% year over year; full-year platform revenue up 5%, with ARPU rising 5% to $55.77.
• Paid Subscribers -- Just over 3.09 million at year-end, up 132,000, or more than 4% year over year, and up 87,000, or 3%, from Q3.
• Product Revenue -- $119.7 million in Q4, an 8% year-over-year decline; connected machines revenue declined 4% while accessories and materials declined 13% year over year.
• Gross Margin -- Total gross margin was 47.4% in Q4 versus 44.9% a year earlier; full-year gross margin reached 55.1%, up from 49.5% for 2024.
• International Sales -- $57.8 million in Q4, increasing 9% year over year and comprising 28% of Q4 revenue; full-year international sales rose 8% to represent 24% of company revenues.
• Operating Income -- $13.9 million for Q4 (6.8% of revenue); full year reached $96.0 million, representing a 26% increase from the previous year.
• Cash Flow and Balance Sheet -- $200 million generated from operations in 2025 (versus $265 million in 2024); $276 million in cash and cash equivalents, with zero debt at year-end.
• Stock Repurchases and Dividends -- $24.6 million spent to repurchase about 4.6 million shares in 2025; $202.1 million paid in dividends during the year.
• AI-Driven Product Initiatives -- Expanded rollout of Create AI and guided project flows, with management citing compelling early results and subscription acquisition impact.
• Bundle-First Strategy -- Introduction of next-generation cutting machines and cohesive machine-material bundles forming a new go-to-market approach, with positive retailer and consumer feedback.
• Product and Service Launches -- Two new cutting machines, new heat presses, significant software enhancements, and rollout of direct-to-film (DTF) service and value material lines during 2025 and early 2026.
• Active Users -- Active users held about flat at just under 5.9 million; ninety-day engaged cutters declined 3% year over year.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Full-year and Q4 company sales failed to grow, with CEO Arora stating, we are disappointed in the lack of total company sales growth for both Q4 and 2025.
• Accessories and materials sales continued to decline, down 13% in Q4 and 9% for the year, attributed by management to increase, manifesting in white-label brands in retailers as well as new entrants in online marketplaces and in retail.
• Potential gross margin pressure on platform revenue may materialize as AI features scale, as CFO Shill stated, as we drive adoption over time, that that might introduce some pressure in platform margins.
• Management cited ongoing uncertainty from tariffs and warns, we are not providing any guidance on margin impact. following the recent legal ruling on IEPA tariffs.

SUMMARY

Cricut (NASDAQ:CRCT) ended 2025 with flat sales and expanded net income, underpinned by growth in paid subscriptions and improved international results. Strategic launches in new machines, guided software, and initial AI-driven features were described as setting up a new era with the company implementing a bundle-first strategy and new monetization streams, such as DTF, primarily targeting existing users. Operational cash flow declined and material segment revenue remained pressured by rising competition, while management warned of ongoing headwinds tied to tariffs and margin mix as AI adoption increases.

• Management will discontinue providing supplemental SEC-reported breakdowns between connected machines and accessories/materials as unit bundling becomes standard.
• Australian operations stabilized through pricing and marketing measures; European sales benefitted from increased marketing and retail expansion.
• The company generated less cash from operations in 2025 versus 2024, but dividend and buyback programs continued, backed by a replenished $50 million repurchase authorization.
• Management expects paid subscriber trends to fluctuate seasonally, with subscriber growth challenging until we increase the pace of machine sales and new user acquisition.

INDUSTRY GLOSSARY

• DTF (Direct-to-Film): Printing technology enabling images designed in app to be printed on special film and transferred to fabric/substrates, expanding platform monetization.
• Guided Flows: Software-driven, step-by-step design and creation processes embedded within Design Space, optimizing user onboarding and project execution.
• Cricut Access: Paid subscription service granting members access to premium design content, fonts, images, and special features within the Cricut ecosystem.
• Create AI: Cricut’s generative artificial intelligence tool that produces project-ready images or designs, integrated with subscription plans and user project flows.

Full Conference Call Transcript

Ashish Arora, Chief Executive Officer, and Kimball Shill, Chief Financial Officer. Today’s prepared remarks have been recorded, after which Ashish and Kimball will host live Q&A. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements, and management may make additional forward-looking statements, including statements regarding our strategies, business, expenses, 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, Inc.’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, 03/03/2026. Cricut, Inc. assumes no obligation to update any forward-looking projection that may be made in today’s release or call. I will now turn the call over to Ashish.

Ashish Arora: Thank you, Jim. While we are pleased with increased profitability and growth in paid subscribers and global machine sellout units, we are disappointed in the lack of total company sales growth for both Q4 and 2025. We are working with tremendous urgency and focus to drive a mass market experience, accelerate our development cycles, and compete better. I would like to look back on 2025 on what went well, what we could do better, and our priorities for 2026. Kimball will go through much of the financial details and how we look at 2026. We are pleased with our increased profitability and the over 4% increase in paid subscribers in 2025 along with positive machine sellout units.

This was our ninth consecutive year of positive net income, as we generated $76,700,000 of net income, which increased 22%, or $13,900,000, compared to 2024. In 2025, we launched two new cutting machines, a new mini heat press, several new materials, including greatly enhancing our Cricut value line, and significant improvements in our software platform that includes compelling AI offerings and easy-to-use project guided flows. We are disappointed we did not post positive full-year revenue growth. Total company sales decreased less than 1% for the full year and decreased 3% year over year in Q4. We believe Cricut, Inc. is a growth business, and we are intent on proving it.

Last year, I mentioned we were fundamentally simplifying our user experience. We are delivering on this commitment with our new project guided flows, which are in the process of being rolled out to our entire user base. While it is still early, we are pleased with the initial results and feedback. We are relentlessly focused on increasing our speed of execution and on accelerating investments that will help drive future revenue growth. These accelerated investments are in hardware product development, materials, and engagement. You can see the early fruits of these efforts from our 2025 launches that I summarized above.

Thus far in 2026, we have already launched two next-generation cutting machines, new heat presses, a new direct-to-film, or DTF, service, and I am excited about our future roadmap. We will continue a similar cadence of marketing and promotional spend as the prior year. We are focused on four main priorities: new user acquisition, user engagement, subscriptions, and accessories and materials. We continue to focus on new user acquisition and engagement growth on our platform, which ultimately drives our monetization flywheel. In Q4, we amplified our marketing reach by strengthening our visibility during this key shopping period. We have continued with increased marketing investment and activated several high-profile partnerships alongside new advertising opportunities.

These efforts led to increased marketing engagement and an increase in Google searches for “what is Cricut,” which we have historically watched as a leading indicator. We believe these efforts will continue to bear fruit in 2026. While we did not grow revenue in the quarter, we did see a continued improvement in sellout of connected machines, which we believe is a result of our ongoing marketing efforts. Quarter-to-date in 2026, we continue to see positive connected machine sellout. In 2026, we are leaning even more into our bundle-first strategy, with a cohesive out-of-box experience that includes tools and materials with the machine along with a tightly integrated guided software flow.

With that, we are excited to announce the introduction of two next-generation cutting machines, with all-new architectures: Cricut Joy 2 and Cricut Explore 5. The overall consumer experience embedded in these new machine bundles represents the start of a new era at Cricut, Inc. Recall last year, I mentioned we would fundamentally simplify our user experience. We delivered on this commitment as we introduce guided project flows for our most popular use cases. These include vinyl decals, iron-on T-shirts, folded cards, cardstock cutouts, insert cards, and stickers and labels. While it is too early to see a material change in engagement from these improvements as they were only recently rolled out, we are pleased with early feedback, especially for onboarders.

Engagement erosion continues to moderate, as we held active users about flat for the year at just under 5,900,000 active users. Ninety-day engaged users who cut during the quarter declined 3% year on year. Our ability to hold active users about flat is a result of efforts. The performance and reliability of our platform continue to increase, which made this holiday making season a more frictionless experience for our users. We have introduced several improvements to the core functionality of our design experience. Our AI-driven features, both user-facing such as Create AI, or behind the scenes such as search algorithms, continue to drive positive impact.

For example, Create AI lets users take their personal images, easily add complementary text, and choose an output style to create unique designs ready to cut, draw, or print. This dramatically improves the likelihood of user success. Create AI lets users generate ready-to-make images using credits as part of their subscription plan and is an acquisition driver to attract non-subscribers to sign up for Cricut Access. We see the use of AI-assisted images and project creation as complementary to our growing image library from our contributing artist program and our curated guided flows and associated templates for the most common project types.

Beyond these continued improvements within our app, we have continued to improve our engagement marketing efforts to drive returning visits to Design Space. As a result of all our efforts, we have seen our net promoter score improve meaningfully in the past 12 months. Despite the continued pressure on our engagement metrics, we are confident in our efforts to simplify our design experience by assisting users based on their project intent, selling more of our connected machines and bundles configured to work seamlessly with these new guided flows, and continuing to grow the number of images, fonts, editable templates, and AI features available to users.

We look forward to 2026, which will be the first year of our cohesive consumer experience that integrates our bundle-first strategy, coupled with our new simplified project workflows that leverage AI throughout the making experience. In Q4, our paid subscribers increased by over 4% year on year, to just over 3.09 million. Paid subscribers continue to be a big positive for us and increased 132,000 year on year in Q4. We are also seeing positive trends on win-backs, where our promotional offers are driving increased sign-ups from prior subscribers. We believe our new platform enhancements, including new project guided flows, templates, and Create AI enhancements, will continue to provide benefits and value to our subscribers.

We have a rich roadmap to continually increase the value proposition for subscribers. As I previously mentioned, we launched Create AI for our Cricut Access subscribers, and we will continue to introduce more AI-driven features. Our goal is to make it incredibly compelling to be a subscriber to leverage our content and software tools. Accessories and materials sales decreased 13% year on year in Q4 and declined 9% for the full year. We realized that over the last several years, we have lost ground in competition and material types where there are low barriers to entry. We continue to see competitive pressure increase, manifesting in white-label brands in retailers as well as new entrants in online marketplaces and in retail.

We have embraced the challenge of providing refreshed and cost-competitive materials and accessories offerings. As these offerings continue to roll out, we intend to reclaim market share and, by doing so, enhance the making experience of our users. I am pleased to report that we have seen share improvements globally within online channels and at select large retailers across the category. For example, we see our value line continue to accelerate in online marketplaces. We continue to regain share in heat presses, and we continue to make progress with driving costs out of our supply chain as we fight to counteract tariffs and address affordability for our consumers.

In Q4, we launched a new EasyPress Mini LT that addresses affordability concern and is available in four attractive colors. During Q1, we launched a new heat press, Cricut EasyPress SE, which comes in two sizes and a variety of colors. These machines provide a professional-quality heat transfer experience without the complexity or large size of an industrial press. They support a wide range of materials, including iron-on, Infusible Ink, sublimation, and DTF. I am also excited to share that in Q1, we launched a DTF service. DTF lets users create in Design Space vibrant, full-color personalized artwork that is printed onto a special film, coated with adhesive powder, and then pressed onto fabric or other substrates.

DTF gives us the opportunity to leverage our Design Space platform and guided flows that we have been investing in over the past year. This is an example of new opportunities we are exploring to monetize our platform and content beyond cutting machines. As you can see, our team has been very busy with R&D, innovation, and new products. We are not done, and we have a great line of new products on our future roadmap. We also continue in our relentless focus to drive costs out of this business. We are intensely focused on the overall customer experience.

It is our fundamental belief that when we give people more reasons and to make things easily and affordably, we will see a lift in materials consumption. We are driven to continue to innovate while exhibiting both long-term focus and current discipline. With that, I will turn the call over to Kimball.

Kimball Shill: Thank you, Ashish, and welcome, everyone. In the fourth quarter, we delivered revenue of $203,600,000, a 3% decline compared to the prior year. Full-year 2025 revenue was $708,800,000, less than a 1% decline from 2024. We generated $7,800,000 in net income, or 3.8% of total sales in Q4, and $76,700,000, or 10.8% of total sales, for the year. Breaking revenue down further, Q4 2025 revenue from platform was $83,900,000, up 6% year on year. We ended the year with just over 3.09 million paid subscribers, which is up 132,000, or more than 4% year on year, and up 87,000, or 3%, from Q3.

For the full year, platform revenue was up 5% and ARPU increased 5% to $55.77 from $53.12 a year ago. Platform revenue was up slightly more than paid subscribers primarily due to the benefit of foreign exchange. Q4 revenue from products was $119,700,000, down 8% year on year. Connected machines revenue decreased 4% year on year in Q4, driven primarily by lower average selling prices as we were more promotional preparing for new product launches in Q1. Accessories and materials decreased 13% in Q4. For the full year, revenue from products decreased 5%, driven mostly by the 9% decrease in accessories and materials while connected machines revenue was about flat.

As Ashish mentioned, machine sellout units were positive for the year and continued to be up quarter-to-date. As a reminder, we do not have perfect coverage for sellout data in all channels, so treat this as directional. As we shift to our bundle-first 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 product revenues and costs as we currently do in our consolidated statement of operations and comprehensive income.

In terms of geographic breakdown, international sales were positive at $57,800,000, an increase of 9% compared to Q4 2024. As a percentage of total revenue, international was 28% in Q4 2025 compared with 25% of total revenue in Q4 2024. For the full year 2025, international sales increased 8% and represented 24% of total company revenues compared to 22% in 2024. Foreign exchange benefited international sales by 6% for Q4 and by 4% for the full year. Our Australian business stabilized through enhanced pricing and marketing programs in the second half. Europe showed solid growth, thanks to increased marketing investment and store expansion for the peak season.

Our emerging markets also demonstrated strong performance, especially in our fledgling Japan and India markets. We continue to make progress in increasing brand awareness in international markets, which we expect to have a positive impact on member acquisition in 2026. We ended the quarter with just over 3.09 million paid subscribers, up over 4% from Q4 2024 and up sequentially. This continues to be a bright spot for us. And Ashish detailed our efforts that are getting traction in this area. But I do want to mention, 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.

Recall, this could result in a seasonal pattern of quarter-on-quarter paid subscriber growth in Q1 and Q4, but flat to declining quarter-on-quarter subscriber growth rates in Q2 and Q3. Moving to gross margin, total gross margin in Q4 was 47.4%, an increase from 44.9% in Q4 2024. For the full year, total gross margin was 55.1%, also an increase compared to 49.5% for 2024. The full-year improvement reflects higher product gross margins and a higher amount of subscription revenue as a percentage of total revenue. Breaking gross margin down further, gross margin from platform in Q4 was 88.6%, an increase compared to 87.9% a year ago.

For the full year, gross margin from platform was 89%, which increased from 88.1% in 2024. The increase in platform gross margin for the quarter and full year was primarily related to lower amortization of software development costs. We are excited about our AI investments. Recall, as we previously mentioned, there may be some gross margin pressure as we continue to ramp our AI features. Gross margin from products was 18.4%, compared to 18.7% in Q4 a year ago. For the full year, products gross margin was 26% in 2025, which increased from 19.3% in 2024. The increase in gross margin for the full year was primarily due to selling previously reserved inventory and reduction in inventory impairments.

Total operating expenses for the quarter were $82,500,000 and included $7,000,000 in stock-based compensation. Total operating expenses increased less than 3% from $80,100,000 in Q4 2024. For the full year, total operating expenses in 2025 of $294,400,000 increased just over 6% from 2024. 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. Operating income for the quarter was $13,900,000, or 6.8% of revenue, compared to $13,900,000, or 6.6% of revenue, in Q4 last year. For the full year, operating income increased to $96,000,000, up 26% compared to $76,100,000 in 2024.

As a percentage of sales, full-year operating income was 13.5% in 2025 compared to 10.7% in 2024. Our tax rate in Q4 2025 was 51% due to the full-year true-up associated with our higher profitability, bringing the full-year tax rate to 28.9%, in line with our expectations. For the quarter, net income was $7,800,000, or $0.04 per diluted share, compared to $11,900,000, or $0.06 per diluted share, in Q4 2024. For the full year, we generated $76,700,000 of net income and diluted earnings per share of $0.35, up from $62,800,000 in net income and $0.29 diluted earnings per share in 2024.

Turning now to balance sheet and cash flow, we continue to generate healthy cash flow on an annual basis, which funds inventory needs and investments for long-term growth. In 2025, we generated $200,000,000 in cash from operations, compared to $265,000,000 in 2024. We ended 2025 with cash and cash equivalents of $276,000,000. We remain debt free. Inventory decreased by $13,000,000 from a year ago, to $103,000,000 at the end of the year. During Q4, we used $5,600,000 of cash to repurchase 1,100,000 shares of our stock. For the full year, we used $24,600,000 to repurchase approximately 4,600,000 shares. As a result, $41,300,000 remain in our approved $50,000,000 stock repurchase program, which the Board replenished in May 2025.

During the year, we paid $202,100,000 in dividends. After the close of Q4, we paid approximately $21,000,000 for the declared $0.10 per share semiannual dividend on January 20, 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. 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. Thus far in 2026, we have already launched two next-generation cutting machines, two new heat presses, and a direct-to-film service, but these have only been available a short time.

We expect to see the benefit in 2026 and beyond. Previously, we talked about the headwinds that tariffs presented to our business. Given the recent Supreme Court ruling overturning IEPA 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. We also expect to continue to be active with our authorized $50,000,000 stock repurchase program, which has $41,300,000 remaining. While tariff uncertainty is a reality of today’s world, our team continues to be proactive and nimble with how we execute our strategy as we continue our investments to position the company for growth.

With that, I will turn the call over to the Operator for questions.

Operator: Thank you so much. And as a reminder, to ask a question, simply press 11 on your telephone and wait for your name to be announced. To withdraw your question, press 11 again. One moment for our first question, please. It comes from Erik Woodring with Morgan Stanley. Please proceed.

Erik Woodring: Guys, thank you very much for taking my questions. I have two, if I may. Just first, Ashish, if we look back on 2025, if we exclude accessories and materials, the business grew year over year. Revenue grew year over year. And then if I go back to the last time you shared connected machine versus accessories and materials growth margins, they were relatively similar margin rates. And so my question is, strategically, given the challenges that face the accessories materials market, why do you need that business? I would just love your thoughts on how it is value-enhancing for you and how you see it going forward. And then a quick follow-up, please.

Ashish Arora: Yep. Eric, thanks for the question. So I think, you know, first of all, as we recently announced, we have launched our bundle strategy, which really simplifies the experience for the user where they have all the materials that they need on day one to start the project. We also believe that while we have competition and some copycats from various brands, including private brands, our machines ultimately have to satisfy the overall holistic experience. So I think it is important from an experience standpoint that we offer these materials, test the compatibility, take control of any—whenever a customer uses our materials, we see from our research that they have peace of mind. They know it just works.

It is high quality. So I think just from an overall experience, it is really important. It is an important business to us. The second is, we believe that as we are successful on our engagement initiatives, while we want to be cost competitive, while we want to compete in this, it is still a very lucrative business. And we believe that, with the value line, with EasyPress, we are on the path of execution, and we think we will be able to turn this corner in the business around. But you are absolutely right.

If you look at the high-quality aspects, if you look at connected machines and sell-through, you look at subscriptions, those are the leading indicators, and it is our job to then monetize that flywheel with accessories and materials and subscriptions. So we think that it is an execution opportunity and an overall opportunity to provide a better experience to our members.

Erik Woodring: Okay. Very fair. I appreciate the cadence. And then just as a quick follow-up, just as we think about either 1Q or 2026, are there any guardrails that you guys can provide behind even user growth, revenue growth, margins, operating expenses, anything that just helps us understand how you are thinking about the year? Or is this just—maybe I will leave it at that. Would love any color that you can maybe provide and help us with. Thank you so much.

Kimball Shill: Yes, Eric, this is Kimball. Thanks for the question. We are really optimistic about the year overall, even as we see some challenges in the first half. So let me kind of break that down a little. We are very confident in platform growth for the year, even as we expect some seasonal softness in Q2 and Q3 as we highlighted in our prepared remarks and as we have seen in the last couple of years, but overall, we are confident we will grow platform for full year.

When it comes to products, there are some challenges in first half because, remember, last year, we had some opportunity to pull forward some accessories and materials demand, especially in Q2 around uncertainty related to tariffs. And that sets up kind of a difficult comp. We have also launched some new machines this Q1 that are lapping cutting machines that we launched a year ago, but a year-ago machines had generally higher prices than the machines we are launching this Q1. So that presents a little bit of a challenge. But that said, we are really excited about our roadmap. We have been investing heavily and there is more goodness to come in the quarters ahead.

And so as we look to the back half of the year, in particular, we think we will hit our stride, and we are really optimistic for full year.

Ashish Arora: Yeah. And, Eric, let me just add to that. So I think about a few quarters ago, we talked about how we are accelerating our innovation across the board. So first and foremost, we just launched two new machines just a few days ago. We are very pleased with the launches. They are part of our holistic bundle strategy coupled with the platform. So we will continue to launch new products in our existing category. The second thing I would mention is that, leveraging the platform, we also plan to launch new services in our existing category, and this is where the true benefits of the platform come to life. And finally, new products and new categories.

I think you will start to see that materialize as you go through the year and into next year. All the engineering and innovation efforts that we have been investing in will come to bear, and I think this underlies what Kimball shared in his comments overall.

Erik Woodring: Thank you very much for the color, guys. Best of luck.

Operator: Thank you. Our next question comes from Adrian Yee with Barclays. Please proceed.

Angus Kelleher-Ferguson: Hi. This is Angus Kelleher-Ferguson on for Adrian Yee. With the shift toward bundles, are retailers needing to make any changes to shelf space or in-store merchandising? And I guess, more broadly, how are retailers responding to your bundle offering? And then I have a follow-up question.

Kimball Shill: Okay. Thanks. Angus, thanks for the question. You know, we are really excited about this bundle-first strategy, and it really is, as Ashish mentioned in his prepared remarks, a new era for Cricut, Inc. users. It kind of breaks down in two pieces. One is, let us talk about ease of use for consumers, because with these new bundles, we are going to have a tightly integrated user experience, and that starts with the new guided user flows that we talked about and that we have spent the last couple of years investing in and creating.

And so it makes it simpler, faster, easier for users to make what they want to make, and these new bundles are designed to match those guided flows. So the out-of-box experience someone researching the brand has is, what is this activity going to cost them when they take it on? And so as we move into this next generation of machines, everything will come in a bundle.

Now, we will have a range of bundle sizes so that we can have compelling opening price points but also larger overall bundles that drive more value for consumers, but each of these bundles will provide that much better experience for consumers in a cohesive, integrated way that they have not had in the past. And so we are really excited about it. Our retail partners understand the strategy, and we get positive feedback from them on it as well. And the guided flows have only been available for a short time as we have been rolling them out, but initial results that we have seen this year, especially with onboarders, is very positive response. Yep. And—

Ashish Arora: I will just add, specifically, just to further embellish what Kimball said from a retail standpoint, we have not seen any big impact of our bundles on the placement strategy, or whether they have reduced our shelf space or things like that. If anything, as we have shared and demonstrated with our retailers, these are not just random materials that are thrown into the bundle. They are very—over the last 12 months, we have done a number of user studies—carefully curated and orchestrated these materials to give that out-of-the-box experience.

And so I think it is, without kind of speaking on their behalf, as they have seen our research, as they have listened to the user feedback, we believe that a good out-of-the-box experience will ultimately drive higher engagement, more trips back to the store, and ultimately, people buy more materials. So I think overall, both consumers and retailers have received this positively. We have not seen any impact to their merchandising or shelf strategy, and, as we said, our initial feedback from the guided flows has been positive. And, even as we launch these two new products, we have gotten a lot of positive feedback on how many things we are including and how well orchestrated those things are.

We are pretty pleased with it overall.

Angus Kelleher-Ferguson: Great. Great. Thank you for the color. And then just one quick follow-up. On DTF, it feels like a new monetization lever beyond your classic offering, kind of adjacent to your classic offering. How should we think about its role longer term? Is it primarily incremental usage from existing users, or is it a way to attract new consumers to the platform?

Kimball Shill: Angus, thanks for the follow-up. So we are excited about our direct-to-film offering, and it is really enabled by the infrastructure we have built around the guided flows as Ashish mentioned in the earlier comments. And it is an example of where we are experimenting with ways to monetize our platform without the need to use a cutting machine. And so today, it is focused on our existing users as we learn, and primarily focused in North America to start. And today, it is only available on desktop.

But as we learn, we will expand the audience and we will expand the geography over time, and you will see other things like this where we are looking for opportunities to monetize the platform outside of just our traditional cutting machines.

Ashish Arora: Yep. So, again, just reinforcing the points that Kimball made. We have—this is a—initially, we are launching this product for our existing members. So as they come into Design Space, as they want to do these high-color, full-color, high-fidelity projects, this is a way to monetize that user need. Second, just double click on what Kimball said. This is a really good example where we have leveraged our T-shirt guided flow that we had already built for our machines to basically provide another use case. Right? So the same guided flow that we use for making a T-shirt with a Cricut is the guided flow that was used as the basis to create a T-shirt flow.

And you will continue to see us expand into those types of services. We have just started rolling out. It is still only on desktop. So I think it is too early to tell, but we are pretty excited about it, and we feel that we will continue to invest in the service.

Angus Kelleher-Ferguson: Great. Thank you. Best of luck.

Operator: Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed.

Emma Huang: Hi. This is Emma Huang on for Eric Sheridan. Thanks for taking the question. Just on the topic of your product roadmap and kind of AI offerings, can you talk about some of the key learnings so far as you continue to roll out these AI-driven features and products, and how they are kind of informing your priorities for go-to-market strategy? Thank you.

Kimball Shill: Yes. So we are really excited about AI. We think it fits very well with our content strategy and is very complementary to it. And just a reminder that one of the primary reasons subscribers subscribe is for the content that it brings to their projects. And so while we have a large image library, and we leverage AI to drive search algorithms to serve that content, we also have a generative AI offering that we call Create AI which, if a user cannot find something that she wants to make already in the existing library, she can easily generate an image and then modify it quickly into a project that she wants to make.

And so we continue to invest heavily in that over time and expect that to continue. Also expect, as we drive adoption over time, that might introduce some pressure in platform margins. But we also see with the early data that it also is a great acquisition tool for attracting new subscribers. And so we see it as an important aspect of continuing to improve our overall customer experience, but very complementary to what we are doing today.

Emma Huang: Great. Thanks for the color.

Operator: And this concludes the Q&A session. I will turn it back to Cricut, Inc. for final comments.

Jim Suva: Thank you, Operator. We will be meeting with investors at the Morgan Stanley Technology, Media and Telecom Conference tomorrow, Wednesday, 03/04/2026, in San Francisco, California, and we hope to see you there. If you have additional questions, please email me at JaySuva@cricut.com.

Operator: This now concludes this earnings call. And you may now disconnect. Thank you. This concludes our conference. Thank you for participating. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.