Cricut, Inc. (CRCT) Earnings

Management highlights

- Business and Brand Strategy * Cricut continues to execute on a platform-first strategy focused on improving user experience, expanding the consumer base beyond existing crafters, and driving sustainable profitable long-term growth. * Launched the global "Think It, Make It Cricut" marketing campaign, which has delivered a meaningful increase in website traffic compared to prior campaigns; the campaign will continue rolling out globally across all key marketing touchpoints. - Product Innovation * New next-generation cutting machines (Cricut Joy 2, Cricut Explore 5) launched in Q1 2026 have performed well, driving double-digit connected machine unit sales growth in the first half of 2026, confirming that the bundle-only sales strategy is popular with consumers. * The new Direct-to-Film (DTF) value-added service is in early launch in North America, and Cricut Patterns was recently added to Cricut Creative Labs. Most DTF users are existing paying subscribers, and the offering deepens user engagement and enhances ecosystem value. * Launched the next-generation large format AutoPress heat press with a compelling price point in July 2026, and new hand tool portfolio refreshes and additional innovation are planned for H2 2026. * New AI-powered agentic features built specifically for Cricut's hardware and creative workflows have been launched to improve design success, and new AI-powered Creative Labs experiences that let users turn personal photos into custom projects have been rolled out for subscribers. - User Engagement & Subscriptions * Engagement metrics stabilized for the first time in a Q2 since 2022: active users grew 1% year-over-year and were flat sequentially, while 90-day engaged users were stable year-over-year. This progress is attributed to simplified user experience, improved onboarding, and stronger new user acquisition. * 25,000 net new paid subscribers were added sequentially in Q2. The new premium subscription tier ($14.99/month starting price) has seen strong adoption after testing, and is now available across desktop and mobile applications, with full rollout across purchase channels planned for 2026. - Accessories & Materials * The category remains challenging and highly competitive, but Cricut has gained share in key categories (printables, branded accessories). Printables are the fastest-growing materials segment, and new SKUs launched as part of retailer resets have received encouraging early consumer response.

Guidance

- Cricut does not provide detailed quarterly or annual guidance, but management remains optimistic about full year 2026 overall, despite a disappointing first half, supported by improving engagement metrics. - Platform revenue is expected to grow quarter-over-quarter for each remaining quarter of 2026. Subscriber growth will follow typical seasonal patterns, with expected softness in Q3 2026. - Cricut expects to remain profitable each quarter and generate positive operating cash flow for full year 2026. - The company expects to continue active repurchases under its approved $50 million stock repurchase program, subject to stock price performance. - No guidance is provided for potential future margin impacts from existing tariffs, due to ongoing uncertainty.

Segment performance

Total company revenue for Q2 2026 was $156.3 million, a 9% year-over-year decline. 1. Platform segment: Revenue reached $85 million, growing just over 5% year-over-year, contributing 54.4% of total revenue. Gross margin for the segment was 93%, up from 89.1% year-over-year, driven by a non-recurring royalty reserve release. Paid subscribers totaled just over 3.1 million, increasing 3% year-over-year, with ARPU rising 5% to $56.37. 2. Product segment: Revenue was $71.3 million, down 22% year-over-year, contributing 45.6% of total revenue. Gross margin for the segment was 52.4%, up from 32.4% year-over-year, primarily due to non-recurring IEPA tariff refunds and the royalty settlement. The decline in product revenue stemmed from tough year-over-year comps from 2025 tariff-related pull forward, lower volumes, promotional pricing, and unfavorable product mix. Connected cutting machine sellout and sell-in units grew double digits year-over-year, led by new Cricut Joy 2 and Explore 5 bundles. 3. International segment: Revenue was $35.9 million, down 1% year-over-year, representing 23% of total revenue (up from 21% in Q2 2025). Foreign exchange provided a 2.6% benefit to international sales; after excluding the timing impact from a European distribution channel transition and FX benefit, international revenue would have grown year-over-year. Double-digit connected machine sellout growth was achieved in high-priority emerging markets (APAC, LATAM, META).

Risks & headwinds

- Tariff uncertainty remains an ongoing headwind, and broader cost pressures from input cost volatility, supply chain dynamics, and a cautious consumer spending environment in some markets persist. - The accessories and materials category remains highly competitive, and product revenue performance missed expectations in Q2 2026. - Forward-looking statements about future performance involve inherent risks and uncertainties, and actual results could differ materially from current expectations, as outlined in the company's SEC filings.

Analyst Q&A

• Q: Excluding the European distribution timing impact and foreign exchange benefit, would international revenue have grown year-over-year in Q2, and what is Cricut's international strategy moving forward? /

  A: The distribution shift in Europe created a temporary timing gap in wholesale revenue that does not reflect underlying consumer demand. That transition is now largely complete and will not be a headwind in Q3. Underlying consumer sellout of machines is strong across all international markets, with double-digit growth. Excluding the one-time distribution impact, international revenue would have grown year-over-year even without the FX benefit. High-growth emerging markets (APAC, LATAM, META) remain small relative to total revenue but continue to deliver strong performance and attractive long-term growth opportunities.

• Q: What is the latest update on DTF adoption, and is DTF already contributing meaningfully to platform ARPU? How should investors think about platform monetization beyond core subscriptions? /

  A: DTF is still in very early stages, having only recently launched in North America with no international rollout or active marketing yet, so it does not currently contribute meaningfully to ARPU. Most DTF users are existing subscribers, and the service is currently positioned to deepen engagement and add incremental value to existing subscriptions rather than drive large new revenue. Cricut will continue refining the user experience, resolve any launch issues, and begin marketing DTF in H2 2026. Over time, new services like DTF and Cricut Patterns are expected to drive higher platform value and monetization.

• Q: What explains the disconnect between strong machine sellout/sell-in unit growth and the large year-over-year decline in product revenue? /

  A: The majority of the 22% year-over-year product revenue decline comes from lapping the very tough 2025 comp from the tariff-related pull forward of accessory and material sales. Additional headwinds include volume and pricing pressure in the traditional accessories and materials segment, and unfavorable product mix: new 2026 machine launches have a lower average selling price than the 2025 launched models they replaced, and higher promotional pricing on legacy products further reduced revenue. Management expects new H2 product launches will reverse this product revenue trend.