Company History and Evolution
Cricut, Inc. was founded in 2014 with the mission of helping people lead creative lives. The company designed and built a creativity platform that enables its engaged and loyal community of users to turn ideas into DIY goods. Cricut's platform centers around its cloud-based Cricut Design Space app, which gives users access to create and work on their projects anywhere, at any time, across desktop and mobile devices.
Since launching its first connected cutting machine in 2014, Cricut has built a loyal and growing community of nearly 5.9 million active users as of the end of 2024. The company's business model is characterized by strong user engagement and diversified sales across its product categories, including connected machines, accessories, materials, subscriptions, and digital content.
In March 2021, Cricut completed its initial public offering, raising $242.7 million in net proceeds after deducting offering costs and underwriting discounts and commissions. This provided the company with additional capital to invest in its business and fuel future growth.
Over the years, Cricut has faced various challenges, including managing its supply chain and manufacturing relationships, navigating market competition, and enhancing its software and user experience. For example, the company experienced supply chain disruptions and inventory challenges during the COVID-19 pandemic in 2020 and 2021, which impacted its ability to meet customer demand. Cricut has also had to contend with the rise of copycat products and unauthorized distribution channels, requiring the company to invest resources in protecting its intellectual property.
Despite these challenges, Cricut has maintained profitability, reporting positive net income for eight consecutive years through 2024. The company has also continued to innovate and expand its product offerings, introducing new connected machines, accessories, materials, and digital content to serve the evolving needs of its user community.
Financial Performance and Key Metrics
Cricut's financial performance has been characterized by consistent profitability, with the company reporting its 8th consecutive year of positive net income in 2024. In the fiscal year 2024, the company generated $712.5 million in total revenue, a 7% decline compared to the previous year. However, this decline was offset by a 17% increase in net income, which reached $62.8 million, or 8.8% of total revenue.
The company's platform revenue, which includes subscription offerings and digital content sales, grew by 1% in 2024, reaching $313.0 million. This segment has become an increasingly important driver of Cricut's business, contributing 44% of the company's total revenue. The platform's strong performance was fueled by a 7% increase in paid subscribers, which reached nearly 3.0 million as of the end of 2024.
In contrast, the company's products segment, which encompasses its connected machines and accessories and materials, experienced a 12% decline in revenue, reaching $399.6 million. This decrease was primarily driven by a 20% drop in accessories and materials sales, as the company faced increased competition and challenges in maintaining its market share in this category.
In the fourth quarter of 2024, Cricut reported revenue of $209.3 million, representing a 9% year-over-year decline. This decrease was driven by a 13% drop in connected machines revenue and an 18% decrease in accessories and materials revenue, partially offset by a 2% increase in platform revenue.
Cricut's international expansion efforts have shown promising results, with 22% of total revenue generated from international markets in 2024, up from 20% in 2023. The company saw strength in France, Meza, and Latin America throughout the year, and improvement in the UK in Q4, although Australia continued to experience softness.
Financials
Cricut's financial position remains robust, with the company ending 2024 with $232.1 million in cash and cash equivalents, $104.8 million in marketable securities, and no outstanding debt. The company's strong cash flow generation, with $265.0 million in cash from operations and $246.6 million in free cash flow in 2024, has enabled it to return capital to shareholders through share repurchases and dividends.
The company's operating income increased 9% to $76.1 million in 2024, compared to $70 million in 2023. As a percentage of sales, full-year operating income was 10.7% in 2024, up from 9.1% in 2023.
Liquidity
Cricut's strong liquidity position, supported by its cash reserves and consistent cash flow generation, provides the company with financial flexibility to invest in growth initiatives and navigate market challenges. The company's debt-to-equity ratio stands at 0.032, while its current ratio and quick ratio are 2.85 and 2.29, respectively, indicating a healthy short-term financial position.
Additionally, Cricut has a $300 million revolving credit facility, with the option to increase the aggregate amount by an additional $150 million, further enhancing its financial flexibility.
Navigating Market Challenges and Investing for the Future
Despite the revenue declines experienced in 2024, Cricut remains focused on navigating the evolving market landscape and investing in strategic initiatives to drive long-term growth. The company has implemented a multi-pronged approach to address the challenges it has faced, including:
1. Accelerating Product Innovation: Cricut recently unveiled the next generation of its popular cutting machines, the Cricut Explore 4 and Cricut Maker 4, which feature increased speed, updated designs, and enhanced value proposition for users.
2. Enhancing User Engagement: The company is actively working to simplify its design software and improve the overall user experience, with the goal of increasing user engagement and retention. This includes proactive efforts to re-engage users through personalized marketing campaigns and lifecycle management.
3. Defending and Expanding Accessories and Materials: Cricut is focused on regaining market share in the accessories and materials category, leveraging its brand strength and introducing new product configurations to be more cost-competitive.
4. Increasing Marketing and Promotional Efforts: The company has increased its marketing and promotional spending, aiming to drive greater brand awareness and attract new users to its platform.
These strategic initiatives, combined with Cricut's strong financial position and loyal user base, position the company to navigate the current challenges and capitalize on the significant long-term growth opportunities in the personal craft and home decor market, which is estimated to have a compound annual growth rate (CAGR) of 5-7% over the next 5 years.
Business Model and Distribution Channels
Cricut designs and develops its own software and hardware products, working with third-party contract manufacturers and logistics providers to bring its products to market. The company employs a multi-channel distribution strategy, selling its products through brick-and-mortar and online retail partners, as well as directly through its website cricut.com. In 2024, 35% of revenue was generated through brick-and-mortar sales, while 65% came from online channels.
Platform and Products Segments
Cricut's business is divided into two main segments: Platform and Products.
The Platform segment generates revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium, as well as digital content sales. Cricut Access provides users with access to over 1 million images, thousands of ready-to-make projects, hundreds of fonts, exclusive software features, discounts, and priority customer support. Cricut Access Premium builds upon this offering with additional discounts and preferred shipping.
In 2024, Platform revenue reached $313.0 million, a 1% increase from the previous year. This growth was driven by a 7% increase in paid subscribers, which reached nearly 3 million by the end of 2024. The Platform segment benefits from recurring subscription revenue and high gross margins, which were 88% in 2024.
The Products segment generates revenue from the sale of connected machines, accessories, and materials. Cricut's connected machine portfolio includes the Cricut Maker, Cricut Explore, Cricut Joy, and Cricut Venture families, with prices ranging from $149 to $999 MSRP. The segment also offers a wide array of accessories and materials, such as Cricut EasyPress, hand tools, and project supplies like vinyl and iron-on.
In 2024, Products revenue was $399.6 million, down 12% from the previous year. This decline was primarily due to fewer units of accessories and materials sold and increased promotional activity. However, the gross margin for the Products segment improved to 19% in 2024, up from 15% in the prior year, due to a reduction in inventory impairment charges.
Future Outlook and Guidance
Looking ahead to 2025, Cricut expects total company sales to decline year-over-year in the first half of the year, but at a slower rate than seen in the first half of 2024. The company anticipates reaching an inflection point and seeing improvements in the second half of 2025.
Platform sales are expected to increase year-over-year, driven by paid subscriber growth, although subscriber growth rates may be uneven throughout the year. Cricut expects operating income and operating margin to be lower in 2025 compared to 2024, with operating margins declining by approximately 2-3 percentage points. However, the company expects to remain profitable in each quarter and generate significant positive cash flow during 2025.
Cricut plans to continue its authorized $50 million stock repurchase program, with $22.9 million remaining. The company's long-term financial model remains unchanged, targeting operating margins of 15-19% when operating at scale (revenue above $1 billion).
Risks and Uncertainties
While Cricut's future looks promising, the company is not without its risks and uncertainties. The highly competitive nature of the DIY market, with the presence of both established players and nimble startups, poses a constant challenge. The company's reliance on a limited number of contract manufacturers and suppliers for its connected machines and materials also introduces potential supply chain disruptions.
Additionally, Cricut's ability to maintain its strong brand reputation and continue to innovate and adapt to evolving consumer preferences will be crucial to its long-term success. The company's expansion into international markets also brings with it regulatory and cultural complexities that must be navigated effectively.
Conclusion
Cricut Inc has established itself as a leader in the creative technology space, empowering millions of users to unleash their artistic potential. Despite the recent revenue declines, the company's focus on product innovation, user engagement, and strategic positioning in the accessories and materials market, combined with its strong financial foundation, position it well to navigate the current challenges and capitalize on the long-term growth opportunities in the personal craft and home decor industry. As Cricut continues to evolve and adapt to the changing market landscape, its ability to drive sustainable growth and create value for its shareholders will be closely watched by investors and industry analysts alike.