Cricut, Inc. Price & Performance (CRCT)

Thank you, operator, and good afternoon, everyone.

Thank you for joining us on Cricket's fourth quarter twenty twenty four earnings call.

Please note that today's call is being webcast and recorded on the Investor Relations section of the company's website. A replay of the webcast will also be available following today's call. For your reference, accompanying slides used on today's call along with a supplemental data sheet, have been posted to the Investor Relations section of the company's website investor.cricket.com Cricut. Joining me on the call today are Ashish Aurora, Chief Executive Officer and Kimbell Shill, Chief Financial Officer Today's prepared remarks have been recorded after which Ashish and Kimbell will host live Q and 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, 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 Cricket's most recently filed Form 10 ks 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. 03/04/2025. Cricket assumes no obligation to update any forward looking that may be made in today's release or call. I will now turn the call over to Ashish. Thank you, Jim. We have a strong conviction in our category and the overall market potential. While our opportunity is sizable, even in the shorter term, we are disappointed with our inability to execute and capitalize on it. While we are pleased with our growth in operating income, we are working with tremendous urgency and focus to drive to an inflection point for growth. We can achieve this potential by driving a mass market experience accelerating our development cycles and competing better. I would like to look back on 2024 on what went well and what we could do better and our priorities for 2025. Kim will go through much of the quarterly details and how we look at 2025. 2024 was our eighth consecutive year of positive net income as we generated $62,800,000 of net income which increased 17% or $9,200,000 compared to 2023 and translate to a $0.05 increase in diluted EPS for the full year.

We are pleased with our increase in profitability and a 7% increase in paid subscribers in 2024. However, we are disappointed with the 7% decline in total company and with engagement metrics that continue to show softness. In 2025, we are relentlessly focused on increasing our speed of execution. And our accelerating investments that will help drive future revenue growth. These accelerated investments are in hardware product development, materials and engagement. We also recently initiated additional litigation to appropriately protect our intellectual property. Finally, we are continuing increased marketing and promotional spending that we initiated in 2024. Some of the hardware and engagement investments we are making will only benefit future years And as a result, we expect operating income to decline year on year in 2025 and Kibil will go into these details. We need to reignite our top line to satisfy the expectations of our team and our shareholders. We have conviction in what we need to do to return to growth. We need to attract more new users to buy our connected machines as we focus on addressing affordability, and increasing marketing and awareness, We need to reverse weakening engagement trends and reinject enthusiasm among our users by simplifying the making process.

You need to defend our share in accessories and materials. This plan is woven into four 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. I'm excited that last week we launched the next generation of our most popular cutting machines. Cricut Explore four and Cricut Maker four. These new machines are up to 2x faster than previous models. They are available in two fresh and modern colors, Sage and C sharp. And we've added greater value to each machine by including tools and materials to help makers get started right out of the box, with enough materials to make up to 10 projects. The Kraken Explore four and Cricket Maker four machine MSRPs are $249 and $399 respectively. For only an additional $50 the users can upgrade to the essential bundle that adds more value and enough materials to make up to 100 projects.

While these machines were just launched last week, we are pleased with the initial feedback which is positive from both retailers and end users.

After several years of reductions in marketing spend, we started to carefully increase our marketing spend in 2024 to drive full funnel excitement augmenting marketing spend by $20,000,000 We are seeing a positive uplift from these efforts. Our market mix analysis shows that our investment in top of funnel marketing had a positive impact on machine sales. In 2025, we expect to continue spending at a similar level as we reaccelerate consumer excitement for the brand and category. Given the positive uplift from our deeper promotions, which we started in 2024, we plan to be even more promotional in 2025.

We ended Q4 twenty twenty four with 5,890,000 active users, down 0.7% year on year, We had three point eight one billion ninety day engaged users who cut during the quarter. Down 3.1% year on year. Over the last three years, we added fewer new users than the COVID cohorts of 2020 and 2021. And the new users that we are attracting more recently tend to cut fewer projects than new users during the pandemic. Both of these dynamics combined pressure our engagement metrics.

Our focus remains to maximize the engagement of our user base. As a reminder, onboarders are a particular focus. Because the more they interact with our platform, [indiscernible] the more likely they are to engage with our platform over time. Which we expect to lead to a more engaged user base. During Q4, we continued to make progress on our initiatives to drive engagement with our new members by streamlining their out of box experience. In 2024, the vast majority of our platform efforts were focused on the experience when users came organically to Design Space. In 2025, this will continue to be a major focus, coupled with proactive efforts to bring users back to design space by sending them relevant personalized inspiration and other triggers. In Q4, we launched our first retention marketing campaigns using our new customer engagement platform. In 2025, we will scale this platform and activate lifecycle campaigns that will span across marketing channels. Reaching our members outside our application, through push notifications, e mail, SMS and social media. In 2025, we continued to simplify design space, focusing on specific use cases and streamlining the entire customer journey for each of those use cases. Both from a design and assembly perspective.

Despite the pressure on our engagement metrics in Q4 twenty twenty four, are confident in our efforts to simplify our design experience by assisting users based on their project intent.

Design Space will meet users where they are and guide them from In 2024, our paid subscribers increased 7% to 2.9 and increased 189,000 year on year, and increased $121,000 sequentially in Q4. We are doing a more effective job at getting higher initial subscription rates from on border. We are also seeing positive trends on winbacks where our promotional offers are driving increased sign ups from our prior subscribers. In the second half of the year, we focused promotional efforts on reducing cancellations and are seeing an incremental drop in our voluntary cancellation rate. Based on our promotional offers. We have a rich roadmap to continually increase the value proposition for subscribers. Including over 1,000,000 high quality makeable images and a suite of premium design tools. Along with the content strategies described above. Our goal is to make it incredibly compelling to sign up as a subscriber to leverage our content and software tools. As our engagement efforts bear fruit, we expect to see further boost to subscriptions. Accessories and Materials sales declined 20% for the full year. Affordability plays a key role in materials. We have lost significant share in retail to private label brands and we are now focused on being more cost competitive in retail and online.

There is additional pressure because of lower engagement. We continue in our relentless focus on driving costs out of this business along with having the right product configurations in the appropriate channels. So Cricut materials are the obvious choice when users want to make. Recall in first half twenty twenty four, we launched the Cricut value line of materials with a limited number of SKUs. And given the success we saw, we launched additional skews in second half.

We are even more optimistic about this product now that we have some history in the market but it's still early and only a small portion of our portfolio. We have additional innovation, products and cost reductions coming in the quarter Consistent with prior comments, we will continue our promotional cadence in this category. To remain price competitive for consumers with a focus on winning share. For some accessories, we recently focused on being more price This may create some margin pressure near term, but as our accelerated hardware strategy bears fruit, we should see an increase in profitability over time. As I mentioned previously, we recently initiated litigation to protect our intellectual property over accessories and materials.

We are intensely focused on the overall customer experience, and we are motivated to work with those retailers that help us create a great experience both on the shelf and for actual use of our ecosystem. It's our fundamental belief that when we give people more reasons and inspiration to make things that are appealing to and we make it easier to make things affordably we will see a lift to materials consumption. We are driven to continue to innovate while exhibiting both long term focus and current discipline. After serving as a member of our Board of Directors since 2013, Len Blackwell has made the decision to not stand for reelection at the upcoming Annual Shareholder Meeting.

We thank Glenfoy's contribution during the past twelve years and wish him the best in his future endeavors. With that, I'll turn the call over to Kimbell.

Thank you, Ashish, and welcome everyone. In the fourth quarter, we delivered revenue of $209,300,000 a 9% decline compared to the prior year.

Full year 2024 revenue was $712,500,000 7% decline over 2023.

We generated $11,900,000 in net income income or 5.7% of total sales in Q4 and $62,800,000 or 8.8% of total sales For the year, This marks our twenty fourth consecutive quarter and our eighth consecutive year of positive net income. Breaking revenue down further, Q4 twenty twenty four revenue from platform $79,400,000 up 2% year on year.

We ended the year with 2,960,000 paid subscribers, which is up 189,000 or or 7% year on year, and up $121,000 or 4% from Q3. For the full year, platform revenue was up slightly over 1% and ARPU increased 2% to $53.12 from $52.07 a year ago. As we were more promotional mix shifted more toward annual versus monthly subscriptions and geographic mix shifted more international. All of which are targeted efforts. Q4 revenue from products was $129,900,000 down 15% year on year.

Connected machines revenue decreased 13% driven primarily by fewer units sold combined with more promotional activity. Accessories and materials decreased 18%.

For the full year, revenue from products decreased 12% driven mostly by the 20% decrease in accessories and materials as connected machines revenue decreased only 3%. In terms of geographic breakdown, international revenue for the quarter was $52,900,000 an increase of 3% compared to Q4 twenty twenty three. As a percentage of total revenue, internationals was 25% in Q4 twenty twenty four, compared with 22% of total revenue in Q4 twenty twenty three. For the full year, 2024 international sales increased 1% and represents 22% of total company revenues compared to 20% in '23 Foreign exchange benefited international sales by less than 1% for both Q4 and full year 2024. We saw strength in France, Meza and Latin America throughout the year, an improvement in The UK in Q4. We are experiencing continued softness in Australia, following more of the trend we see in The U. S. We continue to make strong progress in increasing brand awareness in international markets, which we expect to have a positive impact on member acquisition in 2025. Ended the quarter with 2,960,000 paid subscribers, up 7% from Q4 twenty twenty three and up sequentially.

This continues to be a bright spot for us Ashish detailed our efforts that are gaining 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 quarter one and quarter four, but flat to declining quarter on quarter subscriber growth rates Moving to gross margin. Total gross margin in Q4 was 44.9%, an increase from 42% in Q4 twenty twenty three. For the full year 2024, total gross margin was 49.5%, also an increase compared to forty four point nine percent twenty twenty three. The improvement reflects a higher amount of subscription revenue as a percentage of total revenue and higher product gross margins. Breaking gross margin down further, gross margin from platform in 87.988.8% a year ago. For the full year of 2024, gross margin from Platform was 88.1% which decreased from 89.4% in 2023 The decline in platform gross margin for the quarter and full year was primarily related to the higher software development costs and higher hosting fees compared to a year ago. Gross margin from products was 18.7% compared to 18.2% in Q4 a year ago.

For the full year, products gross margin was 19.3% in 2024 which increased from 14.7% in 2023.

The increase in gross margin for both the quarter and the full year was primarily due to a reduction in inventory impairments and selling previously reserved inventory. Offset partially by higher promotional activity. Total operating expenses for the quarter were $80,100,000 and included $11,300,000 in stock based compensation. Total operating expenses decreased less than 1% from $80,500,000 in Q4 twenty twenty three. For the full year, total operating expenses in 2024 of $276,700,000 increased just over 1% from 2023.

As Ashish mentioned, we increased our marketing efforts during 2024 by $20,000,000 Operating income for the quarter was $13,900,000 or 6.6% of revenue. Compared to $16,500,000 or 7.1% of revenue in Q4 last For the full year 2024, Operating income increased to $76,100,000 up 9% compared to $70,000,000 in 2023. As a percentage of sales, full year operating income was 10.7% in 2024 compared to 9.1% in 2023. Our tax rate in Q4 twenty twenty four was 28.3% bringing the full year tax rate to 29.3%. In line with our expectations.

For the quarter, net income was $11,900,000 or $0.06 per diluted share, compared to $11,300,000 or $0.05 per diluted share For the full year, we generated $62,800,000 of net income and diluted earnings per share of $0.29 up from $53,600,000 in net income and $0.24 diluted earnings per share in 2023. Turning now to balance sheet and cash flow.

We continue to generate healthy cash flow on an annual basis, which funds inventory needs In 2024, we generated $265,000,000 in cash from operations compared to $288,000,000 in 2023. We ended 2024 with cash and cash equivalents of $337,000,000 We remain debt free. Recall we generated higher levels of cash as we work to bring inventory more in line with pre pandemic norms. Accordingly, inventory decreased by $129,000,000 from a year ago to $115,000,000 at the end of the year. During Q4, we used $8,000,000 of cash to repurchase 1,300,000.0 shares of our stock. As a result, dollars 22,900,000.0 remains in our approved $50,000,000 stock repurchase program. After the close of Q4, we paid approximately $21,000,000 for the declared $0.1 semiannual dividend on 01/21/2025. Now on to our outlook for 2025. Recall, we do not give detailed quarterly or annual guidance. But we do want to offer some color on our outlook for 2025. As Ashish mentioned, we are focused on bringing excitement to our category. We are doing this by investing in our core markets through accelerating our investments in R and D new product launches, increased focus on marketing and continuing our strategy of deeper promotions on our products to drive affordability.

We launched two updated Connected machines last week. Which we are very excited about but they have only been available for a few days. We expect total company sales to decline year on year in the first half of twenty twenty five compared to the first half of twenty twenty four due to continued pressure in accessories and materials. However, we expect the rate of the sales decline should be less We have reason to be optimistic that we will reach an inflection point during the second half of the year.

We expect platform sales to increase year on year on paid subscriber growth.

However, lower new user growth rates will put pressure on our subscriber growth rates. This could result in a seasonal pattern of quarter on quarter paid subscriber growth in quarter one and quarter four, but flat to declining quarter on quarter subscriber growth rates in Q2 and Q3. Given that, are continuing the efforts we began in 2024 to increase marketing and promotions. We expect to see benefits from this in 2025 and beyond. In addition, we are adding incremental investment in R and D to accelerate new products and platform enhancements that will benefit future sustainable long term growth. We are also aggressively prosecuting IP protection actions that will impact G and A this year.

Therefore, we expect operating income dollars and operating income margin percentage to be lower in 2025 compared to 2024. This will result in lower operating margins in 2025 by approximately two to three percentage points as we increase operating expenses. We expect incremental improvement in operating margins in subsequent years. We expect to be profitable each quarter. And generate significant positive cash flow during 2025. We also expect to continue to be active with our authorized $50,000,000 stock repurchase program, which has $22,900,000 remaining.

Our long term financial model remains unchanged. With operating margin targets of 15% to 19%. Proven model has demonstrated that when we operate at scale, which we define as revenue above $1,000,000,000 and drive top line growth, these margins are achievable. With that, I'll turn the call over to the operator for questions.

And our first question for the day will be coming from Eric Woodring of Morgan Stanley.

Your line is open. Hello. It's actually Dylan for Eric Wertrin.

So my question is we have been focusing on the engagement for many quarters.

Which have been declining, although you did focus on it in your prepared remarks. But can you give us some details and more color on engagement as it looks like it continues to be challenged and actually going lower And you have spoken about this in the past and lots of efforts, but the data keeps getting worse. So this is a concern and I have been focused on this for a while and the trends have not been improving. So could you please help us understand why your engagement efforts will start to show improvements and I will have a follow-up. Thanks, Sivan. This is Ashish.

So I think you're right, right? We've talked about engagement for a number of quarters [indiscernible] it's been under pressure. So let me first talk about where the pressure coming from. I'll just repeat some of the comments we made in the script. And then I'll talk about what we are doing differently to address it. So the two things that create a lot are creating pressure on engagement is we acquired a lot of users in 2020 and 2021. And as they go through the typical engagement graduation curve, they base that puts a lot of that's putting a lot of pressure on engagement. The second is, as we are acquiring new users, we tend to cut less, which puts some additional pressure. Now, as you pointed out, we've talked about the strategy for a while. We actually believe that we are working on the right things. We have lots of signals in our AB tests, etcetera, that those things are working.

However, what we need to do is to execute faster. So if you noted Kimbell's comments about we are accelerating soft [indiscernible] so that we can actually make sure that we can get to finish some of the work that we've we've now been executing on for a while. So I think the strategy is right. We need to improve and accelerate our execution. One of the things that we are focusing on, one is onboarders, where we basically think that onboarders should have a better engagement journey in the first few days. If they engage better, they engage more over time. The second is we have these user workflows that we are trying to And our commitment basically is to execute and deliver on many of these use cases before the end of the year. And finally, we've basically we've implemented a marketing that we are just starting to ramp up which is effectively our ability it gives us the ability to send personalized information and triggers to get users back to design space. Even though they may not be thinking about making a project, our goal is to generate ideas based on their past behavior, based on some of the actions they've taken.

To actually get them to come back to the platform and engage. So absolutely right, the point is well taken. We have focused on this. We have talked about this for the past many quarters. We believe we're working on the right things. We just need to focus, streamline our efforts and accelerate significantly our execution cycles. So that's what we're working on.

Got it.

Thank you. And you did mention an inflection point in the second half.

Is that for full year or quarter or what did you mean by that? And also what gives you the confidence in that because you're now in the year four of a decline?

Dylan, thanks for the question. And we're not calling for full year growth.

But our optimism really is rooted in our execution and all the things that we're working on as Ashish mentioned. And so let me kind of take you through the different aspects of our business. First in platform, that's the healthiest part of our business We're confident in our subscription business and we expect to grow platform revenue year on year and we did grow in 2024.

In machines, we were down 3% for the full year, we've been spending a lot of money on marketing. We're continuing that spend. The intermediate data that we're tracking tells us that that spend is having an impact and we believe that that continues to generate enthusiasm for our machines. We just launched two updated machines that are being well received. And then we're pleased with the sellout trends that we're seeing quarter to date. So we believe we're gaining momentum in our machines business. And finally in accessories and materials, that was down 20% for the year and we know that that's where we have to really pick up our game, we're launching a bunch of new products in that space. Have over 100 new SKUs coming in, many of those in the first half that will help build that part of the business especially related to our value line materials then in Q4, we started being more promotional on some of our hardware accessories and we're very pleased with the uplift that we saw from that and we're continuing that. So we've that will help us build revenue in that segment. And so all of these things combined really underpin our confidence that will inflect to growth at some point in the second half of the year.

And our next question will be coming from the line of Faiza Merchant of Citi. Your line is open. Great. Thank you for taking my call. On the positive side, international was up I know you highlighted a few countries that did well. Maybe you can just tell us about what's going on there if this is something that you expect, if you expect total revenue to be down again next year with an inflection in the second half, how should be thinking about the international trajectory?

Thanks, Asiya. We are excited that we've grown for a third quarter in a row in our international business. And we look forward to when we're able to deliver even more growth Part of the dynamic is we're in over 50 countries and there are different levels of [indiscernible] experiencing headwinds similar to what we've experienced in The U. S. And so for example, we highlighted a number of quarters last year where The U. K. Was really challenged and we saw U. Really turn a corner in Q4. France and our Meza region in particular performed well for us last year. But other markets like Australia continue to be extremely challenged. And so we see ex shoots of growth but not enough to fully overcome some of the headwinds that we're seeing in some of the other markets.

One of the things that we are working on this year in international is is how we do a better job of getting more awareness about Cricut. And some of our marketing spend that we're continuing at at our continued higher level spend will be focused on building awareness in key international markets.

Okay. And if I may, on a little bit on the connected machines, it seems like the rate of decline here is And I think Ashish did talk about generating positive ROI from deeper promotions. So just just help me bridge that gap, like what gives you the confidence? Is it that these selling these machines is the right we'll turn around and generate positive ROI. What's driving that confidence in generating positive ROI? Thank you.

Thanks. Again, revenue played out much as we expected for the year. And it really goes to the confidence in our marketing spend. And when we talk about marketing spend, that's not just the deeper promotions. Which is an important part of the strategy that we are continuing to '25. But it's also the awareness marketing and how we pull people through the funnel. And that's where our models show us that we are gaining ground with our consumers. That combined with the new machine launches this year and our efforts to continue addressing affordability is what gives us confidence in that business, where Yes, we Q4 was down 14%. But we were down 2% for the full year and we expect to be able to turn the tide on that business as we continue to build momentum.

Thank you. One moment for the next question. And our next question will be coming from the line of Adrian Yeah. Barclays, your line is open.

Hi. This is Angus Kelleher on for Adrianne. I have a quick question and then kind of a longer winded follow-up. A wholesale partner of yours within the specialty retail [indiscernible] Recently filed for bankruptcy. Curious if you could quantify the impact from that in Q4 and if that is included in your guidance? [indiscernible] yes, the bankruptcy you're referring to is reflected in our in our Q4 numbers and it's not material to our financials. I mean that we've been actually managing that risk over the last four months.

Got it. Nice to hear.

My second question is, can you help us bridge the op margin guidance calling for two to three points of decline What are the bigger drivers of that? How much of an impact is the IP protection actions just anything you could share on the timing of those expense headwinds I guess kind of curious if it will have a similar shaping to your sales guidance whereby you'll see 2H recovery. Thank you.

Thanks Angus. So really there's four things I would highlight in of our higher OpEx spend this year. One is we're continuing to spend marketing at a higher level that we initiated last year. And so that's an important part of our investment. Secondly, as Ashish mentioned in his comments, [indiscernible] R and D in our for accelerating R and D in our fiscal products to bring [indiscernible] products that are compelling consumers sooner. We're also investing heavily in we expect to have a meaningfully simpler experience for key use cases for our consumers. And so those are the primary areas that's been. We highlighted the IP protection because earlier this year, we or last year, rather, we initiated both an ITC action and While we have an ongoing IP protection program, we're spending a little bit more with both of those actions, which is why we highlighted. Some of these investments will begin to bear fruit this year like the software platform by the end of the year. Some will benefit next year and future years. And so that's that's why ultimately we're calling for an impact of two to three percentage points on operating margin. Yes. Let me just reinforce that.

And Kip has already said a couple of things, but part of it's also rooted in our conviction. We believe in the very early days, I know we've had tough couple of years, last few years in the last few years, at the end of the day, we believe we're in the very early stages of our market. We have tremendous market potential. So we work internally as a team and with our Board So the areas of investment is continued marketing, You'll see us accelerate and innovate on our product launches, machines, accessories, etcetera. Materials as well. So across the board, we are basically investing [indiscernible] [indiscernible] basically, if you think about the main objections as to what it takes to get to a mass market experience, its affordability and ease of use, So on machines and ecosystems, that's what we are working towards. On the ease of use, we are working on our platform to make it significantly easier to use which ultimately are also better for engagement. So I think those are the three areas sustained marketing, drive innovation to make our products easier, better, faster, more affordable and then finally to make a very addictive engaging platform.

So that's why we believe this is the right opportunity for the company to continue to build towards a mass market experience.

Got it. Thank you.

Best of luck in the airhead.

Thank you. One moment for the next question. And our next question be coming from the line of Eric Sheridan. Of Goldman Sachs. Your line is open.

Thank you so much for taking the questions. Two if I could.

A couple of quarters ago, we talked about alternative pathways to market, things like partnering with commerce platforms and players in the creator economy.

How do you think about beyond just what you're planning now from a mark exploring different alternatives to put your products in the hands of the broader commerce landscape and possibly creating some virality around that away from paid marketing dynamics or promotion dynamics that would be number one. And number two, the balance sheet has an increasing amount of cash on it. You guys do return capital. The shareholders, while we're in this period where the market of New Zealand stays high and the turnaround is deeper into 2025, how do you think about your priorities for capital allocation during this time period? Thank you.

Thanks, Eric. So I'll let Kimball answer the second part of the question.

But let me first talk about the first, probably could kind of take a couple of different angles, right? One is we have data and we see it, our broadening demographics, right? So we believe that our product and our platform have a lot of appeal in its current manifestation. Right? So as we continue to enhance content, as we continue to make the experience simpler as more of guided experience we believe that there's a significant opportunity to expand to different demographics, different use cases etcetera. Now we've talked about this in the past, that a huge part of our marketing comes in the word-of-mouth and people get to know about the product because a friend has made a project. Just as an example, I was in the gym the other day and I have one of the ladies who works right who works out there is a CPA and she was telling me saying, hey, a friend made a project for me and I asked her hey, I didn't know you're that crafty. And the story went on to telling her about Cricut, right? So we believe that as people get more engaged with the platform, there's an opportunity to create that virality that you talked about.

Last but not the least, right, as we are building the platform, in addition to broadening the demographics of our current product, we are always thinking about how what are the other ways to monetize this platform? How do we get to other forms of fulfillment, other forms of what you call the creator economy? So again, our investment in the platform is not only to market our current products, and our current solutions to a wide range of demographics is also with a view to create new business models and new ways of helping people make things. So I'll just leave it at that for now. Let Kimball answer the second question about capital structure. Eric, so I'd call out that we brought down by $129,000,000 and ended the year with $114,000,000 of inventory. And a lot of the excess cash that we've been generating over the last several years has been as we've been bringing inventory levels down from pandemic highs. So So I wouldn't expect us to be kicking off the same level of cash going forward as we were able to produce this year. That said, our capital allocation framework really is to make sure that we have enough inventory to run our business that we are investing for the medium and long term and that we keep some dry powder in case there's a strategic acquisition that makes sense for us.

But beyond that, we're about how do we return capital efficiently to shareholders and the tools we've used historically are we have an active buyback program, we have a recurring dividend where we just paid our second installment in January on our semiannual dividend And then we offer we do special dividends from time to time at the Board's discretion.

Great. Thank you.

Thank you. This does conclude our Q and A session for today. And I would like to go ahead and turn the call back over to Jim Silver for closing remarks. Please go ahead.

Thank you, Lisa, and thank you everyone for joining us this afternoon. We have a large opportunity over the long term to drive new user growth and increase engagement. The Cricket platform continues to not only strengthen but also provide increased value to our users. We will continue to manage the business for sustainable profitable growth and generate healthy cash flows I'm excited about the opportunities ahead for us. We will be meeting with investors at the Morgan Stanley Technology, Media and Telecom Conference tomorrow Wednesday, 03/05/2025, in San Francisco, California and we hope to see you there. If you have additional questions, please email me at jsuvacricket dot com. This now concludes this earnings call.

Thank you.