Participants

Jim Suva; Senior VP of Finance, Treasurer & Investor Relations; Cricut Inc

Ashish Arora; Chief Executive Officer, Director; Cricut Inc

Kimball Shill; Chief Financial Officer; Cricut Inc

Unidentified Participant

Asiya Merchant; Analyst; Citigroup, Inc.

Angus Kelleher-Ferguson; Analyst; Barclays

Eric Sheridan; Analyst; Goldman Sachs Group, Inc.

Presentation

Operator

Good day, and thank you for standing by. Welcome to Cricut fourth quarter 2024 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Jim Suva. Please go ahead.

Jim Suva

Thank you, operator, and good afternoon, everyone. Thank you for joining us on Cricut's fourth quarter 2024 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.cricut.com.
Joining me on the call today are: 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 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'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, March 04, 2024. Cricut 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. 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. Kimball 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 $62.8 million of net income, which increased 17% or $9.2 million compared to 2023 and translates 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 sales and with engagement metrics that continue to show softness.
In 2025, we are relentlessly focused on increasing our speed of execution and are 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 Kimball 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.
We 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 4 and Cricut Maker 4. These new machines are up to 2x faster than previous models.
They are available in two fresh and modern colors, Sage and Seashell, 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 Cricut Explore 4 and Cricut Maker 4 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 million.
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 2024 with 5.89 million active users, down 0.7% year-on-year.
We had 3.81 million 90-day engaged users who cut during the quarter, down 3.1% year-on-year. Over the last 3 years, we added fewer new users than the COVID cohorts of 2020 and '21, 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 early, 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 life cycle 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 continue 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 2024, we 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 inspiration through creation. In 2024, our paid subscribers increased 7% to 2.96 million. Paid subscribers continue to be a big positive for us 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 onboarders. We are also seeing positive trends on win backs 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 road map to continually increase the value proposition for subscribers, including over 1 million 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 2024, we launched the Cricut value line of materials with a limited number of SKUs. And given the success we saw, we launched additional SKUs in the 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 quarters ahead. 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 competitive. 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 them, 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 Len for his contribution during the past 12 years and wish him the best in his future endeavors.
With that, I'll turn the call over to Kimball.

Kimball Shill

Thank you, Ashish, and welcome, everyone. In the fourth quarter, we delivered revenue of $209.3 million, a 9% decline compared to the prior year. Full year 2024 revenue was $712.5 million, a 7% decline over 2023. We generated $11.9 million in net income or 5.7% of total sales in Q4 and $62.8 million or 8.8% of total sales for the year. This marks our 24th consecutive quarter and our eighth consecutive year of positive net income.
Breaking revenue down further, Q4 2024 revenue from platform was $79.4 million, up 2% year-on-year. We ended the year with 2.96 million paid subscribers, which is up 189,000 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 $129.9 million, 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 $52.9 million, an increase of 3% compared to Q4 2023. As a percentage of total revenue, international was 25% in Q4 2024 compared with 22% of total revenue in Q4 2023. For the full year, 2024 international sales increased 1% and represents 22% of total company revenues compared to 20% in 2023.
Foreign exchange benefited international sales by less than 1% for both Q4 and full year 2024. We saw strength in France, MESA and Latin America throughout the year and improvement in the UK in Q4. We are experiencing continued softness in Australia, following more of the trend we see in the US. 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.
We ended the quarter with 2.96 million paid subscribers, up 7% from Q4 2023 and up sequentially. This continues to be a bright spot for us, and 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 1 and quarter 4, but flat to declining quarter-on-quarter subscriber growth rates in quarter 2 and quarter 3. Moving to gross margin.
Total gross margin in Q4 was 44.9%, an increase from 42% in Q4 2023. For the full year 2024, total gross margin was 49.5%, also an increase compared to 44.9% for 2023. 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 Q4 was 87.9% compared to 88.8% 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, which we expect to continue. 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 $80.1 million and included $11.3 million in stock-based compensation.
Total operating expenses decreased less than 1% from $80.5 million in Q4 2023. For the full year, total operating expenses in 2024 of $276.7 million increased just over 1% from 2023. As Ashish mentioned, we increased our marketing efforts during 2024 by $20 million. Operating income for the quarter was $13.9 million or 6.6% of revenue compared to $16.5 million or 7.1% of revenue in Q4 last year. For the full year 2024, operating income increased to $76.1 million, up 9% compared to $70 million 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 2024 was 28.3%, bringing the full year tax rate to 29.3%, in line with our expectations. For the quarter, net income was $11.9 million or $0.06 per diluted share compared to $11.3 million or $0.05 per diluted share in Q4 2023. For the full year, we generated $62.8 million of net income and diluted earnings per share of $0.29, up from $53.6 million 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 and investments for long-term growth. In 2024, we generated $265 million in cash from operations compared to $288 million in 2023. We ended 2024 with cash and cash equivalents of $337 million. 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 million from a year ago to $115 million at the end of the year. During Q4, we used $8 million of cash to repurchase 1.3 million shares of our stock. As a result, $22.9 million remains in our approved $50 million stock repurchase program. After the close of Q4, we paid approximately $21 million for the declared $0.10 per share semiannual dividend on January 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&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 2025 compared to the first half of 2024 due to continued pressure in Accessories and Materials.
However, we expect the rate of the sales decline should be less than the rates we posted in the first half of 2024. 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, we 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&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&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 2-percentage-points to 3-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 million stock repurchase program, which has $22.9 million remaining. Our long-term financial model remains unchanged with operating margin targets of 15% to 19%.
Our proven model has demonstrated that when we operate at scale, which we define as revenue above $1 billion and drive top line growth, these margins are achievable.
With that, I'll turn the call over to the operator for questions.

Question and Answer Session

Operator

(Operator Instructions)
Erik Woodring, Morgan Stanley.

Unidentified Participant

It's actually [ Dylan ] for Erik Woodring. So my question is, we have been focusing on the engagement for many quarters, which has 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.

Ashish Arora

Thanks, Dylan. This is Ashish. So I think you're right, right? We've talked about engagement for a number of quarters, and it's been under pressure. So let me first talk about where the pressure is 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 are creating pressure on engagement is we acquired a lot of users in 2020 and '21. 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, they 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 A/B test, et cetera, that those things are working. However, what we need to do is to execute faster. So if you noted Kimball's comments about we are accelerating software development, we are putting further effort so that we can actually make sure that we can get to finish some of the work that we've now been executing on for a while.
So I think the strategy is right. We need to improve and accelerate our execution. What are 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 implement within our platform. And our commitment basically is to execute and deliver on many of these use cases before the end of the year. And finally, we basically we've implemented a marketing platform 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.
So 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 have taken to actually get them to come back to the platform and engage. So you're 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.

Unidentified Participant

Got it. And you did mention an inflection point in the second half. Is that for full year or a quarter? Or a quarter or what did you mean by that? And also what gives you the confidence in that because you're now in the year 4 of a decline?

Kimball Shill

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, but 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, while 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.
We have over 100 new SKUs coming and many of those in the first half that will help build that part of the business, especially related to our value line materials. And 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 think that will help us build revenue in that segment. And so all of these things combined really underpin our confidence that we'll inflect to growth at some point in the second half of the year.

Operator

Asiya Merchant of Citi.

Asiya Merchant

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 revenues to be down again next year with an inflection in the second half, how we should be thinking about the international trajectory?

Kimball Shill

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 penetration in those markets. And some of the markets we've been in the longest are experiencing headwinds similar to what we've experienced in the US.
And so for example, we highlighted a number of quarters last year where the UK was really challenged, and we saw UK really turn the corner in Q4. France and our MESA region, in particular, performed well for us last year. But other markets like Australia continue to be extremely challenged.
And so we see 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 how we do a better job of getting more awareness about Cricut and some of our marketing spend that we're continuing at our continued higher level of spend will be focused on building awareness in key international markets.

Asiya Merchant

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

Kimball Shill

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 in '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.

Operator

Adrienne Yih of Barclays.

Angus Kelleher-Ferguson

This is Angus Kelleher on for Adrienne Yih. I have a quick question and then kind of a longer-winded follow-up. A wholesale partner of yours within the specialty retail category recently filed for bankruptcy. Curious if you could quantify the impact from that in Q4 and if that is included in your guidance?

Kimball Shill

So yes, the bankruptcy you're referring to is reflected in our Q4 numbers, and it's not material to our financials. I mean, we've been actively managing that risk over the last 24 months.

Angus Kelleher-Ferguson

Got it. Nice to hear. My second question is, can you help us bridge the op margin guidance calling for 2 to 3 points of decline? What are the bigger drivers of that? How much of an impact is the IP protection actions?
And just anything you could share on the timing of those expense headwinds? And I guess, kind of curious if it will have a similar shaping to your sales guidance, whereby you'll see a 2H recovery.

Kimball Shill

Thanks, Angus. So really, there's 4 things I would highlight in terms of our higher OpEx spend this year. One is we're continuing to spend marketing at a higher level than we initiated last year. And so that's an important part of our investment. Secondly, as Ashish mentioned in his comments, that R&D in our we're accelerating R&D in our fiscal products to bring more products that are compelling to consumers sooner.
We're also investing heavily in platform to accelerate some of those things so that by the end of the year, we expect to have a meaningfully simpler experience for key use cases for our consumers. And so those are the primary areas of spend. We highlighted the IP protection because earlier this year, we or last year, rather, we initiated both an ITC action and a district court action to enforce our intellectual property. 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 why ultimately, we're calling for an impact of 2-percentage-points to 3-percentage-points on operating margin there.

Ashish Arora

Let me just reinforce that. Part and Kimball has already said a couple of things, but part of it is also rooted in our conviction. We believe we're in the very early days. I know we've had a tough couple of years last tough few years in the last few years. But 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 will see us accelerate and innovate on our product launches, machines, accessories, et cetera, materials as well. So across the board, we are basically investing this OpEx in accelerating some of the development life cycle and some of the innovation life cycles.
And finally, basically, if you think about the main objections as to what it takes to get to a mass market experience, it's 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 will also benefit 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 where we believe this is the right opportunity for the company to continue to build towards a mass market experience.

Operator

Eric Sheridan, Goldman Sachs.

Eric Sheridan

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 marketing intensity standpoint in terms of exploring different alternative ways 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 to shareholders, while we're in this period where the marketing intensity stays high and the turnaround is deeper into 2025, how do you think about your priorities for capital allocation during this time period?

Ashish Arora

Yeah. Thanks, Eric. So I'll let Kimball answer the second part of the question. But let me first talk about the first, and I'll probably kind of take a couple of different angles, right? One is we have data and we see it a 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 a guided experience, we believe that there is a significant opportunity to expand to different demographics, different use cases, et cetera. 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, you know, a friend made a project for me", and I asked her, "Hey, I didn't know you were 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 we've 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, it's 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, and I'll let Kimball answer the second question about capital structure.

Kimball Shill

Eric, so I'd call out that we brought inventory levels down by $129 million and ended the year with $114 million 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 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.

Operator

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

Jim Suva

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 Cricut 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, March 5, 2025, in San Francisco, California, and we hope to see you there. If you have additional questions, please e-mail me at jsuva@cricut.com. This now concludes this earnings call, and you may now disconnect. Thank you.

Operator

Thank you all for participating in today's conference call. We can disconnect. Have a good evening.