Good day and thank you for standing by. Welcome to the Cricket Q2 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the call to Stacy Clements, Investor Relations, The Blueshirt Group.
Please go ahead.
Thank you, operator, and good afternoon, everyone. Thank you for joining us on Cricket's Q2 2021 earnings call. Please note that today's call is being webcast 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, prepared remarks and accompanying slides used on today's call will also be posted to the Investor Relations section of the website, investor.
Cricket.com. Joining me on the call today are Ashish Arora, Chief Executive Officer and Martie Peterson, Chief Financial Officer. Before we begin, I 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 Q.
Actual events or results may differ materially. All non GAAP numbers referenced in today's call are reconciled in the press release or on the slide presentation on our Investor Relations website. This call also contains time sensitive information that is accurate only as of the date of this broadcast, August 12, 2021. Cricket assumes no obligation to update any forward projection forward looking projection that may be made in today's press release or call. I will now turn the call over to Ashish to begin.
Thank you, Stacy, and welcome, everyone. We had a solid Q2 with revenues increasing across all three categories: connected machines, subscriptions and accessories and materials. Total revenue for the Q2 was $334,500,000 an increase of 42% over an exceptionally strong Q2 last year. Strong revenues coupled with our profitable business model led to a $68,500,000 in EBITDA, A 39% increase over the Q2 last year. We also continue to see growth in our user base and healthy engagement and monetization.
We added over 430,000 users in the quarter, bringing our total user count to nearly 5,400,000. We saw continued healthy engagement levels at 59% in the 2nd quarter, down modestly from the stay at home engagement levels of the prior four quarters. As a result of healthy user growth and engagement, 3,200,000 users were engaged on our platform in Q2. This is 1,100,000 more users engaged in Q2 compared to Q2 of the previous year. The large influx of users from 2020 and the first half of twenty twenty one provide a powerful flywheel effect to our business With ongoing monetization opportunities as well as fuel momentum through word-of-mouth referrals.
I continue to be amazed by all the projects and creativity from our users. As expected, We are seeing many projects centered around events such as weddings, parties, family reunions and vacations just to name a few. As users create, they inspire other users to create. And the more they create, the more Cricket benefits from network effects That ultimately drive new user acquisition and inspire additional engagement. One of the many ways we are able to monetize engagement is up from 1,600,000 at the end of Q1.
We continue to focus heavily on increasing the value proposition of our subscription. We now have over 175,000 images in Cricut Access, an increase of over 40% from Q2 2020. In the coming quarters, we will continue to aggressively add content as well as additional software features That will be available exclusively to Cricket Access members. Another important pillar of our growth strategy is international expansion. Revenue from international markets grew 179% year on year in the second quarter And continues to grow into a greater proportion of total revenue.
Our top markets include Australia, France, Germany and the UK. The international markets are especially promising given our observations that the motivations And behaviors that are driving growth internationally are very similar to those that have grown growth domestically since 2014. We recently introduced our new direct to consumer e commerce site in the UK, giving our users a complete cricket branded shopping experience. We anticipate that more direct to consumer sites will be launched in additional geographies in the coming quarters as we see significant synergies with our omni channel strategy. We also welcome our first sales team members in Italy and Mexico in Q2 And continue to expand our retailer footprint in markets such as Germany, France, Spain, South Africa and Southeast Asia.
As we think about future investments in international markets, you will see us continue to increase our sales and marketing efforts, including adding key influencer relationships across the globe to help raise awareness and drive conversion. We will also continue to diversify our content offerings, invest heavily in language and currency localization, As well as foster and support international markets with cricket team members in those geographies. We plan to grow international markets using the proven cricket playbook, invest in delivering great experiences to users That they will then show and tell to others. We had some very exciting new product launches during the Q2. From the onset, we have focused on building an innovative and expandable platform for our community of users to drive long term growth.
In June, we launched the new Cricket Xplore 3 and Cricket Maker 3 machines. Significant undertakings, which included new physical hardware As well as new software features, content and a line of innovative materials. I'm very pleased With the new products and the improved user experience that they provide. Designed to cut up to twice as fast, users can also cut longer runs of materials. Now this is especially useful when creating things like wall decor, large size of banners or multiple copies of the same project.
In connection with these machine launches, we also launched a line of smart materials designed to increase creative use cases and improve ease of use. Smart Materials are especially engineered to keep materials perfectly aligned and on track from start to finish Without the need for a cutting mat and for cuts up to 12 feet in length, these smart materials create a frictionless experience for our users, Whether they are cutting a small single image or very long or repeated cuts, we will continue to innovate in this area Where quality and seamless integration helps build a moat across our accessories and materials business. Now coming on to software. Our cloud based software enables us to update features and functionality of existing This kind of platform extensibility is a clear differentiator in the market, while also enabling us to rapidly innovate and add features to improve the user experience. For example, during Q2, We added the long requested kerning feature in Design Space, a feature that enhances font usage and encourages engagement by saving time and effort.
Additionally, users can now like projects inside Design Space and more easily organize their personal library With our newly redesigned bookmark feature, we also continued our ongoing search optimization among many other things. We take great pride in listening to feedback from our community, constantly enhancing the platform and the overall user experience. And you will see us continue to invest heavily in these areas. As noted earlier, I love the passion of our users. Many of our users share a love of our brand, products and mission.
In other words, they are the heart and soul of Cricket. Approximately 43% of new customers first hear about Cricket through word-of-mouth, providing a powerful, Viral and cost effective marketing engine for new user acquisition. We now have over 5,200,000 social media followers And 2,400,000,000 views on Cricket on TikTok, which are almost entirely organic. We will continue to foster these communities, amplify their voices and share their amazing work. Overall, I'm really pleased with the quarter and our progress to date.
The products we've launched and the lives we impact Create a tremendous opportunity for us to continue scaling our user base. We estimate our serviceable addressable market in the U. S. And Canada It's roughly 85,000,000 individuals. Including our SAM internationally, we believe our opportunity is roughly 130,000,000 individuals when adding just Australia, France, Germany and the UK markets.
With a user base of nearly 5,400,000, we have penetrated Just over 4% of our SAM. As we continue to expand our offerings, drive continued user engagement And fuel our viral marketing engine, we believe there is an even greater opportunity for creatives everywhere to join the Cricket platform. I will now turn the call over to Marty for more details on the financials.
Thank you, Ashish, and good afternoon. Our second quarter's performance was fueled by strong fundamentals in the business and our powerful community of engaged users. Additionally, Q2 benefited from the new product launches that Ashish mentioned earlier. For those of you who are newer to our Let me quickly touch on the financial drivers of our model. Dating back to 2014, Cricket has a proven track record of strong revenue growth profitability.
Our sales are diversified across categories and give us revenue streams that are largely predictable. The user journey generally starts with the purchase of a connected machine. The gross profit from that purchase mostly covers Our customer acquisition cost. The purchase then triggers a flywheel of engagement, which in turn drives ongoing revenue from subscriptions and accessories and materials. With that as a backdrop, I'll now walk through the financial highlights.
We continued to see organic adoption. Word-of-mouth marketing drove strong connected machine sales and increased user acquisition. Our new and existing users continued to be highly engaged, which drove ongoing monetization through subscriptions and accessories and materials. Revenue in the quarter was 334,500,000 An increase of 42% over Q2 last year, representing strong growth relative to a tough comp A 149% year over year growth in Q2 of 2020 at the onset of the pandemic. Strength in the quarter came across our business, including our ability to replenish lower than normal retail inventory levels and the success From our new product launches.
Breaking down revenue in the quarter even further, revenue from connected machines grew 29% Over Q2 last year, even while comping extremely strong sales in Q2 2020 at the beginning of the pandemic. Connected machine revenue was driven in part by the launch of our new Maker 3 and Explorer 3 machines during the quarter. Strong machine sales and new user acquisition as well as healthy engagement of our growing base of existing users for the past 5 quarters Help drive 111 percent revenue growth in subscriptions in the quarter and 40% growth in accessories and materials. In terms of geographic breakdown, international revenue continued to outpace growth in North America, increasing 179% In the Q2 over the same quarter in 2020. As a percentage of total revenue, international represented 8.5% in the 2nd quarter, up from 4.3% in Q2 2020 and 7.4% in all of 2020.
We anticipate the investments we made in 2020 and ongoing future investments will continue to expand consumer reach and brand awareness internationally. The Cricket community of users drives healthy engagement on our platform and is an important variable in building our long term business With sustainable growth and compelling margins. In the Q2, the number of users engaged in our platform For the prior 90 days increased by 1,100,000 versus the same quarter last year, further demonstrating consistent healthy engagement on our platform. As a percentage of total users, this translates to 59% engagement, which is a slight sequential decline on a percentage basis Given that Q2 is typically a seasonally softer quarter. As we move deeper into the summer months, We have also seen pandemic reopenings amplifying some of our normal summer seasonality.
As a result, we could see slight pressure On engagement in Q3, we continued to rapidly grow our user base in Q2, ending the quarter with nearly 5 point 4,000,000 total users or 64% year over year growth despite the tough comp from the spike in user growth at the beginning of the pandemic. Ending paid subscribers grew nearly 1,800,000, up 77% over Q2 2020. 33% of all users were subscribed at the end of Q2, which is equal to Q1 And up from 30% in Q2 2020. We continue to invest heavily in our subscription business, including strengthening And expanding the value proposition and leveraging user data in our targeted marketing efforts. User monetization from subscriptions and accessories and materials remained healthy in Q2.
We measure through ARPU in those segments. We calculate average revenue per user for subscriptions by dividing total subscription revenue by our entire average user base within that period. ARPU for subscriptions in the 2nd quarter was $9.83 up from $7.91 in Q2 2020. We calculate ARPU from accessories and materials By dividing that portion of revenue by our average user base for the period, ARPU from accessories and materials in Q2 was $26.67 compared to $32.23 at the beginning of the pandemic in Q2 2020 When we saw a surge in accessories and materials sales, we anticipate the new smart materials launched in the quarter will support Total gross margin in the Q2 was 39%, up 31% up from 31% in the Q2 of 2020. As we primarily benefited from lower tariffs associated with moving the bulk of our connected machine production from China to Malaysia and a slightly more favorable product mix in the quarter.
Additionally, starting in Q2, We effected a prospective accounting change where we reclassified approximately $4,800,000 of cost of revenue to sales and marketing. In Q2, the impact to gross margin from this change was an increase of approximately 1 percentage point to gross margin with a corresponding increase Looking to the second half of the year and as we noted last quarter, we may choose to be more promotional in order to optimize user acquisition and product mix as demand and supply normalize, particularly on connected machines. Before I move farther down the P and L, I want to talk for a moment about inventory and supply chain. We and our retail channels are now in a healthy inventory position due to our manufacturing strategies put in place over the last few years, and we feel good about where we stand today. We continue to aggressively manage what is within our control.
We do, however, see some risks to the supply chain similar to what many other companies are experiencing. For example, we are subject to chip shortages and have been securing chip inventory well into the future to help mitigate these risks. We have also seen upward pressure on the cost of commodities such as resin and sheet metal And shipping related costs. There could also be possible shipping delays due to local port challenges and shortages As a precautionary measure, we have a long standing strategy of holding generous levels of onshore inventory in our accessories and material SKUs. In order to further mitigate supply chain risk, we are in the process of building inventories Above our customary levels on accessories and consumables or materials and particularly on connected machines.
And we intend to carry higher inventory levels into the future until we are comfortable the supply chain risks have improved. These dynamics, along with any increased level of promotions in the second half, could put some pressure on margins. Moving on to operating expenses. We continue to take a strategic approach to spending in order to gain efficient business growth long into our future. Total operating expenses in the Q2 were $66,100,000 an increase over Q2 2020 of $38,600,000 Of the increase, dollars 8,100,000 was related to stock based compensation expense in the quarter and $4,800,000 Which I previously mentioned from the reclass of cost of revenue to sales and marketing expense and relates to the accounting treatment For payment processing fees and certain point of purchase displays.
Our total operating expense As a percentage of revenue, it was 19.8%, higher than the prior year as we have leaned into investments in sales and marketing And R and D to help build out the platform and drive future growth. We have always focused on building a long term durable business model That delivers solid profitability while allowing us to grow the top line and invest for our future. Q2 represents the 10th consecutive quarter of positive net income. Net income in the second quarter was $49,100,000 Up 41% from the same period last year and diluted earnings per share was $0.22 Note that Cricket did not have a comparable EPS history prior to the reorganization at the time of the IPO. Turning to EBITDA, which includes $8,100,000 of stock based compensation expense, we delivered EBITDA of $68,500,000 Or 20.5 percent EBITDA margin in the 2nd quarter compared to 49,200,000 Or 20.9% margin in the Q2 2020.
As a reminder, we have been EBITDA positive since 2014. Turning now to the balance sheet and cash flow. We ended the quarter with $314,000,000 in cash and cash equivalents. Our credit line of $150,000,000 remains untapped. Cash used in operations for the Q2 was 54,000,000 reflecting payments for replenishing our inventory position and building additional inventory reserves to help mitigate Supply chain risk mentioned earlier.
Although we are not providing quantitative guidance at this time, I'd like to provide some color. Q2 outperformed our internal expectations, benefiting from 2 primary factors that I mentioned earlier. The replenishment of retail channel inventories to more healthy levels and the initial channel fill as we launch 2 new machines And a new portfolio of smart materials. As a result, product sell in during Q2 materially exceeded sell through. These tailwinds will not continue in the second half.
At the same time, we also began moving into our typically softer summer seasonality. As we emerge from the pandemic, the seasonality has been amplified as people spend less time at home, and we believe this dynamic could extend into Q4. Looking at the year end total, we still expect to add at least 1,800,000 new users in full year 2021, equivalent to the number of new users added in full year 2020. We've made tremendous progress with a little over 1,000,000 New users already added in the first half of the year. Nonetheless, in light of the uncertainties, we are ready to we are not ready to update target further at this time.
This foundation of new users fuels future growth and profitability. Our platform provides for increased user monetization through higher margin subscriptions and accessories and materials revenue. This larger user base will also drive our viral marketing engine resulting in new user acquisition and engagement. We will continue to run our business for the long term. Our singular priority will always be to deliver superior experience to our users throughout their crafting journey.
Due to both uncertainty and logistical difficulties caused by the pandemic in 2020, Our spending levels were restrained despite our growth. Therefore, we entered 2021 trying to catch up to our user growth in more operational areas and expect our increased spending levels to reflect these efforts. With a large base of users coming onto the platform, we plan to increase operating investments for the full year and into next year to drive continued growth In new users and healthy engagement, as we lean into channel expansion opportunities, product development and international growth. Nonetheless, we still expect to operate within our long term EBITDA target range for the full year as disclosed previously. In conclusion, we have aggressively and consistently grown the business for many years.
With only 4% of our SAM penetrated, We have a large runway for growth and extensible platform for continued innovation and a compelling financial model that drives growth and profitability. With that, we'll turn it back to the operator for questions.
Thank you, presenters. We have our first question from Rod Hall from Goldman Sachs. Your line is open.
Yes. Hi, guys. Thanks for the question. I guess, what I wanted Dig into a little bit was the engagement number and I mean, you juxtapose a little bit lower engagement maybe than we anticipated, maybe than you did too, I'm not sure against really good numbers here. What I'm curious about is whether you think you've learned anything Incremental about user behavior that informs you on how this might play out in the second half of the year.
I Some of the commentary sounded pretty cautious there, but I'm just curious what you guys feel like you've learned or have you really learned anything? Are we still kind of waiting to see how consumers Behave as we move into the fall. And then I have a follow-up.
Okay. Well, Rod, let me take that question. This is Ashish. So Just to provide context, let me kind of remind people what how we calculate engagement. So engagement is calculated by The number of people that cut in the last 90 days divided by the entire user base.
So we never churn users out, right? So in Q2, we had, like as Marty said, 3,200,000 users that were engaged in the last 90 days. That is about 1,100,000 more users that are engaged this year than they were last year, Right. So the user growth in terms of engagement was pretty significant. However, as you rightly pointed out, the engagement percentage number 59 was down from Q1.
And the reason was, again, the most important learning was that, I mean, clearly with the extended and amplified seasonality, we saw people taking vacations and getting out of their homes. Now that did influence the types of projects they were making. So we saw people making projects for weddings and parties and Getting out for trips, but at the same time, the overall engagement probably because of lesser home improvement and stay at home projects, The net impact of that was declined. So I think the biggest learning was clearly user behavior is changing. We have tried to offset that with a number of ramping up a lot of our engagement activities By segmenting our users, giving them more inspiration, trying to get them to launch education programs.
So we will see while we will see a continued trend in that decline at least past the summer months, We think we'll be able to offset some of that because of the additional insights and learnings we have. And just to give one more comment, We had a tremendous program lined up for back to school and just in the last week, week and a half, We've seen a significant uptick in engagement because of that back to school activities. So I think it's A lot going on in the world out there and we are keeping pretty vigilant in terms of understanding user behaviors, trends and trying to offset some of that as we go into Q3.
Okay, that's great. Thanks Ashish. Great color there. And then Marty, you talked about margin, Some expected margin pressure in the second half due to supplies and freight and so on. Could you maybe Do anything there to quantify for us like what scale of pressure we're talking about, just so that We can all kind of level set what we should be anticipating for margins in the 2nd part of the year?
Yes. I think that what mainly what I was referring to at that time was leaning into More spending on operations, investments that we had foregone Or should I say, didn't keep up within the early part of 2020. And we're so we came into 2021 working to catch up to with those investments. And so, I think that if you look at the year as a whole, We continue to expect that our EBITDA margin will remain in the in our long term target model range of 17% to 20%, but the quarters can obviously fluctuate.
Okay. And so what we should be thinking is kind of gross margins holding maybe roughly steady In the second half, but then OpEx, as you say, some of those OpEx investments coming back in and that's the way the model Roughly moves in the second half of the year?
Yes, I think that's a fair comment. It will be more in the OpEx side.
Okay. All right. Thanks a lot. Appreciate it.
We have our next question from Kay Huberty from Morgan Stanley. Your line is open.
Yes, thank you. Good afternoon. Marty, you mentioned the strategic decision to hold more inventory. Can you just clarify, is that on Crogate's balance sheet? Or is it also in the channel, or a combination of both of those?
And then can you help us size The contribution to 2Q revenue from rebuilding retail channel inventory and selling in the new products, just so that we can understand what was more One time versus reflecting real sell through?
Yes. So, as far as inventory goes, My comment was primarily focused on our balance sheet. We don't really have Control over, obviously, our the channel inventories. But we've as I mentioned earlier, we have Had a strategy of keeping a little higher balances of our accessories and materials, but we're extending that to machines, Especially right now, just because of the supply chain challenges that exist Today, that being said, we do feel good about The progress that we made in building channel inventories or refilling, let me say, channel inventories from Where they were earlier, you'll recall that over the past year, we've been light On inventory from in terms of being able to meet demand for the channel. And we have caught up on that, and we did that in Q2.
And so we feel pretty good about our position On inventories today, but we continue to build that and will continue to build it into the future. As far as Q2 and the impact of the channel fill from the product launches And the inventory replan, it's Obviously, a little challenging to determine exactly what those numbers are because with the channel inventory Phil, you've got phase in and phase outs that are implemented by some of the retailers and It's a little bit challenging to define it exactly. But our estimate is about 8% to 10% Attributable to the channel fill for the launch and about 5% to 8% for Inventory replan.
And is are those numbers on total revenue or just for device revenue?
On total revenue.
Total revenue. Okay. And the refill was both for accessories and materials and devices or mostly just on the
More yes, more on machines. We were in a better inventory position Earlier on accessories and materials. And so, in Q2, it was really mostly machines.
And Katie, I just want to add to Marty's color, which is and part of the reason it's really hard to estimate is that especially going into the quarter, We still had retailers that were out of product. So we had to kind of net out the sales loss Because we didn't have enough inventory in the channel. So really hard to both from a phase in phase out perspective, because there's a slowdown in the existing products, While new people are waiting after the announcement for the new product, so again, we just have to take that with a grain of salt.
Okay. That's really helpful. And then just a follow-up on the discussion around engagement. You mentioned that Quarter to date, you're seeing a bit of a downtick. Should we expect that that looks similar to the downtick From March to June, which was about 3 points.
And then any view yet on whether you would expect to see the normal Sequential uptick in the December quarter of the holiday season?
Yes. So I think there are two numbers, right? One is that What other companies would define as active user growth, I mean, we talked about it as engagement numbers. So the absolute numbers We'll increase quarter over quarter year on year, right, because we have a much larger install base this year and that's what we saw in Q2. Now in Q3, as summer came and even as we've gone in the last few weeks months, We've clearly seen that engagement, some headwinds for engagement.
What's interesting is that we haven't seen similar headwinds at least to date on subscription, We can kind of look at those two data points in tandem. One of the comments that I was making specifically about Our efforts on back to school is that it's kind of shown that people are there. They're just Kind of either coming back from vacation, so we've seen an uptick, I would say, in the last week on those engagement numbers. I think when you look at overall Q3, yes, there will be some pressure. When you look at the engagement percentage number, The number will increase year on year, but as we go into the holidays, with similar to back to school as we see people getting staying more at home, Getting into the holiday mode, Halloween and Christmas and everything else that goes with it, we'll see more uptick in some of those numbers.
That's perfect. Thank you, Ashish and Marty.
We have our next question from Mark Altschwager from Baird.
Shin, I guess, first, I wanted to ask about the Maker and Explorer 3. Just any further learnings you can provide on From the upgrade there, I guess I'm curious to what extent you're seeing existing maker and explorer owners upgrade their machines Versus just kind of continuing to add features to attract new users to the ecosystem.
Yes. So Mark, just to recap, and again, probably one of my favorite questions, I'm a product guy. So I can talk a lot about products. But overall, I think Those two products have been received very well by the market. We've seen we're not breaking out right now in terms of What percent is too we just don't want to read too much into the initial cycle, because it's it can be very misleading.
But we've seen a healthy mix of people upgrading, but also a healthy percentage of new users coming into the market, Right. So when our goal of launching these products in addition to giving more speeds and feeds was to add versatility and new use cases, Right. So people can with long cutting, people can actually do more types of projects in wall decor and home improvement and even using it as And that also has a parallel impact in how we are approaching channels and new user segments. So we are actually pleased with all of that. We've seen people expanding the way how they use our products.
We've seen New user types, one of the things that I found very interesting when our creative teams initially launched Maker 3 It's the first time we actually use there's a fair good representation of men and women doing different projects. So we had this Gentlemen doing a big sign and other outdoor projects. So I think it's definitely accomplished our strategic objective of increasing the versatility of our platform, but also going after new audiences and segments as well as upgrading.
That's great. Thank you. And Marty, I wanted to follow-up on your comment on promotions in Q3. I guess just help us understand the strategy behind the increased planned promotionality, especially against the backdrop of a channel that's just Kind of recently catching up from a supply perspective.
Yes. So from a I talked about leaning into our investments that we Had kind of lagged on in the high growth periods here recently. The primary things we're leaning into Are going to be channel expansion, I'll just call it platform development or enhancing our platform, Namely software and then international growth. Those are the 3 primary things.
And Mark, let me I'll address the Emotions part of your question. As we go into the holidays, in general, we see our portfolio mix has more machines That we haven't in as we go into the holiday season, so the product mix clearly changes. In addition to that, we have some phase outs Of our existing one of our existing machines that we are planning as well. So we are just using this as an opportunity To acquire as many users as possible so we can generate ARPU. So the goal is to continue to energize and create excitement,
We have our next question from Jim Suva
Question and then a follow-up after you answer it because it might be completely unrelated to it. But on the supply of Channel inventories, are you happy and pleased where they're at now? Are they in equilibrium? Or do your channel inventories Need to come higher or lower. I realized during COVID, there was a big rush in back orders and such, but now that we're Hopefully coming out of COVID, I'm just wondering about your channel inventories.
I've noticed the Mug Press was sold out originally and now it's more in stock at stores. And so I'm just kind of wondering about your channel inventory levels, how you feel about them?
In conversations with our retailers and in viewing their weekly data, We feel good about where we are right now. Obviously, we're not when I make the comment that we're We refilled the channel. It doesn't mean it's on every single SKU, but the vast majority of the SKUs, We've replenished to what I would call a healthy level, a good level that we're comfortable with.
Got you. And then on the Supplies and Materials, if I heard correctly, last year, June quarter was inflated due to like a rush on people buying cutters and Last year was overly inflated. And then this year, is that kind of a sustainable, the $26 rate you kind of see? Or is that still Kind of inflated. The reason why I ask is like our family, we switched from mask making to now birthday party, T shirt making and stuff like that with our crickets.
So just Kind of wondering about the ARPU then versus now and kind of your outlook for ARPU.
Yes. I think your perception, Jim is correct, and we feel good about the $26.67 ARPU number, and let me explain why. So if you just ignore 2020 for a moment, it was an odd year for a lot of reasons. If you look back to 2018 2019, dollars 26.67 It's actually $2.50 higher than what it was in 2018. So The calculation for ARPU, remember, is accessories and materials revenue divided by our entire user base.
And so we've actually increased That ARPU by $2.50 while quadrupling the user base over that same time period. And so we feel pretty good about that $26.67
That makes sense. Thank you
so much for the details and clarification. It's greatly appreciated.
We have our next question from Adrienne Yih From Barclays, your line is open.
Great. Thank you very much and well done on the quarter. Ashish, I wanted to get your view on what you're seeing happening in sort of the maker market trends. Etsy obviously gave us off your guide to the Q3. So are those being supplanted by individual uptake?
And then Marty for you, how far is your chip supply bought forward? It sounds like you have plenty of inventory. So I'm just wondering And how far in advance do you buy those chips? Are they all fungible, meaning that you can buy them as forward as you want and they kind of they're pretty much No changes there. And then you mentioned briefly the potential for promotional activity to pick up perhaps Kind of later on in the year.
I'm just wondering if that was prompted by anything that you're seeing currently or that's just eventuality in the future? Thank you very much.
Yes. So let me take the first part of the question and Marty, you can jump in for the second. One thing that we we have very long term focus and there are some broad macro trends that we think are very well intact and Probably will stay intact for the next many, many, many years. And these are like personalization. There's nothing that has happened pre pandemic, during pandemic or post pandemic that would lend itself for us to believe that that's changing.
The second is the proliferation of social media. So again, that's going to continue to inspire people and people are going to be more and more intent driven In terms of what they're trying to do and have the tools necessary, the proliferation of digital tools for people to be able to make things. And then finally, Like you pointed out, Etsy seller trends, right? So while there may be a tiny variation in some of these things In the shorter term, we believe that those are long term secular trends that we need to continue to focus on. What we have seen is clearly, especially during the summer, certain types of projects being done less off And other types of projects being done a lot more of.
And one of my favorite examples, especially as we are continue to expand our channels, use cases and audiences Is people using our products for labeling and organizing, right? So I'm part of many Facebook groups for professional organizers. And one of our products that we've talked about in the past is Cricket Joy, which is to go after mass market. So a lot of these organizers and even people at home Are using Cricut Joy to create very beautiful labels and to help organize things, whether it's Kids' bedrooms or even as we go into class into schools and classrooms. So I'm very pleased about that.
And then I think one of the other trends that I think if you look at it from a holistic standpoint rather than from a month by month is international, right. Right. I get bombarded almost every other day by somebody in some countries saying, when is cricket coming to XYZ? So I think those are things that there are a few things that have changed in the shorter term that I think was really kind of The opening of economy and the fact that people hadn't gotten out of their homes for a while. But as we look at it Over the medium to long term, I think everything we feel is intact and we are going to continue to execute on going after broadening our use cases, adding Our platform and expanding our channels to reach those new types of users.
Very helpful. Thank you.
So your question about chips and components, First of all, our supply chain team has done an excellent job in helping us mitigate a lot of this risk. And we it was about a year ago that we began very aggressively Working with the manufacturers of these chips and components to lock in supply further out in the future. And some of those components and ships are as far as 52 weeks out that we have locked in. And so As we look at our longer term forecast potential, we feel very good and comfortable With where we are at this moment in the locking in those Chips and components. And the same comment can be made on shipping and our team's efforts there.
We worked very hard to build inventory, especially on machines, fast so that we could Beat the peak congestion that we're experiencing right now in shipping. And so we were able to get a fair amount of inventory in before we knew the crunch was coming. And so From a supply chain standpoint overall supply chain standpoint, we feel pretty good about our position and where we stand.
And Marty, on the promo? Sorry, just to remind.
Do you mind repeating the question on promotions again?
Yes. It was you mentioned Potential for more promotional activity potentially pressuring margins later on. And I was wondering if that stemmed from anything that you might be seeing In current day or it was sort of just a warning for the future? Thank you.
I wouldn't characterize it as a warning. I don't think like again, we are the model that we have is going to stay within that kind of those parameters. I think what I was pointing out to is that in general, in every Q4 as we head into the holiday season, we have a promotional strategy and Based on the year, we have a different cadence towards the promotional strategy. I think we're going to see this very similar Trend as we go from Q2 to Q4, in addition to that, we are we have And many in any other categories that have been a part of, sometimes when you have Phase in, phase out, it's a wonderful opportunity to create some energy and excitement in the market without damaging the price cadence Structurally over the long term. So that's what I was commenting on, which is you're going to see the seasonality that you typically do.
And in addition to that, we may opportunistically use some of that to gain new customers and create excitement while keeping The new model comes out, it's at a full price and then the old model comes out and you're trying to be aggressive with it. But again, I don't think there's anything out of ordinary.
Okay. Makes total sense. Thank you very much.
There are no further questions at this time.
Okay. Stacy, is there anything else we need to cover?
I think that's it. Ashish, do you want to thank you everyone for joining us on the call today, And we look forward to speaking with you over the coming quarter.
Yes. So thank you again everyone for joining our call and appreciate your time and focus on us.
Ladies and gentlemen, this concludes today's presentation. Thank you for participating. You may now disconnect.