Kimball Shill: Paul, this is Kimball. Thanks for the question. First, your question on gross margins. So Accessories and Materials gross margins in the quarter would have been 30%, but for the write-downs, all right? And A&M is our broadest category and as a category, we received the most competition and we launched a lot of products in that category and some do well, some don’t do as well and as we look at velocity and do periodic look backs, GAAP requires that we write down excess inventory. As we have kind of gone through the last couple of years and had declining sales in this category, that has exacerbated somewhat that velocity factors as we do these look backs and so that’s, that’s really what weighed down the margins this year in the quarter.
On the revenue side of the equation, we do see competition here, but as Ashish mentioned that, when we are closer to price with our competitors, we win our fair share, and so we are focused on how we maintain share in this, in this space. Engagement continues to be a headwind, because when consumers are cutting less they are using fewer materials and that puts pressure on their demand. And then, again there is an element of the reach of a conservative approach to restocking inventory that also is weighing on our revenues currently. We are about eight months into a two-year journey to remake this business. I just want to highlight that you know, we have a strong conviction that we have a right to play and win in this space. We have an integrated platform and we have done materials work seamlessly with our platform.
And as we rebuild this business over the next coming quarters, right? We are focused on making sure we have the right products at the right price with the right cost structure, so that we can win and also help our retailers with their margins also.
Ashish Arora: And then I will just add that as we drive engagement, that’s the more structural variable that lift all boats and I think we need to just make sure that we continue to do that over time.
Kimball Shill: Yeah. And I would just call out that, these improvements aren’t going to be like a light switch, right? You will see incremental improvement over time.
Paul Kearney: Perfect. Thanks, I will pass on.
Operator: One moment for our next question. Our next question comes from Mark Altschwager at Baird. Please go ahead. If your line is muted, please unmute it. Please rejoin the conference call, if you can’t hear. Our next question comes from Mark Altschwager at Baird.
Amy Teske: Can you hear me now?
Operator: Yes.
Ashish Arora: Yes. Yes. Can here you.
Amy Teske: All right. This is Amy on for Mark. So thank you for taking our questions. You noted in your prepared remarks that subscriber growth and attach rate could remain under pressure in 2024. So at this point, can you provide us any more color on your initial expectations for 2024?
Kimball Shill: So, I will talk to the subscriber piece for our strategy. We called out this year we are adding fewer new users than we did last year and at our current rate of adding new users we saw that and when we talk to this in Q2 and then this quarter that at the current rate of new user adds that we could be flattish to slight decline on subscribers. And to the extent that growth rates in new user acquisition is moderate, we would see this — we would expect to see the same seasonal pressure next year, which means that would be expected to add subscribers in Q1 and Q2, and potentially flat to maybe down in Q3 depending on exactly how those new user acquisitions play out. In terms of Q 2024, oh, sorry, in terms of 2024 outlook, I think, it’s a little early for us to call that out and we have talked about the headwinds that we are seeing currently in Q4.
We have talked about the promotions that we have planned and we are watching those closely to see what resonates with consumers and what elasticity, we see as we go through those promotions and that’s really going to inform us as we think about especially the first half of 2024.
Ashish Arora: And again, I think, if you look at all the 4 priorities that we have, subscriptions, acquisition, engagement and materials, we feel that we are further in line in our subscriptions roadmap. It’s where we have a ton of innovation coming. We are focusing on driving search, improving services, content. So, we generally have a level of confidence in that part of the portfolio is high. As Kimball said, in addition to that, as we look at acquisition, right, as we acquire new members and penetrate our SAM, it does — the more we acquire, the more it helps our subscriber base. So, our ability to succeed in acquisition is going to directly have a positive impact on subscriptions in terms of acquiring new customers. Our efforts on engagement is going to have a positive impact on our ability to retain those subscribers.
So, I think, again, it’s hard to talk about how the economy is going to shape out and how some of the consumer spending will happen, but again as we look at the medium- to long-term, we have a high degree of confidence in our subscription’s roadmap and strategy.
Amy Teske: Right. Thank you. And then this year you continue to expand the capabilities of your subscription platform while introducing new cutting capabilities with the Joy Xtra Venture machine. Was there any sell-in benefit in the quarter related to that Joy Xtra launch and then could you also speak to any particular areas of opportunity you see in the innovation pipeline? Thank you.
Kimball Shill: So there were some selling benefit in the quarter, but not enough that we are splitting separately. It’s still in distribution and being placed in retailers. So it’s not fully set in all locations where we expect to see it.
