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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-40257
Cricut, Inc.
(Exact name of Registrant as specified in its charter)
Delaware87-0282025
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
10855 South River Front Parkway
South Jordan, Utah 84095
(385) 351-0633
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareCRCTThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of August 5, 2021, the registrant had 24,464,418 shares of Class A Common Stock, and 197,767,473 shares of Class B Common Stock, outstanding.


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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risk and uncertainties. These forward-looking statements, which are subject to a number of risks, uncertainties and assumptions about us, generally relate to future events or our future financial or operating performance. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “target,” “project” or “contemplate” or the negative version of these words and other comparable terminology that concern our expectations, strategy, plans, intentions or projections. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our ability to attract and engage users and attract and expand our relationships with brick-and-mortar and online retail partners and distributors;
our future results of operations, including trends in revenue, costs, operating expenses and key metrics;
our ability to compete successfully in competitive markets;
our expectations and management of future growth;
our ability to manage our supply chain, manufacturing, distribution and fulfillment, including the ability to forecast demand;
our ability to enter new markets and manage our expansion efforts, including internationally;
our ability to attract and retain management, key employees and qualified personnel;
our ability to effectively and efficiently protect our brand;
our ability to maintain, protect and enhance our intellectual property and not infringe upon others’ intellectual property;
our continued use of open source software;
our estimated Serviceable Addressable Market, or SAM, and Total Addressable Market, or TAM;
our ability to prevent serious errors, defects or vulnerabilities in our products and software;
the adequacy of our capital resources to fund operations and growth;
our anticipated uses of net proceeds from our initial public offering;
our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business both domestically and internationally;
Petrus’ significant influence over us and our status as a “controlled company” under the rules of the Nasdaq Global Select Market, or the Exchange;
expectations regarding the impact of the COVID-19 pandemic, the related responses by governments and private industry on our business and financial condition, as well as the financial condition of our brick-and-mortar and online retail partners, online and e-commerce channels and users; and
the other factors identified under the section titled “Risk Factors” appearing elsewhere in this Quarterly Report on Form 10-Q.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. These statements are only predictions based primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. There are important factors that could cause our actual results, events or circumstances to differ materially from the results, events or circumstances expressed or implied by the forward-looking statements, including those factors discussed in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. You should specifically consider the numerous risks
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outlined in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Cricut, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
As of June 30, 2021As of December 31, 2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents$314,080 $122,215 
Accounts receivable, net163,700 162,931 
Inventories426,901 248,745 
Prepaid expenses and other current assets20,267 4,916 
Total current assets924,948 538,807 
Property and equipment, net42,974 33,441 
Intangible assets, net1,900 2,280 
Deferred tax assets3,119 3,119 
Other assets1,361 3,753 
Total assets$974,302 $581,400 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$280,295 $251,658 
Accrued expenses and other current liabilities46,583 71,324 
Deferred revenue, current portion26,329 23,518 
Total current liabilities353,207 346,500 
Deferred revenue, net of current portion4,072 2,758 
Other non-current liabilities3,411 3,217 
Total liabilities360,690 352,475 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, par value $0.001 per share, 100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2021. No shares issued, authorized or outstanding as of December 31, 2020.
  
Common stock, par value $0.001 per share, 1,250,000,000 shares authorized as of June 30, 2021, 222,253,059 shares issued and outstanding as of June 30, 2021; 257,058,262 shares authorized as of December 31, 2020, 208,116,104 shares issued and outstanding as of December 31, 2020
222 208 
Additional paid-in capital698,879 412,741 
Accumulated deficit(85,489)(184,033)
Accumulated other comprehensive income (loss) 9 
Total stockholders’ equity613,612 228,925 
Total liabilities and stockholders’ equity$974,302 $581,400 
See accompanying notes to these unaudited condensed consolidated financial statements.
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Cricut, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revenue:
Connected machines$146,326 $113,388 $287,646 $170,276 
Subscriptions50,673 24,028 96,812 43,208 
Accessories and materials137,494 97,920 273,857 165,575 
Total revenue334,493 235,336 658,315 379,059 
Cost of revenue:
Connected machines116,217 95,543 235,909 147,120 
Subscriptions5,285 3,122 9,583 5,963 
Accessories and materials82,696 63,364 162,258 107,901 
Total cost of revenue204,198 162,029 407,750 260,984 
Gross profit130,295 73,307 250,565 118,075 
Operating expenses:
Research and development20,606 8,636 36,304 17,807 
Sales and marketing33,030 13,437 60,519 25,884 
General and administrative12,507 5,473 24,926 11,173 
Total operating expenses66,143 27,546 121,749 54,864 
Income from operations64,152 45,761 128,816 63,211 
Other income (expense), net14 (368)(15)(942)
Income before provision for income taxes64,166 45,393 128,801 62,269 
Provision for income taxes15,040 10,514 30,257 14,350 
Net income$49,126 $34,879 $98,544 $47,919 
Other comprehensive income (loss):
Foreign currency translation adjustment4 (33)(9)65 
Comprehensive income49,130 34,846 98,535 47,984 
Net income$49,126 $34,879 $98,544 $47,919 
Earnings per share, basic$0.24 $0.17 $0.47 $0.23 
Earnings per share, diluted$0.22 $0.17 $0.46 $0.23 
Weighted-average common shares outstanding, basic208,205,162 208,116,104 207,760,027 208,116,104 
Weighted-average common shares outstanding, diluted222,947,030 208,116,104 216,403,427 208,116,104 
See accompanying notes to these unaudited condensed consolidated financial statements.
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Cricut, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands, except share amounts)
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2020208,116,104 $208 $412,741 $(184,033)$9 $228,925 
Net income— — — 49,418 — 49,418 
Capital contributions— — 200 — — 200 
Initial public offering, net of offering costs13,250,000 13 242,655 — — 242,668 
Repurchase upon Corporate Reorganization(524)— (10)— — (10)
Reclassification of liability awards to equity upon modification
— — 10,784 — — 10,784 
Stock-based compensation— — 6,635 — — 6,635 
Compensatory units repurchased— — (160)— — (160)
Other comprehensive loss— — — — (13)(13)
Balance as of March 31, 2021221,365,580 $221 $672,845 $(134,615)$(4)$538,447 
Net income— — — 49,126 — 49,126 
Issuance of common stock upon vesting of restricted stock units64,566 — — — —  
Forfeiture of unvested common stock(145,902)— — — —  
Initial public offering, net of offering costs968,815 1 18,019 — — 18,020 
Stock-based compensation— — 8,015 — — 8,015 
Other comprehensive income— — — — 4 4 
Balance as of June 30, 2021222,253,059 $222 $698,879 $(85,489)$ $613,612 
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2019208,116,104 $208 $459,573 $(338,611)$(28)$121,142 
Net income— — — 13,040 — 13,040 
Capital contributions— — 1,083 — — 1,083 
Stock-based compensation— — 1,379 — — 1,379 
Compensatory units repurchased— — (732)— — (732)
Other comprehensive income— — — — 98 98 
Balance as of March 31, 2020208,116,104 $208 $461,303 $(325,571)$70 $136,010 
Net income— — — 34,879 — 34,879 
Capital contributions— — 4 — — 4 
Stock-based compensation— — 827 — — 827 
Compensatory units repurchased— — (1,630)— — (1,630)
Other comprehensive loss— — — — (33)(33)
Balance as of June 30, 2020208,116,104 $208 $460,504 $(290,692)$37 $170,057 
See accompanying notes to these unaudited condensed consolidated financial statements.
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Cricut, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six Months Ended June 30,
20212020
Cash flows from operating activities:
Net income$98,544 $47,919 
Adjustments to reconcile net income to net cash and cash equivalents
   (used in) provided by operating activities:
Depreciation and amortization (including amortization of debt issuance
   costs)
8,317 6,685 
Stock-based compensation19,795 2,774 
Provision for inventory obsolescence1,598 2,815 
Provision for doubtful accounts(110)316 
Changes in operating assets and liabilities:
Accounts receivable(659)(57,204)
Inventories(178,527)95,438 
Prepaid expenses and other current assets(15,361)550 
Other assets311 116 
Accounts payable28,833 (15,062)
Accrued expenses and other current liabilities and other non-current
   liabilities
(20,860)27,305 
Deferred revenue4,124 3,616 
Net cash and cash equivalents (used in) provided by operating
   activities
(53,995)115,268 
Cash flows from investing activities:
Acquisitions of property and equipment, including costs capitalized for
development of internal use software
(16,124)(12,269)
Net cash and cash equivalents used in investing activities(16,124)(12,269)
Cash flows from financing activities:
Proceeds from capital contributions200 1,087 
Proceeds from issuance of common stock upon initial public offering, net of offering costs262,007  
Repurchase of compensatory units(160)(2,362)
Repurchase of common stock upon Corporate Reorganization
(10) 
Payments on term loan (2,500)
Drawdowns on revolving loan 228,269 
Payments on revolving loan (260,862)
Payments on capital leases(24)(50)
Payments for debt issuance costs (50)
Net cash provided by (used in) financing activities262,013 (36,468)
Effect of exchange rate on changes on cash and cash equivalents(29)60 
Net increase in cash and cash equivalents191,865 66,591 
Cash and cash equivalents at beginning of period122,215 6,653 
Cash and cash equivalents at end of period$314,080 $73,244 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$14 $1,128 
Cash paid during the period for income taxes$52,410 $31 
Supplemental disclosures of non-cash investing and financing
activities:
Property and equipment included in accounts payable and accrued
expenses and other current liabilities
$3,118 $1,727 
Stock-based compensation capitalized for software development costs$673 $125 
Deferred offering costs in accounts payable and accrued expenses and
other current liabilities
$ $ 
Reclassification of liability awards to equity upon modification$10,784 $ 
See accompanying notes to these unaudited condensed consolidated financial statements.
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Cricut, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.Description of Business and Basis of Presentation
Nature of Business
Cricut, Inc. (“Cricut” or the “Company”) is a designer and marketer of a creativity platform that enables users to turn ideas into professional-looking handmade goods. Using the Company’s versatile connected machines, design apps and accessories and materials, users create everything from personalized birthday cards, mugs and T-shirts to large-scale interior decorations. The Company’s connected machines and related accessories and materials and subscription services are primarily marketed under the Cricut brand in the United States, as well as Europe and other countries of the world. Headquartered in South Jordan, Utah, the Company is an innovator in its industry, focused on bringing innovative technology (automation and consumerization of industrial tools) to the craft, DIY and home décor categories. The Company’s condensed consolidated financial statements include the operations of its wholly owned subsidiaries, which are located throughout Europe and in the Asia-Pacific region.
The Company designs, markets and distributes the Cricut family of products, including connected machines, design apps and accessories and materials. In addition, Cricut sells a broad line of images, fonts and projects for purchase à la carte.
On September 2, 2020, Cricut converted from a Utah corporation to a Delaware corporation. In connection with such conversion, each share of Class A common stock, par value $0.01, of the Utah corporation was exchanged for one share of common stock of the Delaware corporation, par value $0.001. On March 11, 2021, the Company filed an Amended and Restated Certificate of Incorporation to effect a 64.2645654-for-1 forward stock split of its outstanding common stock. The par value per share was not adjusted as a result of the forward stock split. All authorized, issued and outstanding shares of common stock, common stock, additional paid in capital and the related per share amounts contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the forward stock split and change in par value for all prior periods presented.
The Company organizes its business into the following three reportable segments: Connected Machines, Subscriptions and Accessories and Materials. See Note 13, Segment Information, for further discussion of the Company’s segment reporting structure.
Initial Public Offering and Corporate Reorganization
The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on March 24, 2021 by the Securities and Exchange Commission (“SEC”), and the Company’s Class A common stock began trading on the Nasdaq Global Select Market on March 25, 2021. On March 29, 2021, the Company closed its IPO, in which the Company sold 13,250,000 shares of Class A common stock and the selling stockholders sold an additional 2,064,903 shares of Class A Common Stock at a price to the public of $20.00 per share. The Company received aggregate net proceeds of $242.7 million after deducting offering costs, underwriting discounts and commissions of $22.3 million. On April 28, 2021, the Company sold an additional 968,815 shares of Class A common stock and the selling stockholders sold an additional 150,984 shares of Class A common stock pursuant to the partial exercise of the underwriters’ option to purchase additional shares which generated net proceeds of $18.0 million after deducting for underwriting discounts and commissions of $1.4 million.
Immediately prior to the IPO, the Company engaged in a series of related Corporate Reorganization transactions as follows:
Cricut, Inc. filed an amended and restated certificate of incorporation; and
Cricut Holdings, LLC, or Cricut Holdings, dissolved and liquidated in accordance with the terms and conditions of its then existing limited liability company agreement, pursuant to which the holders of existing units in Cricut Holdings (including holders of purchased units, incentive units, zero strike price incentive units, certain phantom units and options), or the Existing Unitholders, received 100% of the capital stock of Cricut, Inc., its sole asset, at the time of the liquidation with a value implied by the initial public offering price of the shares of Class A common stock to be sold in this offering. Cricut Holdings ceased to exist following this transaction.
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In connection with the Corporate Reorganization the outstanding stock based compensation awards issued by Cricut Holdings were modified or settled as described in Note 8 below.
Upon filing the amended and restated certificate of incorporation, all of the Company’s historical Common Stock converted to Class B common stock. Shares of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to five votes per share and is convertible at any time into one share of Class A common stock.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, (the "Securities Act"), on March 25, 2021 (the "Prospectus"). However, the Company believes that the disclosures provided herein are adequate to prevent the information presented from being misleading.
The condensed consolidated financial statements include the accounts of Cricut, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The condensed consolidated balance sheet as of December 31, 2020, included herein, was derived from the audited financial statements as of that date but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.
In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, cash flows and the changes in equity for the interim periods. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending December 31, 2021, or any other period.
Except as described elsewhere in Note 2 below, there have been no material changes to the Company's significant accounting policies as described in the Company’s Prospectus.
2.Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. For revenue recognition, examples of estimates and judgments include: determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price (“SSP”) of performance obligations, estimating variable consideration such as sales incentives and product returns. Other estimates include the warranty reserve, allowance for doubtful accounts, inventory reserve, intangible assets and other long-lived assets valuation, legal contingencies, stock-based compensation, income taxes, deferred tax assets valuation and internally developed software, among others. These estimates and assumptions are based on the Company’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including any effects of the ongoing pandemic and the economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could differ from these estimates.
Deferred Offering Costs
The Company recorded deferred offering costs of $1.9 million as other assets on the consolidated balance sheet as of December 31, 2020 and consist of costs incurred in connection with the Company’s IPO, including legal,
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accounting, printing and other IPO-related costs. Upon completion of the IPO, these deferred offering costs were reclassified to stockholders’ equity and recorded against the proceeds from the offering.
Fair Value Measurement
The Company measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
Money market funds are highly liquid investments and are actively traded. The pricing information for the Company’s money market funds are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. There were no transfers between Levels 1, 2 or 3 for any of the periods presented. As of June 30, 2021 and December 31, 2020, the Company held $283.3 million and $106.0 million in money market funds, respectively, with no unrealized gains or losses.
Earnings Per Share
Earnings per share is computed using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights and sharing of losses, of the Class A common stock and Class B common stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of profits are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net income per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period.
Stock-Based and Stock-Equivalent Compensation
The Company records compensation expense for all stock-based awards granted based on the fair value of the award at the time of the grant. Stock-based compensation costs are recognized as expense over the requisite service period, which is generally the vesting period, on a straight-line basis for awards with only a service condition. The graded vesting method is used for awards that have service and other conditions. Forfeitures are accounted for as they occur.
The Company estimates the fair value of awards with time-based or performance-based vesting provisions using the Black-Scholes method. The fair value of awards subject to market conditions is estimated using a Geometric Brownian Motion Stock Path Monte Carlo Simulation (“Monte Carlo Simulation”). The determination of the grant date fair value of the awards issued is affected by a number of variables, including the fair value of the underlying shares or units, the expected price volatility over the expected life of the awards, the expected term of the award, risk-free interest rates, the expected dividend yield of the underlying units and the likelihood of termination.
The Company has limited publicly available stock information and therefore, the Company uses the historical volatility of the stock price of similar publicly traded peer companies. The Company estimates the expected term using the simplified method for “plain vanilla” stock option awards or based on the expected time to a liquidation event or other transaction that would result in settlement of other awards. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield is 0.0% as the Company does not anticipate paying dividends, and the Company and its former parent, Cricut Holdings, have not paid dividends other than a one-time dividend paid in 2020. Likelihood of termination for the Monte Carlo Simulation is estimated based upon both historical turnover and anticipated turnover based upon Company or market pressures.
3.Revenue and Deferred Revenue
Deferred revenue relates to performance obligations for which payments have been received by the customer prior to revenue recognition. Deferred revenue primarily consists of deferred subscription-based services. Deferred revenue also includes amounts allocated to the unspecified upgrades and enhancements and the Company’s cloud-based services. The Company had no material contract assets.
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The following table summarizes the changes in the deferred revenue balance for the six months ended June 30, 2021 and 2020:
Six Months Ended June 30, 2021 Six Months Ended June 30, 2020
(in thousands)
Deferred revenue, beginning of period$26,276 $14,566 
Recognition of revenue included in beginning of period
deferred revenue
(18,805)(10,209)
Revenue deferred, net of revenue recognized on contracts in
the respective period
22,930 13,827 
Deferred revenue, end of period$30,401 $18,184 
As of June 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was equal to the deferred revenue balance.
The Company expected the following recognition of deferred revenue as of June 30, 2021:
Year Ended December 31,
2021 (remainder of year)202220232024Total
(in thousands)
Revenue expected to be recognized$24,603 $3,281 $2,225 $292 $30,401 
The Company’s revenue from contracts with customers disaggregated by major product lines, excluding sales-based taxes, are included in Note 13 under the heading “Segment Information.”
Revenue recognized during the three and six months ended June 30, 2021 related to performance obligations satisfied or partially satisfied in prior periods was $0.1 million and $0.7 million, respectively.
The following table presents the total revenue by geography based on the ship-to address for the periods indicated:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in thousands)
North America*$306,173 $225,202 $596,510 $359,450 
International28,320 10,134 61,805 19,609 
Total revenue$334,493 $235,336 $658,315 $379,059 
*Consists of United States and Canada
4.Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
As of
June 30,
2021
As of
December 31,
2020
(in thousands)
Sales incentives$22,106 $30,295 
Other accrued liabilities and other current liabilities24,477 41,029 
Total accrued expenses$46,583 $71,324 
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5.Revolving Credit Facility
2020 Credit Agreement
In September 2020, the Company entered into the New Credit Agreement with JPMorgan Chase Bank, N.A., Citibank, N.A. and Origin Bank. The New Credit Agreement replaces the prior amended Credit Agreement with Origin Bank. The New Credit Agreement provides for a three-year asset-based senior secured revolving credit facility of up to $150.0 million, maturing on September 4, 2023. During the term of the New Credit Agreement, the Company may increase the aggregate amount of the New Credit Facility by up to an additional $200.0 million, (for maximum aggregate lender commitments of up to $350.0 million), subject to the satisfaction of certain conditions under the New Credit Agreement, including obtaining the consent of the administrative agent and an increased commitment from existing or new lenders. The New Credit Facility may be used to issue letters of credit and for other business purposes, including working capital needs.
The amount that can be borrowed under the New Credit Facility is limited to the lesser of (a) the borrowing base minus the aggregate revolving exposure or (b) aggregate lender commitments at any given time. The borrowing base is determined according to certain percentages of eligible accounts receivable and eligible inventory (which may be valued at average cost, market value or net orderly liquidation value), subject to reserves determined by the administrative agent. At any time that the Company’s borrowing base is less than the aggregate lender commitments, the Company can only borrow revolving loans up to the amount of the Company’s borrowing base and not in the full amount of the aggregate lender commitments. As of June 30, 2021, no amount was outstanding under the New Credit Agreement and available borrowings were $150.0 million.
Generally, borrowings under the New Credit Agreement bear interest at a rate based on LIBOR (“Adjusted LIBO rate”) or an alternative base rate (“ABR”), plus, in each case, an applicable margin. The applicable margin will range from (a) with respect to borrowings bearing interest at the ABR, 1.50% to 2.00%, and (b) with respect to borrowings bearing interest at the ABR (i) if the “REVLIBOR30 Screen Rate” (as defined in the New Credit Agreement) is available for such period, 1.50% to 2.00%, or (ii) otherwise, 0.00% to 0.50%, in each case for the previous clauses (a) and (b), based on our “Fixed Charge Coverage Ratio” as defined in the New Credit Agreement.
The New Credit Agreement contains financial covenants during the initial year of the agreement, requiring the Company to maintain a fixed charge coverage ratio of at least 1.0 to 1.0, measured monthly on a trailing 12-month basis. The Company is also subject to this covenant in future periods if the available commitment is less than the greater of $15.0 million and 10% of total commitment made by all lenders. Management has determined that the Company was in compliance with all financial and non-financial debt covenants as of June 30, 2021.
6.Income Taxes
As required by Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” the Company computes interim period income taxes by applying an estimated annual effective tax rate to our year-to-date income from operations before income taxes, except for significant unusual or infrequently occurring items. The estimated effective tax rate is adjusted each quarter in accordance with ASC 740.

The estimated annual effective tax rate was 23.4 percent and 23.5 percent for the three and six months ended June 30, 2021, respectively, and 23.2 percent and 23.0 percent for the three and six months ended June 30, 2020, respectively. The Company’s provision for income taxes was $15.0 million and $30.3 million, respectively, for the three and six months ended June 30, 2021, and $10.5 million and $14.4 million, respectively, for the three and six months ended June 30, 2020. The provision for income taxes varied from the tax computed at the U.S. federal statutory income tax rate for the periods presented primarily due to state taxes. The Company reported no significant discrete tax items.
The Company reviews its deferred tax assets for realization based upon historical taxable income, prudent and feasible tax planning strategies, the expected timing of the reversals of existing temporary differences and expected future taxable income. The Company has concluded that it is more likely than not that the net deferred tax assets will be realized. Accordingly, the Company has not recorded a valuation allowance against net deferred tax assets for any of the periods presented.
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7.Capital Structure
In connection with the Corporate Reorganization prior to the IPO, the Company filed an amended and restated certification of incorporation which authorized 100,000,000 shares of preferred stock, par value $0.001 per share, and 1,250,000,000 shares of common stock, par value $0.001 per share, which was divided between two series Class A common stock and Class B common stock. All previously outstanding common stock was reclassified as Class B common stock. During the three and six months ended June 30, 2021, 150,984 and 2,215,887 shares of Class B common stock were converted to Class A common stock, respectively. As of June 30, 2021, the Company had 1,000,000,000 shares of Class A common stock and 250,000,000 shares of Class B common stock authorized and 16,499,268 shares of Class A common stock and 205,753,791 shares of Class B common stock issued and outstanding. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to five votes per share and is convertible at any time into one share of Class A common stock.
8.Stock-Based Compensation
Stock-based Compensation Cost
The following table shows the stock-based compensation cost by award type for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
20212020 20212020
(in thousands)
Equity classified awards$8,015 $827 $14,650 $2,206 
Liability classified awards1,004 622 7,045 825 
Total stock-based compensation$9,019 $1,449 $21,695 $3,031 
The following table sets forth the total stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive income for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
2021202020212020
(in thousands)
Cost of revenue
Connected machines$8 $1 $16 $3 
Subscriptions52 6 88 15 
Accessories and materials    
Total cost of revenue60 7 104 18 
Research and development3,768 508 7,409 1,268 
Sales and marketing2,425 655 8,032 1,112 
General and administrative1,857 157 4,250 375 
Total stock-based compensation expense$8,110 $1,327 $19,795 $2,773 
During the three and six months ended June 30, 2021, the Company capitalized $0.5 million and $1.2 million of stock-based compensation to inventories, respectively. During each of the three and six months ended June 30, 2020, the Company capitalized $0.1 million of stock-based compensation to inventories.
As of June 30, 2021, there was $128.0 million of unrecognized stock-based compensation cost related to equity awards which is expected to be recognized over a weighted-average period of 3.4 years.
As of June 30, 2021, there was $1.9 million of unrecognized stock-based compensation cost related to liability classified awards which is expected to be recognized over a weighted-average period of 1.4 years.
Corporate Reorganization and Stock-Based Compensation Modifications
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In connection with the Corporate Reorganization, all outstanding awards issued under the Incentive Unit Plan discussed below were modified by exchanging the outstanding awards of Cricut Holdings for awards of the Company. All service based vesting conditions were unaffected by the modification. As described below, the vesting conditions were modified for certain awards which previously had both service and market based vesting conditions.
All vested equity classified awards were settled in shares of the Company’s Class B common stock previously held by Cricut Holdings. Unvested equity classified awards were converted to restricted shares of the Company’s Class B common stock subject to future vesting, or in the case of options were converted into options to purchase the Company’s Class B common stock. All vested liability classified awards converted into either shares of Class B common stock to the extent permitted in each applicable jurisdiction or settled in cash. All unvested liability classified awards converted into restricted stock units (“RSUs”) under the 2021 Equity Incentive Plan that will vest into shares of Class A common stock of Cricut, Inc. to the extent permitted in each applicable jurisdiction or into restricted stock unit equivalents which will be settled in cash upon vesting as described below.
In connection with the Corporate Reorganization and modification, the Company granted options under the 2021 Equity Incentive Plan to certain employees. The number of options was calculated based on the number of outstanding incentive units or incentive unit equivalents prior to the modification and the participation threshold of such awards. The vesting terms of the options are also based on the vesting terms of the original award. Therefore, the Company considered the exchange of the original award for the restricted shares or RSUs plus the options to be a single modification and will recognize the incremental compensation cost of $14.5 million over the vesting term. Of this amount, the Company recognized $0.8 million and $4.3 million during the three and six months ended June 30, 2021, respectively, including a cumulative adjustment in March 2021 to recognize the incremental compensation cost associated with historical vesting.
As part of the modification of outstanding awards in connection with the Corporate Reorganization, awards issued under the Incentive Unit Plan which included both service and market conditions were modified to remove the market vesting condition and to increase the participation threshold of the award to the price specified in the former market condition. In total, 3.0 million, 3.0 million, 1.0 million and 1.0 million awards which previously had a participation threshold of $2.00, $2.00, $5.00 and $5.00 per share, respectively, were modified to have a participation threshold of $3.00, $4.00, $6.00 and $7.00 per share, respectively. Incremental compensation cost associated with these awards is included in the total incremental compensation cost associated with the issuance of additional options to employees described above as this change was part of a single modification.
These modifications are shown as cancellations under the Incentive Unit Plan and as grants under the activity summarized below.
2021 Equity Incentive Plan
In March 2021, the Company’s 2021 Equity Incentive Plan became effective. The 2021 Equity Incentive Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants. As of June 30, 2021, 20,800,000 shares of Class A common stock were reserved for issuance under this plan including shares reserved for previously granted awards discussed below as well as shares reserved for issuance of future awards under the plan.
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A summary of the Company’s RSU activity under the 2021 Equity Incentive Plan is as follows:
Number of
RSUs
Weighted-
Average
Grant Date
Fair Value
(per share)
Outstanding at December 31, 2020 $ 
Granted4,318,833 $22.45 
Vested(64,566)$20.00 
Forfeited/cancelled(12,000)$22.96 
Outstanding at June 30, 20214,242,267 $22.48 
Options under the 2021 Equity Incentive Plan have a contractual term of 10 years. The exercise price of an incentive stock option and non-qualified stock option shall not be less than 100% of the fair market value of the shares on the date of grant.
A summary of the Company’s stock option activity under the 2021 Equity Incentive Plan is as follows:
Number of
Options
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Terms
(Years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2020 $ — $ 
Granted3,419,359 20.00 
Forfeited/cancelled(65,642)20.00 
Outstanding at June 30, 20213,353,717 $20.00 6.8$75,794 
Vested and exercisable at June 30, 2021762,320 $20.00 6.1$17,228 
The weighted-average grant date fair value of options granted under the 2021 Equity Incentive Plan during the six months ended June 30, 2021 was $8.79 per share based on the following weighted-average assumptions:

Six Months Ended
June 30, 2021
Expected volatility51.6 %
Risk-free interest rate0.8 %
Expected term (in years)4.9
Expected dividend %
In connection with the Corporate Reorganization, certain employees received restricted stock unit equivalents (“RSU equivalents”). Upon vesting, these awards are settled for a cash payment equal to the difference between the Company’s stock price on the vesting date less the base price specified at the time of the grant. As of June 30, 2021 the total recognized liability for these awards was $1.5 million. A summary of the RSU equivalent activity under the 2021 Equity Incentive Plan is as follows:
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Number of
RSU Equivalents
Weighted-
Average
Base Price
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2020 $ $ 
Granted94,304 6.14 
Outstanding at June 30, 202194,304 $6.14 $3,439 
Unvested Class B Common Stock
The Company’s unvested Class B common stock resulted from the Corporate Reorganization and is not part of the 2021 Equity Incentive Plan. Activity related to Class B common stock subject to future vesting for the six months ended June 30, 2021 is as follows:
Number of
Unvested Shares
Weighted-
Average
Grant Date Fair Value (per share)
Outstanding at December 31, 2020 $ 
Granted14,037,505 $20.00 
Vested(273,983)$20.00 
Forfeited / Cancelled(145,902)$20.00 
Outstanding at June 30, 202113,617,620 $20.00 
Options to Purchase Class B Common Stock
The Company’s options to purchase Class B common stock resulted from the Corporate Reorganization and are not part of the 2021 Equity Incentive Plan. A summary of the Company stock option activity for the options to purchase shares of Class B common stock is as follows:
Number of
Options
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Terms
(Years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2020 $ — $ 
Granted522,000 $9.04 
Forfeited / Cancelled(32,000)$9.04 
Outstanding at June 30, 2021490,000 $9.04 9.4$16,445 
Vested at June 30, 20212,000 $9.04 0.5$67 
The weighted-average grant date fair value of options to purchase Class B common stock during the six months ended June 30, 2021 was $13.42 per share based on the following weighted-average assumptions:
Six Months Ended June 30, 2021
Expected volatility51.4 %
Risk-free interest rate0.8 %
Expected term (in years)5.5
Expected dividend %
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2021 Employee Stock Purchase Plan
In March 2021, the Company’s 2021 Employee Stock Purchase Plan (“2021 ESPP”) became effective. Subject to any limitations contained therein, the 2021 ESPP allows eligible employees to contribute, through payroll deductions, up to 15% of their eligible compensation to purchase the Company’s Class A common stock at a discounted price per share. As of June 30, 2021, 4,000,000 shares of our Class A common stock were available for sale under the 2021 ESPP.
No offerings have been authorized to date by the administrator under the 2021 ESPP. If the administrator authorizes an offering period under the 2021 ESPP, the administrator will establish the duration of offering periods and purchase periods, including the starting and ending dates of offering periods and purchase periods, provided that no offering period may have a duration exceeding 27 months.
Incentive Unit Plan
The Company’s former parent, Cricut Holdings, authorized an Incentive Unit Compensation Plan (the “IU Plan”) that allowed for issuances of common incentive units (“CIUs”). The participation threshold of the awards granted under the IU Plan was typically equal to the fair market value of Cricut Holdings’ membership units at the date of the grant, except zero strike price incentive unit awards which have no participation threshold. Except as noted below, all awards issued under the IU Plan only had service-based conditions. Per unit amounts in the activity below are based on the value of Cricut Holdings’ units.
Equity Classified Units
The Company’s former parent, Cricut Holdings, granted CIUs to employees of the Company. These awards vested 25% annually over four years of service. The Company’s former parent also granted a performance-based incentive unit, which is discussed later. These awards are collectively referred to as equity classified incentive units. Once vested, all equity classified incentive units remained outstanding until the liquidation of Cricut Holdings or until repurchased by Cricut Holdings. Upon the liquidation of Cricut Holdings all outstanding awards were settled or modified as described above.
A summary of the equity classified incentive units activity for the six months ended June 30, 2021 is as follows:
Equity
Incentive
Units
Weighted-
Average
Participation
Threshold
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 202093,371,324 $0.97 $600,316 
Granted1,548,223 $ 
Exercised $ 
Forfeited(82,500)$1.29 
Cancelled upon Corporate Reorganization(94,837,047)$0.95 
Outstanding at June 30, 2021 $ $ 
Vested at June 30, 2021 $ $ 
The following table summarizes the unvested equity classified incentive units activity for the six months ended June 30, 2021:
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Number of
Awards
Weighted-
Average
Grant Date Fair
Value Per Unit
Unvested at December 31, 202037,116,025 $0.74 
Granted1,548,223 $9.06 
Vested(7,123,673)$0.40 
Forfeited(82,500)$0.79 
Cancelled upon Corporate Reorganization(31,458,075)$1.23 
Unvested at June 30, 2021 $ 
The total fair value of equity classified incentive units vested during the six months ended June 30, 2021 was $3.1 million.
The grant date fair value of CIUs granted during the six months ended June 30, 2021 was equal to the estimated fair value of Cricut Holdings’ common unit on the date of the grant as all CIUs had no participation threshold.
Equity Classified Options
The Company’s former parent, Cricut Holdings, granted employees of the Company options to purchase zero strike price incentive units. These options generally vested on a cliff basis upon completion of the service period specified for each award. All outstanding options of Cricut Holdings were exchanged for options to purchase class B common stock of Cricut Inc. in connection with the Corporate Reorganization. A summary of option activity for the six months ended June 30, 2021 is as follows:
Number of
Options
Weighted-
Average
Exercise Price
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 20201,140,000 $4.52 $3,283 
Granted27,027 $7.40 
Exercised(27,027)$7.40 $52 
Forfeited(84,000)$4.52 
Cancelled upon Corporate Reorganization(1,056,000)$4.52 
Outstanding at June 30, 2021 $ $ 
Vested at June 30, 2021 $ $ 
Liability Classified Incentive Unit Equivalents
The Company’s former parent issued incentive unit equivalents (phantom units) to various employees under the Incentive Unit Plan. The incentive unit equivalents paid out upon the occurrence of a liquidation event such as a change in control transaction. In addition, the units did not participate until the sum of distributions and capital appreciation of the common units from the date of grant of the incentive units equaled a specified participation threshold per unit. The incentive unit equivalents did not represent any kind of legal equity interest in the Company or the former parent Company and required cash settlement. Accordingly, the incentive unit equivalent awards were accounted for as liability classified awards and required initial and subsequent measurement at fair value.
Initially, during the six months ended June 30, 2020, these awards generally vested 12.5% annually for each of the first four years of service and 50% after the fifth year of service. Following the amendment of these awards in January 2020, these awards vested 25% annually over four years of service. All liability classified incentive units had indefinite contract terms and, once vested, remained outstanding until liquidation of Cricut Holdings or until repurchased by Cricut Holdings. Upon the liquidation of Cricut Holdings all outstanding awards were settled or modified as described above.
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A summary of the liability classified incentive unit equivalents activity for the six months ended June 30, 2021 is as follows:
Liability
Incentive
Equivalents
Weighted-
Average
Participation
Threshold
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 20202,851,516 $2.1