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United States securities and exchange commission logo
December 7, 2020
Ashish Arora
Chief Executive Officer and Director
Cricut, Inc.
10855 South River Front Parkway
South Jordan, Utah 84095
Re: Cricut, Inc.
Draft Registration
Statement on Form S-1
Submitted November
10, 2020
CIK No. 0001828962
Dear Mr. Arora:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary, page 1
1. You state that you have
3.7 million users but we note that you had 2.5 million users as of
December 31, 2019.
Please clarify. Also, please provide appropriate context
by disclosing the
number of paid users wherever you discuss the number of total users.
Our Opportunity, page 3
2. Please disclose the
material facts and underlying assumptions that support the estimates of
your Serviceable
Addressable Market and Total Addressable Market. Also, disclose the
source of the user
statistics included in the bulleted list on page 4.
Ashish Arora
FirstName
Cricut, Inc.LastNameAshish Arora
Comapany7,
December NameCricut,
2020 Inc.
December
Page 2 7, 2020 Page 2
FirstName LastName
Risk Factors
We rely on a limited number of third party-suppliers..., page 37
3. We note your disclosure in the notes to the financial statements that
the company's top
three vendors accounted for approximately 82% and 94% of total
finished goods
purchases in 2018 and 2019, respectively. Please discuss the material
terms of any
agreements with these suppliers or vendors.
The outbreak of the COVID-19 pandemic could adversely affect our business...,
page 57
4. You state that during the COVID-19 pandemic, you have seen an increase
in demand for
your products and subscriptions. Please revise this risk factor to
quantify the impact
COVID-19 has had on your product sales and subscriptions.
Use of Proceeds, page 69
5. Please quantify the amount of proceeds that may be used to pay amounts
owed to holders
of your outstanding phantom unit awards. Refer to Item 504 of
Regulation S-K.
Selected Consolidated Financial and Other Data, page 76
6. Tell us what consideration you gave to including pro forma
presentation of earnings per
share giving effect to your performance based incentive awards and
your phantom units
that will vest upon the effectiveness of your initial public offering
and the reorganization,
described on page 68 (excluding the effects of the offering).
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview of Our Business and History, page 79
7. To provide appropriate context regarding the total revenues you
present on the graph,
please also include the total amount of net loss or income for the
same periods in the
chart. Consider also providing the number of paid users over the same
time period that
you present the total number of users.
Percentage of Users Creating in Trailing 90 Days, page 86
8. Please briefly explain how you are able to track whether a user has
used a connected
machine for any activity in the past 90 days.
Key Business Metrics and Non-GAAP Financial Measures, page 86
9. In order to provide context to your User metric clarify whether
all of these users are still
active on your machines and the frequency of the activity. As it
appears that a significant
portion of Users have not created in the trailing 90 days, tell
us why you refer to this
metric as Users rather than Connected Machine Sales.
Disclose any known limitations
associated with this metric.
Ashish Arora
FirstName
Cricut, Inc.LastNameAshish Arora
Comapany7,
December NameCricut,
2020 Inc.
December
Page 3 7, 2020 Page 3
FirstName LastName
10. In order to provide context to your Percentage of Users Creating in
Trailing 90 Days
metric clarify whether these are all paying users from whom you
received additional
revenue in the form of subscriptions or sales of accessories and
materials. Disclose any
known limitations associated with this metric.
Results of Operations
Cost of Revenue, Gross Profit and Gross Margin, page 91
11. You disclose that your gross margin for connected machines and
accessories and materials
decreased in 2019 as compared to 2018 due, in part, to tariffs. Please
clarify the nature of
these tariffs and any know trends regarding these costs.
12. You disclose that your gross margin for accessories and materials
decreased in 2019 as
compared to 2018 due, in part, to unfavorable inventory adjustments.
Please clarify the
nature of these adjustments and any known trends regarding these
costs.
Management
Non-Employee Directors, page 121
13. We note that Messrs. Makler, Blasnik and Freeman appear to be
affiliated with Petrus
P.C. LLC, your controlling shareholder. Please disclose whether these
directors were
appointed to the board in connection with any shareholder agreement
and whether they
will continue to serve as directors after the offering. Refer to Item
401(a) of Regulation S-
K.
Principal Stockholders, page 140
14. Please disclose the natural person or persons who exercise the voting
and/or dispositive
powers with respect to the securities owned by the entities affiliated
with Petrus P.C. LLC.
Consolidated Financial Statements
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Revenue Recognition, page F-12
15. Your disclosure indicates that as part of your service offering you
provide access to your
cloud based software that is used to interact with the machine and
that this is a distinct
performance obligation. Please clarify the stand-alone functionality
the machine has
without access to your cloud based software and how customers derive
substantive benefit
from just the machine. Please also clarify the functionality provided
by the cloud based
software as well as the upgrades and enhancements. Refer to ASC
606-10-25-21.
16. Your disclosure on page 109 states that your platform accompanies a
user from an idea to
a finished project, with Cricut providing the connected machines,
design apps and
accessories and materials to make this a seamless journey. In
determining your
performance obligations, clarify how you considered whether the
connected machine,
Ashish Arora
Cricut, Inc.
December 7, 2020
Page 4
access to your cloud based software, and access to your design apps
represent the
combined output for which the customer has contracted and its ability
to derive the
intended benefit from the contract depends on the transfer of all of
these services. Clarify
whether other providers offer cloud based services with the same
functionality that your
customers can access with their machines. Refer to ASC 606-10-25-21.
17. Your disclosure on page 108 states that your software is cloud-based
meaning that users
can access and work on their projects anywhere, at any time, across
desktops or mobile
devices and that each user s credentials, profile, machine
registration data, pressure
settings for various materials and tools, uploaded images, designs,
projects, community
networks and more are stored in the cloud. Clarify whether you have a
hosting
performance obligation and how you have accounted for this obligation.
18. Clarify if there is a contractual term over which you are obligated to
provide access to
your cloud based software and designs, unspecified upgrades and
enhancements to the
essential software, and hosting of customer information and designs
stored in the cloud.
19. Your disclosure indicates that the SSP of the hardware and essential
software reflects the
Company s best estimate of the selling price if it was sold
regularly on a standalone basis.
Clarify if you do sell the hardware and essential software separately
from the other
performance obligations and if you use the observable price for such
stand-alone sales as
stand-alone selling price. Otherwise, please clarify how you estimated
the stand-alone
selling price. Refer to ASC 606-10-32-31 through 35.
10. Capital Structure, page F-25
20. Please clarify the circumstances surrounding the termination of the
Series L shares and
whether there were any other rights or privileges exchanged or
liabilities extinguished in
connection with the termination. Clarify if there was any relationship
between the Series
L shareholders and the Company, its directors and officers, or its
existing shareholders
and whether they received any services from the Company.
11. Stock-Based Compensation, page F-25
21. Your disclosure indicates that your performance based incentive units
and phantom units
pay out upon the occurrence of a liquidation event such as a change in
control transaction.
Please clarify if a change in control transaction includes an initial
public offering. If so,
disclose how many shares will vest upon the effectiveness of an initial
public offering and
the associated compensation expense that will be recognized.
FirstName LastNameAshish Arora
22. Please include the fair value of the underlying common units of Circuit
Holdings used in
Comapany NameCricut, Inc.
the determination of the fair value of your awards with the weighted
average assumptions
December 7, 2020 Page 4 each period presented.
that you disclose for
FirstName LastName
Ashish Arora
FirstName
Cricut, Inc.LastNameAshish Arora
Comapany7,
December NameCricut,
2020 Inc.
December
Page 5 7, 2020 Page 5
FirstName LastName
15. Net Income per Share, page F-31
23. Please clarify how you considered your outstanding equity awards in
the calculation of
diluted earnings per share and provide the information required by ASC
260-10-50-1.
General
24. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Laura Veator, Staff Accountant, at (202) 551-3716 or
Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Matthew Crispino,
Staff Attorney, at (202) 551-3456 or Jan Woo, Legal Branch Chief, at (202)
551-3453 with any
other questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Rezwan D. Pavri