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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 March 31, 2023
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 May 2, 2023, the registrant had 51,398,775 shares of Class A Common Stock, and 167,825,154 shares of Class B Common Stock, outstanding.


TABLE OF CONTENTS
PAGE



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 and manage our inventory;
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 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;
risks related to general socio-economic and political conditions as well as consumer confidence; 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 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
2


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.
3


PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Cricut, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share )
As of March 31, 2023As of December 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents$232,321 $224,943 
Marketable securities75,011 74,256 
Accounts receivable, net90,391 136,539 
Inventories293,696 351,682 
Prepaid expenses and other current assets15,629 23,842 
Total current assets707,048 811,262 
Property and equipment, net61,165 63,407 
Operating lease right-of-use asset15,843 17,078 
Intangible assets, net570 760 
Deferred tax assets27,066 23,819 
Other assets34,747 33,301 
Total assets$846,439 $949,627 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$38,454 $63,195 
Accrued expenses and other current liabilities47,014 69,775 
Deferred revenue, current portion38,556 34,869 
Operating lease liabilities, current portion5,474 5,436 
Dividends payable, current portion984 80,781 
Total current liabilities130,482 254,056 
Operating lease liabilities, net of current portion12,554 13,935 
Deferred revenue, net of current portion3,220 3,789 
Other non-current liabilities6,020 5,112 
Total liabilities152,276 276,892 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, par value $0.001 per share, 100,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022.
  
Common stock, par value $0.001 per share, 1,250,000,000 shares authorized as of March 31, 2023, 219,249,653 shares issued and outstanding as of March 31, 2023; 1,250,000,000 shares authorized as of December 31, 2022, 219,656,587 shares issued and outstanding as of December 31, 2022.
219 220 
Additional paid-in capital685,114 672,990 
Retained earnings9,099  
Accumulated other comprehensive loss(269)(475)
Total stockholders’ equity694,163 672,735 
Total liabilities and stockholders’ equity$846,439 $949,627 
    See accompanying notes to these unaudited condensed consolidated financial statements.
4


Cricut, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended March 31,
20232022
Revenue:
Connected machines$34,131 $62,391 
Subscriptions75,083 64,778 
Accessories and materials72,013 117,614 
Total revenue181,227 244,783 
Cost of revenue:
Connected machines33,066 60,713 
Subscriptions7,631 6,252 
Accessories and materials63,864 78,798 
Total cost of revenue104,561 145,763 
Gross profit76,666 99,020 
Operating expenses:
Research and development17,801 20,530 
Sales and marketing29,616 32,789 
General and administrative18,720 14,294 
Total operating expenses66,137 67,613 
Income from operations10,529 31,407 
Total other income (expense), net2,315 (39)
Income before provision for income taxes12,844 31,368 
Provision for income taxes3,745 7,864 
Net income$9,099 $23,504 
Other comprehensive income (loss):
Change in net unrealized gains on marketable securities, net of tax$188 $ 
Change in foreign currency translation adjustment, net of tax18 (12)
Comprehensive income$9,305 $23,492 
Earnings per share, basic$0.04 $0.11 
Earnings per share, diluted$0.04 $0.11 
Weighted-average common shares outstanding, basic215,587,699 212,403,383 
Weighted-average common shares outstanding, diluted218,749,255 220,967,935 
See accompanying notes to these unaudited condensed consolidated financial statements.
5


Cricut, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands, except share amounts)
Common StockAdditional
Paid-In
Capital
Retained EarningsAccumulated Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2022219,656,587 $220 $672,990 $ $(475)$672,735 
Net income— — — 9,099 — 9,099 
Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax43,671 — (169)— — (169)
Forfeiture of unvested common stock and dividend equivalents(103,906)— 275 — — 275 
Repurchase of common stock(346,699)(1)(3,243)— — (3,244)
Dividend equivalents issued— — 4,366 — — 4,366 
Stock-based compensation— — 10,895 — — 10,895 
Other comprehensive income— — — — 206 206 
Balance as of March 31, 2023219,249,653 $219 $685,114 $9,099 $(269)$694,163 
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Loss
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2021221,913,559 $222 $717,369 $(43,560)$(55)$673,976 
Net income— — — 23,504 — 23,504 
Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax10,387 — (1,328)— — (1,328)
Forfeiture of unvested common stock(114,332)— — — —  
Stock-based compensation— — 10,500 — — 10,500 
Compensatory units repurchased— — (14)— — (14)
Other comprehensive loss— — — — (12)(12)
Balance as of Balance as of March 31, 2022221,809,614 $222 $726,527 $(20,056)$(67)$706,626 
See accompanying notes to these unaudited condensed consolidated financial statements.
6


Cricut, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months Ended March 31,
20232022
Cash flows from operating activities:
Net income$9,099 $23,504 
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation and amortization (including amortization of debt issuance costs)
6,888 6,030 
Impairments441  
Stock-based compensation10,421 8,958 
Deferred income tax(3,311) 
Non-cash lease expense1,238 1,222 
Unrealized foreign currency loss636  
Provision for inventory obsolescence8,477 1,063 
Other473  
Changes in operating assets and liabilities:
Accounts receivable44,416 76,729 
Inventories48,506 (29,127)
Prepaid expenses and other current assets8,351 4,771 
Other assets(466)(134)
Accounts payable(24,192)(49,688)
Accrued expenses and other current liabilities and other non-current liabilities
(17,573)(26,845)
Operating lease liabilities(1,353)(1,185)
Deferred revenue3,118 281 
Net cash and cash equivalents provided by operating activities
95,169 15,579 
Cash flows from investing activities:
Acquisitions of property and equipment, including capitalized software development costs
(7,741)(9,807)
Net cash and cash equivalents used in investing activities(7,741)(9,807)
Cash flows from financing activities:
Repurchases of common stock(3,244) 
Repurchase of compensatory units (14)
Proceeds from exercise of stock options55 31 
Employee tax withholding payments on stock-based awards(1,358)(1,659)
Cash dividend(75,531) 
Net cash and cash equivalents used in financing activities(80,078)(1,642)
Effect of exchange rate on changes on cash and cash equivalents28 (28)
Net increase in cash and cash equivalents7,378 4,102 
Cash and cash equivalents at beginning of period224,943 241,597 
Cash and cash equivalents at end of period$232,321 $245,699 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$ $ 
Cash paid during the period for income taxes$115 $532 
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$ $3,579 
Property and equipment included in accounts payable and accrued expenses and other current liabilities
$2,027 $5,056 
Tax withholdings on stock-based awards included in accrued expenses and other current liabilities$190 $559 
Stock-based compensation capitalized for software development costs$430 $541 
See accompanying notes to these unaudited condensed consolidated financial statements.
7



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.
The Company organizes its business into the following three reportable segments: Connected Machines, Subscriptions, and Accessories and Materials. See Note 16, Segment Information, for further discussion of the Company’s segment reporting structure.
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 annual report on Form 10-K for the fiscal year ended December 31, 2022 (The “Annual Report”). 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, 2022 was derived from the audited consolidated 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 months ended March 31, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending December 31, 2023, or any other period.
There were no material changes to the Company's significant accounting policies during the three months ended March 31, 2023.
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:
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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 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.
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 and certain marketable securities are highly liquid investments and are actively traded. The pricing information for these assets is 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. Other marketable securities such as U.S. Treasury securities are valued using observable inputs from similar assets, or from observable data in markets that are not active; these assets are classified as Level 2 of the fair value hierarchy. There were no transfers between Levels 1, 2 or 3 for any of the periods presented. There were no liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022.
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 awards subject to conditions other than service conditions are considered contingently issuable shares and are included in basic EPS based on the number of awards that would be issuable if the reporting date were the end of the contingency period.
3.Revenue and Deferred Revenue
Deferred revenue relates to performance obligations for which payments have been received from the customer prior to revenue recognition. Deferred revenue primarily consists of deferred subscription-based services. Deferred revenue also includes amounts allocated from the sale of a connected machine to the unspecified upgrades and enhancements and the Company’s cloud-based services. The Company has no material contract assets as of March 31, 2023 and December 31, 2022.
The following table summarizes the changes in the deferred revenue balance for the three months ended March 31, 2023 and 2022:
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Three Months Ended March 31,
20232022
(in thousands)
Deferred revenue, beginning of period$38,658 $35,405 
Recognition of revenue included in beginning of period
deferred revenue
(21,076)(18,039)
Revenue deferred, net of revenue recognized on contracts in
the respective period
24,194 18,321 
Deferred revenue, end of period$41,776 $35,687 
As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was equal to the deferred revenue balance.
The Company expects the following recognition of deferred revenue as of March 31, 2023:
Year Ended December 31,
2023 (remainder of year)202420252026Total
(in thousands)
Revenue expected to be recognized$35,886 $4,742 $1,120 $28 $41,776 
The Company’s revenue from contracts with customers disaggregated by major product lines, excluding sales-based taxes, are included in Note 16 under the heading “Segment Information.”
Revenue recognized during the three months ended March 31, 2023 related to performance obligations satisfied or partially satisfied was $1.0 million.
The following table presents the total revenue by geography based on the ship-to address for the periods indicated:
Three Months Ended March 31,
20232022
(in thousands)
North America*$147,755 $208,305 
International33,472 36,478 
Total revenue$181,227 $244,783 
*North America revenue consists of revenues from the United States and Canada.
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4.Cash, Cash Equivalents, and Financial Instruments
The following table shows the Company’s cash, cash equivalents, and marketable securities by significant investment category as of March 31, 2023 and December 31, 2022:
As of March 31, 2023
Adjusted CostAllowance for Credit Losses Total Unrealized GainsTotal Unrealized LossesFair ValueCash and Cash EquivalentsMarketable Securities
(in thousands)
Cash$191,390 $— $— $— $191,390 $191,390 $— 
Level 1:
Money market funds40,931    40,931 40,931  
Subtotal40,931    40,931 40,931  
Level 2:
U.S. treasury securities75,162   (151)75,011  75,011 
Subtotal75,162   (151)75,011  75,011 
Total$307,483 $ $ $(151)$307,332 $232,321 $75,011 

As of December 31, 2022
Adjusted CostAllowance for Credit Losses Total Unrealized GainsTotal Unrealized LossesFair ValueCash and Cash EquivalentsMarketable Securities
(in thousands)
Cash$155,459 $— $— $— $155,459 $155,459 $— 
Level 1:
Money market funds69,484    69,484 69,484  
Subtotal69,484    69,484 69,484  
Level 2:
U.S. treasury securities74,659   (403)74,256  74,256 
Subtotal74,659   (403)74,256  74,256 
Total$299,602 $ $ $(403)$299,199 $224,943 $74,256 
Marketable securities held as of March 31, 2023 generally mature over the next five to eighteen months.
5.Inventories
Inventories are comprised of the following:
As of
March 31,
2023
As of
December 31,
2022
(in thousands)
Raw materials$42,121 $40,911 
Finished goods282,419 340,557 
Total inventories$324,540 $381,468 
Inventories current$293,696 $351,682 
Inventories non-current (included in other assets)$30,844 $29,786 
The Company has included $1.2 million and $4.5 million in finished goods for connected machines that are currently undergoing rework prior to being in a sellable condition as of March 31, 2023 and December 31, 2022, respectively.
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6.     Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
As of
March 31,
2023
As of
December 31,
2022
(in thousands)
Sales incentives$22,862 $35,552 
Other accrued liabilities and other current liabilities24,152 34,223 
Total accrued expenses$47,014 $69,775 
7.    Revolving Credit Facility
On August 4, 2022, the Company entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A, Citigroup N.A., PNC Bank, N.A., KeyBank, N.A., and other parties. The Credit Agreement replaces the Company’s prior asset-based Credit Agreement with JPMorgan Chase Bank, N.A., Citigroup N.A., and Origin Bank. The Credit Agreement provides for a five-year revolving credit facility (the “Credit Facility”) of up to $300.0 million, maturing on August 4, 2027. In addition, during the term of the Credit Agreement, the Company may increase the aggregate amount of the Credit Facility by up to an additional $150.0 million, (for maximum aggregate lender commitments of up to $450.0 million), subject to customary conditions under the Credit Agreement, including obtaining a consent from participating lenders (or another lender, if applicable) to such increase. The Credit Facility may be used to issue letters of credit and for other business purposes, including working capital needs. The current unused fee rate is 0.175% on per annum basis.

As of March 31, 2023, and December 31, 2022 total unamortized debt issuance costs were $1.4 million and $1.5 million, respectively.

The Credit Agreement is collateralized by substantially all of the Company’s assets and contains affirmative and negative covenants, representations and warranties, events of default and other terms customary for loans of this nature. In particular, the Credit Agreement will not permit the leverage ratio to be greater than 3.0 to 1.0, measured on the last day of any fiscal quarter. In addition, the Credit Agreement will not permit the interest coverage ratio to be less than 3.0 to 1.0, for any period of four consecutive quarters, measured on the last day of any fiscal quarter. Management has determined that the Company was in compliance with all financial and non-financial debt covenants as of March 31, 2023. As of March 31, 2023 and December 31, 2022, no amounts were outstanding under the Credit Agreement and available borrowings were $300.0 million.
Generally, borrowings under the Credit Agreement bear interest at a rate based on an alternative base rate (“ABR”), plus, in each case, an applicable margin. The applicable margin will range from (a) borrowings bearing interest at the ABR 2.00%, and (b) borrowings bearing interest at the Adjusted Term Secured Overnight Financing Rate, the Adjusted Australian Dollar Rate, the Adjusted Canadian Dollar Offered Rate or the Adjusted New Zealand Dollar Rate, as applicable for the interest period in effect for such borrowing plus the applicable rate.

8.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.

The estimated annual effective tax rate was 29.2% and 25.1% for the three months ended March 31, 2023, and 2022, respectively. The Company’s provision for income taxes was $3.7 million and $7.9 million, respectively, for the three months ended March 31, 2023 and 2022. 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 discrete tax items including a stock-based compensation difference due to the decrease in stock price upon vesting versus the stock price at the grant date.
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
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assets will be realized. Accordingly, the Company has not recorded a valuation allowance against net deferred tax assets for any of the periods presented.
9.Capital Structure
As of March 31, 2023, the Company had 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. As of March 31, 2023, 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 51,096,063 shares of Class A common stock and 168,153,590 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. During the three months ended March 31, 2023 and 2022, 7,772,294 and 2,336,595 shares of Class B common stock were converted to Class A common stock, respectively.
Stock Repurchase Program

On July 19, 2022, the Company’s Board of Directors approved a common stock repurchase program under which the Company may repurchase shares of its outstanding Class A common stock up to an aggregate transactional value of $50 million, depending on the Company’s continuing analysis of market, financial, and other factors. The share repurchase program may be suspended or discontinued at any time and does not have a predetermined expiration date.

During the three months ended March 31, 2023, the Company repurchased and retired 346,699 shares of our Class A common stock for $3.2 million under this authorization.
Dividends
On December 21, 2022, the Company declared a special dividend of $0.35 per share on its Class A and Class B common stock, payable on February 15, 2023 to shareholders of record as of February 1, 2023. As part of the dividend, and pursuant to the underlying award agreements, holders of restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) received a dividend equivalent of $0.35 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards. The aggregate dividend of $81.4 million was to be satisfied in cash of $76.9 million payable to holders of Class A and Class B common stock with the remaining $4.5 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders prior to any subsequent forfeitures. Of the cash amount, $1.2 million remains payable to holders of unvested shares of Class A common stock upon vesting of the underlying shares with $0.2 million of the cash dividend payable classified as non-current and presented in other non-current liabilities on the consolidated balance sheets.
10.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 March 31,
20232022
(in thousands)
Equity classified awards
Restricted stock units$8,379 $6,826 
Stock options626 1,012 
Class B common stock 1,889 2,662 
Liability classified awards12 (230)
Total stock-based compensation$10,906 $10,270 
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The following table sets forth the total stock-based compensation cost included in the Company’s condensed consolidated statements of operations and comprehensive income or capitalized to assets for the periods indicated:
Three Months Ended March 31,
20232022
(in thousands)
Cost of revenue
Connected machines$183 $3 
Subscriptions115 52 
Accessories and materials275  
Total cost of revenue573 55 
Research and development3,906 4,011 
Sales and marketing3,205 2,868 
General and administrative2,737 2,024 
Total stock-based compensation expense$10,421 $8,958 
Capitalized for software development costs430 541 
Capitalized to inventories55 771 
Total stock-based compensation$10,906 $10,270 
As of March 31, 2023, there was $131.2 million of unrecognized stock-based compensation cost related to service-based awards which is expected to be recognized over a weighted-average period of 2.8 years. The total unrecognized compensation expense related to unvested performance-based restricted stock units (“PRSUs”) was $150.7 million as of March 31, 2023.
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 March 31, 2023, 42,615,720 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.
A summary of the Company’s service-based restricted stock unit (“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, 20226,364,022 $18.16 
Granted3,331,500 $10.24 
Dividend equivalent grants223,415  
Vested(105,713)$19.69 
Forfeited / cancelled(125,056)$16.89 
Outstanding at March 31, 20239,688,168 $15.43 

In 2022, the Company granted PRSUs under the 2021 Equity Incentive Plan to certain employees that represent shares potentially issuable in the future. The PRSUs vest in two equal tranches subject to the Company achieving cumulative adjusted earnings per share over eight quarters of $4.93 share and $6.16 per share, respectively, at any point during the 5-year performance period, subject to employees remaining with the Company through the vesting date. Adjusted earnings per share means GAAP net income adjusted to exclude income tax
16


expenses, as well as stock-based compensation expense and payroll tax expense specifically related to the PRSU awards.
A summary of the Company’s PRSU activity under the 2021 Equity Incentive Plan is as follows:

Number of
PRSUs (a)
Weighted-
Average
Grant Date
Fair Value
(per share)
Outstanding at December 31, 20226,295,000 $23.32 
Dividend equivalent grants224,351 $ 
Forfeited / cancelled(55,359)$23.37 
Outstanding at March 31, 20236,463,992 $23.32 
a.Represents the maximum number of PRSUs assuming all performance targets are achieved.
The expense recognized each period for these PRSUs is primarily dependent upon the Company’s estimate of the probability of achieving the performance targets. At March 31, 2023, the Company determined it was not probable any performance conditions would be achieved so no stock-based compensation was recorded for these PRSUs during the three months ended March 31, 2023.
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
Term
(Years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 20223,142,911 $20.00 4.6$ 
Forfeited / cancelled(33,499)$20.00 
Outstanding at March 31, 20233,109,412 $20.00 4.4$ 
Vested and exercisable at March 31, 20232,274,558 $20.00 4.1$ 
During the three months ended March 31, 2023 and 2022, no options were granted.
Certain employees received restricted stock unit equivalents (“RSU equivalents”) which upon vesting 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 March 31, 2023, the total recognized liability for these awards was immaterial.
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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 three months ended March 31, 2023 is as follows:
Number of
Unvested Shares
Weighted-
Average
Grant Date Fair Value (per share)
Outstanding at December 31, 20224,655,214 $20.00 
Vested(1,803,656)$20.00 
Forfeited / cancelled(103,906)$20.00 
Outstanding at March 31, 20232,747,652 $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
Term
(Years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2022358,000 $9.04 2.8$82 
Exercised(6,000)9.04 
Forfeited / cancelled(8,000)$9.04 
Outstanding at March 31, 2023344,000 $9.04 2.3$399 
Vested and exercisable at March 31, 2023344,000 $9.04 2.3$399 
During the three months ended March 31, 2023 and 2022, the total intrinsic value of options exercised was immaterial.
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 March 31, 2023, 8,422,446 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.
11.Commitments and Contingencies
Litigation
The Company is subject to certain outside claims and litigation arising in the ordinary course of business. Management is not aware of any contingencies which it believes will have a material effect on its financial position, results of operations or liquidity.
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12.Leases
The Company leases office space with lease terms ranging from one to six years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at the election of the Company to renew or extend the lease.

The Company has determined its leases should be classified as operating leases. Variable lease costs are comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance and are classified as lease cost due to the Company's election to not separate lease and non-lease components. The Company incurred operating lease costs of $1.4 million for the three months ended March 31, 2023 and 2022. The Company also incurred variable lease costs of $0.1 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively.
Cash paid for amounts included in the measurement of operating lease liabilities was $1.5 million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively. These amounts were included in net cash provided by operating activities in the Company's consolidated statements of cash flows.
As of March 31, 2023, the maturities of the Company's operating lease liabilities were as follows: 
Year Ending December 31,
Operating
Leases
(in thousands)
2023 (remainder of the year)$4,470 
20245,495 
20254,252 
20263,798 
2027967 
Total lease payments$18,982 
Less: imputed interest$(954)
Present value of operating lease liabilities$18,028 
Operating lease liabilities, current$5,474 
Operating lease liabilities, non-current$12,554 
As of March 31, 2023, the weighted average remaining operating lease term and the weighted average discount rate used to determine the operating lease liability were as follows:
As of March 31, 2023As of March 31, 2022
Weighted-average remaining lease term of operating leases3.5 years4.5 years
Weighted-average discount rate of operating leases2.5 %2.6 %

13.Restructuring

During the three months ended March 31, 2023, the Company undertook a restructuring plan to improve efficiency and streamline operations. The Company recognized $1.2 million of severance costs which was primarily settled within the three months ended March 31, 2023. Of this amount, $0.7 million, $0.3 million, $0.2 million, were recorded within research and development, selling and marketing, and general and administrative expense, respectively.

14.Employee Benefit Plan
The Company sponsors a 401(k) plan for the benefit of its employees who have attained at least 18 years of age. The Company matches 50% of the first 12% of an employee’s salary contributed to the plan on the first day of the month following their hire date. The Company contributed $0.7 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively.
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15.Net Income Per Share
The computation of net income per share is as follows:
Three Months Ended March 31,
20232022
(in thousands, except share and per share amounts)
Basic earnings per share:
Net income$9,099 $23,504 
Shares used in computation:
Weighted-average common shares outstanding, basic215,587,699 212,403,383 
Earnings per share, basic$0.04 $0.11 
Diluted earnings per share:
Net income$9,099 $23,504 
Shares used in computation:
Weighted-average common shares outstanding, basic215,587,699 212,403,383 
Weighted-average effect of potentially dilutive securities:
Unvested common stock subject to forfeiture2,813,251 8,170,977 
Employee stock options18,851 145,517 
Restricted stock units329,454 248,058 
Diluted weighted-average common shares outstanding218,749,255 220,967,935 
Diluted net income per share$0.04 $0.11 
The following potentially dilutive shares were excluded from the computation of diluted earnings per share for the periods presented because including them would have had an anti-dilutive effect:
Three Months Ended March 31,
20232022
Employee stock options3,109,412 3,256,069 
Restricted stock units8,940,648 3,987,963 
Unvested common stock subject to forfeiture657,228 128,447 

As of March 31, 2023, 6,463,992 PRSUs were not assessed for inclusion in diluted earnings per share, and any potential antidilutive shares were excluded from the table above because they are subject to performance conditions that were not achieved as of such date.
16.Segment Information
The Company’s operating segments are generally organized by the type of product or service offered. Similar operating segments have been aggregated into three reportable segments: Connected Machines, Subscriptions and Accessories and Materials. Segment information is presented in the same manner that the Company’s Chief Operating Decision Maker (“CODM”) reviews the results of operations in assessing performance and allocating resources. The CODM reviews revenue and gross profit for each of the reportable segments. Gross profit is defined as revenue less cost of revenue incurred by the segment. The Company does not allocate assets at the reportable segment level as these are managed on an entity wide group basis. As of March 31, 2023, long-lived assets located outside the United States, primarily located in Malaysia and China, were $18.0 million.
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The Connected Machines segment derives revenue from the sale of its connected machine hardware and related essential software. The Subscriptions segment derives revenue primarily from monthly and annual subscription fees and a portion of the revenue allocated to unspecified future upgrades and enhancements related to the essential software and access to the Company’s cloud-based services. The Accessories and Materials segment primarily consists of craft, DIY, home décor products and heat presses including the Cricut EasyPress, Cricut Mug Press, and Cricut Autopress. There are no internal revenue transactions between the Company’s segments.
Key financial performance measures of the segments including revenue, cost of revenue and gross profit are as follows:
Three Months Ended March 31,
20232022
(in thousands)
Connected Machines:
Revenue$34,131 $62,391 
Cost of revenue$33,066 $60,713 
Gross profit$1,065 $1,678 
Subscriptions:
Revenue$75,083 $64,778 
Cost of revenue$7,631 $6,252 
Gross profit$67,452 $58,526 
Accessories and Materials:
Revenue$72,013 $117,614 
Cost of revenue$63,864 $78,798 
Gross profit$8,149 $38,816 
Consolidated:
Revenue$181,227 $244,783 
Cost of revenue