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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, 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 August 1, 2023, the registrant had 52,972,343 shares of Class A Common Stock, and 166,857,988 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 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, consumer confidence, as well as current macro-economic and post-COVID-19 factors; 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 June 30, 2023As of December 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents$286,121 $224,943 
Marketable securities75,364 74,256 
Accounts receivable, net88,651 136,539 
Inventories294,330 351,682 
Prepaid expenses and other current assets18,574 23,842 
Total current assets763,040 811,262 
Property and equipment, net58,471 63,407 
Operating lease right-of-use asset14,576 17,078 
Intangible assets, net380 760 
Deferred tax assets31,311 23,819 
Other assets30,563 33,301 
Total assets$898,341 $949,627 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$67,171 $63,195 
Accrued expenses and other current liabilities48,289 69,775 
Deferred revenue, current portion39,605 34,869 
Operating lease liabilities, current portion5,439 5,436 
Dividends payable, current portion234,693 80,781 
Total current liabilities395,197 254,056 
Operating lease liabilities, net of current portion11,141 13,935 
Deferred revenue, net of current portion2,812 3,789 
Other non-current liabilities6,884 5,112 
Total liabilities416,034 276,892 
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 June 30, 2023 and December 31, 2022.
  
Common stock, par value $0.001 per share, 1,250,000,000 shares authorized as of June 30, 2023, 219,830,304 shares issued and outstanding as of June 30, 2023; 1,250,000,000 shares authorized as of December 31, 2022, 219,656,587 shares issued and outstanding as of December 31, 2022.
220 220 
Additional paid-in capital482,724 672,990 
Retained earnings  
Accumulated other comprehensive loss(637)(475)
Total stockholders’ equity482,307 672,735 
Total liabilities and stockholders’ equity$898,341 $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 June 30,Six Months Ended June 30,
2023202220232022
Revenue:
Connected machines$37,284 $35,438 $71,415 $97,829 
Subscriptions76,129 67,604 151,212 132,382 
Accessories and materials64,352 80,715 136,365 198,329 
Total revenue177,765 183,757 358,992 428,540 
Cost of revenue:
Connected machines33,765 34,882 66,831 95,595 
Subscriptions7,898 6,181 15,529 12,433 
Accessories and materials48,447 57,266 112,311 136,064 
Total cost of revenue90,110 98,329 194,671 244,092 
Gross profit87,655 85,428 164,321 184,448 
Operating expenses:
Research and development16,346 20,055 34,147 40,585 
Sales and marketing29,407 31,516 59,023 64,305 
General and administrative22,652 13,828 41,372 28,122 
Total operating expenses68,405 65,399 134,542 133,012 
Income from operations19,250 20,029 29,779 51,436 
Total other income (expense), net3,691 322 6,006 283 
Income before provision for income taxes22,941 20,351 35,785 51,719 
Provision for income taxes6,917 6,524 10,662 14,388 
Net income$16,024 $13,827 $25,123 $37,331 
Other comprehensive income (loss):
Change in net unrealized gains (losses) on marketable securities, net of tax$(318)$(343)$(130)$(343)
Change in foreign currency translation adjustment, net of tax(50)(110)(32)(122)
Comprehensive income$15,656 $13,374 $24,961 $36,866 
Earnings per share, basic$0.07 $0.06 $0.12 $0.17 
Earnings per share, diluted$0.07 $0.06 $0.11 $0.17 
Weighted-average common shares outstanding, basic216,963,697 214,852,256 216,236,887 213,634,584 
Weighted-average common shares outstanding, diluted219,915,839 220,791,640 219,597,977 221,199,963 
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 
Net income— — — 16,024 — 16,024 
Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax884,619 1 (4,583)— — (4,582)
Forfeiture of unvested common stock and dividend equivalents(199,898)— 120 — — 120 
Repurchase of common stock(104,070)— (967)— — (967)
Dividends declared— — (209,502)(25,123)— (234,625)
Stock-based compensation— — 12,542 — — 12,542 
Other comprehensive loss— — — — (368)(368)
Balance as of June 30, 2023219,830,304 $220 $482,724 $ $(637)$482,307 
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 March 31, 2022221,809,614 $222 $726,527 $(20,056)$(67)$706,626 
Net income— — — 13,827 — 13,827 
Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax500,237 — (3,218)— — (3,218)
Forfeiture of unvested common stock(123,492)— — — —  
Stock-based compensation— — 11,478 — — 11,478 
Other comprehensive loss— — — — (453)(453)
Balance as of June 30, 2022222,186,359 $222 $734,787 $(6,229)$(520)$728,260 
See accompanying notes to these unaudited condensed consolidated financial statements.
6


Cricut, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six Months Ended June 30,
20232022
Cash flows from operating activities:
Net income$25,123 $37,331 
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation and amortization (including amortization of debt issuance costs)
14,378 12,129 
Bad debt expense6,563  
Impairments1,959  
Stock-based compensation22,307 19,360 
Deferred income tax(7,447) 
Non-cash lease expense2,478 2,406 
Unrealized foreign currency loss599  
Provision for inventory obsolescence10,280 4,454 
Other(1,290)(59)
Changes in operating assets and liabilities:
Accounts receivable40,665 118,447 
Inventories50,356 (64,783)
Prepaid expenses and other current assets5,286 4,237 
Other assets(523)(594)
Accounts payable4,277 (91,840)
Accrued expenses and other current liabilities and other non-current liabilities
(16,457)(25,990)
Operating lease liabilities(2,702)(1,861)
Deferred revenue3,760 (231)
Net cash and cash equivalents provided by operating activities
159,612 13,006 
Cash flows from investing activities:
Purchases of marketable securities (84,601)
Proceeds from maturities of marketable securities 807 
Purchases of property and equipment, including capitalized software development costs
(12,825)(17,775)
Net cash and cash equivalents used in investing activities(12,825)(101,569)
Cash flows from financing activities:
Repurchases of common stock(4,210) 
Repurchase of compensatory units (14)
Proceeds from exercise of stock options208 31 
Employee tax withholding payments on stock-based awards(5,799)(5,048)
Cash dividend(75,808) 
Net cash and cash equivalents used in financing activities(85,609)(5,031)
Effect of exchange rate on changes on cash and cash equivalents (232)
Net increase (decrease) in cash and cash equivalents61,178 (93,826)
Cash and cash equivalents at beginning of period224,943 241,597 
Cash and cash equivalents at end of period$286,121 $147,771 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$ $ 
Cash paid during the period for income taxes$12,086 $5,967 
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$ $4,307 
Property and equipment included in accounts payable and accrued expenses and other current liabilities
$2,447 $5,895 
Tax withholdings on stock-based awards included in accrued expenses and other current liabilities$483 $388 
Stock-based compensation capitalized for software development costs$975 $1,153 
Leasehold improvements acquired through tenant allowances$ $752 
Dividends declared but unpaid$234,625 $ 
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 and six months ended June 30, 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 six months ended June 30, 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:
8


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 June 30, 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.
Accounts Receivable
Accounts receivable are recorded at original invoice amounts less estimates for credit losses. Management determines the allowance for credit losses by specifically identifying troubled accounts and by using historical write off experience, adjusted for current market conditions and reasonable supportable forecasts of future economic conditions, applied to an aging of all other accounts. If a retailer fails to follow the policies and guidelines in our sales agreements, we may choose to temporarily or permanently stop shipping product to that retailer.
As of June 30, 2023, and December 31, 2022, the Company had allowances against accounts receivable of $7.0 million and $0.4 million, respectively.
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 June 30, 2023 and December 31, 2022.
9


The following table summarizes the changes in the deferred revenue balance for the six months ended June 30, 2023 and 2022:
Six Months Ended June 30,
20232022
(in thousands)
Deferred revenue, beginning of period$38,658 $35,405 
Recognition of revenue included in beginning of period
deferred revenue
(27,416)(23,938)
Revenue deferred, net of revenue recognized on contracts in
the respective period
31,175 23,707 
Deferred revenue, end of period$42,417 $35,174 
As of June 30, 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 June 30, 2023:
Year Ended December 31,
2023 (remainder of year)202420252026Total
(in thousands)
Revenue expected to be recognized$31,828 $9,125 $1,349 $115 $42,417 
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 and six months ended June 30, 2023 related to performance obligations satisfied or partially satisfied was $0.2 million and $1.2 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,
2023202220232022
(in thousands)
North America*$145,124 $159,479 $292,880 $367,784 
International32,641 24,278 66,112 60,756 
Total revenue$177,765 $183,757 $358,992 $428,540 
*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 June 30, 2023 and December 31, 2022:
As of June 30, 2023
Adjusted CostAllowance for Credit Losses Total Unrealized GainsTotal Unrealized LossesFair ValueCash and Cash EquivalentsMarketable Securities
(in thousands)
Cash$247,365 $— $— $— $247,365 $247,365 $— 
Level 1:
Money market funds38,756    38,756 38,756  
Subtotal38,756    38,756 38,756  
Level 2:
U.S. treasury securities75,942   (578)75,364  75,364 
Subtotal75,942   (578)75,364  75,364 
Total$362,063 $ $ $(578)$361,485 $286,121 $75,364 

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 June 30, 2023 generally mature over the next five to eighteen months.
5.Inventories
Inventories are comprised of the following:
As of
June 30,
2023
As of
December 31,
2022
(in thousands)
Raw materials$39,530 $40,911 
Finished goods281,484 340,557 
Total inventories$321,014 $381,468 
Inventories current$294,330 $351,682 
Inventories non-current (included in other assets)$26,684 $29,786 
The Company has included zero and $4.5 million in finished goods for connected machines that are currently undergoing rework prior to being in a sellable condition as of June 30, 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
June 30,
2023
As of
December 31,
2022
(in thousands)
Sales incentives$23,536 $35,552 
Other accrued liabilities and other current liabilities24,753 34,223 
Total accrued expenses$48,289 $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 replaced 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 June 30, 2023, and December 31, 2022 total unamortized debt issuance costs were $1.3 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 June 30, 2023. As of June 30, 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 30.2% and 29.8% for the three and six months ended June 30, 2023, respectively, and 32.1% and 27.8% for the three and six months ended June 30, 2022, respectively. The Company’s provision for income taxes was $6.9 million and $10.7 million, respectively, for the three and six months ended June 30, 2023, and $6.5 million and $14.4 million, respectively, for the three and six months ended June 30, 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
12


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 June 30, 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 June 30, 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 52,675,233 shares of Class A common stock and 167,155,071 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 six months ended June 30, 2023 and 2022, 8,573,915 and 5,653,017 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 six months ended June 30, 2023, the Company repurchased and retired 450,769 shares of our Class A common stock for $4.2 million under this authorization.
Dividends
On May 18, 2023, the Company declared a special dividend of $1.00 per share on its Class A and Class B common stock, payable on July 17, 2023 to shareholders of record as of July 3, 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 $1.00 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards. The aggregate dividend of $234.6 million was to be satisfied in cash of $219.8 million payable to holders of Class A and Class B common stock with the remaining $14.8 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders prior to any subsequent forfeitures.
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.
Dividends payable includes dividends declared but not yet paid and prior dividends on unvested shares of Class A common stock payable upon future vesting. $0.8 million of the cash dividend payable is classified as non-current and presented in other non-current liabilities on the consolidated balance sheets due to vesting conditions.
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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 June 30,Six Months Ended June 30,
2023202220232022
(in thousands)
Equity classified awards
Restricted stock units$10,640 $8,424 $19,019 $15,250 
Stock options520 906 1,146 1,918 
Class B common stock 1,383 2,148 3,272 4,810 
Liability classified awards14 22 26 (208)
Total stock-based compensation$12,557 $11,500 $23,463 $21,770 
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 June 30,Six Months Ended June 30,
2023202220232022
(in thousands)
Cost of revenue
Connected machines$191 $9 $374 $12 
Subscriptions214 107 329 159 
Accessories and materials249  524  
Total cost of revenue654 116 1,227 171 
Research and development4,717 4,915 8,623 8,926 
Sales and marketing3,001 3,255 6,206 6,123 
General and administrative3,514 2,116 6,251 4,140 
Total stock-based compensation expense$11,886 $10,402 $22,307 $19,360 
Capitalized for software development costs545 612 975 1,153 
Capitalized to inventories126 486 181 1,257 
Total stock-based compensation$12,557 $11,500 $23,463 $21,770 
As of June 30, 2023, there was $119.7 million of unrecognized stock-based compensation cost related to service-based awards which is expected to be recognized over a weighted-average period of 2.7 years. The total unrecognized compensation expense related to unvested performance-based restricted stock units (“PRSUs”) was $147.2 million as of June 30, 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 June 30, 2023, 41,746,040 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 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 
Granted3,722,994 $10.60 
Dividend equivalent grants223,415  
Vested(1,549,421)$18.53 
Forfeited / cancelled(266,194)$15.52 
Outstanding at June 30, 20238,494,816 $14.83 
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 per 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 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(205,564)$23.37 
Outstanding at June 30, 20236,313,787 $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 June 30, 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 six months ended June 30, 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(92,560)$20.00 
Outstanding at June 30, 20233,050,351 $20.00 4.0$ 
Vested and exercisable at June 30, 20232,281,992 $20.00 3.8$ 
During the six months ended June 30, 2023 and 2022, no options were granted.
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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 June 30, 2023, the total recognized liability for these awards was immaterial.
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, 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(1,935,246)$20.00 
Forfeited / cancelled(303,804)$20.00 
Outstanding at June 30, 20232,416,164 $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(22,000)9.04 
Forfeited / cancelled(40,000)$9.04 
Outstanding at June 30, 2023296,000 $9.04 2.3$27 
Vested and exercisable at June 30, 2023296,000 $9.04 2.3$27 
During the six months ended June 30, 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 June 30, 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.
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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.
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 $1.3 million and $2.7 million for the three and six months ended June 30, 2023, respectively, and $1.3 million and $2.7 million for the three and six months ended June 30, 2022, respectively. The Company also incurred variable lease costs of $0.1 million and $0.2 million, for the three and six months ended June 30, 2023, respectively, and $0.1 million and $0.3 million for the three and six months ended June 30, 2022, respectively.
Cash paid for amounts included in the measurement of operating lease liabilities was $1.5 million and $3.0 million for the three and six months ended June 30, 2023, respectively, and $1.5 million and $2.8 million for the three and six months ended June 30, 2022, respectively. These amounts were included in net cash provided by operating activities in the Company's consolidated statements of cash flows.
As of June 30, 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)$2,942 
20245,445 
20254,250 
20263,796 
2027967 
Total lease payments$17,400 
Less: imputed interest$(820)
Present value of operating lease liabilities$16,580 
Operating lease liabilities, current$5,439 
Operating lease liabilities, non-current$11,141 
As of June 30, 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 June 30, 2023As of June 30, 2022
Weighted-average remaining lease term of operating leases3.3 years4.2 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.
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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 $1.4 million for the three and six months ended June 30, 2023, respectively, and $0.6 million and $1.4 million for the three and six months ended June 30, 2022, respectively.
15.Net Income Per Share
The computation of net income per share is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in thousands, except share and per share amounts)
Basic earnings per share:
Net income$16,024 $13,827 $25,123 $37,331 
Shares used in computation:
Weighted-average common shares outstanding, basic216,963,697 214,852,256 216,236,887 213,634,584 
Earnings per share, basic$0.07 $0.06 $0.12 $0.17 
Diluted earnings per share:
Net income$16,024 $13,827 $25,123 $37,331 
Shares used in computation:
Weighted-average common shares outstanding, basic216,963,697 214,852,256 216,236,887 213,634,584 
Weighted-average effect of potentially dilutive securities:
Unvested common stock subject to forfeiture1,740,938 5,439,764 2,283,285 6,841,217 
Employee stock options32,133 2,042 14,971 81,850 
Restricted stock units1,179,071 497,578 1,062,834 642,312 
Diluted weighted-average common shares outstanding219,915,839 220,791,640 219,597,977 221,199,963 
Diluted net income per share$0.07 $0.06 $0.11 $0.17 
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 June 30,Six Months Ended June 30,
2023202220232022
Employee stock options3,050,351 3,245,818 3,050,351 3,245,818 
Restricted stock units4,728,505 6,174,330 8,068,678 3,371,942 
Unvested common stock subject to forfeiture367,133 1,062,247 552,113 511,094 
As of June 30, 2023, 6,313,787 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
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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 June 30, 2023, long-lived assets located outside the United States, primarily located in Malaysia and China, were $15.0 million.
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 June 30,Six Months Ended June 30,
2023202220232022
(in thousands)
Connected Machines:
Revenue$37,284 $35,438 $71,415 $97,829 
Cost of revenue33,765 34,882 66,831 95,595 
Gross profit$3,519 $556 $4,584 $2,234 
Subscriptions:
Revenue$76,129 $67,604 $151,212 $132,382 
Cost of revenue7,898 6,181 15,529 12,433 
Gross profit$68,231 $61,423 $135,683 $119,949 
Accessories and Materials:
Revenue$64,352 $80,715 $136,365 $198,329 
Cost of revenue48,447 57,266 112,311 136,064 
Gross profit$15,905 $23,449 $24,054 $62,265 
Consolidated:
Revenue$177,765 $183,757 $358,992 $428,540 
Cost of revenue90,110 98,329 194,671 244,092 
Gross profit$87,655 $85,428 $164,321 $184,448 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our interim condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”). This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in the sections titled “Risk Factors” and “Note Regarding Forward-Looking Statements.”
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Overview of Our Business and History
At Cricut, our mission is to help people lead creative lives. We have designed and built a creativity platform that enables our engaged and loyal community of over 8.4 million users to turn ideas into professional-looking handmade goods. With our highly versatile connected machines, design apps and accessories and materials, our users create everything from personalized birthday cards, mugs and T-shirts to large-scale interior decorations.
Our users’ journeys typically begin with the purchase of a connected machine. We currently sell a portfolio of connected machines that cut, write, score and create other decorative effects using a wide variety of materials including paper, vinyl, iron-on vinyl, pens, and more. Our connected machines are designed for a wide range of uses and are available at a variety of price points (MSRP by machine family as of June 30, 2023):
Cricut Joy for personalization, organization, and customization, $179.00 MSRP
Cricut Explore family for cutting, writing and scoring, $249.00 - $319.00 MSRP
Cricut Maker family for cutting, writing, scoring and adding decorative effects to a wider range of materials, $399.00 - $429.00 MSRP
Cricut Venture for cutting, writing, and scoring large-format projects at professional speeds, $999.00 MSRP
Our software integrates our connected machines and design apps, allowing our users to create and share seamlessly. Our software is cloud-based, meaning that users can access and work on their projects anywhere, at any time, across desktops or mobile devices. We enable our users to be inspired, to create and share projects with the Cricut community and to follow others doing the same. On our apps, users can find inspiration, purchase or upload content like fonts and images, design a project from scratch or find a vast array of ready-to-make projects.
Users can leverage the full power of our platform by using our connected machines together with our free design apps, in-app purchases and subscription offerings to design and complete projects. All users can access a select number of free images, fonts and projects from our design apps or upload their own. In addition, we offer a wider selection of images, fonts and projects for purchase à la carte, including licensed content from partners with well-known brands and characters, like major motion picture studios. We also have two subscription offerings: Cricut Access and Cricut Access Premium. Cricut Access provides a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care. Cricut Access is billed monthly for $9.99 per month or annually for $95.88 per year. Cricut Access Premium includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping and is billed annually for $119.88 per year. As of June 30, 2023, we had over 2.7 million Paid Subscribers to Cricut Access and Cricut Access Premium.
We sell a broad range of accessories and materials that bring our users’ designs to life, from advanced tools like heat presses to Cricut-branded rulers, scoring tools, pens, paper and iron-on vinyl, all designed to work seamlessly with our connected machines. Designing and completing projects drives repeat purchases of Cricut-branded accessories and materials.
We design and develop our software and hardware products, and we work with third-party contract manufacturers to source components and finished goods and with third-party logistics companies to warehouse and distribute our products.
We sell our connected machines and accessories and materials through our brick-and-mortar and online retail partners, as well as through our website at cricut.com. Our partners include Amazon, Hobby Lobby, HSN, Jo-Ann, Michaels, Target, Walmart and many others. We also sell our products, including subscriptions to Cricut Access and Cricut Access Premium, on cricut.com.
Historically, we have experienced the highest revenue levels in the fourth quarter of the year, coinciding with the holiday shopping season in the United States. For example, in 2020, 2021 and 2022, our fourth quarter represented 39%, 30% and 32% of total revenue for the year, respectively. Our promotional discounting activity is higher in the fourth quarter as well, which negatively impacts gross margin during this period. For example, gross margin in the fourth quarter of 2022 was 30%, compared to gross margin of 39% for all of 2022. Additionally, sales of accessories and materials typically rise and fall with seasonal holiday crafting periods. The yearly seasonality patterns experienced in 2020, 2021, and 2022 are not representative of our typical historical patterns due to the unique aspects of the pandemic and condition of the global economy. For example, we experienced unusually high
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demand in the first and second quarters of 2021, which is inconsistent with normal seasonality patterns. In 2022, we experienced a deceleration of sales post-Q1 due to the global economic slowdown which drove a deviation from our typically expected seasonality. As the impact of the pandemic and global economy challenges on behaviors abate, we expect to return to a more normal seasonality pattern. As we continue to grow internationally, we expect we may experience seasonality in additional markets, which may differ from the seasonality experienced in the United States.
On March 29, 2021, we completed an initial public offering (“IPO”), in which we 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. We received aggregate net proceeds of $242.7 million after deducting offering costs, underwriting discounts and commissions of $22.3 million. On April 28, 2021, we 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.
For more information regarding our business model, factors affecting our performance, and seasonality, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Form 10-K.
Key Business Metrics
In addition to the measures presented in our interim condensed consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, identify trends and make strategic decisions.
As of June 30,
20232022
Users (in thousands)8,446 7,192 
Percentage of Users Creating in Trailing 90 Days43 %51 %
Number of Users Creating in Trailing 90 Days3,652 3,670 
Paid Subscribers (in thousands)2,722 2,367 
Three Months Ended June 30,
20232022
Subscription ARPU$9.13 $9.59 
Accessories and Materials ARPU$7.71 $11.45 
Users
We define a User as a registered user of at least one registered connected machine as of the end of a period. One user may own multiple registered connected machines but is only counted once if that user registers those connected machines by using the same email address. If possession of a connected machine is transferred to a new owner and registered by that new owner, the new owner is added to the total user count and the prior owner is removed from the total user count if the prior owner does not own any other registered connected machines. User count is a key indicator of the health of our business, because changes in the number of users reflects changes in connected machine sales and represents opportunities for us to drive additional sales of subscriptions and accessories and materials. There are certain limitations associated with this metric. For example, this metric does not capture whether a User is active in using a connected machine and does not indicate whether a User is purchasing subscriptions or accessories and materials. We compensate for these limitations by also reviewing other metrics that capture portions of this information, including the metrics below.
Percentage of Users Creating in Trailing 90 Days
We define the Percentage of Users Creating in Trailing 90 Days as the percentage of users who have used a connected machine for any activity, such as cutting, writing or any other activity enabled by our connected machines, in the past 90 days. This metric is a key indicator of our engagement with users, which helps drive sales
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of subscriptions and accessories and materials. There are certain limitations associated with this metric. For example, this metric does not capture how active a User is during the 90-day period, nor whether a User is purchasing subscriptions or accessories and materials. We compensate for some of these limitations by also reviewing other metrics that capture portions of this information, including the metrics below.
Paid Subscribers
We define Paid Subscribers as the number of users with a subscription to Cricut Access or Cricut Access Premium, excluding cancelled, unpaid or free trial subscriptions, as of the end of a period. Paid Subscribers is a key metric to track growth in our subscriptions revenue and potential leverage in our gross margin.
Subscription ARPU
We define Subscription ARPU as Subscriptions revenue divided by average users in a period. Subscription ARPU allows us to forecast Subscriptions revenue over time and is an indicator of our ability to expand with users and of user engagement with our subscription offerings.
Accessories and Materials ARPU
We define Accessories and Materials ARPU as Accessories and Materials revenue divided by average users in a period. Accessories and Materials ARPU allows us to forecast Accessories and Materials revenue over time and is an indicator of our ability to expand with users, particularly the volume of projects created by our users.
Components of our Results of Operations
We operate and manage our business in three reportable segments: Connected Machines, Subscriptions and Accessories and Materials. We identify our reportable segments based on the information used by management to monitor performance and make operating decisions. See Note 16 to our unaudited consolidated financial statements included elsewhere in this filing for additional information regarding our reportable segments.
Revenue
Connected Machines
We generate Connected Machines revenue from sales of our portfolio of connected machines, currently consisting of machines in four product families, Cricut Maker, which includes Maker and Maker 3, Cricut Explore, which includes Explore Air 2 and Explore 3, Cricut Joy, and Cricut Venture, net of sales discounts, incentives and returns. Connected Machines revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.
Subscriptions
We generate Subscriptions revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium and a minimal amount of revenue allocated to the unspecified future upgrades and enhancements related to the essential software and access to our cloud-based services. For a monthly or annual subscription fee, Cricut Access includes a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care. For an annual subscription fee, Cricut Access Premium includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping. Subscriptions revenue excludes à la carte digital content purchases. Subscriptions revenue is recognized on a ratable basis over the subscription term.
Accessories and Materials
We generate Accessories and Materials revenue from sales of ancillary products, such as Cricut EasyPress, Cricut Mug Press, hand tools, machine replacement tools and blades, project materials such as vinyl and iron-on and sales of à la carte digital content purchases, including fonts, images and projects. Accessories and Materials revenue is recognized for sales of such items, net of sales discounts, incentives and returns and includes amounts allocated to the material right for discounts on materials and accessories available only to paid subscribers. Accessories and Materials revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.
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Cost of Revenue
Connected Machines
Cost of revenue related to Connected Machines consists of product costs, including costs of components, costs of contract manufacturers for production, inspecting and packaging, shipping, receiving, handling, warehousing and fulfillment, duties and other applicable importing costs, warranty replacement, excess and obsolete inventory write-downs, tooling and equipment depreciation and royalties. We expect our cost of revenue related to Connected Machines as a percentage of revenue to fluctuate in the near term as we continue selling through end of life machines, address global supply chain challenges and continue to invest in the growth of our business and decrease over the long term as we drive greater scale and efficiency in our business.
Subscriptions
Cost of revenue related to Subscriptions consists primarily of hosting fees, digital content costs, amortization of capitalized software development costs and software maintenance costs. We expect our cost of revenue related to Subscriptions as a percentage of revenue to fluctuate in the near term as we expand our content offerings, including localized content for international target markets, and decrease over time as we drive greater scale and efficiency in our business.
Accessories and Materials
Costs of revenue related to Accessories and Materials consists of product costs, including costs of components, costs of contract manufacturers for production, inspecting and packaging, shipping, receiving, handling, warehousing and fulfillment, duties and other applicable importing costs, warranty replacement, excess and obsolete inventory write-downs, tooling and equipment depreciation and royalties. We expect our cost of revenue related to Accessories and Materials as a percentage of revenue to fluctuate in the near term as we address global supply chain challenges and continue to invest in the growth of our business and decrease over the long term as we drive greater scale and efficiency in our business.
Operating Expenses
Research and Development
Research and development expenses consist primarily of costs associated with the development of our connected machines, software and accessories and materials, including personnel-related expenses for engineering, product development and quality assurance, as well as prototype costs, service fees incurred by contracting with vendors and allocated overhead. We expect our research and development expenses to fluctuate in the near term as we refine our product roadmaps. Longer term, we expect research and development expense to return to our long-term expected range of 7-8% as a percentage of revenue. We expect to produce gross savings of approximately $4.6 million during 2023 as a result of the January 2023 restructuring plan.
Sales and Marketing
Sales and marketing expenses consist primarily of the advertising and marketing of our products, third-party payment processing fees, personnel-related expenses, including salaries and bonuses, benefits and stock-based compensation expense, as well as sales incentives, professional services, promotional items, and allocated overhead costs. We expect our sales and marketing expenses as a percentage of revenue to fluctuate in the near term. Longer term, we expect sales and marketing expense to return to our long-term expected range of 8-10% as a percentage of revenue. We expect to produce gross savings of approximately $1.1 million during 2023 as a result of the January 2023 restructuring plan.
General and Administrative
General and administrative expenses consist of personnel-related expenses for our finance, legal, human resources and administrative personnel, including salaries and bonuses, benefits and stock-based compensation expense, as well as the costs of professional services, any allocated overhead, information technology, impairment charges of unused equipment, and other administrative expenses. We expect our general and administrative expenses as a percentage of revenue to increase in the near term as we expand our operations, invest in systems enhancements, and incur expenses required of a public company. Longer term, we expect general and
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administrative expense to return to our long-term expected range of 3-4% as a percentage of revenue. We expect to produce gross savings of approximately $1.0 million during 2023 as a result of the January 2023 restructuring plan.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs.
Provision for Income Taxes
Provision for income taxes consists of income taxes in the United States and certain state and foreign jurisdictions in which we conduct business. We have not recorded a valuation allowance against our deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will be realized.
Results of Operations
The following tables set forth the components of our interim condensed consolidated statements of operations for each of the periods presented and as a percentage of our revenue for those periods. The period-to-period comparison of results of operations is not necessarily indicative of results of future periods.
The following table is presented in thousands:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(in thousands)
Revenue:
Connected machines$37,284 $35,438 $71,415 $97,829 
Subscriptions76,129 67,604 151,212 132,382 
Accessories and materials64,352 80,715 136,365 198,329 
Total revenue177,765 183,757 358,992 428,540 
Cost of revenue:
Connected machines(1)
33,765 34,882 66,831 95,595 
Subscriptions(1)
7,898 6,181 15,529 12,433 
Accessories and materials(1)
48,447 57,266 112,311 136,064 
Total cost of revenue90,110 98,329 194,671 244,092 
Gross profit87,655 85,428 164,321 184,448 
Operating expenses:
Research and development(1)
16,346 20,055 34,147 40,585 
Sales and marketing(1)
29,407 31,516 59,023 64,305 
General and administrative