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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, 2024
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 1, 2024, the registrant had 51,394,617 shares of Class A Common Stock, and 165,319,847 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 March 31, 2024As of December 31, 2023
(unaudited)
Assets
Current assets:
Cash and cash equivalents$178,992 $142,187 
Marketable securities102,703 102,952 
Accounts receivable, net77,597 111,247 
Inventories225,367 244,469 
Prepaid expenses and other current assets11,198 19,114 
Total current assets595,857 619,969 
Property and equipment, net44,616 47,614 
Operating lease right-of-use asset11,076 12,353 
Deferred tax assets39,058 34,823 
Other assets33,104 35,363 
Total assets$723,711 $750,122 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$45,206 $76,860 
Accrued expenses and other current liabilities58,071 71,933 
Deferred revenue, current portion43,912 40,304 
Operating lease liabilities, current portion4,955 5,230 
Dividends payable, current portion809 2,137 
Total current liabilities152,953 196,464 
Operating lease liabilities, net of current portion7,792 8,938 
Deferred revenue, net of current portion2,721 2,931 
Other non-current liabilities7,673 6,916 
Total liabilities171,139 215,249 
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, 2024 and December 31, 2023.
  
Common stock, par value $0.001 per share, 1,250,000,000 shares authorized as of March 31, 2024, 216,702,784 shares issued and outstanding as of March 31, 2024; 1,250,000,000 shares authorized as of December 31, 2023, 217,915,713 shares issued and outstanding as of December 31, 2023.
217 218 
Additional paid-in capital504,293 505,864 
Retained earnings48,161 28,514 
Accumulated other comprehensive income (loss)(99)277 
Total stockholders’ equity552,572 534,873 
Total liabilities and stockholders’ equity$723,711 $750,122 
    
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,
20242023
Revenue:
Platform$78,286 $76,241 
Products89,106 104,986 
Total revenue167,392 181,227 
Cost of revenue:
Platform8,759 7,761 
Products67,039 96,800 
Total cost of revenue75,798 104,561 
Gross profit91,594 76,666 
Operating expenses:
Research and development14,853 17,801 
Sales and marketing33,030 29,616 
General and administrative18,506 18,720 
Total operating expenses66,389 66,137 
Income from operations25,205 10,529 
Other income (expense):
Interest income2,418 1,753 
Interest expense(81)(79)
Other income748 641 
Total other income, net3,085 2,315 
Income before provision for income taxes28,290 12,844 
Provision for income taxes8,643 3,745 
Net income$19,647 $9,099 
Other comprehensive income (loss):
Change in net unrealized gains (losses) on marketable securities, net of tax$(288)$188 
Change in foreign currency translation adjustment, net of tax(88)18 
Comprehensive income$19,271 $9,305 
Earnings per share, basic$0.09 $0.04 
Earnings per share, diluted$0.09 $0.04 
Weighted-average common shares outstanding, basic215,549,467 215,587,699 
Weighted-average common shares outstanding, diluted216,865,052 218,749,255 
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, 2023217,915,713 $218 $505,864 $28,514 $277 $534,873 
Net income— — — 19,647 — 19,647 
Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax548,344 1 (2,324)— — (2,323)
Forfeiture of unvested common stock and dividend equivalents(64,001)— 73 — — 73 
Repurchase of common stock(1,697,272)(2)(10,793)— — (10,795)
Stock-based compensation— — 11,473 — — 11,473 
Other comprehensive loss— — — — (376)(376)
Balance as of March 31, 2024216,702,784 $217 $504,293 $48,161 $(99)$552,572 
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 
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,
20242023
Cash flows from operating activities:
Net income$19,647 $9,099 
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation and amortization (including amortization of debt issuance costs)
7,496 6,888 
Bad debt expense992 1,107 
Impairments 441 
Stock-based compensation10,757 10,421 
Deferred income tax(4,140)(3,311)
Non-cash lease expense1,272 1,238 
Unrealized foreign currency loss605 636 
Provision for inventory obsolescence563 8,477 
Other(739)(634)
Changes in operating assets and liabilities:
Accounts receivable32,011 44,416 
Inventories20,849 48,506 
Prepaid expenses and other current assets8,497 8,351 
Other assets259 (466)
Accounts payable(31,096)(24,192)
Accrued expenses and other current liabilities and other non-current liabilities
(12,280)(17,573)
Operating lease liabilities(1,403)(1,353)
Deferred revenue3,398 3,118 
Net cash and cash equivalents provided by operating activities
56,688 95,169 
Cash flows from investing activities:
Purchases of marketable securities(25,442) 
Proceeds from maturities of marketable securities25,440  
Purchases of property and equipment, including capitalized software development costs
(5,117)(7,741)
Net cash and cash equivalents used in investing activities(5,119)(7,741)
Cash flows from financing activities:
Repurchases of common stock(10,795)(3,244)
Proceeds from exercise of stock options 55 
Employee tax withholding payments on stock-based awards(2,408)(1,358)
Cash dividend(1,439)(75,531)
Net cash and cash equivalents used in financing activities(14,642)(80,078)
Effect of exchange rate on changes on cash and cash equivalents(122)28 
Net increase in cash and cash equivalents36,805 7,378 
Cash and cash equivalents at beginning of period142,187 224,943 
Cash and cash equivalents at end of period$178,992 $232,321 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$ $ 
Cash paid during the period for income taxes$151 $115 
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment included in accounts payable and accrued expenses and other current liabilities
$1,786 $2,027 
Tax withholdings on stock-based awards included in accrued expenses and other current liabilities$367 $190 
Stock-based compensation capitalized for software development costs$330 $430 
Dividends declared but unpaid$831 $ 
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 platform, versatile connected machines, and accessories and materials, users create everything from personalized birthday cards, mugs and T-shirts to large-scale interior decorations. The Company’s subscription services, connected machines and related accessories and materials are primarily marketed under the Cricut brand in the United States, as well as Europe and other countries around 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 the platform, connected machines, and accessories and materials. In addition, Cricut sells a broad line of images, fonts, and projects for purchase à la carte.
During the year ended December 31, 2023 and prior periods, we had three reportable segments: Connected Machines, Subscriptions, and Accessories and Materials. As of January 2024, we realigned our operating segment structure and now have two reportable segments: Platform and Products. The change in operating segments is based on how the Company’s chief operating decision maker (“CODM”) makes operating decisions and assesses business performance. Prior period segment information has been recast retrospectively to reflect the realignment. 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, 2023 (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, 2023 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, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending December 31, 2024, or any other period.
Recently Issued Accounting Pronouncements
In March 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) Compensation-Stock Compensation (Topic 718). The ASU clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or non-employees in exchange for goods or services. Public
8


business entities must apply the ASU’s guidance to annual periods beginning after December 15, 2025. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses, and is effective for fiscal years beginning after December 15, 2023 on a retrospective basis. The Company is currently evaluating the impact of this standard on the consolidated financial statements.
In December, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation. They must also further disaggregate income taxes paid. Public business entities must apply the ASU’s guidance to annual periods beginning after December 15, 2024 (2025 for calendar-year-end Public business entities). The Company is currently evaluating the impact of this standard on the consolidated financial statements.
2.Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. For revenue recognition, examples of estimates and judgments include: determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price (“SSP”) of performance obligations, and estimating variable consideration such as sales incentives and product returns. Other estimates include the warranty reserve, allowance for credit losses, 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, 2024 and December 31, 2023.
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-
9


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 March 31, 2024, December 31, 2023, and January 1, 2023, the Company had net accounts receivable balances of $77.6 million, $111.2 million and $136.5 million, respectively. As of March 31, 2024, and December 31, 2023, the Company had allowances against accounts receivable of $2.9 million and $2.0 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 recognized no contract assets as of March 31, 2024 and December 31, 2023.
The following table summarizes the changes in the deferred revenue balance for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
20242023
(in thousands)
Deferred revenue, beginning of period$43,235 $38,658 
Recognition of revenue included in beginning of period
deferred revenue
(23,479)(21,076)
Revenue deferred, net of revenue recognized on contracts in
the respective period
26,877 24,194 
Deferred revenue, end of period$46,633 $41,776 
As of March 31, 2024, 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, 2024:
Year Ended December 31,
2024 (remainder of year)202520262027Total
(in thousands)
Revenue expected to be recognized$41,228 $4,411 $976 $18 $46,633 
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, 2024 related to performance obligations satisfied or partially satisfied was $2.6 million.
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The following table presents the total revenue by geography based on the ship-to address for the periods indicated:
Three Months Ended March 31,
20242023
(in thousands)
North America*$134,835 $147,755 
International32,557 33,472 
Total revenue$167,392 $181,227 
*North America revenue consists of revenues from the United States and Canada.
The following table presents the total revenue by source for the periods indicated:
Three Months Ended March 31,
20242023
(in thousands)
Platform
$78,286 $76,241 
Connected machines
36,948 34,131 
Accessories and materials
52,158 70,855 
Total revenue$167,392 $181,227 
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, 2024 and December 31, 2023:
As of March 31, 2024
Adjusted CostAllowance for Credit Losses Total Unrealized GainsTotal Unrealized LossesFair ValueCash and Cash EquivalentsMarketable Securities
(in thousands)
Cash$134,285 $— $— $— $134,285 $134,285 $— 
Level 1:
Money market funds44,707    44,707 44,707  
Subtotal44,707    44,707 44,707  
Level 2:
U.S. treasury securities102,544  159  102,703  102,703 
Subtotal102,544  159  102,703  102,703 
Total$281,536 $ $159 $ $281,695 $178,992 $102,703 

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As of December 31, 2023
Adjusted CostAllowance for Credit Losses Total Unrealized GainsTotal Unrealized LossesFair ValueCash and Cash EquivalentsMarketable Securities
(in thousands)
Cash$44,809 $— $— $— $44,809 $44,809 $— 
Level 1:
Money market funds97,378    97,378 97,378  
Subtotal97,378    97,378 97,378  
Level 2:
U.S. treasury securities102,411  541  102,952  102,952 
Subtotal102,411  541  102,952  102,952 
Total$244,598 $ $541 $ $245,139 $142,187 $102,952 
Marketable securities held as of March 31, 2024 generally mature over the next twenty-four months. As of March 31, 2024 and December 31, 2023 all balances were in a gain position, therefore there are no allowances for credit losses recorded for the periods presented.
5.Inventories
Inventories are comprised of the following:
As of
March 31,
2024
As of
December 31,
2023
(in thousands)
Raw materials$44,224 $44,935 
Finished goods267,285 286,988 
Total inventories$311,509 $331,923 
Less: reserves$(55,021)$(54,416)
Total inventories, net$256,488 $277,507 
Inventories current$225,367 $244,469 
Inventories non-current (included in other assets)$31,121 $33,038 
The Company’s recorded inventory reserves as of March 31, 2024 consisted of $5.1 million related to excess connected machine inventory, $46.4 million related to excess accessories and materials inventory, and $3.5 million related to raw material components. Amounts charged to the reserve account are recorded primarily in cost of revenues.
6.     Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
As of
March 31,
2024
As of
December 31,
2023
(in thousands)
Sales incentives$21,116 $30,479 
Other accrued liabilities and other current liabilities36,955 41,454 
Total accrued expenses$58,071 $71,933 
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
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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, 2024, and December 31, 2023 total unamortized debt issuance costs were $1.1 million and $1.2 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, 2024. As of March 31, 2024 and December 31, 2023, 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 plus 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 effective tax rate was 30.6% and 29.2% for the three months ended March 31, 2024, and 2023, respectively. The Company’s provision for income taxes was $8.6 million and $3.7 million, for the three months ended March 31, 2024, and 2023, respectively. 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 an increase for permanent adjustments from Section 83(b) elections and stock-based compensation differences resulting from 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 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, 2024, 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, 2024, 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 51,292,929 shares of Class A common stock and 165,409,855 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, 2024 and 2023, 1,027,258 and 7,772,294 shares of Class B common stock were converted to Class A common stock, respectively.
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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, 2024, the Company repurchased and retired 1,697,272 shares of our Class A common stock for $10.8 million, effectively finishing the stock repurchase program authorized in August 2022.
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 RSUs and 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.
During the three months ended March 31, 2024, an aggregate of $1.4 million was paid in cash. During three months ended March 31, 2023, $75.5 million was paid in cash and $4.4 million was satisfied in the form of dividend equivalents to RSU or PRSU holders.
Dividends payable includes dividends declared but not yet paid and prior dividends on unvested shares of Class A common stock payable upon future vesting.
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,
20242023
(in thousands)
Equity classified awards
Restricted stock units$9,798 $8,379 
Stock options437 626 
Class B common stock 1,238 1,889 
Liability classified awards7 12 
Total stock-based compensation$11,480 $10,906 
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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,
20242023
(in thousands)
Cost of revenue
Platform$237 $115 
Products186 458 
Total cost of revenue423 573 
Research and development3,713 3,906 
Sales and marketing2,936 3,205 
General and administrative3,685 2,737 
Total stock-based compensation expense$10,757 $10,421 
Capitalized for software development costs330 430 
Capitalized to inventories393 55 
Total stock-based compensation$11,480 $10,906 
As of March 31, 2024, there was $78.3 million of unrecognized stock-based compensation cost related to service-based awards which is expected to be recognized over a weighted-average period of 2.1 years. The total unrecognized compensation expense related to unvested PRSUs was $152.6 million as of March 31, 2024.
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, 2024, 51,770,242 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, 20238,893,831 $14.38 
Granted247,500 $4.91 
Vested(991,402)$11.33 
Forfeited / cancelled(406,288)$12.93 
Outstanding at March 31, 20247,743,641 $14.54 
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.
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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, 20236,766,001 $23.32 
Forfeited / cancelled(223,116)$23.37 
Outstanding at March 31, 20246,542,885 $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, 2024, 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, 2024.
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, 20232,999,085 $18.65 3.5$ 
Forfeited / cancelled(4,065)$18.65 
Outstanding at March 31, 20242,995,020 $18.65 3.1$ 
Vested and exercisable at March 31, 20242,680,069 $18.65 3.0$ 
During the three months ended March 31, 2024 and 2023, 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, 2024, 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 three months ended March 31, 2024 is as follows:
Number of
Unvested Shares
Weighted-
Average
Grant Date Fair Value (per share)
Outstanding at December 31, 20231,656,679 $20.00 
Vested(988,133)$20.00 
Forfeited / cancelled(64,001)$20.00 
Outstanding at March 31, 2024604,545 $20.00 
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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, 2023259,425 $7.69 1.9$ 
Exercised  
Forfeited / cancelled(6,000)$7.69 
Outstanding at March 31, 2024253,425 $7.69 1.5$ 
Vested and exercisable at March 31, 2024253,425 $7.69 1.5$ 
During the three months ended March 31, 2024 and 2023, 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, 2024, 10,602,602 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.
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 $1.4 million for the three months ended March 31, 2024 and 2023, respectively. The Company also incurred variable lease costs of $0.2 million and $0.1 million, for the three months ended March 31, 2024 and 2023, respectively.
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Cash paid for amounts included in the measurement of operating lease liabilities was $1.5 million for both the three months ended March 31, 2024 and 2023, 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, 2024, the maturities of the Company's operating lease liabilities were as follows: 
Year Ended December 31,
Operating
Leases
(in thousands)
2024 (remainder of the year)$4,047 
20254,350 
20263,899 
2027967 
Total lease payments$13,263 
Less: imputed interest$(516)
Present value of operating lease liabilities$12,747 
Operating lease liabilities, current$4,955 
Operating lease liabilities, non-current$7,792 
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, 2024As of December 31, 2023
Weighted-average remaining lease term of operating leases2.7 years2.9 years
Weighted-average discount rate of operating leases2.5 %2.5 %

13.Restructuring
During the three months ended March 31, 2024, and March 31, 2023, the Company undertook restructuring plans to improve efficiency and streamline operations. During the three months ended March 31, 2024, the Company recognized severance costs of $0.9 million, of which $0.4 million, $0.4 million and $0.1 million were recorded within research and development, selling and marketing, and general and administrative expense, respectively. In the three months ended March 31, 2023, the Company recognized severance costs of $1.2 million, of which $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 for both the three months ended March 31, 2024 and 2023.
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15.Net Income Per Share
The computation of net income per share is as follows:
Three Months Ended March 31,
20242023
(in thousands, except share and per share amounts)
Basic earnings per share:
Net income$19,647 $9,099 
Shares used in computation:
Weighted-average common shares outstanding, basic215,549,467 215,587,699 
Earnings per share, basic$0.09 $0.04 
Diluted earnings per share:
Net income$19,647 $9,099 
Shares used in computation:
Weighted-average common shares outstanding, basic215,549,467 215,587,699 
Weighted-average effect of potentially dilutive securities:
Unvested common stock subject to forfeiture794,502 2,813,251 
Employee stock options 18,851 
Restricted stock units521,083 329,454 
Diluted weighted-average common shares outstanding216,865,052 218,749,255 
Diluted net income per share$0.09 $0.04 
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,
20242023
Employee stock options3,248,445 3,109,412 
Restricted stock units7,396,613 8,940,648 
Unvested common stock subject to forfeiture246,083 657,228 
As of March 31, 2024, 6,542,885 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

In January 2024, the Company reevaluated its operating segments in order to better align with how the CODM evaluates performance and allocates resources. The key factor evaluated by the Company resulted from the growth and expansion of Design Space, the Company’s digital platform. Since its initial public offering, the Company’s digital platform has evolved and grown considerably. Key enhancements to the platform include the size of its images, fonts, and projects library, the introduction of advanced design tools, the software support for several new cutting machines, and the creation of enhanced subscriptions offerings. The change in operating segments reflects the Company’s strategy to focus on continuing to expand revenue and margin generated from its digital platform and Paid Subscribers. At the same time, a number of product related factors also contributed to this decision, including the relative importance of physical products to the platform, including bundles (comprised of several combinations of machines, accessories, and materials), and changes in our Accessories and Materials
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business. Based on these changes, the Company has determined that it was appropriate to reduce its reportable segments from three to two, combining its Subscriptions and digital content businesses into one Platform segment, and its Connected Machines and Accessories and Materials businesses into one Product segment. Prior period segment results have been retrospectively recast to reflect the new reportable segments.

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 considered the provisions of ASC 280-10-50 as it relates to the information provided to and used by the CODM for evaluating performance and allocating resources to operating segments.

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, 2024, long-lived assets located outside the United States, primarily located in Malaysia and China, were $7.3 million.
The Platform segment derives revenue primarily from monthly and annual subscription fees, digital content, 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. For the three months ended March 31, 2024, upfront digital content revenue comprised 1% of Platform revenue. The remaining Platform revenue consists of ratably recognized subscription revenue. The Products segment derives revenue primarily from the sale of its connected machine hardware, and sale of craft, DIY, home décor products and extensions. 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,
20242023
(in thousands)
Platform:
Revenue$78,286 $76,241 
Cost of revenue8,759 7,761 
Gross profit$69,527 $68,480 
Products:
Revenue$89,106 $104,986 
Cost of revenue67,039 96,800 
Gross profit$22,067 $8,186 
Consolidated:
Revenue$167,392 $181,227 
Cost of revenue75,798 104,561 
Gross profit$91,594 $76,666 
17. Subsequent Events
On May 6, 2024, the Board of Directors approved a special dividend of $0.40 per share and a recurring semi-annual dividend of $0.10 per share on its Class A and Class B common stock payable on July 19, 2024 to shareholders of record as of July 2, 2024. In addition, the Board of Directors also approved a share repurchase program authorizing the Company to purchase up to an aggregate of $50 million of the Company’s Class A common stock.
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
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information appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report. 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.”
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 nearly 6.0 million Active Users to turn ideas into professional-looking handmade goods. We define “Active User” as a registered user of at least one registered connected machine who has utilized their connected machine to create a project in the last 365 days. With our highly versatile Design Space Platform and our products, including our connected machines 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 March 31, 2024):
Cricut Joy family for personalization, organization, and customization, $149.00 - $199.00 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 platform integrates our design apps and connected machines, 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 platform, 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: 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 March 31, 2024, we had nearly 2.8 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,
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Michaels, Target, Walmart and many others. We also sell our products and 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 2021, 2022 and 2023, our fourth quarter represented 30%, 32% and 30% 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 2023 was 42%, compared to gross margin of 45% for all of 2023. Additionally, sales of accessories and materials typically rise and fall with seasonal holiday crafting periods. The yearly seasonality patterns experienced in 2021, 2022, and 2023 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 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.
In January 2024, the Company reevaluated its operating segments in order to better align with how the CODM evaluates performance and allocates resources. The key factor evaluated by the Company resulted from the growth and expansion of Design Space, the Company’s digital platform. Since its initial public offering, the Company’s digital platform has evolved and grown considerably. Key enhancements to the platform include the size of its images, fonts, and projects library, the introduction of advanced design tools, the software support for several new cutting machines, and the creation of enhanced subscriptions offerings. In 2020, revenue and gross profit generated from the platform represented 12% and 31% of total, respectively. In 2023, revenue and gross profit generated from the platform represented 40% and 80% of total, respectively. Over this same time period, Paid Subscribers on the platform grew 115% from 1.3 million to nearly 2.8 million. The change in operating segments reflects the Company’s strategy to focus on continuing to expand revenue and margin generated from its digital platform and Paid Subscribers. At the same time, a number of product related factors also contributed to this decision, including the relative importance of physical products to the platform, including bundles (comprised of several combinations of machines, accessories, and materials), and changes in our Accessories and Materials business. Based on these changes, the Company has determined that it was appropriate to reduce its reportable segments from three to two, combining its Subscriptions and digital content businesses into one Platform segment, and its Connected Machines and Accessories and Materials businesses into one Product segment. Prior period segment results have been retrospectively recast to reflect the new reportable segments.
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 Annual Report, which is incorporated herein by reference.
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 March 31,
20242023
Active Users (in thousands)5,952 5,943 
90-Day Engaged Users (in thousands)3,5273,710 
Paid Subscribers (in thousands)2,797 2,715 
Three Months Ended March 31,
20242023
Platform ARPU$52.26 $48.51 
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Active Users
We define Active Users as registered users of at least one registered connected machine who have utilized their connected machine to create a project in the last 365 days. 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 Active Users and the prior owner is removed from the total Active Users if the prior owner does not own any other registered connected machines. Active Users is a key indicator of the health of our business, because changes in the number of Active Users excludes non-users to better represent opportunities for us to drive additional platform and accessories and materials revenue.
90-Day Engaged Users
We define 90-Day Engaged Users as registered users of at least one registered connected machine who have utilized their connected machine to create a project in the last 90 days. 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 90-Day Engaged Users and the prior owner is removed from the total 90-Day Engaged Users if the prior owner does not own any other registered connected machines. 90-Day Engaged Users excludes non-users to better represent opportunities for us to drive additional platform and accessories and materials revenue.
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 Platform revenue and potential leverage in our gross margin.
Platform ARPU
We define Platform ARPU as Platform revenue in a 12-month period divided by Active Users. Platform ARPU allows us to forecast Platform revenue over time and is an indicator of our ability to expand with users and of user engagement with our subscription offerings.
Components of our Results of Operations
We operate and manage our business in two reportable segments: Platform and Products. 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
Platform
We generate Platform revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium, digital content, 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 our annual subscription fee, Cricut Access Premium includes all the benefits of Cricut Access as well as additional discounts and preferred shipping. Digital content includes à la carte digital content purchases, including fonts, images and projects. Platform revenue is recognized on a ratable basis over time the subscription term for subscriptions, and at the point in time when control is transferred for à la carte digital content.
Products
We generate Products revenue from sales of connected machines and ancillary products, 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. Our connected machines portfolio consists 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, which includes Joy and Joy Xtra; and Cricut Venture. Our ancillary products include Cricut
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EasyPress, Cricut MugPress, hand tools, machine replacement tools and blades, and project materials such as vinyl and iron-on. Products 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.
Cost of Revenue
Platform
Cost of revenue related to Platform 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 Platform 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.
Products
Cost of revenue related to Products consists of product costs, including costs of components, cost 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 Products 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.
Operating Expenses
Research and Development
Research and development expenses consist primarily of costs associated with the development of our platform and products, 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. We expect to produce gross savings of approximately $3.2 million during 2024 as a result of the Q1 2024 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. We expect to produce gross savings of approximately $2.5 million during 2024 as a result of the Q1 2024 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. We expect to produce gross savings of approximately $0.6 million during 2024 as a result of the Q1 2024 restructuring plan.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income from our investments in marketable securities, offset by interest expense associated with our debt financing arrangements and amortization of debt issuance costs.
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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 March 31,
20242023
(in thousands)
Revenue:
Platform$78,286 $76,241 
Products89,106 104,986 
Total revenue167,392 181,227 
Cost of revenue:
Platform(1)
8,759 7,761 
Products(1)
67,039 96,800 
Total cost of revenue75,798 104,561 
Gross profit91,594 76,666 
Operating expenses:
Research and development(1)
14,853 17,801 
Sales and marketing(1)
33,030 29,616 
General and administrative(1)
18,506 18,720 
Total operating expenses66,389 66,137 
Income from operations25,205 10,529 
Other income (expense), net3,085 2,315 
Income before provision for income taxes28,290 12,844 
Provision for income taxes8,643 3,745 
Net income$19,647 $9,099 
(1)    Includes stock-based compensation expense as follows:
Three Months Ended March 31,
20242023
(in thousands)
Cost of revenue
Platform$237 $115 
Products186 458 
Total cost of revenue423 573 
Research and development3,713 3,906 
Sales and marketing2,936 3,205 
General and administrative3,685 2,737 
Total stock-based compensation expense$10,757 $10,421 

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Comparison of the Three Months Ended March 31, 2024 and 2023
Revenue
Three Months Ended
March 31,
Change
20242023$%
(dollars in thousands)
Revenue:
Platform$78,286 $76,241 $2,045 %
Products89,106 104,986 (15,880)(15)%
Total revenue$167,392 $181,227 $(13,835)(8)%

Three Months Ended March 31, 2024 and 2023
Platform revenue increased by $2.0 million, or 3%, to $78.3 million for the three months ended March 31, 2024 from $76.2 million for the three months ended March 31, 2023. The increase was driven by an increase in the number of paid subscribers which increased from 2.7 million as of March 31, 2023 to nearly 2.8 million as of March 31, 2024.
Products revenue decreased by $15.9 million, or 15%, to $89.1 million for the three months ended March 31, 2024 from $105.0 million for the three months ended March 31, 2023. The decrease was primarily driven by fewer units of Accessories & Materials sold during the period, partially offset by an increase in Connected Machine units sold during the period.
Cost of Revenue, Gross Profit and Gross Margin
Three Months Ended
March 31,
Change
20242023$%
(dollars in thousands)
Cost of Revenue:
Platform$8,759$7,761$998 13 %
Products67,03996,800(29,761)(31)%
Total cost revenue$75,798$104,561$(28,763)(28)%
Gross Profit:
Platform69,52768,4801,047 %
Products22,0678,18613,881 170 %
Total gross profit$91,594$76,666$14,928 19 %
Gross Margin
Platform89 %90 %
Products25 %%
Three Months Ended March 31, 2024 and 2023
Platform cost of revenue increased by $1.0 million, or 13%, to $8.8 million for the three months ended March 31, 2024 from $7.8 million for the three months ended March 31, 2023. The increase was primarily driven by an increase in the amortization of capitalized software costs.
Gross margin for Platform was 89% for the three months ended March 31, 2024 and 90% for the three months ended March 31, 2023. The decrease was primarily driven by an increase in the amortization of capitalized software costs.
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Products cost of revenue decreased by $29.8 million, or 31%, to $67.0 million for the three months ended March 31, 2024 from $96.8 million for the three months ended March 31, 2023. The decrease was primarily driven by lower excess inventory write downs compared to the prior year and fewer units of Accessories & Materials sold during the period.
Gross margin for Products was 25% for the three months ended March 31, 2024 and 8% for the three months ended March 31, 2023. The increase was primarily driven by lower excess inventory write downs in the current period compared to prior year, improved product mix within Connected Machines, and lower outbound freight costs.
Operating Expenses
Research and Development
Three Months Ended
March 31,
Change
20242023$%
(dollars in thousands)
Research and development$14,853$17,801$(2,948)(17)%
As a percentage of total revenue%10 %
Research and development expenses decreased by $2.9 million, or 17%, to $14.9 million for the three months ended March 31, 2024 from $17.8 million for the three months ended March 31, 2023. The decrease was primarily due to a $1.3 million decrease in personnel related expense, a $1.2 million decrease in product development expenses for future products, and a $0.3 million decrease in professional services.
Sales and Marketing
Three Months Ended
March 31,
Change
20242023$%
(dollars in thousands)
Sales and marketing$33,030$29,616$3,414 12 %
As a percentage of total revenue20 %16 %
Sales and marketing expenses increased by $3.4 million, or 12%, to $33.0 million for the three months ended March 31, 2024 from $29.6 million for the three months ended March 31, 2023. The increase was primarily due to a $2.6 million increase in advertising and other marketing costs and a $0.8 million increase in personnel related expense.
General and Administrative
Three Months Ended
March 31,
Change
20242023$%
(dollars in thousands)
General and administrative$18,506$18,720$(214)(1)%
As a percentage of total revenue11 %10 %
General and administrative expenses decreased by $0.2 million, or 1%, to $18.5 million for the three months ended March 31, 2024 from $18.7 million for the three months ended March 31, 2023. The decrease was primarily due to a decrease in professional services expense, partially offset by an increase in personnel related expense.
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Other Income (Expense), Net
Three Months Ended
March 31,
Change
20242023$%
(dollars in thousands)
Other income (expense), net$3,085 $2,315 $770 33 %
Other income (expense), net increased by $0.8 million or 33% to $3.1 million for the three months ended March 31, 2024 from $2.3 million for the three months ended March 31, 2023. The increase was due to an increase in interest income.
Income Tax Expense
Three Months Ended
March 31,
Change
20242023$%
(dollars in thousands)
Provision for income taxes$8,643 $3,745 $4,898 131 %

Provision for income taxes increased by $4.9 million, or 131%, to $8.6 million for the three months ended March 31, 2024 from $3.7 million for the three months ended March 31, 2023. The increase was primarily due to a decrease in the foreign derived intangible income deduction, a decrease to deductible equity compensation related to an increase in the unfavorable permanent adjustment from Section 83(b) elections, an increase in stock-based compensation difference due to the decrease in stock price upon vesting versus the stock price at the grant date, and a decrease to the Research and Development credit. This resulted in an effective tax rate of 30.6% and 29.2% for the three months ended March 31, 2024 and 2023, respectively.
Liquidity and Capital Resources
Our operations during the periods presented have been financed primarily through cash flow from operating activities and the net proceeds from our initial public offering in March of 2021. We believe our balances of cash and cash equivalents and marketable securities, which totaled $179.0 million and $102.7 million, respectively, as of March 31, 2024, along with forecasted cash expected to be generated by ongoing operations and $300.0 million in available borrowings and the option to increase the aggregate amount of our credit facility by up to an additional $150.0 million (see Note 7) will be sufficient to satisfy our cash requirements over the next 12 months and beyond. Except for the recently announced special and semi-annual dividends and the new share repurchase program, our cash requirements have not changed materially since our Annual Report.
During the three months ended March 31, 2023, we paid a dividend of $75.5 million to holders of Class A and Class B common stock.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other growth initiatives, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our products and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.

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Cash Flows
Three Months Ended March 31,
20242023
(in thousands)
Net cash flows provided by operating activities
$56,688 $95,169 
Net cash flows used in investing activities(5,119)(7,741)
Net cash flows used in financing activities
(14,642)(80,078)
Operating Activities
The change in net cash flows from operating activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is primarily due to lower inventory purchases during 2023 due to higher beginning inventory balances combined with softening of consumer demand. In addition, a decrease in payable balances with inventory vendors in 2024 compared to 2023, due to higher payments to vendors in 2024. These decreases were partially offset by a reduction in cash received from accounts receivable in 2024 compared to 2023.
Investing Activities
The change in net cash flows from investing activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was due to lower purchases of property and equipment in 2024.
Financing Activities
The change in net cash flows from financing activities for the three months ended March 31, 2024 compared to three months ended March 31, 2023 was primarily due to dividend payments of $75.5 million in 2023 offset by an increase in the repurchase of common stock in 2024.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements include those described in Note 2 of the notes to our condensed consolidated financial statements in the section titled “Summary of Significant Accounting Policies” in Part I, Item 1 of this Quarterly Report on Form 10-Q and in our Annual Report.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of the Company’s market risk, please refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report. There have been no material changes to the Company’s market risk during the first three months of 2024.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable
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assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or would be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not presently a party to any material pending legal proceedings. We are, from time to time, subject to legal proceedings and claims arising from the normal course of business activities, and an unfavorable resolution of any of these matters could materially affect our business, results of operations, financial condition or cash flows.
Litigation may be necessary, among other things, to defend ourselves or our users by determining the scope, enforceability and validity of third-party proprietary rights, to establish our proprietary rights, or to address royalty payments we make. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
In September 2020, we joined NXN LLC and dozens of other plaintiffs in a complaint against the U.S. federal government in the United States Court of International Trade alleging unlawful actions by the federal government on the imposition of the third and fourth round of tariffs on products covered in the United States Trade Representative’s Section 301 Action Concerning China’s Act’s, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. The complaint seeks declaratory judgment that the United States Trade Representative’s actions were beyond its delegated authority under the Trade Act of 1974 and in violation of the Administrative Procedure Act and the United States Constitution.
ITEM 1A. RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our condensed consolidated financial statements and related notes and all of the other information in this Quarterly Report on Form 10-Q, before making a decision to invest in our Class A common stock. If any of the risks actually occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.
Summary of Risk Factors
Investing in our Class A common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as described below. The principal factors and uncertainties that make investing in our Class A common stock risky include, among others:
risks regarding our ability to attract and engage with our users, including anticipating their product preferences;
competitive risks in both of our two segments: Platform and Products;
supply chain, manufacturing, distribution and fulfillment risks, including our being primarily dependent on two contract manufacturers and on limited sources of supply for components, accessories and materials, as well as our ability to forecast demand and manage our inventory;
international risks, including regulation, tariffs that have materially increased our costs and the potential for further trade barriers;
sales and marketing risks, including our dependence on sales to brick-and-mortar and online retail partners and our need to continue to grow online sales;
risks relating to the complexity of our business, which includes connected machines, custom tools, hundreds of materials, design apps, e-commerce software, subscriptions, content, international production, direct sales, and retail distribution, particularly for a company of our relative size;
risks related to product quality, safety and warranty claims and returns;
risks related to protection of our intellectual property, as well as to cybersecurity and potential data breaches;
risks related to general socio-economic and political conditions as well as consumer confidence; and
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risks related to our dependence on our Chief Executive Officer.
Risks Related to Our Industry and Business
If we are not able to attract and engage with our users, our business and rate of growth could be adversely affected.
Since launching our first connected machine, we have built a loyal and growing community of users that has reached substantial scale. Our business and rate of growth is dependent upon our ability to attract and engage with our users. User engagement is one of many factors that affects our revenue in both of our segments, and it is difficult to isolate its effect on revenue and our other financial results in any given quarter. We cannot ensure that our efforts to attract and engage with users, which we modify from time to time, will be successful or that we will be able to maintain sales to our users. There are a number of factors that could impact our number of users and our ability to increase sales to users, including:
a decline in the public’s interest in or discretionary time and money available for do-it-yourself, or DIY, crafting activities;
pricing, perceived value and ease of use of our platform and products;
our ability to satisfy demand for and deliver quality products and value for subscriptions;
sales of competitive products;
our failure to broaden our demographic appeal;
our ability to continue to improve the user experience in each aspect of our business and successfully educate our users about our products;
our failure to capitalize on growth opportunities;
our inability to meet the challenges resulting from fast-paced changes in technology;
the failure of our connected machines to communicate or sync properly with Cricut-authorized design apps, including our Design Space apps, or other third-party applications such as Android, iOS and Windows;
unsatisfactory experiences with our products, including with respect to the use, purchasing or delivery of our products or with Cricut Member Care, including public disclosure of those experiences through social media or other communications from our community;
changes to our product offerings;
our failure to increase our international presence, including the failure to translate and localize our digital content and subscriptions, or the failure to further expand internationally;
decreased word-of-mouth referrals from our community or failed marketing efforts; and
deteriorating general economic conditions, inflationary pressures affecting the pricing of our products or otherwise, or changes in consumer spending preferences or buying trends, each of which we currently are experiencing.
As a result of these factors, our rate of adding new users is declining in comparison to recent years and, in the short term, the number of Paid Subscribers could remain flat or decline, and we cannot be sure that we will be successful in attracting and engaging with users, or increasing sales to our users, at levels that will be adequate to maintain or grow our business. If user engagement declines, then Platform ARPU and Products revenue, specifically as it relates to accessories and materials, may also decline. However, Platform ARPU has increased in recent periods.
Our revenue growth rate and financial performance have fluctuated in recent periods and may not be indicative of our future performance, and we expect our revenue growth rate to decline compared to prior years.
We experienced rapid revenue growth through 2021 and experienced a reduction in revenue since then, with revenue of $1,306.2 million, $886.3 million and $765.1 million for the years ended December 31, 2021, 2022, and 2023, respectively. You should not rely on our revenue for any previous quarterly or annual period as any indication
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of our revenue or revenue growth in future periods. As we grow our business, we expect our revenue growth rates to decline compared to prior years due to a number of reasons, including more challenging comparisons to prior periods, slowing demand for our platform and products, increasing competition, a decrease in the growth of our overall market and our failure to capitalize on growth opportunities. For example, we saw significant growth in sales during the COVID-19 pandemic in 2020 and 2021 but saw a reduction in sales in 2022 and 2023. There can be no assurance that sales will return to 2020 and 2021 levels in the future or that we will be able to continue to significantly grow our revenue in a post-COVID-19 environment. Our rate of adding new users has declined in comparison to recent years and, in the short term, the number of Paid Subscribers could remain flat or decline.
If we are unable to anticipate user preferences and successfully develop and introduce new, innovative and updated products in a timely manner, our business may be adversely affected.
Our success in maintaining and increasing our user community depends on our ability to identify trends, as well as to anticipate and react to changing preferences, which cannot be predicted with certainty. If we are unable to introduce new or enhanced products, or additional designs and projects, in a timely manner, if such new offerings are not accepted by our user community or if our competitors introduce similar offerings faster than we do, our business may be adversely affected. We also need to successfully educate our users on new offerings or improvements to current offerings. Moreover, our new offerings may not receive market acceptance if preferences change rapidly to different types of personal DIY offerings or away from these types of offerings altogether. Our future success depends in part on our ability to anticipate and respond to these changes as well as to improve the user experience in each aspect of our business. For example, some users find our connected machines to be challenging to use or may require user education in order to operate them efficiently or have the best user experience. If we are not able to make our connected machines easier to use or improve user education and experience, it may have an adverse effect on our business. In addition, failure to anticipate and respond in a timely manner to changing user preferences could lead to, among other things, reduced word-of-mouth referrals, lower sales, lower subscription rates, pricing pressure, lower gross margins, discounting of our existing products and excess inventory levels.
Even if we are successful in anticipating user preferences, our ability to adequately react to and address them will partially depend upon our continued ability to develop and introduce innovative, high-quality products. Development and launch of new or enhanced products is time-consuming and requires significant financial investment, which could result in increased costs and a reduction in our profit margins. We have experienced, and may in the future experience, delays in the planned release dates of new products. Delays could result in adverse publicity (if potential new product announcements are leaked and then delayed), loss of sales and delay in market acceptance, any of which could cause us to lose or fail to engage with existing users or impair our ability to attract new users. In addition, the introduction of new products by competitors could adversely affect our ability to compete. Any delay or failure in the introduction of new products could harm our business, results of operations and financial condition.
Moreover, we must successfully manage the introduction of new or enhanced products and product offerings, which could adversely affect the sales of our existing products. For instance, users may choose to forgo purchasing existing connected machines in advance of new product launches, and we may experience higher returns from users of existing products after a new product launch occurs. As we introduce new or enhanced products, we may face additional challenges related to managing a more complex supply chain and manufacturing process, including the time and cost associated with onboarding and overseeing additional suppliers, contract manufacturers and third-party logistics partners. As we develop, acquire, and introduce new technologies, including those that may incorporate artificial intelligence and machine learning, we may be subject to new or heightened legal, ethical, and other challenges, including the ability to innovate as quickly as our competitors as well as increased research and development expenses. We may also face challenges managing the inventory of new or existing products, which could lead to excess inventory and discounting of such products. Users may negatively react to changes we introduce to products and product offerings. In addition, new or enhanced products may have varying selling prices and costs compared to legacy products, which could negatively impact our gross margins and results of operations.
We derive a significant portion of our revenue from sales of products, particularly our connected machines, and a decline in sales of our connected machines would adversely affect our future revenue and results of operations.
We derive a significant portion of our revenue from sales of our products, particularly our connected machines. Our connected machine revenue decreased by $54.3 million, or 21%, to $198.3 million for the year ended December 31, 2023 from $252.6 million for the year ended December 31, 2022. Any factors adversely
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affecting sales of our connected machines, including introduction by competitors of comparable machines at lower price points, a maturing product lifecycle, shortages in our supply or inventory of connected machines, a decline in consumer spending or other factors discussed elsewhere in this Risk Factors section, could result in a continued decline in sales of our connected machines, which would adversely affect our future revenue and results of operations.
Moreover, because we derive a significant portion of our platform and accessories and materials revenue as an extension of the sales and use of our connected machines, any material decline in the sales and use of our connected machines would also have a pronounced impact on platform and accessories and materials revenue, which would adversely affect our future revenue and results of operations. For example, accessories and materials revenue decreased by $98.5 million, or 27%, to $262.8 million for the year ended December 31, 2023 from $361.4 million for the year ended December 31, 2022. In addition to sales of our connected machines, accessories and materials revenues are influenced by multiple factors, some of which can be hard to isolate in a given time period. These factors include retailer demand, currency, consumer buying behavior (pantry loading), promotional activity, competition, and engagement (defined by consumer cutting behavior and therefore consumption of materials). Each of these can have an impact on accessories and materials revenue in different time frames that are hard to estimate. Our efforts to increase our sales of accessories and materials may not have the desired effect.
Our results of operations could be adversely affected if we are unable to accurately forecast consumer demand for our products or adequately manage our inventory, the manufacturing capacity of our contract manufacturers or their component supply.
Our ability to accurately forecast demand could be affected by many factors, including changes in consumer demand for our products, changes in demand for the products of our competitors, unanticipated changes in general market or economic conditions or changes in consumer confidence in future economic conditions. This risk may be exacerbated by the fact that we do not have the manufacturing capacity or supply-chain flexibility to satisfy short-term demand increases. For example, during the COVID-19 pandemic and stay-at-home orders, we saw significant growth in sales in 2020, which strained our inventory levels and caused shortages that likely resulted in lost sales. Although our in-channel and on-hand inventory as of December 31, 2023 were generally sufficient, if we fail to accurately forecast consumer demand, we may experience insufficient or excess inventory levels or a shortage or surplus of products available for sale. If we underestimate demand or are otherwise unable to meet consumer demand, we could experience loss of revenue, reputational harm and damaged relationships, including through social media or other communications from our community, and adversely affect our business, financial condition and results of operations. If we forecast inventory levels in excess of consumer demand, this may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and premium nature of our brand image. While supply chain conditions have improved during 2023 and 2024, if our supply chain faces challenges again, it could continue to put pressure on margins.
We depend on sales to brick-and-mortar and online retail partners, including a limited number of sophisticated key brick-and-mortar and online retail partners. The loss or substantial decline in volume of sales to any of our key brick-and-mortar and online retail partners could adversely affect our financial performance.
Our financial performance has been and will continue to be significantly determined by our success in attracting and retaining brick-and-mortar and online retail partners. For the year ended December 31, 2022, our top seven brick-and-mortar and online retail partners accounted for 37% of total revenue. For the year ended December 31, 2023, our top seven brick-and-mortar and online retail partners accounted for 33% of total revenue. For the three months ended March 31, 2024, our top seven brick-and-mortar and online retail partners accounted for 30% of total revenue. We anticipate that a similar level of concentration will continue for the foreseeable future.
We are dependent on our brick-and-mortar and online retail partners to manage the sales of our products in their stores and on their websites. For example, we depend on brick-and-mortar retail partners to provide adequate and attractive space for our products and point of purchase displays in their stores to maintain appropriate inventory for our product in their stores and to employ, educate and motivate their sales personnel to sell our products. We also depend on our brick-and-mortar and online retail partners to adequately market our products on their websites and provide a positive online shopping and shipping experience for their customers. However, we generally do not have significant input or control over the display or promotion of our products by our brick-and-mortar and online retail partners, and they are generally not prohibited from promoting products of our competitors.
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Our key brick-and-mortar and online retail partners have demanded and may in the future demand heightened security, product safety or packaging requirements and specified service levels. If we fail to meet these requirements, we may not only lose a brick-and-mortar and online retail partner, but we may have to pay significant punitive costs or retailer-imposed fines for such failures. We also impose policies and guidelines on our brick-and-mortar and online retail partners through our contractual agreements and otherwise. We are motivated to work with those retailers that help us create a great experience both on shelf and for the actual usage of our ecosystem. If a retailer fails to follow the policies and guidelines in our sales agreements and otherwise, we may choose to temporarily or permanently stop shipping product to that retailer, which could adversely affect our revenue and results of operations.
Because our key brick-and-mortar and online retail partners have dominant positions in their markets, a loss of any key retailer may not be easily replaced. The loss or substantial decline in volume of sales to our key brick-and-mortar and online retail partners, including lost sales because of inadequate retailer inventory, would adversely affect our operating results and financial performance. Moreover, if we are not able to meet demand from our key brick-and-mortar and online retail partners, they may limit or eliminate our shelf space, fail to feature our products on their websites or cease to offer our products and instead offer or promote products from our competitors who are able to meet their demands.
If the financial condition of one or more of our key brick-and-mortar and online retail partners weakens, a key retailer stops selling our products or uncertainty regarding demand for some or all of our products causes one or more of these brick-and-mortar and online retail partners to reduce its ordering and marketing of our products, it could decrease revenue from sales to brick-and-mortar and online retail partners and adversely affect our total revenue. Financial difficulties for one or more of our key brick-and-mortar and online retail partners could also expose us to financial risk if such retailer were unable to pay for the products purchased from us. We may not be able to collect our receivables from our brick-and-mortar and online retail partners, or we may incur significant expense in attempting to collect receivables, which would materially and adversely affect our profitability and cash flows from operations. In addition, current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products or otherwise, and changes in consumer spending preferences or buying trends could have an effect on sales through our brick-and-mortar and online retail partners.
Our long-term growth is dependent upon our ability to increase online sales through the websites of our brick-and-mortar and online retail partners as well as through our own website. If we do not effectively grow our online channels while reducing our reliance on our other sales channels, our business, financial condition, results of operations and profitability could be harmed.
Our ability to continue our revenue growth and increase our profitability depends in part upon our ability to successfully implement certain strategic go-to-market initiatives, including expanding our online sales presence while continuing to work with key brick-and-mortar and online retail partners. Our online sales include online sales through the websites of our brick-and-mortar and online retail partners as well as through our own website cricut.com. In the year ended December 31, 2021, 50% of our revenue was generated from these online channels. In the year ended December 31, 2022, 59% of our revenue was generated from these online channels. For the year ended December 31, 2023, 62% of our revenue was generated from these online channels. For the three months ended March 31, 2024, 63% of our revenue was generated from these online channels. There can be no assurance that online sales will remain at these levels in the future or that we will be able to continue to significantly grow our online channels.
To successfully grow our sales through cricut.com, we must continue to drive traffic to our website, convert a larger percentage of potential brick-and-mortar and online retail partner sales to our website and create and maintain a streamlined and intuitive online shopping experience. Increasing sales through cricut.com may be costly and may place increased demands on our operational, managerial, administrative and other resources. We are dependent on our brick-and-mortar and online retail partners to manage their own e-commerce operations effectively, to maintain appropriate inventory for our product in their e-commerce operations and to promote our products through those channels. We or our brick-and-mortar and online retail partners may be unable to effectively address the challenges involved with increasing online sales, including maintaining adequate retailer inventory, which could negatively affect our results of operations and financial condition.
Sales through online channels, either through cricut.com or our online retail partners’ websites, could reduce sales by our current brick-and-mortar retail partners, which could adversely affect our relationship with our brick-and-mortar retail partners, particularly those that do not have a strong online presence. Based on our strategic initiative to increase sales through online channels, our brick-and-mortar retail partners may decide not to
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adequately display our products in store, choose to reduce the in-store space for our products, locate our products in less than premium positioning in their store, choose not to carry some or all of our products or promote competitors’ products over ours in store, and as a result, our sales could decrease and our business could be harmed.
If we are not successful in effectively and sustainably growing our online sales channels, through cricut.com and our brick-and-mortar and online retail partners’ websites, our business, financial condition, results of operations and profitability could be harmed.
If we are unable to maintain or increase our subscriptions, or if existing users do not renew their subscriptions, our future revenue and results of operations could be harmed.
Subscriptions are a significant portion of our Platform revenue. If we are unable to maintain or increase subscriptions, which have higher margins than our other products, our future revenue and results of operations could be harmed. Our Paid Subscribers have no contractual obligation to renew their subscriptions to Cricut Access or Cricut Access Premium after the expiration of their initial subscription term, and our subscriptions may be offered on a monthly and annual basis. The images and designs on our platform are available for purchase à la carte, which may limit the incentive for users to purchase subscriptions. Our ability to increase new subscriptions may decline or fluctuate as a result of a number of factors, including seasonality, the quality of images and projects we offer, level of engagement, the number of new features and capabilities only offered through our subscriptions, the prices of products offered by our competitors and the budgets and consumer spending habits of our users. If our users do not renew their subscriptions or if additional users do not purchase subscriptions, our future revenue and results of operations could be harmed. To the extent that users of our free design apps do not purchase images, projects or products à la carte or convert to a subscription, our future revenue and results of operations could be harmed. Our efforts to increase our subscriptions may not have the desired effect. For example, in 2021, we proposed changes to our free Design Space app that would have limited the number of personal images or patterns a user could upload and save each month to our cloud without a subscription; however, because of user reaction, we determined not to proceed with the proposed changes. Instead of increasing subscriptions, other attempts to increase subscriptions could cause our users to limit their use of our connected machines, cause reputational harm and damaged relationships, and result in reduced sales of connected machines and accessories and materials, any of which could negatively affect our future revenue and results of operations. Finally, any future changes to our subscription model could make our subscriptions less attractive to users or reduce our margins on subscriptions, which could negatively affect our future revenue and results of operations.
We operate in a highly competitive market and we may be unable to compete successfully against existing and future competitors.
The markets in which we participate, including the traditional craft market and the other creative or DIY markets we touch, are highly competitive with limited barriers to entry. We operate and manage our business in two reportable segments: Platform and Products. We face competition in every aspect of our business, but particularly as it relates to the accessories and materials offerings within our Products segment. Many accessories and materials produced by our competitors, including the private label products of some of our retail partners, are compatible with our connected machines and are often available for purchase through our retail partners. Our competitors may offer competing accessories and materials at lower price points or with different features than our products. We are currently seeing intensifying competition as it relates to accessories and materials, and we expect the competition in the accessories and materials DIY market to continue to intensify in the future as new and existing competitors introduce new or enhanced products that may compete with our product lines. Our efforts to increase our sales of accessories and materials may not have the desired effect. Because we derive a significant portion of our revenue from the sales of accessories and materials, the material decline in such sales is having and could continue to have a pronounced impact on our future revenue and results of operations.
We also experience competition in connected machines from sellers of both connected and manual cutting and other machines. For example, Brother, Graphtec, Loklik, Silhouette America, and Siser sell cutting machines, and a number of companies sell heat press machines. Our Platform business, which provides users with fonts and images for making designs, competes with well-established content providers, from free resources that enable users to access content that is compatible with our platform, to more specific content marketplaces, like Creative Fabrica and Etsy, where customers can purchase digital files to upload to our platform.
With respect to both of our segments, introduction by competitors of comparable products at lower price points, a maturing product lifecycle, a decline in consumer spending or other factors could result in a decline in our
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Products revenue, which may adversely affect our business, financial condition and results of operations. Additionally, if in the future, due to competitor discounting or other marketing strategies, we significantly reduce our prices on our products without a corresponding increase in sales volume, it would negatively impact our revenue and would adversely affect our gross margins and overall profitability.
As our product categories mature, new competitive forces and competitors may emerge. As we expand our product offerings, we may begin to compete in new product offerings with new competitors. Our competitors may develop, or have already developed, products, features, content, services or technologies that are similar to ours or that achieve greater market acceptance, undertake more successful product development efforts, create more compelling employment opportunities or marketing campaigns or may adopt more aggressive pricing policies. Our competitors may develop or acquire, or have already developed or acquired, intellectual property rights that significantly limit or prevent our ability to compete effectively in the public marketplace. In addition, our competitors may have significantly greater resources than we do or may introduce product features, including artificial intelligence and machine learning capabilities, sooner than we do, allowing them to identify and capitalize more efficiently upon opportunities in new markets and consumer preferences and trends, quickly transition and adapt their products, devote greater resources to marketing and advertising or better position themselves to withstand substantial price competition. If we are not able to compete effectively against our competitors, they may acquire and engage our users or generate revenue at the expense of our efforts, which could adversely affect our business, financial condition and results of operations.
Sales of copycat products or unauthorized “gray market” products by brick-and-mortar and online retail partners or distributors could adversely affect our authorized distribution channels and harm our reputation, business and results of operations.
Copycat companies or products have in the past attempted, are currently attempting, and in the future may continue to attempt to imitate our connected machines and accessories and materials, our brand or the functionality of our products. When consumers purchase copycat products in lieu of our products, it negatively affects our business and results of operations. In the past, when we have become aware of such products, we have employed technological or legal measures in an attempt to halt their distribution, and we plan to continue to employ such measures in the future. However, we may be unable to detect all copycat products in a timely manner, and, even if we could, technological and legal measures may be insufficient to halt their distribution. In some cases, particularly in the case of brick-and-mortar and online retail partners and distributors operating outside of the United States, our available remedies may not be adequate to protect us against the effect of such copycat products. Regardless of whether we can successfully enforce our rights against the producers of these products, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, results of operations or financial condition. For example, we are currently aware of certain unauthorized copycat products, including machines, mats and other accessories, that are actively marketed for use with our connected machine