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What changed in Cricut, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Cricut, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+475 added−502 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-06)

Top changes in Cricut, Inc.'s 2024 10-K

475 paragraphs added · 502 removed · 412 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

92 edited+7 added−12 removed95 unchanged
Biggest changeAs of December 31, 2023, 44% of our users cut on their connected machine in the last 90 days and 66% created in the last 365 days. In Cricut Design Space, users find inspiration, purchase or upload content like fonts and images, and design a project from scratch or customize a vast array of ready-to-make projects.
Biggest changeIn Cricut Design Space, our users find inspiring content for their projects and easy-to-use software tools and instructions to customize or design from scratch their project idea. Users can take advantage of images, fonts and ready-to-make projects available within our platform, or they can upload their own. We offer a select number of free images, fonts, and projects.
As we launch new software and products, and as our community continues to grow and share on our platform and elsewhere online, can continually refresh this relationship and expand the versatility of our platform. Our large and loyal community of users engage with Cricut and each other both in Design Space and through social media.
As we launch new software and products, and as our community continues to grow and share on our platform and elsewhere online, users can continually refresh this relationship and expand the versatility of our platform. Our large and loyal community of users engage with Cricut and each other both in Design Space and through social media.
The integrated structure of our hardware and software allows us to continue releasing new connected products with uses that seamlessly integrate with our existing ecosystem, allowing us to grow the lifetime value of our consumer base. Connected Machines Our connected machine portfolio currently includes the Cricut Joy family, the Cricut Explore family, and the Cricut Maker family, and Cricut Venture.
The integrated structure of our hardware and software allows us to continue releasing new connected products with uses that seamlessly integrate with our existing ecosystem, allowing us to grow the lifetime value of our consumer base. Connected Machines Our connected machine portfolio currently includes the Cricut Joy family, the Cricut Explore family, the Cricut Maker family, and Cricut Venture.
Significant time and resources also go towards training our Cricut community management and Member Care teams to address issues relating to our products and services to reduce negative impacts on our users’ experience. Research and Development 14 Our research and development efforts focus on enabling our users to express their creativity.
Significant time and resources also go towards training our Cricut community management and Member Care teams to address issues relating to our products and services to reduce negative impacts on our users’ experience. 14 Research and Development Our research and development efforts focus on enabling our users to express their creativity.
Our third-party logistics partners complete a substantial percentage of our deliveries to brick-and-mortar and online retail partners, distributors, and online sales channels. Our products generally arrive at our third-party logistics partner facilities via ocean shipping services from our contract manufacturers. Direct shipments to users are then typically ground shipped for U.S. users and air- or ocean-freighted for our international users.
Our third-party logistics partners complete a substantial percentage of our deliveries to brick-and-mortar and online retail partners, distributors, and online sales channels. Our products generally arrive at our third-party logistics partner facilities via ocean shipping services from our contract manufacturers. Direct shipments to users are then typically ground shipped for U.S. users and ground- or ocean-freighted for our international users.
Creating projects drives repeat purchases of accessories and materials for years after a user first buys a connected machine, demonstrating a growing customer lifetime value through ongoing engagement with our platform. Many of our users share a love of our brand, products, and mission, fostering a loyal community of users who are deeply engaged with Cricut and each other.
Creating projects drives repeat purchases of accessories and materials for years after a user first buys a connected machine, demonstrating a growing customer lifetime value through ongoing engagement with our platform. 4 Many of our users share a love of our brand, products, and mission, fostering a loyal community of users who are deeply engaged with Cricut and each other.
The ability to control the amount of machine pressure used by Cricut Maker was an industry first in such a compact form factor, and it allows our users to not only cut thicker materials like matboard, leather and basswood but also to deboss heavy chipboard or engrave metal.
The 9 ability to control the amount of machine pressure used by Cricut Maker was an industry first in such a compact form factor, and it allows our users to not only cut thicker materials like matboard, leather and basswood but also to deboss heavy chipboard or engrave metal.
While assorted machine tools are required to create these decorative effects, our connected machines also have the capability to automatically detect 9 whether the proper tool is installed to safeguard proper operation and help our users achieve their desired effect. • Cloud-Based Architecture Which Allows for Simplicity, Scalability and Security.
While assorted machine tools are required to create these decorative effects, our connected machines also have the capability to automatically detect whether the proper tool is installed to safeguard proper operation and help our users achieve their desired effect. • Cloud-Based Architecture Which Allows for Simplicity, Scalability and Security.
We also compete 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. We believe that our brand, technology, software, and content set us apart.
We also compete 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 Canva, Creative Fabrica, and Etsy, where customers can purchase digital files to upload to our platform. We believe that our brand, technology, software, and content set us apart.
Our employees strive to support this mission by providing an innovative creativity platform that includes software, machines, materials, and tools to our users. Much of our team are makers and crafters themselves and are engaged with our end-users. We celebrate seeing the creativity and kindness that our end users create with the tools we provide.
Our employees strive to support this mission by providing an innovative creativity platform that includes software, machines, materials, and tools for our users. Much of our team are makers and crafters themselves and are engaged with our end-users. We celebrate seeing the creativity and kindness that our end users create with the tools we provide.
We assess our SAM and TAM in the United States and Canada and internationally. Today, a small portion of our revenue is generated from countries outside the United States and Canada. We currently classify four of these countries, Australia, France, Germany and the United Kingdom, as our primary international target markets and include them in our international SAM and TAM.
We assess our SAM and TAM in the United States and Canada and internationally. Today, a portion of our revenue is generated from countries outside the United States and Canada. We currently classify four of these countries, Australia, France, Germany and the United Kingdom, as our primary international target markets and include them in our international SAM and TAM.
Whether through the creation, acquisition or licensing of varied creative assets, our content teams then use a proprietary process to convert these images and projects into content specifically optimized to integrate with our connected machines and Cricut-branded accessories and materials seamlessly.
Whether through the creation, acquisition or licensing of varied creative assets, our content teams then use a proprietary process to convert these images and 10 projects into content specifically optimized to integrate with our connected machines and Cricut-branded accessories and materials seamlessly.
As we diversify our content categories and further expand internationally, we will continue to 10 develop localized and meaningful content shaped to meet the language, needs and preferences of our growing global user base. As our user base expands, demand for content is higher than ever.
As we diversify our content categories and further expand internationally, we will continue to develop localized and meaningful content shaped to meet the language, needs and preferences of our growing global user base. As our user base expands, demand for content is higher than ever.
We also have an international sales and marketing force in the United Kingdom, Australia, across Western Europe, South Africa, Middle East, Singapore, Mexico, and Brazil, to drive sales and whose reach 13 spans into many jurisdictions across the globe.
We also have an international sales and marketing force in the United Kingdom, Australia, across Western Europe, South Africa, Middle East, Singapore, Mexico, and Brazil, to drive sales and whose reach spans into many jurisdictions across the globe.
Users often share projects they created, inspiring other users to create. Design Space provides users with the ability to share direct links to projects and designs, so that others may view and create their own items from the same design.
Users often share projects they created, inspiring other users to create. Design Space provides users 6 with the ability to share direct links to projects and designs, so that others may view and create their own items from the same design.
Through the interlocking of gears with the machine carriage, our Adaptive Tool System (currently available only on Cricut Maker) can additionally lift and turn the blade during operation.
Through the interlocking of gears with the machine carriage, our Adaptive Tool System (currently available only on Cricut Maker family) can additionally lift and turn the blade during operation.
In addition, as we continue to expand internationally, the 12 laws of certain foreign countries may not protect our intellectual property rights to the same extent as laws in the United States.
In addition, as we continue to expand internationally, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as laws in the United States.
Our sales and channels team located in the United States support both the onboarding of new brick-and-mortar and online retail partners as well as account management of existing brick-and-mortar and online retail partners.
Our sales and channels team located in the United States support both the onboarding of 13 new brick-and-mortar and online retail partners as well as account management of existing brick-and-mortar and online retail partners.
We sell our connected machines, accessories, and materials globally through our brick-and-mortar and online retail partners, as well as through our website at cricut.com. Our partners include major retailers such as Amazon, Best Buy, Costco, Hobby Lobby, HSN, Jo-Ann, Michaels, Target, and Walmart, along with many others. We also sell our products, including subscriptions to Cricut Access, on cricut.com.
We sell our connected machines, accessories, and materials globally through our brick-and-mortar and online retail partners, as well as through our website at cricut.com. Our partners include major retailers such as Amazon, Best Buy, Costco, Hobby Lobby, HSN, Michaels, Target, and Walmart, along with many others. We also sell our products, including subscriptions to Cricut Access, on cricut.com.
Additionally, we are subject to laws, rules, and regulations regarding cross-border transfers of personal data, including laws relating to the transfer of personal data outside the European Economic Area, or EEA, and the United Kingdom (after Brexit). We rely on transfer mechanisms permitted under these laws, including the standard contract clauses, which have been subject to regulatory and judicial scrutiny.
Additionally, we are subject to laws, rules, and regulations regarding cross-border transfers of personal data, including laws relating to the transfer of personal data outside the European Economic Area, or EEA, and the United Kingdom. We rely on transfer mechanisms permitted under these laws, including the standard contract clauses, which have been subject to regulatory and judicial scrutiny.
We extend the inspiring and intuitive nature of our platform to our hardware with connected machines that are both beautiful and easy to use. Our portfolio of connected machines cuts, writes, scores, and creates decorative effects for a wide range of use cases on an array of materials including paper, vinyl, wood, and leather.
We extend the inspiring and intuitive nature of our platform to our hardware with connected machines that are both beautiful and easy to use. Our portfolio of connected machines cuts, writes, scores, and creates decorative effects for a wide range of use cases on an array of materials including paper, adhesive vinyl, iron-on vinyl, wood, and leather.
Approximately 24% of our users make projects to sell. Our Opportunity We believe that anyone can be creative, and thus anyone can be a part of the Cricut community of users. This presents us with a large untapped market opportunity in addition to our current user base.
Approximately 27% of our users make projects to sell. Our Opportunity We believe that anyone can be creative, and thus anyone can be a part of the Cricut community of users. This presents us with a large untapped market opportunity in addition to our current user base.
To streamline e-commerce logistics, inventory management, warehousing and fulfillment, we engage a small number of third-party logistics partners, including last mile warehousing and delivery partners, located in the United States, China, Europe, and Australia to receive and distribute our products.
To streamline logistics, inventory management, warehousing and fulfillment, we engage a small number of third-party logistics partners, including last mile warehousing and delivery partners, located in the United States, China, Europe, and Australia to receive and distribute our products.
The broad range of accessories and materials in the Cricut ecosystem also help bring designs to life, from heat presses and handheld crafting tools to materials like paper and vinyl. These products work seamlessly and easily with our connected machines, which helps build brand loyalty among our userbase.
The broad range of accessories and materials in the Cricut ecosystem also help bring designs to life, from heat presses and handheld crafting tools to materials like paper and vinyl. These products work seamlessly and easily with our connected machines, which helps build brand loyalty among our user base.
Users take advantage of these capabilities to show off their creations through social media platforms, video platforms, and their own websites and shops. Many users have even taken passion for Cricut to the next level, creating their own tutorials, inspirational posts, and other influential content to share with others.
Users take advantage of these capabilities to show off their creations on our platform, through social media platforms, video platforms, and their own websites and shops. Many users have even taken passion for Cricut to the next level, creating their own tutorials, inspirational posts, and other influential content to share with others.
Utilizing a patent-pending card mat to hold these cards in place during operation, Cricut machines can cut and draw professional-looking handmade cards for any occasion while easily pulling from hundreds of ready-to-make greeting card projects in Design Space.
Utilizing a patented card mat to hold these cards in place during operation, Cricut machines can cut and draw professional-looking handmade cards for any occasion while easily pulling from hundreds of ready-to-make greeting card projects in Design Space.
The Cricut User Journey Creative individuals come to Cricut and become engaged users who can express themselves both individually and as part of a large and passionate community. As of December 31, 2023, 92% of our users identify as women. Many users also earn income through products they create on Cricut.
The Cricut User Journey Creative individuals come to Cricut and become engaged users who can express themselves both individually and as part of a large and passionate community. As of December 31, 2024, 94% of our users identify as women. Many users also earn income through products they create on Cricut.
We also had 53 pending patent applications in the United States and 185 pending patent applications in non-U.S. jurisdictions. These issued patents and pending patent applications are intended to protect our proprietary inventions that are relevant to our business. We continually review our development efforts to assess the existence and patentability of new intellectual property.
We also had 46 pending patent applications in the United States and 121 pending patent applications in non-U.S. jurisdictions. These issued patents and pending patent applications are intended to protect our proprietary inventions that are relevant to our business. We continually review our development efforts to assess the existence and patentability of new intellectual property.
We sell to specialized arts and crafts supply retailers with large regional or national presence, such as Hobby Lobby, Hobbycraft, Jo-Ann, and Michaels. • National Retailers. We sell to large, mass merchant retailers with national and international presence, such as Amazon, Target, and Walmart. • Independent Retailers.
We sell to specialized arts and crafts supply retailers with large regional or national presence, such as Hobby Lobby, Hobbycraft, Michaels, and Cultura. • National Retailers. We sell to large, mass merchant retailers with national and international presence, such as Amazon, Target, and Walmart. • Independent Retailers.
We also sell to a network of distributors in over 50 countries who resell our products primarily to international brick-and-mortar and online retail partners and on a limited basis to U.S. brick-and-mortar and online retail partners. In 2022, 59%, and in 2023, 62% of our revenue was generated through online channels, respectively.
We also sell to a network of distributors in over 50 countries who resell our products primarily to international brick-and-mortar and online retail partners and on a limited basis to U.S. brick-and-mortar and online retail partners. In 2023, 62%, and in 2024, 65% of our revenue was generated through online channels, respectively.
With 86% of our users, as of December 31, 2023, creating projects for their friends and family, word-of-mouth marketing continues to be paramount to our operational success. Crafting inspires feelings of accomplishment in our users, which promotes repeat use of our products and re-engagement in our platform and community.
With 87% of our users, as of December 31, 2024, creating projects for their friends and family, word-of-mouth marketing continues to be paramount to our operational success. Crafting inspires feelings of accomplishment in our users, which promotes repeat use of our products and re-engagement in our platform and community.
Additionally, Cricut provides opportunities for employees to privately support its members and select community organizations that are aligned to our mission to help people lead creative lives. While support is primarily provided in the form of product donations, it also includes employees’ time in providing crafted projects. The health and wellness of our employees and members remains a priority.
Additionally, Cricut provides opportunities for employees to privately support its members and select community organizations that are aligned to our mission to help people lead creative lives. While support is primarily provided in the form of product donations, it also includes employees’ time in providing crafted projects.
Our platform is primarily built and maintained in-house by a team of professionals across design, product management and engineering disciplines. As of December 31, 2023, we had over 263 employees in our research and development organization.
Our platform is primarily built and maintained in-house by a team of professionals across design, product management and engineering disciplines. As of December 31, 2024, we had over 250 employees in our research and development organization.
We continue to grow our revenues within our international markets and in 2022 16.1%, and in 2023 20.3% of our overall revenue came from our international business. Many of our products are sold through traditional brick-and-mortar retail partners, varying in size, including on their websites, as follows: • Specialized Craft Retailers.
We continue to grow our revenues within our international markets and in 2023 20%, and in 2024 22% of our overall revenue came from our international business. Many of our products are sold through traditional brick-and-mortar retail partners, varying in size, including on their websites, as follows: • Specialized Craft Retailers.
This 6 adds a larger, broader audience to Cricut’s own social audience of more than 6.9 million followers. The social conversation that this audience generates includes millions of posts tagging Cricut and related hashtags, billions of video views, and many third-party, independently run Cricut-related groups across social platforms.
This adds a larger, broader audience to Cricut’s own social audience consisting of millions of followers. The social conversation that this audience generates includes millions of posts tagging Cricut and related hashtags, billions of video views, and many third-party, independently run Cricut-related groups across social platforms.
We primarily use two contract manufacturers, with operations in Malaysia and China, to produce our connected machines, which are built based on our quality and performance standards and specifications.
We use three contract manufacturers, with operations in Malaysia, to produce our connected machines, which are built based on our quality and performance standards and specifications.
Available as a monthly or annual subscription, Cricut Access subscribers enjoy a greater and ever-growing selection of more than 750 thousand images, hundreds of fonts, and thousands of ready-to-make projects in our design library, as well as other members-only special features, like Monogram Maker. Subscribers also receive discounts to cricut.com and priority support.
Available as a monthly or annual subscription, Cricut Access subscribers enjoy a greater and ever-growing selection of more than one million images, hundreds of fonts, and thousands of ready-to-make projects in our design library, as well as other members-only special features, like Background Remover. Subscribers also receive discounts to cricut.com and priority support.
Federal privacy legislation also has been proposed. These developments create the potential for a patchwork of overlapping but different laws. 15 Further, some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of operating our products and services and other aspects of our business.
These developments create the potential for a patchwork of overlapping but different laws, and increase our risk and compliance costs. 15 Further, some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of operating our products and services and other aspects of our business.
With 86% of our users creating products for their friends and family, word-of-mouth marketing continues to be one of the most efficient and effective ways we attract new users. In 2023, over 38% of new users first heard about Cricut through friends and family. We also use digital and social media marketing to attract users.
With 87% of our users creating products for their friends and family, word-of-mouth marketing continues to be one of the most efficient and effective ways we attract new users. In 2024, 39% of new users first heard about Cricut through friends and family. We also use digital and social media marketing to attract users.
For additional information, see the section titled “Risk factors—Risks Related to our Intellectual Property.” Manufacturing, Supply Chain and Fulfillment We currently outsource the manufacturing of our products to third-party contract manufacturers located primarily in Malaysia and China. We believe outsourcing our manufacturing function promotes more flexibility and scalability in our operations.
For additional information, see the section titled “Risk factors—Risks Related to our Intellectual Property.” Manufacturing, Supply Chain and Fulfillment We currently outsource the manufacturing of our connected machines, accessories and materials to third-party contract manufacturers located primarily in Malaysia, China, Thailand and South Korea. We believe outsourcing our manufacturing function promotes more flexibility and scalability in our operations.
A standard and premium version of our subscription service, Cricut Access, enables use of special design features and expanded app capabilities as well as a growing library of more than 750 thousand images, thousands of ready-to-make projects, and hundreds of fonts. Cricut Access also includes other member benefits, such as discounts and priority support.
The standard and premium version of our subscription service, Cricut Access, enables access to a growing library of more than one million images, thousands of ready-to-make projects, and hundreds of fonts, and the use of special design features and expanded app capabilities. Cricut Access also includes other member benefits, such as discounts on cricut.com and priority member care support.
For the years ended December 31, 2021, 2022 and 2023, we generated: • Total revenue of $1,306.2 million, $886.3 million and $765.1 million, respectively, representing 36%, (32)% and (14)% year-over-year growth, respectively • Net income of $140.5 million, $60.7 million and $53.6 million, respectively, representing (9)%, (57)% and (12)% year-over-year growth, respectively Our Industry We both influence and benefit from powerful secular tailwinds: • Personalization is a Global Mega Trend.
For the years ended December 31, 2022, 2023 and 2024, we generated: • Total revenue of $886.3 million, $765.1 million and $712.5 million, respectively, representing (32)%, (14)% and (7)% year-over-year growth, respectively • Net income of $60.7 million, $53.6 million and $62.8 million, respectively, representing (57)%, (12)% and 17% year-over-year growth, respectively Our Industry We both influence and benefit from powerful secular tailwinds: • Personalization is a Global Mega Trend.
Item 1. Business Overview At Cricut, our mission is to help people lead creative lives. Our creativity platform enables our engaged and loyal community of over 8.9 million users, as of December 31, 2023, to turn ideas into “I Did It’s” — DIY goods from custom greeting cards, and apparel to on-demand gifts and large-scale decor.
Item 1. Business Overview At Cricut, our mission is to help people lead creative lives. Our creativity platform enables our engaged and loyal community of nearly 5.9 million Active Users, as of December 31, 2024, to turn ideas into DIY goods from custom greeting cards and apparel to on-demand gifts and large-scale decor.
We believe we compete favorably across these factors, and we have developed a business model that is difficult to replicate. For additional information, see the section titled “Risk Factors—Risks Related to Our Industry and Business.” Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
We believe we compete favorably across these factors. For additional information, see the section titled “Risk Factors—Risks Related to Our Industry and Business.” Intellectual Property We believe that our intellectual property rights are valuable and important to our business.
Each project becomes an opportunity to create a conversation – our users share, inspire and teach each other. Our community of over 8.9 million users as of December 31, 2023, creates a reinforcing network effect. As the number of our users grow, so does the number of projects made and shared physically or digitally.
Each project becomes an opportunity to create a conversation – our users share, inspire and teach each other. Our community of nearly 5.9 million Active Users as of December 31, 2024, creates a reinforcing network effect. The number of projects made and shared physically or digitally continues 8 to grow over time.
As of December 31, 2023, we have a total of 17 registered trademarks in the United States and 75 registered trademarks in non-U.S. jurisdictions. We also have registered domain names for websites that we use in our business, such as cricut.com and other variations.
As of December 31, 2024, we had a total of 18 registered trademarks in the 12 United States and 86 registered trademarks in non-U.S. jurisdictions. We also have registered domain names for websites that we use in our business, such as cricut.com and other variations.
New users typically intend to create a broad range of products but may start with one or two intended uses and grow with Cricut over time. For example, a user may buy a connected machine and begin by making cards but later branch out to T-shirts, wall decals, and more.
New users typically intend to create a variety of things but may start with one intended use and grow with Cricut over time. For example, a user may buy a connected machine and begin by making cards but later branch out to T-shirts, wall decals, and more.
To calculate our SAM and TAM, we extrapolate these survey results across the general population ages 18 and older in each region. 5 Our SAM consists of the portion of individuals surveyed who said they have made at least one creative project in categories addressed by our current products each month in the last 12 months, whom we call “active creatives.” Our TAM includes the individuals in our SAM as well as the portion of individuals surveyed who said they like, buy, used to make or are interested in creating personalized, handmade or custom items, whom we call “potential creatives” but who have not made at least one creative project in categories addressed by our current products in the last 12 months.
Our SAM consists of the portion of individuals surveyed who said they have made at least one creative project in categories addressed by our current products each month in the last 12 months, whom we call “active creatives.” Our TAM includes the individuals in our SAM as well as the portion of individuals surveyed who said they like, buy, used to make or are interested in creating personalized, handmade or custom items, whom we call “potential creatives” but who have not made at least one creative project in categories addressed by our current products in the last 12 months.
In 2023, 38% of our revenue was generated through brick-and-mortar sales and 62% was generated through online channels. Our Competitive Strengths Our competitive strengths include: Our Vertically Integrated Platform Encourages Continual Engagement.
In 2024, 35% of our revenue was generated through brick-and-mortar sales and 65% was generated through online channels. Our Competitive Strengths Our competitive strengths include: Our Vertically Integrated Platform Encourages Continual Engagement.
We continue to monitor and abide by local safety guidelines applicable to each Cricut facility. The majority of Cricut employees operate on a hybrid model, working in-office 3+ days per week and working virtually the remainder of the week. Policies and practices are in place to ensure adherence to occupational safety within each office.
The majority of Cricut employees operate on a hybrid model, working in-office 3+ days per week and working virtually the remainder of the week. Policies and practices are in place to ensure adherence to occupational safety within each office.
Every project is an opportunity to start a conversation and we often see our users inspire, teach, and create together. Users are passionate about sharing Cricut tips, tricks, and 4 personal stories and this engagement carries over into social media and into everyday life.
Every project is an opportunity to start a conversation and we often see our users inspire, teach, and create together. Users are passionate about sharing Cricut tips, tricks, and personal stories and this engagement carries over into social media and into everyday life. Globally, there are millions of Cricut followers and hundreds of independently run Cricut groups across social media.
We face heightened competition in providing accessories and materials that we sell for use with our connected machines. We compete against well-established, well-known companies, many of which are also our channel partners.
The accessories and materials DIY market is highly competitive with few barriers to entry. We face heightened competition in providing accessories and materials that we sell for use with our connected machines. We compete against well-established, well-known companies, many of which are also our channel partners.
This engagement generates even more shared projects and word-of-mouth that in turn helps to grow our community. 8 We Have a Positive Impact on Our Users, in Good Times and in Bad. When users design with our products, they feel creative and self-accomplished.
This engagement generates even more shared projects and word-of-mouth that in turn helps to grow our community. We Have a Positive Impact on Our Users, in Good Times and in Bad. When users design with our products, they feel creative and self-accomplished. When they personalize an object or make something for someone as a gift, they feel good about themselves.
According to in-house research conducted in 2023: • 38% of new users bought their Cricut machine specifically to make a broad range of projects • 33% of new users make projects to sell • 82% of users say crafting with Cricut inspires feelings of accomplishment • 86% of users made projects for other people rather than themselves • 56% of users bought their machine to make personalized gifts A user’s journey evolves after their first purchase.
According to in-house research conducted in 2024: • 38% of new users bought their Cricut machine specifically to make a variety of things • 55% of users bought their machine to make personalized gifts • 27% of users make projects to sell • 84% of users say crafting with Cricut inspires feelings of accomplishment • 87% of users made projects for other people rather than themselves A user’s journey evolves after their first purchase.
The premium version includes all of the benefits of the basic Cricut Access subscription, as well as additional discounts and preferred shipping services. As of December 31, 2023, we had nearly 2.8 million paid subscribers, representing approximately 31% of our total users.
The premium version includes all of the benefits of the basic Cricut Access subscription, as well as additional discounts and preferred shipping services. As of December 31, 2024, we had nearly 3.0 million paid subscribers.
To mitigate the risks of having a limited number of suppliers, we have in place currently-qualified alternative contract manufacturers for certain products; however, we do not currently have alternative suppliers for certain key components.
As we grow and scale, we continue to evaluate and assess the need for existing and new manufacturers, suppliers, and partners. To mitigate the risks of having a limited number of suppliers, we have in place currently-qualified alternative contract manufacturers for certain products; however, we do not currently have alternative suppliers for certain key components.
As of December 31, 2023, we had over 8.9 million users, implying approximately 7% penetration of our SAM in all markets. We estimate that there are over 163 million potential creatives in the United States and Canada and over 109 million potential creatives in our primary international target markets.
As of December 31, 2024, we had nearly 5.9 million Active Users. We estimate that there are over 163 million potential creatives in the United States and Canada and over 109 million potential creatives in our primary international target markets.
We drive consumers to our website and platform primarily through word-of-mouth marketing channels and the use of low-cost marketing channels like social media. We believe our omni-channel strategy enables us to target a diverse consumer base.
Additionally, users can make in-app purchases of images, fonts and projects à la carte on our platform and through our design app. We drive consumers to our website and platform primarily through word-of-mouth marketing channels and the use of low-cost marketing channels like social media. We believe our omni-channel strategy enables us to target a diverse consumer base.
We quantify our market opportunity in terms of target audience profile, which includes active Makers with relevant behavioral attributes who we address with our current products and price points, and our SAM and TAM, which includes potential creatives who we believe we can reach over the long term with products that address new use cases, greater accessibility, and a broader set of price points.
We quantify our market opportunity in terms of target audience profile, which includes active creatives with relevant behavioral attributes who we address with our current products and price points, and our Serviceable Addressable Market (“SAM”) and Total Addressable Market (“TAM”), which includes potential creatives who we believe we can reach over the long term with products that address new use cases, greater accessibility, and a broader set of price points. 5 We commissioned a study from YouGov America in September 2020 across multiple countries.
The revenue generated from the sales of our connected machines, subscriptions, accessories, and materials comes from a robust mix of brick-and-mortar and online retail, including direct-to-consumer on cricut.com, and partners like Amazon, Best Buy, Costco, Hobby Lobby, HSN, Jo-Ann, Michaels, Target, and Walmart. We are a profitable business.
This design of our product ecosystem and marketing helped scale our community of users significantly over time. The revenue generated from the sales of our connected machines, subscriptions, accessories, and materials comes from a robust mix of brick-and-mortar and online retail, including direct-to-consumer on cricut.com, and partners like Amazon, Best Buy, Costco, Hobby Lobby, HSN, Michaels, Target, and Walmart.
These machines are available at a variety of price points: • 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 MRSP Cricut often becomes a huge part of users’ creative lives, serving as the foundation for their journey of creativity.
These machines are available at a variety of price points: • Cricut Joy family $149.00-$199.00 MSRP • Cricut Explore family $249.00 - $319.00 MSRP • Cricut Maker family $399.00 - $429.00 MSRP • Cricut Venture $999.00 MRSP Cricut often becomes a huge part of users’ creative lives, serving as the foundation for their journey of creativity.
For example, the CCPA gives California residents expanded rights to access and deletion of their personal information, to opt out of certain personal information sharing and to receive detailed information about how their personal information is collected and used.
CCPA gives California residents various rights with regard to their personal information, including to access and delete their personal information, to opt out of certain sales and sharing of personal information, and to receive detailed information about how their personal information is collected and used.
Our software integrates our connected machines with the rest of our platform and enables a seamless creative experience for our users. Our hardware and software are beautifully designed to be easy-to-use, so that users can be their creative best. • Proprietary Technology. Our platform benefits from our proprietary intellectual property.
Our hardware and software are beautifully designed to be easy-to-use, so that users can be their creative best. • Proprietary Technology. Our platform benefits from our proprietary intellectual property.
We began our international expansion by launching in Australia, Canada, France, Germany and the United Kingdom, and subsequently launched in Latin America, Western Europe, and more recently most of Asia (including India, Japan, and South Korea). We have also localized our design app in each of the most commonly spoken languages in the countries we have entered.
We began our international expansion by launching in Australia, Canada, France, Germany and the United Kingdom, and subsequently launched in Latin America, Western Europe, META (Middle East, Turkey, and Africa), and more recently most of Asia (including India, Japan, and South Korea).
As of December 31, 2023, we had 61 issued patents in the United States, which are expected to expire at various times between May 4, 2024, and March 23, 2042, as well as 125 issued patents in non-U.S. jurisdictions, which are expected to expire at various times between July 8, 2024, and December 19, 2048.
As of December 31, 2024, we had 78 issued patents in the United States, which are expected to expire at various times between January 4, 2025, and June 16, 2043, as well as 207 issued patents in non-U.S. jurisdictions, which are expected to expire at various times between January 16, 2025, and December 19, 2048.
As of December 31, 2023, we had over 690 employees of which 152 lived outside of the United States. As of December 31, 2023, we had employees in 33 states and 23 countries.
As of December 31, 2024, we had over 640 employees of which 161 lived outside of the United States. As of December 31, 2024, we had employees in 31 states and 25 countries.
To date, our success has been driven by word-of-mouth referrals as well as effective use of low-cost marketing channels like social media, which we then complement with our targeted sales and marketing efforts. This design of our product ecosystem and marketing helped scale our community of users significantly over time.
This generates even more shared projects and word-of-mouth that in turn helps to grow our community. To date, our success has been driven by word-of-mouth referrals as well as effective use of low-cost marketing channels like social media, which we then complement with our targeted sales and marketing efforts.
Every touchpoint is an opportunity to engage the customer and exceed expectations. Our goal is to provide users with an experience that is both inspiring and intuitive, and we take great care to make our products easy to use. Our elegant products are backed by deep user experience, software, technology, and engineering expertise.
Our goal is to provide users with an experience that is both inspiring and intuitive, and we take great care to make our products easy to use. Our elegant products are backed by deep user experience, software, technology, and engineering expertise. We Designed our Platform to Constantly Evolve so We Can Find New Ways to Delight Users.
Cricut Access is $9.99 billed monthly or $95.88 billed annually. Cricut Access Premium, which includes all the benefits of Cricut Access, includes additional discounts and preferred shipping for an annual cost of $119.88. As of December 31, 2023, we had nearly 2.8 million Cricut Access subscribers, representing approximately 31% of our total users.
Cricut Access is $9.99 billed monthly or $95.88 billed annually. Cricut Access Premium, which includes all the benefits of Cricut Access, includes additional discounts and preferred shipping for an annual cost of $119.88.
In addition, we expanded the Contributing Artists Program, which launched in 2022, to more than 700 artists with over 580,000 contributed images in this short time. We Have a Strong and Loyal Community of Users. Many of our users become deeply engaged in our creative community and loyal to our brand.
In addition, we expanded the Contributing Artists Program, which launched in 2022, to well over 1 million images and expanded it to include easy-to-make projects. We Have a Strong and Loyal Community of Users. Many of our users become deeply engaged in our creative community and loyal to our brand.
When they personalize an object or make something for someone as a gift, they feel good about themselves. Our products make people feel accomplished and confident – powerful emotions that help create a relationship and love between our brand and our users. Crafting allows people to create their own gifts or to earn income selling handmade goods.
Our products make people feel accomplished and confident – powerful emotions that help create a relationship and love between our brand and our users. Crafting allows people to create their own gifts or to earn income selling handmade goods. Given the positive emotions connected with crafting, our users create to celebrate and as a respite during difficult times.
Our contract manufacturers then procure these components from our suppliers within the lead times provided by our finished goods purchase orders based on component allocations that we control. We also hold long lead-time electronic component inventories in contracted warehouses in Asia as a mitigation measure against shortages. We generally do not have long-term contractual agreements with these component suppliers.
We also hold long lead-time electronic component inventories in contracted warehouses in Asia as a mitigation measure against shortages. We generally do not have long-term contractual agreements with these component suppliers.
Through our platform and online footprint, we help users create and inspire others in the Cricut community through shared ideas and projects. Cricut software also puts community ideas and inspiration front and center and encourages interaction with one another through a number of sharing and social features.
Cricut software also puts community ideas and inspiration front and center and encourages interaction with one another through a number of sharing and social features. As the number of our users grow, so does the number of projects made and shared physically or digitally through the reinforcing network effect.
We sell to a network of smaller, independent retailers in targeted locations or in specialty markets. Each of Jo-Ann, Michaels, and Walmart represented 10% or more of our consolidated revenue in the year ended December 31, 2021.
We sell to a network of smaller, independent retailers in targeted locations or in specialty markets. As of December 31, 2023 and December 31, 2024 we did not have any customers that represented 10% or more of our consolidated revenue.
We offer over 3,000 total SKUs within our Cricut extensions, accessories, and materials, ranging in price from a $0.99 a la carte image in Design Space to the $999.00 for Cricut Autopress. How We Go to Market Many of our users hear about our products through word-of-mouth.
Handheld tools from scissors, to weeding tools, to rulers, complete the Cricut ecosystem for a full-brand offering made for the discerning consumer. We offer thousands of SKUs within our Cricut extensions, accessories, and materials, ranging in price from $1.99 to $999.00. How We Go to Market Many of our users hear about our products through word-of-mouth.
Given the positive emotions connected with crafting, our users create to celebrate and as a respite during difficult times. Our Growth Strategy These are key elements of our growth strategy: Reach More Users. As of December 31, 2023, we had over 8.9 million users, representing approximately 7% of the 129 million addressable active creatives in our SAM.
Our Growth Strategy These are key elements of our growth strategy: Reach More Users. As of December 31, 2024, we had nearly 5.9 million Active Users, representing approximately 5% of the 129 million addressable active creatives in our SAM.
Our contracts with our two primary contract manufacturers do not obligate them to supply our connected machines in any specific quantity or at any specific price and allow us to enter purchase orders with such manufacturers.
Our contracts with our three contract manufacturers do not obligate them to supply our connected machines in any specific quantity or at any specific price and allow us to enter purchase orders with such manufacturers. Our contract manufacturers procure from approved third-party suppliers a majority of the components (measured by spend) that are used in the production of our products.
Our mission is rooted in our passion for design, and this passion comes to life in the beautiful products we build and experiences we create. We take great pride in marrying design and functionality for each SKU – from our connected machines and design app to content to accessories and materials.
We take great pride in marrying design and functionality for each SKU – from our connected machines and design app to content to accessories and materials. Every touchpoint is an opportunity to engage the customer and exceed expectations.
Competition We compete in several market segments with our business. We experience competition in connected machines; for example, Brother, Graphtec, Loklik, Silhouette America, and Siser sell cutting machines.
Competition We compete in several market segments with our business. 11 We experience competition in connected machines; for example, Brother, Graphtec, Loklik, Silhouette America, and Siser sell cutting machines. We expect significant competition to continue, both from current competitors as well as new entrants into the market, some of which may become significant competitors in the future.
We Designed our Platform to Constantly Evolve so We Can Find New Ways to Delight Users. We constantly innovate and offer new products and functionality to provide users with new capabilities for their existing connected machines. New products are integrated seamlessly into existing connected machines with updates to our software, infrastructure, and content.
We constantly innovate and offer new features and improvements to existing ones to provide users with new capabilities for their existing connected machines. New features are integrated seamlessly into existing connected machines with updates to our software, infrastructure, and content. We continuously improve our software to address the unique needs our users have when crafting.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNegative developments in Malaysia’s socio-political environment may adversely affect our business, financial condition, results of operations and prospects. Although the overall Malaysian economic environment appears to be positive, there can be no assurance that this will continue to prevail in the future.
Biggest changeAlthough the overall Malaysian economic environment appears to be positive, there can be no assurance that this will continue to prevail in the future. Economic growth is determined by countless factors, and it is extremely difficult to predict with any level of certainty. We may be affected by recent and possible future political, social and economic conditions in China.
We rely on Amazon Web Services for a substantial portion of our computing, storage, data processing, networking and other services. Any disruption of or interference with our use of Amazon Web Services or other third-party services could adversely affect our business, financial condition and results of operations.
Any disruption of or interference with our use of Amazon Web Services or other third-party services could adversely affect our business, financial condition and results of operations. We rely on Amazon Web Services for a substantial portion of our computing, storage, data processing, networking and other services.
If we cannot 40 Table of Contents successfully defend any large claim, maintain our general liability insurance on acceptable terms or maintain adequate coverage against potential claims, our financial results could be adversely affected.
If we 40 Table of Contents cannot successfully defend any large claim, maintain our general liability insurance on acceptable terms or maintain adequate coverage against potential claims, our financial results could be adversely affected.
We strive to comply with applicable privacy laws; however, the regulatory framework for privacy, data protection and information security worldwide is, and is likely to remain for the foreseeable future, varied, and it is possible that these or other obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another.
We strive to comply with applicable privacy laws and other obligations; however, the regulatory framework for privacy, data protection and information security worldwide is, and is likely to remain for the foreseeable future, varied, and it is possible that these or other obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another.
As a controlled company, we are exempt under the Exchange’s standards from the obligation to comply with certain corporate governance requirements, including the requirements: • that a majority of our board of directors consists of independent directors; • that we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and 55 Table of Contents • that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
As a controlled company, we are exempt under the Exchange’s standards from the obligation to comply with certain corporate governance requirements, including the requirements: • that a majority of our board of directors consists of independent directors; 55 Table of Contents • that we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
Bribery Act, by us, our employees and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to consumer protection, consumer product safety and data privacy frameworks, such as the EU’s GDPR, including data transfer or localization restrictions, or LGPD; • varying levels of Internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs; • tariffs and other non-tariff barriers, such as quotas and local content rules, as well as tax consequences; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; and • political or social unrest or economic instability in a specific country or region in which we operate, including, for example, recent social and political unrest in China, which could have an adverse impact on our operations in that location.
Bribery Act, by us, our employees and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to consumer protection, consumer product safety and privacy frameworks, such as the GDPR, including data transfer or localization restrictions, or LGPD; • varying levels of Internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs; • tariffs and other non-tariff barriers, such as quotas and local content rules, as well as tax consequences; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; and • political or social unrest or economic instability in a specific country or region in which we operate, including, for example, recent social and political unrest in China, which could have an adverse impact on our operations in that location.
With laws and regulations such as the GDPR, LGPD, CCPA and CPRA imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other laws and regulations, there is a risk that the requirements of these or other laws and regulations, or of contractual or other obligations relating to privacy, data protection or information security, are interpreted or applied in a manner that is, or is alleged to be, inconsistent with our management and processing practices, our policies or procedures, or the features of our products and services.
With laws and regulations such as the GDPR, LGPD and CCPA imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other laws and regulations, there is a risk that the requirements of these or other laws and regulations, or of contractual or other obligations relating to privacy, data protection or information security, are interpreted or applied in a manner that is, or is alleged to be, inconsistent with our management and processing practices, our policies or procedures, or the features of our products and services.
Any such defects could make our products unsafe, create a risk of environmental or property damage, personal injury or data privacy, security and data protection harms, and subject us to the hazards and uncertainties of product liability and other claims and related litigation. As a result, our services may not perform as anticipated and may not meet expectations.
Any such defects could make our platform and products unsafe, create a risk of environmental or property damage, personal injury or data privacy, security and data protection harms, and subject us to the hazards and uncertainties of product liability and other claims and related litigation. As a result, our services may not perform as anticipated and may not meet expectations.
For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA and Switzerland to the United States could result in further limitations on the ability to transfer personal data across borders, particularly if governments are unable or unwilling to reach agreement on or maintain existing mechanisms designed to support cross-border data transfers.
For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA, United Kingdom and Switzerland to the United States could result in further limitations on the ability to transfer personal data across borders, particularly if governments are unable or unwilling to reach agreement on or maintain existing mechanisms designed to support cross-border data transfers.
There can be no assurance that we will be able to detect and fix all issues and defects in the hardware, software and services we offer. Failure to timely identify, patch, fix or recall products and services with such defects could result in widespread technical and performance issues affecting our products and could lead to claims against us.
There can be no assurance that we will be able to detect and fix all issues and defects in the hardware, software and services we offer. Failure to timely identify, patch, fix or recall products and services with such defects could result in widespread technical and performance issues affecting our platform and products and could lead to claims against us.
In addition, events such as inclement weather, natural disasters, government shut-downs as a result of air quality, power grid limitations, pandemics, civil unrest or other reasons, labor strikes or shortages, transportation security vulnerabilities or cyberattacks could impair third-party production capabilities.
In addition, events such as inclement weather, natural disasters, government shut-downs as a result of air quality, power grid limitations, pandemics, civil unrest or other reasons, labor strikes, restrictions, or shortages, transportation security vulnerabilities or cyberattacks could impair third-party production capabilities.
Under the announced policies, our dual class capital structure would make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing in our stock.
Under certain announced policies, our dual class capital structure would make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing in our stock.
Our financial condition, results of operations and operating metrics in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including those discussed in this Risk Factors section and: • the continued market acceptance, and the growth, of the personal craft market; • our ability to attract and engage our users, leading to increased sales to them; • our development and improvement of the quality of our user experience, including enhancement of existing products, creation of new products, technology and features and licensing of new content; • the continued development and upgrading of our proprietary software; • the timing and success of new products, features and content introductions by us or our competitors or any other change in the competitive landscape of the markets in which we operate; • pricing pressure as a result of inflationary pressures, competition or otherwise; • the impact of price increases on our retail partners or consumers generally; • cost increases, delays or disruptions in our supply chain; • errors in our forecasting of the demand for our products, which could lead to lower revenue, increased costs or both; • increases in marketing, sales and other operating expenses; • seasonal fluctuations in subscriptions, engagement by users and purchases of accessories and materials; • the mix of our products sales from period to period; • our ability to maintain gross margins and operating margins, including as a result of higher fixed costs, warehousing or operations expense, or price competitiveness, in one or more product categories, which we are experiencing and may experience again in the future; • system failures or breaches of security or privacy; • adverse litigation judgments, settlements or other litigation-related costs; • changes in the legislative or regulatory environment, including with respect to privacy, data protection and security, consumer product safety and advertising or enforcement by government regulators, including fines, orders or consent decrees; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • changes in our effective tax rate; • changes in accounting standards, policies, guidance, interpretations or principles; and • changes in business or macroeconomic conditions, including the impact of the COVID-19 pandemic, lower consumer confidence, recessionary conditions, inflationary pressures, increased unemployment rates or stagnant or declining wages.
Our financial condition, results of operations and operating metrics in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including those discussed in this Risk Factors section and: • the continued market acceptance, and the growth, of the personal craft market; • our ability to attract and engage our users, leading to increased sales to them; • our development and improvement of the quality of our user experience, including enhancement of existing products, creation of new products, technology and features and licensing of new content; • the continued development and upgrading of our proprietary software; • the timing and success of new products, features and content introductions by us or our competitors or any other change in the competitive landscape of the markets in which we operate; • pricing pressure as a result of inflationary pressures, competition or otherwise; • the impact of price increases on our retail partners or consumers generally; • cost increases, delays or disruptions in our supply chain; • errors in our forecasting of the demand for our products, which could lead to lower revenue, increased costs or both; • increases in marketing, sales and other operating expenses; • seasonal fluctuations in platform revenue, engagement by users and purchases of accessories and materials; • the mix of our products sales from period to period; • our ability to maintain gross margins and operating margins, including as a result of higher fixed costs, warehousing or operations expense, or price competitiveness, in one or more product categories, which we are experiencing and may experience again in the future; • system failures or breaches of security or privacy; • adverse litigation judgments, settlements or other litigation-related costs; • changes in the legislative or regulatory environment, including with respect to privacy, data protection and security, consumer product safety and advertising or enforcement by government regulators, including fines, orders or consent decrees; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • changes in our effective tax rate; 25 Table of Contents • changes in accounting standards, policies, guidance, interpretations or principles; and • changes in business or macroeconomic conditions, including the impact of the COVID-19 pandemic, lower consumer confidence, recessionary conditions, inflationary pressures, increased unemployment rates or stagnant or declining wages.
While supply chain conditions have improved during 2023, 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.
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.
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.
Instead of increasing subscriptions, 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.
Failures in Internet infrastructure or interference with broadband access, including regulatory actions, could cause current or potential users to believe that our platform system or design apps are unreliable, possibly leading our users to switch to our competitors or to avoid using our products and subscriptions.
Failures in Internet infrastructure or interference with broadband access, including regulatory actions, could cause current or potential users to believe that our platform system or design apps are unreliable, possibly leading our users to switch to our competitors or to avoid using our products and platform.
In such an eventuality, we could be forced to relocate our manufacturing, either temporarily or permanently, to another potentially costlier location or find alternative potentially costlier methods of shipping our finished products to brick-and-mortar and online retail partners and users.
In such an eventuality, we could be forced to relocate certain of our manufacturing, either temporarily or permanently, to another potentially costlier location or find alternative potentially costlier methods of shipping our finished products to brick-and-mortar and online retail partners and users.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • overall performance of the equity markets and the performance of technology companies in particular; • variations in our results of operations, cash flows and other financial metrics and non-financial metrics and how those results compare to analyst expectations; • changes in the financial projections or business guidance we may provide to the public, or our failure to meet these projections; • failure of securities analysts to maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • recruitment or departure of key personnel; • the economy as a whole and market conditions in our industry; • negative publicity related to problems in our manufacturing or the real or perceived quality of our products, as well as the failure to timely launch new products or services that gain market acceptance; • rumors and market speculation involving us or other companies in our industry; 54 Table of Contents • announcements by us or our competitors of new products, accessories, features and content, significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • actual or perceived privacy or data security incidents; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us, litigation involving our industry, or both; • developments or disputes concerning our or other parties’ products, services or intellectual property rights; • the inclusion or exclusion of our Class A common stock from any trading indices; • other events or factors, including those resulting from war, including the current conflicts between Russia and Ukraine and between Israel and Hamas, incidents of terrorism, man-made or natural disasters, pandemics or responses to these events; • the effects of our stock repurchase program; • the size of our public float; and • purchases or sales of shares of our Class A common stock by us or our stockholders or public announcements of such activities.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • overall performance of the equity markets and the performance of technology companies in particular; • variations in our results of operations, cash flows and other financial metrics and non-financial metrics and how those results compare to analyst expectations; • changes in the financial projections or business guidance we may provide to the public, or our failure to meet these projections; • failure of securities analysts to maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • recruitment or departure of key personnel; • the economy as a whole and market conditions in our industry; • negative publicity related to problems in our manufacturing or the real or perceived quality of our products, as well as the failure to timely launch new products or services that gain market acceptance; 54 Table of Contents • rumors and market speculation involving us or other companies in our industry; • announcements by us or our competitors of new products, accessories, features and content, significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • actual or perceived privacy or data security incidents; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • lawsuits threatened or filed against us, litigation involving our industry, or both; • developments or disputes concerning our or other parties’ products, services or intellectual property rights; • the inclusion or exclusion of our Class A common stock from any trading indices; • other events or factors, including those resulting from war, including the current conflicts between Russia and Ukraine and in the Middle East, incidents of terrorism, man-made or natural disasters, pandemics or responses to these events; • the effects of our stock repurchase program and any dividends; • the size of our public float; and • purchases or sales of shares of our Class A common stock by us or our stockholders or public announcements of such activities.
Our charter documents also contain other provisions that could have an anti-takeover effect, such as: 56 Table of Contents • subject to the rights of the holders of preferred stock, permitting the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • prohibiting cumulative voting for directors; • requiring super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorizing the issuance of undesignated preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminating the ability of stockholders to call special meetings of stockholders; • prohibiting stockholder action by written consent prior to the Final Conversion Date unless the action is first recommended or approved by the board, and prohibiting stockholder action by written consent from and after the Final Conversion Date, which requires stockholder actions to be taken at a meeting of our stockholders; • certain litigation against us can only be brought in Delaware; and • our dual class common stock structure as described above.
Our charter documents also contain other provisions that could have an anti-takeover effect, such as: • subject to the rights of the holders of preferred stock, permitting the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • prohibiting cumulative voting for directors; • requiring super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorizing the issuance of undesignated preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminating the ability of stockholders to call special meetings of stockholders; • prohibiting stockholder action by written consent prior to the Final Conversion Date unless the action is first recommended or approved by the board, and prohibiting stockholder action by written consent from and after the Final Conversion Date, which requires stockholder actions to be taken at a meeting of our stockholders; • certain litigation against us can only be brought in Delaware; and • our dual class common stock structure as described above.
In addition, due to concerns with the security of products and services from certain telecommunications and video providers based in China, the United States government has enacted bans on the use of certain Chinese-origin components or systems either in items sold to the U.S. government or in the internal networks of government contractors and subcontractors (even if those networks are not used for government-related projects).
In addition, due to concerns with the security of products and services from certain telecommunications and video providers based in China, the United States government has enacted bans on the use of certain Chinese- and Russian-origin components, software, and systems either in items sold to the U.S. government or in the internal networks of government contractors and subcontractors (even if those networks are not used for government-related projects).
A cyberattack, security breach or incident or other event that causes the loss or public disclosure of, or unauthorized access by third parties to, sensitive information stored by us or our brick-and-mortar and online retail partners, or the perception that any of these have occurred, could have serious negative consequences for our business, including loss of information, indemnity obligations, claims, regulatory investigations, fines, penalties and damages, reduced demand for our products and services, an unwillingness of our users to use our products or services, harm to our reputation and brand, and time consuming and expensive litigation, any of which could adversely affect our financial results.
A cyberattack, security breach or incident or other event that causes the loss or public disclosure of, or unauthorized access by third parties to, sensitive information stored by us or our brick-and-mortar and online retail partners, or the perception that any of these have occurred, could have serious negative consequences for our business, including loss of information, indemnity obligations, claims, regulatory investigations, fines, penalties and damages, reduced demand for our products and services, an unwillingness of our users to use our products or services, harm to our reputation and brand, and time consuming and expensive litigation, any of which could adversely affect our 46 Table of Contents financial results.
The GDPR also imposed numerous requirements on companies operating in the EU, including enhanced disclosures to data subjects about how personal data is processed (including information about the profiling of individuals and automated individual decision-making), limited retention periods of personal data, mandatory data breach notification obligations and additional policies and procedures required to comply with the accountability principle under the GDPR.
The GDPR also imposes numerous requirements on companies operating in the EU, including enhanced disclosures to data subjects about how personal data is processed (including information about the profiling of individuals and automated individual decision-making), limited retention periods of personal data, mandatory data breach notification obligations and additional policies and procedures required to comply with the accountability principle under the GDPR.
Within our extensions, accessories and materials, our SKUs range in price from $0.99 to $999.00. Demand for our products can be sensitive to price, especially in times of slow or uncertain economic growth and consumer economic conservatism. To the degree we implement price increases, we could see further impact on consumer behavior and demand.
Within our extensions, accessories and materials, our SKUs range in price from $1.99 to $999.00. Demand for our products can be sensitive to price, especially in times of slow or uncertain economic growth and consumer economic conservatism. To the degree we implement price increases, we could see further impact on consumer behavior and demand.
We had in 2021, 2022 and 2023, and may continue to have in the future, low gross margins in the early stages of our relationships with certain brick-and-mortar and online retail partners, particularly international brick-and-mortar and online retail partners that often require significant ramp-up periods, which has and may in the future adversely affect our total revenue.
We had in 2022, 2023 and 2024, and may continue to have in the future, low gross margins in the early stages of our relationships with certain brick-and-mortar and online retail partners, particularly international brick-and-mortar and online retail partners that often require significant ramp-up periods, which has and may in the future adversely affect our total revenue.
In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon (i) the date following the Effectiveness Date on which 53 Table of Contents the number of shares of our capital stock, including Class A common stock and Class B common stock, and any shares of capital stock underlying any securities, including restricted stock units, options or other convertible instruments, held by “Petrus Affiliates,” as defined in our amended and restated certificate of incorporation, and their permitted entities is less than 50% of the number of shares of Class B common stock held by Petrus Affiliates and their permitted entities as of 11:59 p.m.
In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon (i) the date following the Effectiveness Date on which the number of shares of our capital stock, including Class A common stock and Class B common stock, and any shares of capital stock underlying any securities, including restricted stock units, options or other convertible instruments, held by “Petrus Affiliates,” as defined in our amended and restated certificate of incorporation, and their permitted entities is less than 50% of the number of shares of Class B common stock held by Petrus Affiliates and their permitted entities as of 11:59 p.m.
Our Subscriptions 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.
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 Canva, Creative Fabrica, and Etsy, where customers can purchase digital files to upload to our platform.
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 products and subscriptions, increasing competition, a decrease in the growth of our overall market and our failure to capitalize on growth opportunities.
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.
Any such cybersecurity incidents related to our use of artificial intelligence and machine learning applications could adversely affect our reputation and results of operations.
Any cybersecurity incidents related to our use of artificial intelligence and machine learning applications could adversely affect our reputation and results of operations.
If we or our contract manufacturers lose access to components or accessories and materials from a particular supplier or experience a significant disruption in the supply of products and components from a current supplier, we may be unable to locate alternative suppliers of comparable quality on terms that are acceptable to us, or at all, which may undermine our ability to deliver our products to brick-and-mortar and online retail partners or users in a timely manner and our business could be 37 Table of Contents materially and adversely affected.
If we or our contract manufacturers lose access to components or accessories and materials from a particular supplier or experience a significant disruption in the supply of products and components from a current supplier, we may be unable to locate alternative suppliers of comparable quality on terms that are acceptable to us, or at all, which may undermine our ability to deliver our products to brick-and-mortar and online retail partners or users in a timely manner and our business could be materially and adversely affected.
Frequent or persistent interruptions, even if resulting from users’ personal Internet access rather than our systems, could cause current or potential users to believe that our systems or services are unreliable, leading them to switch to our competitors or avoid using our products and subscriptions, and could permanently harm our reputation and brands.
Frequent or persistent interruptions, even if resulting from users’ personal Internet access rather than our systems, could cause current or potential users to believe that our systems or services are unreliable, leading them to switch to our competitors or avoid using our products and platform, and could permanently harm our reputation and brands.
The occurrence of 30 Table of Contents any material defects in our connected machines or certain other products, or the flow-down obligations for brick-and-mortar and online retail partner and distributor returns, could result in an increase in product returns or make us liable for damages and warranty claims and/or returns in excess of our current reserves, which could result in an adverse effect on our business prospects, liquidity, financial condition and cash flows if warranty claims were to materially exceed anticipated levels.
The occurrence of any material defects in our connected machines or certain other products, or the flow-down obligations for brick-and-mortar and online retail partner and distributor returns, could result in an increase in product returns or make us liable for damages and warranty claims and/or returns in excess of our current reserves, which could result in an adverse effect on our business prospects, liquidity, financial condition and cash flows if warranty claims were to materially exceed anticipated levels.
Moreover, we experienced a significant increase in sales after the outbreak of the COVID-19 pandemic, and the rollout of COVID-19 vaccines, lifting of restrictions on movement and/or normalized full-time return to work trends have negatively impacted demand for our products and subscriptions, as have current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products, and changes in consumer spending preferences and buying trends, and our sales activity may continue to diminish as a result.
Moreover, we experienced a significant increase in sales after the outbreak of the COVID-19 pandemic, and the rollout of COVID-19 vaccines, lifting of restrictions on movement and/or normalized full-time return to work trends have negatively impacted demand for our products and platform services, as have current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products, and changes in consumer spending preferences and buying trends, and our sales activity may continue to diminish as a result.
Our directors, executive officers and holders of 5% or more of our common stock hold approximately 91% of the total voting power of our common stock and are able to exert significant control over us, which will limit your ability to influence the outcome of important transactions, including a change of control.
Our directors, executive officers and holders of 5% or more of our common stock hold approximately 92% of the total voting power of our common stock and are able to exert significant control over us, which will limit your ability to influence the outcome of important transactions, including a change of control.
Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of U.S. federal securities laws in the types of lawsuits to which they apply, the exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, shareholders, officers or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, shareholders, officers or other employees.
Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of U.S. federal securities laws in the types of lawsuits to which they apply, the exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our 57 Table of Contents directors, shareholders, officers or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, shareholders, officers or other employees.
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 each of our segments, and it is difficult to isolate its effect on revenue and our other financial results in any given quarter.
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.
Furthermore, our rapid growth in recent years may obscure the extent to which seasonality trends have affected our business and may continue to affect our business. For example, we experienced unusually high demand in the first and second quarters of 2021, which is inconsistent with normal seasonality patterns.
Furthermore, our rapid growth in prior years may obscure the extent to which seasonality trends have affected our business and may continue to affect our business. For example, we experienced unusually high demand in the first and second quarters of 2021, which is inconsistent with normal seasonality patterns.
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.
Although our in-channel and on-hand inventory as of December 31, 2024 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.
In addition, users who access our subscriptions and design apps through mobile devices, such as smartphones and tablets, should utilize a high-speed connection, such as Wi-Fi, 4G, 5G or LTE, to ensure the best experience with our services and design apps.
In addition, users who access our platform through mobile devices, such as smartphones and tablets, should utilize a high-speed connection, such as Wi-Fi, 4G, 5G or LTE, to ensure the best experience with our services and design apps.
We have grown rapidly in recent years and have limited operating experience at our current scale of operations. If we are unable to manage our growth and the complexity of our business effectively, our brand, company culture and financial performance may suffer. We have grown rapidly in recent years and have limited operating experience at our current size.
We have grown rapidly in prior years and have limited operating experience at our current scale of operations. If we are unable to manage our growth and the complexity of our business effectively, our brand, company culture and financial performance may suffer. We have grown rapidly in prior years and have limited operating experience at our current size.
We are currently seeing intensifying competition in 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.
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.
The CJEU’s decision, the revised SCCs, regulatory guidance and opinions and other developments relating to cross-border data transfer may require us to implement additional contractual and technical safeguards for any personal data transferred out of the EEA and Switzerland.
The CJEU’s decision, the revised SCCs, regulatory guidance and opinions and other developments relating to cross-border data transfer may require us to implement additional contractual and technical safeguards for any personal data transferred out of the EEA, United Kingdom and Switzerland.
These promotional programs consist of incentives or entitlements to our customers, such as advertising allowances, volume and growth incentives, business development, product damage allowances and point-of-sale support. Customer rebates are considered to be variable consideration, which we estimate each quarter using the expected value method or most likely amount, based upon the nature of the incentive.
These promotional programs consist of incentives or entitlements to our 23 Table of Contents customers, such as advertising allowances, volume and growth incentives, business development, product damage allowances and point-of-sale support. Customer rebates are considered to be variable consideration, which we estimate each quarter using the expected value method or most likely amount, based upon the nature of the incentive.
In Brazil, the Lei Geral de Proteção de Dados Pessoais – Law No. 13,709/2018, or LGPD, similar in many respects to the GDPR, was enacted August 14, 2018 and entered into effect September 18, 2020. Penalties for violation of the LGPD, if and when enforced, may be up to 2% of revenue in Brazil, capped at R$50 million per violation.
In Brazil, the Lei Geral de Proteção de Dados Pessoais – Law No. 13,709/2018, or LGPD, similar in many respects to the GDPR, was enacted August 14, 2018 and entered into effect September 18, 2020. Penalties for violation of the LGPD may be up to 2% of revenue in Brazil, capped at R$50 million per violation.
If our two primary contract manufacturers fail for any reason to continue manufacturing our connected machines in required volumes, in a timely manner, at high quality levels or at all, we may have to increase connected machine production at currently qualified contract manufacturers or engage acceptable alternative contract manufacturers, either of which would be time consuming, particularly given the complexity of our connected machines.
If our three contract manufacturers fail for any reason to continue manufacturing our connected machines in required volumes, in a timely manner, at high quality levels or at all, we may have to increase connected machine production at currently qualified contract manufacturers or engage acceptable alternative contract manufacturers, either of which would be time consuming, particularly given the complexity of our connected machines.
Many of our products and our subscriptions depend on our users’ high-speed broadband access to the Internet. Increasing numbers of users and increasing bandwidth requirements may degrade the performance of our users’ Internet access and therefore their access to or experience with our services and design apps.
Many of our products and our platform depend on our users’ high-speed broadband access to the Internet. Increasing numbers of users and increasing bandwidth requirements may degrade the performance of our users’ Internet access and therefore their access to or experience with our services and design apps.
Our failure to adequately prevent fraudulent transactions could damage our reputation, result in litigation or regulatory action and lead to expenses that could substantially impact our results of operations. 35 Table of Contents Risks Related to Manufacturing, Supply Chain and Fulfillment We primarily depend upon two contract manufacturers, and our operations would be disrupted if we encountered problems with our contract manufacturers.
Our failure to adequately prevent fraudulent transactions could damage our reputation, result in litigation or regulatory action and lead to expenses that could substantially impact our results of operations. 35 Table of Contents Risks Related to Manufacturing, Supply Chain and Fulfillment We depend upon three contract manufacturers, and our operations would be disrupted if we encountered problems with our contract manufacturers.
Continued deterioration in trade relations or adverse developments in political, social or economic conditions in China or future unforeseen problems, including health pandemics or regulatory changes, 41 Table of Contents could affect deliveries of our products to our retail partners or users, possibly resulting in business interruptions, substantially delayed or lost sales, loss of inventory or increased expenses that cannot be passed on to brick-and-mortar and online retail partners or users, any of which could ultimately have a material adverse effect on our business and financial results.
Continued deterioration in trade relations or adverse developments in political, social or economic conditions in or affecting China or future unforeseen problems, including health pandemics or regulatory changes, could affect deliveries of our products to our retail partners or users, possibly resulting in business interruptions, substantially delayed or lost sales, loss of inventory or increased expenses that cannot be passed on to brick-and-mortar and online retail partners or users, any of which could ultimately have a material adverse effect on our business and financial results.
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. 24 Table of Contents Our quarterly results of operations and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict.
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. Our quarterly results of operations and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict.
While we have policies, procedures and training to foster compliance with these laws, we cannot assure you that our employees or third-party business partners or intermediaries, contractors, representatives and 49 Table of Contents agents will not take actions in violation of our policies or applicable law for which we may ultimately be held responsible.
While we have policies, procedures and training to foster compliance with these laws, we cannot assure you that our employees or third-party business partners or intermediaries, contractors, representatives and agents will not take actions in violation of our policies or applicable law for which we may ultimately be held responsible.
If we fail to meet such expectations, the market price of our Class A common stock could fall substantially, and we could face costly lawsuits, including securities class action suits. 25 Table of Contents Our future growth depends in part on further penetrating our SAM and TAM and we may not be successful in doing so.
If we fail to meet such expectations, the market price of our Class A common stock could fall substantially, and we could face costly lawsuits, including securities class action suits. Our future growth depends in part on further penetrating our SAM and TAM and we may not be successful in doing so.
Further, our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. Our platform is complex and multifaceted, and operational and performance issues could arise both from the platform itself and from outside factors, such as cybersecurity attacks or other third-party attacks.
Further, our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. 26 Table of Contents Our platform is complex and multifaceted, and operational and performance issues could arise both from the platform itself and from outside factors, such as cybersecurity attacks or other third-party attacks.
Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could result in other liabilities for us and could harm our business. Furthermore, the circumstances in which we may be held liable for the acts, omissions or responsibilities of these parties is uncertain, complex and evolving.
Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could result in other liabilities for us and could harm our business. Furthermore, the circumstances in which we may be 58 Table of Contents held liable for the acts, omissions or responsibilities of these parties is uncertain, complex and evolving.
We are dependent on the interoperability of our software, as well as Cricut Access, Cricut Access Premium, Cricut Joy App, Design Space and other design apps, with popular desktop and mobile operating systems, such as Android and iOS.
We are dependent on the interoperability of our software, as well as Cricut Access, Cricut Access Premium, Design Space and other design apps, with popular desktop and mobile operating systems, such as Android and iOS.
The third-party systems and operations and manufacturers we rely on are subject to similar risks. For example, we engage third-party service providers, a portion of whose software development staff resides in Ukraine. Due to the current conflict, we may experience an interruption in the services provided by these parties.
The third-party systems and operations and manufacturers we rely on are subject to similar risks. For example, we engage third-party service providers, a portion of whose software development staff 59 Table of Contents resides in Ukraine. Due to the current conflict, we may experience an interruption in the services provided by these parties.
We have taken legal action against certain of the producers of these copycat products and anticipate expending significant financial or other resources in the future to combat these products. In addition, to the extent that sales of copycat products create confusion or experiences with our products among consumers, our brand and business could be harmed.
We have taken legal action against certain of the producers of these copycat products and anticipate expending significant financial or other resources in the future to combat these products. In addition, to the extent that sales of copycat products create confusion or experiences 22 Table of Contents with our products among consumers, our brand and business could be harmed.
We rely on, and expect to continue to rely on, a combination of trademark, 50 Table of Contents trade dress, domain name, copyright, trade secret and patent laws, as well as confidentiality and license agreements with our employees, contractors, consultants and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.
We rely on, and expect to continue to rely on, a combination of trademark, trade dress, domain name, copyright, trade secret and patent laws, as well as confidentiality and license agreements with our employees, contractors, consultants and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.
As a result, we could experience delays, increased shipping costs and lost sales as a result of missed delivery deadlines and product demand cycles. For example, at times during the COVID-19 pandemic, shipping of our products has been delayed, which has inconvenienced our users and brick-and-mortar and online retail partners.
As a result, we could experience delays, increased shipping costs and lost sales as a result of missed delivery deadlines and product demand cycles. For example, at times during the COVID-19 pandemic, shipping of our products was delayed, which inconvenienced our users and brick-and-mortar and online retail partners.
In particular, we are dependent upon major shipping companies, including FedEx and UPS, for the shipment of our products to and from our third-party logistics partner facilities. Changes in shipping terms, or the inability of these third-party shippers to perform effectively, could affect our responsiveness to our users and brick-and-mortar and online retail partners.
In particular, we are dependent upon major shipping companies for the shipment of our products to and from our third-party logistics partner facilities. Changes in shipping terms, or the inability of these third-party shippers to perform effectively, could affect our responsiveness to our users and brick-and-mortar and online retail partners.
In a cloud- 45 Table of Contents computing environment, we could be subject to outages, security breaches and incidents and cyberattacks affecting the third-party service provider. More of our and our service providers’ personnel are working remotely in recent years than prior to the COVID-19 pandemic, which increases the risks of cyberattacks and security breaches and incidents.
In a cloud-computing environment, we could be subject to outages, security breaches and incidents and cyberattacks affecting the third-party service provider. More of our and our service providers’ personnel are working remotely in recent years than prior to the COVID-19 pandemic, which increases the risks of cyberattacks and security breaches and incidents.
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.
Many accessories and 21 Table of Contents 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.
To comply with this new law, we will likely have to devote significant time and resources to develop technologies to prevent infringing content from being uploaded to our platform and, to the extent infringing content makes it onto our platform, to expeditiously remove such content and implement measures to prevent re-uploads of such content.
To comply with this new law, we will likely have to devote significant time and resources to develop 52 Table of Contents technologies to prevent infringing content from being uploaded to our platform and, to the extent infringing content makes it onto our platform, to expeditiously remove such content and implement measures to prevent re-uploads of such content.
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 21 Table of Contents 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.
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.
All of the components that go into the manufacturing of our products, as well as our accessories and materials, are sourced from a limited number of third-party suppliers, many of which are located internationally. Some of the key components our manufacturers use in the production of our products come from a limited or single source of supply.
All of the components that go into the manufacturing of our products, including our accessories and materials, are sourced from a limited number of third-party suppliers, many of which are located internationally. Some of the key components our manufacturers use in the production of our products come from a limited or single source of supply.
In addition, the most commonly used Internet browsers—Chrome, Firefox, Internet Explorer and Safari—allow Internet users to modify their browser settings to prevent cookies from being accepted by their browsers, and a number of other software tools allow users to block or otherwise limit the functionality of cookies.
In addition, the most commonly used Internet browsers—Chrome, Firefox, Internet 47 Table of Contents Explorer and Safari—allow Internet users to modify their browser settings to prevent cookies from being accepted by their browsers, and a number of other software tools allow users to block or otherwise limit the functionality of cookies.
If we fail to maintain effective analytics capabilities, our metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies. An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products. Our products and subscriptions may be considered discretionary items for consumers.
If we fail to maintain effective analytics capabilities, our metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies. An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products and platform services. Our products and platform services may be considered discretionary items for consumers.
We may be required to take additional steps to legitimize any impacted personal data transfers and may be subject to increased costs of compliance and limitations on our vendors, contractors, consultants and us. On June 4, 2021, the European 43 Table of Contents Commission published new SCCs.
We may be required to take additional steps to legitimize any impacted personal data transfers and may be subject to increased costs of compliance and limitations on our vendors, contractors, consultants and us. On June 4, 2021, the European Commission published new SCCs.
Further, the separation between voting power and economic interests could cause conflicts of interest between Petrus and our other stockholders, which may result in Petrus undertaking, or causing us to undertake, actions that would be desirable for Petrus but would not be desirable for our other stockholders.
Further, the separation between voting power and economic interests could cause conflicts of interest between Petrus and our other stockholders, 53 Table of Contents which may result in Petrus undertaking, or causing us to undertake, actions that would be desirable for Petrus but would not be desirable for our other stockholders.
Any factors adversely 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.
Any factors adversely 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, an increase in second-hand machines, 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.
Competitive pricing pressures, including with respect to our products, subscriptions and shipping, may harm our business and results of operations. If we are unable to sustain pricing levels for our products and subscriptions, whether due to competitive pressure or otherwise, our gross margins could be significantly reduced.
Competitive pricing pressures, including with respect to our platform services, products, and shipping, may harm our business and results of operations. If we are unable to sustain pricing levels for our platform services and products, whether due to competitive pressure or otherwise, our gross margins could be significantly reduced.
As we continue to grow, including by expanding our presence internationally, and develop the infrastructure associated with being a public company, we will need to maintain our culture among a larger number of employees, dispersed across various geographic regions.
As we continue to grow, including by expanding our presence internationally, and develop the infrastructure associated with being a public 34 Table of Contents company, we will need to maintain our culture among a larger number of employees, dispersed across various geographic regions.
Further, 51 Table of Contents during the course of any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments. If securities analysts and investors regard these announcements as negative, the market price of our Class A common stock may decline.
Further, during the course of any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments. If securities analysts and investors regard these announcements as negative, the market price of our Class A common stock may decline.
For example, a significant natural disaster, such as a pandemic, earthquake, fire or flood, could adversely affect our business, financial condition and results of operations, and our 59 Table of Contents insurance coverage may be insufficient to compensate us for losses that may occur.
For example, a significant natural disaster, such as a pandemic, earthquake, fire or flood, could adversely affect our business, financial condition and results of operations, and our insurance coverage may be insufficient to compensate us for losses that may occur.
Amazon Web Services may also take actions beyond our control that 28 Table of Contents could seriously harm our business, including discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether or altering how we are able to process data in a way that is unfavorable or costly to us.
Amazon Web Services may also take actions beyond our control that could seriously harm our business, including discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether or altering how we are able to process data in a way that is unfavorable or costly to us.
We may not be successful in developing relationships with key participants with original equipment manufacturing or mobile industry or in developing software that operate effectively with these technologies, 29 Table of Contents systems, networks or standards. For example, mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our software.
We may not be successful in developing relationships with key participants with original equipment manufacturing or mobile industry or in developing software that operate effectively with these technologies, systems, networks or standards. For example, mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our software.
Further, our decisions around the development of new products and subscriptions are grounded in assumptions about eventual pricing levels. If there is price compression in the market after these decisions are made, our business and results of operations could be adversely affected.
Further, our decisions around the development of new products and platform services are grounded in assumptions about eventual pricing levels. If there is price compression in the market after these decisions are made, our business and results of operations could be adversely affected.
For example, the United States recently enacted the Inflation Reduction Act, which imposes a 1% excise tax on certain stock repurchases (including potentially pursuant to our stock repurchase program) and a 15% alternative minimum tax on adjusted financial statement income.
For example, the United States enacted the Inflation Reduction Act in 2022, which imposes a 1% excise tax on certain stock repurchases (including potentially pursuant to our stock repurchase program) and a 15% alternative minimum tax on adjusted financial statement income.
Increasing sales through cricut.com may be costly 20 Table of Contents 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.
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.
These providers could take measures that degrade, disrupt or increase the cost of user access to high-speed Internet connections, any of which would make our design apps and subscriptions less attractive to users, and reduce our revenue. Failures of Internet infrastructure or interference with broadband access may also impact our international expansion in countries that lack widespread high-speed Internet.
These providers could take measures that degrade, disrupt or increase the cost of user access to high-speed Internet connections, any of which would make our platform less attractive to users, and reduce our revenue. Failures of Internet infrastructure or interference with broadband access may also impact our international expansion in countries that lack widespread high-speed Internet.
On June 23, 2022, the Italian data protection authority adopted a similar decision. Other data protection authorities in the European Union increasingly are focused on the use of online tracking tools and have indicated that they plan to issue similar rulings.
On June 23, 2022, the Italian data protection authority adopted a similar decision. Other data protection authorities in the EU increasingly are focused on the use of online tracking tools and have indicated that they plan to issue similar rulings.
Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive work-arounds or impose other unfavorable terms.
Any claims 51 Table of Contents or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive work-arounds or impose other unfavorable terms.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor additional information regarding whether any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition, please refer to Item 1A, “Risk Factors,” in this annual report on Form 10-K, including the risk factors under the heading “Risks Related to Privacy, Data Protection and Cybersecurity,” which is incorporated herein by reference.
Biggest changeWhile we are not aware of any material data security breaches to date, for additional information regarding whether any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition, please refer to Item 1A, “Risk Factors,” in this annual report on Form 10-K, including the risk factors under the heading “Risks Related to Privacy, Data Protection and Cybersecurity,” which is incorporated herein by reference. 62 Table of Contents Governance Our board of directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face.
The processes by which our CISO 62 Table of Contents and our steering committee on information security are informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents includes the following: risk assessment and management, policy development and implementation, prevention strategies, detection mechanisms, incident response and mitigation, remediation and recovery, reporting and communication, compliance and legal considerations, efforts at continuous improvement, and training and awareness.
The processes by which our CISO and our steering committee on information security are informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents includes the following: risk assessment and management, policy development and implementation, prevention strategies, detection mechanisms, incident response and mitigation, remediation and recovery, reporting and communication, compliance and legal considerations, efforts at continuous improvement, and training and awareness.
He also received a CIO Executive Education Certificate from Stanford University. Our CISO and our steering committee on information security oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
Our CISO has over 20 years of experience leading in the information security field at well-known publicly traded technology companies. He also received a CIO Executive Education Certificate from Stanford University. Our CISO and our steering committee on information security oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
Our CISO and our steering committee on information security, which includes members of our executive management as well as leaders of business functional areas, are primarily responsible to assess and manage our material risks from cybersecurity threats. Our CISO has over 20 years of experience leading in the information security field at well-known publicly traded technology companies.
Our CISO and our steering committee on information security, which includes members of our executive management as well as leaders of business functional areas, together with our Privacy and Data Protection Team, are primarily responsible to assess and manage our material risks from cybersecurity threats.
Governance Our board of directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its cybersecurity risk oversight function directly as a whole, as well as through the audit committee.
Our board of directors administers its cybersecurity risk oversight function directly as a whole, as well as through the audit committee.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters are in South Jordan, Utah under operating leases that expire at various times through 2027. We also lease offices elsewhere in Utah, China and Malaysia. All of our offices are leased and we do not own any real property. We believe that our existing facilities are sufficient for our current needs.
Biggest changeItem 2. Properties Our corporate headquarters are in South Jordan, Utah under operating leases that expire at various times through 2029. We also lease offices elsewhere in Utah, China and Malaysia. All of our offices are leased and we do not own any real property. We believe that our existing facilities are sufficient for our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe 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.
Biggest changeThe 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. Item 4. Mine Safety Disclosures Not applicable. 63 Table of Contents PART II
Removed
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.
Removed
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 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividend Policy On December 21, 2022, we declared a $0.35 per share special dividend payable February 15, 2023, for stockholders of record on February 1, 2023, and on May 18, 2023, we declared a $1.00 per share special dividend payable on July 17, 2023 to shareholders of record on July 3, 2023; however, we have not adopted a dividend policy and do not expect to pay any regular dividends in the future.
Biggest changeOn May 18, 2023, we declared a $1.00 per share special dividend payable on July 17, 2023 to shareholders of record on July 3, 2023, and on December 21, 2022, we declared a $0.35 per share special dividend payable February 15, 2023, for stockholders of record on February 1, 2023.
The following graph compares (i) the cumulative total stockholder return on our Class A common stock from March 25, 2021 (the date our Class A common stock commenced trading on the Nasdaq) through December 31, 2023 with (ii) the cumulative total return of the Nasdaq Composite Index and the S&P Mid Cap 400 Index over the same period, assuming the investment of $100 in our Class A common stock and in each index on March 25, 2021 and the reinvestment of dividends.
The following graph compares (i) the cumulative total stockholder return on our Class A common stock from March 25, 2021 (the date our Class A common stock commenced trading on the Nasdaq) through December 31, 2024 with (ii) the cumulative total return of the Nasdaq Composite Index and the S&P Mid Cap 400 Index over the same period, assuming the investment of $100 in our Class A common stock and in each index on March 25, 2021 and the reinvestment of dividends.
The graph uses the closing market price on March 25, 2021 of $17.80 per share as the initial value of our Class A common stock. The comparisons are based on historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. Unregistered Sales of Equity Securities None. Item 6. [ Reserved ]
The graph uses the closing market price on March 25, 2021 of $17.80 per share as the initial value of our Class A common stock. The comparisons are based on historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. Unregistered Sales of Equity Securities None.
Prior to that date, there was no public trading market for our Class A common stock. There is no public trading market for our Class B common stock. Holders of Record 63 Table of Contents As of March 1, 2024, we had 257 holders of record of our Class A and Class B common stock.
Prior to that date, there was no public trading market for our Class A common stock. There is no public trading market for our Class B common stock. Holders of Record As of February 28, 2025, we had 160 holders of record of our Class A and Class B common stock.
Our ability to pay cash dividends on our capital stock may also be limited by the terms of our Credit Agreement and the terms of any future debt or preferred securities or future indebtedness. 64 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, or the SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act.
Stock Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, or the SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Act.
Any future determination to pay dividends on our common stock will be made at the discretion of our board of directors subject to applicable laws, and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements.
Any future determination to pay dividends on our common stock will be made at the discretion of our board of directors subject to applicable laws, and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements. 64 Table of Contents Our ability to pay cash dividends on our capital stock may also be limited by the terms of our Credit Agreement and the terms of any future debt or preferred securities or future indebtedness.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information regarding share repurchases made by Cricut during the three months ended December 31, 2023: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) October 1, 2023 through October 31, 2023 821,252 $8.42 821,252 $20,026 November 1, 2023 through November 30, 2023 381,715 $7.55 381,715 $17,146 December 1, 2023 through December 31, 2023 856,399 $6.93 856,399 $11,211 Total 2,059,366 $7.64 2,059,366 $11,211 (1) On August 9, 2022, we announced that our Board of Directors had approved a common stock repurchase program under which we may purchase shares of our outstanding Class A common stock up to an aggregate transactional value of $50 million, depending on our continuing analysis of market, financial, and other factors.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information regarding share repurchases made by Cricut during the three months ended December 31, 2024: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) October 1, 2024 through October 31, 2024 610,207 $6.55 610,207 $26,840 November 1, 2024 through November 30, 2024 0 $0.00 0 $26,840 December 1, 2024 through December 31, 2024 681,165 $5.85 681,165 $22,854 Total 1,291,372 $6.18 1,291,372 $22,854 (1) On August 9, 2022, we announced that our Board of Directors had approved a common stock repurchase program under which we may purchase shares of our outstanding Class A common stock up to an aggregate transactional value of $50 million.
The share repurchase program may be suspended or discontinued at any time and does not have a predetermined expiration date.
On May 6, 2024, the Board of Directors approved an additional $50 million for the share repurchase program, to purchase shares of our outstanding Class A common stock depending on our 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.
Added
Dividend Policy On November 1, 2024, the Board of Directors approved its second recurring semi-annual dividend of $0.10 per share on its Class A and Class B common stock, payable on January 21, 2025 to shareholders of record as of January 7, 2025 and on May 6, 2024, the Company declared 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.
Added
As part of the dividends, and pursuant to the underlying award agreements, holders of restricted stock units and performance-based restricted stock units received a dividend equivalent per unit in the form of additional restricted stock units and performance-based restricted stock units subject to the same vesting conditions as the original awards. However, we have not adopted a dividend policy.
Added
Item 6. [ Reserved ] 65 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe only jurisdiction where the top-up tax would be applicable is Switzerland and the estimated tax is not expected to be material. 73 Table of Contents Results of Operations The following table is presented in thousands: Year Ended December 31, 2023 2022 2021 (in thousands) Revenue: Connected machines $ 198,312 $ 252,563 $ 548,205 Subscriptions 303,989 272,344 205,858 Accessories and materials 262,846 361,389 552,164 Total revenue 765,147 886,296 1,306,227 Cost of revenue: Connected machines (1) 172,571 244,260 484,025 Subscriptions (1) 32,346 26,375 21,961 Accessories and materials (1) 216,937 265,768 342,791 Total cost of revenue 421,854 536,403 848,777 Gross profit 343,293 349,893 457,450 Operating expenses: Research and development (1) 65,048 76,914 79,814 Sales and marketing (1) 123,169 130,379 133,963 General and administrative (1) 85,091 62,647 51,268 Total operating expenses 273,308 269,940 265,045 Income from operations 69,985 79,953 192,405 Other income (expense): Interest income 7,976 1,809 181 Interest expense (323) (289) (298) Other income (expense) 2,145 508 85 Other income (expense), net 9,798 2,028 (32) Income before provision for income taxes 79,783 81,981 192,373 Provision for income taxes 26,147 21,315 51,900 Net income $ 53,636 $ 60,666 $ 140,473 (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue Connected machines $ 700 $ 288 $ 34 Subscriptions 926 443 219 Accessories and materials 805 199 — Total cost of revenue 2,431 930 253 Research and development 18,169 17,713 15,782 Sales and marketing 12,740 12,603 13,814 General and administrative 13,986 9,875 8,225 Total stock-based compensation expense $ 47,326 $ 41,121 $ 38,074 74 Table of Contents Comparison of the years ended December 31, 2023 and 2022 Revenue Years Ended December 31, Change Change 2023 $ % 2022 $ % 2021 (in thousands) Revenue: Connected machines $ 198,312 $ (54,251) (21) % $ 252,563 $ (295,642) (54) % $ 548,205 Subscriptions 303,989 31,645 12 % 272,344 66,486 32 % 205,858 Accessories and materials 262,846 (98,543) (27) % 361,389 (190,775) (35) % 552,164 Total revenue $ 765,147 $ (121,149) (14) % $ 886,296 $ (419,931) (32) % $ 1,306,227 Connected Machines 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.
Biggest changeOf the jurisdictions where Pillar Two has been adopted, the only jurisdiction where the top-up tax is applicable is Switzerland and the estimated tax is immaterial. 72 Table of Contents Results of Operations The following table is presented in thousands: Year Ended December 31, 2024 2023 2022 (in thousands) Revenue: Platform $ 312,976 $ 309,012 $ 278,646 Products 399,562 456,135 607,650 Total revenue 712,538 765,147 886,296 Cost of revenue: Platform (1) 37,288 32,804 26,676 Products (1) 322,462 389,050 509,727 Total cost of revenue 359,750 421,854 536,403 Gross profit 352,788 343,293 349,893 Operating expenses: Research and development (1) 60,399 65,048 76,914 Sales and marketing (1) 143,294 123,169 130,379 General and administrative (1) 72,985 85,091 62,647 Total operating expenses 276,678 273,308 269,940 Income from operations 76,110 69,985 79,953 Other income (expense): Interest income 11,016 7,976 1,809 Interest expense (326) (323) (289) Other income 2,077 2,145 508 Total other income, net 12,767 9,798 2,028 Income before provision for income taxes 88,877 79,783 81,981 Provision for income taxes 26,047 26,147 21,315 Net income $ 62,830 $ 53,636 $ 60,666 (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Cost of revenue Platform $ 1,192 $ 926 $ 443 Products 712 1,505 487 Total cost of revenue 1,904 2,431 930 Research and development 15,620 18,169 17,713 Sales and marketing 12,825 12,740 12,603 General and administrative 14,718 13,986 9,875 Total stock-based compensation expense $ 45,067 $ 47,326 $ 41,121 73 Table of Contents Comparison of the years ended December 31, 2024 and 2023 Revenue Years Ended December 31, Change Change 2024 $ % 2023 $ % 2022 (in thousands) Revenue: Platform $ 312,976 $ 3,964 1 % $ 309,012 $ 30,366 11 % $ 278,646 Products 399,562 (56,573) (12) % 456,135 (151,515) (25) % 607,650 Total revenue $ 712,538 $ (52,609) (7) % $ 765,147 $ (121,149) (14) % $ 886,296 Platform revenue increased by $4.0 million, or 1%, to $313.0 million for the year ended December 31, 2024 from $309.0 million for the year ended December 31, 2023.
On our apps, users can find inspiration, purchase or upload content like fonts and images, design a project from scratch or find a vast array of ready-to-make projects. Users can leverage the full power of our platform by using our connected machines together with our free design apps, in-app purchases and subscription offerings to design and complete projects.
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.
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.
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.
Other factors that can influence that determination are local restrictions on remittances (for example, in some countries a central bank application and approval are required in order for our local country subsidiary to pay a dividend), economic stability and asset risk. See Note 10 to our audited consolidated financial statements.
Other factors that can influence that determination are local restrictions on remittances (for example, in some countries a central bank application and approval are required in order for our local country subsidiary to pay a dividend), economic stability and asset risk. See Note 9 to our audited consolidated financial statements.
For a monthly or annual subscription fee, Cricut Access includes a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care. For an annual subscription fee, Cricut Access Premium includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping.
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.
We identify our reportable segments based on the information used by management to monitor performance and make operating decisions. See Note 19 to our audited consolidated financial statements included elsewhere in this filing for additional information regarding our reportable segments.
We identify our reportable segments based on the information used by management to monitor performance and make operating decisions. See Note 18 to our audited consolidated financial statements included elsewhere in this filing for additional information regarding our reportable segments.
Certain customer rebate programs are estimates at period end due to the nature of the incentives or expected and yet-to-be announced incentive programs that apply to current period revenue transactions. These estimates are based on our incentive program experience, historical and projected sales data and current contractual terms.
Certain customer rebate programs are estimates at period end due to the nature of the incentives or expected and yet-to-be announced incentive programs that apply to current period revenue transactions. These estimates are based on our incentive program experience, historical 78 Table of Contents and projected sales data and current contractual terms.
Cost of Revenue Connected Machines Cost of revenue related to Connected Machines consists of product costs, including costs of components, costs of contract manufacturers for production, inspecting and packaging, shipping, receiving, handling, warehousing and fulfillment, duties and other applicable importing costs, warranty replacement, excess and obsolete inventory write-downs, tooling and equipment depreciation and royalties.
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.
Subscriptions We generate Subscriptions revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium and a minimal amount of revenue allocated to the unspecified future upgrades and enhancements related to the essential software and access to our cloud-based services.
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.
While we 69 Table of Contents expect to continue or increase our investments on these items in the future, we cannot be certain they will result in the growth of our number of users or increase engagement with existing users.
While we expect to continue or increase our investments on these items in the future, we cannot be certain they will result in the growth of our number of users or increase engagement with existing users.
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.” A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found in “Management’s Discussion and Analysis of 65 Table of Contents Financial Condition and Results of Operations” in our annual report on Form 10-K filed on March 13, 2023, which is hereby incorporated by reference herein.
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.” A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K filed on March 6, 2024, which is hereby incorporated by reference herein.
By subscribing to our offerings, users have access to a curated and growing design library of over 750 thousand images, thousands of ready-to-make projects and hundreds of fonts. We believe that the number of Paid Subscribers is an indicator of the depth of our users’ engagement.
By subscribing to our offerings, users have access to a curated and growing design library of over one million images, thousands of ready-to-make projects and hundreds of fonts. We believe that the number of Paid Subscribers is an indicator of the depth of our users’ engagement.
Overview of Our Business and History At Cricut, our mission is to help people lead creative lives. We have designed and built a creativity platform that enables our engaged and loyal community of over 8.9 million users to turn ideas into professional-looking handmade goods.
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 5.9 million Active Users to turn ideas into professional-looking handmade goods.
As part of the dividend, and pursuant to the underlying award agreements, holders of RSU and PRSUs will receive 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.
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.
Our Business Model Our business model thrives because our products unlock creativity, which then in turn drives the engagement of our users. Our over 8.9 million users’ journeys typically begin with the purchase of a connected machine and expand across our family of products as users harness the power of our platform.
Our Business Model Our business model thrives because our products unlock creativity, which then in turn drives the engagement of our users. Our nearly 5.9 million Active Users’ journeys typically begin with the purchase of a connected machine and expand across our family of products as users harness the power of our platform.
With our highly versatile connected machines, design apps and accessories and materials, our users create everything from personalized birthday cards, mugs and T-shirts to large-scale interior decorations. Our users’ journeys typically begin with the purchase of a connected machine.
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.
If possession of a connected machine is transferred to a new owner and registered by that new owner, the new owner is added to the total user count and the prior owner is removed from the total user count if the prior owner does not own any other registered connected machines.
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.
We expect to pursue additional geographic diversification in our supply chain to mitigate tariffs and other supply chain challenges. We must continue to build relationships with strong third-party suppliers, contract manufacturers and third-party logistics companies and continue to diversify our supply chain to improve operational results.
Much of our supply chain originates in Malaysia and China. We expect to pursue additional geographic diversification in our supply chain to mitigate tariffs and other supply chain challenges. We must continue to build relationships with strong third-party suppliers, contract manufacturers and third-party logistics companies and continue to diversify our supply chain to improve operational results.
Subscriptions Cost of revenue related to Subscriptions consists primarily of hosting fees, digital content costs, amortization of capitalized software development costs and software maintenance costs.
Cost of Revenue Platform Cost of revenue related to Platform consists primarily of hosting fees, digital content costs, amortization of capitalized software development costs, software maintenance costs, and royalties.
To date, word-of-mouth referrals, as well as effective use of low-cost marketing channels like social media, have driven our success. In 2023, over 38% of new users first heard about Cricut through friends and family. Sales and marketing expenses represented 10%, 15% and 16% of revenue in 2021, 2022 and 2023, respectively.
To date, word-of-mouth referrals, as well as effective use of low-cost marketing channels like social media, have driven our success. In 2024, 39% of new users first heard about Cricut through friends and family. Sales and marketing expenses represented 15%, 16% and 20% of revenue in 2022, 2023 and 2024, respectively.
We expect our sales and marketing expenses as a percentage of revenue to fluctuate in the near term. We produced gross savings in sales and marketing of approximately $1.1 million during 2023 as a result of the January 2023 restructuring plan.
We expect our sales and marketing expenses as a percentage of revenue to fluctuate in the near term. We produced gross savings in sales and marketing of approximately $2.5 million during 2024 as a result of the January 2024 restructuring plan.
Inventory and Supply Chain We utilize third-party contract manufacturers to source components and finished goods and third-party logistics companies to warehouse and distribute our products . As of December 31, 2023, we had component purchase obligations of $19.2 million , with $17.5 million payable within 12 months in addition to ongoing inventory purchases of finished goods from our contract manufacturers.
Inventory and Supply Chain We utilize third-party contract manufacturers to source components and finished goods and third-party logistics companies to warehouse and distribute our products . As of December 31, 2024, we had component purchase obligations of $6.4 million , with $2.0 million payable within 12 months in addition to ongoing inventory purchases of finished goods from our contract manufacturers.
The Organization for Economic Co-operation and Development (“OECD”) Pillar Two Model Rules (“Pillar Two”) for a global 15% minimum tax are in the process of being adopted in a number of jurisdictions in which we operate. Pillar Two is expected to be applicable to us beginning January 1, 2024 if our revenues exceed €750 million.
The Organization for Economic Co-operation and Development (“OECD”) Pillar Two Model Rules (“Pillar Two”) for a global 15% minimum tax are in the process of being adopted in a number of jurisdictions in which we operate. Pillar Two is applicable to us beginning January 1, 2024.
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 dividend equivalents of $1.00 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.
As part of the dividend, and pursuant to the underlying award agreements, holders of RSUs and PRSUs received dividend equivalents of $1.00 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.
In 2021, 2022, and 2023, 50%, 59%, and 62% of our revenue was generated through online channels, respectively. 66 Table of Contents For the years ended December 31, 2021, 2022 and 2023, we generated: • Total revenue of $1,306.2 million, $886.3 million and $765.1 million, respectively, representing 36%, (32)% and (14)% year-over-year growth, respectively • Net income of $140.5 million, $60.7 million and $53.6 million, respectively, representing (9)%, (57)% and (12)% year-over-year growth, respectively On March 29, 2021, we completed an initial public offering (“IPO”), in which we sold 13,250,000 shares of Class A common stock, and the selling stockholders sold an additional 2,064,903 shares of Class A common stock at a price to the public of $20.00 per share.
For the years ended December 31, 2022, 2023 and 2024, we generated: • Total revenue of $886.3 million, $765.1 million and $712.5 million, respectively, representing (32)%, (14)% and (7)% year-over-year growth, respectively • Net income of $60.7 million, $53.6 million and $62.8 million, respectively, representing (57)%, (12)% and 17% year-over-year growth, respectively On March 29, 2021, we completed an initial public offering (“IPO”), in which we sold 13,250,000 shares of Class A common stock, and the selling stockholders sold an additional 2,064,903 shares of Class A common stock at a price to the public of $20.00 per share.
Once they have purchased connected machines, users inspire one another to create and use more of our digital content, subscriptions and accessories and materials. In turn, we learn from our users’ creativity, and launch new products to help expand their creative horizons. We measure engagement by the Percentage of Users Creating in Trailing 90 Days.
Once they have purchased connected machines, users inspire one another to create and use more of our digital content, subscriptions and accessories and materials. In turn, we learn from our users’ creativity, and launch new products to help expand their creative horizons. We measure engagement by the number of Active Users and 90-Day Engaged Users interacting with our Platform.
We expect our research and development expenses to fluctuate in the near term as we refine our product roadmaps. We produced gross savings in research and development of approximately $4.6 million during 2023 as a result of the January 2023 restructuring plan.
We expect our research and development expenses to increase in the near term as we refine our product roadmaps. We produced gross savings in research and development of approximately $3.2 million during 2024 as a result of the January 2024 restructuring plan.
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 77 Table of Contents operations. There can be no assurances that we will be able to raise additional capital.
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.
Our users are engaged when they create with 68 Table of Contents connected machines, design apps and accessories and materials. It is therefore important that users find our products intuitive and easy to use. As users create on their connected machines, they are more likely to purchase subscriptions and accessories and materials.
Our users are engaged when they create with connected machines, design apps and accessories and materials. It is therefore important that users find our products intuitive and easy to use. As users create on their connected machines, they are more likely to purchase subscriptions and accessories and materials. Historically we find that our users continue to be engaged over time.
Other Income (Expense) Years Ended December 31, Change Change 2023 $ % 2022 $ % 2021 (dollars in thousands) Other income (expense) $ 9,798 $ 7,770 383 % $ 2,028 $ 2,060 (6438) % $ (32) Other income (expense) increased by $7.8 million, or 383%, to a net income of $9.8 million for the year ended December 31, 2023 from a net income of $2.0 million for the year ended December 31, 2022.
Other Income Years Ended December 31, Change Change 2024 $ % 2023 $ % 2022 (dollars in thousands) Other income, net $ 12,767 $ 2,969 30 % $ 9,798 $ 7,770 383 % $ 2,028 Other income, net increased by $3.0 million, or 30%, to a net income of $12.8 million for the year ended December 31, 2024 from a net income of $9.8 million for the year ended December 31, 2023.
The remaining portion of this liability is based on contractual amounts and does not require estimation. 79 Table of Contents In limited cases where the customer rebate is specifically for co-operative marketing or advertising campaigns, we classify these expenditures as selling and marketing expenses only if they meet the criteria of being a distinct good or service, are distinct within the context of the contract and the fair value is readily estimable.
In limited cases where the customer rebate is specifically for co-operative marketing or advertising campaigns, we classify these expenditures as selling and marketing expenses only if they meet the criteria of being a distinct good or service, are distinct within the context of the contract and the fair value is readily estimable.
Sales and Marketing Years Ended December 31, Change Change 2023 $ % 2022 $ % 2021 (dollars in thousands) Sales and marketing $ 123,169 $ (7,210) (6) % $ 130,379 $ (3,584) (3) % $ 133,963 As a percentage of total revenue 16 % 15 % 10% Sales and marketing expenses decreased by $7.2 million, or 6%, to $123.2 million for the year ended December 31, 2023 from $130.4 million for the year ended December 31, 2022.
Sales and Marketing Years Ended December 31, Change Change 2024 $ % 2023 $ % 2022 (dollars in thousands) Sales and marketing $ 143,294 $ 20,125 16 % $ 123,169 $ (7,210) (6) % $ 130,379 As a percentage of total revenue 20 % 16 % 15% Sales and marketing expenses increased by $20.1 million, or 16%, to $143.3 million for the year ended December 31, 2024 from $123.2 million for the year ended December 31, 2023.
Subscription ARPU allows us to forecast Subscriptions revenue over time and is an indicator of our ability to expand with users and of user engagement with our subscription offerings. Accessories and Materials ARPU We define Accessories and Materials ARPU as Accessories and Materials revenue divided by average users in a period.
We review Platform ARPU as an indicator of the monetization of our Active Users. 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.
We believe our balances of cash and cash equivalents, which totaled $142.2 million as of December 31, 2023, along with forecasted cash expected to be generated by ongoing operations and $300.0 million in available borrowings on our credit facility (see Note 9) will be sufficient to satisfy our cash requirements over the next 12 months and beyond.
We believe our balances of cash and cash equivalents, which totaled $232.1 million as of December 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 8 ) will be sufficient to satisfy our cash requirements over the next 12 months and beyond.
For a limited number of our products, which collectively constitute a small portion of our revenue, a particular contract manufacturer is the sole source of the finished product. Our concentration of suppliers could lead to supply shortages, long lead times for components and supply changes. Much of our supply chain originates in Malaysia and China.
We rely on three contract manufacturers to build our connected machines. For a limited number of our products, which collectively constitute a small portion of our revenue, a particular contract manufacturer is the sole source of the finished product. Our concentration of suppliers could lead to supply shortages, long lead times for components and supply changes.
Our ability to grow depends largely on the ability of these third-party companies to scale with us, provide high quality services and deliver components and finished products on time and at reasonable costs. We primarily rely on two contract manufacturers to build the majority of our connected machines.
Managing our Supply Chain We rely on third-party suppliers, contract manufacturers and third-party logistics partners to produce and distribute our products. Our ability to grow depends largely on the ability of these third-party companies to scale with us, provide high quality services and deliver components and finished products on time and at reasonable costs.
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 December 31, 2023): • 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 software integrates our connected machines and design apps, allowing our users to create and share seamlessly.
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 December 31, 2024): • Cricut Joy family $149.00 - $199.00 MSRP • Cricut Explore family $249.00 - $319.00 MSRP • Cricut Maker family $399.00 - $429.00 MSRP • Cricut Venture $999.00 MSRP Our platform integrates our design apps and connected machines, allowing our users to create and share seamlessly.
Paid Subscribers is a key metric to track growth in our subscriptions revenue and potential leverage in our gross margin. Subscription ARPU We define Subscription ARPU as Subscriptions revenue divided by average users in a period.
Paid Subscribers is a key metric to track growth in our Platform revenue and potential leverage in our gross margin. 70 Table of Contents Platform ARPU We define Platform ARPU as Platform revenue in a 12-month period divided by Active Users.
Investing Activities The change in net cash flows from investing activities for the year ended December 31, 2023 compared to year ended December 31, 2022 was primarily due to fewer purchases of marketable securities during 2023.
Investing Activities The change in net cash flows from investing activities for the year ended December 31, 2024 compared to year ended December 31, 2023 was primarily due to a decrease in net purchases and maturities of marketable securities during 2024 compared to 2023, in addition to a decrease in acquisitions of property and equipment.
In addition, we are investing in sales and marketing and operations as appropriate to support our growth. Our expenses may also increase as we hire additional personnel and continue to attract technical talent.
We will continue to prioritize our investments in technology innovation including software and hardware development, content and accessories and materials. In addition, we are investing in sales and marketing and operations as appropriate to support our growth. Our expenses may also increase as we hire additional personnel and continue to attract technical talent.
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 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 produced gross savings in general and administrative of approximately $0.6 million during 2024 as a result of the January 2024 restructuring plan.
We also have two subscription offerings: Cricut Access and Cricut Access Premium. Cricut Access provides a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care. Cricut Access is billed monthly for $9.99 per month or annually for $95.88 per year.
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.
We expect our cost of revenue related to Subscriptions as a percentage of revenue to fluctuate in the near term and long term as we expand our content and software feature offerings, including localized content for international target markets.
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.
Revenue Connected Machines We generate Connected Machines revenue from sales of our portfolio of connected machines, currently consisting of machines in four product families, Cricut Maker, which includes Maker and Maker 3, Cricut Explore, which includes Explore Air 2 and Explore 3, Cricut Joy, which includes Joy and Joy Xtra, and Cricut Venture, net of sales discounts, incentives and returns.
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.
Accessories and Materials 71 Table of Contents revenue is recognized for sales of such items, net of sales discounts, incentives and returns and includes amounts allocated to the material right for discounts on materials and accessories available only to paid subscribers.
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.
As of December 31, 2021, 2022 and 2023, we had 6.4 million, 7.9 million and 8.9 million users, respectively, representing 48%, 23% and 13% year-over-year growth, respectively. See the section titled “—Key Business Metrics” for the definition of users.
As of December 31, 2022, 2023 and 2024, we had 5.8 million, 5.9 million and 5.9 million Active Users, respectively, representing 12%, 2% and (1)% year-over-year growth, respectively. See the section titled “Key Business Metrics” for the definition of Active Users.
Our international expansion has resulted in, and will continue to result in, increased costs and is subject to a variety of risks, including content localization, multilingual customer support, potentially complex delivery logistics and compliance with foreign laws and regulations.
Our international expansion has resulted in, and will continue to result in, increased costs and is subject to a variety of risks, including content localization, multilingual customer support, potentially complex delivery logistics and compliance with foreign laws and regulations. 69 Table of Contents Seasonality 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.
See the section titled “—Key Business Metrics” for the definition of Paid Subscribers and for information regarding that metric over the last three years. As of December 31, 2023, we had nearly 2.8 million Paid Subscribers, representing 6% year-over-year growth. As of December 31, 2023, approximately 31% of our users were also Paid Subscribers.
See the section titled “Key Business Metrics” for the definition of Paid Subscribers and for information regarding that metric over the last three years. As of December 31, 2024, we had nearly 3.0 million Paid Subscribers, representing 7% year-over-year growth. We aim to increase the number of our users that are Paid Subscribers over time.
We believe we are in the early stages of our growth and that we have a significant untapped opportunity in the United States and Canada, as well as globally.
We believe we are in the early stages of our growth and that we have a significant untapped opportunity in the United States and Canada, as well as globally. We have been able to efficiently acquire new users and drive sales of our products because of the powerful network effects of our community.
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.
For example, gross margin in the fourth quarter of 2024 was 45%, compared to gross margin of 50% for all of 2024. Additionally, sales of accessories and materials typically rise and fall with seasonal holiday crafting periods.
Accessories and Materials ARPU allows us to forecast Accessories and Materials revenue over time and is an indicator of our ability to expand with users, particularly the volume of projects created by our users. Components of our Results of Operations We operate and manage our business in three reportable segments: Connected Machines, Subscriptions and Accessories and Materials.
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 compensate for some of these limitations by also reviewing other metrics that capture portions of this information, including the metrics below. Paid Subscribers We define Paid Subscribers as the number of users with a subscription to Cricut Access or Cricut Access Premium, excluding cancelled, unpaid or free trial subscriptions, as of the end of a period.
Paid Subscribers 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.
The increase was primarily due to a $13.0 million impairment of unused equipment, software, and inventory (see Note 2), a $4.1 million increase in stock-based compensation, a $2.4 million increase in professional services expense, a $1.7 million increase in bad debt expense, and a $1.7 million increase in software subscriptions expense.
The decrease was primarily due to a $13.3 million decrease in impairment of unused equipment, software, and inventory (see Note 2) and a $1.9 million decrease in professional services expense, partially offset by increases in personnel-related expense and bad debt expense.
Accessories and Materials revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.
Our ancillary products include Cricut 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.
This durable relationship is motivated by new software and products that we launch to expand the capabilities of existing connected machines as well as through the inspiration derived from our large and passionate community. If our users engage with their connected machines less over time, the overall growth in our business may slow.
As of December 31, 2024, nearly 5.9 million Active Users created on their connected machines in the last 365 days. This durable relationship is motivated by new software and products that we launch to expand the capabilities of existing connected machines as well as through the inspiration derived from our large and passionate community.
Operating Expenses Research and Development Years Ended December 31, Change Change 2023 $ % 2022 $ % 2021 (dollars in thousands) Research and development $ 65,048 $ (11,866) (15) % $ 76,914 $ (2,900) (4) % $ 79,814 As a percentage of total revenue 9 % 9 % 6 % Research and development expenses decreased by $11.9 million, or 15%, to $65.0 million for the year ended December 31, 2023 from $76.9 million for the year ended December 31, 2022.
The increase was primarily driven by a reduction in inventory impairment charges compared to prior year, partially offset by increased promotional activity . 74 Table of Contents Operating Expenses Research and Development Years Ended December 31, Change Change 2024 $ % 2023 $ % 2022 (dollars in thousands) Research and development $ 60,399 $ (4,649) (7) % $ 65,048 $ (11,866) (15) % $ 76,914 As a percentage of total revenue 8 % 9 % 9 % Research and development expenses decreased by $4.6 million, or 7%, to $60.4 million for the year ended December 31, 2024 from $65.0 million for the year ended December 31, 2023.
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.
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.
Financing Activities The change in net cash flows from financing activities for the year ended December 31, 2023 compared to year ended December 31, 2022 was primarily due to the payment of special dividends during 2023.
Financing Activities The change in net cash flows from financing activities for the year ended December 31, 2024 compared to year ended December 31, 2023 was primarily due to a decrease in dividends paid in 2024 compared to 2023, partially offset by an increase in repurchases of common stock .
Leases As of December 31, 2023, we had fixed lease payment obligations of $14.8 million, with $5.6 million payable within 12 months primarily for corporate and other office space. See Note 14 of the notes to our consolidated financial statements for additional information.
Leases As of December 31, 2024, we had fixed lease payment obligations of $17.0 million, with $4.6 million payable within 12 months primarily for corporate and other office space.
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 December 31, 2023, we had nearly 2.8 million Paid Subscribers to Cricut Access and Cricut Access Premium.
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.
The increase was primarily driven by an increase in amortization of capitalized software development costs and increased external digital content costs. Gross margin for Subscriptions decreased to 89% for the year ended December 31, 2023 from 90% for the year ended December 31, 2022.
The increase was primarily driven by increases in software development costs and hosting fees. Gross margin for Platform decreased to 88% for the year ended December 31, 2024 from 89% for the year ended December 31, 2023. The decrease was primarily driven by increases in software development costs and hosting fees.
Subscriptions revenue increased by $31.6 million, or 12%, to $304.0 million for the year ended December 31, 2023 from $272.3 million for the year ended December 31, 2022. The increase was primarily driven by growth of 6% in the number of Paid Subscribers from 2.6 million as of December 31, 2022 to nearly 2.8 million as of December 31, 2023.
The increase was primarily driven by growth of 7% in the number of Paid Subscribers from 2.8 million as of December 31, 2023 to nearly 3.0 million as of December 31, 2024. The increase was offset partially by increased promotional activity, increased mix shift to annual subscriptions, and increased mix shift to international subscriptions.
This represents an effective tax rate of 32.8% and 26.0% for the years ended December 31, 2023 and 2022, respectively. The increase in the tax rate is due mainly to a decrease in tax credits specifically related to Research and Development and an increase in uncertain tax positions related to prior years foreign-derived intangible income.
This represents an effective tax rate of 29.3% and 32.8% for the years ended December 31, 2024 and 2023, respectively. The decrease in the tax rate is due mainly to a decrease in uncertain tax positions related to the release of reserves due to statute lapses and a decrease in return to provision adjustments.
We expect our cost of revenue related to Connected Machines as a percentage of revenue to fluctuate in the near term as we continue selling through end of life machines, address global supply chain challenges and continue to invest in the growth of our business and decrease over the long term as we drive greater scale and efficiency in our business.
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. 71 Table of Contents Operating Expenses Research and Development Research and development expenses consist primarily of costs associated with the development of our connected machines, software and accessories and materials, including personnel-related expenses for engineering, product development and quality assurance, as well as prototype costs, service fees incurred by contracting with vendors and allocated overhead.
If we fail to expand our products or maintain high quality standards in our products, our brand, business and results of operations will be adversely affected. Managing our Supply Chain We rely on third-party suppliers, contract manufacturers and third-party logistics partners to produce and distribute our products.
To continue to grow, we must employ the right personnel to execute our product roadmap and effectively work with third-party suppliers and manufacturers. If we fail to expand our products or maintain high quality standards in our products, our brand, business and results of operations will be adversely affected.
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.
We also sell our products and subscriptions to Cricut Access and Cricut Access Premium on cricut.com. 66 Table of Contents 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.
Our partners include Amazon, Hobby Lobby, HSN, Jo-Ann, Michaels, Target, Walmart and many others. We also sell our products, including subscriptions to Cricut Access and Cricut Access Premium, on cricut.com. In 2021, 2022, and 2023, 50%, 41%, and 38% of our revenue was generated through brick-and-mortar sales, respectively.
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, Michaels, Target, Walmart and many others. We also sell our products, including subscriptions to Cricut Access and Cricut Access Premium, on cricut.com.
The decrease was primarily due to a $2.6 million decrease in advertising and other marketing expense, a $1.7 million decrease in personnel-related expense, a $1.3 million decrease in professional services expense, and a $1.1 million decrease in software subscriptions expense. 76 Table of Contents General and Administrative Years Ended December 31, Change Change 2023 $ % 2022 $ % 2021 (dollars in thousands) General and administrative $ 85,091 $ 22,444 36 % $ 62,647 $ 11,379 22 % $ 51,268 As a percentage of total revenue 11 % 7 % 4% General and administrative expenses increased by $22.4 million, or 36%, to $85.1 million for the year ended December 31, 2023 from $62.6 million for the year ended December 31, 2022.
General and Administrative Years Ended December 31, Change Change 2024 $ % 2023 $ % 2022 (dollars in thousands) General and administrative $ 72,985 $ (12,106) (14) % $ 85,091 $ 22,444 36 % $ 62,647 As a percentage of total revenue 10 % 11 % 7% General and administrative expenses decreased by $12.1 million, or 14%, to $73.0 million for the year ended December 31, 2024 from $85.1 million for the year ended December 31, 2023.
Subscriptions revenue excludes à la carte digital content purchases. Subscriptions revenue is recognized on a ratable basis over the subscription term.
Digital content includes à la carte digital content purchases, including fonts, images and projects. Platform revenue is recognized on a ratable basis over time, during the subscription term for subscriptions, and at the point in time when control is transferred for à la carte digital content.
Provision for Income Taxes Years Ended December 31, Change Change 2023 $ % 2022 $ % 2021 (dollars in thousands) Provision for income taxes $ 26,147 $ 4,832 23 % $ 21,315 $ (30,585) (59) % $ 51,900 Provision for income taxes increased by $4.8 million, or 23%, to $26.1 million for the year ended December 31, 2023 from $21.3 million for the year ended December 31, 2022.
The change was primarily related to interest from marketable securities due to more favorable rates and higher cash balances in 2024. 75 Table of Contents Provision for Income Taxes Years Ended December 31, Change Change 2024 $ % 2023 $ % 2022 (dollars in thousands) Provision for income taxes $ 26,047 $ (100) — % $ 26,147 $ 4,832 23 % $ 21,315 Provision for income taxes decreased by $0.1 million, or 0%, to $26.0 million for the year ended December 31, 2024 from $26.1 million for the year ended December 31, 2023.
Scaling our Hardware and Software Product Offerings We have historically enjoyed strong demand for our products, both physical and digital, driving methodical growth. Our growth depends in part on our ability to design and introduce new products and enhance existing products that meet the preferences of our users.
If our users engage with their connected machines less over time, the overall growth in our business may slow. 68 Table of Contents Scaling our Hardware and Software Product Offerings We have historically enjoyed strong demand for our products, both physical and digital, driving methodical growth.
The decrease was primarily due to a $9.4 million decrease in product development expense for future products and a $3.5 million decrease in personnel-related expense, partially offset by increases in professional services expense.
The increase was primarily due to a $16.0 million increase in advertising and other marketing expense and a $4.8 million increase in personnel-related expense, partially offset by a decrease in software subscriptions expense.
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. The decrease was primarily driven by a decline in unit sales of project materials and extensions products.
Products cost of revenue decreased by $66.6 million, or 17%, to $322.5 million for the year ended December 31, 2024 from $389.1 million for the year ended December 31, 2023. The decrease was primarily driven by a reduction in inventory impairment charges compared to prior year and fewer units of Accessories & Materials sold during the period.
We must also carefully manage any changes to our product offerings so that we do not harm our brand or our relationships with our users. To continue to grow, we must employ the right personnel to execute our product roadmap and effectively work with third-party suppliers and manufacturers.
Our growth depends in part on our ability to design and introduce new products and enhance existing products that meet the preferences of our users. We must also carefully manage any changes to our product offerings so that we do not harm our brand or our relationships with our users.
We produced gross savings in general and administrative of approximately $1.0 million during 2023 as a result of the January 2023 restructuring plan. 72 Table of Contents Other Income (Expense) Other income (expense) 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.
Other Income Other income, 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. 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.
Stock Repurchase Program On July 19, 2022 , our Board of Directors authorized a share repurchase program to repurchase up to $50 million of its outstanding Class A common stock. During the twelve months ended December 31, 2023, we repurchased and retired 2,548,893 shares of our Class A common stock for $20.3 million under this program.
See Note 13 of the notes to our consolidated financial statements for additional information. 76 Table of Contents Stock Repurchase Program On July 19, 2022 , our Board of Directors authorized a share repurchase program to repurchase up to $50 million of its outstanding Class A common stock which was completed during the six months ended June 30, 2024.
The table below shows the Percentage of Users Creating in Trailing 90 Days for the periods indicated. 2021 2022 2023 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Users (in Thousands) 4,939 5,373 5,732 6,409 6,904 7,192 7,457 7,893 8,239 8,446 8,639 8,944 Percentage of Users Creating in Trailing 90 Days 62% 59% 56% 60% 54% 51% 48% 51% 45% 43% 42% 44% Many of our users choose to pay for our subscription offerings which include a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, 67 Table of Contents priority Cricut Member Care, and, in the case of Cricut Access Premium, preferred shipping.
See the section titled “Key Business Metrics” for the definitions of Active Users and 90-Day Engaged Users and for information regarding those metrics over the last three years. 67 Table of Contents The table below shows the number of Active Users and 90-Day Engaged Users for the periods indicated. 2022 2023 2024 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Active Users (in Thousands) 5,498 5,593 5,673 5,834 5,943 5,912 5,929 5,935 5,952 5,918 5,894 5,892 90-Day Engaged Users (in Thousands) 3,703 3,670 3,564 4,050 3,710 3,652 3,641 3,932 3,527 3,541 3,532 3,812 Growing With Users Over Time Many of our users choose to pay for our subscription offerings which include a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, priority Cricut Member Care, and, in the case of Cricut Access Premium, preferred shipping.
User count is a key indicator of the health of our business, because changes in the number of users reflects changes in connected machine sales and represents opportunities for us to drive additional sales of subscriptions and accessories and materials. There are certain limitations associated with this metric.
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.
Factors Affecting Our Performance Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following: Attracting New Users and Driving Connected Machine Sales Our growth depends in part on our ability to drive continued growth in users and connected machine sales.
See the section titled “Key Business Metrics” for the definition of Platform ARPU and for information regarding that metric over the last three years. 2022 2023 2024 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Paid Subscribers (in thousands) 2,311 2,367 2,438 2,609 2,715 2,722 2,699 2,770 2,797 2,813 2,838 2,959 Platform ARPU $42.31 $44.58 $46.58 $47.76 $48.51 $50.13 $51.20 $52.07 $52.26 $52.61 $52.86 $53.12 Factors Affecting Our Performance Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following: Attracting New Users and Driving Connected Machine Sales Our growth depends in part on our ability to drive continued growth in users and connected machine sales.
The decrease was primarily driven by an increase in amortization of capitalized software development costs and external digital content costs. Accessories and Materials cost of revenue decreased by $48.8 million, or 18%, to $216.9 million for the year ended December 31, 2023 from $265.8 million for the year ended December 31, 2022.
Products revenue decreased by $56.6 million, or 12%, to $399.6 million for the year ended December 31, 2024 from $456.1 million for the year ended December 31, 2023. The decrease was primarily driven by fewer units of Accessories & Materials sold and increased promotional activity during the period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo date, we have not been exposed, nor do we anticipate being exposed to material 80 Table of Contents risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
Biggest changeTo date, we have not been exposed, nor do we anticipate being exposed to material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
As the impact of foreign currency exchange rates was not material to results of operations during 2021, 2022 and 2023, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.
As the impact of foreign currency exchange rates was not material to results of operations during 2022, 2023 and 2024, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.

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