What changed in this filing

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Item 1A. Risk Factors

2023-03-13 compared with 2022-03-09 · 210 added, 175 removed, 1026 unchanged (27% of the section changed)

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• risks related to protection of our intellectual property, as well as to cybersecurity and potential data breaches;

• risks related to general socio-economic and political conditions as well as consumer confidence;

• risks related to our dependence on our Chief Executive Officer.

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Our business and rate of growth is dependent upon our ability to attract and engage with our users.

We cannot ensure that our efforts to attract and engage with users will be successful or that we will be able to maintain sales to 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.

We cannot ensure that our efforts to attract and engage with users, which we modify from time to time, will be successful or that we will be able to maintain sales to our users.

There are a number of factors that could impact our number of users and our ability to increase sales to users, including:

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• decreased word-of-mouth referrals from our community or failed marketing efforts;

• deteriorating general economic conditions or changes in consumer spending preferences or buying trends.

As a result of these factors, we cannot be sure that we will be successful in attracting and engaging with users, or increasing sales to our users, at levels that will be adequate to maintain or grow our business.

• deteriorating general economic conditions, inflationary pressures affecting the pricing of our products or otherwise, or changes in consumer spending preferences or buying trends, each of which we currently are experiencing.

As a result of these factors, our rate of adding new users is declining in comparison to the last two years and, in the short term, the number of paid subscribers could remain flat or decline, and we cannot be sure that we will be successful in attracting and engaging with users, or increasing sales to our users, at levels that will be adequate to maintain or grow our business.

If user engagement declines, then Subscription ARPU and Accessories and Materials ARPU may also decline.

Subscriptions ARPU and Accessories and Materials ARPU have declined in recent periods and may decline again in the future.

Declining ARPU has had and may continue to have an adverse effect on our revenue and results of operations.

Our revenue growth rate and financial performance in recent periods may not be indicative of our future performance, and we expect our revenue growth rate to decline compared to prior years.

We have experienced rapid revenue growth in recent periods, with revenue of $486.6 million, $959.0 million and $1,306.2 million for the years ended December 31, 2019, 2020 and 2021, respectively.

We experienced rapid revenue growth in recent periods through 2021, with revenue of $959.0 million, $1,306.2 million, and $886.3 million for the years ended December 31, 2020, 2021 and 2022, respectively.

You should not rely on our revenue for any previous quarterly or annual period as any indication of our revenue or revenue growth in future periods.

As we grow our business, we expect our revenue growth rates to decline compared to prior years due to a number of reasons, including more challenging comparisons to prior periods as our revenue grows, 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.

For example, we saw significant growth in sales online through the online channels of our brick-and-mortar or online retail partners as well as through our website during the COVID-19 pandemic in 2020 and 2021, but there can be no assurance that online sales will remain at these levels in the future or that we will be able to continue to significantly grow our online channels, particularly once the rollout of COVID-19 vaccines reaches critical mass, restrictions on movement are lifted and full-time return to work trends normalize.

For example, we saw significant growth in sales during the COVID-19 pandemic in 2020 and 2021 but saw a reduction in sales in 2022.

There can be no assurance that sales will return to 2020 and 2021 levels in the future or that we will be able to continue to significantly grow our revenue in a post-COVID-19 environment.

Our rate of adding new users declined in comparison to the last two years and, in the short term, the number of paid subscribers could remain flat or decline.

If we are unable to anticipate user preferences and successfully develop and introduce new, innovative and updated products in a timely manner, our business may be adversely affected.

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We derive a significant portion of our revenue from sales of our connected machines.

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 decline in sales of our connected machines, which would adversely affect our future revenue and results of operations.

Our connected machine revenue decreased by $295.6 million, or 54%, to $252.6 million for the year ended December 31, 2022 from $548.2 million for the year ended December 31, 2021.

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.

Moreover, because we derive a significant portion of our revenue from the sale of subscriptions and accessories and materials as an extension of the sales and use of our connected machines, any material decline in the sales and use of our connected machines would also have a pronounced impact on the sales of subscriptions and accessories and materials, which would adversely affect our future revenue and results of operations.

For example, accessories and materials revenue decreased by $190.8 million, or 35%, to $361.4 million for the year ended December 31, 2022 from $552.2 million for the year ended December 31, 2021.

Accessories and materials ARPU is defined as total sell-in revenue for the segment in a given period divided by total unique users for same period.

In addition to sales of our connected machines, accessories and materials revenues are influenced by multiple factors, some of which can be hard to isolate in a given time period.

These factors include retailer demand, currency, consumer buying behavior (pantry loading), promotional activity, competition, and engagement (defined by consumer cutting behavior and therefore consumption of materials).

Each of these can have an impact on accessories and materials revenue in different time frames that are hard to estimate.

Our efforts to increase our sales of accessories and materials may not have the desired effect.

Decline in accessories and materials ARPU, which has occurred in recent periods and may occur again in the future, is influenced by how these factors interplay with each other and could adversely affect our revenue and results of operations.

Our results of operations could be adversely affected if we are unable to accurately forecast consumer demand for our products or adequately manage our inventory, the manufacturing capacity of our contract manufacturers or their component supply.

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For example, during the COVID-19 pandemic and stay-at-home orders, we saw significant growth in sales in 2020, which strained our inventory levels and caused shortages that likely resulted in lost sales.

Although our in-channel and on-hand inventory as of year-end 2021 were strong, 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, 2022 were sufficient, if we fail to accurately

forecast consumer demand, we may experience insufficient or excess inventory levels or a shortage or surplus of products available for sale.

If we underestimate demand or are otherwise unable to meet consumer demand, we could experience loss of revenue, reputational harm and damaged relationships, including through social media or other communications from our community, and adversely affect our business, financial condition and results of operations.

If we forecast inventory levels in excess of consumer demand, this may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and premium nature of our brand image.

We currently intend to carry higher component and product inventory levels into the future until we are comfortable current supply chain risks have improved.

These dynamics, along with an increased level of promotions in the fourth quarter of 2021, decreased our margins in the fourth quarter of 2021.

We expect these inventory and supply chain dynamics to continue to put some pressure on margins in 2022.

While supply chain conditions have improved during 2022, 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.

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Our financial performance has been and will continue to be significantly determined by our success in attracting and retaining brick-and-mortar and online retail partners.

For the year ended December 31, 2021, our top seven brick-and-mortar and online retail partners accounted for 52% of product revenue.

We anticipate that a similar concentration will continue for the foreseeable future.

For the year ended December 31, 2021, our top seven brick-and-mortar and online retail partners accounted for 52% of total revenue.

For the twelve months ended December 31, 2022, our top seven brick-and-mortar and online retail partners accounted for 37% of total revenue.

We anticipate that a similar level of concentration will continue for the foreseeable future.

We are dependent on our brick-and-mortar and online retail partners to manage the sales of our products in their stores and on their websites.

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We may not be able to collect our receivables from our brick-and-mortar and online retail partners, or we may incur significant expense in attempting to collect receivables, which would materially and adversely affect our profitability and cash flows from operations.

For example, the COVID-19 pandemic has had a material adverse effect on many retail chains generally, many of whom were required to close their stores for periods of time, and some of which have gone out of business.

While the challenges that many retail chains experienced during the COVID-19 pandemic have not had a material adverse effect on our business, such challenges could negatively affect our business and results of operations in the future.

For example, the COVID-19 pandemic had a material adverse effect on many retail chains generally, many of whom were required to close their stores for periods of time, and some of which went out of business.

While the challenges that many retail chains experienced during the COVID-19 pandemic did not have a material adverse effect on our business, such challenges could negatively affect our business and results of operations in the future.

In addition, current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products or otherwise, and changes in consumer spending preferences or buying trends could have an effect on sales through our brick-and-mortar and online retail partners.

Our long-term growth is dependent upon our ability to increase online sales through the websites of our brick-and-mortar and online retail partners as well as through our own website.

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Our online sales include online sales through the websites of our brick-and-mortar and online retail partners as well as through our own website cricut.com.

In each of the years ended December 31, 2019 and 2020, 48% of our revenue was generated from these online channels.

In the year ended December 31, 2020, 48% of our revenue was generated from these online channels.

In the year ended December 31, 2021, 50% of our revenue was generated from these online channels.

For the twelve months ended December 31, 2022, 59% of our revenue was generated from these online channels.

There can be no assurance that online sales will remain at these levels in the future or that we will be able to continue to significantly grow our online channels.

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As of December 31, 2022, approximately 33% of our users were Paid Subscribers.

If w e are unable to maintain or increase subscriptions, which have higher margins than our other products, our future revenue and results of operations could be harmed.

If we are unable to maintain or increase subscriptions, which have higher margins than our other products, our future revenue and results of operations could be harmed.

Our Paid Subscribers have no contractual obligation to renew their subscriptions to Cricut Access or Cricut Access Premium after the expiration of their initial subscription term, and our subscriptions may be offered on a monthly and annual basis.

The images and designs on our platform are available for purchase à la carte, which may limit the incentive for users to purchase subscriptions.

Our ability to increase new subscriptions may decline or fluctuate as a result of a number of factors, including seasonality, the quality of images and projects we offer, the number of new features and capabilities only offered through our subscriptions, the prices of products offered by our competitors and the budgets and consumer spending habits of our users.

Our ability to increase new subscriptions may decline or fluctuate as a result of a number of factors, including seasonality, the quality of images and projects we offer, level of engagement, the number of new features and capabilities only offered through our subscriptions, the prices of products offered by our competitors and the budgets and consumer spending habits of our users.

If our users do not renew their subscriptions or if additional users do not purchase subscriptions, our future revenue and results of operations could be harmed.

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Instead of increasing subscriptions, other attempts to increase subscriptions could cause our users to limit their use of our connected machines, cause reputational harm and damaged relationships, and result in reduced sales of connected machines and accessories and materials, any of which could negatively affect our future revenue and results of operations.

Finally, any future changes to our subscription model could make our subscriptions less attractive to users or reduce our margins on subscriptions, which could negatively affect our future revenue and results of operations.

Finally, any future changes to our subscription model could make our subscriptions less attractive to

users or reduce our margins on subscriptions, which could negatively affect our future revenue and results of operations.

We operate in a highly competitive market and we may be unable to compete successfully against existing and future competitors.

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Our competitors may offer competing accessories and materials at lower price points or with different features than our products.

Moreover, we expect the competition in the accessories and materials DIY market to intensify in the future as new and existing competitors introduce new or enhanced products that may compete with our product lines.

Because we derive a significant portion of our revenue from the sales of accessories and materials, any material decline in such sales would have a pronounced impact on our future revenue and results of operations.

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.

Our efforts to increase our sales of accessories and materials may not have the desired effect.

Because we derive a significant portion of our revenue from the sales of accessories and materials, the material decline in such sales is having and could continue to have a pronounced impact on our future revenue and results of operations.

We also experience competition in connected machines from sellers of both connected and manual cutting and other machines.

For example, Brother, Graphtec and Silhouette America sell cutting machines, and a number of companies sell heat press machines.

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, where customers can purchase digital files to upload to our platform.

For example, Brother, Graphtec, Loklik, Silhouette America, and Siser sell cutting machines, and a number of companies sell heat press machines.

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.

With respect to all of our segments, introduction by competitors of comparable products at lower price points, a maturing product lifecycle, a decline in consumer spending or other factors could result in a decline in our revenue derived from our products, which may adversely affect our business, financial condition and results of operations.

Additionally, if in the future, due to competitor discounting or other marketing strategies, we significantly reduce our prices on our products without a corresponding increase in sales volume, it would negatively impact our revenue and would adversely affect our gross margins and overall profitability.

As our product categories mature, new competitive forces and competitors may emerge.

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However, we may be unable to detect all copycat products in a timely manner, and, even if we could, technological and legal measures may be insufficient to halt their distribution.

In some cases, particularly in the case of brick-and-mortar and online retail partners and distributors operating outside of the United States, our available remedies may not be adequate to protect us against the effect of such copycat products.

of such copycat products.

Regardless of whether we can successfully enforce our rights against the producers of these products, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, results of operations or financial condition.

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To the degree we implement price increases, we could see further impact on consumer behavior and demand.

Many factors can significantly impact our pricing strategies, including production and personnel costs, as well as other factors outside of our control, such as consumer sentiment, increases in the price of raw materials, and our competitors’ pricing and marketing strategies.

Many factors can significantly impact our pricing strategies, including production and personnel costs, as well as other factors outside of our control, such as consumer sentiment, increases in the price of raw materials, inflationary pressures, and our competitors’ pricing and marketing strategies.

Changes in our pricing strategies have had, and may continue to have, a significant impact on our revenue and net income.

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Furthermore, brick-and-mortar and online retail partners may choose to offer promotions or sales on our products, including our connected machines, and we may have to match those prices on our own website to continue to attract users to our website to make purchases, which could affect our business and results of operations.

Many of our accessories and materials, including vinyl, iron-on vinyl, paper, metal, laminate, leather, fabric, stationery, stickers and other merchandise, are also offered by our competitors at lower prices or with free or accelerated shipping timelines that we either are unable to or choose not to match.

Many of our accessories and materials, including vinyl, iron-on vinyl, paper, stationery, stickers and other merchandise, are also offered by our competitors at lower prices or with free or accelerated shipping timelines that we either are unable to or choose not to match.

Accordingly, if a user runs out of materials during a project, they may opt to purchase a replacement from a competitor or other online retail partner, such as Amazon, to receive one or two-day shipping, which we may not be able to offer.

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We have grown rapidly in recent years and have limited operating experience at our current size.

For example, our revenue has grown from $486.6 million to $959.0 million and $1,306.2 million for the years ended December 31, 2019, 2020 and 2021, respectively.

In addition, between January 1, 2019 and December 31, 2020, our employee headcount increased from over 350 to over 640, and we expect headcount growth to continue for the foreseeable future.

Employee headcount as of December 31, 2021 was over 830.

For example, our revenue grew from $486.6 million in 2019 to $1,306.2 million in 2021 before reducing to $886.3 million in 2022.

In addition, between December 31, 2020 and December 31, 2021, our employee headcount increased from over 640 to over 830, and as of December 31, 2022, our employee headcount was over 775.

In January 2023, due to the challenging macroeconomic environment and with the goal of maintaining the health and sustainability of the company, we implemented a workforce reduction which impacted approximately 8% of Cricut employees.

While we do not expect headcount growth to continue at the same pace as in recent years, we may choose to significantly increase headcount again in the future.

Fur ther, as we grow, our business becomes increasingly complex, particularly for a company of our relative size.

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If we do not adapt to meet these evolving challenges, including hiring and maintaining the right number of employees for each aspect of our business, or if our management team does not effectively scale with our growth, we may experience erosion to our brand, the quality of our products may suffer and our company culture may be harmed.

Our growth strategy contemplates an increase in our advertising and other sales and marketing spending, which represented 8% and 7% of revenue in 2019 and 2020, respectively, and 10% for the twelve months ended December 31, 2021.

Our growth strategy contemplates an increase in our advertising and other sales and marketing spending, which represented 7%, 10% and 15% of revenue in 2020, 2021 and 2022, respectively.

Successful implementation of our growth strategy will require significan t expenditures before any substantial associated revenue is ge nerated, and we cannot guarantee that these increased investments will result in corresponding and offsetting revenue growth.

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We generate a disproportionate amount of sales activity related to our products during the fourth quarter, due in large part to seasonal holiday demand.

For example, in 2019 and 2020 our fourth quarter represented 36% and 39% of total revenue for the year, respectively, and 30% of total revenue for the twelve months ended December 31, 2021.

Our promotional discounting activity is also higher in the fourth quarter, which negatively impacts gross margin during this period.

For example, in 2020, 2021 and 2022, our fourth quarter represented 39%, 30% and 32% of total revenue for the year, respectively.

Our promotional discounting activity is also higher in the fourth quarter, which negatively impacts gross

margin during this period.

Accordingly, adverse events that occur during these months could have a disproportionate effect on our results of operations for the entire fiscal year.

In contrast, sales of accessories and materials typically slow in the second quarter of the year in connection with school summer holidays.

Seasonality in our business can also be affected by introductions of new or enhanced products, including the costs associated with such introductions.

Seasonality in our business can also be skewed by macroeconomic factors, such as inflation and reduction in consumer demand.

In addition, seasonality can be affected by introductions of new or enhanced products, including the costs associated with such introductions.

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.

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Accordingly, yearly or quarterly comparisons of our results of operations may not be useful and our results in any particular period will not necessarily be indicative of the results to be expected for any future period.

Moreover, we have experienced a significant increase in sales since 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 may negatively impact demand for our products and subscriptions, and our sales activity may 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 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.

As a result of these factors, our rate of adding new users is declining in comparison to the last two 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.

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• 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 competition or otherwise;

• delays or disruptions in our supply chain;

• 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;

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• the mix of our products sales from period to period;

• our ability to maintain gross margins and operating margins;

• 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;

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• 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.

As a result of these factors, our rate of adding new users is declining in comparison to the last two years and, in the short term, the number of paid subscribers could remain flat or decline.

Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our results of operations.

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We believe that our growth depends on our ability to reach our market opportunity in terms of our SAM, which includes active creatives who we address with our current products and price points, and our TAM, which includes potential creatives who we believe we can reach over the long term as we make products for new uses and products that are more accessible, even easier to use and available at a broad set of price points.

See the section titled “Business - Our Opportunity.” We assess our SAM and TAM in the United States and Canada, as well as internationally.

See the section titled “Business - Our Opportunity.”.

We assess our SAM and TAM in the United States and Canada, as well as internationally.

We believe that in order to further penetrate our SAM and TAM, we must continually improve ease of use and user experience, launch new products in new categories and expand internationally.

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Our SAM and TAM are representative of a broad demographic.

However, historically we have served a largely female demographic representing 94% of our users as of December 31, 2021.

We continue to explore additional offerings that address new categories that will appeal to a wider demographic.

However, historically we have served a largely female demographic representing 93% of our users as of December 31, 2022 We continue to explore additional offerings that address new categories that will appeal to a wider demographic.

Any new offerings may not appeal to current consumer preferences and may not be accepted by our user community or potential new users.

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Our rapid growth has, in certain instances, strained these systems.

As we grow, we continue to implement modifications and upgrades to our systems, including sunsetting the use of internal servers and the implementing a company-wide product lifecycle management system.

As we grow, we continue to implement modifications and upgrades to our systems, including sunsetting the use of internal servers and implementing a company-wide product lifecycle management

These changes subject us to inherent costs and risks associated with replacing and upgrading these systems, including, but not limited to, impairment of our ability to fulfill brick-and-mortar and online retail partners orders and other disruptions in our business operations.

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Our sales to brick-and-mortar and online retail partners can be subject to lower gross margins, heightened product or packaging requirements or long ramp up times.

Our top seven brick-and-mortar and online retail partners, measured by the product revenue we derive from them, accounted for 52% of product revenue for the year ended December 31, 2021.

Gross margins from sales to retailers may decline as a result of a number of factors outside our control, including tariffs as a result of trade wars and our reliance on a primary contract manufacturer which holds influence over the supply chain.

Our top seven brick-and-mortar and online retail partners, measured by the product revenue we derive from them, accounted for 52% of product revenue for the year ended December 31, 2021 and 37% for the year ended December 31, 2022.

Gross margins from sales to retailers may decline as a result of a number of factors outside our control, including inflationary pricing pressures, tariffs as a result of trade wars and our reliance on a primary contract manufacturer which holds influence over the supply chain.

This may magnify the impact of variations in revenue and operating costs on our results of operations, which in turn could adversely affect our overall margins and profitability.

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If we lose any of our key distributors, particularly in our international target markets, if we are unable to meet our key distributors’ demand requirements or if our key distributors sell competing products, our business and results of operations could be adversely affected.

Moreover, because certain of our key distributors may have dominant positions in their markets, such key distributors may not be easy to replace and the loss of a key distributor could also impact our relationships with certain retailers.

certain retailers.

Any loss of market share or financial difficulties faced by our key distributors, including bankruptcy and financial restructuring, could adversely affect our financial performance.

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In the future, we may choose to temporarily or permanently stop shipping product to distributors who do not follow the policies and guidelines in our sales agreements, which could adversely affect our revenue and results of operations.

Additionally, our international distributors generally buy from us in U.S.

dollars and generally sell to retailers in local currency, so significant currency fluctuations could affect their profitability, and in turn, affect their ability to buy products from us in the future.

For example, the COVID-19 pandemic has created significant short-term volatility in global stock markets and has caused currency exchange rate fluctuations that make it more expensive for international distributors to purchase our products.

Additionally, many of our international distributors buy from us in U.S.

dollars and sell to retailers in local currency, so significant currency fluctuations could affect their profitability, and in turn, affect their ability to buy products from us in the future.

For example, in recent years, there has been significant short-term volatility in global stock markets and currency exchange rate fluctuations that make it more expensive for international distributors to purchase our products.

Any reduction in sales by our international retailers could harm our international expansion and adversely affect our future growth.

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Additionally, the loss of any key personnel could make it more difficult to manage our operations and research and development activities, reduce our employee retention and revenue and impair our ability to compete.

For example, on January 3, 2022, Martin Petersen, Cricut’s Chief Financial Officer, informed Cricut of his intention to step down from his position as Chief Financial Officer, effective March 31, 2022, and to retire from Cricut effective September 30, 2022, serving as Executive Vice President and Senior Advisor from April 1, 2022 until his retirement.

For example, Martin Petersen, Cricut’s former Chief Financial Officer, retired from Cricut effective September 30, 2022.

In connection with our initial public offering, we entered into employment letters with our key personnel.

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A variety of factors including an increase in sales or fluctuation in demand for support due to seasonality or other factors, have and will continue to put additional pressure on our customer support team.

In particular, the COVID-19 pandemic-related closure of our offices has largely forced our Cricut Member Care staff to work from home, which has and may continue to result in work-productivity issues or a decrease in efficiencies, particularly during times of high call volume as we have seen when delivery lead times get longer.

We may be unable to respond quickly enough to accommodate short-term increases in demand for technical support.

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If we are unable to continue to develop self-service support resources that are easy to use and allow our users to resolve their technical issues, or if our users choose not to collaborate or engage with other users on technical support issues, our self-service support resources may not be effective, and our users’ experience with our platform may be negatively impacted.

Any failure to, or market perception that we do not, maintain high-quality support, including through social media or other communications from our community, could harm our reputation, our ability to attract new users, the engagement of our existing users with our platform and our business, results of operations and financial condition.

Any failure to, or market perception that we do

not, maintain high-quality support, including through social media or other communications from our community, could harm our reputation, our ability to attract new users, the engagement of our existing users with our platform and our business, results of operations and financial condition.

Our business depends on the integration of our software across a wide range of desktop and mobile devices and operating systems that are outside of our control.

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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.

If Internet access service providers have outages or deteriorations in their quality of service, our users will not have access to our platform or may experience a decrease in the quality of our services.

If Internet access service providers have outages or deterioration in their quality of service, our users will not have access to our platform or may experience a decrease in the quality of our services.

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.

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A number of states have enacted or are considering legislation or executive actions that would regulate the conduct of broadband providers.

Democratic control of the Executive Branch, Congress and the FCC following the 2020 elections may increase the likelihood of legislative or FCC action to reverse the 2018 order or adopt new national network neutrality rules.

Democratic control of the Executive Branch, Congress and the FCC following the 2020 elections may increase the likelihood of legislative or FCC action to reverse the 2018 order or adopt new

national network neutrality rules.

We cannot predict whether the FCC order or state initiatives will be modified, overturned or vacated by legal action of the court, federal or state legislation or the FCC.

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Also, while our warranty is limited to repairs and returns, warranty claims may result in litigation, the occurrence of which could adversely affect our business, financial condition and results of operations.

In addition to warranties supplied by us, our brick-and-mortar and online retail partners may offer the option for users to purchase third-party extended warranty and services contracts in some markets, which creates an ongoing performance obligation beyond the warranty period.

Extended warranties are regulated in the United States on a state level and are treated differently by each state.

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Changes in interpretation of the insurance regulations or other laws and regulations concerning extended warranties on a federal, state, local or international level may cause us to incur costs or have additional regulatory requirements to meet in the future.

Our failure to comply with past, present and future similar laws could result in reduced sales of our products, reputational damage, penalties and other sanctions, which could adversely affect our business, financial condition and results of operations.

Our failure or the failure of third parties to comply with contractual obligations or past, present and future similar laws could result in reduced sales of our products, reputational damage, penalties and other sanctions, which could adversely affect our business, financial condition and results of operations.

Product recalls and/or product liability, as well as changes in product safety and other consumer protection laws, may adversely affect our operations, merchandise offerings, reputation, results of operations, cash flow and financial condition.

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If our suppliers or manufacturers are unable or unwilling to recall products failing to meet our quality standards, we may be required to recall those products at a substantial cost to us.

Moreover, changes in product safety or other consumer protection laws could lead to increased costs to us for certain merchandise, or additional labor costs associated with readying merchandise for sale.

Moreover, changes in product safety or other consumer protection laws could lead to increased costs to us for certain merchandise, or additional

labor costs associated with readying merchandise for sale.

Long lead times on merchandise ordering cycles increase the difficulty for us to plan and prepare for potential changes to applicable laws.

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Factors affecting the level of consumer spending for such discretionary items include general economic conditions, consumer confidence in future economic conditions, fears of recession, the availability and cost of consumer credit, inflationary pressures, consumers’ individual savings-to-spend ratio, levels of unemployment, discretionary time available, tax rates and political factors, including war or other armed conflicts, including the current conflict between Russia and Ukraine.

While we have seen an increase in demand for our products and subscriptions during the COVID-19 pandemic, there is no guarantee that such trends will continue at the same rate in the future or at all, particularly once the rollout of COVID-19 vaccines reaches critical mass, restrictions on movement are lifted and full-time return to work trends normalize.

To date, our business has operated almost exclusively in a relatively strong economic environment and, therefore, we cannot be sure the extent to which we may be affected by recessionary conditions.

While we saw an increase in demand for our products and subscriptions during the COVID-19 pandemic in 2020 and 2021, our current revenue growth rates are declining compared to those years.

There can be no assurance that sales will return to 2020 and 2021 levels in the future or that we will be able to continue to significantly grow our revenue in a post-COVID-19 environment.

To date, our business has operated almost exclusively in a relatively strong economic environment.

Current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products, and changes in consumer spending preferences and buying trends are having an adverse effect on demand for our products.

Unfavorable economic conditions or other related factors may lead consumers to delay or reduce purchases of our products and subscriptions, and consumer demand for our products and subscriptions may not grow as we expect.

As a result of these factors, our rate of adding new users is declining in comparison to the last two years and, in the short term, the number of paid subscribers could remain flat or decline.

Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and subscriptions could adversely affect our business, financial condition and results of operations.

Covenants in the Credit Agreement governing our secured revolving credit facility may restrict our ability to grow our business, and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely affected.

In September 2020, we entered into a credit agreement, or the Credit Agreement, with JPMorgan Chase Bank, N.A., Citibank, N.A.

and Origin Bank, providing for a three-year secured revolving credit facility with aggregate lender commitments of $150 million.

We have the option to increase the lender commitments by up to $200 million (for maximum aggregate lender commitments of up to $350 million), subject to the satisfaction of certain conditions under the Credit Agreement, including obtaining the consent of the administrative agent and each lender being added or increasing its commitment.

The credit facility is a standard asset-based lending facility, meaning that notwithstanding the aggregate lender commitments, we can only borrow up to an amount equal to our borrowing base at any given time.

As of December 31, 2021, we were able to borrow up to $150.0 million.

Our borrowing base is determined according to certain percentages of eligible accounts receivable and eligible inventory (which may be valued at average cost, market value or net orderly liquidation value), subject to reserves determined by the administrative agent.

At any time that our borrowing base is less than the aggregate lender commitments, we can only borrow revolving loans up to the amount of our borrowing base and not in the full amount of the aggregate lender commitments.

The Credit Agreement and related loan documents contain various restrictive covenants, including, among other things, a minimum fixed charge coverage ratio, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders or enter into certain types of related party transactions.

Our potential indebtedness could materially adversely affect our financial health, limit our ability to finance future acquisitions and capital expenditures and prevent us from fulfilling our financial obligations.

Much of our debt is secured by a substantial portion of our assets.

Much of our debt has a variable interest rate component that may significantly increase our interest costs in a rising rate environment.

In August 2022, we entered into a credit agreement (the “New Credit Agreement”), with JPMorgan Chase Bank, N.A, as administrative agent, and the lenders party thereto, providing for a five-year senior secured revolving credit facility with aggregate lender commitments of $300.0 million.

We have the option to increase the lender commitments by up to $150.0 million(for maximum aggregate lender commitments of up to $450.0 million), subject to the satisfaction of certain conditions under the New Credit Agreement, including obtaining the consent of the administrative agent and each lender being added or increasing its commitment.

The New Credit Agreement and related loan documents could have important consequences to us, including the following:

• limitations on our ability to make acquisitions or declare dividends on our capital stock;

• impaired ability to obtained additional financing for acquisitions, dividends, capital expenditures, working capital or general corporate purposes;

• reduced funds available for our operations and other purposes, as a portion of our cash flow from operations may be dedicated to the payment of principal and interest on, and fees with respect to, our indebtedness;

• exposure to the risk of increasing interest rates as certain borrowings are, and will continue to be, at variable rates of interest.

The New Credit Agreement and related loan documents contain covenants that limit our discretion with respect to certain business matters, including incurring additional debt, granting liens on our assets, acquiring assets, disposing of assets, making investments, declaring dividends, entering into related-party transactions and engaging in new types of business.

We are also subject to financial covenants that require us to maintain a maximum leverage ratio and a minimum interest coverage ratio.

These restrictions may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions.

Pursuant to the Credit Agreement and related loan documents, we granted a security interest in substantially all of our assets.

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreement” for additional information.

Our ability to comply with these restrictive covenants and limitations on our ability to grow our business can be impacted by events beyond our control and we may be unable to do so.

The Credit Agreement provides that our breach or failure to satisfy certain covenants constitutes an event of default.

Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding under the Credit Agreement to be immediately due and payable or proceed against the assets we provided as collateral.

If the debt under the Credit Agreement was to be accelerated, we may not have sufficient cash on hand or be able to sell sufficient collateral to repay it, which would have an immediate adverse effect on our business and results of operations.

A breach of any of these covenants could result in a default under the New Credit Agreement, which could result in the termination of the lenders’ commitments to make loans thereunder and the acceleration of our payment obligations under the New Credit Agreement and related loan documents.

Pursuant to the New Credit Agreement and related loan documents, we granted a security interest in substantially all of our assets.

If we default on our obligations thereunder, the secured parties may be able to foreclosure upon their security interests and otherwise be entitled to obtain or control those assets.

If these events were to occur, we may not be able to pay our debts or borrow sufficient funds to refinance them.

Even if new financing were available, it may not be on terms acceptable to us.

As a result of this risk, we could be forced to take actions that we otherwise would not take, or not take actions that we otherwise might take, in order to comply with the New Credit Agreement and related loan documents.

In addition, the lenders’ obligations to make loans or other credit accommodations under the New Credit Agreement is subject to the satisfaction of certain conditions precedent including, for example, that our representations and warranties therein and the related loan documents are true and correct in all material respects

as of the date of the proposed credit extension.

If any of our representations or warranties in the New Credit Agreement or the related loan documents are not true and correct in all material respects as of the date of a proposed credit extension, or if other conditions precedent are not satisfied, we may not be able to request new loans or other credit accommodations under the New Credit Agreement, which could have a material adverse impact on our business, results of operation, financial condition and cash flows.

Additionally, from time to time in the future we may need to refinance obligations outstanding under the New Credit Agreement and related loan documents.

At the time we must refinance, the market for our debt, or our financial condition or asset valuations, may not be favorable.

It is possible that financing to replace or renew our debt may be unfavorable, which would adversely affect our financial condition and results of operations.

In certain cases, we may turn to equity or other alternative financing.

Our debt under the New Credit Agreement is subject to variable rates of interest.

If interest rates increase, our borrowing costs may increase substantially.

This could have a material adverse impact on our business, results of operation, financial condition and cash flows.

We may use interest rate derivatives to hedge a portion of our variable rate debt, when appropriate, based upon market conditions.

We may not be able to satisfy our debt obligations upon the occurrence of a change in control under the New Credit Agreement

Upon the occurrence of a change in control as defined in the New Credit Agreement, the lenders will have the right to terminate their commitments to lend under the New Credit Agreement and to declare all outstanding obligations under the New Credit Agreement and related loan documents due and payable.

There can be no assurance that we would have sufficient resources available to satisfy all of our obligations under the New Credit Agreement and related loan documents in the event of a change in control.

If we were unable to satisfy these obligations, it could have a material adverse impact on our business and the holders of our capital stock.

A “change in control”, as defined in the New Credit Agreement, includes, among other events, the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), other than Permitted Holders (as defined therein), of equity interests representing more than 35% of the aggregate ordinary voting power represented by our issued and outstanding equity interests.

We may require additional capital to support business growth and objectives, and this capital may not be available to us on reasonable terms, if at all, and could result in stockholder dilution.

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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.

The widespread stay-at-home orders resulting from the COVID-19 pandemic have required us to make substantial changes to the way that the vast majority of our employee population does their work, and we have faced new and unforeseen challenges arising from the management of remote, geographically-dispersed teams.

Recent employment trends have required us to make substantial changes to the way that the vast majority of our employee population does their work, and we have faced new and unforeseen challenges arising from the management of remote, geographically-dispersed teams.

In addition, our recent workforce reduction could affect our culture.

Any failure to preserve our culture could adversely affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.

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Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies.

Specifically, Ashish Arora, our Chief Executive Officer, has not previously been the chief executive officer of a publicly traded company, and Kimball Shill, our next chief financial officer, will be serving in that role for the first time.

Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.

Specifically, Ashish Arora, our Chief Executive Officer, has not previously been the chief executive officer of a publicly traded company, and Kimball Shill, our Chief Financial Officer, is serving in that role for the first time.

Our management team may not successfully or efficiently manage our continued transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.

These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.

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Although we believe that our tax positions and related provisions reflected in the financial statements are fully supportable, we recognize that these tax positions and related provisions have been challenged and may be challenged in the future by various tax authorities.

These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available,

including progress on tax audits, changes in interpretation of tax laws, developments in case law and closing of statute of limitations.

These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law and closing of statute of limitations.

To the extent that the ultimate results differ from our original or adjusted estimates, our effective tax rate can be adversely affected.

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As a result, we could be subject to higher than anticipated tax liabilities as well as ongoing variability in our quarterly tax rates as audits close and exposures are re-evaluated.

We continue to analyze our exposure for taxes and related liabilities and have accrued $4.0 million and $3.3 million as of December 31, 2019 and 2020, respectively, and $2.5 million as of December 31, 2021 for uncertain tax positions.

We continue to analyze our exposure for taxes and related liabilities and have accrued $3.3 million as of December 31, 2022 for uncertain tax positions.

We may incur significant losses from fraud.

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In addition, under current credit card practices, we are typically liable for fraudulent credit card transactions.

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.

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.

Risks Related to Manufacturing, Supply Chain and Fulfillment

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We depend on third-party contract manufacturers to produce all of our products, and primarily rely upon one contract manufacturer, Intretech, to build most of our connected machines in Malaysia and China.

We are increasing use of another contract manufacturer, also with operations in Malaysia.

The agreements with our top vendors in 2020, 2021 and 2022, including Intretech, each have an initial term of five years from 2018 and automatically renew for subsequent periods of one year unless either party provides notice of non-renewal at least 60 days prior to the expiration of the initial term.

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Delays, component shortages and other manufacturing and supply problems could impair the distribution of our connected machines and ultimately our brand, or could negatively affect our gross margins.

Furthermore, any adverse change in Intretech’s or our other contract manufacturers’ financial or business conditions could disrupt our ability to supply our products to our brick-and-mortar and online retail partners, distributors and online sales channels.

Furthermore, certain of our contract manufacturers have in the past and may in the future experience adverse changes in their business conditions.

Any adverse change in Intretech’s or our other contract manufacturers’ financial or business conditions could disrupt our ability to supply our products to our brick-and-mortar and online retail partners, distributors and online sales channels, and could negatively impact our ability to meet our forecasted consumer demand and to timely launch new products or features .

In addition, Intretech primarily manufactures our connected machines at one facility located in Malaysia with some manufacturing conducted in the People’s Republic of China, or China.

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We believe that we must continue to upgrade and expand our current third-party contract manufacturer production capability to meet our projected revenue targets and quality control requirements.

Operational difficulties, such as a significant interruption in the operations of or equipment breakdowns in production facilities operated by third parties, could delay production or shipment of our products.

Operational difficulties,

such as a significant interruption in the operations of or equipment breakdowns in production facilities operated by third parties, could delay production or shipment of our products.

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.

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As a result, our manufacturing, and therefore our business, financial condition and results of operations may be adversely affected by social, political, regulatory and economic developments in Malaysia and China.

In particular, the COVID-19 pandemic has caused, and will likely continue to cause, interruptions in the development, manufacturing (including the procurement of key components) and shipment of our connected machines, which could adversely impact our revenue, gross margins and results of operations.

In particular, a variety of recent events have caused, and will likely continue to cause, interruptions in the development, manufacturing (including the procurement of key components) and shipment of our connected machines, which could adversely impact our revenue, gross margins and results of operations.

Such interruptions may be due to, among other things, industry-wide capacity limitations, temporary closures of our facilities or those of our contract manufacturers or other vendors in our supply chain, restrictions on travel or the import and export of goods and services from certain ports that we use and local quarantines.

Any adverse change in the operations of our manufacturers, including as a result of political, social, economic or transportation conditions in Malaysia or China, or issues such as actual or perceived unfair labor practices, labor disputes or violations of laws or other obligations or issues unknown to us, could affect deliveries of our products to our brick-and-mortar and online 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 adversely affect our business and financial results.

Any adverse change in the operations of our manufacturers, including as a result of political, social, economic or transportation conditions in Malaysia or China, supply chain issues, failure of our manufacturers to remain in business, or issues such as actual or perceived unfair labor practices, labor disputes or violations of laws or other obligations or issues unknown to us, could affect deliveries of our products to our brick-and-mortar and online retail partners or users, possibly resulting in business interruptions, substantially delayed or lost sales, delayed launches of new products or features, 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 adversely affect our business and financial results.

We rely on a limited number of third-party suppliers, some of which are sole-source suppliers, and many of which are located internationally, to provide components to our manufacturers, as well as to source our accessories and materials, which may lead to supply shortages, long lead times for components and supply changes, any of which could disrupt our supply chain and may negatively affect our business.

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In addition, the lead times associated with procuring certain components or accessories and materials are lengthy and preclude rapid changes in quantities and delivery schedules and could increase for a number of reasons outside our control, including natural disaster, a pandemic, social or political unrest or other interruptions.

In particular, the COVID-19 pandemic has caused, and will likely continue to cause, interruptions in the development, manufacturing, sourcing and shipment of our products, which could adversely affect our revenue, gross margins and results of operations.

During the COVID-19 pandemic, we have secured long-lead-time component supply directly from suppliers on a purchase order basis.

In particular, a variety of recent events have caused, and will likely continue to cause, interruptions in the development, manufacturing, sourcing and shipment of our products, which could adversely affect our revenue, gross margins and results of operations.

In recent years, we have secured long-lead-time component supply directly from suppliers on a purchase order basis.

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.

To the extent that we do not accurately forecast the components we purchase, we may be left paying for components that our contract manufacturers do not need.

Our contract manufacturers may from time to time have disputes or litigation with third-party suppliers regarding any number of matters, including contractual issues related to the manufacture of our products.

We may choose to intervene in these disputes, including by paying financial settlements, in order to avoid interruption of our supply.

Furthermore, most of our contract manufacturers’ primary facilities are located in Malaysia and China, which exposes us to certain additional risks in addition to the above that could adversely affect our business, financial condition and results of operations.

For example, we have experienced issues with the import of goods and services from certain ports.

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.

Access to credit in Asia is tightening, which is having an impact on the terms upon which we and our contract manufacturers are able to obtain access to components or accessories and materials from particular suppliers.

products to brick-and-mortar and online retail partners or users in a timely manner and our business could be materially and adversely affected.

Such supply chain issues, if severe enough, could also affect our contract manufacturers’ ability to remain in business, which would require us to shift production of products made by such manufacturers to other of our manufacturers or new manufacturers, either of which could result in delays in delivery of our products and could have a material and adverse effect on our business.

In addition, if we experience an increase in demand for our products, our suppliers may not have the capacity or may elect not to meet our needs as they allocate components or accessories and materials to their other customers.

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In the event that any of our key or sole suppliers for any of our components are unable to supply the components that our manufacturers need to meet anticipated consumer demand, our business would be materially and adversely affected.

To mitigate electronic component shortages we have or may experience, we have identified and qualified and continue to seek out and qualify new component

suppliers to promote continuity of supply.

To mitigate electronic component shortages we have or may experience, we have identified and qualified and continue to seek out and qualify new component suppliers to promote continuity of supply.

Doing so on a large scale and at a fast pace and the novelty of certain component suppliers to us and our products carries inherent risk that may impact the quality of our products.

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We may be required to incur higher costs to secure the necessary production capacity and components to meet unanticipated demand, which could result in lower margins.

We currently intend to carry higher inventory levels into the future until we are comfortable current supply chain risks have improved.

These dynamics, along with an increased level of promotions in the fourth quarter of 2021, decreased our margins in the fourth quarter of 2021.

We expect these inventory and supply chain dynamics to continue to put some pressure on our margins in 2022.

While supply chain conditions have improved during 2022, if our supply chain faces challenges again, it could continue to put pressure on margins.

The failure of our third-party logistics partners to adequately and effectively staff could adversely affect our brick-and-mortar and online retail partner and user experience and results of operations.

We currently receive and distribute merchandise through five third-party logistics partners, two of which are located in the United States and one of which is located in each of China, Europe, and Singapore.

We currently receive and distribute merchandise through six third-party logistics partners, two of which are located in the United States and one of which is located in each of Australia, China, Europe, and Singapore.

The majority of our products are received and distributed through one of our third-party logistics partners in California.

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• price increases;

• difficulties in establishing additional supplier, manufacturer or third-party logistics partner relationships if we experience difficulties with our existing suppliers, manufacturers or third-party logistics partners;

• shortages of materials or components;

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In addition, we may be exposed to recalls, product replacements or modifications, write-offs of inventory or intangible assets and significant warranty and other expenses, such as litigation costs and regulatory fines.

If we 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.

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.

In the event that we receive shipments of products that have defects or otherwise fail to comply with our technical specifications or that fail to conform to our quality control standards, and we are not able to obtain replacement products in a timely manner, we risk revenue losses from the inability to sell those products, increased administrative and shipping costs and lower profitability.

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Significant increases in inflation, commodity prices or transportation costs may adversely affect the costs of our component suppliers and contract manufacturers, and we may be unable to pass on these higher costs to our brick-and-mortar and online retail partners or users.

Significant future increases in commodity prices, such as base metals (e.g.

We are currently experiencing inflationary pressures affecting the prices of components for our products and transportation resources.

Significant increases in commodity prices, such as base metals (e.g.

copper), alloys or plastic resins, or inflation could adversely affect the costs of our component suppliers and contract manufacturers and result in higher costs to us if we are unable to pass on the increased costs to our brick-and-mortar and online retail partners or users.

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We also depend on semiconductors made in Taiwan, and a worsening of the geopolitical situation between China and Taiwan could affect our ability to procure these semiconductors.

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, 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.

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.

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.

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tariff rates on specified products from China.

Although we continue to work with our vendors to mitigate our exposure to current or potential tariffs, there can be no assurance that we will be able to offset any increased costs.

continue to work with our vendors to mitigate our exposure to current or potential tariffs, there can be no assurance that we will be able to offset any increased costs.

Other changes in U.S.

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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 actual obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another.

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 also expect that there will continue to be new privacy laws proposed and enacted in various jurisdictions.

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Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to the United States as well as other countries that have not been found to provide adequate protection to such personal data.

The GDPR also introduced numerous privacy-related changes for 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), limiting retention periods of personal data, requiring mandatory data breach notification and requiring additional policies and procedures to comply with the accountability principle under the GDPR.

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.

In addition, data subjects have more robust rights with regard to their personal data.

Although legal mechanisms have been designed to allow for the transfer of personal data from the United Kingdom, the EEA, and Switzerland to the United States, uncertainty about compliance with such data protection laws remains and such mechanisms may not be available or applicable with respect to the personal data processing activities necessary to research, develop and market our products and services.

For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA 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 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.

Specifically, on July 16, 2020, the Court of Justice of the EU, or CJEU, invalidated the EU-U.S.

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Privacy Shield adequate for the purposes of personal data transfers from Switzerland to the United States.

These developments may result in European data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from Europe to the United States.

We may be required to take additional steps to legitimize any personal data transfers impacted by these developments and be subject to increased costs of compliance and limitations on our vendors, contractors, consultants and us.

On October 7, 2022, President Biden signed an Executive Order on Enhancing Safeguards for United States Signals Intelligence Activities, which directs the United States to take certain steps to implement the EU-U.S.

Data Privacy Framework, and on December 13, 2022, the European Commission announced a draft decision on U.S.

However, there have been reports that the EU-U.S.

Data Privacy Framework may be subject to challenge.

These and other developments may result in European data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from Europe to the United States.

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.

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.

More generally, we may find it necessary or desirable to modify our data handling practices, and our practices relating to cross-border transfers of data or other data handling practices, or those of our vendors, contractors and consultants and vendors, may be challenged and our business, financial condition and operating results may be adversely impacted.

We continue to monitor and review the impact of any developments relating to cross-border data transfers from the EEA that could affect our operations.

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.

More generally, we may find it necessary or desirable to modify our data handling practices, and our practices relating to cross-border transfers of data or other data handling practices, or those of our vendors, contractors and consultants, may be challenged and our business, financial condition and operating results may be adversely impacted.

We continue to monitor and review the impact of any developments relating to cross-border data transfers from the EEA and Switzerland that could affect our operations.

Further, the United Kingdom’s exit from the EU, and ongoing developments in the United Kingdom, have created uncertainty with regard to data protection regulation in the United Kingdom.

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Although the European Commission adopted an adequacy decision for the United Kingdom in June 2021 that allows for the continued flow of personal data from the EU to the United Kingdom, this decision may be revoked or modified and will need to be renewed after four years from the date of adoption.

In February 2022, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses, or the UK SCCs, to support personal data transfers out of the United Kingdom.

If approved by the United Kingdom’s Parliament, the UK SCCs will become effective in March 2022.

In February 2022, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses, or the UK SCCs, to support personal data transfers out of the United Kingdom, which went into effect in March 2022.

We may, in addition to other impacts, experience additional costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing personal data on our behalf or localize certain data.

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Vietnam’s cybersecurity law went into effect on January 1, 2019 and includes stringent requirements regarding data localization and data transfers.

A draft Decree on Personal Data Protection, with sub-legislation introduced December 27, 2019, elaborates requirements relating to data protection;

however, further notice and comment is anticipated before its requirements enter into effect.

As proposed, the draft decree would require us to further invest in potentially duplicative infrastructure and personnel in Vietnam, establish and maintain a local data protection program, incur other costs and expenses related to these new requirements.

On August 15, 2022, the Vietnamese government issued Decree 53, which elaborates on requirements relating to data protection and went into effect on October 1, 2022.

To comply with the decree, we may be required to further invest in potentially duplicative infrastructure and personnel in Vietnam, establish and maintain a local data protection program, and incur other costs and expenses related to these new requirements.

California also enacted legislation affording consumers expanded privacy protections, the CCPA, that went into effect as of January 1, 2020 and was subject to enforcement starting July 1, 2020.

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The CCPA also provides for civil penalties for violations (up to $7,500 per violation), as well as a private right of action for certain data breaches that may increase data breach litigation.

Additionally, a new privacy law, the CPRA, was approved by California voters in November 2020, which will go into effect January 1, 2023.

The CPRA creates obligations relating to consumer personal information collected as of January 1, 2022, with implementing regulations expected in the third or fourth quarter of 2022, and enforcement beginning July 1, 2023.

Additionally, a new privacy law, the CPRA, was approved by California voters in November 2020, which went into effect January 1,

The CPRA creates obligations relating to consumer personal information collected as of January 1, 2022, with implementing regulations expected in early 2023, and enforcement beginning July 1, 2023.

The CPRA significantly modifies the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in efforts to comply.

Other states have also enacted or proposed similar data privacy laws.

For example, in 2021, Virginia passed its Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which differ from the CPRA and become effective in 2023.

For example, in 2021 and 2022, Virginia passed its Consumer Data Protection Act, Colorado passed the Colorado Privacy Act, Utah passed the Utah Consumer Privacy Act, and Connecticut passed the Act Concerning Personal Data and Online Monitoring, all of which differ from the CPRA and have or will become effective in 2023.

This legislation and other proposed laws at the state and federal level in the United States, could create the potential for a patchwork of overlapping but different laws, result in further uncertainty, require us to incur additional costs and expenses in an effort to comply or require changes in business practices and policies.

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In a cloud-computing environment, we could be subject to outages, security breaches and cyberattacks affecting the third-party service provider.

In the COVID-19 pandemic, more of our and our service providers’ personnel are working remotely, which increases the risks of security breaches and cyberattacks.

If our data management systems do not effectively and securely collect, store, process and report relevant data and information for the operation of our business, whether due to equipment malfunction or constraints, software defects or deficiencies, bugs, vulnerabilities, computer viruses, malware, ransomware, phishing attacks, distributed denial-of-service attacks, security breaches, cyberattacks, catastrophic events or human error or malfeasance, our ability to effectively plan, forecast and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially.

Since the COVID-19 pandemic, more of our and our service providers’ personnel are working remotely, which increases the risks of security breaches and cyberattacks.

distributed denial-of-service attacks, security breaches, cyberattacks, catastrophic events or human error or malfeasance, our ability to effectively plan, forecast and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially.

Any such impairment could materially and adversely affect our financial condition, results of operations, cash flows and the timeliness with which we internally and externally report our results of operations.

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There can be no assurance that any efforts we make to prevent against such breaches will prevent breakdowns in our systems or security breaches that could adversely affect our business.

Third parties may also attempt to fraudulently induce employees or users into disclosing usernames, passwords or other sensitive information, which may in turn be used to access information technology systems used in our business.

Third parties may also attempt to fraudulently induce employees or users, using constantly evolving social engineering techniques, into disclosing usernames, passwords or other sensitive information, which may in turn be used to access information technology systems used in our business.

For example, our employees have received and likely will continue to receive “phishing” e-mails attempting to induce them to divulge sensitive information.

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We do not have measures to configure, update or secure our users’ desktop or mobile devices or any information stored in our users’ own systems or at their locations, which is the responsibility of our users.

While we have implemented security measures to protect our hardware and software products from unauthorized access and cyberattacks, these measures may not be effective in securing these products, particularly since techniques used to obtain unauthorized access or otherwise sabotage systems, change frequently and may not be recognized until launched against a target.

While we have implemented security measures designed to protect our hardware and software products from unauthorized access and cyberattacks, these measures may not be effective in securing these products, particularly since techniques used to obtain unauthorized access or otherwise sabotage systems, change frequently and may not be recognized until launched against a target.

A security breach, cyberattack 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.

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In addition to the EU and United Kingdom, other regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem.

For example, the CCPA grants California residents the right to opt-out of a company’s sharing of personal information for advertising purposes in exchange for money or other valuable consideration.

For example, on January 13, 2022, the Austrian data protection authority published a decision ruling that the collection of personal data and transfer to the U.S.

through Google Analytics and other analytics and tracking tools used by website operators violates the GDPR.

In 2022, the Danish, French and Italian data protection authorities adopted similar decisions.

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.

In addition, the CCPA grants California residents the right to opt-out of a company’s sharing of personal information for advertising purposes in exchange for money or other valuable consideration.

Additionally, some providers of consumer devices and web browsers have implemented means to make it easier for Internet users to block tracking technologies or to require new permissions from users for certain activities, which could, if widely adopted, significantly reduce the effectiveness of such practices and technologies.

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In addition, significant judgment is required in evaluating our tax positions and determining our provision for income taxes.

If U.S., Canadian, United Kingdom or other foreign tax laws further change, if our current or future structures and arrangements are challenged by a taxing authority, or if we are unable to appropriately adapt the manner in which we operate our business, we may have to undertake further costly modifications to our international structure and our tax liabilities and results of operations may be adversely affected.

In addition, increases in corporate tax rates, such as have been proposed by the current U.S.

administration, could increase our effective tax rate and have an adverse effect on our results of operations.

or foreign tax laws further change or the way in which such laws are implemented change, if our current or future structures and arrangements are challenged by a taxing authority, or if we are unable to appropriately adapt the manner in which we operate our business, we may have to undertake further costly modifications to our international structure and our tax liabilities and results of operations may be adversely affected.

In addition, increases in corporate tax rates could increase our effective tax rate and have an adverse effect on our results of operations.

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.

In addition, the Organization for Economic Co-Development has proposed a global minimum tax of 15%, which has been adopted by EU member countries effective as of January 1,2024.

We may face exposure to foreign currency exchange rate fluctuations.

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Effective protection of patents, trademarks and domain names is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights.

As we have grown, we have sought to obtain and protect our intellectual property rights in an increasing number of countries, a process that can be expensive and may not always be successful.

As we have grown, we have sought to obtain and protect our intellectual property rights in an increasing number of countries, a

process that can be expensive and may not always be successful.

For example, the U.S.

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Future transfers by the holders of Class B common stock will generally result in those shares automatically converting into shares of Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning or other transfers by Petrus.

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.

their permitted entities as of 11:59 p.m.

Eastern Time on the Effectiveness Date, which we refer to herein as the 50% Ownership Threshold, (ii) the first date after the Effectiveness Date when the outstanding shares of Class B common stock represent less than a majority of the total voting power of the then outstanding shares of our capital stock entitled to vote generally in the election of directors or (iii) the time following the Effectiveness Date specified by affirmative vote or written election of the holders of at least two-thirds of the outstanding shares of Class B common stock.

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• other events or factors, including those resulting from war, including the current conflict between Russia and Ukraine, 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;

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The amount of shares of our Class A common stock issued in connection with an investment or acquisition could constitute a material portion of then-outstanding shares of our common stock.

We do not currently intend to pay dividends for the foreseeable future.

In September 2020, we paid a cash dividend to Cricut Holdings, our sole stockholder at the time.

We currently do not intend to pay any cash dividends in the foreseeable future.

Additionally, our ability to pay dividends on our common stock is limited by the restrictions under the terms of our Credit Agreement.

We may not pay dividends in the future.

We recently declared a $0.35 per share special dividend payable February 15, 2023, for stockholders of record on February 1, 2023;

however, we may not pay any other dividends in the future.

Additionally, our ability to pay dividends on our capital stock is limited by the restrictions under the terms of our New Credit Agreement.

Generally, under our New Credit Agreement, we cannot pay dividends on our capital stock unless both (a) no default or event of default has occurred and is continuing and (b) our Leverage ratio (as defined therein) will not exceed 2.50 to 1.00, determined on a pro forma basis as of the most recently completed fiscal quarter for which we have delivered financial statements to the administrative agent and giving effect to any indebtedness incurred in connection therewith.

We anticipate that for the foreseeable future we will retain all of our future earnings for use in the development of our business and for general corporate purposes.

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General Risk Factors

The COVID-19 pandemic could adversely affect our business, results of operations and financial condition.

The COVID-19 pandemic has caused significant volatility in financial markets.

Public health problems resulting from the COVID-19 pandemic and precautionary measures instituted by governments and businesses to mitigate its spread, have contributed to, and could in the future contribute to, a general slowdown in the global economy, adversely impact our brick-and-mortar and online retail partners, potential customers, third-party suppliers, contract manufacturers, third-party logistics providers and other business partners, and disrupt our operations.

Changes in our operations in response to the COVID-19 pandemic have resulted, and could continue to result in, inefficiencies or delays, including in manufacturing, sales, delivery and product development efforts, and additional costs related to business continuity initiatives, that cannot be fully mitigated through succession and business continuity planning, employees working remotely or teleconferencing technologies.

During the COVID-19 pandemic we have experienced an increase in demand for our products and subscriptions.

For example, from 2018 to 2019 our revenue from connected machines grew 35%, our revenue from subscriptions grew 72% and our revenue from accessories and materials grew 45%.

In comparison, from 2019 to 2020 our revenue from connected machines grew 110%, our revenue from subscriptions grew 107% and our revenue from accessories and materials grew 84%.

From 2020 to 2021 our revenue from connected machines grew 32%, our revenue from subscriptions grew 85% and our revenue from accessories and materials grew 28%.

We believe that some portion of our 2020 and 2021 revenue growth was a result of the COVID-19 pandemic, but we are not able to quantify the proportion of the increase in demand that is attributable to the COVID-19 pandemic as opposed to other factors contributing to our growth in recent periods.

There is no guarantee that such trends will continue at all or at the same rate in the future, particularly once the rollout of COVID-19 vaccines reaches critical mass, restrictions on movement are lifted and full-time return to work trends normalize.

To the contrary, the COVID-19 pandemic has had and may lead to a negative impact on our business and results of operations due to the occurrence of some or all of the following events or circumstances, among others:

• our inability to manage our business effectively due to key employees becoming ill or infection clusters in worker populations, working from home inefficiently and being unable to travel to our facilities;

• our third-party suppliers’, contract manufacturers’, third-party logistics providers’ and other business partners’ inability to operate worksites, including manufacturing facilities, shipping and fulfillment centers and third-party logistics facilities;

for example, we have experienced longer lead times requirements with suppliers and slowdowns with our contract manufacturers during the COVID-19 pandemic;

• prolonged delivery timelines;

• increased return rates or decreased sales of our connected machines, subscriptions and accessories and materials, as applicable, due to a decrease in consumer discretionary spending;

• inventory shortages caused by a combination of increased demand for our products and longer lead-times in the manufacturing of our connected machines and certain other products, due to work restrictions related to the COVID-19 pandemic, import and export conditions, such as port congestion and local government orders;

• interruptions in manufacturing (including the sourcing and procurement of key components) and shipment of our products;

for example, in certain instances, our suppliers, manufacturers and third-party logistic partners have closed and may in the future temporarily close certain of their facilities for short periods of time;

• government mandated shutdowns or movement control orders in the countries in which our contract manufacturers and suppliers are located, specifically China and Malaysia, which may disrupt the operations of our contract manufacturers and third-party suppliers, which could impact our ability to purchase components at efficient prices and in sufficient amounts;

• incurrence of significant increases to employee health care and benefits costs.

Although recent vaccine rates have raised hopes of a turnaround in the COVID-19 pandemic at some point, renewed waves and new variants continue to pose concerns for the outlook.

Growth may be stymied if virus surges (including from new variants) prove difficult to contain, infections and deaths mount rapidly before vaccines are widely available, and social distancing or lockdowns are more stringent than anticipated.

Slower-than-anticipated progress on medical interventions could dampen hopes of an exit from the COVID-19 pandemic and weaken confidence.

Specifically, vaccine rollout could suffer delays or be uneven, widespread hesitancy could hamper vaccine take-up, vaccines could deliver shorter-lived immunity than anticipated and advances on therapies could be limited.

Intensifying social unrest, including due to higher inequality and unequal access to vaccines and therapies, could further complicate the recovery.

Moreover, if policy support is withdrawn before full economic recovery, bankruptcies of viable but illiquid companies could mount, leading to further employment and income losses.

The ensuing tighter financial conditions could increase rollover risks for vulnerable borrowers, add to the already large number of economies in debt distress, and increase insolvencies among corporations and households.

In the United States, given the widespread impact of the COVID-19 pandemic, substantial governmental support is still required and the American Rescue Plan or other relief may be insufficient for long-term economic sustainability should there be a protracted recovery.

Furthermore, investors fleeing the Dollar could elevate inflation expectations and interest rates.

Additionally, high unemployment could lead to mortgage and rental defaults adding losses to the commercial banking industry, resulting in higher loan-loss provision, tighter lending standards and lending curtailment.

If the impacts of the COVID-19 pandemic are materially prolonged, it could result in a cascade of additional corporate filings for bankruptcies, further eroding market confidence and increasing unemployment rates.

Together, these uncertainties and risks could have a material adverse impact not only on our financial condition, business and results of operations in the United States, but also on our consolidated financial conditions, business and results of operations.

There are no comparable recent events which may provide guidance as to the effect of the spread and the ultimate impact of the COVID-19 pandemic.

Consequently, the total magnitude of impact to our business and duration of impact is uncertain and difficult to reasonably estimate at this time.

The extent of the impact of the COVID-19 pandemic on our business and financial results will depend largely on future developments, including the duration of the spread of the pandemic, the impact on capital and financial markets and the related impact on the financial circumstances of our customers, all of which are highly uncertain and cannot be predicted.

This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

Our business is subject to a large number of U.S.

laws, many of which are evolving, including laws specific to e-commerce.

We are subject to a variety of laws and regulations in the United States and around the world, including those relating to traditional businesses, such as employment laws and taxation, as well as laws and regulations focused on e-commerce and online marketplaces, such as online payments, privacy, anti-spam, data security and protection, online platform liability, intellectual property and consumer protection, the ability to collect and/or share necessary information that allows us to conduct business on the Internet, marketing communications and advertising, content protection, electronic contracts or gift cards.

advertising, content protection, electronic contracts or gift cards.

In some cases, non-U.S.

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Our business is vulnerable to damage or interruption from earthquakes, fires, pandemics, floods, power losses, telecommunications failures, terrorist attacks, acts of war, including the current conflict between Russia and Ukraine, human errors, break-ins, public health crises, including the COVID-19 pandemic and similar events.

For example, our operations are subject to a range of external factors related to the COVID-19 pandemic that are not within our control.

A wide range of governmental restrictions have been imposed on our employees’, customers’ and suppliers’ physical movement to limit the spread of COVID-19.

There can be no assurance that precautionary measures, whether adopted by us or imposed by others, will be effective, and such measures could negatively affect our sales, marketing and Cricut Member Care efforts, delay and lengthen our sales cycles, decrease our employees’ or customers’ or partners’ productivity or create operational or other challenges, any of which could harm our business, results of operations and financial condition.

For example, our operations have been subject to a range of external factors related to the COVID-19 pandemic that are not within our control.

The third-party systems and operations and manufacturers we rely on are subject to similar risks.

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We rely on internal systems as well as those of third parties to process payment.

Acceptance and processing of these payment methods are subject to certain rules and regulations and require payment of interchange and other fees.

Acceptance and processing of these payment methods are subject to certain rules and regulations and

require payment of interchange and other fees.

To the extent there are disruptions in our payment processing systems, increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors or changes to rules or regulations concerning payment processing, our revenue, operating expenses and results of operation could be adversely impacted.

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Such restrictions or limitations on the availability of consumer credit could have an adverse impact on our business, results of operations and financial condition.

The estimates of market size included in this Annual Report on Form 10-K or that we have provided publicly may prove to be inaccurate, and even if the market in which we compete is of the size we estimate, we cannot assure you that our business will penetrate some or all of our SAM or TAM.

The estimates of market size included in our Annual Report on Form 10-K or that we have provided publicly may prove to be inaccurate, and even if the market in which we compete is of the size we estimate, we cannot assure you that our business will penetrate some or all of our SAM or TAM.

Market size estimates are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.

The estimates of market size in this Annual Report on Form 10-K or that we have provided publicly relating to our SAM and TAM, including estimates based on our commissioned surveys or our own internal survey data, may prove to be inaccurate.

The estimates of market size in our Annual Report on Form 10-K or that we have provided publicly relating to our SAM and TAM, including estimates based on our commissioned surveys or our own internal survey data, may prove to be inaccurate.

Even if the market is of the size we estimate, we may not further penetrate our SAM or TAM, or at all.

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Effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud.

In addition, we will be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act as early as in our annual report on Form 10-K for the year ended December 31, 2022.

We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

In addition, we are required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, for which we expect to incur significant expenses and devote substantial management effort toward ensuring compliance.

As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, results of operations and financial condition.

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that states could impose sales tax collection obligations on out-of-state sellers even if those sellers lack any physical presence within the states imposing the sales taxes.

Under Wayfair, a person requires only a “substantial nexus” with the taxing state before the state may subject the person to sales tax collection obligations therein.

An increasing number of states (both before and after the publication of Wayfair) have considered or adopted laws that attempt to impose sales tax collection obligations on out-of-state sellers.

An increasing number of states have considered or adopted laws that attempt to impose sales tax collection obligations on out-of-state sellers.

Supreme Court’s Wayfair decision has removed a significant impediment to the enactment and enforcement of these laws, and it is possible that states may seek to tax out-of-state sellers on sales that occurred in prior tax years, which could create additional administrative burdens for us, put us at a competitive disadvantage if such states do not impose similar obligations on our competitors and decrease our future sales, which could adversely impact our business and results of operations.

Although we believe that we currently collect and remit sales taxes in all states that have adopted laws imposing sales tax collection obligations on out-of-state sellers since Wayfair was decided, a successful assertion by one or more states requiring us to collect sales taxes where we presently do not do so, or to collect more taxes in a jurisdiction where we currently do collect some sales taxes, could result in substantial tax liabilities, including taxes on past sales, as well as interest and penalties.

Although we believe that we currently collect and remit sales taxes in all states in which we are required to do so, a successful assertion by one or more states requiring us to collect sales taxes where we presently do not do so, or to collect more taxes in a jurisdiction where we currently do collect some sales taxes, could result in substantial tax liabilities, including taxes on past sales, as well as interest and penalties.

The adoption of new laws by, or a successful assertion by taxing authorities of such laws, could also require us to incur substantial costs to capture data and collect and remit taxes.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors