What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-13 compared with 2022-03-09 · 282 added, 281 removed, 864 unchanged (39% of the section changed)

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Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Ca sh Flows

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2021 due to the adoption of Accounting Standards Codification (“ASC”) Topic 842, Leases .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 13, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Variable Consideration Related to Customer Rebates

As described in Note 2 to the consolidated financial statements, the Company recognizes revenue at the net sales price, which includes certain estimates for variable consideration related to customer rebates.

Variable Consideration Related to Customer Rebate Liabilities

As described in Note 2 to the consolidated financial statements, the Company recognizes revenue for physical goods at the net sales price, which includes certain estimates for variable consideration related to customer rebates.

The reserves for variable consideration related to customer rebates are recorded as a liability in the consolidated balance sheets and totaled $36 million as of December 31, 2022.

While a portion of this liability is based on contractual amounts and does

not require estimation, certain customer rebate programs are estimates at period end due to the nature of the incentives or expected and yet-to-be announced incentive programs that apply to current period revenue transactions.

We identified the auditing of certain estimated variable consideration related to customer rebate amounts as a critical audit matter.

Specifically, estimated variable consideration for certain customer rebates reflects management's evaluation of contractual terms, historical experience and assumptions over projected sales data and additional incentives expected to be granted.

Auditing these estimates involved especially challenging and complex auditor judgment due to the level of uncertainty involved in management’s subjective assumptions regarding the expected realization of these various programs.

While a portion of this liability is based on contractual terms and does not require estimation, certain customer rebates are estimates at period end due to the nature of the rebates.

We identified the auditing of certain inputs in estimating variable consideration related to the customer rebate liabilities as a critical audit matter.

Estimating variable consideration for specific customer rebates reflects certain management inputs including sell through data.

Auditing the sell through data involved especially challenging and complex auditor judgment due to the nature and extent of audit effort required.

The primary procedures we performed to address this critical audit matter included:

• Assessing the completeness of estimated customer rebate listings with the Company’s internal sales personnel.

• Developing an expectation for estimated variable consideration and liabilities related to customer rebates using sales data, rebate percentages per contractual agreements and historical claims data and comparing to actual results.

• Assessing the current and historical accuracy of management’s estimates by comparing customer rebate liabilities to actual settlements made in subsequent periods and for a selection of liabilities, evaluating whether the Company considered relevant information, including agreements with customers, historical data, and economic conditions.

• Performing a search for unrecorded customer rebate liabilities at period end by inspecting significant subsequent claims activity.

• Evaluating whether customer related information, including sell through data used in estimating rebates, was reasonable by selecting a sample of period end liabilities.

• Assessing management’s ability to accurately determine certain inputs, including sell through data, used in calculating customer rebates by performing a retrospective review for a sample of customer rebates.

/s/ BDO USA, LLP

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March 13, 2023

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

South Jordan, Utah

Opinion on Internal Control over Financial Reporting

We have audited Cricut, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 13, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Salt Lake City, Utah

March 13, 2023

Consolidated Balance Sheets

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Cash and cash equivalents $ 224,943 $ 241,597

Marketable securities 74,256 —

Accounts receivable, net 136,539 199,508

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Operating lease liabilities, current portion 5,436 3,755

Dividends payable, current portion 80,781 —

Total current liabilities 254,056 308,367

Operating lease liabilities, net of current portion

13,935 15,780

Deferred revenue, net of current portion 3,789 4,858

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Stockholders’ equity:

Preferred stock, par value $ 0.001 per share, 100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021.

No shares issued, authorized or outstanding as of December 31, 2020.

Common stock, par value $ 0.001 per share, 1,250,000,000 shares authorized as of December 31, 2021, 221,913,559 shares issued and outstanding as of December 31, 2021;

257,058,262 shares authorized as of December 31, 2020, 208,116,104 shares issued and outstanding as of December 31, 2020.

Preferred stock, par value $ 0.001 per share, 100,000,000 shares authorized, and no shares issued and outstanding as of December 31, 2022 and December 31, 2021.

Common stock, par value $ 0.001 per share, 1,250,000,000 shares authorized as of December 31, 2022, 219,656,587 and 221,913,559 shares issued and outstanding as of December 31, 2022 and 2021, respectively.

Additional paid-in capital 672,990 717,369

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Income from operations 79,953 192,405 200,513

Total other expense, net ( 32 ) ( 1,320 ) ( 3,293 )

Total other income (expense), net 2,028 ( 32 ) ( 1,320 )

Income before provision for income taxes 81,981 192,373 199,193

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Other comprehensive income (loss):

Change in foreign currency translation adjustment, net of tax ( 64 ) 37 ( 28 )

Change in net unrealized gains (losses) on marketable securities, net of tax ( 300 ) — —

Change in foreign currency translation adjustment ( 120 ) ( 64 ) 37

Comprehensive income 60,246 140,409 154,615

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Common Stock Additional

Capital Accumulated

Capital Retained Earnings (Accumulated

Deficit) Accumulated Other

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Compensatory units repurchased — — ( 3,038 ) — — ( 3,038 )

Other comprehensive loss — — — — ( 28 ) ( 28 )

Balance as of December 31, 2019 208,116,104 $ 208 $ 459,573 $ ( 338,611 ) $ ( 28 ) $ 121,142

Net income — — — 154,578 — 154,578

Capital contributions — — 2,452 — — 2,452

Stock-based compensation — — 4,956 — — 4,956

Compensatory units repurchased — — ( 3,038 ) — — ( 3,038 )

Cash dividend — — ( 51,202 ) — — ( 51,202 )

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Balance as of December 31, 2021 221,913,559 $ 222 $ 717,369 $ ( 43,560 ) $ ( 55 ) $ 673,976

Net income — $ — $ — $ 60,666 $ — $ 60,666

Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax 620,611 $ — $ ( 6,815 ) $ — $ — $ ( 6,815 )

Forfeiture of unvested common stock ( 528,002 ) $ — $ — $ — $ — $ —

Repurchases of common stock ( 2,349,581 ) $ ( 2 ) $ ( 18,578 ) $ — $ — $ ( 18,580 )

Dividends declared — $ — $ ( 64,314 ) $ ( 17,106 ) $ — $ ( 81,420 )

Stock-based compensation — $ — $ 45,342 $ — $ — $ 45,342

Compensatory units repurchased — $ — $ ( 14 ) $ — $ — $ ( 14 )

Other comprehensive loss — $ — $ — $ — $ ( 420 ) $ ( 420 )

Balance as of December 31, 2022 219,656,587 $ 220 $ 672,990 $ — $ ( 475 ) $ 672,735

See accompanying notes to these consolidated financial statements.

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Net income $ 60,666 $ 140,473 $ 154,578

Adjustments to reconcile net income to net cash and cash equivalents (used in) provided by operating activities:

Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:

Depreciation and amortization (including amortization of debt issuance costs)

26,957 19,388 14,116

Impairment of trade name — — 747

Impairments 2,922 — —

Stock-based compensation 41,121 38,074 9,484

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Non-cash lease expense 4,845 4,186 —

(Gain) loss on disposal of property and equipment ( 2 ) — 16

Provision for inventory obsolescence 11,466 5,070 2,802

Provision for doubtful accounts 1,096 128 699

Loss on extinguishment of debt — — 162

Unrealized foreign currency (gain) loss ( 1,040 ) — —

Other ( 504 ) 1,094 128

Changes in operating assets and liabilities:

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Deferred revenue 3,252 9,128 11,710

Net cash and cash equivalents (used in) provided by operating activities

Net cash and cash equivalents provided by (used in) operating activities

117,683 ( 104,949 ) 248,227

Cash flows from investing activities:

Acquisitions of property and equipment, including capitalized software development costs

Purchase of marketable securities ( 180,112 ) — —

Proceeds from maturities of marketable securities 21,393 — —

Proceeds from sales of marketable securities 84,621 — —

Purchases of property and equipment, including capitalized software development costs

( 33,771 ) ( 35,786 ) ( 21,842 )

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Proceeds from issuance of common stock upon initial public offering, net of offering costs — 262,007 —

Repurchases of common stock ( 18,580 ) — —

Repurchase of compensatory units ( 14 ) ( 170 ) ( 3,038 )

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Other financing activities, net — ( 48 ) ( 1,318 )

Net cash and cash equivalents (used in) provided by financing activities 260,244 ( 110,915 ) 10,896

Net cash and cash equivalents provided by (used in) financing activities ( 26,247 ) 260,244 ( 110,915 )

Effect of exchange rate on changes on cash and cash equivalents ( 221 ) ( 127 ) 92

Net increase in cash and cash equivalents 119,382 115,562 637

Net (decrease) increase in cash and cash equivalents ( 16,654 ) 119,382 115,562

Cash and cash equivalents at beginning of period 241,597 122,215 6,653

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 4,285 $ 6,805 $ —

Refinance of credit facility $ — $ — $ 11,667

Property and equipment included in accounts payable and accrued expenses and other current liabilities

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Purchased unit equivalents issued in settlement of bonus $ — $ — $ 1,364

Dividends declared but unpaid $ 81,420 $ — $ —

See accompanying notes to these consolidated financial statements.

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Initial Public Offering and Corporate Reorganization

The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on March 24, 2021 by the Securities and Exchange Commission (“SEC”), and the Company’s Class A common stock began trading on the Nasdaq Global Select Market on March 25, 202 1.

The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on March 24, 2021 by the SEC, and the Company’s Class A common stock began trading on the Nasdaq Global Select Market on March 25, 202 1.

On March 29, 2021, the Company closed its IPO, in which the Company sold 13,250,000 shares of Class A common stock and the selling stockholders sold an additional 2,064,903 shares of Class A common stock at a price to the public of $ 20.00 per share.

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Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).

Certain prior year reported amounts have been reclassified to conform with the current period presentation.

These reclassifications did not have a material impact on the Company's consolidated financial statements or related footnotes.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

The consolidated financial statements include the accounts of Cricut, Inc.

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determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price (“SSP”) of performance obligations, estimating variable consideration such as sales incentives and product returns.

Other estimates include the warranty reserve, allowance for doubtful accounts, inventory reserve, intangible assets and other long-lived assets valuation, legal contingencies, stock-based compensation, income taxes, deferred tax assets valuation and developed software, among others.

Other estimates include the warranty reserve, allowance for credit losses, inventory reserve, intangible assets and other long-lived assets valuation, legal contingencies, stock-based compensation, income taxes, deferred tax assets valuation and developed software, among others.

These estimates and assumptions are based on the Company’s best estimates and judgment.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including any effects of the ongoing pandemic and the economic environment, which management believes to be reasonable under the circumstances.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including any effects of the pandemic and the economic environment, which management believes to be reasonable under the circumstances.

Management adjusts such estimates and assumptions when facts and circumstances dictate.

Actual results could differ from these estimates.

Foreign Currency Transactions

The Company translates assets and liabilities of foreign subsidiaries from functional currencies into United States dollars (“USD”) at exchange rates in effect at the balance sheet dates, and related revenues and expenses are translated into USD at average exchange rates in effect during each period.

Net foreign currency gains and losses resulting from the translation of assets and liabilities of foreign operations into USD are reported as a separate component of other comprehensive income in the consolidated statements of comprehensive income.

Realized and unrealized foreign currency transaction gains and losses included in net income are recorded within operating expenses.

Foreign currency transaction gains (losses) totaled $( 1.0 ) million, $( 0.9 ) million, and $( 0.3 ) million for the years ended December 31, 2022, 2021, and 2020, respectively.

Comprehensive Income

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Other comprehensive income (loss) refers to net gains and losses that are recorded as an element of stockholders’ equity but are excluded from net income.

The Company’s other comprehensive income (loss) consists of foreign currency translation adjustments from those subsidiaries not using the U.S.

The Company’s other comprehensive income (loss) consists of unrealized gains and losses on marketable securities as well as foreign currency translation adjustments from those subsidiaries not using the U.S.

dollar as their functional currency.

Realized and unrealized foreign currency transaction gains and losses included in net income are recorded within operating expenses.

Foreign currency transaction gains (losses) totaled $( 0.9 ) million, $( 0.3 ) million, and $ 0.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Cash and Cash Equivalents

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The Company also classifies amounts in transit from payment processors for credit card and debit card transactions as cash equivalents.

Marketable Securities

The Company designates investments in debt securities as available-for-sale.

Available-for-sale debt securities with original maturities of three months or less from the date of purchase are classified within cash and cash equivalents.

Available-for-sale debt securities with original maturities longer than three months are available to fund current operations and are classified as marketable securities, within current assets on the consolidated balance sheets.

Available-for-sale debt securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax.

Realized gains and losses on the sale of marketable securities are determined using the average cost method on a first-in, first-out basis and recorded in total other income (expense), net in the consolidated statements of operations and comprehensive income.

The available-for-sale debt securities are subject to a periodic impairment review.

For investments in an unrealized loss position, the Company writes down the amortized cost basis of the investment if it is more likely than not that the Company will be required or will intend to sell the investment before recovery of its amortized cost basis.

For investments not likely to be sold before recovery of the amortized cost basis, the Company determines whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, and reasonable and supportable forecasts of economic conditions.

The Company recognizes an allowance for credit losses up to the amount of the unrealized loss when appropriate.

Allowances for credit losses and write-downs are recognized in total other income (expense), net, and unrealized losses not related to credit losses are recognized in accumulated other comprehensive income (loss).

There are no allowances for credit losses recorded for the periods presented.

As of December 31, 2022, the gross unrealized losses on available-for-sale debt securities are related to market interest rate changes and not attributable to credit.

Accounts Receivable

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Other receivables 8,550 6,205

Allowance for doubtful accounts ( 1,454 ) ( 357 )

Allowance for credit losses ( 448 ) ( 1,454 )

Total accounts receivable, net $ 136,539 $ 199,508

The movements in the allowance for credit losses were not material for any of the periods presented.

During the year ended December 31, 2021, the Company recorded a provision for credit losses of $ 1.1 million related to a single customer.

The full amount of $ 0.9 million was written off during the year ended December 31, 2022, net of $ 0.2 million in unrealized foreign currency losses.

Other activity related to the allowance for credit losses was not significant for any of the periods presented.

Concentration of Credit Risk

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Historically, the Company has not experienced any losses related to such accounts.

The Company’s non-interest bearing cash balances at December 31, 2021 and 2020 were fully insured up to $250,000 per depositor at each financial institution, and the Company’s non-interest bearing cash balances may significantly exceed federally insured limits.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of trade receivables.

The Company’s non-interest bearing cash balances at December 31, 2022 and 2021 were fully insured up to $250,000 per depositor at each financial institution.

Balances held at the institutions may significantly exceed federally insured limits.

Financial instruments, which potentially subject the Company to concentrations of credit risk, include trade receivables.

In the normal course of business, the Company provides credit terms to its customers.

Accordingly, the Company performs ongoing credit evaluations of its customers, generally does not require collateral and considers the credit risk profile of the customer from which the receivable is due in further evaluating collection risk.

The Company maintains allowances for possible losses which, when realized, have been within the range of management’s expectations.

The Company maintains allowances for possible losses which, when realized, have been within the range of

management’s expectations.

If one or more of the Company’s significant customers were to become insolvent or were otherwise unable to pay for product purchased, it would have a material adverse effect on the Company’s financial condition and results of consolidated operations.

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Customer B 12 % 12 %

Customer C 12 % 22 %

Customer D * 10 %

* Accounts receivable was less than 10%.

Customers with revenue equal to or greater than 10% of total revenue for the periods indicated were as follows:

Year Ended December 31,

2021 2020 2019

Customer A 11 % *

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The revenue from these customers is associated with the Connected Machines and Accessories and Materials segments.

As of December 31, 2022, no customers accounted for more than 10% of revenue.

Supplier Concentration

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We rely on single source, or a small number of suppliers.

For the year ended December 31, 2021, the Company’s top two vendors accounted for approximately 76 % of total finished goods purchases.

For the year ended December 31, 2020, the Company’s top two vendors accounted for approximately 73 % of total finished goods purchases.

For the year ended December 31, 2019, the Company’s top three vendors accounted for approximately 84 % of total finished goods purchases.

Inventories, which primarily consist of finished goods, are valued at the lower of average cost or net realizable value.

For the years ended December 31, 2022, 2021, and 2020, the Company’s top two vendors accounted for approximately 61 %, 76 %, and 73 % of total finished goods purchases, respectively.

Inventories (current and non-current), which consist of finished goods and raw materials, are valued at the lower of average cost or net realizable value.

Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

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Once established, the original cost of the inventory less the related inventory reserve represents the new cost basis of such products.

As needed, we complete strategic and market beneficial purchases of critical raw materials that are used in our core production process (such as microchips) in quantities that exceed anticipated consumption within our normal operating cycle, which is 12 months.

We classify such raw materials that we do not expect to consume within our normal operating cycle as non-current within Other assets.

Property and Equipment

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Expenditures for tools and molds are capitalized and depreciated over the estimated useful lives of the assets.

We capitalize certain software development costs in the application development stage in accordance with ASC 350-40, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use” and upon the establishment of technological feasibility for a product in accordance with ASC 985-20, “Software to Be Sold, Leased or Otherwise Marketed.

We capitalize certain software development costs in the application development stage in accordance with Accounting Standards Codification (“ASC”) 350-40, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use” and upon the establishment of technological feasibility for a product in accordance with ASC 985-20, “Software to Be Sold, Leased or Otherwise Marketed”.

When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the consolidated statements of operations.

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Manufacturing tools and equipment 3 - 5 years

Vehicles 5 years

Leasehold improvements Shorter of lease term or remaining life of the asset

As described in “ Recently adopted accounting standards” below, the Company adopted ASC 842, Leases (“ASC 842”) effective January 1, 2021.

Under ASC 842, the Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset.

Cloud Computing Arrangement Implementation Costs

The Company incurs costs to implement cloud computing arrangements that are hosted by third-party vendors.

Implementation costs incurred during the application development stage are capitalized until the software is ready for its intended use.

The costs are then amortized on a straight-line basis over the term of the associated hosting arrangement and are recognized as an operating expense within the consolidated statements of operations.

To date, these costs primarily relate to new website hosting services.

During the years ended December 31, 2022, and 2021, the Company recorded amortization expense of $ 0.7 million and $ 0.1 million, respectively, for these implementation costs.

Gross capitalized costs were $ 2.2 million and $ 1.4 million as of December 31, 2022 and 2021, respectively, with accumulated amortization of $ 0.8 million and $ 0.1 million, respectively.

Capitalized costs are reported as a component of other assets on the Company's consolidated balance sheets.

The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset.

Right-of-use (ROU) assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

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Debt Issuance Costs

Third-party costs incurred to obtain debt financing are capitalized and amortized using the effective interest method over the life of the debt instruments.

Costs incurred by the lender and paid by the Company for term debt are recorded as a reduction of the debt proceeds (debt discount) and are amortized to interest expense (see Note 8).

Costs incurred by the lender and paid by the Company for the revolver debt are recorded as other assets and amortized over the term of the revolver using the straight-line method.

Deferred Offering Costs

The Company recorded deferred offering costs of $ 1.9 million as other assets on the consolidated balance sheet as of December 31, 2020 and consist of costs incurred in connection with the Company’s IPO, including legal, accounting, printing and other IPO-related costs.

Upon completion of the IPO, these deferred offering costs were reclassified to stockholders’ equity and recorded against the proceeds from the offering.

Costs incurred and paid to the lender or third parties for the revolver credit facility are recorded as other assets and amortized over the term of the revolver using the straight-line method.

Impairment of Long-lived Assets

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Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to the consolidated statement of operations.

During the years ended December 31, 2021, 2020, the Company recorded no impairments relating to amortized intangible assets.

During the year ended December 31, 2019, the Company recorded $ 0.7 million in impairment within sales and marketing expense on the Company’s consolidated statements of operations relating to its amortized intangible assets (see Note 6).

During the years ended December 31, 2021, 2020 and 2019, the Company recorded no impairments for certain property and equipment (see Note 5).

During the years ended December 31, 2022, 2021, and 2020, the Company recorded no impairments relating to amortized intangible assets.

During the year ended December 31, 2022, the Company recorded impairments of $ 2.9 million for equipment purchased to manufacture products the Company no longer plans to commercialize.

These impairment charges were recorded primarily within general and administrative expense in the consolidated statements of operations.

During the years ended December 31, 2021 and 2020, the Company recorded no impairments of property and equipment (see Note 6).

Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, and accounts payable.

The Company’s financial instruments include cash and cash equivalents, marketable securities, accounts receivable, and accounts payable.

At December 31, 2022, and 2021, the carrying amounts of cash, accounts receivable, and accounts payable approximate fair values because of the short-term nature of these instruments.

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The key variables that drive the discounted cash flow analysis are estimated revenue growth rates, levels of profitability, the terminal value growth rate assumptions and the weighted average cost of capital rate applied, among others.

No long-lived assets were measured at fair value on a recurring basis, and financial instruments measured at fair value on a recurring basis were not material at each of December 31, 2021 and 2020.

No long-lived assets were measured at fair value on a recurring basis as of December 31, 2022 and 2021.

Money market funds are highly liquid investments and are actively traded.

The pricing information for the Company’s money market funds are readily available and can be independently validated as of the measurement date.

The pricing information for these assets is readily available and can be independently validated as of the measurement date.

This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

Marketable securities such as U.S.

Treasury securities are valued using observable inputs from similar assets, or from observable data in markets that are not active;

these assets are classified as Level 2 of the fair value hierarchy.

There were no transfers between Levels 1, 2 or 3 for any of the periods presented.

As of December 31, 2021 and December 31, 2020, the Company held $ 197.8 million and $ 106.0 million in money market funds, respectively, with no unrealized gains or losses.

There were no liabilities measured at fair value on a recurring basis as of December 31, 2022 and December 31, 2021 other than stock-based awards discussed in Note 12 below.

Earnings Per Share

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Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenue.

The Company accounts for shipping and handling activities performed after a customer obtains control

of the goods as activities to fulfill the promise to transfer the good.

The Company does not incur significant costs to obtain contracts with customers.

The Company accounts for shipping and handling activities performed after a customer obtains control of the goods as activities to fulfill the promise to transfer the good.

All incremental costs of obtaining a contract with a customer are expensed as incurred if the expected amortization period of the asset that would have been recognized is one year or less.

The Company does not have any material contract cost assets.

The following describes the nature of the Company’s primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the types of transactions with its customers.

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Connected machines include the Cricut Joy, Cricut Explore and Cricut Maker machine architectures.

Payment for sale of products online through the online channel at cricut.com is collected at point of sale in advance of shipping the products.

Payment by traditional brick-and-mortar retail partners, including their online channels, is due under customary fixed payment terms.

Payment for sale of products online through the online channel at cricut.com is collected at point of sale in advance of shipping the products.

The Company’s contracts with customers for a connected machine contain multiple promises that include hardware, software, unspecified future upgrades and enhancements related to the software and access to the Company’s cloud-based services.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment.

Determining whether the hardware, software, unspecified future upgrades, enhancements and cloud-based services are considered distinct performance obligations requires significant judgment.

The Company’s software used to design, cut and complete projects can be accessed offline or with the cloud-based services at no charge.

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The estimated service period may change in the future in response to competition, technology developments and the Company’s business strategy.

Judgment is required to determine the SSP for each distinct performance obligation.

The Company allocates revenue to each performance obligation based on their relative SSP.

The Company estimates SSP for items that are not sold separately, which include the connected machines and related software, unspecified software upgrades and cloud-based services using information that may include the range of prices for the bundle of products and services and the cost of providing the products or services plus a reasonable margin.

Judgment is required to determine the SSP for each distinct performance obligation related to sales of connected machines and the allocation of the transaction price to each of those performance obligations.

The Company estimates SSP for performance obligations that are not sold separately, which include the connected machines and related software, unspecified future upgrades and enhancements and cloud-based services using information that may include the range of prices for the bundle of products and services and the cost of providing the products or services plus a reasonable margin.

In developing SSP estimates, the Company also considers the nature of the products and services and the expected level of future services.

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Subscriptions

The Company’s paid subscription services relate to Cricut Access and Cricut Access Premium which provide users access to images, fonts and projects, which is in addition to the free service of unspecified future upgrades and enhancements related to the essential software and access to the Company’s cloud-based services noted above.

The Company’s paid subscription services relate to Cricut Access and Cricut Access Premium which provide users access to images, fonts and projects.

The paid subscription is separate from our free of charge service to provide unspecified future upgrades and enhancements related to the essential software and access to the Company’s cloud-based services as described above.

The paid subscription services are offered on a month-to-month or annual basis.

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Cricut Access and Cricut Access Premium are generally sold in standalone contracts and reallocations are not required

other than allocations to customer options that were determined to be material rights related to incremental discounts on purchases of physical products that paid subscribers receive.

The transaction price is allocated between the subscription and material right based on the relative standalone selling prices of the subscription and material right.

Revenue related to the material right is recognized as accessories and materials revenue upon redemption or expiration of the material right.

Revenue related to subscriptions is recognized ratably over the length of the subscription using a time-based output measure as the customer consumes the benefit of the service each day.

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Revenue from accessories and materials is recognized at a point-in-time when control is transferred, either upon shipment or delivery of goods, in accordance with the terms of each contract with the customer, or in the case of digital goods, at a point-in-time when the goods are made available to the customer.

Payment for sale of accessories and materials through the online channel at

cricut.com is collected at point of sale in advance of shipping the products.

Payment by traditional brick-and-mortar retail partners, including their online channels, is due under customary fixed payment terms.

Payment for sale of accessories and materials through the online channel at cricut.com is collected at point of sale in advance of shipping the products.

Cost of Revenue

Connected Machines

Cost of revenue related to Connected Machines consists of product costs, including costs of contract manufacturers for production, inspecting and packaging, shipping, receiving, handling, warehousing and fulfillment, duties and other applicable importing costs, warranty replacement, excess and obsolete inventory write-downs, tooling and equipment depreciation and royalties.

Cost of revenue related to Connected Machines consists of product costs, including costs of components, costs of contract manufacturers for production, inspecting and packaging, shipping, receiving, handling, warehousing and fulfillment, duties and other applicable importing costs, warranty replacement, excess and obsolete inventory write-downs, tooling and equipment depreciation and royalties.

Subscriptions

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Customer Rebates

The Company recognizes revenue at the net sales price, which includes certain estimates for variable consideration related to customer rebates with our key brick-and-mortar and online retail partners.

The Company recognizes revenue at the net sales price, which at times includes certain contractual discounts or estimates for variable consideration related to customer rebates with our key brick-and-mortar and online retail partners.

These promotional programs are designed to enhance the sale of the Company’s products and consist of incentives to the Company’s customers.

The promotional programs include advertising and product damage allowances, volume/growth and business development incentives and point-of-sale support.

Sales incentives are considered to be variable consideration, which the Company estimates using the expected value method or most likely amount, based upon the nature of the incentive.

The Company estimates certain consumer rebates or sales incentives using either the expected value method or most likely amount, based upon the nature of the incentive.

Sales are reduced by the cost of these promotional and rebate programs and the Company records a related customer rebate liability in its consolidated balance sheets at the date of the transaction.

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(in thousands)

Warranty reserve, beginning of period $ 1,284 $ 633

Balance at beginning of period $ 2,398 $ 1,284

Additions charged to cost of revenue 8,146 7,261

Repairs and replacements ( 6,147 ) ( 2,032 )

Warranty reserve, end of period $ 2,398 $ 1,284

Repairs and replacement costs incurred ( 8,060 ) ( 6,147 )

Balance at end of period $ 2,484 $ 2,398

The Company uses the asset and liability method of accounting for income taxes.

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For the years ended December 31, 2022, 2021 and 2020, interest or penalties related to income tax matters included in the provision for income taxes have not been material.

South Dakota v.

Wayfair is a U.S.

Supreme Court case that was decided on June 21, 2018 that nullified the physical presence precedent established by Quill Corp.

v North Dakota in 1992.

The overarching effect of the Wayfair case was that state governments were given the power to impose sales tax on the shipment of goods to customers located within their state boundary even if the seller did not have a physical presence within the state.

As such, the Company is required by certain governmental authorities to collect sales taxes on certain transactions.

The Company is required by certain governmental authorities to collect sales taxes on certain transactions.

The Company currently collects and reports on sales tax in all states in which it does business.

However, the application of existing,

new or revised taxes on our business, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of selling products over the Internet.

However, the application of existing, new or revised taxes on our business, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of selling products over the Internet.

The application of these taxes on our business could also create significant increases in internal costs necessary to capture data and collect and remit taxes.

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The determination of the grant date fair value of the awards issued is affected by a number of variables, including the fair value of the underlying shares or units, the expected price volatility over the expected life of the awards, the expected term of the award, risk-free interest rates, the expected dividend yield of the underlying shares or units and the likelihood of termination.

The Company has limited publicly available stock information and therefore, used the historical volatility of the stock price of similar publicly traded peer companies prior to its IPO in March 2021, and a blended average of average historical stock volatilities of peer companies and historical volatility of the Company's stock price for valuations subsequent to the IPO.

The Company has limited publicly available stock information and therefore, used the historical volatility of the stock price of similar publicly traded peer companies prior to its IPO in March 2021, and the historical volatility of the Company's stock price or a blended average of average historical stock volatilities of peer companies and historical volatility of the Company's stock price for valuations subsequent to the IPO.

The Company estimates the expected term using the simplified method for “plain vanilla” stock option awards or based on the expected time to a liquidation event or other transaction that would result in settlement of other awards.

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Treasury yield curve in effect at the time of grant.

Expected dividend yield is 0.0 % as the Company does not anticipate paying dividends, and the Company and its former parent, Cricut Holdings, have not paid dividends other than a one-time dividend paid in 2020.

Likelihood of termination for the Monte Carlo Simulation is estimated based upon both historical turnover and anticipated turnover based upon Company or market pressures.

Expected dividend yield is 0.0 % as the Company does not anticipate paying dividends, and the Company and its former parent, Cricut Holdings, have not paid dividends other than special dividends declared in 2020 and 2022, and the Company does not expect to pay regular dividends in the future.

See Note 11 for further discussion of the Company’s dividends.

Likelihood of termination for the Monte Carlo Simulation was estimated based upon both historical turnover and anticipated turnover based upon Company or market pressures.

Prior to the Corporate Reorganization, the Company’s former parent Cricut Holdings issued stock-based awards to employees of the Company.

As the awards were issued by Cricut Holdings, the Company recorded a capital contribution from Cricut Holdings commensurate with the amount of compensation expense recognized in relation to the awards.

Incentive unit equivalents (phantom units) granted by Cricut Holdings to the Company’s employees entitled the recipient to future compensation based upon satisfaction of service conditions and were liability classified.

Incentive unit equivalents (phantom units) granted by Cricut Holdings prior to the Corporate Reorganization to the Company’s employees entitled the recipient to future compensation based upon satisfaction of service conditions and were liability classified.

The amount of compensation was determined by the change in the underlying value of Cricut Holdings common units.

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The impact of fair value re-measurement was recognized as compensation cost over the requisite service period.

Common Unit Valuations

Fair value of the underlying common units of Cricut Holdings was historically determined by Cricut Holdings’ Board of Managers (“Board of Managers”) on the date of grant for all awards granted.

In the absence of a public trading market, the Board of Managers, with input from management, exercised significant judgment and consider numerous objective and subjective factors to determine the fair value of Cricut Holdings’ common units as of the date of each award grant, including:

• relevant precedent transactions involving Cricut Holdings’ capital units;

• Cricut Holdings’ actual consolidated operating and financial performance;

• current business conditions and projections;

• Cricut Holdings’ stage of development;

• the likelihood and timing of achieving a liquidity event, such as an initial public offering, given prevailing market conditions;

• any adjustment necessary to recognize a lack of marketability of the common units;

• the market performance of comparable publicly traded companies;

and global capital market conditions.

In addition, Cricut Holdings’ Board of Managers considered the independent valuations completed by a third-party valuation consultant.

The valuations of Cricut Holdings’ common units were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

Shipping and Handling Revenue and Expenses

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R&D costs are expensed as incurred.

Recently Issued Accounting Standards

Recently adopted accounting standards

In February 2016 the FASB issued ASU 2016-02, Leases (“ASU 2016-02” or “Topic 842”).

ASU 2016-02 amends a number of aspects of lease accounting, including requiring lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments.

On January 1, 2021, the Company adopted Topic 842 using the modified retrospective approach.

Results for the twelve months ended December 31, 2021 are presented under Topic 842.

No prior period amounts were adjusted and continue to be reported in accordance with previous lease guidance, ASC Topic 840, Leases.

The new standard provides a number of optional practical expedients in transition.

The Company elected the practical expedients to not reassess its prior conclusions about lease identification under the new standard, to not reassess lease classification, to not reassess initial direct costs, and to use hindsight in determining the lease term and in assessing impairment of the Company's right-of-use assets.

The impact of the adoption of Topic 842 on the accompanying consolidated balance sheet as of January 1, 2021 was as follows:

As reported December 31, 2020 Adjustments due to the adoption of Topic 842 As adjusted January 1, 2021

(in thousands)

Operating lease right-of-use assets $ — $ 15,036 $ 15,036

Prepaid expenses and other current assets:

Prepaid rent 9 ( 9 ) —

Accounts payable and accrued liabilities

Operating lease liabilities - current — 3,918 3,918

Deferred rent 2,376 ( 2,376 ) —

Operating lease liabilities - non-current $ — $ 13,485 $ 13,485

The adjustments due to the adoption of Topic 842 related to the recognition of operating lease right-of-use assets and operating lease liabilities for the existing operating leases.

The adoption of the new standard did not have an impact on the Company's beginning equity, statement of operations or cash flows.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments – Credit Losses” (Topic 326).

ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to estimate an expected lifetime credit loss on financial assets.

For available-for-sale debt securities in unrealized loss positions, ASU 2016-13 requires allowances to be recorded instead of reducing the amortized cost of the investment.

ASU 2016-13 became effective on January 1, 2021.

The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes” (Topic 740).

ASU 2019-12 removes certain exceptions for investments, intraperiod allocations and interim calculations and adds guidance to reduce complexity in accounting for income taxes.

The Company adopted this standard effective January 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40) – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense.

The Company adopted this standard on a prospective basis effective January 1, 2021.

During the year ended December 31, 2021, the Company capitalized $ 1.4 million of implementation costs under this standard primarily related to the implementation of additional accounting and financial reporting tools.

These costs are recorded within other assets in the consolidated balance sheets and amortized on a straight-line basis over the term of the associated hosting arrangement.

Amortization of implementation costs during the year ended December 31, 2021 was not significant.

Revenue and Deferred Revenue

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Deferred revenue, beginning of period $ 35,405 $ 26,276

Recognition of revenue included in beginning of period

Recognition of revenue for amounts included in beginning of period

deferred revenue

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United States represents 95 %, 96 %, and 98 % of North America revenue for the years ended December 31, 2022, 2021, and 2020, respectively.

Cash, Cash Equivalents, and Financial Instruments

The following table shows the Company’s cash, cash equivalents, and marketable securities by significant investment category as of December 31, 2022:

As of December 31, 2022

Adjusted Cost Allowance for Credit Losses Total Unrealized Gains Total Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities

(in thousands)

Cash $ 155,459 $ — $ — $ — $ 155,459 $ 155,459 $ —

Money market funds 69,484 — — — 69,484 69,484 —

Subtotal 69,484 — — — 69,484 69,484 —

treasury securities 74,659 — — ( 403 ) 74,256 — 74,256

Subtotal 74,659 — — ( 403 ) 74,256 — 74,256

Total $ 299,602 $ — $ — $ ( 403 ) $ 299,199 $ 224,943 $ 74,256

Marketable securities held as of December 31, 2022 generally mature over the next 9 months to 21 months.

As of December 31, 2021 the Company had cash and cash equivalents of $ 241.6 million including $ 197.8 million in money market funds with no unrealized gains or losses.

Inventories of finished goods are comprised of the following:

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Total inventories $ 381,468 $ 454,174

Inventories current $ 351,682 $ 454,174

Inventories non-current (included in Other assets) $ 29,786 $ —

The Company has included $ 4.5 million in finished goods for connected machines that are currently undergoing rework prior to being in a sellable condition.

Property and Equipment

5 unchanged sentences

Manufacturing tools and equipment 35,396 29,753

Vehicles — 22

Assets under construction 13,134 9,118

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Depreciation expense for the years ended December 31, 2022, 2021 and 2020 was $ 25.9 million, $ 18.3 million and $ 13.2 million, respectively.

Property and equipment, along with all other Company assets, including inventory, are pledged as collateral on the revolving credit facility (see Note 8).

Property and equipment, along with all other Company assets are pledged as collateral on the New Credit Agreement (see Note 9).

Intangible Assets, Net

The following is a summary of the Company’s intangible assets in the consolidated balance sheets:

The following is a summary of the Company’s intangible assets:

December 31, 2022

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Amortization is expensed on a straight-line basis for all intangible assets, as this is the Company’s best estimate of the period of economic benefit to be received.

The Company performed an evaluation of its intangible assets and determined there was an impairment of $ 0.7 million during the years ended December 31, 2019, associated with a product trade name which is no longer in use.

These impairment charges were recognized within sales and marketing expense on the Company’s consolidated statements of operations.

Amortization expense of intangible assets totaled $ 0.8 million for each of the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2021, estimated future amortization of intangible assets is as follows:

(in thousands)

Total $ 1,520

As of December 31, 2022, estimated future amortization is $ 0.8 million in 2023.

Accrued Expenses and Other Current Liabilities

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2020 Credit Agreement

In September 2020, the Company entered into the Credit Agreement with JPMorgan Chase Bank, N.A., Citibank, N.A.

In September 2020, the Company entered into a credit agreement ( the “2020 Credit Agreement”) with JPMorgan Chase Bank, N.A., Citibank, N.A.

and Origin Bank.

The Credit Agreement replaces the prior amended credit agreement with Origin Bank.

The Credit Agreement provides for a three-year asset-based senior secured revolving credit facility of up to $ 150.0 million, maturing on September 4, 2023.

During the term of the Credit Agreement, the Company may increase the aggregate amount of the credit facility by up to an additional $ 200.0 million, (for maximum aggregate lender commitments of up to $ 350.0 million), subject to the satisfaction of certain conditions under the Credit Agreement, including obtaining the consent of the administrative agent and an increased commitment from existing or new lenders.

The 2020 Credit Agreement provided for a three-year asset-based senior secured revolving credit facility of up to $ 150.0 million, maturing on September 4, 2023.

The amount that could be borrowed under the 2020 Credit Agreement was limited to the lesser of (a) the borrowing base minus the aggregate revolving exposure or (b) aggregate lender commitments at any given time.

The borrowing base was determined according to certain percentages of eligible accounts receivable and eligible inventory, subject to reserves determined by the administrative agent.

As disclosed below, the 2020 Credit Agreement was replaced on August 4, 2022.

At that time, no amount was outstanding under the 2020 Credit Agreement, available borrowings were $ 150.0 million, and the Company was in compliance with all financial and non-financial debt covenants.

2022 Credit Agreement

On August 4, 2022, the Company entered into a credit agreement (the “New Credit Agreement”) with JPMorgan Chase Bank, N.A, Citigroup N.A., PNC Bank, N.A., KeyBank, N.A., and other parties.

The New Credit Agreement replaces the Company’s prior asset-based Credit Agreement with JPMorgan Chase Bank, N.A., Citigroup N.A., and Origin Bank.

The New Credit Agreement provides for a five-year revolving credit facility (the “Credit Facility”) of up to $ 300.0 million, maturing on August 4, 2027.

In addition, during the term of the New Credit Agreement, the Company may increase the aggregate amount of the Credit Facility by up to an additional $ 150.0 million, (for maximum aggregate lender commitments of up to $ 450.0 million), subject to customary conditions under the New Credit Agreement, including obtaining a consent from participating lenders (or another lender, if applicable) to such increase.

The Credit Facility may be used to issue letters of credit and for other business purposes, including working capital needs.

The amount that can be borrowed under the Credit Agreement is limited to the lesser of (a) the borrowing base minus the aggregate revolving exposure or (b) aggregate lender commitments at any given time.

The 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 the Company’s borrowing base is less than the aggregate lender commitments, the Company can only borrow revolving loans up to the amount of the Company’s borrowing base and not in the full amount of the aggregate lender commitments.

As of December 31, 2021, no amount was outstanding under the Credit Agreement and available borrowings were $ 150.0 million.

Generally, borrowings under the Credit Agreement bear interest at a rate based on LIBOR (“Adjusted LIBO rate”) or an alternative base rate (“ABR”), plus, in each case, an applicable margin.

The applicable margin will range from (a) with respect to borrowings bearing interest at the ABR, 1.50 % to 2.00 %, and (b) with respect to borrowings bearing interest at the ABR (i) if the “REVLIBOR30 Screen Rate” (as defined in the Credit Agreement) is available for such period, 1.50 % to 2.00 %, or (ii) otherwise, 0.00 % to 0.50 %, in each case for the previous clauses (a) and (b), based on our “Fixed Charge Coverage Ratio” as defined in the Credit Agreement.

The Credit Agreement contains financial covenants during the initial year of the agreement, requiring the Company to maintain a fixed charge coverage ratio of at least 1.0 to 1.0, measured monthly on a trailing 12 month basis.

The Company is also subject to this covenant in future periods if the available commitment is less than the greater of $ 15.0 million and 10 % of total commitment made by all lenders.

The current unused fee rate is 0.175 % on per annum basis.

The Company accounted for the 2022 Credit Agreement as a modification of the 2020 Credit Agreement in accordance with ASC 470-50 Modification and Extinguishments .

In connection with the New Credit Agreement, the Company incurred and capitalized $ 1.3 million of debt issuance costs in addition to $ 0.3 million of existing unamortized debt issuance costs with the 2020 Credit Agreement which remained deferred, resulting a total deferral of debt issuance costs of $ 1.6 million as of the date of the New Credit Agreement.

As of December 31, 2022, total unamortized debt issuance costs were $ 1.5 million.

The New Credit Agreement is collateralized by substantially all of the Company’s assets and contains affirmative and negative covenants, representations and warranties, events of default and other terms customary for loans of this nature.

In particular, the New Credit Agreement will not permit the leverage ratio to be greater than 3.0 to 1.0, measured on the last day of any fiscal quarter.

In addition, the New Credit Agreement will not permit the interest coverage ratio to be less than 3.0 to 1.0, for any period of four consecutive quarters, measured on the last day of any fiscal quarter.

Management has determined that the Company was in compliance with all financial and non-financial debt covenants as of December 31, 2022.

As of December 31, 2022, no amount was outstanding under the New Credit Agreement and available borrowings were $ 300.0 million

Generally, borrowings under the New Credit Agreement bear interest at a rate based on an alternative base rate (“ABR”), plus, in each case, an applicable margin.

The applicable margin will range from (a) borrowings bearing interest at the ABR 2.00 %, and (b) borrowings bearing interest at the Adjusted Term Secured Overnight Financing

Rate, the Adjusted Australian Dollar Rate, the Adjusted Canadian Dollar Offered Rate or the Adjusted New Zealand Dollar Rate, as applicable for the interest period in effect for such borrowing plus the applicable rate.

The Company’s income before income taxes of $ 82.0 million, $ 192.4 million, and $ 199.2 million during the years ended December 31, 2022, 2021, and 2020, respectively, consisted of $ 81.0 million, $ 191.5 million, and $ 199.7 million of income earned in the United States.

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Total provision for income taxes 26.0 % 27.0 % 22.4 %

Differences between the Company’s effective tax rate and the statutory tax rate relate primarily to state income taxes, stock-based compensation, tax credits and changes in unrecognized tax benefits during the period.Deferred taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reporting and the amount used for income tax purposes.

Deferred taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reporting and the amount used for income tax purposes.

Significant components of the Company’s net deferred tax assets are comprised of the following:

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Inventories $ 5,694 $ 3,387

Deferred rent — 370

Lease liability 4,799 5,068

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Amortization 36 149

Capitalized research expenditures 15,567 —

Net operating loss carryforwards 122 146

Capital loss carryforwards 114 —

Tax credits 2,286 1,003

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The Company establishes valuation allowances if it is more likely than not that deferred tax assets will not be realized.

We believe that we will generate sufficient future taxable income to realize the net operating loss deferred tax asset and other net deferred tax assets recorded in our consolidated financial statements.

The Company believes that it will generate sufficient future taxable income to realize the net operating loss deferred tax asset and other net deferred tax assets recorded in our consolidated financial statements.

Accordingly, the Company has not recorded a valuation allowance against net deferred tax assets for the years ended December 31, 2022 and 2021.

As of December 31, 2022, 2021, and 2020, $ 4.1 million, $ 2.8 million and $ 1.4 million, respectively, of unrecognized tax benefits would affect our effective tax rate if recognized.

The total balance of unrecognized gross tax benefits for the years ended December 31, 2021 and 2020, resulting primarily from research and development credits, fixed asset and inventory basis differences were as follows:

The total balance of unrecognized gross tax benefits for the years ended December 31, 2022 and 2021, resulted primarily from research and development credits and inventory basis differences.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

Year Ended December 31,

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During the year ended December 31, 2022, 7,466,096 shares of Class B common stock were converted to Class A common stock.

As of December 31, 2021, the Company had 1,000,000,000 shares of Class A common stock and 250,000,000 shares of Class B common stock authorized and 37,886,660 shares of Class A common stock and 184,026,899 shares of Class B common stock issued and outstanding.

As of December 31, 2022, the Company had 1,000,000,000 shares of Class A common stock and 250,000,000 shares of Class B common stock authorized and 43,623,797 shares of

Class A common stock and 176,032,790 shares of Class B common stock issued and outstanding.

Each share of Class A common stock is entitled to one vote per share.

Each share of Class B common stock is entitled to five votes per share and is convertible at any time into one share of Class A common stock.

Stock Repurchase Program

On July 19, 2022, the Company’s Board of Directors approved a common stock repurchase program under which the Company may repurchase shares of its outstanding Class A common stock up to an aggregate transactional value of $ 50 million, depending on the Company’s continuing analysis of market, financial, and other factors.

The share repurchase program may be suspended or discontinued at any time and does not have a predetermined expiration date.

During the year ended December 31, 2022, the Company repurchased and retired 2,349,581 shares of our Class A common stock for $ 18.5 million under this authorization.

On December 21, 2022, the Company declared a special dividend of $ 0.35 per share on its Class A and Class B common stock, payable on February 15, 2023 to shareholders of record as of February 1, 2023.

As part of the dividend, and pursuant to the underlying award agreements, holders of restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) will receive a dividend equivalent of $ 0.35 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

The aggregate dividend of $ 81.4 million will be satisfied in cash of $ 76.9 million payable to holders of Class A and Class B common stock with the remaining $ 4.5 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders.

Of the cash amount, $ 0.6 million of the dividend is classified as non-current and presented in other non-current liabilities on the consolidated balance sheets due to vesting conditions.

Stock-Based Compensation

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Equity-classified awards

Restricted stock units $ 32,442 $ 14,149 $ —

Stock options 3,579 6,406 —

Class B common stock 9,321 15,200 —

Incentive unit awards — — 4,956

Liability-classified awards ( 54 ) 6,447 5,161

16 unchanged sentences

Total stock-based compensation $ 45,288 $ 42,202 $ 10,117

As of December 31, 2021, there was $ 125.8 million of unrecognized stock-based compensation cost related to stock-based awards which is expected to be recognized over a weighted-average period of 3.2 years.

As of December 31, 2022, there was $ 110.8 million of unrecognized stock-based compensation cost related to service-based awards, which is expected to be recognized over a weighted-average period of 2.7 years.

The total unrecognized compensation expense related to unvested PRSUs was $ 146.8 million as of December 31, 2022.

Corporate Reorganization and Stock-Based Compensation Modifications

In connection with the Corporate Reorganization, all outstanding awards issued under the Incentive Unit Plan discussed below were modified by exchanging the outstanding awards of Cricut Holdings for awards of the Company.

In connection with the Corporate Reorganization in 2021, all outstanding awards issued under the Incentive Unit Plan discussed below were modified by exchanging the outstanding awards of Cricut Holdings for awards of the Company.

All service based vesting conditions were unaffected by the modification.

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All vested liability classified awards converted into either shares of Class B common stock to the extent permitted in each applicable jurisdiction or settled in cash.

All unvested liability classified awards converted into restricted stock units (“RSUs”) under the 2021 Equity Incentive Plan that will vest into shares of Class A common stock of Cricut, Inc.

All unvested liability classified awards converted into restricted stock units under the 2021 Equity Incentive Plan that will vest into shares of Class A common stock of Cricut, Inc.

to the extent permitted in each applicable jurisdiction or into restricted stock unit equivalents which will be settled in cash upon vesting as described below.

2 unchanged sentences

The vesting terms of the options are also based on the vesting terms of the original award.

Therefore, the Company considered the exchange of the original award for the unvested shares or RSUs plus the options to be a single modification and will recognize the incremental compensation cost of $ 14.5 million over the vesting term.

Of this amount, the Company recognized $ 5.8 million during the year ended December 31, 2021 including a cumulative adjustment in March 2021 to recognize the incremental compensation cost associated with historical vesting.

Therefore, the Company considered the exchange of the original award for the unvested shares or RSUs plus the options to be a single modification and began recognizing the incremental compensation cost of $ 14.5 million beginning in March 2021 over the vesting term, including a cumulative adjustment in March 2021 to recognize the incremental compensation cost associated with historical vesting .

As part of the modification of outstanding awards in connection with the Corporate Reorganization, awards issued under the Incentive Unit Plan which included both service and market conditions were modified to remove the market vesting condition and to increase the participation threshold of the award to the price specified in the former market condition.

1 unchanged sentence

Incremental compensation cost associated with these awards is included in the total incremental compensation cost associated with the issuance of additional options to employees described above as this change was part of a single modification.

These modifications are shown as cancellations under the Incentive Unit Plan and as grants under the activity summarized below.

2021 Equity Incentive Plan

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The 2021 Equity Incentive Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants.

Outstanding restricted stock units and performance units are entitled to dividend equivalents in the form of additional unvested restricted stock units or unvested performance units equal in value to the amount of any declared dividend based on the closing price of the Company’s class A stock on the dividend payment date.

Dividend equivalents are forfeited if the underlying award does not vest.

As of December 31, 2022, 31,684,790 shares of Class A common stock were reserved for issuance under this plan including shares reserved for previously granted awards discussed below as well as shares reserved for issuance of future awards under the plan.

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Outstanding at December 31, 2022 6,364,022 $ 18.16

In 2022, the Company granted PRSUs under the 2021 Equity Incentive Plan to certain employees that represent shares potentially issuable in the future.

The PRSUs vest in two equal tranches subject to the Company achieving cumulative adjusted earnings per share over eight quarters of $ 4.93 share and $ 6.16 per share, respectively, at any point during the 5.0 years performance period, subject to employees remaining with the Company through the vesting date.

Adjusted earnings per share means GAAP net income adjusted to exclude income tax expenses, as well as stock-based compensation expense and payroll tax expense specifically related to the PRSU awards.

A summary of the Company’s PRSU activity under the 2021 Equity Incentive Plan is as follows:

Outstanding at December 31, 2021 — $ —

Granted 6,655,000 $ 23.31

Forfeited / cancelled ( 360,000 ) $ 23.11

Outstanding at December 31, 2022 6,295,000 $ 23.32

Represents the maximum number of PRSUs assuming all performance targets are achieved.

The expense recognized each period for these PRSUs is primarily dependent upon the Company’s estimate of the probability of achieving the performance targets during the performance period.

At December 31, 2022, the Company determined it was not probable any performance conditions would be achieved, so no stock-based compensation was recorded for these PRSUs during the year ended December 31, 2022.

Options under the 2021 Equity Incentive Plan have a contractual term of 10 years.

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Outstanding at December 31, 2021 3,260,357 $ 20.00 5.8 $ 6,814

Granted 3,419,359 20.00

Exercised ( 1,535 ) 20.00

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Vested and exercisable at December 31, 2022 2,135,938 $ 20.00 4.3 $ —

For the year ended December 31, 2021, the total intrinsic value of options exercised was $ 0.1 million.

The weighted-average grant date fair value of options granted under the 2021 Equity Incentive Plan during the year ended December 31, 2021 was $ 8.79 per share based on the following weighted-average assumptions:

For the year ended December 31, 2022, no options were granted and the total intrinsic value of options exercised was immaterial.

The weighted-average grant date fair value of options granted during the year ended December 31, 2021 was $ 8.79 per share and the total intrinsic value of options exercised was $ 0.1 million.

The Company used the following weighted-average assumptions in determining the grant date fair value of options granted:

Year Ended December 31, 2021

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Upon vesting, these awards are settled for a cash payment equal to the intrinsic value of the award on the date of the Corporate Reorganization plus the difference between the Company’s stock price on the vesting date less the base price specified at the time of the grant.

If the base price exceeds the Company’s stock price on the vesting date, the stock-based award is considered cancelled.

Due to the cash settlement feature, these awards are liability classified awards and require initial and subsequent measurement at fair value.

As of December 31, 2021, the total recognized liability for these awards was $ 0.9 million which was included in accrued expenses and other current liabilities per the Company’s consolidated balance sheets.

As of December 31, 2022, the total recognized liability for the unvested awards was not material.

A summary of the RSU equivalent activity under the 2021 Equity Incentive Plan is as follows:

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Granted 1,000 $ —

Vested ( 13,227 ) $ 20.00 $ 436

Forfeited/cancelled ( 77,231 ) $ 20.00

Outstanding at December 31, 2022 4,846 $ 15.87 $ 86

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The Company’s unvested Class B common stock resulted from the Corporate Reorganization and is not part of the 2021 Equity Incentive Plan.

Dividends declared on unvested Class B common stock are subject to vesting and are forfeited if the underlying stock does not vest.

Activity related to Class B common stock subject to future vesting for the year ended December 31, 2022 is as follows:

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Outstanding at December 31, 2021 10,854,859 $ 20.00

Granted 14,037,505 $ 20.00

Vested ( 5,671,643 ) $ 20.00

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Outstanding at December 31, 2021 434,000 $ 9.04 3.9 $ 5,664

Granted 522,000 $ 9.04

Forfeited / Cancelled ( 76,000 ) $ 9.04

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Incentive Unit Plan

The Company’s former parent, Cricut Holdings, authorized an Incentive Unit Compensation Plan (the “IU Plan”) that allowed for issuances of common incentive units (“CIUs”).

Prior to the Corporate Reorganization which occurred in 2021, the Company’s former parent, Cricut Holdings, had authorized an Incentive Unit Compensation Plan (the “IU Plan”) that allowed for issuances of common incentive units (“CIUs”).

The participation threshold of the awards granted under the IU Plan was typically equal to the fair market value of Cricut Holdings’ membership units at the date of the grant, except zero strike price incentive unit awards which have no participation threshold.

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Per unit amounts in the activity below are based on the value of Cricut Holdings’ units.

Upon the Corporate Reorganization Cricut Holdings, was liquidated and all outstanding awards were settled or modified as described above.

Equity Classified Units

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These awards vested 25 % annually over four years of service.

The Company’s former parent also granted a performance-based incentive unit, which is discussed later.

The Company’s former parent also granted a performance-based incentive unit, which are discussed later.

These awards are collectively referred to as equity classified incentive units.

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Upon the liquidation of Cricut Holdings all outstanding awards were settled or modified as described above.

A summary of the equity classified incentive units activity for the year ended December 31, 2021 is as follows:

Participation

(in thousands)

Outstanding at December 31, 2020 93,371,324 $ 0.97 $ 600,316

Granted 1,548,223 $ —

Exercised — $ —

Forfeited ( 82,500 ) $ 1.29

Cancelled upon Corporate Reorganization ( 94,837,047 ) $ 0.95

Outstanding at December 31, 2021 — $ — $ —

Vested at December 31, 2021 — $ — $ —

The following table summarizes the unvested equity classified incentive units activity for the year ended December 31, 2021:

Grant Date Fair

Value Per Unit

Unvested at December 31, 2020 37,116,025 $ 0.74

Granted 1,548,223 $ 9.06

Vested ( 7,123,673 ) $ 0.40

Forfeited ( 82,500 ) $ 0.79

Cancelled upon Corporate Reorganization ( 31,458,075 ) $ 1.23

Unvested at December 31, 2021 — $ —

Accordingly, no CIUs were granted during the year ended December 31, 2022.

The weighted-average grant date fair value of equity classified incentive units granted during the years ended December 31, 2021 and 2020 was $ 9.06 and $ 1.27 , respectively.

The total intrinsic value of equity classified incentive units exercised during the years ended December 31, 2021, 2020 and 2019 was nil , $ 2.8 million and $ 0.3 million, respectively.

The total fair value of equity classified incentive units vested during the years ended December 31, 2021, 2020 and 2019 was $ 3.2 million, $ 3.1 million and $ 0.4 million, respectively.

The grant date fair value of CIUs granted during the year ended December 31, 2021 was equal to the estimated fair value of Cricut Holdings’ common unit on the date of the grant as all CIUs had no participation threshold.

The fair value of CIUs granted during the years ended December 31, 2020 and 2019 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:

The total intrinsic value of equity classified incentive units exercised during the years ended December 31, 2021 and 2020 was nil and $ 2.8 million, respectively.

The total fair value of equity classified incentive units vested during the years ended December 31, 2021 and 2020 was $ 3.2 million, and $ 3.1 million, respectively.

The grant date fair value of CIUs granted during the year ended December 31, 2021 was equal to the estimated fair value of Cricut Holdings’ common units on the date of the grant as all CIUs had no participation threshold.

The fair value of CIUs granted during the year ended December 31, 2020 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Year Ended December 31, 2020

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The second and third tranches were subject to the same service vesting conditions as tranche one;

however, they were also subject to a market vesting condition wherein the fair value of the Cricut Holdings common units was required to exceed a determined price threshold for two consecutive board meetings or for 100 out of 120 consecutive trading days if the Company became public traded.

however, they were also subject to a market vesting condition wherein the fair

value of the Cricut Holdings common units was required to exceed a determined price threshold for two consecutive board meetings or for 100 out of 120 consecutive trading days if the Company became public traded.

In the absence of a public trading market, the fair value of a common unit was derived through a valuation technique allowed under ASC 718.

The determined price thresholds were $ 6.00 and $ 7.00 for the second and third tranches, respectively.

In the event of a change in control, all unvested units immediately vest subject to the recipient being employed through the date of the event and any applicable price thresholds being met at the time of the change in control.

In the event the recipient was terminated for cause, all incentive units, whether unvested or vested are immediately forfeited.

The incentive units represented a net profits interest and only pay out upon the occurrence of a liquidation event such as a change in control transaction.

In addition, the units did not participate until the sum of distributions and capital appreciation of the common units from the date of grant of the incentive units equaled $ 5.00 per unit.

The units did not participate in distributions until the sum of distributions and capital appreciation of the common units from the date of grant of the incentive units equaled $ 5.00 per unit.

On the date of grant, the Company determined the fair value of this award to be $ 2.3 million based upon a Monte Carlo Simulation.

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in connection with the Corporate Reorganization.

A summary of option activity for the year ended December 31, 2021 is as follows:

Exercise Price

(in thousands)

Outstanding at December 31, 2020 1,140,000 $ 4.52 $ 3,283

Granted 27,027 $ 7.40

Exercised ( 27,027 ) $ 7.40 $ 52

Forfeited ( 84,000 ) $ 4.52

Cancelled upon Corporate Reorganization ( 1,056,000 ) $ 4.52

Outstanding at December 31, 2021 — $ — $ —

Vested at December 31, 2021 — $ — $ —

The grant date fair value of options was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions for the periods indicated:

Year Ended December 31,

The weighted-average grant date fair value of options granted during the years ended December 31, 2021 and 2020 was $ 4.45 and $ 3.01 per share, respectively, and were estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions for the periods indicated:

Years Ended December 31.

Fair value of common unit $ 8.99 $ 6.24

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Liability Classified Incentive Unit Equivalents

The Company’s former parent issued incentive unit equivalents (phantom units) to various employees under the Incentive Unit Plan.

Prior to the Corporate Reorganization which occurred in 2021, the Company’s former parent issued incentive unit equivalents (phantom units) to various employees under the Incentive Unit Plan.

The incentive unit equivalents paid out upon the occurrence of a liquidation event such as a change in control transaction.

In addition, the units did not participate until the sum of distributions and capital appreciation of the common units from the date of grant of the incentive units equaled a specified participation threshold per unit.

The incentive unit equivalents did not represent any kind of legal equity interest in the Company or

the former parent Company and required cash settlement.

The incentive unit equivalents did not represent any kind of legal equity interest in the Company or the former parent Company and required cash settlement.

Accordingly, the incentive unit equivalent awards were accounted for as liability classified awards and required initial and subsequent measurement at fair value.

Initially, during the year ended December 31, 2020, these awards generally vested 12.5 % annually for each of the first four years of service and 50 % after the fifth year of service.

Following the amendment of these awards in January 2020, these awards vested 25 % annually over four years of service.

Following the amendment of these awards in January 2020 and through the Corporate Reorganization in 2021, these awards vested 25 % annually over four

years of service.

All liability classified incentive units had indefinite contract terms and, once vested, remained outstanding until liquidation of Cricut Holdings or until repurchased by Cricut Holdings.

Upon the liquidation of Cricut Holdings all outstanding awards were settled or modified as described above.

A summary of the liability classified incentive unit equivalents activity for the year ended December 31, 2021 is as follows:

Participation

(in thousands)

Outstanding at December 31, 2020 2,851,516 $ 2.13 $ 15,017

Granted 320,000

Forfeited ( 4,000 )

Cancelled upon Corporate Reorganization ( 3,167,516 ) $ 1.92

Outstanding at December 31, 2021 — $ — $ —

Exercisable at December 31, 2021 — $ — $ —

Vested and expected to vest at December 31, 2021 — $ — $ —

The following table summarizes the unvested liability classified incentive unit equivalents activity for the year ended December 31, 2021:

Grant Date Fair

Value Per Unit

Unvested at December 31, 2020 2,851,516 $ 1.74

Granted 320,000 $ 8.19

Forfeited ( 4,000 ) $ 6.58

Cancelled upon Corporate Reorganization ( 3,167,516 ) $ 2.39

Unvested at December 31, 2021 — $ —

Upon the liquidation of Cricut Holdings in the Corporate Reorganization all outstanding awards were settled or modified as described above.

The weighted-average grant date fair value of liability classified incentive units granted during the years ended December 31, 2021 and 2020 was $ 8.19 and $ 2.01 , respectively.

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Fair value of common units $ 7.40

Expected life (in years) 0.3 - 5 years

Expected life (in years) 0.3 - 5.0

Expected Volatility 51.1 %

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The cumulative adjustment upon settlement or modification is included in stock-based compensation related to liability awards above.

Liability classified incentive unit equivalents were included in accrued expenses and other current liabilities per the Company’s consolidated balance sheets and the rollforward of this liability is as follows (in thousands):

(in thousands)

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Stock-based compensation during year $ 6,041

Purchased unit equivalents during year 181

Balance at December 31, 2020 $ 5,702

Stock-based compensation during period 6,041

Settlement or modification of awards $ ( 11,743 )

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Management is not aware of any contingencies which it believes will have a material effect on its financial position, results of operations or liquidity.

The Company leases office space with lease terms ranging from 1 to 10 years.

Self-Insurance Liabilities

Starting in 2022, the Company began to self-insure for certain employee medical benefits.

The recorded liabilities for self-insured risks are calculated using actuarial methods and are not discounted.

The liabilities include amounts for actual claims and claims incurred but not reported.

Actual experience, including claim frequency and severity as well as health care inflation, could result in actual liabilities being more or less than the amounts currently recorded.

We have accrued $ 0.7 million for employee medical claims at December 31, 2022.

Such amounts are included in Accrued expenses and other current liabilities on our consolidated balance sheets.

The Company leases office space with original lease terms ranging from 1 to 6 years.

These leases require monthly lease payments that may be subject to annual increases throughout the lease term.

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As a result of this amendment, the Company remeasured the associated operating lease liability and right-of-use asset for this lease.

The Company will also lease additional space at its corporate headquarters commencing in January of 2022 under the same terms as its existing lease.

Lease obligations for the additional space total $ 4.1 million and are excluded from future maturities disclosed below.

The Company also leased additional space at its corporate headquarters which commenced in January of 2022 under the same terms as its existing lease.

The Company has determined its leases should be classified as operating leases.

Variable lease costs are comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance and are classified as lease cost due to the Company's election to not separate lease and non-lease components.

For the year ended December 31, 2021, the Company incurred operating lease costs of $ 4.7 million and variable lease costs of $ 0.5 million.

Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2021 was $ 5.1 million and was included in net cash used in operating activities in the Company's consolidated statements of cash flows.

For the years ended December 31, 2022 and 2021, the Company incurred operating lease costs of $ 5.5 million and $ 4.7 million, respectively, and variable lease costs of $ 0.5 million and $ 0.5 million, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2022 and 2021 was $ 5.8 million and $ 5.1 million, respectively, and was included in net cash used in operating activities in the Company's consolidated statements of cash flows.

As of December 31, 2022, the maturities of the Company's operating lease liabilities were as follows:

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(in thousands)

Thereafter 748

Total lease payments $ 20,467

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Operating lease liabilities, non-current $ 13,935

As of December 31, 2021, the weighted average remaining operating lease term and the weighted average discount rate used to determine the operating lease liability were as follows:

As of December 31, 2021

Weighted-average remaining lease term of operating leases 4.6 years

T he weighted average remaining operating lease term and the weighted average discount rate used to determine the operating lease liability were as follows:

As of December 31, 2022 As of December 31, 2021

Weighted-average remaining lease term of operating leases 3.7 years 4.6 years

Weighted-average discount rate of operating leases 2.6 % 3.1 %

Rent expense totaled $ 4.0 million and $ 4.2 million for the years ended December 31, 2020 and 2019, respectively.

Rent expense totaled $ 4.0 million for the year ended December 31, 2020.

Related Party Transactions

For the years ended December 31, 2021, 2020 and 2019 the Company received $ 0.2 million, $ 2.5 million and $ 1.3 million, respectively, of capital contributions from Cricut Holdings, as a result of additional common units issued by Cricut Holdings at the estimated fair value of the underlying units.

For the years ended December 31, 2022, 2021 and 2020 the Company received nil , $ 0.2 million and $ 2.5 million, respectively, of capital contributions from Cricut Holdings, as a result of additional common units issued by Cricut Holdings at the estimated fair value of the underlying units.

The equity offering was purchased by a subset of then current common unit holders of Cricut Holdings and employees of the Company.

The Company has an active common stock repurchase program that allows for the repurchase of common stock in the open market or in private transactions as described in Note 11.

On August 24, 2022 the Company repurchased and retired 250,000 shares of its Class A common stock from a previous executive at a price per share at the market price of $ 6.47 in a private transaction for a total of $ 1.6 million.

Employee Benefit Plan

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The Company matches 50 % of the first 12 % of an employee’s salary contributed to the plan on the first day of the month following their hire date.

The Company contributed $ 2.4 million and $ 1.1 million years ended December 31, 2021 and 2020, respectively.

The Company contributed $ 2.5 million and $ 2.4 million during the years ended December 31, 2022 and 2021, respectively.

Net Income Per Share

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2022 2021 2020

Employee stock options 3,142,911 — —

Restricted stock units 5,742,284 786,500 —

Unvested common stock subject to forfeiture 831,952 — —

Segment Information

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Gross profit $ 349,893 $ 457,450 $ 332,374

Subsequent Events

On January 7, 2022, the Company granted 6,615,000 RSUs to employees and directors of the Company under the 2021 Equity Incentive Plan which vest in two equal tranches subject to the Company achieving cumulative adjusted earnings per share over eight quarters of $ 4.93 share and $ 6.16 per share, respectively.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

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 8. Financial Statements and Supplementary Data