What changed in this filing

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Item 1A. Risk Factors

2025-03-05 compared with 2024-03-06 · 266 added, 267 removed, 982 unchanged (35% of the section changed)

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• risks regarding our ability to attract and engage with our users, including anticipating their product preferences;

• competitive risks in each of our three segments:

Connected Machines, Subscriptions and Accessories and Materials;

• supply chain, manufacturing, distribution and fulfillment risks, including our being primarily dependent on two contract manufacturers and on limited sources of supply for components, accessories and materials, as well as our ability to forecast demand and manage our inventory;

• international risks, including regulation, tariffs that have materially increased our costs and the potential for further trade barriers;

• competitive risks in both of our segments:

Platform and Products;

• supply chain, manufacturing, distribution and fulfillment risks, including our being dependent on three contract manufacturers to produce connected machines, and on limited sources of supply for components, accessories and materials, as well as our ability to forecast demand and manage our inventory;

• international risks, including regulation, tariffs that historically materially increased our costs and the potential for further trade barriers;

• sales and marketing risks, including our dependence on sales to brick-and-mortar and online retail partners and our need to continue to grow online sales;

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• risks related to product quality, safety and warranty claims and returns;

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

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

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

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

User engagement is one of many factors that affects our revenue in each of our segments, and it is difficult to isolate its effect on revenue and our other financial results in any given quarter.

User engagement is one of many factors that affects our revenue in both of our segments, and it is difficult to isolate its effect on revenue and our other financial results in any given quarter.

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

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• a decline in the public’s interest in or discretionary time and money available for do-it-yourself, or DIY, crafting activities;

• pricing, perceived value and ease of use of our connected machines and accessories and materials as well as our subscriptions;

• pricing, perceived value and ease of use of our platform and products;

• our ability to satisfy demand for and deliver quality products and value for subscriptions;

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

• increase in users joining our platform through a second-hand machine, who tend to exhibit lower engagement intensity compared to users joining through a newly purchased machine;

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

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

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

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

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

If user engagement declines, then Platform ARPU and Products revenue,

specifically as it relates to accessories and materials, may also decline.

However, Platform ARPU has increased in recent periods.

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

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

As we grow our business, we expect our revenue growth rates to decline compared to prior years due to a number of reasons, including more challenging comparisons to prior periods, slowing demand for our products and subscriptions, increasing competition, a decrease in the growth of our overall market and our failure to capitalize on growth opportunities.

As we grow our business, we expect our revenue growth rates to decline compared to prior years due to a number of reasons, including more challenging comparisons to prior periods, slowing demand for our platform and products, increasing competition, a decrease in the growth of our overall market and our failure to capitalize on growth opportunities.

For example, we saw significant growth in sales during the COVID-19 pandemic in 2020 and 2021 but saw a reduction in sales in 2022, 2023 and 2024.

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

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

Our rate of adding new users has declined over the last three years in comparison to 2020 and 2021, and the number of Paid Subscribers could remain flat or decline.

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

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We may also face challenges managing the inventory of new or existing products, which could lead to excess inventory and discounting of such products.

Users may negatively react to changes we introduce to products and product offerings.

Users may negatively react to changes we

introduce to products and product offerings.

In addition, new or enhanced products may have varying selling prices and costs compared to legacy products, which could negatively impact our gross margins and results of operations.

We derive a significant portion of our revenue from sales of our connected machines, and a decline in sales of our connected machines would adversely affect our future revenue and results of operations.

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

We derive a significant portion of our revenue from sales of products, particularly our connected machines, and a decline in sales of our connected machines would adversely affect our future revenue and results of operations.

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

Our connected machine revenue decreased by $5.9 million, or 3.0%, to $192.4 million for the year ended December 31, 2024 from $198.3 million for the year ended December 31, 2023.

Any factors adversely affecting sales of our connected machines, including introduction by competitors of comparable machines at lower price points, a maturing product lifecycle, shortages in our supply or inventory of connected machines, a decline in consumer spending or other factors discussed elsewhere in this Risk Factors section, could result in a continued decline in sales of our connected machines, which would adversely affect our future revenue and results of operations.

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

Any factors adversely affecting sales of our connected machines, including introduction by competitors of comparable machines at lower price points, a maturing product lifecycle, shortages in our supply or inventory of connected machines, a decline in consumer spending, an increase in second-hand machines, or other factors discussed elsewhere in this Risk Factors section, could result in a continued decline in sales of our connected machines, which would adversely affect our future revenue and results of operations.

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

For example, accessories and materials revenue decreased by $50.7 million, or 19.7%, to $207.1 million for the year ended December 31, 2024 from $257.8 million for the year ended December 31, 2023.

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

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

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

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

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

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

While supply chain conditions have improved during 2023, if our supply chain faces challenges again, it could continue to put pressure on margins.

While supply chain conditions have improved during 2023 and 2024, if our supply chain faces challenges again, it could continue to put pressure on margins.

We depend on sales to brick-and-mortar and online retail partners, including a limited number of sophisticated key brick-and-mortar and online retail partners.

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The loss or substantial decline in volume of sales to our key brick-and-mortar and online retail partners, including lost sales because of inadequate retailer inventory, would adversely affect our operating results and financial performance.

Moreover, if we are not able to meet demand from our key brick-and-mortar and online retail partners, they may limit or eliminate our shelf space, fail to feature our products on their websites or cease to offer our products and instead offer or promote products from our competitors who are able to meet their demands.

Moreover, if we are not able to meet demand from our key brick-and-mortar and online retail partners, or if we are unable to satisfy minimum revenue growth and margin targets, they may limit or eliminate our shelf space, fail to feature our products on their websites or cease to offer our products and instead offer or promote products from our competitors who are able to meet their demands.

If the financial condition of one or more of our key brick-and-mortar and online retail partners weakens, a key retailer stops selling our products or uncertainty regarding demand for some or all of our products causes one or more of these brick-and-mortar and online retail partners to reduce its ordering and marketing of our products, it could decrease revenue from sales to brick-and-mortar and online retail partners and adversely affect our total revenue.

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

Cricut’s sales to customers are typically made on credit terms without collateral.

A bankruptcy, financial distress, or restructuring of one of our brick-and mortar or online retail partners could result in our inability to collect receivables, and in some cases require us to return money previously received from the partner as directed by the bankruptcy court.

For example, in January 2025, our customer JOANN, Inc.

announced it had filed for Chapter 11 bankruptcy and in February 2025 announced that it would liquidate and discontinue business.

While we do not currently expect JOANN, Inc.’s bankruptcy to have a material adverse effect on our business, results of operations or financial condition, there can be no assurance that the bankruptcy, financial distress, or restructuring of one of our brick-and-mortar or online partners would not have such an effect.

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

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To successfully grow our sales through cricut.com, we must continue to drive traffic to our website, convert a larger percentage of potential brick-and-mortar and online retail partner sales to our website and create and maintain a streamlined and intuitive online shopping experience.

Increasing sales through cricut.com may be costly

and may place increased demands on our operational, managerial, administrative and other resources.

Increasing sales through cricut.com may be costly and may place increased demands on our operational, managerial, administrative and other resources.

We are dependent on our brick-and-mortar and online retail partners to manage their own e-commerce operations effectively, to maintain appropriate inventory for our product in their e-commerce operations and to promote our products through those channels.

We or our brick-and-mortar and online retail partners may be unable to effectively address the challenges involved with increasing online sales, including maintaining adequate retailer inventory, which could negatively affect our results of operations and financial condition.

We actively work to develop channel strategies to service omni-channel retailers, which are sellers who can serve product through in-store, online, and buy online and pick up in store programs (BOPIS).

Sales through online channels, either through cricut.com or our online retail partners’ websites, could reduce sales by our current brick-and-mortar retail partners, which could adversely affect our relationship with our brick-and-mortar retail partners, particularly those that do not have a strong online presence.

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If we are unable to maintain or increase our subscriptions, or if existing users do not renew their subscriptions, our future revenue and results of operations could be harmed.

As of December 31, 2023, approximately 31% of our users were Paid Subscribers.

Subscriptions are a significant portion of our Platform revenue.

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

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

In addition, new users joining our platform through a second-hand machine tend to have a lower subscription sign-up rate and engagement intensity than new users joining us through a newly purchased machine.

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

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Our efforts to increase our subscriptions may not have the desired effect.

For example, in 2021, we proposed changes to our free Design Space app that would have limited the number of personal images or patterns a user could upload and save each month to our cloud without a subscription;

however, because of user reaction, we determined not to proceed with the proposed changes.

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

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

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

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The markets in which we participate, including the traditional craft market and the other creative or DIY markets we touch, are highly competitive with limited barriers to entry.

We operate and manage our business in three reportable segments:

Connected Machines, Subscription and Accessories and Materials.

We face competition in every aspect of our business, but particularly in Accessories and Materials.

Many accessories and materials produced by our competitors, including the private label products of some of our retail partners, are compatible with our connected machines and are often available for purchase through our retail partners.

We operate and manage our business in two reportable segments:

Platform and Products.

We face competition in every aspect of our business, but particularly as it relates to the accessories and materials offerings within our Products segment.

Many accessories and

materials produced by our competitors, including the private label products of some of our retail partners, are compatible with our connected machines and are often available for purchase through our retail partners.

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

We are currently seeing intensifying competition in Accessories and Materials, and we expect the competition in the accessories and materials DIY market to continue to intensify in the future as new and existing competitors introduce new or enhanced products that may compete with our product lines.

We are currently seeing intensifying competition as it relates to accessories and materials, and we expect the competition in the accessories and materials DIY market to continue to intensify in the future as new and existing competitors introduce new or enhanced products that may compete with our product lines.

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

Because we derive a significant portion of our revenue

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

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

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

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

Our Subscriptions business, which provides users with fonts and images for making designs, competes with well-established content providers, from free resources that enable users to access content that is compatible with our platform, to more specific content marketplaces, like Creative Fabrica and Etsy, where customers can purchase digital files to upload to our platform.

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

Our Platform business, which provides users with fonts and images for making designs, competes with well-established content providers, from free resources that enable users to access content that is compatible with our platform, to more specific content marketplaces, like Canva, Creative Fabrica, and Etsy, where customers can purchase digital files to upload to our platform.

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

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

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We have taken legal action against certain of the producers of these copycat products and anticipate expending significant financial or other resources in the future to combat these products.

In addition, to the extent that sales of copycat products create confusion or experiences with our products among consumers, our brand and business could be harmed.

In addition, to the extent that sales of copycat products create confusion or experiences

with our products among consumers, our brand and business could be harmed.

For example, in some cases, users purchase copycat products believing them to be Cricut products and then inaccurately attribute defects with those products to Cricut, which would adversely affect our reputation.

In other cases, our users purchase copycat accessories to use with their connected machine, but since the copycat accessories are not calibrated correctly to work with our connected machines, they may have a negative experience and attribute it to the connected machine.

Further, some of our products may find their way to unauthorized outlets or distribution channels.

This “gray market” for our products can undermine authorized brick-and-mortar and online retail partners and distributors who

promote and support our products and can damage our reputation and business, and we may have to spend significant time and resources in the future to challenge such copycat products and unauthorized “gray market” products.

Competitive pricing pressures, including with respect to our products, subscriptions and shipping, may harm our business and results of operations.

If we are unable to sustain pricing levels for our products and subscriptions, whether due to competitive pressure or otherwise, our gross margins could be significantly reduced.

Further, some of our products may find their way to unauthorized outlets or distribution channels, and could include used product sold as new, fraudulent, unbundled, or stolen goods.

This type of “gray market” selling through unauthorized resellers could negatively impact Cricut’s product value, brand value, and retailer/partner margins.

Further, this “gray market” for our products can undermine authorized brick-and-mortar and online retail partners and distributors who promote and support our products and can damage our reputation and business, and we may have to spend significant time and resources in the future to challenge such copycat products and unauthorized “gray market” products.

Competitive pricing pressures, including with respect to our platform services, products, and shipping, may harm our business and results of operations.

If we are unable to sustain pricing levels for our platform services and products, whether due to competitive pressure or otherwise, our gross margins could be significantly reduced.

Our portfolio of connected machines range from $149.00 to $999.00 MSRP, and subscription offerings range from $9.99 per month to $95.88 per year for Cricut Access or $119.88 per year for Cricut Access Premium, which includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping.

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

In addition, we vary our pricing strategies to effectively compete in certain international target markets.

If o ur online retailers sell our products across borders on their global storefronts, there is a risk that our products could be sold for lower than established retail prices within a specific region or market.

This type of sales activity could disrupt our brick-and-mortar retailer partners’ sales efforts.

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

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

Further, our decisions around the development of new products and subscriptions are grounded in assumptions about eventual pricing levels.

Further, our decisions around the development of new products and platform services are grounded in assumptions about eventual pricing levels.

If there is price compression in the market after these decisions are made, our business and results of operations could be adversely affected.

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We participate in promotional and rebate programs with our key brick-and-mortar and online retail partners to enhance the sale of our products.

These promotional programs consist of incentives or entitlements to our customers, such as advertising allowances, volume and growth incentives, business development, product damage allowances and point-of-sale support.

These promotional programs consist of incentives or entitlements to our

customers, such as advertising allowances, volume and growth incentives, business development, product damage allowances and point-of-sale support.

Customer rebates are considered to be variable consideration, which we estimate each quarter using the expected value method or most likely amount, based upon the nature of the incentive.

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To the extent that our estimates of variable consideration from customer rebates each quarter are not accurate, it could affect our revenue in future periods.

We have grown rapidly in recent years and have limited operating experience at our current scale of operations.

We have grown rapidly in prior years and have limited operating experience at our current scale of operations.

If we are unable to manage our growth and the complexity of our business effectively, our brand, company culture and financial performance may suffer.

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

For example, our revenue grew from $959.0 million in 2020 to $1,306.2 million in 2021 before reducing to $886.3 million

in 2022 and $765.1 million in 2023.

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

For example, our revenue peaked in 2021 at $1.3 billion before reducing to $886.3 million in 2022, $765.1 million in 2023, and $712.5 million in 2024.

In addition, between December 31, 2022 and December 31, 2023, our employee headcount decreased from over 775 to over 690, and as of December 31, 2024, our employee headcount was over 640.

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

In March 2024, due to the challenging macroeconomic environment and with the goal of maintaining the health and sustainability of the company, we implemented a workforce reduction which impacted approximately 8% of Cricut employees.

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

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

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

Furthermore, our rapid growth in recent years may obscure the extent to which seasonality trends have affected our business and may continue to affect our business.

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

associated with such introductions.

Furthermore, our rapid growth in prior years may obscure the extent to which seasonality trends have affected our business and may continue to affect our business.

For example, we experienced unusually high demand in the first and second quarters of 2021, which is inconsistent with normal seasonality patterns.

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

Moreover, we experienced a significant increase in sales after the outbreak of the COVID-19 pandemic, and the rollout of COVID-19 vaccines, lifting of restrictions on movement and/or normalized full-time return to work trends have negatively impacted demand for our products and subscriptions, as have current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products, and changes in consumer spending preferences and buying trends, and our sales activity may continue to diminish as a result.

Moreover, we experienced a significant increase in sales after the outbreak of the COVID-19 pandemic, and the rollout of COVID-19 vaccines, lifting of restrictions on movement and/or normalized full-time return to work trends have negatively impacted demand for our products and platform services, as have current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products, and changes in consumer spending preferences and buying trends, and our sales activity may continue to diminish as a result.

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

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• increases in marketing, sales and other operating expenses;

• seasonal fluctuations in subscriptions, engagement by users and purchases of accessories and materials;

• seasonal fluctuations in platform revenue, engagement by users and purchases of accessories and materials;

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

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As our user community grows and their usage of our services increases, we will be required to make additional investments in network capacity to maintain adequate data transmission speeds, the availability of which may be limited, and the cost of which may be on terms unacceptable to us.

If adequate capacity is not available to us as our users’ usage increases, our network may be

unable to achieve or maintain sufficiently high reliability or performance.

If adequate capacity is not available to us as our users’ usage increases, our network may be unable to achieve or maintain sufficiently high reliability or performance.

In the event that our users are unable to access our platform or suffer operational issues with our platform, it could negatively affect their experience with our products and platform and harm our reputation.

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

Our top seven brick-and-mortar and online retail partners, measured by the product revenue we derive from them, accounted for 37% of product revenue for the year ended December 31, 2022 and 33% for the year ended December 31, 2023.

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

Our top seven brick-and-mortar and online retail partners, measured by the revenue we derive from them, accounted for 33% of total revenue for the year ended December 31, 2023 and 30% for the year ended December 31, 2024.

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

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

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We also continue to pursue direct to retailer sales, which may impact our relationships with existing distributors.

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

In the future, we may choose to temporarily or permanently stop shipping product to distributors who do

not follow the policies and guidelines in our sales agreements, which could adversely affect our revenue and results of operations.

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

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Amazon Web Services has broad discretion to change and interpret the terms of service and other policies with respect to us, and those actions may be unfavorable to our business operations.

Amazon Web Services may also take actions beyond our control that

could seriously harm our business, including discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether or altering how we are able to process data in a way that is unfavorable or costly to us.

Amazon Web Services may also take actions beyond our control that could seriously harm our business, including discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether or altering how we are able to process data in a way that is unfavorable or costly to us.

Although we expect that we could obtain similar services from other third parties, if our arrangements with Amazon Web Services were terminated, we could experience interruptions on our platform and in our ability to make our content available to users, as well as delays and additional expenses in arranging for alternative cloud infrastructure services.

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Users engage with our software across a wide range of desktop and mobile devices and from a number of operating systems that are outside of our control.

We are dependent on the interoperability of our software, as well as Cricut Access, Cricut Access Premium, Cricut Joy App, Design Space and other design apps, with popular desktop and mobile operating systems, such as Android and iOS.

We are dependent on the interoperability of our software, as well as Cricut Access, Cricut Access Premium, Design Space and other design apps, with popular desktop and mobile operating systems, such as Android and iOS.

Any changes in such systems that degrade the functionality of our software or design apps or give preferential treatment to competitors could adversely affect our software’s usage on desktop and mobile devices.

To deliver high-quality images and projects, it is important that our software is designed effectively and works well with a range of third-party desktop and mobile systems, networks and standards.

We may not be successful in developing relationships with key participants with original equipment manufacturing or mobile industry or in developing software that operate effectively with these technologies,

systems, networks or standards.

For example, mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our software.

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If we are restricted from operating in one or more countries, our ability to attract and engage users in those regions may be adversely affected, and we may not be able to grow our business as we anticipate.

Failures in Internet infrastructure or interference with broadband access, including regulatory actions, could cause current or potential users to believe that our platform system or design apps are unreliable, possibly leading our users to switch to our competitors or to avoid using our products and subscriptions.

Many of our products and our subscriptions depend on our users’ high-speed broadband access to the Internet.

Many of our products and our platform depend on our users’ high-speed broadband access to the Internet.

Increasing numbers of users and increasing bandwidth requirements may degrade the performance of our users’ Internet access and therefore their access to or experience with our services and design apps.

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

Frequent or persistent interruptions, even if resulting from users’ personal Internet access rather than our systems, could cause current or potential users to believe that our systems or services are unreliable, leading them to switch to our competitors or avoid using our products and subscriptions, and could permanently harm our reputation and brands.

In addition, users who access our subscriptions and design apps through mobile devices, such as smartphones and tablets, should utilize a high-speed connection, such as Wi-Fi, 4G, 5G or LTE, to ensure the best experience with our services and design apps.

Frequent or persistent interruptions, even if resulting from users’ personal Internet access rather than our systems, could cause current or potential users to believe that our systems or services are unreliable, leading them to switch to our competitors or avoid using our products and platform, and could permanently harm our reputation and brands.

In addition, users who access our platform through mobile devices, such as smartphones and tablets, should utilize a high-speed connection, such as Wi-Fi, 4G, 5G or LTE, to ensure the best experience with our services and design apps.

Currently, this access is provided by companies that have significant and increasing market power in the broadband and Internet access marketplace, including incumbent phone companies, cable companies and wireless companies.

These providers could take measures that degrade, disrupt or increase the cost of user access to high-speed Internet connections, any of which would make our design apps and subscriptions less attractive to users, and reduce our revenue.

These providers could take measures that degrade, disrupt or increase the cost of user access to high-speed Internet connections, any of which would make our platform less attractive to users, and reduce our revenue.

Failures of Internet infrastructure or interference with broadband access may also impact our international expansion in countries that lack widespread high-speed Internet.

Further, in January 2018, the Federal Communications Commission, or the FCC, released an order reclassifying broadband Internet access as an information service, subject to certain provisions of Title I of the Communications Act of 1934.

Among other things, the order eliminates rules adopted in 2015 that prohibited broadband providers from blocking, impairing or degrading access to legal content, applications, services or non-harmful devices or engaging in the practice of paid prioritization, e.g., the favoring of some lawful Internet traffic over other traffic in exchange for higher payments.

The order was contested in federal court;

it was largely affirmed by a three-judge panel but the panel did order the FCC to reconsider certain elements of the repeal.

The request for rehearing was denied and the parties declined to appeal the decision to the U.S.

Supreme Court.

In October 2020, the FCC adopted an order concluding that the issues remanded by the court did not provide a basis to alter its conclusions in the 2018 order.

The 2020 order could be subject to further petitions for reconsideration or court appeals.

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

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

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

Under the new FCC rules, broadband Internet access providers may be able to charge web-based services such as ours for priority access to customers, which could result in increased costs to us and a loss of existing users, impair our ability to attract new users and materially and adversely affect our business and opportunities for growth.

Further, broadband Internet service providers operate in a rapidly evolving legal environment, and existing or future legislation or regulations, or absence thereof, including Internet neutrality regulations, could adversely affect our users’ ability to access broadband Internet service or certain content, or create different user experiences in certain jurisdictions.

In January 2025, the U.S.

Court of Appeals for the Sixth Circuit struck down the Federal Communications Commission’s, or FCC’s, 2024 net neutrality order that reinstated the FCC’s 2015 rules prohibiting broadband providers from blocking, impairing, or degrading access to lawful content, applications, services, or non-harmful devices, or engaging in paid prioritization (e.g., favoring certain lawful internet traffic over other traffic in exchange for higher payments).

Several states have enacted or are considering state-level legislation or executive action that would implement certain net neutrality protections, including some that go beyond those established in the FCC’s 2015 net neutrality order (e.g., restrictions on zero-rating—i.e., the practice whereby an ISP exempts certain Internet traffic from a customer's data cap).

State broadband regulations have been upheld by courts in certain jurisdictions, creating the potential for a patchwork of disparate regulatory regimes whereby broadband Internet access providers may be able to block or throttle content, or charge web-based services such as ours for priority access to customers in some jurisdictions but not others, which could result in increased costs to us and a loss of existing users, impair our ability to attract new users and materially and adversely affect our business and opportunities for growth.

The future of broadband regulation remains uncertain, and the regulatory landscape continues to evolve.

Republican control of the Executive Branch, Congress and the FCC following the 2024 elections may increase the likelihood of federal action to reduce the FCC’s authority over broadband providers or preempt state-level net neutrality initiatives.

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

We may be subject to warranty claims and brick-and-mortar and online retail partner return policies that could result in significant direct or indirect costs, or we could experience greater product returns than expected, either of which could adversely affect our business, financial condition and results of operations.

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Additionally, our brick-and-mortar and online retail partners and distributors provide users with their own respective warranty and/or return policies relative to our connected machines, accessories and materials and other Cricut products they sell, which in turn flow down to us as a contractual obligation and/or allowance that we must honor.

The occurrence of

any material defects in our connected machines or certain other products, or the flow-down obligations for brick-and-mortar and online retail partner and distributor returns, could result in an increase in product returns or make us liable for damages and warranty claims and/or returns in excess of our current reserves, which could result in an adverse effect on our business prospects, liquidity, financial condition and cash flows if warranty claims were to materially exceed anticipated levels.

The occurrence of any material defects in our connected machines or certain other products, or the flow-down obligations for brick-and-mortar and online retail partner and distributor returns, could result in an increase in product returns or make us liable for damages and warranty claims and/or returns in excess of our current reserves, which could result in an adverse effect on our business prospects, liquidity, financial condition and cash flows if warranty claims were to materially exceed anticipated levels.

In addition, we could incur significant costs to correct any defects, warranty claims or other problems, including costs related to product recalls.

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

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

Moreover, changes in product

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

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

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We maintain general liability insurance; however, design and manufacturing defects, and claims related thereto, may subject us to judgments or settlements that result in damages materially in excess of the limits of our insurance coverage.

In addition, we may be exposed to write-offs of inventory or intangible assets

or other expenses such as litigation costs and regulatory fines.

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

If we cannot successfully defend any large claim, maintain our general liability insurance on acceptable terms or maintain adequate coverage against potential claims, our business, results of operations and financial condition could be adversely impacted.

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User metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics could harm our business, revenue and financial results.

We regularly review metrics, including the number of our users, whether a user created on their connected machines in the last 90 days, the number of Paid Subscribers and other measures to evaluate engagement and growth trends, to measure our performance and to make strategic decisions.

We regularly review metrics such as whether a user created on their connected machines in the last 365 or 90 days, the number of Paid Subscribers and other measures to evaluate engagement and growth trends, to measure our performance and to make strategic decisions.

These metrics are calculated using internal company data, and in some cases third-party data, and have not been validated by an independent third party.

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If we fail to maintain effective analytics capabilities, our metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies.

An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products.

Our products and subscriptions may be considered discretionary items for consumers.

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

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

An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products and platform services.

Our products and platform services may be considered discretionary items for consumers.

available, tax rates and political factors, including war or other armed conflicts, including the current conflicts between Russia and Ukraine and in the Middle East.

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

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

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or global economic conditions, including corporate and consumer spending, and liquidity of capital markets.

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

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

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

Our sensitivity to economic

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

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

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

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

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

As a result of this risk, we

could be forced to take actions that we otherwise would not take, or not take actions that we otherwise might take, in order to comply with the Credit Agreement and related loan documents.

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

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

It is possible that financing to replace or renew our debt may be

unfavorable, which would adversely affect our financial condition and results of operations.

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

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

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We believe that a critical component of our success has been our corporate culture.

As we continue to grow, including by expanding our presence internationally, and develop the infrastructure associated with being a public company, we will need to maintain our culture among a larger number of employees, dispersed across various geographic regions.

As we continue to grow, including by expanding our presence internationally, and develop the infrastructure associated with being a public

company, we will need to maintain our culture among a larger number of employees, dispersed across various geographic regions.

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

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

Our management team has limited experience managing a public company.

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

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

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

the continuous scrutiny of securities analysts and investors.

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

We may experience fluctuations in our tax obligations and effective tax rate.

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Risks Related to Manufacturing, Supply Chain and Fulfillment

We primarily depend upon two contract manufacturers, and our operations would be disrupted if we encountered problems with our contract manufacturers.

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

We depend upon three contract manufacturers, and our operations would be disrupted if we encountered problems with our contract manufacturers.

We depend on third-party contract manufacturers to produce all of our products, and rely upon three contract manufacturers to build our connected machines in Malaysia.

For a limited number of our products, which collectively constitute a small portion of our revenue, a particular contract manufacturer is the sole source of the finished product.

The agreements with our top vendors in 2021, 2022 and 2023, each have an initial term of five years from 2018 and automatically renew for subsequent periods of one year unless either party provides notice of non-renewal at least 60 days prior to the expiration of the initial term.

The agreements with our top vendors each have an initial multi-year term and automatically renew for subsequent one-year periods unless either party provides notice of non-renewal at least 60 days prior to the expiration of the initial term.

Such agreements may be terminated by the vendors only for cause, such as (i) a breach of our payment obligation for accepted products that is not cured within ten days after notice from the vendor or (ii) certain events relating to our insolvency or filing a petition for bankruptcy.

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

In addition, our primary two contract manufacturers primarily manufacture our connected machines at facilities located in Malaysia, with some manufacturing conducted by one of our primary contract manufacturers in the People’s Republic of China, or China.

Manufacturing in these countries may be subject to political, economic, pandemic-related labor constraints, border closures, social and legal uncertainties that may harm our relationships with these parties.

Our other contract manufacturers are also located in China and Malaysia, which may increase supply risk, including the risk of supply interruptions.

Our contracts with our two primary contract manufacturers do not obligate them to supply our connected machines in any specific quantity or at any specific price and allow us to enter purchase orders with such manufacturers.

In addition, our three contract manufacturers manufacture our connected machines at facilities located in Malaysia, with some manufacturing of certain accessories and materials conducted in the People’s Republic of China, or China.

Manufacturing in these countries, particularly Malaysia, may be subject to political, economic, widespread health outbreaks, labor constraints, border closures, social and legal uncertainties that may harm our relationships with these parties.

In particular, changes in Malaysia’s employment regulations, including increases to the national minimum wage and restrictions on migrant labor, could significantly harm our contract manufacturers’ ability to meet our expected manufacturing yields and costs.

Our other contract manufacturers are also located in Malaysia, China, Thailand and South Korea, which may increase supply risk, including the risk of supply interruptions.

Our contracts with our three contract manufacturers do not obligate them to supply our connected machines in any specific quantity or at any specific price and allow us to enter purchase orders with such manufacturers.

Entering into agreements requiring additional purchase orders is a typical part of our business and is common practice with other vendors that we may use from time to time.

If our two primary contract manufacturers fail for any reason to continue manufacturing our connected machines in required volumes, in a timely manner, at high quality levels or at all, we may have to increase connected machine production at currently qualified contract manufacturers or engage acceptable alternative contract manufacturers, either of which would be time consuming, particularly given the complexity of our connected machines.

If our three contract manufacturers fail for any reason to continue manufacturing our connected machines in required volumes, in a timely manner, at high quality levels or at all, we may have to increase connected machine production at currently qualified contract manufacturers or engage acceptable alternative contract manufacturers, either of which would be time consuming, particularly given the complexity of our connected machines.

Identifying, selecting and onboarding acceptable alternative contract manufacturers could also be costly.

Alternative contract manufacturers may not be available to us when needed or may not be in a position to satisfy our production requirements at commercially reasonable prices or to our quality and performance standards.

Any significant interruption in manufacturing at our two primary contract manufacturers would reduce our supply of connected machines, which could cause us to delay our orders or breach our purchase orders with our brick-and-mortar and online retail partners, distributors and online sales channels, which in turn would reduce our revenue and user growth.

Any significant interruption in manufacturing at our three contract manufacturers would reduce our supply of connected machines, which could cause us to delay our orders or breach our purchase orders with our brick-and-mortar and online retail partners, distributors and online sales channels, which in turn would reduce our revenue and user growth.

If our third-party contract manufacturers are unable to meet our needs, as a result of operational issues or other factors, our business would be harmed.

The location of our third-party manufacturers in Malaysia and China may exacerbate some of these risks.

The locations of our third-party manufacturers may exacerbate some of these risks.

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

Operational difficulties, such as a significant interruption in the operations of or equipment breakdowns in production facilities operated by

third parties, could delay production or shipment of our products.

In addition, events such as inclement weather, natural disasters, government shut-downs as a result of air quality, power grid limitations, pandemics, civil unrest or other reasons, labor strikes or shortages, transportation security vulnerabilities or cyberattacks could impair third-party production capabilities.

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

In addition, events such as inclement weather, natural disasters, government shut-downs as a result of air quality, power grid limitations, pandemics, civil unrest or other reasons, labor strikes, restrictions, or shortages, transportation security vulnerabilities or cyberattacks could impair third-party production capabilities.

The inability of our third-party contract manufacturers to meet our production requirements, particularly in our peak season, could lead to customer dissatisfaction, impact sales and damage our reputation and brand, which would result in reduced revenue.

Moreover, if the costs of meeting production requirements, including capital expenditures, were to exceed our expectations, our results of operations would be harmed.

Our third-party manufacturers are largely based in Malaysia and China.

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

Our third-party manufacturers are largely based in Malaysia, China, Thailand and South Korea, and our connected machines are manufactured in Malaysia.

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

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

All of the components that go into the manufacturing of our products, as well as our accessories and materials, are sourced from a limited number of third-party suppliers, many of which are located internationally.

All of the components that go into the manufacturing of our products, including our accessories and materials, are sourced from a limited number of third-party suppliers, many of which are located internationally.

Some of the key components our manufacturers use in the production of our products come from a limited or single source of supply.

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

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

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

Our contract manufacturers then procure these components from our suppliers within the lead times provided by our finished goods purchase orders based on component allocations that we control.

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

In previous years during times of supply shortages, we secured long-lead-time component supply directly from suppliers on a purchase order basis.

Our contract manufacturers then procured these components from us within the lead times provided by our finished goods purchase orders based on component allocations that we controlled.

To the extent that we did not accurately forecast the need for the components we purchased, or if market conditions render such components unnecessary, we may not recoup our investment in purchased components that our contract manufacturers do not need.

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

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

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

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

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

If we or our contract manufacturers lose access to components or accessories and materials from a particular supplier or experience a significant disruption in the supply of products and components from a current supplier, we may be unable to locate alternative suppliers of comparable quality on terms that are acceptable to us, or at all, which may undermine our ability to deliver our products to brick-and-mortar and online retail partners or users in a timely manner and our business could be

materially and adversely affected.

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

For example, we have

experienced issues with the import of goods and services from certain ports.

Credit in Asia has in the past and may in the future be difficult to access, which could have an impact on the terms upon which we and our contract manufacturers are able to obtain access to components or accessories and materials from particular suppliers.

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

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We do not currently have alternative suppliers for several key components.

In particular, there are currently shortages in global electronic component supply, and we may not be able to obtain the electronic components necessary for the performance of our connected machines in a timely manner or at all.

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

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

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

Managing our inventory supply chain, including manufacturing and component lead time, is complex and exposes us to risk.

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Failure to forecast appropriate demand, lead times, significant price fluctuations or shortages in materials or components, including the costs to transport such materials or components, the uncertainty of currency fluctuations against the U.S.

dollar, increases in labor rates, trade duties or tariffs and/or the introduction of new and expensive raw materials could adversely affect our contract manufacturers’ ability to manufacture our products in sufficient quantity and within sufficient time to meet our consumer demand, which would adversely affect our business, financial condition and operational results.

dollar, increases in labor rates, limitations on the availability of labor, trade duties or tariffs and/or the introduction of new and expensive raw materials, some of which we expect in 2025, could adversely affect our contract manufacturers’ ability to manufacture our products in sufficient quantity and within sufficient time to meet our consumer demand, which would adversely affect our business, financial condition and operational results.

If we overestimate our production requirements, we or our contract manufacturers may purchase excess components and build excess inventory.

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If we underestimate our product requirements, our contract manufacturers may have inadequate component inventory, which could interrupt the manufacturing of our products and result in delays or cancellation of orders from brick-and-mortar and online retail partners, distributors and online sales channels.

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

While supply chain conditions have improved during 2023, if our supply chain faces challenges again, it could continue to put pressure on margins.

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

lower margins.

While supply chain conditions have improved during 2024, if our supply chain faces challenges again, it could put pressure on margins.

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

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A disruption in the service, a significant increase in the cost of our primary delivery and shipping services for our products or a significant disruption at shipping ports could adversely affect our business.

We use a variety of shipping services for delivery of our products to users and brick-and-mortar and online retail partners, including air carriers and ocean shipping services.

We use a variety of shipping services for delivery of our products to users and brick-and-mortar and online retail partners.

All of our contract manufacturers are based in Asia, so our products are shipped to our third-party logistics partner facilities primarily via ocean shipping services.

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As a result, we could experience delays, increased shipping costs and lost sales as a result of missed delivery deadlines and product demand cycles.

For example, at times during the COVID-19 pandemic, shipping of our products has been delayed, which has inconvenienced our users and brick-and-mortar and online retail partners.

For example, at times during the COVID-19 pandemic, shipping of our products was delayed, which inconvenienced our users and brick-and-mortar and online retail partners.

We could experience shipping delays in the future as a result of shortages of containers and ships, local port challenges or for other reasons.

Furthermore, if the cost of delivery or shipping services were to increase significantly and the additional costs could not be covered by product pricing, our results of operations could be adversely affected.

In particular, we are dependent upon major shipping companies, including FedEx and UPS, for the shipment of our products to and from our third-party logistics partner facilities.

In particular, we are dependent upon major shipping companies for the shipment of our products to and from our third-party logistics partner facilities.

Changes in shipping terms, or the inability of these third-party shippers to perform effectively, could affect our responsiveness to our users and brick-and-mortar and online retail partners.

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Our products may be affected from time to time by design and manufacturing defects, and we may face claims related to such defects, either of which could adversely affect our business and result in harm to our reputation.

Our connected machines and design apps may be affected by design and manufacturing defects.

Our platform and products may be affected by design and manufacturing defects.

In addition, sophisticated firmware and applications, such as those offered by us, may have issues that unexpectedly interfere with the intended operation of hardware or software products.

Defects may also exist in software, components and products that we source from third parties.

Any such defects could make our products unsafe, create a risk of environmental or property damage, personal injury or data privacy, security and data protection harms, and subject us to the hazards and uncertainties of product liability and other claims and related litigation.

Any such defects could make our platform and products unsafe, create a risk of environmental or property damage, personal injury or data privacy, security and data protection harms, and subject us to the hazards and uncertainties of product liability and other claims and related litigation.

As a result, our services may not perform as anticipated and may not meet expectations.

There can be no assurance that we will be able to detect and fix all issues and defects in the hardware, software and services we offer.

Failure to timely identify, patch, fix or recall products and services with such defects could result in widespread technical and performance issues affecting our products and could lead to claims against us.

Failure to timely identify, patch, fix or recall products and services with such defects could result in widespread technical and performance issues affecting our platform and products and could lead to claims against us.

We maintain general liability insurance;

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

successfully defend any large claim, maintain our general liability insurance on acceptable terms or maintain adequate coverage against potential claims, our financial results could be adversely affected.

cannot successfully defend any large claim, maintain our general liability insurance on acceptable terms or maintain adequate coverage against potential claims, our financial results could be adversely affected.

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

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Our results of operations may be adversely affected if we are unable to secure, or are able to secure only at significantly higher costs, components for our products or adequate transportation resources.

Key third-party manufacturers are located in China and may be affected by recent and possible future political, social and economic conditions.

We rely on third-party manufacturers in China and Chinese-owned manufacturers in Malaysia through which the substantial majority of our finished products are prepared and shipped to brick-and-mortar and online retail partners, users or third-party logistics partners.

Our business therefore could be affected by social, political, regulatory or economic developments in China.

In 2018, the Office of the U.S.

Trade Representative, or the USTR, enacted a tariff of 10% on imports into the U.S.

from China, including communications equipment products and components manufactured and imported from China.

Since then, additional tariffs have been imposed by the USTR on imports into the United States from China, and China has also imposed tariffs on imports into China from the United States.

In addition, due to concerns with the security of products and services from certain telecommunications and video providers based in China, the United States government has enacted bans on the use of certain Chinese-origin components or systems either in items sold to the U.S.

government or in the internal networks of government contractors and subcontractors (even if those networks are not used for government-related projects).

It is possible that the U.S.

government may take future measures to impose stricter export controls on items destined for China or additional duties on shipments made from China.

In addition, the U.S.

government may add additional parties to the Entity List, which could harm our business, increase the cost of conducting our operations in China or result in retaliatory actions against U.S.

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

Continued deterioration in trade relations or adverse developments in political, social or economic conditions in China or future unforeseen problems, including health pandemics or regulatory changes,

could affect deliveries of our products to our retail partners or users, possibly resulting in business interruptions, substantially delayed or lost sales, loss of inventory or increased expenses that cannot be passed on to brick-and-mortar and online retail partners or users, any of which could ultimately have a material adverse effect on our business and financial results.

In such an eventuality, we could be forced to relocate our manufacturing, either temporarily or permanently, to another potentially costlier location or find alternative potentially costlier methods of shipping our finished products to brick-and-mortar and online retail partners and users.

While we are taking measures to attempt to maintain the continuity of our product delivery operations notwithstanding the impact on the use of our international facilities, the continued or deteriorating conditions in China or other future unforeseen problems in China, we cannot ensure that these measures will be successful in eliminating disruptions in our business.

Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.

We have shifted the majority of our contract manufacturing presence to Malaysia.

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

Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, nullification of contract, changes in interest rates, imposition of capital controls and methods of taxation.

We have shifted all of the contract manufacturing of our connected machines to Malaysia.

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

Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, nullification of contract, labor and employment regulations (including increases to the national minimum wage and restrictions on migrant labor), changes in interest rates, imposition of capital controls and methods of taxation.

In addition, our contract manufacturers in Malaysia are subject to risks of theft, fire, earthquake, flooding and other similar casualty risks.

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Economic growth is determined by countless factors, and it is extremely difficult to predict with any level of certainty.

We may be affected by recent and possible future political, social and economic conditions in China.

One of the contract manufacturers that produces our connected machines is wholly-owned by a Chinese parent company, and many of the components that go into the manufacturing of our products, including our accessories and materials, are sourced from third-party suppliers in China.

Our business therefore could be affected by social, political, regulatory or economic developments in China.

For example, since 2018, the Office of the U.S.

Trade Representative, or the USTR, has imposed additional tariffs of 10% or more on various imports into the U.S.

of Chinese-origin goods, including communications equipment products and components manufactured in and imported from China and China has also imposed tariffs on imports into China from the United States.

In addition, due to concerns with the security of products and services from certain telecommunications and video providers based in China, the United States government has enacted bans on the use of certain Chinese- and Russian-origin components, software, and systems either in items sold to the U.S.

government or in the internal networks of government contractors and subcontractors (even if those networks are not used for government-related projects).

It is possible that the U.S.

government may take future measures to impose (a) stricter export controls on items destined for China;

(b) additional restrictions on the import of certain components, software, and/or systems from China;

and (c) additional duties on shipments made from China.

The likelihood of one or more of these actions occurring has materially increased in light of comments by the new U.S.

presidential administration, which has repeatedly communicated an intention to impose additional duties on imports from China (as well as on imports from other countries).

Any of these actions could affect the profitability and/or stability of the manufacturing activities conducted by our key third-party manufacturing partners or introduce other risks to our business, including supply chain interruptions, substantially delayed or lost shipments, or increased expenses.

In addition, the U.S.

government may add additional parties to the Entity List, the List of Specialty Designated Nationals, or other restricted party lists, which could harm our business, increase the cost of conducting our operations in China, and/or result in retaliatory actions against U.S.

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

Further, the U.S.

government has introduced various regulatory changes to its export controls regime since 2022 that have significantly affected the semiconductor manufacturing and semiconductor manufacturing equipment industries.

Continued deterioration in trade relations or adverse developments in political, social or economic conditions in or affecting China or future unforeseen problems, including health pandemics or regulatory changes, could affect deliveries of our products to our retail partners or users, possibly resulting in business interruptions, substantially delayed or lost sales, loss of inventory or increased expenses that cannot be passed on to brick-and-mortar and online retail partners or users, any of which could ultimately have a material adverse effect on our business and financial results.

In such an eventuality, we could be forced to relocate certain of our manufacturing, either temporarily or permanently, to another potentially costlier location or find alternative potentially costlier methods of shipping our finished products to brick-and-mortar and online retail partners and users.

If any of our China-based suppliers for any of our components are unable to supply the components that our manufacturers need to meet anticipated consumer demand, our business would be materially and adversely affected.

Changes in U.S.

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Importing and exporting has involved more risk since the beginning of 2018, as there has been increasing rhetoric, in some cases coupled with legislative or executive action, from several United States and foreign leaders regarding tariffs against foreign imports of certain materials.

For example, the U.S.

government imposed significant new tariffs on China related to the importation of certain product categories following the U.S.

Trade Representative’s Section 301 investigation.

It is possible that the U.S.

government may take further measures in the future to impose stricter export controls on items destined for China or additional duties on shipments made from China.

During fiscal 2019, the Bureau of Industry and Security, or BIS, of the U.S.

Department of Commerce placed certain Chinese entities on the Entity List, limiting the ability of U.S.

For example, in September 2018, the U.S.

Trade Representative (the “USTR”) enacted a tariff on the import of other Chinese products, with a combined import value of approximately $200 billion.

Since that time the U.S.

government has continued to impose significant and increasingly large tariffs on a broader range of products imported from China The U.S.

government also has continued to impose stricter export controls on items destined for China In addition, the Bureau of Industry and Security, or BIS, of the U.S.

Department of Commerce has continued to add certain Chinese entities to U.S.

lists of restricted parties including the Entity List, limiting the ability of U.S.

companies to do business with those entities.

government may add additional parties to the Entity List, which could harm our business, increase the cost of conducting our operations in China or result in retaliatory actions against U.S.

In response to U.S.

government measures, the Chinese government is expanding its control on exports, and these controls or other measures could impact our business.

government may continue to add additional parties to these restricted parties list, which could harm our business, increase the cost of conducting our operations in China or result in additional retaliatory actions against U.S.

In addition, the U.S.

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For example, on May 15, 2019, then-President Trump issued an executive order that invoked national emergency economic powers to implement a framework to regulate the acquisition or transfer of information communications technology in transactions that imposed undue national security risks.

The executive order was subject to implementation by the Secretary of Commerce and purports to apply to contracts entered into prior to the effective date of the order.

On January 19, 2021, the U.S.

Department of Commerce published interim final rules in the Federal Register, subject to public notice and comment, which purport to permit the Department of Commerce to investigate transactions involving the use of information communications technology products or services provided by persons owned or controlled by certain nations, including China, and potentially to modify or prohibit those transactions.

On December 5, 2024, the U.S.

Department of Commerce published final

rules in the Federal Register, establishing the terms under which the Department of Commerce may investigate transactions involving the use of information communications technology products or services provided by persons owned or controlled by certain nations, including China, and potentially to modify or prohibit those transactions.

In addition, the White House, the Department of Commerce and other executive branch agencies have implemented additional restrictions and may implement still further restrictions that would affect conducting business with certain Chinese companies.

We cannot predict whether these recent rules and restrictions will be implemented and acted upon by the Biden administration, modified, overturned or vacated by legal action.

A substantial portion of our products are manufactured in China.

As a result of tariffs, our cost of goods imported from China increased substantially, and could increase further depending on the outcome of the current trade negotiations, which have been protracted and resulted in increases in U.S.

tariff rates on specified products from China.

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

As a result of tariffs and other trade controls, our cost of goods imported from China increased substantially, and could increase further because of threatened increases in U.S.

tariff rates on products from China.

The risk of such U.S.

tariff increases has materially increased in light of the new administration, which has repeatedly communicated an intention to impose additional duties on imports from China and a number of other countries.

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

Other changes in U.S.

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We are subject to numerous federal, state, local and international laws and regulations regarding privacy, data protection, information security and the storing, sharing, use, processing, transfer, disclosure and protection of personal information and other content and data, which we refer to collectively as privacy laws, the scope of which is changing, subject to differing interpretations and may be inconsistent among countries, or conflict with other laws, regulations or other obligations.

We are also subject to the terms of our privacy policies and obligations to our users and other third parties related to privacy, data protection and information security.

We strive to comply with applicable privacy laws;

We are also subject to the terms of our privacy policies and other obligations to our users and other third parties relating to privacy, data protection and information security.

We strive to comply with applicable privacy laws and other obligations;

however, the regulatory framework for privacy, data protection and information security worldwide is, and is likely to remain for the foreseeable future, varied, and it is possible that these or other obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another.

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For example, in May 2018, the GDPR went into effect in the EU.

The GDPR imposed stringent data protection requirements and provides greater penalties for noncompliance than previous data protection laws, including potential penalties of up to €20 million or 4% of annual global revenue, whichever is greater.

The GDPR imposed stringent data protection requirements and provides penalties for noncompliance of up to €20 million or 4% of annual global revenue, whichever is greater.

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

The GDPR also imposed numerous requirements on companies operating in the EU, including enhanced disclosures to data subjects about how personal data is processed (including information about the profiling of individuals and automated individual decision-making), limited retention periods of personal data, mandatory data breach notification obligations and additional policies and procedures required to comply with the accountability principle under the GDPR.

The GDPR also imposes numerous requirements on companies operating in the EU, including enhanced disclosures to data subjects about how personal data is processed (including information about the profiling of individuals and automated individual decision-making), limited retention periods of personal data, mandatory data breach notification obligations and additional policies and procedures required to comply with the accountability principle under the GDPR.

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

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

For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA and Switzerland to the United States could result in further limitations on the ability to transfer personal data across borders, particularly if governments are unable or unwilling to reach agreement on or maintain existing mechanisms designed to support cross-border data transfers.

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

For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA, United Kingdom and Switzerland to the United States could result in further limitations on the ability to transfer personal data across borders, particularly if governments are unable or unwilling to reach agreement on or maintain existing mechanisms designed to support cross-border data transfers.

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

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The same decision also imposed additional conditions with respect to use of the Standard Contractual Clauses, or the SCCs, to lawfully transfer personal data from Europe to the United States and most other countries.

The Swiss Federal Data Protection and Information Commissioner also has stated that it no longer considers the Swiss-U.S.

The Swiss Federal Data Protection and Information

Commissioner also has stated that it no longer considers the Swiss-U.S.

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

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

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

adequacy, which has allowed the EU-U.S.

Data Privacy Framework to become available for use by companies seeking to legitimize personal data transfers from the EU to the U.S.

There have, however, been reports that the EU-U.S.

Data Privacy Framework may be subject to challenge.

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

Data Privacy Framework or the DPF.

Following a July 10, 2023 adequacy decision issued by the European Commission, the DPF, along with a United Kingdom extension to the DPF that allows the transfer of personal data from the United Kingdom to the U.S., or UK DPF Extension, are available for companies to use to legitimize personal data transfers from the EEA and United Kingdom to the U.S.

Further, a framework similar to the DPF, the Swiss-U.S.

Data Privacy Framework, or Swiss-U.S.

DPF, also has been established to facilitate the lawful transfer of personal data from Switzerland to the U.S.

There have, however, legal challenges to the DPF, and it, the UK DPF Extension and the Swiss-U.S.

DPF may be subject to legal challenges in the future from privacy advocacy groups or others .

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

On June 4, 2021, the European

Commission published new SCCs.

The CJEU’s decision, the revised SCCs, regulatory guidance and opinions and other developments relating to cross-border data transfer may require us to implement additional contractual and technical safeguards for any personal data transferred out of the EEA and Switzerland.

On June 4, 2021, the European Commission published new SCCs.

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

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

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

Data processing in the United Kingdom is now governed by the UK General Data Protection Regulation and other domestic data protection laws, such as the UK Data Protection Act of 2018, which provide for penalties for noncompliance of up to the greater of £17.5 million or 4% of worldwide revenues.

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

Further, the United Kingdom has established its own domestic regime with the UK General Data Protection Regulation, or UK GDPR, and other domestic data protection laws, such as the UK Data Protection Act of 2018, which provide for penalties for noncompliance of up to the greater of £17.5 million or 4% of worldwide revenues.

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

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13,709/2018, or LGPD, similar in many respects to the GDPR, was enacted August 14, 2018 and entered into effect September 18, 2020.

Penalties for violation of the LGPD, if and when enforced, may be up to 2% of revenue in Brazil, capped at R$50 million per violation.

Penalties for violation of the LGPD may be up to 2% of revenue in Brazil, capped at R$50 million per violation.

The LGPD applies to businesses that process the personal data of individuals located in Brazil and provides consumer rights similar to the GDPR.

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

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

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

Additionally, the California Attorney General issued regulations that may add additional requirements on businesses.

The potential effects of this legislation and the related CCPA regulations are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

For example, the CCPA gives California residents expanded rights to access personal information, request deletion of personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is collected and used.

To comply with the decree, we may be required to further invest in potentially duplicative infrastructure and personnel in

Vietnam, establish and maintain a local data protection program, and incur other costs and expenses related to these new requirements.

California has also enacted legislation affording consumers expanded privacy protections.

The CCPA, which was amended by the CPRA, gives California residents various rights, including rights to access their personal information, request deletion of their personal information, opt out of certain sale sand sharing of their personal information, and receive detailed information about how their personal information is collected and used.

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

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

The CPRA creates obligations relating to consumer personal information collected as of January 1, 2022, with

implementing regulations remaining partially in flux, and enforcement having commenced July 1, 2023.

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

Numerous other states have also enacted or proposed similar data privacy laws.

For example, Virginia, Colorado, Utah and Connecticut have each passed laws similar to but different from the CCPA and CPRA that have taken effect in 2023;

Florida, Montana, Oregon and Texas have enacted similar laws that go into effect in 2024;

Tennessee, Delaware and Iowa have enacted similar laws that go into effect in 2025;

and Indiana has enacted a similar law that will go into effect in 2026.

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

For example, Virginia, Colorado, Utah, Connecticut, Florida, Montana, Oregon, Texas Tennessee, Delaware, Iowa, Indiana, Maryland, Minnesota, Nebraska, New Hampshire, New Jersey, Kentucky and Rhode Island have enacted similar laws that have gone into effect, or will go into effect through 2026.

The CCPA, these other state laws and other proposed laws at the state and federal level in the United States are far-reaching and in certain cases are overlapping but different l, resulting in further uncertainty and potentially requiring changes in our business practices and policies and our incurring, require us to incur additional costs and expenses in an effort to comply.

Further, some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of operating our products and services and other aspects of our business.

With laws and regulations such as the GDPR, LGPD, CCPA and CPRA imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other laws and regulations, there is a risk that the requirements of these or other laws and regulations, or of contractual or other obligations relating to privacy, data protection or information security, are interpreted or applied in a manner that is, or is alleged to be, inconsistent with our management and processing practices, our policies or procedures, or the features of our products and services.

With laws and regulations such as the GDPR, LGPD and CCPA imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other laws and regulations, there is a risk that the requirements of these or other laws and regulations, or of contractual or other obligations relating to privacy, data protection or information security, are interpreted or applied in a manner that is, or is alleged to be, inconsistent with our management and processing practices, our policies or procedures, or the features of our products and services.

We may face challenges in addressing their requirements and making any necessary changes to our policies and practices, and we may find it necessary or appropriate to assume additional burdens with respect to data handling, to restrict our data processing or otherwise to modify our data handling practices and to incur significant costs and expenses in these efforts.

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The use of artificial intelligence and machine learning may result in cybersecurity incidents that implicate the personal data of end users of such applications.

Any such cybersecurity incidents related to our use of artificial intelligence and machine learning applications could adversely affect our reputation and results of operations.

We have been subject to cyberattacks, security breaches, and incidents in the past, and such cyberattacks and other security breaches and incidents could expose us to a risk of lost, exposed or corrupted information, unauthorized disclosure of information, litigation and possible liability to employees, users, brick-and-mortar and online retail partners and regulatory authorities.

Any cybersecurity incidents related to our use of artificial intelligence and machine learning applications could adversely affect our reputation and results of operations.

We have been subject to cyberattacks and security breaches and

incidents in the past, and cyberattacks, security breaches and incidents could expose us to a risk of lost, exposed or corrupted information, unauthorized disclosure of information, litigation and possible liability to employees, users, brick-and-mortar and online retail partners and regulatory authorities.

Geopolitical conflicts and tensions may also increase our risks from cyberattacks and security breaches and incidents.

In addition, a significant portion of our data and information is hosted in a cloud-computing environment, where design apps and data are hosted, accessed and processed through a third-party provider over a broadband Internet connection.

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

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

More of our and our service providers’ personnel are working remotely in recent years than prior to the COVID-19 pandemic, which increases the risks of cyberattacks and security breaches and incidents.

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

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

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

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

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

For example, our employees and users have received and likely will continue to receive “phishing” e-mails attempting to induce them to divulge sensitive information or to purchase counterfeits of our products, respectively.

In addition, unauthorized persons may attempt to hack into our products or systems to obtain personal data relating to users or employees, our confidential or proprietary information or confidential information we maintain from third parties, which, if successful, could pose a risk of loss of data, risk to customer safety and risk of product recall.

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Moreover, we manufacture and sell hardware and software products that allow our users to store confidential information, including their original designs, locally or in our cloud infrastructure.

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

While we have measures in place to protect and update our software installed on our users’ devices, we do not have measures to configure, update or secure our users’ desktop or mobile devices or any information stored in our users’ own systems or at their locations, which is the responsibility of our users.

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

A cyberattack, security breach or incident or other event that causes the loss or public disclosure of, or unauthorized access by third parties to, sensitive information stored by us or our brick-and-mortar and online retail partners, or the perception that any of these have occurred, could have serious negative consequences for our business, including loss of information, indemnity obligations, claims, regulatory investigations, fines, penalties and damages, reduced demand for our products and services, an unwillingness of our users to use our products or services, harm to our reputation and brand, and time consuming and expensive litigation, any of which could adversely affect our financial results.

financial results.

We also expect to incur significant costs in an effort to detect and prevent cyberattacks and security breaches and incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived cyberattack or security breach or incident.

Many governments have enacted laws requiring companies to provide notice of certain security breaches involving certain types of personal data or personal information.

We are also contractually required to notify certain

customers of cyberattacks, security breaches or incidents.

We are also contractually required to notify certain customers of cyberattacks, security breaches or incidents.

We cannot be certain that any limitations of liability provisions in our contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a cyberattack, security breach or incident.

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Governments in the United States and internationally have enacted, have considered or are considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ electronic tracking tools or the use of data gathered with such tools.

For example, the European Commission has proposed a draft regulation, known as the Regulation of Privacy and Electronic Communications, or the ePrivacy Regulation, which would replace the current ePrivacy Directive.

If adopted, the ePrivacy Regulation could have broad potential impacts on the use of internet-based services and tracking technologies, such as cookies.

For example, the European Commission has proposed a regulation, known as the Regulation of Privacy and Electronic Communications, or the ePrivacy Regulation, which would replace the current ePrivacy Directive.

The ePrivacy Regulation remains in the negotiation stage.

If adopted, the ePrivacy Regulation is anticipated to have broad potential impacts on the use of internet-based services and tracking technologies, such as cookies.

We expect to incur additional costs to comply with the requirements of the ePrivacy Regulation and national implementation laws once they are enacted .

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On June 23, 2022, the Italian data protection authority adopted a similar decision.

Other data protection authorities in the European Union increasingly are focused on the use of online tracking tools and have indicated that they plan to issue similar rulings.

Other data protection authorities in the EU increasingly are focused on the use of online tracking tools and have indicated that they plan to issue similar rulings.

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

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These developments have impacted and may continue to impact business.

In February 2022, Google announced it planned to adopt similar restrictions to restrict tracking activity across Android devices.

In addition, the most commonly used Internet browsers—Chrome, Firefox, Internet Explorer and Safari—allow Internet users to modify their browser settings to prevent cookies from being accepted by their browsers, and a number of other software tools allow users to block or otherwise limit the functionality of cookies.

In February 2022, Google announced its Privacy Sandbox initiative, including plans to adopt similar restrictions to restrict tracking activity across Android devices.

In July 2024, Google announced its plans to roll out a new user choice mechanism regarding third-party cookies.

In addition, the most commonly used Internet browsers—Chrome, Firefox, Internet

Explorer and Safari—allow Internet users to modify their browser settings to prevent cookies from being accepted by their browsers, and a number of other software tools allow users to block or otherwise limit the functionality of cookies.

Users can decide to opt out of nearly all cookie data creation, which could negatively impact operations.

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Bribery Act, by us, our employees and our business partners;

• complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to consumer protection, consumer product safety and data privacy frameworks, such as the EU’s GDPR, including data transfer or localization restrictions, or LGPD;

• complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to consumer protection, consumer product safety and privacy frameworks, such as the GDPR, including data transfer or localization restrictions, or LGPD;

• varying levels of Internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs;

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Our failure to successfully manage these risks could harm our international operations and adversely affect our business, financial condition and results of operations.

In addition, Brexit, and the ongoing negotiations of the future trading relationship between the United Kingdom and the EU during the transition period, have yet to provide clarity on what the outcome will be for the United Kingdom or Europe.

Changes related to Brexit could subject us to heightened risks in that region, including disruptions to trade and free movement of goods, services and people to and from the United Kingdom, disruptions to the workforce of our business partners, increased foreign exchange volatility with respect to the British pound and

additional legal, political and economic uncertainty.

In addition, changes related to Brexit could subject us to heightened risks in that region, including disruptions to trade and free movement of goods, services and people to and from the United Kingdom, disruptions to the workforce of our business partners, increased foreign exchange volatility with respect to the British pound and additional legal, political and economic uncertainty.

If these actions impacting our international distribution and sales channels result in increased costs for us or our international partners, such changes could result in higher costs to us, adversely affecting our operations, particularly as we expand our international presence.

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In addition, U.S.

public companies are required to maintain records that accurately and fairly represent their transactions and maintain internal controls and compliance procedures designed to prevent violations of anti-corruption laws.

agents will not take actions in violation of our policies or applicable law for which we may ultimately be held responsible.

corruption laws.

While we have policies, procedures and training to foster compliance with these laws, we cannot assure you that our employees or third-party business partners or intermediaries, contractors, representatives and agents will not take actions in violation of our policies or applicable law for which we may ultimately be held responsible.

Any violation of the FCPA, other applicable anti-corruption laws or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, fines, damages, severe criminal or civil penalties against us, our officers or our employees, disgorgement of profits, suspension or debarment from government contracts, any of which could adversely affect our reputation, business, results of operations, stock price, financial condition and prospects.

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

For example, the United States recently enacted the Inflation Reduction Act, which imposes a 1% excise tax on certain stock repurchases (including potentially pursuant to our stock repurchase program) and a 15% alternative minimum tax on adjusted financial statement income.

For example, the United States enacted the Inflation Reduction Act in 2022, which imposes a 1% excise tax on certain stock repurchases (including potentially pursuant to our stock repurchase program) and a 15% alternative minimum tax on adjusted financial statement income.

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

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Our success depends in large part on our proprietary technology and our patents, trade secrets, trademarks and other intellectual property rights.

We rely on, and expect to continue to rely on, a combination of trademark,

trade dress, domain name, copyright, trade secret and patent laws, as well as confidentiality and license agreements with our employees, contractors, consultants and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.

We rely on, and expect to continue to rely on, a combination of trademark, trade dress, domain name, copyright, trade secret and patent laws, as well as confidentiality and license agreements with our employees, contractors, consultants and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.

However, our efforts to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable.

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From time to time, our competitors or other third parties may claim that we are infringing upon or misappropriating their intellectual property rights, and we may be found to be infringing upon such rights.

Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive work-arounds or impose other unfavorable terms.

or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive work-arounds or impose other unfavorable terms.

We expect that the occurrence of infringement claims is likely to grow as the market for our products and services grows and as we introduce new and updated products and services.

Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.

during the course of any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments.

Further, during the course of any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments.

If securities analysts and investors regard these announcements as negative, the market price of our Class A common stock may decline.

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The EU has also enacted a new law that will require us to use best efforts in accordance with the high industry standards of professional diligence to exclude infringing content from our platform that may be uploaded by our users.

To comply with this new law, we will likely have to devote significant time and resources to develop technologies to prevent infringing content from being uploaded to our platform and, to the extent infringing content makes it onto our platform, to expeditiously remove such content and implement measures to prevent re-uploads of such content.

To comply with this new law, we will likely have to devote significant time and resources to develop

technologies to prevent infringing content from being uploaded to our platform and, to the extent infringing content makes it onto our platform, to expeditiously remove such content and implement measures to prevent re-uploads of such content.

Although the new law does not mandate monitoring, there may be no practical way for us to comply with the law’s stringent new requirements without adopting some form of robust content identification systems.

We may also be required to enter into license agreements with various rights holders to obtain licenses that authorize the storage and use of content uploaded by our users.

We may not be able to develop technological solutions to

comply with applicable law on economically reasonable terms and there is no guarantee that we will be able to enter into agreements with all relevant rights holders on terms that we deem reasonable.

We may not be able to develop technological solutions to comply with applicable law on economically reasonable terms and there is no guarantee that we will be able to enter into agreements with all relevant rights holders on terms that we deem reasonable.

Compliance may therefore cause us to encounter increased costs which could substantially harm our business and results of operations.

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This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately affect the market price of our Class A common stock.

Further, the separation between voting power and economic interests could cause conflicts of interest between Petrus and our other stockholders, which may result in Petrus undertaking, or causing us to undertake, actions that would be desirable for Petrus but would not be desirable for our other stockholders.

Further, the separation between voting power and economic interests could cause conflicts of interest between Petrus and our other stockholders,

which may result in Petrus undertaking, or causing us to undertake, actions that would be desirable for Petrus but would not be desirable for our other stockholders.

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

In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon (i) the date following the Effectiveness Date on which

the number of shares of our capital stock, including Class A common stock and Class B common stock, and any shares of capital stock underlying any securities, including restricted stock units, options or other convertible instruments, held by “Petrus Affiliates,” as defined in our amended and restated certificate of incorporation, and their permitted entities is less than 50% of the number of shares of Class B common stock held by Petrus Affiliates and their permitted entities as of 11:59 p.m.

In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon (i) the date following the Effectiveness Date on which the number of shares of our capital stock, including Class A common stock and Class B common stock, and any shares of capital stock underlying any securities, including restricted stock units, options or other convertible instruments, held by “Petrus Affiliates,” as defined in our amended and restated certificate of incorporation, and their permitted entities is less than 50% of the number of shares of Class B common stock held by Petrus Affiliates and their permitted entities as of 11:59 p.m.

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

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For example, certain index providers (like FTSE Russell) have restrictions on including companies with multiple-class share structures in certain of their indices, while others (like S&P Dow Jones) have backed away from such policies.

Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices;

however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria.

Under the announced policies, our dual class capital structure would make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing in our stock.

These policies are still fairly new and it is currently unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices, but it is possible that they may depress their valuations compared to the valuations of other similar companies that are included.

Under certain announced policies, our dual class capital structure would make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing in our stock.

It is currently unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices, but it is possible that they may depress their valuations compared to the valuations of other similar companies that are included.

Because of our dual class structure, we will likely be excluded from certain of these indices and we cannot assure you that other stock indices will not take similar actions.

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• the inclusion or exclusion of our Class A common stock from any trading indices;

• other events or factors, including those resulting from war, including the current conflicts between Russia and Ukraine and between Israel and Hamas, incidents of terrorism, man-made or natural disasters, pandemics or responses to these events;

• the effects of our stock repurchase program;

• other events or factors, including those resulting from war, including the current conflicts between Russia and Ukraine and in the Middle East, incidents of terrorism, man-made or natural disasters, pandemics or responses to these events;

• the effects of our stock repurchase program and any dividends;

• the size of our public float;

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

We may not pay dividends in the future.

We declared a $0.35 per share special dividend payable February 15, 2023, for stockholders of record on February 1, 2023, and an additional $1.00 per share special dividend payable July 17, 2023, for stock holders of record on July 3, 2023;

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

We may reduce or discontinue the payment of cash dividends in the future.

We recently announced the declaration of a semi-annual, regular cash dividend program of $0.10 per share.

In addition, we declared a $0.35 per share special dividend payable February 15, 2023, for stockholders of record on February 1, 2023, an additional $1.00 per share special dividend payable July 17, 2023, for stockholders of record on July 3, 2023, and an additional $0.40 per share special dividend payable July 19, 2024, for stockholders of record on July 2, 2024.

However, we are not obligated to pay dividends on our Class A and Class B common stock and we may not pay any other dividends in the future.

Although we anticipate paying regular semi-annual dividends in the future, dividend declarations and the establishment of future record and payment dates are subject to our board of directors’ continuing determination that our dividend program is in the best interests of our stockholders and in compliance with all laws and agreements applicable to the declaration and payment of cash dividends.

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

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

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

Any determination to pay dividends in the future will be at the discretion of our board of directors.

Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends at all or in any particular amounts.

Any reduction or suspension in our dividend payments could have a negative effect on the price of our Class A common stock.

If we do not pay dividends, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Provisions in our charter documents and under Delaware law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our Class A common stock.

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Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of U.S.

federal securities laws in the types of lawsuits to which they apply, the exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, shareholders, officers or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, shareholders, officers or other employees.

directors, shareholders, officers or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, shareholders, officers or other employees.

Our stockholders will not be deemed to have waived our compliance with the U.S.

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Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could result in other liabilities for us and could harm our business.

Furthermore, the circumstances in which we may be held liable for the acts, omissions or responsibilities of these parties is uncertain, complex and evolving.

Furthermore, the circumstances in which we may be

held liable for the acts, omissions or responsibilities of these parties is uncertain, complex and evolving.

If an increasing number of such laws are passed, the resulting compliance costs and potential liability risk could negatively impact our business.

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The time required to evaluate such indications of interest could require significant attention from management, disrupt the ordinary functioning of our business and adversely affect our business, financial condition and results of operations.

Our business is subject to the risk of earthquakes, fire, power outages, floods, public health crises, such as the COVID-19 pandemic, and other catastrophic events, and to interruption by man-made problems such as war or terrorism.

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

Our business is subject to the risk of earthquakes, fire, power outages, floods, public health crises, such as post-COVID-19 factors, and other catastrophic events, and to interruption by man-made problems such as war or terrorism.

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

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

For example, we engage third-party service providers, a portion of whose software development staff resides in Ukraine.

For example, we engage third-party service providers, a portion of whose software development staff

resides in Ukraine.

Due to the current conflict, we may experience an interruption in the services provided by these parties.

Our insurance policies may not cover losses from these catastrophic events or may provide insufficient compensation that does not cover our total losses.

For example, a significant natural disaster, such as a pandemic, earthquake, fire or flood, could adversely affect our business, financial condition and results of operations, and our

insurance coverage may be insufficient to compensate us for losses that may occur.

For example, a significant natural disaster, such as a pandemic, earthquake, fire or flood, could adversely affect our business, financial condition and results of operations, and our insurance coverage may be insufficient to compensate us for losses that may occur.

Acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could also cause disruptions in our or our suppliers’ and manufacturers’ businesses or the economy as a whole.

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In order to maintain and, if required, improve our disclosure controls and procedures, and internal control over, financial reporting to meet this standard, significant resources and management oversight may be required.

If, in the future,

we have material weaknesses or deficiencies in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated.

If, in the future, we have material weaknesses or deficiencies in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated.

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

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Although we have already hired additional employees to assist us in complying with these requirements, our finance team is small and we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses.

Being a public company and complying with applicable rules and regulations will make it much more expensive for us to obtain director and officer liability insurance, and we will incur substantially higher costs to obtain and maintain the same or similar coverage.

As a public company it is much more expensive for us to obtain director and officer liability insurance, and we will incur substantially higher costs to obtain and maintain the same or similar coverage.

These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.

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

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

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

collect and remit taxes.

If such obligations were imposed, the additional costs associated with tax collection, remittance and audit requirements could adversely affect our business, financial condition and results of operations.

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

What changed 10-K

Item 1A. Risk Factors