What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-05 compared with 2024-03-06 · 135 added, 191 removed, 314 unchanged (51% of the section changed)

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Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in the sections titled “Risk Factors” and “Note Regarding Forward-Looking Statements.”

A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found in “Management’s Discussion and Analysis of

Financial Condition and Results of Operations” in our annual report on Form 10-K filed on March 13, 2023, which is hereby incorporated by reference herein.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K filed on March 6, 2024, which is hereby incorporated by reference herein.

Overview of Our Business and History

At Cricut, our mission is to help people lead creative lives.

We have designed and built a creativity platform that enables our engaged and loyal community of over 8.9 million users to turn ideas into professional-looking handmade goods.

With our highly versatile connected machines, design apps and accessories and materials, our users create everything from personalized birthday cards, mugs and T-shirts to large-scale interior decorations.

We have designed and built a creativity platform that enables our engaged and loyal community of nearly 5.9 million Active Users to turn ideas into professional-looking handmade goods.

We define “Active User” as a registered user of at least one registered connected machine who has utilized their connected machine to create a project in the last 365 days.

With our highly versatile Design Space Platform and our products, including our connected machines and accessories and materials, our users create everything from personalized birthday cards, mugs and T-shirts, to large-scale interior decorations.

Our users’ journeys typically begin with the purchase of a connected machine.

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Our connected machines are designed for a wide range of uses and are available at a variety of price points (MSRP by machine family as of December 31, 2024):

• Cricut Joy family for personalization, organization, and customization, $149.00 - $199.00 MSRP

• Cricut Explore family for cutting, writing and scoring, $249.00 - $319.00 MSRP

• Cricut Maker family for cutting, writing, scoring and adding decorative effects to a wider range of materials, $399.00 - $429.00 MSRP

• Cricut Venture for cutting, writing, and scoring large-format projects at professional speeds, $999.00 MSRP

Our software integrates our connected machines and design apps, allowing our users to create and share seamlessly.

• Cricut Joy family $149.00 - $199.00 MSRP

• Cricut Explore family $249.00 - $319.00 MSRP

• Cricut Maker family $399.00 - $429.00 MSRP

• Cricut Venture $999.00 MSRP

Our platform integrates our design apps and connected machines, allowing our users to create and share seamlessly.

Our software is cloud-based, meaning that users can access and work on their projects anywhere, at any time, across desktops or mobile devices.

We enable our users to be inspired, to create and share projects with the Cricut community and to follow others doing the same.

On our apps, users can find inspiration, purchase or upload content like fonts and images, design a project from scratch or find a vast array of ready-to-make projects.

On our platform, users can find inspiration, purchase or upload content like fonts and images, design a project from scratch or find a vast array of ready-to-make projects.

Users can leverage the full power of our platform by using our connected machines together with our free design apps, in-app purchases and subscription offerings to design and complete projects.

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We also have two subscription offerings:

Cricut Access and Cricut Access Premium.

Cricut Access provides a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care.

• Cricut Access:

Provides a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care.

Cricut Access is billed monthly for $9.99 per month or annually for $95.88 per year.

Cricut Access Premium includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping and is billed annually for $119.88 per year.

• Cricut Access Premium:

Includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping and is billed annually for $119.88 per year.

As of December 31, 2024, we had nearly 3.0 million Paid Subscribers to Cricut Access and Cricut Access Premium.

We sell a broad range of accessories and materials that bring our users’ designs to life, from advanced tools like heat presses to Cricut-branded rulers, scoring tools, pens, paper and iron-on vinyl, all designed to work seamlessly with our connected machines.

Designing and completing projects drives repeat purchases of Cricut-branded accessories and materials.

We sell our connected machines and accessories and materials through our brick-and-mortar and online retail partners, as well as through our website at cricut.com.

Our partners include Amazon, Hobby Lobby, HSN, Michaels, Target, Walmart and many others.

We also sell our products and subscriptions to Cricut Access and Cricut Access Premium on cricut.com.

We design and develop our software and hardware products, and we work with third-party contract manufacturers to source components and finished goods and with third-party logistics companies to warehouse and distribute our products.

We sell our connected machines and accessories and materials through our brick-and-mortar and online retail partners, as well as through our website at cricut.com.

Our partners include Amazon, Hobby Lobby, HSN, Jo-Ann, Michaels, Target, Walmart and many others.

Our partners include Amazon, Hobby Lobby, HSN, Michaels, Target, Walmart and many others.

We also sell our products, including subscriptions to Cricut Access and Cricut Access Premium, on cricut.com.

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Our business model thrives because our products unlock creativity, which then in turn drives the engagement of our users.

Our over 8.9 million users’ journeys typically begin with the purchase of a connected machine and expand across our family of products as users harness the power of our platform.

Our nearly 5.9 million Active Users’ journeys typically begin with the purchase of a connected machine and expand across our family of products as users harness the power of our platform.

Our business model is characterized by strong engagement and diversified sales across product categories.

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Since launching our first connected machine in 2014, we have built a loyal and growing community of users that has reached substantial scale.

As of December 31, 2021, 2022 and 2023, we had 6.4 million, 7.9 million and 8.9 million users, respectively, representing 48%, 23% and 13% year-over-year growth, respectively.

See the section titled “—Key Business Metrics” for the definition of users.

As of December 31, 2022, 2023 and 2024, we had 5.8 million, 5.9 million and 5.9 million Active Users, respectively, representing 12%, 2% and (1)% year-over-year growth, respectively.

See the section titled “Key Business Metrics” for the definition of Active Users.

We believe we are in the early stages of our growth and that we have a significant untapped opportunity in the United States and Canada, as well as globally.

Our over 8.9 million users represent approximately 7% of our total SAM which includes the United States, Canada, and our four leading international markets of Australia, France, Germany and the United Kingdom.

We have been able to efficiently acquire new users and drive sales of our products because of the powerful network effects of our community.

To date, word-of-mouth referrals, as well as effective use of low-cost marketing channels like social media, have driven our success.

In 2023, over 38% of new users first heard about Cricut through friends and family.

In 2024, 39% of new users first heard about Cricut through friends and family.

Sales and marketing expenses represented 15%, 16% and 20% of revenue in 2022, 2023 and 2024, respectively.

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In turn, we learn from our users’ creativity, and launch new products to help expand their creative horizons.

We measure engagement by the Percentage of Users Creating in Trailing 90 Days.

See the section titled “—Key Business Metrics” for the definition of Percentage of Users Creating in Trailing 90 Days and for information regarding that metric over the last three years.

As of December 31, 2023, 44% of our over 8.9 million users created on their connected machines in the last 90 days.

The table below shows the Percentage of Users Creating in Trailing 90 Days for the periods indicated.

We measure engagement by the number of Active Users and 90-Day Engaged Users interacting with our Platform.

See the section titled “Key Business Metrics” for the definitions of Active Users and 90-Day Engaged Users and for information regarding those metrics over the last three years.

The table below shows the number of Active Users and 90-Day Engaged Users for the periods indicated.

2022 2023 2024

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Users (in Thousands) 4,939 5,373 5,732 6,409 6,904 7,192 7,457 7,893 8,239 8,446 8,639 8,944

Percentage of Users Creating in Trailing 90 Days 62% 59% 56% 60% 54% 51% 48% 51% 45% 43% 42% 44%

Many of our users choose to pay for our subscription offerings which include a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts,

priority Cricut Member Care, and, in the case of Cricut Access Premium, preferred shipping.

By subscribing to our offerings, users have access to a curated and growing design library of over 750 thousand images, thousands of ready-to-make projects and hundreds of fonts.

Active Users (in Thousands) 5,498 5,593 5,673 5,834 5,943 5,912 5,929 5,935 5,952 5,918 5,894 5,892

90-Day Engaged Users (in Thousands) 3,703 3,670 3,564 4,050 3,710 3,652 3,641 3,932 3,527 3,541 3,532 3,812

Growing With Users Over Time

By subscribing to our offerings, users have access to a curated and growing design library of over one million images, thousands of ready-to-make projects and hundreds of fonts.

We believe that the number of Paid Subscribers is an indicator of the depth of our users’ engagement.

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As of December 31, 2024, we had nearly 3.0 million Paid Subscribers, representing 7% year-over-year growth.

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

We aim to increase the number of our users that are Paid Subscribers over time.

Growing With Users Over Time

The vast majority of the connected machines we sell are first-time Cricut purchases.

We launch software enhancements and new tools for our connected machines, as well as new accessories and materials SKUs, to enhance the capabilities of our connected machines over time.

We grow with our users as they continue to create on their connected machines, subscribe to Cricut Access and Cricut Access Premium and purchase à la carte items and our accessories and materials repeatedly.

The table below is a summary of our Users, Paid Subscribers, Subscription ARPU and Accessories and Materials ARPU since Q1 2021.

In 2023, we generated, on average, approximately $67.33 combined from subscriptions and accessories and materials per user.

Our users purchase subscriptions and accessories and materials, our higher gross margin categories, long after they first purchase a connected machine.

In 2023, the gross margin of our subscriptions and accessories and materials categories was 89% and 17%, respectively, compared to 13% for our connected machines category.

We review Platform ARPU as an indicator of the monetization of our Active Users.

We define Platform ARPU as Platform revenue in a 12-month period divided by Active Users.

Platform ARPU allows us to forecast Platform revenue over time and is an indicator of our ability to expand with users and of user engagement with our subscription offerings.

See the section titled “Key Business Metrics” for the definition of Platform ARPU and for information regarding that metric over the last three years.

2022 2023 2024

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Users (in Thousands) 4,939 5,373 5,732 6,409 6,904 7,192 7,457 7,893 8,239 8,446 8,639 8,944

Paid Subscribers (in thousands) 2,311 2,367 2,438 2,609 2,715 2,722 2,699 2,770 2,797 2,813 2,838 2,959

Subscription ARPU $9.96 $9.83 $9.60 $9.18 $9.73 $9.59 $9.40 $9.26 $9.31 $9.13 $8.93 $8.70

Accessories and Materials ARPU $29.45 $26.67 $18.79 $28.66 $17.67 $11.45 $7.61 $13.99 $8.93 $7.71 $5.75 $8.80

We review Subscription ARPU and Accessories and Materials ARPU as an indicator of the monetization of the journey of our users.

Connected Machine revenue fluctuates as we introduce new connected machines at various price points and as the mix of connected machines purchased changes.

We define Accessories and Materials ARPU as Accessories and Materials revenue divided by average users in a period.

Accessories and Materials ARPU fluctuates seasonally as well as over time as we introduce new accessories and materials at various price points and as the volume and mix of accessories and materials purchased changes.

We expect this metric to continue to fluctuate both seasonally and over time from shifts in volume and mix.

Platform ARPU $42.31 $44.58 $46.58 $47.76 $48.51 $50.13 $51.20 $52.07 $52.26 $52.61 $52.86 $53.12

Factors Affecting Our Performance

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An important part of our success is driven by engagement of our users, as well as our ability to sell additional products to our users after their first connected machine purchase.

Our users are engaged when they create with

connected machines, design apps and accessories and materials.

Our users are engaged when they create with connected machines, design apps and accessories and materials.

It is therefore important that users find our products intuitive and easy to use.

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Historically we find that our users continue to be engaged over time.

As of December 31, 2023, 66% of our over 8.9 million users created on their connected machines in the last 365 days.

As of December 31, 2024, nearly 5.9 million Active Users created on their connected machines in the last 365 days.

This durable relationship is motivated by new software and products that we launch to expand the capabilities of existing connected machines as well as through the inspiration derived from our large and passionate community.

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Our ability to grow depends largely on the ability of these third-party companies to scale with us, provide high quality services and deliver components and finished products on time and at reasonable costs.

We primarily rely on two contract manufacturers to build the majority of our connected machines.

We rely on three contract manufacturers to build our connected machines.

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

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We have a strong focus on the unit economics of each of our products and consistency in how we operate the business.

Our investments to date have been critical to our success and have allowed us to reach over 8.9 million users as of December 31, 2023 and launch more than 6,000 SKUs since the launch of our first connected machine.

We will continue to prioritize our investments in technology innovation including software and hardware development, content and accessories and materials.

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Our expenses may also increase as we hire additional personnel and continue to attract technical talent.

expect to continue or increase our investments on these items in the future, we cannot be certain they will result in the growth of our number of users or increase engagement with existing users.

While we expect to continue or increase our investments on these items in the future, we cannot be certain they will result in the growth of our number of users or increase engagement with existing users.

Growing Internationally

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Additionally, sales of accessories and materials typically rise and fall with seasonal holiday crafting periods.

The yearly seasonality patterns experienced in 2021, 2022, and 2023 are not representative of our typical historical patterns due to the unique aspects of the pandemic and condition of the global economy.

As the impact of the pandemic and global economy challenges on behaviors abate, we expect to return to a more normal seasonality pattern.

As we continue to grow internationally, we expect we may experience seasonality in additional markets, which may differ from the seasonality experienced in the United States.

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2024 2023 2022

Users (in thousands) 8,944 7,893 6,409

Percentage of Users Creating in Trailing 90 Days 44 % 51 % 60 %

Number of Users Creating in Trailing 90 Days 3,932 4,050 3,828

Active Users (in thousands) 5,892 5,935 5,834

90-Day Engaged Users (in thousands) 3,812 3,932 4,050

Paid Subscribers (in thousands) 2,959 2,770 2,609

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2024 2023 2022

Subscription ARPU $ 36.11 $ 38.09 $ 38.37

Accessories and Materials ARPU $ 31.22 $ 50.54 $ 102.91

We define a User as a registered user of at least one registered connected machine as of the end of a period.

Platform ARPU $53.12 $52.07 $47.76

We define Active Users as registered users of at least one registered connected machine who have utilized their connected machine to create a project in the last 365 days.

One user may own multiple registered connected machines but is only counted once if that user registers those connected machines by using the same email address.

If possession of a connected machine is transferred to a new owner and registered by that new owner, the new owner is added to the total user count and the prior owner is removed from the total user count if the prior owner does not own any other registered connected machines.

User count is a key indicator of the health of our business, because changes in the number of users reflects changes in connected machine sales and represents opportunities for us to drive additional sales of subscriptions and accessories and materials.

There are certain limitations associated with this metric.

For example, this metric does not capture whether a User is active in using a connected machine and does not indicate whether a User is purchasing subscriptions or accessories and materials.

We compensate for these limitations by also reviewing other metrics that capture portions of this information, including the metrics below.

Percentage of Users Creating in Trailing 90 Days

We define the Percentage of Users Creating in Trailing 90 Days as the percentage of users who have used a connected machine for any activity, such as cutting, writing or any other activity enabled by our connected machines, in the past 90 days.

This metric is a key indicator of our engagement with users, which helps drive sales of subscriptions and accessories and materials.

There are certain limitations associated with this metric.

For example, this metric does not capture how active a User is during the 90-day period, nor whether a User is purchasing subscriptions or accessories and materials.

We compensate for some of these limitations by also reviewing other metrics that capture portions of this information, including the metrics below.

If possession of a connected machine is transferred to a new owner and registered by that new owner, the new owner is added to the total Active Users and the prior owner is removed from the total Active Users if the prior owner does not own any other registered connected machines.

Active Users is a key indicator of the health of our business, because changes in the number of Active Users excludes non-users to better represent opportunities for us to drive additional platform and accessories and materials revenue.

90-Day Engaged Users

We define 90-Day Engaged Users as registered users of at least one registered connected machine who have utilized their connected machine to create a project in the last 90 days.

One user may own multiple registered connected machines but is only counted once if that user registers those connected machines by using the same email address.

If possession of a connected machine is transferred to a new owner and registered by that new owner, the new owner is added to the total 90-Day Engaged Users and the prior owner is removed from the total 90-Day Engaged Users if the prior owner does not own any other registered connected machines.

90-Day Engaged Users excludes non-users to better represent opportunities for us to drive additional platform and accessories and materials revenue.

Paid Subscribers

We define Paid Subscribers as the number of users with a subscription to Cricut Access or Cricut Access Premium, excluding cancelled, unpaid or free trial subscriptions, as of the end of a period.

Paid Subscribers is a key metric to track growth in our subscriptions revenue and potential leverage in our gross margin.

Subscription ARPU

We define Subscription ARPU as Subscriptions revenue divided by average users in a period.

Subscription ARPU allows us to forecast Subscriptions revenue over time and is an indicator of our ability to expand with users and of user engagement with our subscription offerings.

Accessories and Materials ARPU

We define Accessories and Materials ARPU as Accessories and Materials revenue divided by average users in a period.

Accessories and Materials ARPU allows us to forecast Accessories and Materials revenue over time and is an indicator of our ability to expand with users, particularly the volume of projects created by our users.

Paid Subscribers is a key metric to track growth in our Platform revenue and potential leverage in our gross margin.

Platform ARPU

We define Platform ARPU as Platform revenue in a 12-month period divided by Active Users.

Platform ARPU allows us to forecast Platform revenue over time and is an indicator of our ability to expand with users and of user engagement with our subscription offerings.

Components of our Results of Operations

We operate and manage our business in three reportable segments:

Connected Machines, Subscriptions and Accessories and Materials.

We operate and manage our business in two reportable segments:

Platform and Products.

We identify our reportable segments based on the information used by management to monitor performance and make operating decisions.

See Note 18 to our audited consolidated financial statements included elsewhere in this filing for additional information regarding our reportable segments.

Connected Machines

We generate Connected Machines revenue from sales of our portfolio of connected machines, currently consisting of machines in four product families, Cricut Maker, which includes Maker and Maker 3, Cricut Explore, which includes Explore Air 2 and Explore 3, Cricut Joy, which includes Joy and Joy Xtra, and Cricut Venture, net of sales discounts, incentives and returns.

Connected Machines revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.

Subscriptions

We generate Subscriptions revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium and a minimal amount of revenue allocated to the unspecified future upgrades and enhancements related to the essential software and access to our cloud-based services.

We generate Platform revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium, digital content, and a minimal amount of revenue allocated to the unspecified future upgrades and enhancements related to the essential software and access to our cloud-based services.

For a monthly or annual subscription fee, Cricut Access includes a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care.

For an annual subscription fee, Cricut Access Premium includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping.

Subscriptions revenue excludes à la carte digital content purchases.

Subscriptions revenue is recognized on a ratable basis over the subscription term.

Accessories and Materials

We generate Accessories and Materials revenue from sales of ancillary products, such as Cricut EasyPress, Cricut Mug Press, hand tools, machine replacement tools and blades, project materials such as vinyl and iron-on and sales of à la carte digital content purchases, including fonts, images and projects.

Accessories and Materials

revenue is recognized for sales of such items, net of sales discounts, incentives and returns and includes amounts allocated to the material right for discounts on materials and accessories available only to paid subscribers.

Accessories and Materials revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.

For our annual subscription fee, Cricut Access Premium includes all the benefits of Cricut Access as well as additional discounts and preferred shipping.

Digital content includes à la carte digital content purchases, including fonts, images and projects.

Platform revenue is recognized on a ratable basis over time, during the subscription term for subscriptions, and at the point in time when control is transferred for à la carte digital content.

We generate Products revenue from sales of connected machines and ancillary products, net of sales discounts, incentives and returns, and includes amounts allocated to the material right for discounts on materials and accessories available only to Paid Subscribers.

Our connected machines portfolio consists of machines in four product families:

Cricut Maker, which includes Maker and Maker 3;

Cricut Explore, which includes Explore Air 2 and Explore 3;

Cricut Joy, which includes Joy and Joy Xtra;

and Cricut Venture.

Our ancillary products include Cricut EasyPress, Cricut MugPress, hand tools, machine replacement tools and blades, and project materials such as vinyl and iron-on.

Products revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.

Cost of Revenue

Connected Machines

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

We expect our cost of revenue related to Connected Machines as a percentage of revenue to fluctuate in the near term as we continue selling through end of life machines, address global supply chain challenges and continue to invest in the growth of our business and decrease over the long term as we drive greater scale and efficiency in our business.

Subscriptions

Cost of revenue related to Subscriptions consists primarily of hosting fees, digital content costs, amortization of capitalized software development costs and software maintenance costs.

We expect our cost of revenue related to Subscriptions as a percentage of revenue to fluctuate in the near term and long term as we expand our content and software feature offerings, including localized content for international target markets.

Accessories and Materials

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

We expect our cost of revenue related to Accessories and Materials as a percentage of revenue to fluctuate in the near term and long term as we address global supply chain challenges and continue to invest in the growth of our business.

Cost of revenue related to Platform consists primarily of hosting fees, digital content costs, amortization of capitalized software development costs, software maintenance costs, and royalties.

We expect our cost of revenue related to Platform as a percentage of revenue to fluctuate in the near term as we expand our content offerings, including localized content for international target markets, and decrease over time as we drive greater scale and efficiency in our business.

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

We expect our cost of revenue related to Products as a percentage of revenue to fluctuate in the near term as we continue selling through end of life machines, address global supply chain challenges and continue to invest in the growth of our business and decrease over the long term as we drive greater scale and efficiency in our business.

Operating Expenses

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Research and development expenses consist primarily of costs associated with the development of our connected machines, software and accessories and materials, including personnel-related expenses for engineering, product development and quality assurance, as well as prototype costs, service fees incurred by contracting with vendors and allocated overhead.

We expect our research and development expenses to fluctuate in the near term as we refine our product roadmaps.

We expect our research and development expenses to increase in the near term as we refine our product roadmaps.

We produced gross savings in research and development of approximately $3.2 million during 2024 as a result of the January 2024 restructuring plan.

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We produced gross savings in general and administrative of approximately $0.6 million during 2024 as a result of the January 2024 restructuring plan.

Other Income (Expense)

Other income (expense) consists primarily of interest income from our investments in marketable securities, offset by interest expense associated with our debt financing arrangements and amortization of debt issuance costs.

Other income, net consists primarily of interest income from our investments in marketable securities, offset by interest expense associated with our debt financing arrangements and amortization of debt issuance costs.

Provision for Income Taxes

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The Organization for Economic Co-operation and Development (“OECD”) Pillar Two Model Rules (“Pillar Two”) for a global 15% minimum tax are in the process of being adopted in a number of jurisdictions in which we operate.

Pillar Two is expected to be applicable to us beginning January 1, 2024 if our revenues exceed €750 million.

The only jurisdiction where the top-up tax would be applicable is Switzerland and the estimated tax is not expected to be material.

Pillar Two is applicable to us beginning January 1, 2024.

Of the jurisdictions where Pillar Two has been adopted, the only jurisdiction where the top-up tax is applicable is Switzerland and the estimated tax is immaterial.

Results of Operations

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(in thousands)

Connected machines $ 198,312 $ 252,563 $ 548,205

Subscriptions 303,989 272,344 205,858

Accessories and materials 262,846 361,389 552,164

Platform $ 312,976 $ 309,012 $ 278,646

Products 399,562 456,135 607,650

Total revenue 712,538 765,147 886,296

Cost of revenue:

Connected machines (1)

37,288 32,804 26,676

Subscriptions (1)

322,462 389,050 509,727

Accessories and materials (1)

216,937 265,768 342,791

Total cost of revenue 359,750 421,854 536,403

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Interest expense (326) (323) (289)

Other income (expense) 2,145 508 85

Other income (expense), net 9,798 2,028 (32)

Other income 2,077 2,145 508

Total other income, net 12,767 9,798 2,028

Income before provision for income taxes 88,877 79,783 81,981

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Cost of revenue

Connected machines $ 700 $ 288 $ 34

Subscriptions 926 443 219

Accessories and materials 805 199 —

Platform $ 1,192 $ 926 $ 443

Products 712 1,505 487

Total cost of revenue 1,904 2,431 930

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(in thousands)

Connected machines $ 198,312 $ (54,251) (21) % $ 252,563 $ (295,642) (54) % $ 548,205

Subscriptions 303,989 31,645 12 % 272,344 66,486 32 % 205,858

Accessories and materials 262,846 (98,543) (27) % 361,389 (190,775) (35) % 552,164

Platform $ 312,976 $ 3,964 1 % $ 309,012 $ 30,366 11 % $ 278,646

Products 399,562 (56,573) (12) % 456,135 (151,515) (25) % 607,650

Total revenue $ 712,538 $ (52,609) (7) % $ 765,147 $ (121,149) (14) % $ 886,296

Connected Machines revenue decreased by $54.3 million, or 21%, to $198.3 million for the year ended December 31, 2023 from $252.6 million for the year ended December 31, 2022.

The decrease was primarily driven by a decline in the number of Connected Machines sold during the period, particularly Maker and Air 2 units.

The decrease was offset partially by increased sales of Explore 3 and sales of Joy Xtra, which launched in September 2023.

Subscriptions revenue increased by $31.6 million, or 12%, to $304.0 million for the year ended December 31, 2023 from $272.3 million for the year ended December 31, 2022.

Platform revenue increased by $4.0 million, or 1%, to $313.0 million for the year ended December 31, 2024 from $309.0 million for the year ended December 31, 2023.

The increase was primarily driven by growth of 7% in the number of Paid Subscribers from 2.8 million as of December 31, 2023 to nearly 3.0 million as of December 31, 2024.

Accessories and Materials revenue decreased by $98.5 million, or 27%, to $262.8 million for the year ended December 31, 2023 from $361.4 million for the year ended December 31, 2022.

The decrease was primarily driven by a decline in unit sales of project materials and extensions products.

The increase was offset partially by increased promotional activity, increased mix shift to annual subscriptions, and increased mix shift to international subscriptions.

Products revenue decreased by $56.6 million, or 12%, to $399.6 million for the year ended December 31, 2024 from $456.1 million for the year ended December 31, 2023.

The decrease was primarily driven by fewer units of Accessories & Materials sold and increased promotional activity during the period.

Cost of Revenue, Gross Profit and Gross Margin

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Cost of Revenue:

Connected machines $ 172,571 $ (71,689) (29) % $ 244,260 $ (239,765) (50) % $ 484,025

Subscriptions 32,346 5,971 23 % 26,375 4,414 20 % 21,961

Accessories and materials 216,937 (48,831) (18) % 265,768 (77,023) (22) % 342,791

Platform $ 37,288 $ 4,484 14 % $ 32,804 $ 6,128 23 % $ 26,676

Products 322,462 (66,588) (17) % 389,050 (120,677) (24) % 509,727

Total cost revenue $ 359,750 $ (62,104) (15) % $ 421,854 $ (114,549) (21) % $ 536,403

Gross Profit:

Connected machines $ 25,741 $ 17,438 210 % $ 8,303 $ (55,877) (87) % $ 64,180

Subscriptions 271,643 25,674 10 % 245,969 62,072 34 % 183,897

Accessories and materials 45,909 (49,712) (52) % 95,621 (113,752) (54) % 209,373

Platform $ 275,688 $ (520) — % $ 276,208 $ 24,238 10 % $ 251,970

Products 77,100 10,015 15 % 67,085 (30,838) (31) % 97,923

Total gross profit $ 352,788 $ 9,495 3 % $ 343,293 $ (6,600) (2) % $ 349,893

Connected machines 13 % 3 % 12 %

Subscriptions 89 % 90 % 89 %

Accessories and materials 17 % 26 % 38 %

Connected Machines cost of revenue decreased by $71.7 million, or 29%, to $172.6 million for the year ended December 31, 2023 from $244.3 million for the year ended December 31, 2022.

The decrease was primarily driven by a decline in the number of Connected Machines sold during the year, particularly Maker and Air 2 units, offset partially by sales of Joy Xtra, which launched in September 2023, and increased sales of Explore 3.

Gross margin for Connected Machines increased to 13% for the year ended December 31, 2023 from 3% for the year ended December 31, 2022.

The increase was primarily related to improved product mix and less promotional activity, offset partially by increased warehousing and operations c osts as a percentage of revenue.

Subscriptions cost of revenue increased by $6.0 million, or 23%, to $32.3 million for the year ended December 31, 2023 from $26.4 million for the year ended December 31, 2022.

The increase was primarily driven by an increase in amortization of capitalized software development costs and increased external digital content costs.

Gross margin for Subscriptions decreased to 89% for the year ended December 31, 2023 from 90% for the year ended December 31, 2022.

The decrease was primarily driven by an increase in amortization of capitalized software development costs and external digital content costs.

Accessories and Materials cost of revenue decreased by $48.8 million, or 18%, to $216.9 million for the year ended December 31, 2023 from $265.8 million for the year ended December 31, 2022.

The decrease was primarily driven by a decline in unit sales of Accessories and Materials during the period, particularly for units of project materials and extensions products.

The decrease was partially offset by inventory write-downs attributed to extensions products and project materials.

Gross margin for Accessories and Materials decreased to 17% for the year ended December 31, 2023 from 26% for the year ended December 31, 2022.

Gross margin decreased primarily due to inventory write-downs of e xtensions products and p roject materials, and increased warehousing and operations costs as a percentage of revenue.

The decline was partially offset by more favorable costs per unit.

Platform 88 % 89 % 90 %

Products 19 % 15 % 16 %

Platform cost of revenue increased by $4.5 million, or 14%, to $37.3 million for the year ended December 31, 2024 from $32.8 million for the year ended December 31, 2023.

The increase was primarily driven by increases in software development costs and hosting fees.

Gross margin for Platform decreased to 88% for the year ended December 31, 2024 from 89% for the year ended December 31, 2023.

The decrease was primarily driven by increases in software development costs and hosting fees.

Products cost of revenue decreased by $66.6 million, or 17%, to $322.5 million for the year ended December 31, 2024 from $389.1 million for the year ended December 31, 2023.

The decrease was primarily driven by a reduction in inventory impairment charges compared to prior year and fewer units of Accessories & Materials sold during the period.

Gross margin for Products increased to 19% for the year ended December 31, 2024 from 15% for the year ended December 31, 2023.

The increase was primarily driven by a reduction in inventory impairment charges compared to prior year, partially offset by increased promotional activity .

Operating Expenses

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Research and development expenses decreased by $4.6 million, or 7%, to $60.4 million for the year ended December 31, 2024 from $65.0 million for the year ended December 31, 2023.

The decrease was primarily due to a $9.4 million decrease in product development expense for future products and a $3.5 million decrease in personnel-related expense, partially offset by increases in professional services expense.

The decrease was primarily due to a $4.7 million decrease in personnel-related expense.

Sales and Marketing

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As a percentage of total revenue 20 % 16 % 15%

Sales and marketing expenses decreased by $7.2 million, or 6%, to $123.2 million for the year ended December 31, 2023 from $130.4 million for the year ended December 31, 2022.

The decrease was primarily due to a $2.6 million decrease in advertising and other marketing expense, a $1.7 million decrease in personnel-related expense, a $1.3 million decrease in professional services expense, and a $1.1 million decrease in software subscriptions expense.

Sales and marketing expenses increased by $20.1 million, or 16%, to $143.3 million for the year ended December 31, 2024 from $123.2 million for the year ended December 31, 2023.

The increase was primarily due to a $16.0 million increase in advertising and other marketing expense and a $4.8 million increase in personnel-related expense, partially offset by a decrease in software subscriptions expense.

General and Administrative

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As a percentage of total revenue 10 % 11 % 7%

General and administrative expenses increased by $22.4 million, or 36%, to $85.1 million for the year ended December 31, 2023 from $62.6 million for the year ended December 31, 2022.

The increase was primarily due to a $13.0 million impairment of unused equipment, software, and inventory (see Note 2), a $4.1 million increase in stock-based compensation, a $2.4 million increase in professional services expense, a $1.7 million increase in bad debt expense, and a $1.7 million increase in software subscriptions expense.

Other Income (Expense)

General and administrative expenses decreased by $12.1 million, or 14%, to $73.0 million for the year ended December 31, 2024 from $85.1 million for the year ended December 31, 2023.

The decrease was primarily due to a $13.3 million decrease in impairment of unused equipment, software, and inventory (see Note 2) and a $1.9 million decrease in professional services expense, partially offset by increases in personnel-related expense and bad debt expense.

Years Ended December 31,

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(dollars in thousands)

Other income (expense) $ 9,798 $ 7,770 383 % $ 2,028 $ 2,060 (6438) % $ (32)

Other income (expense) increased by $7.8 million, or 383%, to a net income of $9.8 million for the year ended December 31, 2023 from a net income of $2.0 million for the year ended December 31, 2022.

The change was primarily related to interest from marketable securities due to more favorable rates.

Other income, net $ 12,767 $ 2,969 30 % $ 9,798 $ 7,770 383 % $ 2,028

Other income, net increased by $3.0 million, or 30%, to a net income of $12.8 million for the year ended December 31, 2024 from a net income of $9.8 million for the year ended December 31, 2023.

The change was primarily related to interest from marketable securities due to more favorable rates and higher cash balances in 2024.

Provision for Income Taxes

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Provision for income taxes $ 26,047 $ (100) — % $ 26,147 $ 4,832 23 % $ 21,315

Provision for income taxes increased by $4.8 million, or 23%, to $26.1 million for the year ended December 31, 2023 from $21.3 million for the year ended December 31, 2022.

Provision for income taxes decreased by $0.1 million, or 0%, to $26.0 million for the year ended December 31, 2024 from $26.1 million for the year ended December 31, 2023.

This represents an effective tax rate of 29.3% and 32.8% for the years ended December 31, 2024 and 2023, respectively.

The increase in the tax rate is due mainly to a decrease in tax credits specifically related to Research and Development and an increase in uncertain tax positions related to prior years foreign-derived intangible income.

The decrease in the tax rate is due mainly to a decrease in uncertain tax positions related to the release of reserves due to statute lapses and a decrease in return to provision adjustments.

Liquidity and Capital Resources

Our operations during the periods presented have been financed primarily through cash flows from operating activities and the net proceeds from our initial public offering in March of 2021.

We believe our balances of cash and cash equivalents, which totaled $142.2 million as of December 31, 2023, along with forecasted cash expected to be generated by ongoing operations and $300.0 million in available borrowings on our credit facility (see Note 9) will be sufficient to satisfy our cash requirements over the next 12 months and beyond.

We believe our balances of cash and cash equivalents, which totaled $232.1 million as of December 31, 2024, along with forecasted cash expected to be generated by ongoing operations and $300.0 million in available borrowings and the option to increase the aggregate amount of our credit facility by up to an additional $150.0 million (see Note 8 ) will be sufficient to satisfy our cash requirements over the next 12 months and beyond.

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other growth initiatives, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our products and overall economic conditions.

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The sale of additional equity would result in additional dilution to our stockholders.

The incurrence of debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our

The incurrence of debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.

There can be no assurances that we will be able to raise additional capital.

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Stock Repurchase Program

On July 19, 2022 , our Board of Directors authorized a share repurchase program to repurchase up to $50 million of its outstanding Class A common stock.

On July 19, 2022 , our Board of Directors authorized a share repurchase program to repurchase up to $50 million of its outstanding Class A common stock which was completed during the six months ended June 30, 2024.

On May 6, 2024 the Company’s Board of Directors approved an additional $50 million for the share repurchase program to purchase shares of its outstanding Class A common stock depending on the Company’s continuing analysis of market, financial, and other factors.

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

During the twelve months ended December 31, 2024, we repurchased and retired 6,247,175 shares of our Class A common stock for $38.4 million under this program.

On November 1, 2024, the Board of Directors declared a recurring semi-annual dividend of $0.10 per share on its Class A and Class B common stock, payable on January 21, 2025 to shareholders of record as of January 7, 2025.

As part of the dividends, and pursuant to the underlying award agreements, holders of restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) received a dividend equivalent of $0.10 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

The aggregate dividend of $24.2 million was to be satisfied in cash of $21.3 million payable to holders of Class A and Class B common stock with the remaining $2.9 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders prior to any subsequent forfeitures.

On May 6, 2024, the Company declared a special dividend of $0.40 per share and a recurring semi-annual dividend of $0.10 per share on its Class A and Class B common stock, payable on July 19, 2024 to shareholders of record as of July 2, 2024.

As part of the dividends, and pursuant to the underlying award agreements, holders of RSUs and PRSUs received a dividend equivalent of $0.50 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

The aggregate dividend of $121.7 million was to be satisfied in cash of $108.2 million payable to holders of Class A and Class B common stock with the remaining $13.5 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders prior to any subsequent forfeitures.

On May 18, 2023, the Company declared a special dividend of $1.00 per share on its Class A and Class B common stock, payable on July 17, 2023 to shareholders of record as of July 3, 2023.

As part of the dividend, and pursuant to the underlying award agreements, holders of restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) received dividend equivalents of $1.00 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

As part of the dividend, and pursuant to the underlying award agreements, holders of RSUs and PRSUs received dividend equivalents of $1.00 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

The aggregate dividend of $234.6 million was to be satisfied in cash of $219.8 million payable to holders of Class A and Class B common stock with the remaining $14.8 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders prior to any subsequent forfeitures.

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

As part of the dividend, and pursuant to the underlying award agreements, holders of RSU and PRSUs will receive a dividend equivalent of $0.35 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

As part of the dividend, and pursuant to the underlying award agreements, holders of RSUs and PRSUs received a dividend equivalent of $0.35 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

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

During the twelve months ended December 31, 2024, an aggregate of $110.0 million was paid in cash, and $13.5 million was satisfied in the form of dividend equivalents to RSU or PRSU holders.

However, we have not adopted a dividend policy.

Any future determination to pay dividends on our common stock will be made at the discretion of our board of directors subject to applicable laws, and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements.

Our ability to pay cash dividends on our capital stock may also be limited by the terms of our Credit Agreement and the terms of any future debt or preferred securities or future indebtedness.

Year Ended December 31,

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Operating Activities

The change in net cash flows from operating activities for the year ended December 31, 2023 compared to year ended December 31, 2022 is primarily due to lower inventory purchases during 2023 due to higher beginning inventory balances combined with softening of consumer demand.

In addition, we experienced a smaller decrease in payable balances with inventory vendors in 2023 compared to 2022, due to fewer purchases in 2023.

These increases were partially offset by a reduction in cash received from accounts receivable in 2023 compared to 2022.

The change in net cash flows from operating activities for the year ended December 31, 2024 compared to year ended December 31, 2023 is primarily due to a decrease in payable balances , and a reduction in cash received from accounts receivable in 2024 compared to 2023.

These decreases were partially offset by lower in ventory purchases during 2023 due to higher beginning inventory balances combined with softening of consumer demand.

Investing Activities

The change in net cash flows from investing activities for the year ended December 31, 2023 compared to year ended December 31, 2022 was primarily due to fewer purchases of marketable securities during 2023.

The change in net cash flows from investing activities for the year ended December 31, 2024 compared to year ended December 31, 2023 was primarily due to a decrease in net purchases and maturities of marketable securities during 2024 compared to 2023, in addition to a decrease in acquisitions of property and equipment.

Financing Activities

The change in net cash flows from financing activities for the year ended December 31, 2023 compared to year ended December 31, 2022 was primarily due to the payment of special dividends during 2023.

The change in net cash flows from financing activities for the year ended December 31, 2024 compared to year ended December 31, 2023 was primarily due to a decrease in dividends paid in 2024 compared to 2023, partially offset by an increase in repurchases of common stock .

Critical Accounting Estimates

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Certain customer rebate programs are estimates at period end due to the nature of the incentives or expected and yet-to-be announced incentive programs that apply to current period revenue transactions.

These estimates are based on our incentive program experience, historical and projected sales data and current contractual terms.

These estimates are based on our incentive program experience, historical

and projected sales data and current contractual terms.

The remaining portion of this liability is based on contractual amounts and does not require estimation.

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If actual demand is lower than our estimated demand, we could be required to write-down the value of additional inventory, which would have a negative effect on our gross profit.

Stock-based compensation

Stock-based compensation is based on the grant date fair value of equity classified awards and is based on the fair value of liability classified awards at each reporting date through settlement.

Through the date of our corporate reorganization in March 2021 (“Corporate Reorganization”), Cricut Holdings had granted to certain of our employees common incentive units (“CIUs”), options to purchase zero-strike price incentive units, and incentive unit equivalents (phantom units).

The grant date fair value of CIUs and options to purchase zero-strike price incentive units was determined using the Black-Scholes option-pricing model.

The fair value of incentive unit equivalents which also had a market condition, was estimated using a Geometric Brownian Motion Stock Path Monte Carlo Simulation, or Monte Carlo Simulation.

The determination of the grant date fair value of awards issued is affected by a number of variables, including the fair value of the underlying share, the expected term of each award and the expected price volatility over the expected term of each award.

Prior to our Corporate Reorganization and IPO, significant estimation was required for these inputs.

We performed valuations of the underlying units of Cricut Holdings using various valuation methods including combinations of income and market approaches with input from management.

We derived our volatility from the average historical stock volatilities of peer public companies over a period equivalent to the expected term of the awards.

We estimated the expected term based on the expected time to a liquidation event or other transaction that would result in settlement of the award.

At the time of our Corporate Reorganization in 2021, all outstanding awards were settled or modified as described in Note 12 of the notes to our consolidated financial statements.

After our Corporate Reorganization and initial public offering in March 2021, we estimate the fair value of stock-based awards based on the observable fair value of our common stock, the risk-free interest rate, volatility based upon the historical volatility of the Company's stock price or a blended average of historical stock volatilities of peer companies and historical volatility of our stock price over a period equal to the expected term of the awards, and our expected dividend yield.

The recognition of stock-based compensation for awards with performance based vesting conditions, including our performance-based restricted stock units (“PRSU”) awards, is dependent on whether it is probable that the performance based vesting conditions will be met.

As of December 31, 2023, we determined it is not probable that the performance conditions will be met.

Unrecognized stock-based compensation associated with unvested PRSU awards was $157.8 million as of December 31, 2023.

Qualitative and Quantitative Disclosures About Market Risk

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We monitor our cost of borrowing, taking into account our funding requirements and our expectations for interest rates in the future.

To date, we have not been exposed, nor do we anticipate being exposed to material

risks due to changes in interest rates.

To date, we have not been exposed, nor do we anticipate being exposed to material risks due to changes in interest rates.

A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis