What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-04 compared with 2025-03-05 · 65 added, 59 removed, 390 unchanged (24% of the section changed)

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

We currently sell a portfolio of connected machines that cut, write, score and create other decorative effects using a wide variety of materials including paper, vinyl, iron-on vinyl, pens, and more.

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

• Cricut Joy family $149.00 - $199.00 MSRP

• Cricut Explore family $249.00 - $319.00 MSRP

• Cricut Maker family $399.00 - $429.00 MSRP

• Cricut Venture $999.00 MSRP

We currently sell a portfolio of connected machines that cut, write, score and create other decorative effects using a wide variety of materials including paper, adhesive vinyl, iron-on vinyl, pens, and more.

Our connected machines are designed in a variety of sizes for a wide range of uses and are available at a variety of price points and in a variety of bundles with accessories and materials, or with accessories and materials plus subscription.

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

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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 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.

As of December 31, 2025, we had just over 3.09 million Paid Subscribers to Cricut Access and Cricut Access Premium.

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.

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• Net income of $53.6 million, $62.8 million and $76.7 million, respectively, representing (12)%, 17% and 22% year-over-year growth, respectively

On March 29, 2021, we completed an initial public offering (“IPO”), in which we sold 13,250,000 shares of Class A common stock, and the selling stockholders sold an additional 2,064,903 shares of Class A common stock at a price to the public of $20.00 per share.

We received aggregate net proceeds of $242.7 million after deducting offering costs, underwriting discounts and commissions of $22.3 million.

On April 28, 2021, we sold an additional 968,815 shares of Class A common stock and the selling stockholders sold an additional 150,984 shares of Class A common stock pursuant to the partial exercise of the underwriters’ option to purchase additional shares which generated net proceeds of $18.0 million after deducting for underwriting discounts and commissions of $1.4 million.

Our Business Model

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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, 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.

As of December 31, 2023, 2024 and 2025, we had nearly 5.9 million, 5.9 million and nearly 5.9 million Active Users, respectively, representing 2%, (1)% and 0% year-over-year growth, respectively.

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

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Sales and marketing expenses represented 16%, 20% and 22% of revenue in 2023, 2024 and 2025, respectively.

Once we acquire a user, we see strong engagement with them over time.

Once we acquire a user, we often see strong engagement with them over time.

We drive engagement through a highly interactive and fulfilling product experience and the strength of our community.

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Once they have purchased connected machines, users inspire one another to create and use more of our digital content, subscriptions and accessories and materials.

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

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

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

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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 one million images, thousands of ready-to-make projects and hundreds of fonts.

By subscribing to our offerings, users have access to a curated and growing design library of over 1.6 million images, thousands of templates, thousands of ready-to-make projects and over a thousand fonts.

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

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

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

As of December 31, 2025, we had just over 3.09 million Paid Subscribers, representing 4% year-over-year growth.

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

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We expect to pursue additional geographic diversification in our supply chain to mitigate tariffs and other supply chain challenges.

We must continue to build relationships with strong third-party suppliers, contract manufacturers and third-party logistics companies and continue to diversify our supply chain to improve operational results.

continue to build relationships with strong third-party suppliers, contract manufacturers and third-party logistics companies and continue to diversify our supply chain to improve operational results.

We manage our inventory levels to account for the complexity of our supply chain, resulting in a variety of risks.

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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.

Business Environment

Beginning in 2025, the U.S.

government implemented a series of tariffs affecting a broad range of products manufactured outside the United States.

Since that time, tariff measures have continued to evolve, including the imposition of additional tariffs, temporary pauses, modifications, and product or country-specific exclusions.

government has also indicated that it is engaged in, or may engage in, bilateral or multilateral negotiations that could result in further changes to applicable tariff rates, scope, or enforcement.

Approximately one-half of Cricut’s revenue is derived from platform, which is not subject to these tariffs.

In addition, of the physical products manufactured outside the United States, approximately 20% are sold outside the United States, and therefore are

not subject to U.S.

import tariffs.

Notwithstanding these mitigating factors, tariffs may continue to have a significant impact on our cost structure and results of operations due to our global manufacturing footprint across multiple Asian countries.

While the majority of our manufacturing currently occurs in Malaysia, we also source products from South Korea, Thailand, China, and other Asian jurisdictions, each of which may be subject to different tariff regimes, changes in trade policy, or future restrictions.

We continue to actively monitor developments in the trade, regulatory, and consumer environment and may adjust our sourcing, pricing, promotional, and operational strategies as appropriate.

The combined impact of existing and potential future tariffs, shifts in sourcing strategies, pricing or promotional actions, changes in consumer demand or behavior, and other related factors could materially adversely affect our sales, margins, cash flows, and results of operations in future periods.

Key Business Metrics

In addition to the measures presented in our consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, identify trends and make strategic decisions.

Year Ended December 31,

As of December 31,

2025 2024 2023

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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.

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

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

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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.

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

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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 Maker, which includes Maker, Maker 3 and Maker 4;

Cricut Explore, which includes Explore Air 2, Explore 3 and Explore 4;

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.

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

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.

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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.

Sales and Marketing

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We expect our sales and marketing expenses as a percentage of revenue to fluctuate in the near term.

We produced gross savings in sales and marketing of approximately $2.5 million during 2024 as a result of the January 2024 restructuring plan.

General and Administrative

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We expect our general and administrative expenses as a percentage of revenue to increase in the near term as we expand our operations, invest in systems enhancements, and incur expenses required of a public company.

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

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.

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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.

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

The One Big Beautiful Bill Act was enacted on July 4, 2025.

The Act permits taxpayers to deduct any previously unamortized domestic Section 174 research and experimental (“R&E”) expenditures either entirely in the 2025 tax year or ratably over a two-year period.

The Company elected to deduct the full amount of its previously unamortized Section 174 R&E expenditures in 2025.

On an after-tax basis, this election resulted in an approximate $20 million reduction to deferred tax assets, which primarily accounts for the decrease in capitalized research expenditures.

Results of Operations

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Platform revenue increased by $14.4 million, or 5%, to $327.4 million for the year ended December 31, 2025 from $313.0 million for the year ended December 31, 2024.

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

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

The increase was primarily driven by growth of 4% in the number of Paid Subscribers from 3.0 million as of December 31, 2024 to just over 3.09 million as of December 31, 2025.

Products revenue decreased by $18.2 million, or 5%, to $381.4 million for the year ended December 31, 2025 from $399.6 million for the year ended December 31, 2024.

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

The decrease was primarily driven by fewer units of accessories and materials sold and at a lower average selling price.

Cost of Revenue, Gross Profit and Gross Margin

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Products 26 % 19 % 15 %

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.

Platform cost of revenue decreased by $1.3 million, or 3%, to $36.0 million for the year ended December 31, 2025 from $37.3 million for the year ended December 31, 2024.

The decrease was primarily driven by lower amortization of capitalized software development costs.

Gross margin for Platform increased to 89% for the year ended December 31, 2025 from 88% for the year ended December 31, 2024.

The increase was primarily driven by decreases in amortization of capitalized software development costs.

Products cost of revenue decreased by $40.1 million, or 12%, to $282.4 million for the year ended December 31, 2025 from $322.5 million for the year ended December 31, 2024.

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.

The decrease was primarily driven by a reduction in net inventory impairment charges and lower inventory procurement costs.

Gross margin for Products increased to 26% for the year ended December 31, 2025 from 19% for the year ended December 31, 2024.

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

The increase was primarily driven by a reduction in net inventory impairment charges and lower inventory procurement costs.

Operating Expenses

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As a percentage of total revenue 9 % 8 % 9 %

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

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

Research and development expenses increased by $6.1 million, or 10%, to $66.5 million for the year ended December 31, 2025 from $60.4 million for the year ended December 31, 2024.

The increase was primarily due to a $4.7 million increase in product development expense and a $1.0 million increase primarily from software development contractors.

Sales and Marketing

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Sales and marketing expenses increased by $16.1 million, or 11%, to $159.4 million for the year ended December 31, 2025 from $143.3 million for the year ended December 31, 2024.

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.

The increase was primarily due to a $16.0 million increase in advertising and other marketing expense.

General and Administrative

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General and administrative expenses decreased by $4.5 million, or 6%, to $68.5 million for the year ended December 31, 2025 from $73.0 million for the year ended December 31, 2024.

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.

The decrease was primarily due to a $4.7 million net reversal of bad debt.

Years Ended December 31,

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Other income, net $ 11,860 $ (907) (7) % $ 12,767 $ 2,969 30 % $ 9,798

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.

Other income, net decreased by $0.9 million, or 7%, to $11.9 million for the year ended December 31, 2025 from $12.8 million for the year ended December 31, 2024.

The change was primarily related to a decrease in interest from marketable securities due to less favorable rates and lower marketable security balances in 2025.

Provision for Income Taxes

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Provision for income taxes $ 31,188 $ 5,141 20 % $ 26,047 $ (100) — % $ 26,147

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.

Provision for income taxes increased by $5.1 million, or 20%, to $31.2 million for the year ended December 31, 2025 from $26.0 million for the year ended December 31, 2024.

This represents an effective tax rate of 28.9% and 29.3% for the years ended December 31, 2025 and 2024, respectively.

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

The decrease in the tax rate is due mainly to a decrease in stock based compensation differences attributable to the decrease in stock price upon vesting versus the stock price at the grant date.

Liquidity and Capital Resources

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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 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.

On May 2, 2025, the board of directors approved a replenishing of the share repurchase program authorizing the Company to purchase up to an aggregate of $50 million 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, 2025, we repurchased and retired 4,577,893 shares of our Class A common stock for $24.6 million under this program.

On October 31, 2025, the Company declared a recurring semi-annual dividend of $0.10 per share on its Class A and Class B common stock, payable on January 20, 2026 to shareholders of record as of January 6, 2026.

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 $24.3 million was to be satisfied in cash of $21.1 million payable to holders of Class A and Class B common stock with the remaining $3.2 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders prior to any subsequent forfeitures.

On May 2, 2025, the Company declared a special dividend of $0.75 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 21, 2025 to shareholders of record as of July 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 $0.85 per unit in the form of additional RSUs or PRSUs subject to the same vesting conditions as the original awards.

The aggregate dividend of $204.8 million was to be satisfied in cash of $180.6 million payable to holders of Class A and Class B common stock with the remaining $24.2 million satisfied on the payment date in the form of dividend equivalents to RSU or PRSU holders prior to any subsequent forfeitures.

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.

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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 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, 2025, an aggregate of $202.1 million was paid in cash, and $26.3 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.

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.

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Operating Activities

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.

The change in net cash flows from operating activities for the year ended December 31, 2025 compared to year ended December 31, 2024 is due to a net decrease in operating assets and liabilities of $57.3 million in 2025 compared to $130.0 million in 2024, due primarily to a reduction in inventory due to lower inventory purchases in 2025.

In addition, there were non-cash adjustments of $66.3 million in 2025 compared to $72.1 million in 2024, due primarily to a decrease in the provision for inventory obsolescence in 2025 and a decrease in stock-based compensation in 2025, offset by an increase in deferred income tax in 2025.

Investing Activities

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

The change in net cash flows from investing activities for the year ended December 31, 2025 compared to year ended December 31, 2024 was primarily due to proceeds from maturities of marketable securities in 2025 not used to purchase new securities.

Financing Activities

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

The change in net cash flows from financing activities for the year ended December 31, 2025 compared to year ended December 31, 2024 was primarily due to dividend payments of $202.1 million in 2025 compared to $110.0 million paid in 2024.

Critical Accounting Estimates

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The promotional programs include 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 using the expected value method or most likely amount, based upon the nature of the incentive.

Customer rebates are considered to be variable consideration, which we

estimate using the expected value method or most likely amount, based upon the nature of the incentive.

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

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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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