Part I [Business](index=7&type=section&id=Item%201.%20Business) Cricut operates a creativity platform with 6.4 million users, generating $1.31 billion in 2021 revenue from connected machines, subscriptions, and materials Financial Performance (2019-2021) | Metric | 2019 | 2020 | 2021 | YoY Growth (2021) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $486.6 million | $959.0 million | $1,306.2 million | 36% | | **Net Income** | $39.2 million | $154.6 million | $140.5 million | (9)% | - As of December 31, 2021, the company has a community of **6.4 million users**, which grew **48%** from the previous year[19](index=19&type=chunk)[21](index=21&type=chunk) - The company's platform includes a portfolio of connected machines (Cricut Joy, Explore, Maker), free design apps with subscription options (Cricut Access), and a wide range of accessories and materials[23](index=23&type=chunk)[25](index=25&type=chunk) - As of December 31, 2021, Cricut had over **2.0 million paid subscribers** to its Cricut Access and Cricut Access Premium services, representing approximately **32%** of its total user base[23](index=23&type=chunk)[50](index=50&type=chunk) - The company sells products through brick-and-mortar and online retail partners like Amazon, Michaels, and Walmart, as well as directly via cricut.com; in 2021, online channels accounted for **50% of revenue**[53](index=53&type=chunk) - Cricut outsources its manufacturing to third-party contractors, primarily **Xiamen Intretech, Inc.**, with operations in Malaysia and China[91](index=91&type=chunk)[93](index=93&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from user engagement, competition, and significant supply chain dependencies, particularly on its primary manufacturer - The business is highly dependent on its ability to attract and engage users, and a decline in interest in DIY crafting could adversely affect growth[120](index=120&type=chunk)[121](index=121&type=chunk)[126](index=126&type=chunk) - Cricut faces **significant competition** in all segments, particularly in Accessories and Materials, where competitors offer compatible products at lower prices[149](index=149&type=chunk) - The company is primarily dependent on a single contract manufacturer, **Intretech**, for most of its connected machines, creating significant supply chain risk[242](index=242&type=chunk)[243](index=243&type=chunk) - A significant portion of revenue comes from a limited number of key retail partners; in 2021, **Amazon, Michaels, and Walmart each represented 10% or more** of consolidated revenue[101](index=101&type=chunk)[136](index=136&type=chunk) - The dual-class stock structure concentrates approximately **67% of voting power** with Petrus and its affiliates, limiting the influence of Class A common stockholders[354](index=354&type=chunk)[363](index=363&type=chunk) - The business is affected by seasonality, with a disproportionate amount of sales in the fourth quarter, which represented **30% of total revenue** in 2021[169](index=169&type=chunk)[472](index=472&type=chunk) [Properties](index=67&type=section&id=Item%202.%20Properties) Cricut leases all its properties, including its Utah headquarters, and does not own any real estate - The company's corporate headquarters are leased in South Jordan, Utah, with leases expiring at various times through 2027[423](index=423&type=chunk) - Cricut does not own any real property and leases all of its office facilities, including locations in China and Malaysia[423](index=423&type=chunk) [Legal Proceedings](index=68&type=section&id=Item%203.%20Legal%20Proceedings) The company is not party to any material legal proceedings but has joined a lawsuit challenging US tariffs on Chinese goods - The company is not currently involved in any material pending legal proceedings[426](index=426&type=chunk) - In September 2020, Cricut joined other plaintiffs in a lawsuit against the U.S. government, challenging the lawfulness of Section 301 tariffs on products imported from China[428](index=428&type=chunk) [Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[428](index=428&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=69&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq as "CRCT" since March 2021, and it does not currently intend to pay dividends - Class A common stock has been listed on the Nasdaq under the symbol **"CRCT"** since March 25, 2021[431](index=431&type=chunk) - The company does not currently intend to pay cash dividends and plans to retain future earnings for business growth[433](index=433&type=chunk)[434](index=434&type=chunk) - A cash dividend of **$51.2 million** was paid to common stockholders in September 2020[433](index=433&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=71&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 36% to $1.31 billion in 2021, but net income fell 9% due to rising operating expenses and lower machine margins Key Business Metrics (as of Dec 31) | Metric | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | **Users (thousands)** | 2,525 | 4,323 | 6,409 | | **Paid Subscribers (thousands)** | 604 | 1,303 | 2,037 | | **Subscription ARPU** | $25.57 | $32.52 | $38.37 | | **Accessories & Materials ARPU** | $111.44 | $125.88 | $102.91 | Revenue by Segment (in thousands) | Segment | 2020 | 2021 | % Change | | :--- | :--- | :--- | :--- | | **Connected machines** | $416,714 | $548,205 | 32% | | **Subscriptions** | $111,337 | $205,858 | 85% | | **Accessories and materials** | $430,979 | $552,164 | 28% | | **Total revenue** | **$959,030** | **$1,306,227** | **36%** | Gross Margin by Segment | Segment | 2020 | 2021 | | :--- | :--- | :--- | | **Connected machines** | 16% | 12% | | **Subscriptions** | 88% | 89% | | **Accessories and materials** | 39% | 38% | - The increase in Connected Machines revenue was driven by growth in units sold, including the new Explore 3 and Maker 3 models launched in June 2021[498](index=498&type=chunk) - Operating expenses increased significantly in 2021, with **R&D up 105%** to $79.8M and **Sales & Marketing up 112%** to $134.0M, primarily due to higher product development, advertising, and personnel costs[509](index=509&type=chunk)[510](index=510&type=chunk) - Net cash used in operating activities was **$104.9 million** in 2021, a significant shift from $248.2 million provided in 2020, mainly due to increased cash used to build inventory[521](index=521&type=chunk)[522](index=522&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=85&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are minimal interest rate risk and foreign currency exchange risk, which is not currently hedged - The company has minimal exposure to interest rate risk as it had no outstanding borrowings under its credit facilities[536](index=536&type=chunk) - Foreign currency exchange risk exists due to transactions in various foreign currencies, but the impact on results of operations was not material for 2019, 2020, and 2021[537](index=537&type=chunk) - The company does not currently use derivative or hedging instruments for foreign currency exposure but may do so in the future[537](index=537&type=chunk) [Financial Statements and Supplementary Data](index=86&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for fiscal year 2021, detailing assets, liabilities, and performance Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $538,807 | $928,099 | | **Total Assets** | $581,400 | $1,006,250 | | **Total Current Liabilities** | $346,500 | $308,367 | | **Total Liabilities** | $352,475 | $332,274 | | **Total Stockholders' Equity** | $228,925 | $673,976 | Consolidated Statement of Operations Data (in thousands) | Account | 2020 | 2021 | | :--- | :--- | :--- | | **Total Revenue** | $959,030 | $1,306,227 | | **Gross Profit** | $332,374 | $457,450 | | **Income from Operations** | $200,513 | $192,405 | | **Net Income** | $154,578 | $140,473 | Consolidated Statement of Cash Flows Data (in thousands) | Activity | 2020 | 2021 | | :--- | :--- | :--- | | **Net cash from operating activities** | $248,227 | $(104,949) | | **Net cash used in investing activities** | $(21,842) | $(35,786) | | **Net cash from financing activities** | $(110,915) | $260,244 | - The independent auditor's report identifies the **estimation of variable consideration for customer rebates** as a critical audit matter due to the subjective assumptions involved[546](index=546&type=chunk)[547](index=547&type=chunk)[550](index=550&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=124&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) No changes in or disagreements with accountants on accounting and financial disclosures were reported - None reported[743](index=743&type=chunk) [Controls and Procedures](index=125&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were effective, and the company is exempt from the internal control report as a new filer - Management concluded that disclosure controls and procedures were **effective** as of December 31, 2021[745](index=745&type=chunk) - The company is exempt from management's report on internal control over financial reporting due to the transition period for newly public companies[746](index=746&type=chunk) - No material changes in internal control over financial reporting occurred during the fourth quarter of 2021[747](index=747&type=chunk) [Other Information](index=126&type=section&id=Item%209B.%20Other%20Information) There is no other information to report for this item - None[750](index=750&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=127&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, officers, and governance is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the company's Proxy Statement[755](index=755&type=chunk) [Executive Compensation](index=127&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the company's Proxy Statement[756](index=756&type=chunk) [Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters](index=127&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owner%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the company's Proxy Statement[756](index=756&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=127&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the company's Proxy Statement[757](index=757&type=chunk) [Principal Accounting Fees and Services](index=127&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding accounting fees and services is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the company's Proxy Statement[758](index=758&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=128&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the annual report - This item lists all financial statements, schedules, and exhibits filed with the 10-K report[760](index=760&type=chunk) - Key exhibits include corporate governance documents, material contracts (e.g., credit and supply agreements), and executive compensation plans[764](index=764&type=chunk) [Form 10-K Summary](index=131&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided under this item - None[786](index=786&type=chunk)

Financial Performance - Revenue reached $260.1 million, a 24.4% year-over-year increase[6] - Net income was $30.0 million, resulting in an 11.5% net income margin[6] - EBITDA was $42.7 million, representing a 16.4% EBITDA margin[6] User Growth - Total users exceeded 5.7 million, a 55.7% year-over-year growth[7] - Engaged users surpassed 3.2 million, a 37.4% year-over-year growth[7] - Paid subscribers exceeded 1.8 million, a 55.8% year-over-year growth[7] Revenue Breakdown - Connected machine revenue grew 35.7% year-over-year[21] - Subscription revenue grew 70.8% year-over-year[21] - Accessories & Materials revenue grew 2.0% year-over-year[21] - International revenue grew 109.7% year-over-year and represented 12.0% of total revenue[17, 21] User Monetization - Subscription ARPU (Average Revenue Per User) increased to $9.60[25] - Accessories & Materials ARPU increased to $18.79[25] Investments - Increased investments in software, subscriptions, new product development, and international expansion to drive future growth[6]

Cricut, Inc. (NASDAQ:CRCT) Q3 2021 Earnings Conference Call November 10, 2021 5:00 PM ET Company Participants Stacie Clements – Investor Relations-Blue Shirt Group Ashish Arora – President and Chief Executive Officer Marty Petersen – Chief Financial Officer Conference Call Participants Mark Altschwager – Baird Jim Suva – Citigroup Paul Kearney – Barclays Erik Woodring – Morgan Stanley Operator Ladies and gentlemen, thank you for standing by, and welcome to the Cricut Q3 2021 Conference Call. At this time a ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Cricut, Inc.'s unaudited condensed consolidated financial statements and related management discussion for the period ended September 30, 2021 [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Cricut, Inc.'s unaudited condensed consolidated financial statements for the period ended September 30, 2021, reflecting financial position, operational results, and cash flows, including the significant impact of its Initial Public Offering (IPO) in March 2021 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Cricut's total assets increased to **$980.6 million** by September 30, 2021, driven by higher cash and inventories, while equity surged due to IPO proceeds Condensed Consolidated Balance Sheet Highlights (in thousands of US dollars) | Account | Sep 30, 2021 (unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $224,003 | $122,215 | | Inventories | $524,576 | $248,745 | | Total current assets | $922,176 | $538,807 | | **Total assets** | **$980,604** | **$581,400** | | **Liabilities & Equity** | | | | Total current liabilities | $318,576 | $346,500 | | Total liabilities | $327,386 | $352,475 | | Total stockholders' equity | $653,218 | $228,925 | | **Total liabilities and stockholders' equity** | **$980,604** | **$581,400** | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Q3 2021 revenue grew **24%** to **$260.1 million**, but net income declined **34%** to **$30.0 million** due to higher costs, while nine-month revenue increased **56%** to **$918.4 million** Q3 2021 vs Q3 2020 Performance (in thousands of US dollars) | Metric | Q3 2021 | Q3 2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $260,086 | $209,005 | +24% | | Gross Profit | $102,063 | $89,550 | +14% | | Income from Operations | $37,748 | $57,718 | -35% | | Net Income | $30,005 | $45,211 | -34% | | Diluted EPS | $0.13 | $0.22 | -41% | Nine Months 2021 vs 2020 Performance (in thousands of US dollars) | Metric | Nine Months 2021 | Nine Months 2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $918,401 | $588,064 | +56% | | Gross Profit | $352,628 | $207,625 | +70% | | Income from Operations | $166,564 | $120,929 | +38% | | Net Income | $128,549 | $93,130 | +38% | | Diluted EPS | $0.59 | $0.45 | +31% | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity significantly increased to **$653.2 million** by September 30, 2021, primarily driven by IPO proceeds and net income - The company completed its IPO, receiving net proceeds of **$242.7 million** in March 2021 and an additional **$18.0 million** in April 2021 from the underwriters' option exercise[19](index=19&type=chunk)[31](index=31&type=chunk) - Net income of **$128.5 million** for the nine months ended September 30, 2021, contributed to the increase in retained earnings (by reducing the accumulated deficit)[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine-month operating cash flow was a net outflow of **$131.8 million** due to inventory build-up, while financing activities provided **$262.0 million** from the IPO Cash Flow Summary (Nine Months Ended Sep 30, in thousands of US dollars) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(131,793) | $187,403 | | Net cash used in investing activities | $(28,339) | $(16,883) | | Net cash provided by (used in) financing activities | $261,990 | $(109,627) | | **Net increase in cash and cash equivalents** | **$101,788** | **$60,854** | - The significant cash use in operations was mainly driven by a **$276.2 million** increase in inventories to support seasonal sales and mitigate shipping delays[24](index=24&type=chunk)[200](index=200&type=chunk) - Financing activities were dominated by **$262.0 million** in net proceeds from the IPO[24](index=24&type=chunk)[205](index=205&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail Cricut's business as a creativity platform, its March 2021 IPO, three reportable segments, and accounting policies - The company designs and markets a creativity platform with connected machines, design apps, and materials, operating in three reportable segments: Connected Machines, Subscriptions, and Accessories and Materials[27](index=27&type=chunk)[30](index=30&type=chunk)[112](index=112&type=chunk) - The company completed its IPO on March 29, 2021, selling **13,250,000** shares of Class A common stock and raising net proceeds of **$242.7 million**, with an additional **$18.0 million** raised in April 2021[31](index=31&type=chunk) - A corporate reorganization and IPO led to modification of stock-based awards, resulting in **$14.5 million** incremental compensation cost recognized over the vesting term[73](index=73&type=chunk)[75](index=75&type=chunk) Segment Gross Profit (Nine Months Ended Sep 30, 2021, in thousands of US dollars) | Segment | Revenue | Cost of Revenue | Gross Profit | | :--- | :--- | :--- | :--- | | Connected Machines | $390,100 | $323,558 | $66,542 | | Subscriptions | $150,115 | $15,517 | $134,598 | | Accessories and Materials | $378,186 | $226,698 | $151,488 | | **Consolidated Total** | **$918,401** | **$565,773** | **$352,628** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2021 revenue growth of **24%** to **$260.1 million** but a **34%** net income decline, alongside nine-month revenue growth of **56%** to **$918.4 million**, driven by user base expansion and IPO proceeds - In Q3 2021, revenue grew **24%** year-over-year to **$260.1 million**, while net income fell **34%** to **$30.0 million**[122](index=122&type=chunk) - For the nine months ended September 30, 2021, revenue grew **56%** year-over-year to **$918.4 million**, and net income grew **38%** to **$128.5 million**[125](index=125&type=chunk) Key Business Metrics (as of Sep 30, 2021) | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Users (in thousands) | 5,732 | 3,688 | | Paid Subscribers (in thousands) | 1,814 | 1,164 | - The company's cash position was strengthened by net proceeds of **$260.7 million** from its IPO in March and April 2021[125](index=125&type=chunk)[192](index=192&type=chunk) - Operating cash flow was negative **$131.8 million** for the first nine months of 2021, primarily due to a **$276.2 million** increase in inventory to support seasonal demand and mitigate supply chain risks[199](index=199&type=chunk)[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies interest rate and foreign currency exchange risks as primary market exposures, neither of which is currently considered material - The company is primarily exposed to interest rate risk from its revolving credit facility, but a hypothetical **10%** change in rates would not have a material impact[211](index=211&type=chunk) - Foreign currency exchange risk exists due to transactions in various foreign currencies, but the impact has not been material, and the company does not currently hedge this exposure[212](index=212&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[213](index=213&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[214](index=214&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers other required disclosures including legal proceedings, comprehensive risk factors, equity sales, and filed exhibits [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings but is involved in a complaint against the U.S. government regarding tariffs on Chinese imports - The company is not currently involved in any material legal proceedings[220](index=220&type=chunk) - In September 2020, Cricut joined a complaint against the U.S. government challenging the legality of Section 301 tariffs on certain products from China[222](index=222&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section details numerous risks including user engagement, intense competition, supply chain vulnerabilities, intellectual property, and the dual-class stock structure [Risks Related to Our Industry and Business](index=42&type=section&id=Risks%20Related%20to%20Our%20Industry%20and%20Business) The company's success depends on user engagement, product innovation, accurate demand forecasting, and managing reliance on key retail partners - The company's growth depends on its ability to attract and engage users and anticipate their preferences for new products[227](index=227&type=chunk)[232](index=232&type=chunk) - For the nine months ended September 30, 2021, the top seven brick-and-mortar and online retail partners accounted for **55%** of product revenue, indicating significant partner concentration risk[241](index=241&type=chunk) - Inaccurate forecasting of consumer demand could lead to inventory shortages or excess stock, impacting revenue and margins, with the company intending to carry higher inventory levels to mitigate supply chain risks[238](index=238&type=chunk)[239](index=239&type=chunk) [Risks Related to Manufacturing, Supply Chain and Fulfillment](index=58&type=section&id=Risks%20Related%20to%20Manufacturing%2C%20Supply%20Chain%20and%20Fulfillment) Cricut faces significant manufacturing and supply chain risks due to dependence on a single contract manufacturer, limited-source suppliers, and manufacturing concentration in China and Malaysia - The company is primarily dependent on a single contract manufacturer, Xiamen Intretech, Inc., for the production of most of its connected machines[353](index=353&type=chunk) - Reliance on limited or sole-source suppliers for key components, such as microchips, exposes the company to shortages and price increases, which is a current global issue[362](index=362&type=chunk)[365](index=365&type=chunk) - Manufacturing concentration in China and Malaysia exposes the company to risks from tariffs, trade policy changes, and regional disruptions like the COVID-19 pandemic[357](index=357&type=chunk)[359](index=359&type=chunk)[394](index=394&type=chunk) [Risks Related to Privacy, Data Protection and Cybersecurity](index=65&type=section&id=Risks%20Related%20to%20Privacy%2C%20Data%20Protection%20and%20Cybersecurity) The company is subject to evolving global privacy laws and cybersecurity threats, with non-compliance or breaches posing significant financial and reputational risks - The company is subject to numerous and evolving privacy laws globally, such as GDPR and CCPA, with non-compliance posing risks of significant penalties and reputational damage[402](index=402&type=chunk)[403](index=403&type=chunk)[410](index=410&type=chunk) - Cybersecurity threats, including breaches, phishing, and hacking, pose a risk to user data, proprietary information, and system integrity[415](index=415&type=chunk)[418](index=418&type=chunk) - The company relies on Amazon Web Services (AWS) for a substantial portion of its computing and data services, making it vulnerable to disruptions or policy changes from AWS[305](index=305&type=chunk)[306](index=306&type=chunk) [Risks Related to Foreign Operations](index=69&type=section&id=Risks%20Related%20to%20Foreign%20Operations) International expansion exposes Cricut to risks including complex local regulations, currency fluctuations, tariffs, and compliance with anti-corruption laws - International expansion subjects the company to risks including complex local regulations, currency fluctuations, tariffs, and the need to localize products and content[425](index=425&type=chunk) - The company is subject to U.S. and foreign governmental export/import controls and economic sanctions laws, which could impair its ability to compete internationally[430](index=430&type=chunk)[431](index=431&type=chunk) - Compliance with anti-corruption laws like the FCPA and U.K. Bribery Act is critical, and violations could lead to severe penalties and reputational harm[435](index=435&type=chunk)[437](index=437&type=chunk) [Risks Related to our Intellectual Property](index=72&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) Cricut's success depends on protecting its intellectual property, facing risks of infringement from counterfeit products and third-party claims, and managing open-source software use - The company's inability to protect its intellectual property (patents, trademarks, etc.) could reduce the value of its products and brand[446](index=446&type=chunk)[447](index=447&type=chunk) - The company faces threats of infringement lawsuits from third parties, which could result in substantial damages, royalty payments, or prevent the sale of certain products[452](index=452&type=chunk)[453](index=453&type=chunk) - Use of open-source software in products carries risks, including potential requirements to disclose proprietary source code or re-engineer products[462](index=462&type=chunk)[463](index=463&type=chunk) [Risks Related to the Ownership of Our Class A Common Stock](index=75&type=section&id=Risks%20Related%20to%20the%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) Risks include concentrated voting power with pre-IPO stockholders due to a dual-class stock structure, affecting corporate governance and stock price volatility - The dual-class stock structure concentrates approximately **66%** of voting power with Petrus and its affiliates, limiting the influence of other stockholders on major corporate decisions[467](index=467&type=chunk)[475](index=475&type=chunk) - As a "controlled company," Cricut is exempt from certain Nasdaq corporate governance requirements, such as having a majority of independent directors[476](index=476&type=chunk) - The company does not intend to pay dividends for the foreseeable future, meaning investors must rely on stock price appreciation for returns[484](index=484&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities and confirms the use of **$260.7 million** net proceeds from its March and April 2021 IPO - The company completed its IPO on March 29, 2021, receiving net proceeds of **$242.7 million**, with an additional **$18.0 million** in net proceeds received on April 28, 2021, from the partial exercise of the underwriters' option[539](index=539&type=chunk) - There were no unregistered sales of equity securities during the reporting period[539](index=539&type=chunk) [Item 3. Default Upon Senior Securities](index=86&type=section&id=Item%203.%20Default%20Upon%20Senior%20Securities) This item is not applicable as the company reports no defaults upon senior securities - Not applicable[542](index=542&type=chunk) [Item 4. Mine Safety Disclosures](index=86&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[543](index=543&type=chunk) [Item 5. Other Information](index=86&type=section&id=Item%205.%20Other%20Information) This item is not applicable as there is no other information to report - Not applicable[544](index=544&type=chunk) [Item 6. Exhibits](index=87&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes CEO and CFO certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act[550](index=550&type=chunk) - XBRL Taxonomy Extension documents are also filed as exhibits[550](index=550&type=chunk)

Financial Performance - Cricut's Q2 2021 net revenue reached $334.5 million, a 41% year-over-year increase[7] - Net income for Q2 2021 was $49.1 million, up 39% year-over-year[7] - EBITDA for Q2 2021 was $68.5 million, a 42% year-over-year increase, including $8.1 million of stock-based compensation expense[7] - International revenue grew by 179% year-over-year and represented 8.5% of total revenue[23] User Growth and Engagement - Total users reached 5.4 million, a 64% year-over-year growth[8] - Engaged users totaled 3.2 million, a 53% year-over-year growth, with 59% of all users engaged in Q2 2021[8] - Ending paid subscribers reached 1.8 million, a 77% year-over-year growth, with almost 33% of users as paid subscribers[8, 12] Product and Platform Expansion - Cricut Access provides access to over 175,000 images, a 40% increase compared to Q2 2020[12] - The company launched Cricut Explore 3 and Cricut Maker 3, featuring faster performance and new materials[15] User Monetization - Subscriptions ARPU (Average Revenue Per User) was $9.83 in Q2 2021[30] - Accessories & Materials ARPU was $26.67 in Q2 2021[30] Market Opportunity - The company estimates a total addressable market (TAM) of 402 million users and a serviceable addressable market (SAM) of 129 million users[18]

Financial Data and Key Metrics Changes - Total revenue for Q2 2021 was $334.5 million, an increase of 42% compared to Q2 2020 [6][21] - EBITDA for Q2 2021 was $68.5 million, a 39% increase from the previous year [6][33] - Net income for Q2 2021 was $49.1 million, up 41% from the same period last year, with diluted earnings per share at $0.22 [32] Business Line Data and Key Metrics Changes - Revenue from connected machines grew 29% year-over-year, driven by the launch of new machines [22] - Subscription revenue increased by 111% year-over-year, while accessories and materials revenue grew by 40% [22] - The number of Cricut Access subscribers rose to nearly 1.8 million, up from 1.6 million in Q1 2021 [9] Market Data and Key Metrics Changes - International revenue grew 179% year-over-year, representing 8.5% of total revenue in Q2 2021, up from 4.3% in Q2 2020 [23] - The user base reached nearly 5.4 million, reflecting a 64% year-over-year growth [25] Company Strategy and Development Direction - The company is focusing on international expansion, with plans to launch more direct-to-consumer sites in various geographies [10][11] - New product launches, including Cricut Explore 3 and Cricut Maker 3, are aimed at enhancing user experience and driving long-term growth [12][13] - The company plans to increase investments in sales and marketing, particularly in international markets [11] Management's Comments on Operating Environment and Future Outlook - Management noted that engagement levels have slightly declined due to seasonal factors and pandemic reopenings, but they are implementing strategies to boost engagement [41][42] - The company anticipates some margin pressure in the second half of the year due to increased operational spending and supply chain challenges [44][30] Other Important Information - The gross margin for Q2 2021 was 39%, up from 31% in Q2 2020, benefiting from lower tariffs and a favorable product mix [27] - The company ended the quarter with $314 million in cash and cash equivalents, with a credit line of $150 million remaining untapped [34] Q&A Session Summary Question: Engagement numbers and user behavior insights - Management acknowledged a decline in engagement percentage due to seasonal factors and changing user behavior as people return to outdoor activities [41][42] Question: Margin pressure and operational spending - Management indicated that while gross margins may hold steady, operating expenses are expected to increase due to investments in operations [44][45] Question: Inventory levels and channel fill impact - Management confirmed that channel inventories have been replenished to healthy levels, with an estimated 8% to 10% of Q2 revenue attributable to channel fill from new product launches [48][49] Question: ARPU sustainability and outlook - Management expressed confidence in the current ARPU of $26.67, noting it is higher than pre-pandemic levels and reflects a growing user base [66] Question: Chip supply and inventory management - Management reported that they have secured chip supplies up to 52 weeks in advance, mitigating risks associated with supply chain challenges [75][76] Question: Promotional activity and holiday season strategy - Management indicated that promotional strategies will be employed as part of the typical seasonal approach, aimed at user acquisition and maintaining price structure [78][79]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-40257 Cricut, Inc. (Exact name of Registrant as specified in its charter) Delaware 87-0282025 (State or other jurisdiction of incorporation or o ...

Financial Data and Key Metrics Changes - Revenue in Q1 2021 was $324 million, representing a 125% increase year-over-year, leading to a trailing 12-month run rate exceeding $1 billion [7][21] - EBITDA for Q1 2021 was $68.6 million, a 232% increase compared to Q1 2020 [7][27] - Net income for Q1 2021 was $49.4 million, up 279% from the same period last year, with diluted earnings per share at $0.24 [26] Business Line Data and Key Metrics Changes - Revenue from Connected Machines grew 148% year-over-year [21] - Subscription revenue increased by 141%, while revenue from Accessories and Materials grew by 102% [21] - Ending paid subscribers reached 1.6 million, up 118% year-over-year [23] Market Data and Key Metrics Changes - International revenue grew 253% in Q1 2021, representing 10.3% of total revenue, up from 7.4% in 2020 [21] - User growth was 76% year-over-year, bringing total users to just under 5 million [8][23] Company Strategy and Development Direction - The company aims to continue disciplined investment in growth initiatives while expanding internationally [6][15] - Cricut is focusing on enhancing its platform with new products and software capabilities, such as the Cricut Mug Press [16][17] - The company is targeting a serviceable addressable market (SAM) of approximately 130 million individuals, with less than 4% penetration currently [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining user growth and engagement despite potential normalization post-COVID [29][30] - The company is monitoring engagement metrics closely, anticipating shifts in user behavior as restrictions ease [65] - Management highlighted the importance of community engagement and user creativity as key drivers for future growth [11][30] Other Important Information - The company has a strong focus on maintaining profitability while investing in R&D and marketing [25][26] - Gross margin improved to 37% in Q1 2021, up from 31% in Q1 2020, primarily due to lower tariffs from shifting production to Malaysia [24][26] Q&A Session Summary Question: User growth expectations and seasonal trends - Management expects to match or exceed the number of new users added in 2020, despite typical seasonal declines in Q2 [34][35] Question: Incremental revenue drivers - Incremental revenue growth was attributed to channel fill of machines, strong demand, and the successful launch of the Mug Press [42][43] Question: Supply chain and inventory levels - Supply chain constraints are expected to persist through the end of the year, but the company is working to mitigate these issues [50][51] Question: Engagement trends post-COVID - Engagement has remained strong, with management noting that while some projects may decline, others will increase, such as those related to events and holidays [65][66] Question: Cost pressures from raw materials - The company is experiencing rising commodity prices but believes these impacts will be transitory [52][53]

NASDAQ : CRCT Q1 2021 Financial Results 1 Financial Results Q1 2021 May 13, 2021 ed [ 0 ] [ ] [ ] [ ] [ ] ] [ Safe Harbor Statement This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the ...

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of financial performance, market risk exposures, and internal controls [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) The company reported significant growth in the first quarter of 2021, with total revenue increasing 125% year-over-year to $323.8 million and net income rising 279% to $49.4 million. This performance was driven by strong sales across all segments: Connected Machines, Subscriptions, and Accessories & Materials. The balance sheet was substantially strengthened by $242.7 million in net proceeds from the company's Initial Public Offering (IPO) in March 2021, increasing cash and cash equivalents to $337.5 million [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2021, the company's total assets grew to $840.2 million from $581.4 million at the end of 2020, primarily driven by a significant increase in cash and cash equivalents to $337.5 million following the IPO. Total liabilities decreased to $301.7 million from $352.5 million, while total stockholders' equity surged to $538.4 million from $228.9 million, reflecting the IPO proceeds and net income Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $337,472 | $122,215 | | Inventories | $301,776 | $248,745 | | Total current assets | $795,829 | $538,807 | | Total assets | $840,187 | $581,400 | | **Liabilities & Stockholders' Equity** | | | | Accounts payable | $203,828 | $251,658 | | Total current liabilities | $294,788 | $346,500 | | Total liabilities | $301,740 | $352,475 | | Total stockholders' equity | $538,447 | $228,925 | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the three months ended March 31, 2021, Cricut reported total revenue of $323.8 million, a 125% increase from $143.7 million in the same period of 2020. Net income grew significantly to $49.4 million from $13.0 million year-over-year, resulting in a diluted EPS of $0.24, up from $0.06. The growth was broad-based, with substantial increases in revenue from Connected Machines, Subscriptions, and Accessories & Materials Q1 2021 vs Q1 2020 Performance (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Revenue** | | | | Connected machines | $141,320 | $56,888 | | Subscriptions | $46,139 | $19,180 | | Accessories and materials | $136,363 | $67,655 | | **Total revenue** | **$323,822** | **$143,723** | | Gross profit | $120,270 | $44,768 | | Income from operations | $64,664 | $17,450 | | **Net income** | **$49,418** | **$13,040** | | **Earnings per share, diluted** | **$0.24** | **$0.06** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first quarter of 2021, net cash used in operating activities was $22.0 million, primarily due to a significant increase in inventories. Net cash used in investing activities was $7.8 million for property and equipment. Net cash provided by financing activities was a substantial $245.1 million, driven by proceeds from the IPO. This resulted in a net increase in cash and cash equivalents of $215.3 million for the period Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(21,963) | $6,437 | | Net cash used in investing activities | $(7,839) | $(7,753) | | Net cash provided by financing activities | $245,098 | $36,710 | | **Net increase in cash and cash equivalents** | **$215,257** | **$35,477** | - The primary source of financing cash flow in Q1 2021 was **$245.1 million** in net proceeds from the issuance of common stock upon the initial public offering[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business structure, recent IPO, accounting policies, and segment performance. Key events include the IPO on March 29, 2021, which raised $242.7 million in net proceeds. The company operates in three segments: Connected Machines, Subscriptions, and Accessories and Materials, all of which saw significant revenue growth. The notes also cover stock-based compensation modifications related to the corporate reorganization and IPO, and confirm compliance with debt covenants under the new credit facility - The company closed its IPO on March 29, 2021, selling **13,250,000 shares** of Class A common stock and receiving aggregate net proceeds of **$242.7 million** after costs[30](index=30&type=chunk) - In connection with its IPO, the company underwent a Corporate Reorganization, converting all historical Common Stock to Class B common stock, which holds **five votes per share** compared to **one vote** for Class A common stock[31](index=31&type=chunk)[34](index=34&type=chunk) Revenue by Geography (in thousands) | Region | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | North America | $290,337 | $134,248 | | International | $33,485 | $9,475 | | **Total** | **$323,822** | **$143,723** | Segment Revenue and Gross Profit (in thousands) | Segment | Q1 2021 Revenue | Q1 2020 Revenue | Q1 2021 Gross Profit | Q1 2020 Gross Profit | | :--- | :--- | :--- | :--- | :--- | | Connected Machines | $141,320 | $56,888 | $21,628 | $5,311 | | Subscriptions | $46,139 | $19,180 | $41,841 | $16,339 | | Accessories and Materials | $136,363 | $67,655 | $56,801 | $23,118 | | **Consolidated** | **$323,822** | **$143,723** | **$120,270** | **$44,768** | - Subsequent to the quarter's end, on April 28, 2021, the company sold an additional **968,815 shares** of Class A common stock as part of the underwriters' option exercise, generating net proceeds of **$18.1 million**[106](index=106&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the strong Q1 2021 performance to increased consumer demand and successful product launches. Revenue grew 125% YoY, driven by a 148% increase in Connected Machines, 141% in Subscriptions, and 102% in Accessories & Materials. Gross margin improved across all segments. Key business metrics showed strong growth, with Users reaching 4.9 million and Paid Subscribers increasing 118% to 1.6 million. The company's liquidity was significantly enhanced by the IPO, with cash and equivalents reaching $337.5 million. Management expects to continue investing in R&D and international expansion [Overview of Our Business and History](index=24&type=section&id=Overview%20of%20Our%20Business%20and%20History) Cricut operates a creativity platform enabling a community of 4.9 million users to create handmade goods. The ecosystem consists of connected machines (Cricut Joy, Explore, Maker), cloud-based design software, and a wide range of accessories and materials. The company generates revenue from hardware sales, subscriptions (Cricut Access), and consumables, sold through retail partners and directly via cricut.com - Cricut's mission is to help people lead creative lives through its platform of connected machines, design apps, and materials[110](index=110&type=chunk) - As of March 31, 2021, the company had **4.9 million users** and **1.6 million Paid Subscribers** to its Cricut Access and Cricut Access Premium services[110](index=110&type=chunk)[111](index=111&type=chunk) [Key Business Metrics and Non-GAAP Financial Measures](index=25&type=section&id=Key%20Business%20Metrics%20and%20Non-GAAP%20Financial%20Measures) The company tracks several key metrics to evaluate performance, including Users, Paid Subscribers, and ARPU. As of March 31, 2021, Users grew to 4.9 million from 2.8 million a year prior, and Paid Subscribers increased to 1.6 million from 740,000. Both Subscription ARPU and Accessories and Materials ARPU also increased. EBITDA, a non-GAAP measure, grew 232% YoY to $68.6 million Key Business Metrics | Metric | As of/For the Three Months Ended March 31, 2021 | As of/For the Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Users (in thousands) | 4,939 | 2,803 | | Paid Subscribers (in thousands) | 1,614 | 740 | | Subscription ARPU | $9.96 | $7.20 | | Accessories and Materials ARPU | $29.45 | $25.40 | EBITDA Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net income | $49,418 | $13,040 | | Depreciation and amortization | $3,886 | $3,236 | | Interest expense, net | $79 | $574 | | Corporate income tax expense | $15,217 | $3,836 | | **EBITDA** | **$68,600** | **$20,686** | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Total revenue for Q1 2021 increased 125% YoY to $323.8 million. Connected Machines revenue grew 148% due to strong unit sales of Cricut Maker and Explore Air 2. Subscriptions revenue rose 141%, driven by a 118% increase in Paid Subscribers. Accessories and Materials revenue increased 102%, boosted by strong sales of EasyPress units and the launch of the Mug Press. Gross margin improved from 31% to 37% YoY, reflecting better margins across all segments. Operating expenses increased 104% to $55.6 million, driven by higher stock-based compensation, headcount, and marketing costs Revenue Change by Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Connected machines | $141,320 | $56,888 | $84,432 | 148% | | Subscriptions | $46,139 | $19,180 | $26,959 | 141% | | Accessories and materials | $136,363 | $67,655 | $68,708 | 102% | | **Total revenue** | **$323,822** | **$143,723** | **$180,099** | **125%** | Gross Margin by Segment | Segment | Q1 2021 Gross Margin | Q1 2020 Gross Margin | | :--- | :--- | :--- | | Connected machines | 15% | 9% | | Subscriptions | 91% | 85% | | Accessories and materials | 42% | 34% | - Operating expenses increased significantly, with R&D up **71%**, Sales & Marketing up **121%**, and G&A up **118%**, primarily due to increased stock-based compensation, higher headcount, and increased marketing and professional services costs[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position strengthened significantly, with cash and cash equivalents at $337.5 million as of March 31, 2021, largely due to $242.7 million in net proceeds from its IPO. The company has a $150.0 million revolving credit facility, with $137.3 million available as of quarter-end, and was in compliance with all debt covenants. Management believes existing cash and cash flow will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months - The company's primary source of liquidity is cash flow from operations and its credit facility, significantly boosted by **$242.7 million** in net proceeds from its March 2021 IPO[169](index=169&type=chunk) - The company has a three-year, **$150.0 million** asset-based senior secured revolving credit facility, with an option to increase it by an additional **$200.0 million**. As of March 31, 2021, available borrowings were **$137.3 million**[173](index=173&type=chunk)[174](index=174&type=chunk) - Net cash used in operating activities was **$22.0 million**, driven by an **$52.9 million** increase in inventories and a **$48.3 million** decrease in accounts payable[179](index=179&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate risk and foreign currency exchange risk. Interest rate risk exposure is related to its revolving credit facility, but is not considered material. Foreign currency risk arises from transactions in currencies like the Australian Dollar, Canadian Dollar, Euro, and British Pound, but the impact has not been material to date. The company does not currently use derivative or hedging instruments - The company is primarily exposed to interest rate risk from its revolving credit loan, but a hypothetical **10% change** in rates would not have a material impact[189](index=189&type=chunk) - Foreign currency exchange risk exists as the company transacts in multiple currencies, but the impact was not material for the periods presented, and no hedging is currently in place[190](index=190&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2021. There were no material changes to the internal control over financial reporting during the quarter - Management concluded that as of the end of the quarter, the company's disclosure controls and procedures were effective[191](index=191&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[192](index=192&type=chunk) PART II. OTHER INFORMATION This section details legal matters, comprehensive risk factors, equity issuance information, and a list of filed exhibits [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material pending legal proceedings. However, it is subject to ordinary course claims and litigation. Notably, in September 2020, Cricut joined a complaint against the U.S. federal government challenging the legality of tariffs imposed on certain products from China - The company is not presently a party to any material pending legal proceedings[196](index=196&type=chunk) - In September 2020, the company joined a lawsuit against the U.S. government in the Court of International Trade, challenging the lawfulness of Section 301 tariffs on products from China[196](index=196&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks, with key concerns including its ability to attract and engage users, intense competition, and dependence on a single primary manufacturer in China. Other significant risks involve supply chain disruptions, international expansion challenges, reliance on retail partners, protection of intellectual property, cybersecurity threats, and the concentration of voting power with its principal stockholder, Petrus, due to a dual-class stock structure - Key risks include the ability to attract and engage users, competition, supply chain dependence on a single China-based manufacturer, international risks including tariffs, and reliance on retail partners[198](index=198&type=chunk) - The company's dual-class stock structure concentrates approximately **61.4%** of voting power with its principal stockholder, Petrus, making Cricut a "controlled company" exempt from certain corporate governance requirements[439](index=439&type=chunk)[450](index=450&type=chunk) - The company primarily depends on a single contract manufacturer, Xiamen Intretech, Inc., located in China, for most of its connected machines, creating significant supply chain risk[323](index=323&type=chunk)[324](index=324&type=chunk) - The COVID-19 pandemic has increased demand but also created risks, including supply chain disruptions, longer lead times, and uncertainty about whether demand trends will continue post-pandemic[471](index=471&type=chunk)[473](index=473&type=chunk)[474](index=474&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Prior to the IPO, in Q1 2021, the company's former parent issued unregistered incentive units and options to employees and service providers, which were exempt from registration under the Securities Act. The company completed its IPO on March 29, 2021, receiving net proceeds of $242.7 million. There has been no material change in the planned use of these proceeds from what was disclosed in the prospectus - In Q1 2021, prior to the IPO, the company's former parent, Cricut Holdings, LLC, issued an aggregate of **1,868,223 incentive units** and an option for **27,027 units** to employees and service providers as unregistered securities[515](index=515&type=chunk) - The company received net proceeds of **$242.7 million** from its IPO on March 29, 2021. The planned use of these proceeds has not materially changed from the prospectus disclosures[517](index=517&type=chunk)[520](index=520&type=chunk) [Item 6. Exhibits](index=91&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including the company's Amended and Restated Certificate of Incorporation and Bylaws, various compensation and employment agreements, and certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act - The report includes key corporate documents such as the Amended and Restated Certificate of Incorporation and Bylaws[529](index=529&type=chunk) - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are filed as exhibits[529](index=529&type=chunk)[531](index=531&type=chunk)[532](index=532&type=chunk)[533](index=533&type=chunk)