10-Q 1 crct-20220630.htm 10-Q crct-20220630
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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, 2022
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)
Delaware87-0282025
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
10855 South River Front Parkway
South Jordan, Utah 84095
(385) 351-0633
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareCRCTThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of August 2, 2022, the registrant had 44,200,508 shares of Class A Common Stock, and 177,983,885 shares of Class B Common Stock, outstanding.


TABLE OF CONTENTS
PAGE



NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risk and uncertainties. These forward-looking statements, which are subject to a number of risks, uncertainties and assumptions about us, generally relate to future events or our future financial or operating performance. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “target,” “project” or “contemplate” or the negative version of these words and other comparable terminology that concern our expectations, strategy, plans, intentions or projections. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our ability to attract and engage users and attract and expand our relationships with brick-and-mortar and online retail partners and distributors;
our future results of operations, including trends in revenue, costs, operating expenses and key metrics;
our ability to compete successfully in competitive markets;
our expectations and management of future growth;
our ability to manage our supply chain, manufacturing, distribution and fulfillment, including the ability to forecast demand and manage our inventory;
our ability to enter new markets and manage our expansion efforts, including internationally;
our ability to attract and retain management, key employees and qualified personnel;
our ability to effectively and efficiently protect our brand;
our ability to maintain, protect and enhance our intellectual property and not infringe upon others’ intellectual property;
our continued use of open source software;
our estimated Serviceable Addressable Market, or SAM, and Total Addressable Market, or TAM;
our ability to prevent serious errors, defects or vulnerabilities in our products and software;
the adequacy of our capital resources to fund operations and growth;
our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business both domestically and internationally;
Petrus’ significant influence over us and our status as a “controlled company” under the rules of the Nasdaq Global Select Market, or the Exchange;
expectations regarding the impact of the COVID-19 pandemic, the related responses by governments and private industry on our business and financial condition, as well as the financial condition of our brick-and-mortar and online retail partners, online and e-commerce channels and users;
risks related to general socio-economic and political conditions as well as consumer confidence; and
the other factors identified under the section titled “Risk Factors” appearing elsewhere in this Quarterly Report on Form 10-Q.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. These statements are only predictions based primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. There are important factors that could cause our actual results, events or circumstances to differ materially from the results, events or circumstances expressed or implied by the forward-looking statements, including those factors discussed in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. You should specifically consider the numerous risks outlined in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to
2


predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Cricut, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
As of June 30, 2022As of December 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents$147,771 $241,597 
Marketable securities83,547  
Accounts receivable, net81,061 199,508 
Inventories484,216 454,174 
Prepaid expenses and other current assets28,498 32,820 
Total current assets825,093 928,099 
Property and equipment, net63,112 53,261 
Operating lease right-of-use asset19,541 17,653 
Intangible assets, net1,140 1,520 
Deferred tax assets3,255 3,255 
Other assets34,458 2,462 
Total assets$946,599 $1,006,250 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$113,554 $204,714 
Accrued expenses and other current liabilities43,028 69,351 
Deferred revenue, current portion31,261 30,547 
Operating lease liabilities, current portion5,257 3,755 
Total current liabilities193,100 308,367 
Operating lease liabilities, net of current portion16,709 15,780 
Deferred revenue, net of current portion3,913 4,858 
Other non-current liabilities4,617 3,269 
Total liabilities218,339 332,274 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, par value $0.001 per share, 100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021.
  
Common stock, par value $0.001 per share, 1,250,000,000 shares authorized as of June 30, 2022, 222,186,359 shares issued and outstanding as of June 30, 2022; 1,250,000,000 shares authorized as of December 31, 2021, 221,913,559 shares issued and outstanding as of December 31, 2021.
222 222 
Additional paid-in capital734,787 717,369 
Accumulated deficit(6,229)(43,560)
Accumulated other comprehensive income (loss)(520)(55)
Total stockholders’ equity728,260 673,976 
Total liabilities and stockholders’ equity$946,599 $1,006,250 
See accompanying notes to these unaudited condensed consolidated financial statements.
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Cricut, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(unaudited)
(in thousands, except share and per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue:
Connected machines$35,438 $146,326 $97,829 $287,646 
Subscriptions67,604 50,673 132,382 96,812 
Accessories and materials80,715 137,494 198,329 273,857 
Total revenue183,757 334,493 428,540 658,315 
Cost of revenue:
Connected machines34,882 116,217 95,595 235,909 
Subscriptions6,181 5,285 12,433 9,583 
Accessories and materials57,266 82,696 136,064 162,258 
Total cost of revenue98,329 204,198 244,092 407,750 
Gross profit85,428 130,295 184,448 250,565 
Operating expenses:
Research and development20,055 20,606 40,585 36,304 
Sales and marketing31,516 33,030 64,305 60,519 
General and administrative13,828 12,507 28,122 24,926 
Total operating expenses65,399 66,143 133,012 121,749 
Income from operations20,029 64,152 51,436 128,816 
Total other income (expense), net322 14 283 (15)
Income before provision for income taxes20,351 64,166 51,719 128,801 
Provision for income taxes6,524 15,040 14,388 30,257 
Net income$13,827 $49,126 $37,331 $98,544 
Other comprehensive income (loss):
Change in net unrealized gains (losses) on marketable securities$(343)$ $(343)$ 
Change in foreign currency translation adjustment, net of tax(110)4 (122)(9)
Total other comprehensive income (loss):$(453)$4 $(465)$(9)
Comprehensive income$13,374 $49,130 $36,866 $98,535 
Earnings per share, basic$0.06 $0.24 $0.17 $0.47 
Earnings per share, diluted$0.06 $0.22 $0.17 $0.46 
Weighted-average common shares outstanding, basic214,852,256 208,205,162 213,634,584 207,760,027 
Weighted-average common shares outstanding, diluted220,791,640 222,947,030 221,199,963 216,403,427 
See accompanying notes to these unaudited condensed consolidated financial statements.
5


Cricut, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands, except share amounts)
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2021221,913,559 $222 $717,369 $— $(43,560)$(55)$673,976 
Net income— — — 23,504 — 23,504 
Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax10,387 — (1,328)— — (1,328)
Forfeiture of unvested common stock(114,332)— — — —  
Stock-based compensation— — 10,500 — — 10,500 
Compensatory units repurchased— — (14)— — (14)
Other comprehensive loss— — — — (12)(12)
Balance as of March 31, 2022221,809,614 $222 $726,527 $(20,056)$(67)$706,626 
Net income— $— $— $13,827 $— $13,827 
Issuance of common stock upon vesting or exercise of stock-based awards, net of withholding tax500,237 $— $(3,218)$— $— $(3,218)
Forfeiture of unvested common stock(123,492)$— $— $— $— $ 
Stock-based compensation— $— $11,478 $— $— $11,478 
Other comprehensive loss— $— $— $— $(453)$(453)
Balance as of June 30, 2022222,186,359 $222 $734,787 $(6,229)$(520)$728,260 
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 2020208,116,104 $208 $412,741 $(184,033)$9 $228,925 
Net income— — — 49,418 — 49,418 
Capital contributions— — 200 — — 200 
Initial public offering, net of offering costs13,250,000 13 242,655 — — 242,668 
Repurchase upon Corporate Reorganization(524)— (10)— — (10)
Extinguishment of liability awards to equity— — 10,784 — — 10,784 
Stock-based compensation— — 6,635 — — 6,635 
Compensatory units repurchased— — (160)— — (160)
Other comprehensive loss— — — — (13)(13)
Balance as of Balance as of March 31, 2021221,365,580 $221 $672,845 $(134,615)$(4)$538,447 
Net income— $— $— $49,126 $— $49,126 
Issuance of common stock upon vesting or exercise of stock-based awards64,566 $— $ $— $— $ 
Forfeiture of unvested common stock(145,902)$— $— $— $— $ 
Initial public offering, net of offering costs968,815 $1 $18,019 $— $— $18,020 
Stock-based compensation— $— $8,015 $— $— $8,015 
Other comprehensive income— $— $— $— $4 $4 
Balance as of June 30, 2021222,253,059 $222 $698,879 $(85,489)$ $613,612 
See accompanying notes to these unaudited condensed consolidated financial statements.
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Cricut, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net income$37,331 $98,544 
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
Depreciation and amortization (including amortization of debt issuance costs)
12,129 8,317 
Stock-based compensation19,360 19,795 
Non-cash lease expense2,406 1,887 
Provision for inventory obsolescence4,454 1,598 
Other(59)(110)
Changes in operating assets and liabilities:
Accounts receivable118,447 (659)
Inventories(64,783)(178,527)
Prepaid expenses and other current assets4,237 (15,361)
Other assets(594)311 
Accounts payable(91,840)28,833 
Accrued expenses and other current liabilities and other non-current liabilities
(25,990)(20,560)
Operating lease liabilities(1,861)(2,187)
Deferred revenue(231)4,124 
Net cash and cash equivalents (used in) provided by operating activities
13,006 (53,995)
Cash flows from investing activities:
Purchase of marketable securities(84,601) 
Proceeds from maturities of marketable securities807  
Acquisitions of property and equipment, including capitalized software development costs
(17,775)(16,124)
Net cash and cash equivalents used in investing activities(101,569)(16,124)
Cash flows from financing activities:
Proceeds from capital contributions 200 
Proceeds from issuance of common stock upon initial public offering, net of offering costs 262,007 
Repurchase of compensatory units(14)(160)
Repurchase of common stock upon Corporate Reorganization
 (10)
Proceeds from exercise of stock options31  
Employee tax withholding payments on stock-based awards(5,048) 
Payments on capital leases (24)
Net cash and cash equivalents (used in) provided by financing activities(5,031)262,013 
Effect of exchange rate on changes on cash and cash equivalents(232)(29)
Net increase (decrease) in cash and cash equivalents(93,826)191,865 
Cash and cash equivalents at beginning of period241,597 122,215 
Cash and cash equivalents at end of period$147,771 $314,080 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$ $14 
Cash paid during the period for income taxes$5,967 $52,410 
Supplemental disclosures of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities$4,307 $3,529 
Property and equipment included in accounts payable and accrued expenses and other current liabilities
$5,895 $3,118 
Tax withholdings on stock-based awards included in accrued expenses and other current liabilities$388 $ 
Stock-based compensation capitalized for software development costs$1,153 $673 
Reclassification of liability awards to equity upon modification$ $10,784 
Leasehold improvements acquired through tenant allowances$752 $ 
See accompanying notes to these unaudited condensed consolidated financial statements.
7



Cricut, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.Description of Business and Basis of Presentation
Nature of Business
Cricut, Inc. (“Cricut” or the “Company”) is a designer and marketer of a creativity platform that enables users to turn ideas into professional-looking handmade goods. Using the Company’s versatile connected machines, design apps and accessories and materials, users create everything from personalized birthday cards, mugs and T-shirts to large-scale interior decorations. The Company’s connected machines and related accessories and materials and subscription services are primarily marketed under the Cricut brand in the United States, as well as Europe and other countries of the world. Headquartered in South Jordan, Utah, the Company is an innovator in its industry, focused on bringing innovative technology (automation and consumerization of industrial tools) to the craft, DIY and home décor categories. The Company’s condensed consolidated financial statements include the operations of its wholly owned subsidiaries, which are located throughout Europe and in the Asia-Pacific region.
The Company designs, markets and distributes the Cricut family of products, including connected machines, design apps and accessories and materials. In addition, Cricut sells a broad line of images, fonts and projects for purchase à la carte.
On September 2, 2020, Cricut converted from a Utah corporation to a Delaware corporation. In connection with such conversion, each share of Class A common stock, par value $0.01, of the Utah corporation was exchanged for one share of common stock of the Delaware corporation, par value $0.001. On March 11, 2021, the Company filed an Amended and Restated Certificate of Incorporation to effect a 64.2645654-for-1 forward stock split of its outstanding common stock. The par value per share was not adjusted as a result of the forward stock split. All authorized, issued and outstanding shares of common stock, additional paid in capital and the related per share amounts contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the forward stock split and change in par value for all prior periods presented.
The Company organizes its business into the following three reportable segments: Connected Machines, Subscriptions, and Accessories and Materials. See Note 16, Segment Information, for further discussion of the Company’s segment reporting structure.
Initial Public Offering and Corporate Reorganization
The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on March 24, 2021 by the Securities and Exchange Commission (“SEC”), and the Company’s Class A common stock began trading on the Nasdaq Global Select Market on March 25, 2021. On March 29, 2021, the Company closed its IPO, in which the Company sold 13,250,000 shares of Class A common stock and the selling stockholders sold an additional 2,064,903 shares of Class A common stock at a price to the public of $20.00 per share. The Company received aggregate net proceeds of $242.7 million after deducting offering costs, underwriting discounts and commissions of $22.3 million. On April 28, 2021, the Company 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.
Immediately prior to the IPO, the Company engaged in a series of related Corporate Reorganization transactions as follows:
Cricut, Inc. filed an amended and restated certificate of incorporation; and
Cricut Holdings, LLC, or Cricut Holdings, dissolved and liquidated in accordance with the terms and conditions of its then existing limited liability company agreement, pursuant to which the holders of existing units in Cricut Holdings (including holders of purchased units, incentive units, zero strike price incentive units, certain phantom units and options), or the Existing Unitholders, received 100% of the capital stock of Cricut, Inc., its sole asset, at the time of the liquidation with a value implied by the initial public offering price of the shares of Class A common stock to be sold in this offering. Cricut Holdings ceased to exist following this transaction.
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In connection with the Corporate Reorganization the outstanding stock based compensation awards issued by Cricut Holdings were modified or settled as described in Note 10 below.
Upon filing the amended and restated certificate of incorporation, all of the Company’s historical Common Stock converted to Class B common stock. Shares of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to five votes per share and is convertible at any time into one share of Class A common stock.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the annual report on Form 10-K for the fiscal year ended December 31, 2021 (The “Annual Report”). However, the Company believes that the disclosures provided herein are adequate to prevent the information presented from being misleading.
The condensed consolidated financial statements include the accounts of Cricut, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited financial statements as of that date but does not include all disclosures including certain notes required by GAAP on an annual reporting basis.
In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, cash flows and the changes in equity for the interim periods. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending December 31, 2022, or any other period.
Certain prior year reported amounts have been reclassified to conform with the current period presentation. These reclassifications did not have a material impact on the Company's consolidated financial statements or related footnotes.
There were no material changes to the Company's significant accounting policies during the six months ended June 30, 2022.
2.Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. For revenue recognition, examples of estimates and judgments include: determining the nature and timing of satisfaction of performance obligations, determining the standalone selling price (“SSP”) of performance obligations, estimating variable consideration such as sales incentives and product returns. Other estimates include the warranty reserve, allowance for doubtful accounts, inventory reserve, intangible assets and other long-lived assets valuation, legal contingencies, stock-based compensation, income taxes, deferred tax assets valuation and developed software, among others. These estimates and assumptions are based on the Company’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including any effects of the ongoing pandemic and the economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could differ from these estimates.
9


Marketable Securities

The Company designates investments in debt securities as available-for-sale. Available-for-sale debt securities with original maturities of three months or less from the date of purchase are classified within cash and cash equivalents. Available-for-sale debt securities with original maturities longer than three months are available to fund current operations and are classified as marketable securities, within current assets on the consolidated balance sheets. Available-for-sale debt securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Realized gains and losses on the sale of marketable securities are determined using the average cost method on a first-in, first-out basis and recorded in total other income (expense), net in the condensed consolidated statements of operations and comprehensive income.

The available-for-sale debt securities are subject to a periodic impairment review. For investments in an unrealized loss position, the Company writes down the amortized cost basis of the investment if it is more likely than not that the Company will be required or will intend to sell the investment before recovery of its amortized cost basis. For investments not likely to be sold before recovery of the amortized cost basis, the Company determines whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, and reasonable and supportable forecasts of economic conditions. The Company recognizes an allowance for credit losses up to the amount of the unrealized loss when appropriate. Allowances for credit losses and write-downs are recognized in total other income (expense), net, and unrealized losses not related to credit losses are recognized in accumulated other comprehensive income (loss). There are no allowances for credit losses recorded for the periods presented. As of June 30, 2022, the gross unrealized losses on available-for-sale securities are related to market interest rate changes and not attributable to credit.

Fair Value Measurement
The Company measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
Money market funds and certain marketable securities are highly liquid investments and are actively traded. The pricing information for these assets is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. Other marketable securities such as corporate bonds, commercial paper, U.S. Treasury and agency securities are valued using observable inputs from similar assets, or from observable data in markets that are not active; these assets are classified as Level 2 of the fair value hierarchy. There were no transfers between Levels 1, 2 or 3 for any of the periods presented. There were no liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021.
Earnings Per Share
Earnings per share is computed using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights and sharing of losses, of the Class A common stock and Class B common stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of profits are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net income per share will, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
Basic earnings per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period. Stock-based awards subject to conditions other than service conditions are considered contingently issuable shares and are included in basic EPS based on the number of awards that would be issuable if the reporting date were the end of the contingency period.
Inventories
Inventories (current and non-current), which primarily consist of finished goods, are valued at the lower of average cost or net realizable value. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Assessments to value the inventory at the lower of the average cost to purchase the inventory, or the net realizable value of the
10


inventory, are based upon assumptions about future demand, physical deterioration, changes in price levels and market conditions. As a result of the Company’s assessments, when the net realizable value of inventory is less than the carrying value, the inventory cost is written down to the net realizable value and the write down is recorded as a charge to cost of revenue. Inventories include indirect acquisition and production costs that are incurred to bring the inventories to their present condition and location. Inventories are recorded net of reserves for obsolescence. Once established, the original cost of the inventory less the related inventory reserve represents the new cost basis of such products.
As needed, we complete strategic and market beneficial purchases of critical raw materials that are used in our core production process (such as microchips) in quantities that exceed anticipated consumption within our normal operating cycle, which is 12 months. We classify such raw materials that we do not expect to consume within our normal operating cycle as non-current within Other assets.

3.Revenue and Deferred Revenue
Deferred revenue relates to performance obligations for which payments have been received from the customer prior to revenue recognition. Deferred revenue primarily consists of deferred subscription-based services. Deferred revenue also includes amounts allocated from the sale of a connected machine to the unspecified upgrades and enhancements and the Company’s cloud-based services. The Company had no material contract assets.
The following table summarizes the changes in the deferred revenue balance for the six months ended June 30, 2022 and 2021:
Six Months Ended June 30,
20222021
(in thousands)
Deferred revenue, beginning of period$35,405 $26,276 
Recognition of revenue included in beginning of period
deferred revenue
(23,938)(18,805)
Revenue deferred, net of revenue recognized on contracts in
the respective period
23,707 22,930 
Deferred revenue, end of period$35,174 $30,401 
As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was equal to the deferred revenue balance.
The Company expects the following recognition of deferred revenue as of June 30, 2022:
Year Ended December 31,
2022 (remainder of year)202320242025Total
(in thousands)
Revenue expected to be recognized$25,314 $7,847 $1,884 $129 $35,174 
The Company’s revenue from contracts with customers disaggregated by major product lines, excluding sales-based taxes, are included in Note 16 under the heading “Segment Information.”
Revenue recognized during the three and six months ended June 30, 2022 related to performance obligations satisfied or partially satisfied in prior periods was $0.3 million and $0.7 million, respectively.
The following table presents the total revenue by geography based on the ship-to address for the periods indicated:
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Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
North America*$159,479 $306,173 $367,784 $596,510 
International24,278 28,320 60,756 61,805 
Total revenue$183,757 $334,493 $428,540 $658,315 
*North America revenue consists of revenues from the United States and Canada.
4.Cash, Cash Equivalents, and Financial Instruments
The following table shows the Company’s cash, cash equivalents, and marketable securities by significant investment category as of June 30, 2022:
As of June 30, 2022
Adjusted CostAllowance for Credit Losses Total Unrealized GainsTotal Unrealized LossesFair ValueCash and Cash EquivalentsMarketable Securities
(in thousands)
Cash$128,989 $— $— $— $128,989 $128,989 $— 
Level 1:
Commercial paper27,842   (20)27,822 16,635 11,187 
Subtotal27,842   (20)27,822 16,635 11,187 
Level 2:
Corporate debt securities47,408   (239)47,169 2,147 45,022 
U.S. treasury securities27,422   (84)27,338  27,338 
Subtotal74,830   (323)74,507 2,147 72,360 
Total$231,661 $ $ $(343)$231,318 $147,771 $83,547 
Marketable securities held as of June 30, 2022 generally mature over the next one to eighteen months.
As of December 31, 2021 the Company had cash and cash equivalents of $241.6 million including $106.0 million in money market funds with no unrealized gains or losses.

5.Inventory
Inventories are comprised of the following:
As of
June 30,
2022
As of
December 31,
2021
(in thousands)
Raw materials$34,659 $20,187 
Finished goods481,102 433,987 
Total inventories$515,761 $454,174 
Inventories current$484,216 $454,174 
Inventories non-current (included in other assets)$31,545 $ 
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6.     Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
As of
June 30,
2022
As of
December 31,
2021
(in thousands)
Sales incentives$18,979 $36,969 
Other accrued liabilities and other current liabilities24,049 32,382 
Total accrued expenses$43,028 $69,351 
7.    Revolving Credit Facility
2020 Credit Agreement
In September 2020, the Company entered into the Credit Agreement with JPMorgan Chase Bank, N.A., Citibank, N.A. and Origin Bank. The Credit Agreement replaces the prior amended credit agreement with Origin Bank. The Credit Agreement provides for a three-year asset-based senior secured revolving credit facility of up to $150.0 million, maturing on September 4, 2023. During the term of the Credit Agreement, the Company may increase the aggregate amount of the Credit Facility by up to an additional $200.0 million, (for maximum aggregate lender commitments of up to $350.0 million), subject to the satisfaction of certain conditions under the Credit Agreement, including obtaining the consent of the administrative agent and an increased commitment from existing or new lenders. The Credit Facility may be used to issue letters of credit and for other business purposes, including working capital needs.
The amount that can be borrowed under the Credit Facility is limited to the lesser of (a) the borrowing base minus the aggregate revolving exposure or (b) aggregate lender commitments at any given time. The borrowing base is determined according to certain percentages of eligible accounts receivable and eligible inventory (which may be valued at average cost, market value or net orderly liquidation value), subject to reserves determined by the administrative agent. At any time that the Company’s borrowing base is less than the aggregate lender commitments, the Company can only borrow revolving loans up to the amount of the Company’s borrowing base and not in the full amount of the aggregate lender commitments. As of June 30, 2022, no amount was outstanding under the Credit Agreement and available borrowings were $150.0 million.
Generally, borrowings under the Credit Agreement bear interest at a rate based on LIBOR (“Adjusted LIBO rate”) or an alternative base rate (“ABR”), plus, in each case, an applicable margin. The applicable margin will range from (a) with respect to borrowings bearing interest at the ABR, 1.50% to 2.00%, and (b) with respect to borrowings bearing interest at the ABR (i) if the “REVLIBOR30 Screen Rate” (as defined in the Credit Agreement) is available for such period, 1.50% to 2.00%, or (ii) otherwise, 0.00% to 0.50%, in each case for the previous clauses (a) and (b), based on our “Fixed Charge Coverage Ratio” as defined in the Credit Agreement.
The Credit Agreement contains financial covenants during the initial year of the agreement, requiring the Company to maintain a fixed charge coverage ratio of at least 1.0 to 1.0, measured monthly on a trailing 12 month basis. The Company is also subject to this covenant in future periods if the available commitment is less than the greater of $15.0 million and 10% of total commitment made by all lenders. Management has determined that the Company was in compliance with all financial and non-financial debt covenants as of June 30, 2022. As disclosed in Note 17, the 2020 Credit Agreement was replaced on August 4, 2022.
8.Income Taxes
As required by Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes,” the Company computes interim period income taxes by applying an estimated annual effective tax rate to our year-to-date income from operations before income taxes, except for significant unusual or infrequently occurring items. The estimated effective tax rate is adjusted each quarter in accordance with ASC 740.

The estimated annual effective tax rate was 32.1 percent and 27.8 percent for the three and six months ended June 30, 2022, respectively, and 23.4 percent and 23.5 percent for the three and six months ended June 30, 2021, respectively. The Company’s provision for income taxes was $6.5 million and $14.4 million, respectively, for the three and six ended June 30, 2022, and $15.0 million and $30.3 million, respectively, for the three and six
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months ended June 30, 2021. The provision for income taxes varied from the tax computed at the U.S. federal statutory income tax rate for the periods presented primarily due to discrete tax items including a stock based compensation shortfall due to the decrease in stock price upon vesting.
The Company reviews its deferred tax assets for realization based upon historical taxable income, prudent and feasible tax planning strategies, the expected timing of the reversals of existing temporary differences and expected future taxable income. The Company has concluded that it is more likely than not that the net deferred tax assets will be realized. Accordingly, the Company has not recorded a valuation allowance against net deferred tax assets for any of the periods presented.
9.Capital Structure
As of June 30, 2022, the Company had authorized 100,000,000 shares of preferred stock, par value $0.001 per share, and 1,250,000,000 shares of common stock, par value $0.001 per share, which was divided between two series: Class A common stock and Class B common stock. As of June 30, 2022, the Company had 1,000,000,000 shares of Class A common stock and 250,000,000 shares of Class B common stock authorized and 44,050,301 shares of Class A common stock and 178,136,058 shares of Class B common stock issued and outstanding. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to five votes per share and is convertible at any time into one share of Class A common stock. During the six months ended June 30, 2022 and 2021, 5,653,017 and 2,215,887 shares of Class B common stock were converted to Class A common stock, respectively.
10.Stock-Based Compensation
Stock-based Compensation Cost
The following table shows the stock-based compensation cost by award type for the periods indicated:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Equity classified awards
Restricted stock units8,424 4,479 15,250 4,775 
Stock options906 773 1,918 4,267 
Class B common stock 2,148 2,763 4,810 5,608 
Liability classified awards22 1,004 (208)7,045 
Total stock-based compensation$11,500 $9,019 $21,770 $21,695 
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The following table sets forth the total stock-based compensation cost included in the Company’s condensed consolidated statements of operations and comprehensive income or capitalized to assets for the periods indicated:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Cost of revenue
Connected machines$9 $8 $12 $16 
Subscriptions107 52 159 88 
Accessories and materials    
Total cost of revenue116 60 171 104 
Research and development4,915 3,768 8,926 7,409 
Sales and marketing3,255 2,425 6,123 8,032 
General and administrative2,116 1,857 4,140 4,250 
Total stock-based compensation expense$10,402 $8,110 $19,360 $19,795 
Capitalized for software development costs612 379 1,153 673 
Capitalized to inventory486  530 1,257 1,227 
Total stock-based compensation$11,500 $9,019 $21,770 $21,695 
As of June 30, 2022, there was $136.8 million of unrecognized stock-based compensation cost related to service-based awards which is expected to be recognized over a weighted-average period of 3.1 years. The total unrecognized compensation expense related to unvested performance-based restricted stock units (“PRSUs”) was $154.2 million as of June 30, 2022.
Corporate Reorganization and Stock-Based Compensation Modifications
In connection with the Corporate Reorganization, all outstanding awards issued under the Incentive Unit Plan discussed below were modified by exchanging the outstanding awards of Cricut Holdings for awards of the Company. All service based vesting conditions were unaffected by the modification. As described below, the vesting conditions were modified for certain awards which previously had both service and market based vesting conditions.
All vested equity classified awards were settled in shares of the Company’s Class B common stock previously held by Cricut Holdings. Unvested equity classified awards were converted to restricted shares of the Company’s Class B common stock subject to future vesting, or in the case of options were converted into options to purchase the Company’s Class B common stock. All vested liability classified awards converted into either shares of Class B common stock to the extent permitted in each applicable jurisdiction or settled in cash. All unvested liability classified awards converted into restricted stock units (“RSUs”) under the 2021 Equity Incentive Plan that will vest into shares of Class A common stock of Cricut, Inc. to the extent permitted in each applicable jurisdiction or into restricted stock unit equivalents which will be settled in cash upon vesting as described below.
In connection with the Corporate Reorganization and modification, the Company granted options under the 2021 Equity Incentive Plan to certain employees. The number of options was calculated based on the number of outstanding incentive units or incentive unit equivalents prior to the modification and the participation threshold of such awards. The vesting terms of the options are also based on the vesting terms of the original award. Therefore, the Company considered the exchange of the original award for the restricted shares or RSUs plus the options to be a single modification and began recognizing the incremental compensation cost of $14.5 million beginning in March 2021 over the vesting term, including a cumulative adjustment in March 2021 to recognize the incremental compensation cost associated with historical vesting.
As part of the modification of outstanding awards in connection with the Corporate Reorganization, awards issued under the Incentive Unit Plan which included both service and market conditions were modified to remove the market vesting condition and to increase the participation threshold of the award to the price specified in the former market condition. In total, 3.0 million, 3.0 million, 1.0 million and 1.0 million awards which previously had a participation threshold of $2.00, $2.00, $5.00 and $5.00 per share, respectively, were modified to have a participation threshold of $3.00, $4.00, $6.00 and $7.00 per share, respectively. Incremental compensation cost associated with these awards is included in the total incremental compensation cost associated with the issuance of additional options to employees described above as this change was part of a single modification.
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2021 Equity Incentive Plan
In March 2021, the Company’s 2021 Equity Incentive Plan became effective. The 2021 Equity Incentive Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants. As of June 30, 2022, 31,895,729 shares of Class A common stock were reserved for issuance under this plan including shares reserved for previously granted awards discussed below as well as shares reserved for issuance of future awards under the plan.
A summary of the Company’s service-based RSU activity under the 2021 Equity Incentive Plan is as follows:
Number of
RSUs
Weighted-
Average
Grant Date
Fair Value
(per share)
Outstanding at December 31, 20214,673,831 $23.84 
Granted2,895,550 $13.82 
Vested(910,462)$22.60 
Forfeited/cancelled(215,938)$22.09 
Outstanding at June 30, 20226,442,981 $19.56 

In 2022, the Company granted PRSUs under the 2021 Equity Incentive Plan to certain employees that represent shares potentially issuable in the future. The PRSUs vest in two equal tranches subject to the Company achieving cumulative adjusted earnings per share over eight quarters of $4.93 share and $6.16 per share, respectively, at any point during the 5-year performance period, subject to employees remaining with the Company through the vesting date. Adjusted earnings per share means GAAP net income adjusted to exclude income tax expenses, as well as stock-based compensation expense and payroll tax expense specifically related to the PRSU awards.
A summary of the Company’s PRSU activity under the 2021 Equity Incentive Plan is as follows:

Number of
PRSUs (a)
Weighted-
Average
Grant Date
Fair Value
(per share)
Outstanding at December 31, 2021 $ 
Granted6,655,000 $23.31 
Forfeited/cancelled(40,000)$23.37 
Outstanding at June 30, 20226,615,000 $23.31 
a.Represents the maximum number of PRSUs assuming all performance targets are achieved.
The expense recognized each period for these PRSUs is primarily dependent upon the Company’s estimate of the probability of achieving the performance targets. At June 30, 2022, the Company determined it was not probable any performance conditions would be achieved so no stock-based compensation was recorded for these PRSUs during the six months ended June 30, 2022.
Options under the 2021 Equity Incentive Plan have a contractual term of 10 years. The exercise price of an incentive stock option and non-qualified stock option shall not be less than 100% of the fair market value of the shares on the date of grant.
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A summary of the Company’s stock option activity under the 2021 Equity Incentive Plan is as follows:
Number of
Options
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Term
(Years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 20213,260,357 $20.00 5.8$6,814 
Exercised(1,535)$20.00 
Forfeited/cancelled(13,004)$20.00 
Outstanding at June 30, 20223,245,818 $20.00 5.3$ 
Vested and exercisable at June 30, 20221,578,208 $20.00 4.9$ 
In connection with the Corporate Reorganization, certain employees received restricted stock unit equivalents (“RSU equivalents”). Upon vesting, these awards are settled for a cash payment equal to the intrinsic value of the award on the date of the Corporate Reorganization plus the difference between the Company’s stock price on the vesting date less the base price specified at the time of the grant. As of June 30, 2022, the total recognized liability for these awards was $0.7 million. A summary of the RSU equivalent activity under the 2021 Equity Incentive Plan is as follows:
Number of
RSU Equivalents
Weighted-
Average
Base Price
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 202181,077 $20.00 $1,231 
Granted1,000 $ 
Forfeited / Cancelled(