Cricut Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
CRCT$8.78-5.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001828962-24-000048
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001828962-24-000102
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 94 previous paragraphs and 105 current paragraphs.
64 unchanged; 24 reworded; 14 added; 4 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Other Income, Net
Current report
Six Months Ended June 30, 2024 and 2023
Current report
Products revenue decreased by $26.0 million, or 13%, to $179.4 million for the six months ended June 30, 2024 from $205.4 million for the six months ended June 30, 2023. The decrease was primarily driven by fewer units of Accessories & Materials sold during the period, partially offset by an increase in Connected Machine units sold during the period.
Current report
Products cost of revenue decreased by $12.9 million, or 16%, to $69.2 million for the three months ended June 30, 2024 from $82.1 million for the three months ended June 30, 2023. The decrease was primarily driven by a reduction in inventory impairment charges compared to prior year and fewer unit sales of Accessories & Materials.
Current report
Gross marginfor Products was 23% for the three months ended June 30, 2024 and 18% for the three months ended June 30, 2023. The increase was primarily driven by a reduction in inventory impairment charges partially offset by higher inventory procurement costs and more promotional activity.
Current report
Six Months Ended June 30, 2024 and 2023
Current report
Platform cost of revenue increased by $1.9 million, or 12%, to $17.6 million for the six months ended June 30, 2024 from $15.8 million for the six months ended June 30, 2023. The increase was primarily driven by an increase in the amortization of capitalized software costs.
Current report
Gross marginfor Products was 24% for thesix months ended June 30, 2024 and 13% for thesix months ended June 30, 2023. The increase was primarily driven a reduction in inventory impairment charges compared to prior year.
Current report
Research and development expenses decreased by $2.0 million, or 12%, to $14.3 million for the three months ended June 30, 2024 from $16.3 million for the three months ended June 30, 2023. The decrease was primarily due to a $2.0 million decrease in personnel-related expense.
Current report
Sales and marketing expenses increased by $7.4 million, or 12%, to $66.4 million for the six months ended June 30, 2024 from $59.0 million for the six months ended June 30, 2023. The increase was primarily due to a $5.6 million increase in advertising and other marketing costs and a $1.9 million increase in personnel-related expense.
Current report
General and administrative expenses decreased by $6.9 million, or 31%, to $15.7 million for the three months ended June 30, 2024 from $22.7 million for the three months ended June 30, 2023. The decrease was primarily due to a $7.2 million decrease in bad debt expense.
Current report
General and administrative expenses decreased by $7.1 million, or 17%, to $34.2 million for the six months ended June 30, 2024 from $41.4 million for the six months ended June 30, 2023. The decrease was primarily due to a $7.3 million decrease in bad debt expense.
Current report
Other Income, Net
Current report
Other income, net decreased by $0.3 million or 9% to $3.4 million for the three months ended June 30, 2024 from $3.7 million for the three months ended June 30, 2023. The decrease was due to a decrease in interest income.
Removed paragraphs (4)
Previous report
Other Income (Expense), Net
Previous report
Gross marginfor Products was 25% for the three months ended March 31, 2024 and 8% for the three months ended March 31, 2023. The increase was primarily driven by lower excess inventory write downs in the current period compared to prior year, improved product mix within Connected Machines, and lower outbound freight costs.
Previous report
General and administrative expenses decreased by $0.2 million, or 1%, to $18.5 million for the three months ended March 31, 2024 from $18.7 million for the three months ended March 31, 2023. The decrease was primarily due to a decrease in professional services expense, partially offset by an increase in personnel related expense.
Previous report
Other Income (Expense), Net
Reworded paragraphs (24)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read together with our interim condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in the sections titled “Risk Factors” and “Note Regarding Forward-Looking Statements.”
Current wording
The following discussion and analysis of our financial condition and results of operations should be read together with our interim condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed, or incorporated by reference, in the sections titled “Risk Factors” and “Note Regarding Forward-Looking Statements.”
Previous wording
At Cricut, our mission is to help people lead creative lives. We have designed and built a creativity platform that enables our engaged and loyal community of nearly 6.0 million Active Users to turn ideas into professional-looking handmade goods. We define “Active User” as a registered user of at least one registered connected machine who has utilized their connected machine to create a project in the last 365 days. With our highly versatile Design Space Platform and our products, including our connected machines and accessories and materials, our users create everything from personalized birthday cards, mugs and T-shirts, to large-scale interior decorations.
Current wording
At Cricut, our mission is to help people lead creative lives. We have designed and built a creativity platform that enables our engaged and loyal community of 5.9 million Active Users to turn ideas into professional-looking handmade goods. We define “Active User” as a registered user of at least one registered connected machine who has utilized their connected machine to create a project in the last 365 days. With our highly versatile Design Space Platform and our products, including our connected machines and accessories and materials, our users create everything from personalized birthday cards, mugs and T-shirts, to large-scale interior decorations.
Previous wording
Users can leverage the full power of our platform by using our connected machines together with our free design apps, in-app purchases and subscription offerings to design and complete projects. All users can access a select number of free images, fonts and projects from our design apps or upload their own. In addition, we offer a wider selection of images, fonts and projects for purchase à la carte, including licensed content from partners with well-known brands and characters, like major motion picture studios. We also have two subscription offerings:
Current wording
Users can leverage the full power of our platform by using our connected machines together with our free design apps, in-app purchases and subscription offerings to design and complete projects. All users can access a select number of free images, fonts and projects from our design apps or upload their own. In addition, we offer a wider selection of images, fonts and projects for purchase à la carte, including licensed content from partners with well-known brands and characters, like major motion picture studio[s. We also have two subscription offerings:
Previous wording
As of March 31, 2024, we had nearly 2.8 million Paid Subscribers to Cricut Access and Cricut Access Premium.
Current wording
As of June 30, 2024, we had 2.8 million Paid Subscribers to Cricut Access and Cricut Access Premium.
Previous wording
We sell our connected machines and accessories and materials through our brick-and-mortar and online retail partners, as well as through our website at cricut.com. Our partners include Amazon, Hobby Lobby, HSN, Jo-Ann,
Current wording
We sell our connected machines and accessories and materials through our brick-and-mortar and online retail partners, as well as through our website at cricut.com. Our partners include Amazon, Hobby Lobby, HSN, Jo-Ann, Michaels, Target, Walmart and many others. We also sell our products and subscriptions to Cricut Access and Cricut Access Premium on cricut.com.
Previous wording
Historically, we have experienced the highest revenue levels in the fourth quarter of the year, coinciding with the holiday shopping season in the United States. For example, in 2021, 2022 and 2023, our fourth quarter represented 30%, 32% and 30% of total revenue for the year, respectively. Our promotional discounting activity is higher in the fourth quarter as well, which negatively impacts gross margin during this period. For example, gross margin in the fourth quarter of 2023 was 42%, compared to gross margin of 45% for all of 2023. Additionally, sales of accessories and materials typically rise and fall with seasonal holiday crafting periods. The yearly seasonality patterns experienced in 2021, 2022, and 2023 are not representative of our typical historical patterns due to the unique aspects of the pandemic and condition of the global economy. For example, we experienced unusually high demand in the first and second quarters of 2021, which is inconsistent with normal seasonality patterns. In 2022, we experienced a deceleration of sales post-Q1 due to the global economic slowdown which drove a deviation from our typically expected seasonality. As the impact of the pandemic and global economy challenges on behaviors abate, we expect to return to a more normal seasonality pattern. As we continue to grow internationally, we expect we may experience seasonality in additional markets, which may differ from the seasonality experienced in the United States.
Current wording
Historically, we have experienced the highest revenue levels in the fourth quarter of the year, coinciding with the holiday shopping season in the United States. For example, in 2021, 2022 and 2023, our fourth quarter represented 30%, 32% and 30% of total revenue for the year, respectively. Our promotional discounting activity is higher in the fourth quarter as well, which negatively impacts gross margin during this period. For example, gross margin in the fourth quarter of 2023 was 42%, compared to gross margin of 45% for all of 2023. Additionally, sales of accessories and materials typically rise and fall with seasonal holiday crafting periods. The yearly seasonality patterns experienced in 2021, 2022, and 2023 are not representative of our typical historical patterns due to the unique aspects of the pandemic and condition of the global economy. For example, we experienced unusually high demand in the first and second quarters of 2021, which is inconsistent with normal seasonality patterns. In 2022, we experienced a deceleration of sales post-Q1 due to the global economic slowdown which drove a deviation from our typically expected seasonality. As the impact of the pandemic and global economic challenges on behaviors abate, we expect to return to a more normal seasonality pattern. As we continue to grow internationally, we expect we may experience seasonality in additional markets, which may differ from the seasonality experienced in the United States.
Previous wording
We generate Platform revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium, digital content, and a minimal amount of revenue allocated to the unspecified future upgrades and enhancements related to the essential software and access to our cloud-based services. For a monthly or annual subscription fee, Cricut Access includes a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care. For our annual subscription fee, Cricut Access Premium includes all the benefits of Cricut Access as well as additional discounts and preferred shipping. Digital content includes à la carte digital content purchases, including fonts, images and projects. Platform revenue is recognized on a ratable basis over time the subscription term for subscriptions, and at the point in time when control is transferred for à la carte digital content.
Current wording
We generate Platform revenue primarily from sales of subscriptions to Cricut Access and Cricut Access Premium, digital content, and a minimal amount of revenue allocated to the unspecified future upgrades and enhancements related to the essential software and access to our cloud-based services. For a monthly or annual subscription fee, Cricut Access includes a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care. For our annual subscription fee, Cricut Access Premium includes all the benefits of Cricut Access as well as additional discounts and preferred shipping. Digital content includes à la carte digital content purchases, including fonts, images and projects. Platform revenue is recognized on a ratable basis over time, during the subscription term for subscriptions, and at the point in time when control is transferred for à la carte digital content.
Previous wording
We generate Products revenue from sales of connected machines and ancillary products, net of sales discounts, incentives and returns, and includes amounts allocated to the material right for discounts on materials and accessories available only to Paid Subscribers. Our connected machines portfolio consists of machines in four product families: Cricut Maker, which includes Maker and Maker 3; Cricut Explore, which includes Explore Air 2 and Explore 3; Cricut Joy, which includes Joy and Joy Xtra; and Cricut Venture. Our ancillary products include Cricut
Current wording
We generate Products revenue from sales of connected machines and ancillary products, net of sales discounts, incentives and returns, and includes amounts allocated to the material right for discounts on materials and accessories available only to Paid Subscribers. Our connected machines portfolio consists of machines in four product families: Cricut Maker, which includes Maker and Maker 3; Cricut Explore, which includes Explore Air 2 and Explore 3; Cricut Joy, which includes Joy and Joy Xtra; and Cricut Venture. Our ancillary products include Cricut EasyPress, Cricut MugPress, hand tools, machine replacement tools and blades, and project materials such as vinyl and iron-on. Products revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.
Previous wording
Other income (expense), net consists primarily of interest income from our investments in marketable securities, offset by interest expense associated with our debt financing arrangements and amortization of debt issuance costs.
Current wording
Other income, net consists primarily of interest income from our investments in marketable securities, offset by interest expense associated with our debt financing arrangements and amortization of debt issuance costs.
Previous wording
Comparison of the Three Months Ended March 31, 2024 and 2023
Current wording
Comparison of the Three and Six Months Ended June 30, 2024 and 2023
Previous wording
Platform revenue increased by $2.0 million, or 3%, to $78.3 million for the three months ended March 31, 2024 from $76.2 million for the three months ended March 31, 2023. The increase was driven by an increase in the number of paid subscribers which increased from 2.7 million as of March 31, 2023 to nearly 2.8 million as of March 31, 2024.
Current wording
Platform revenue increased by $0.3 million, or 0%, to $77.6 million for the three months ended June 30, 2024 from $77.4 million for the three months ended June 30, 2023. The increase was driven by an increase in the number of paid subscribers which increased from 2.7 million as of June 30, 2023 to 2.8 million as of June 30, 2024.
Previous wording
Products revenue decreased by $15.9 million, or 15%, to $89.1 million for the three months ended March 31, 2024 from $105.0 million for the three months ended March 31, 2023. The decrease was primarily driven by fewer units of Accessories & Materials sold during the period, partially offset by an increase in Connected Machine units sold during the period.
Current wording
Products revenue decreased by $10.1 million, or 10%, to $90.3 million for the three months ended June 30, 2024 from $100.4 million for the three months ended June 30, 2023. The decrease was primarily driven by fewer units of Accessories & Materials sold during the period, partially offset by an increase in Connected Machine units sold during the period.
Previous wording
Platform cost of revenue increased by $1.0 million, or 13%, to $8.8 million for the three months ended March 31, 2024 from $7.8 million for the three months ended March 31, 2023. The increase was primarily driven by an increase in the amortization of capitalized software costs.
Current wording
Platform cost of revenue increased by $0.9 million, or 11%, to $8.9 million for the three months ended June 30, 2024 from $8.0 million for the three months ended June 30, 2023. The increase was primarily driven by an increase in the amortization of capitalized software costs.
Previous wording
Gross margin for Platform was 89% for the three months ended March 31, 2024 and 90% for the three months ended March 31, 2023. The decrease was primarily driven by an increase in the amortization of capitalized software costs.
Current wording
Gross margin for Platform was 89% for thethree months ended June 30, 2024 and 90% for the three months ended June 30, 2023. The decrease was primarily driven by an increase in the amortization of capitalized software costs.
Previous wording
Products cost of revenue decreased by $29.8 million, or 31%, to $67.0 million for the three months ended March 31, 2024 from $96.8 million for the three months ended March 31, 2023. The decrease was primarily driven by lower excess inventory write downs compared to the prior year and fewer units of Accessories & Materials sold during the period.
Current wording
Products cost of revenue decreased by $42.6 million, or 24%, to $136.3 million for the six months ended June 30, 2024 from $178.9 million for the six months ended June 30, 2023. The decrease was primarily driven by a reduction in inventory impairment charges compared to prior year and fewer units of Accessories & Materials sold during the period.
Previous wording
Research and development expenses decreased by $2.9 million, or 17%, to $14.9 million for the three months ended March 31, 2024 from $17.8 million for the three months ended March 31, 2023. The decrease was primarily due to a $1.3 million decrease in personnel related expense, a $1.2 million decrease in product development expenses for future products, and a $0.3 million decrease in professional services.
Current wording
Research and development expenses decreased by $5.0 million, or 15%, to $29.2 million for the six months ended June 30, 2024 from $34.1 million for the six months ended June 30, 2023. The decrease was primarily due to a $3.3 million decrease in personnel-related expense, a $1.4 million decrease in product development expenses for future products, and a $0.4 million decrease in professional services.
Previous wording
Sales and marketing expenses increased by $3.4 million, or 12%, to $33.0 million for the three months ended March 31, 2024 from $29.6 million for the three months ended March 31, 2023. The increase was primarily due to a $2.6 million increase in advertising and other marketing costs and a $0.8 million increase in personnel related expense.
Current wording
Sales and marketing expenses increased by $3.9 million, or 13%, to $33.4 million for the three months ended June 30, 2024 from $29.4 million for the three months ended June 30, 2023. The increase was primarily due to a $3.0 million increase in advertising and other marketing costs and a $1.1 million increase in personnel-related expense.
Previous wording
Other income (expense), net increased by $0.8 million or 33% to $3.1 million for the three months ended March 31, 2024 from $2.3 million for the three months ended March 31, 2023. The increase was due to an increase in interest income.
Current wording
Other income, net increased by $0.4 million or 7% to $6.4 million for the six months ended June 30, 2024 from $6.0 million for the six months ended June 30, 2023. The increase was due to an increase in interest income.
Previous wording
Provision for income taxes increased by $4.9 million, or 131%, to $8.6 million for the three months ended March 31, 2024 from $3.7 million for the three months ended March 31, 2023. The increase was primarily due to a decrease in the foreign derived intangible income deduction, a decrease to deductible equity compensation related to an increase in the unfavorable permanent adjustment from Section 83(b) elections, an increase in stock-based compensation difference due to the decrease in stock price upon vesting versus the stock price at the grant date, and a decrease to the Research and Development credit. This resulted in an effective tax rate of 30.6% and 29.2% for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Provision for income taxes increased by $8.0 million, or 75%, to $18.7 million for the six months ended June 30, 2024 from $10.7 million for the six months ended June 30, 2023. The increase was primarily due to a decrease in the foreign derived intangible income deduction, an increase in stock-based compensation difference due to the decrease in stock price upon vesting versus the stock price at the grant date, and a decrease to the Research and Development credit. This resulted in an effective tax rate of 32.1% and 29.8% for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Our operations during the periods presented have been financed primarily through cash flow from operating activities and the net proceeds from our initial public offering in March of 2021. We believe our balances of cash and cash equivalents and marketable securities, which totaled $179.0 million and $102.7 million, respectively, as of March 31, 2024, along with forecasted cash expected to be generated by ongoing operations and $300.0 million in available borrowings and the option to increase the aggregate amount of our credit facility by up to an additional $150.0 million (see Note 7) will be sufficient to satisfy our cash requirements over the next 12 months and beyond. Except for the recently announced special and semi-annual dividends and the new share repurchase program, our cash requirements have not changed materially since our Annual Report.
Current wording
Our operations during the periods presented have been financed primarily through cash flow from operating activities. We believe our balances of cash and cash equivalents and marketable securities, which totaled $195.6 million and $103.9 million, respectively, as of June 30, 2024, along with forecasted cash expected to be generated by ongoing operations and $300.0 million in available borrowings and the option to increase the aggregate amount of our credit facility by up to an additional $150.0 million (see Note 7) will be sufficient to satisfy our cash requirements over the next 12 months and beyond. Except for the recently announced special and semi-annual dividends and the new share repurchase program, our cash requirements have not changed materially since our Annual Report.
Previous wording
During the three months ended March 31, 2023, we paid a dividend of $75.5 million to holders of Class A and Class B common stock.
Current wording
During the six months ended June 30, 2023, we paid a dividend of $75.8 million to holders of Class A and Class B common stock. After June 30, 2024, we paid a dividend of $107.9 million to holders of Class A and Class B common stock.
Previous wording
The change in net cash flows from operating activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is primarily due to lower inventory purchases during 2023 due to higher beginning inventory balances combined with softening of consumer demand. In addition, a decrease in payable balances with inventory vendors in 2024 compared to 2023, due to higher payments to vendors in 2024. These decreases were partially offset by a reduction in cash received from accounts receivable in 2024 compared to 2023.
Current wording
The change in net cash flows from operating activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is primarily due to a decrease in accounts payable due to higher payments to inventory vendors in 2024 and a reduction in cash received from accounts receivable in 2024 compared to 2023. In addition, extension tax payments had a negative impact on cash.
Previous wording
The change in net cash flows from investing activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was due to lower purchases of property and equipment in 2024.
Current wording
The change in net cash flows from investing activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to lower purchases of property and equipment in 2024.
Previous wording
The change in net cash flows from financing activities for the three months ended March 31, 2024 compared to three months ended March 31, 2023 was primarily due to dividend payments of$75.5 million in 2023 offset by an increase in the repurchase of common stock in 2024.
Current wording
The change in net cash flows from financing activities for the six months ended June 30, 2024 compared to six months ended June 30, 2023 was primarily due to dividend payments of$75.8 million in 2023 offset by an increase in the repurchase of common stock in 2024.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Platform revenue increased by $2.3 million, or 2%, to $155.9 million for the six months ended June 30, 2024 from $153.6 million for the six months ended June 30, 2023. The increase was driven by an increase in the number of paid subscribers which increased from 2.7 million as of June 30, 2023 to 2.8 million as of June 30, 2024.
Current report — wording carried from elsewhere
Gross margin for Platform was 89% for thesix months ended June 30, 2024 and 90% for thesix months ended June 30, 2023. The decrease was primarily driven by an increase in the amortization of capitalized software costs.
Current report — wording carried from elsewhere
Provision for income taxes increased by $3.1 million, or 45%, to $10.0 million for the three months ended June 30, 2024 from $6.9 million for the three months ended June 30, 2023. The increase was primarily due to an increase in stock-based compensation difference due to the decrease in stock price upon vesting versus the stock price at the grant date, and a decrease to the Research and Development credit. This resulted in an effective tax rate of 33.6% and 30.2% for the three months ended June 30, 2024 and 2023, respectively.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Michaels, Target, Walmart and many others. We also sell our products and subscriptions to Cricut Access and Cricut Access Premium on cricut.com.
Previous report — wording carried elsewhere
EasyPress, Cricut MugPress, hand tools, machine replacement tools and blades, and project materials such as vinyl and iron-on. Products revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.