CRCT

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How CRCT rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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New in FY2025

The principal factors and uncertainties that make investing in our Class A common stock risky include, among others: • risks regarding our ability to attract and engage with our users, including anticipating their product preferences; • competitive risks in both of our segments: Platform and Products; • supply chain, manufacturing, distribution and fulfillment risks, including our being dependent on three contract manufacturers to produce connected machines, and on limited sources of supply for components, accessories and materials, as well as our ability to forecast demand and manage our inventory; • international risks, including regulation, tariffs that have materially increased, and may continue to increase, our costs and the potential for further trade barriers; • sales and marketing risks, including our dependence on sales to brick-and-mortar and online retail partners and our need to continue to grow online sales; • risks relating to the complexity of our business, which includes connected machines, custom tools, hundreds of materials, design apps, e-commerce software, subscriptions, content, international production, direct sales, and retail distribution, particularly for a company of our relative size; • risks related to product quality, safety and warranty claims and returns; • risks related to protection of our intellectual property, as well as to cybersecurity and potential security breaches and incidents; • risks related to general socio-economic and political conditions as well as consumer confidence; and • risks related to our dependence on our Chief Executive Officer.
There are a number of factors that could impact our number of users and our ability to increase sales to users, including: • a decline in the public’s interest in or discretionary time and money available for do-it-yourself, or DIY, crafting activities; • pricing, perceived value and ease of use of our platform and products; • our ability to satisfy demand for and deliver quality products and value for subscriptions; • sales of competitive products; • our failure to broaden our demographic appeal; • our ability to continue to improve the user experience in each aspect of our business and successfully educate our users about our products; • our failure to capitalize on growth opportunities; • our inability to meet the challenges resulting from fast-paced changes in technology, including the use of artificial intelligence and machine learning; • the failure of our connected machines to communicate or sync properly with Cricut-authorized design apps, including our Design Space apps, or other third-party applications such as Android, iOS and Windows; • unsatisfactory experiences with our products, including with respect to the use, purchasing or delivery of our products or with Cricut Member Care, including public disclosure of those experiences through social media or other communications from our community; • changes to our product offerings; • our failure to increase our international presence, including the failure to translate and localize our digital content and subscriptions, or the failure to further expand internationally; • decreased word-of-mouth referrals from our community or failed marketing efforts; • increase in users joining our platform through a second-hand machine, who tend to exhibit lower engagement intensity compared to users joining through a newly purchased machine; and • deteriorating general economic conditions, inflationary pressures affecting the pricing of our products or otherwise, or changes in consumer spending preferences or buying trends, each of which we currently are experiencing.
Our revenue growth rate and financial performance have fluctuated in recent periods and may not be indicative of our future performance, and we expect our revenue growth rate to be lower than growth rates we experienced in prior years.
We experienced rapid revenue growth through 2021 and experienced a reduction in revenue since then, with revenue of $765.1 million, $712.5 million, and $708.8 million for the years ended December 31, 2023, 2024 and 2025, respectively.
For example, we saw significant growth in sales during the COVID-19 pandemic in 2020 and 2021 but saw a reduction in sales in 2022, 2023, 2024 and 2025.
There can be no assurance that sales will return to 2020 and 2021 levels in the future or that we will be able to continue to significantly grow our revenue.
Our rate of adding new users has declined over the last four years in comparison to 2020 and 2021, and the number of Paid Subscribers could remain flat or decline.
Alternatively, our more experienced users potentially may not appreciate our efforts to simplify or streamline the user experience they may be accustomed to.
As we develop, acquire, and introduce new technologies, including those that may incorporate artificial intelligence and machine learning, we may be subject to new or heightened legal, ethical, and other challenges, including the ability to innovate as quickly as our competitors as well as increased research and development expenses and other unanticipated expenses, including but not limited to, costs associated with potential increased AI usage and image storage.
Our connected machine revenue remained flat at $192.4 million for the year ended December 31, 2025 and $192.4 million for the year ended December 31, 2024.
Any factors adversely affecting sales of our connected machines, including introduction by competitors of comparable machines at lower price points, a maturing product lifecycle, shortages in our supply or inventory of connected machines, a decline in consumer spending, an increase in second-hand machines, or other factors discussed elsewhere in this Risk Factors section, could result in a decline in sales of our connected machines, which would adversely affect our future revenue and results of operations.
For example, accessories and materials revenue decreased by $18.2 million, or 8.8%, to $188.9 million for the year ended December 31, 2025 from $207.1 million for the year ended December 31, 2024.
This risk may be exacerbated by the fact that we may not have the manufacturing capacity or supply-chain flexibility to satisfy short-term demand increases.
If we fail to accurately forecast consumer demand, we may experience insufficient or excess inventory levels or a shortage or surplus of products available for sale.
While supply chain conditions improved during 2023, 2024 and 2025, if our supply chain faces challenges again, it could put pressure on margins.
For the year ended December 31, 2024, our top seven brick-and-mortar and online retail partners accounted for 30% of total revenue.
For the twelve months ended December 31, 2025, our top seven brick-and-mortar and online retail partners accounted for 31% of total revenue.
All of JOANN, Inc.’s brick-and-mortar locations closed by the end of May 2025.
While JOANN, Inc.’s bankruptcy has not had a material adverse effect on our business, results of operations or financial condition, there can be no assurance that the bankruptcy, financial distress, or restructuring of one of our brick-and-mortar or online partners would not have such an effect.
Our ability to grow revenue and increase our profitability depends in part upon our ability to successfully implement certain strategic go-to-market initiatives, including expanding our online sales presence while continuing to work with key brick-and-mortar and online retail partners.
In the year ended December 31, 2024, 65% of our revenue was generated from these online channels.
For the twelve months ended December 31, 2025, 69% of our revenue was generated from these online channels.
In addition, our competitors may have significantly greater resources than we do or may introduce product features and/or technologies, including artificial intelligence and machine learning capabilities, sooner than we do, allowing them to identify and capitalize more efficiently upon opportunities in new markets and consumer preferences and trends, quickly transition and adapt their products, devote greater resources to marketing and advertising or better position themselves to withstand substantial price competition.
While we continued to focus in 2025 on launching new innovation and consumable products, specifically for e-commerce channels, which has resulted in market share gains, if we are not able to compete effectively against our competitors, they may acquire and engage our users or generate revenue at the expense of our efforts, which could adversely affect our business, financial condition and results of operations.
If we are unable to sustain pricing levels for our platform services and products, including our bundles, whether due to competitive pressure or otherwise, our gross margins could be significantly reduced.
Our portfolio of connected machines, extensions, accessories and materials and bundles are available at a variety of price points, and subscription offerings range from $9.99 per month to $95.88 per year for Cricut Access or $119.88 per year for Cricut Access Premium, which includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping.
Many of our accessories and materials, including adhesive vinyl, iron-on vinyl, paper, stationery, stickers and other merchandise, are also offered by our competitors at lower prices or with free or accelerated shipping timelines that we either are unable to or choose not to match.
We have grown rapidly in prior years and face risks associated with the growth of our business.
We have grown rapidly in prior years and continue to appropriately scale our business as we implement our growth strategy.
For example, our revenue peaked in 2021 at $1.3 billion before reducing to $765.1 million in 2023, $712.5 million in 2024, and $708.8 million in 2025.
In addition, between December 31, 2023 and December 31, 2024, our employee headcount decreased from over 690 to over 640, and as of December 31, 2025, our employee headcount was over 700.
To effectively manage and capitalize on our growth opportunities, we must continue to forecast demand and manage our supply chain, expand our sales and marketing, focus on innovative product development, upgrade and secure our management information systems and other processes and obtain more space for our expanding staff.
Failure to appropriately scale with growth, improve ease of use and user experience, launch new products in new categories, and strategically expand internationally, could harm our future success, including our ability to effectively focus on and pursue our corporate objectives.
Moreover, the complicated nature of our business, in which we design our own products, develop our own design apps, rely on third-party manufacturers and sell our products through brick-and-mortar and online retail partners, as well as through our website, exposes us to risk and disruption at many points that are critical to successfully operating our business and may make it more difficult for us to scale our business at an effective rate.
Our growth strategy contemplates an increase in our advertising and other sales and marketing spending, which represented 16%, 20% and 22% of revenue in 2023, 2024 and 2025, respectively.
The complexity of our business and rapidly evolving nature of the market in which we sell our products, raises substantial uncertainty concerning how these markets and other economic factors beyond our control may develop and reduces our ability to accurately forecast quarterly or annual revenue.
Failure to manage our future growth effectively could adversely affect our business, brand, financial condition and results of operations.
For example, in 2023, 2024 and 2025, our fourth quarter represented 30%, 29% and 29% of total revenue for the year, respectively.
For example, we experienced significant growth in sales in 2020 and 2021 but have seen a reduction in sales in 2022, 2023, 2024, and 2025.
Moreover, we experienced a significant increase in sales after the outbreak of the COVID-19 pandemic, but normalized full-time return to work trends have negatively impacted demand for our products and platform services, as have current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products, and changes in consumer spending preferences and buying trends, and our sales activity may continue to diminish as a result.

and 91 more.

Gone since FY2024

The principal factors and uncertainties that make investing in our Class A common stock risky include, among others: • risks regarding our ability to attract and engage with our users, including anticipating their product preferences; • competitive risks in both of our segments: Platform and Products; • supply chain, manufacturing, distribution and fulfillment risks, including our being dependent on three contract manufacturers to produce connected machines, and on limited sources of supply for components, accessories and materials, as well as our ability to forecast demand and manage our inventory; • international risks, including regulation, tariffs that historically materially increased our costs and the potential for further trade barriers; • sales and marketing risks, including our dependence on sales to brick-and-mortar and online retail partners and our need to continue to grow online sales; • risks relating to the complexity of our business, which includes connected machines, custom tools, hundreds of materials, design apps, e-commerce software, subscriptions, content, international production, direct sales, and retail distribution, particularly for a company of our relative size; • risks related to product quality, safety and warranty claims and returns; • risks related to protection of our intellectual property, as well as to cybersecurity and potential security breaches and incidents; • risks related to general socio-economic and political conditions as well as consumer confidence; and • risks related to our dependence on our Chief Executive Officer.
There are a number of factors that could impact our number of users and our ability to increase sales to users, including: • a decline in the public’s interest in or discretionary time and money available for do-it-yourself, or DIY, crafting activities; • pricing, perceived value and ease of use of our platform and products; • our ability to satisfy demand for and deliver quality products and value for subscriptions; • sales of competitive products; • our failure to broaden our demographic appeal; • our ability to continue to improve the user experience in each aspect of our business and successfully educate our users about our products; • our failure to capitalize on growth opportunities; • our inability to meet the challenges resulting from fast-paced changes in technology; • the failure of our connected machines to communicate or sync properly with Cricut-authorized design apps, including our Design Space apps, or other third-party applications such as Android, iOS and Windows; • unsatisfactory experiences with our products, including with respect to the use, purchasing or delivery of our products or with Cricut Member Care, including public disclosure of those experiences through social media or other communications from our community; • changes to our product offerings; • our failure to increase our international presence, including the failure to translate and localize our digital content and subscriptions, or the failure to further expand internationally; • decreased word-of-mouth referrals from our community or failed marketing efforts; • increase in users joining our platform through a second-hand machine, who tend to exhibit lower engagement intensity compared to users joining through a newly purchased machine; and • deteriorating general economic conditions, inflationary pressures affecting the pricing of our products or otherwise, or changes in consumer spending preferences or buying trends, each of which we currently are experiencing.
Our revenue growth rate and financial performance have fluctuated in recent periods and may not be indicative of our future performance, and we expect our revenue growth rate to decline compared to prior years.
We experienced rapid revenue growth through 2021 and experienced a reduction in revenue since then, with revenue of $886.3 million, $765.1 million, and $712.5 million for the years ended December 31, 2022, 2023 and 2024, respectively.
For example, we saw significant growth in sales during the COVID-19 pandemic in 2020 and 2021 but saw a reduction in sales in 2022, 2023 and 2024.
There can be no assurance that sales will return to 2020 and 2021 levels in the future or that we will be able to continue to significantly grow our revenue in a post-COVID-19 environment.
Our rate of adding new users has declined over the last three years in comparison to 2020 and 2021, and the number of Paid Subscribers could remain flat or decline.
As we develop, acquire, and introduce new technologies, including those that may incorporate artificial intelligence and machine learning, we may be subject to new or heightened legal, ethical, and other challenges, including the ability to innovate as quickly as our competitors as well as increased research and development expenses.
Our connected machine revenue decreased by $5.9 million, or 3.0%, to $192.4 million for the year ended December 31, 2024 from $198.3 million for the year ended December 31, 2023.
Any factors adversely affecting sales of our connected machines, including introduction by competitors of comparable machines at lower price points, a maturing product lifecycle, shortages in our supply or inventory of connected machines, a decline in consumer spending, an increase in second-hand machines, or other factors discussed elsewhere in this Risk Factors section, could result in a continued decline in sales of our connected machines, which would adversely affect our future revenue and results of operations.
For example, accessories and materials revenue decreased by $50.7 million, or 19.7%, to $207.1 million for the year ended December 31, 2024 from $257.8 million for the year ended December 31, 2023.
This risk may be exacerbated by the fact that we do not have the manufacturing capacity or supply-chain flexibility to satisfy short-term demand increases.
For example, during the COVID-19 pandemic and stay-at-home orders, we saw significant growth in sales in 2020, which strained our inventory levels and caused shortages that likely resulted in lost sales.
Although our in-channel and on-hand inventory as of December 31, 2024 were generally sufficient, if we fail to accurately forecast consumer demand, we may experience insufficient or excess inventory levels or a shortage or surplus of products available for sale.
While supply chain conditions have improved during 2023 and 2024, if our supply chain faces challenges again, it could continue to put pressure on margins.
For the year ended December 31, 2023, our top seven brick-and-mortar and online retail partners accounted for 33% of total revenue.
For the twelve months ended December 31, 2024, our top seven brick-and-mortar and online retail partners accounted for 30% of total revenue.
While we do not currently expect JOANN, Inc.’s bankruptcy to have a material adverse effect on our business, results of operations or financial condition, there can be no assurance that the bankruptcy, financial distress, or restructuring of one of our brick-and-mortar or online partners would not have such an effect.
Our ability to continue our revenue growth and increase our profitability depends in part upon our ability to successfully implement certain strategic go-to-market initiatives, including expanding our online sales presence while continuing to work with key brick-and-mortar and online retail partners.
In the year ended December 31, 2022, 59% of our revenue was generated from these online channels.
For the twelve months ended December 31, 2024, 65% of our revenue was generated from these online channels.
In addition, our competitors may have significantly greater resources than we do or may introduce product features, including artificial intelligence and machine learning capabilities, sooner than we do, allowing them to identify and capitalize more efficiently upon opportunities in new markets and consumer preferences and trends, quickly transition and adapt their products, devote greater resources to marketing and advertising or better position themselves to withstand substantial price competition.
If we are not able to compete effectively against our competitors, they may acquire and engage our users or generate revenue at the expense of our efforts, which could adversely affect our business, financial condition and results of operations.
If we are unable to sustain pricing levels for our platform services and products, whether due to competitive pressure or otherwise, our gross margins could be significantly reduced.
Our portfolio of connected machines range from $149.00 to $999.00 MSRP, and subscription offerings range from $9.99 per month to $95.88 per year for Cricut Access or $119.88 per year for Cricut Access Premium, which includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping.
Within our extensions, accessories and materials, our SKUs range in price from $1.99 to $999.00.
Many of our accessories and materials, including vinyl, iron-on vinyl, paper, stationery, stickers and other merchandise, are also offered by our competitors at lower prices or with free or accelerated shipping timelines that we either are unable to or choose not to match.
We have grown rapidly in prior years and have limited operating experience at our current scale of operations.
We have grown rapidly in prior years and have limited operating experience at our current size.
For example, our revenue peaked in 2021 at $1.3 billion before reducing to $886.3 million in 2022, $765.1 million in 2023, and $712.5 million in 2024.
In addition, between December 31, 2022 and December 31, 2023, our employee headcount decreased from over 775 to over 690, and as of December 31, 2024, our employee headcount was over 640.
To effectively manage and capitalize on our growth, we must continue to forecast demand and manage our supply chain, expand our sales and marketing, focus on innovative product development, upgrade and secure our management information systems and other processes and obtain more space for our expanding staff.
Failure to scale with growth could harm our future success, including our ability to effectively focus on and pursue our corporate objectives.
Moreover, the complicated nature of our business, in which we design our own products, develop our own design apps, rely on third-party manufacturers and sell our products through brick-and-mortar and online retail partners, as well as through our website, exposes us to risk and disruption at many points that are critical to successfully operating our business and may make it more difficult for us to scale our business.
Our growth strategy contemplates an increase in our advertising and other sales and marketing spending, which represented 15%, 16% and 20% of revenue in 2022, 2023 and 2024, respectively.
Because we have a limited history of operating our business at its current scale, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model future growth and anticipate the risks that may affect our business.
This limited operating experience, combined with the complexity of our business and rapidly evolving nature of the market in which we sell our products, raises substantial uncertainty concerning how these markets and other economic factors beyond our control may develop and reduces our ability to accurately forecast quarterly or annual revenue.
Failure to manage our future growth effectively could adversely affect our business, financial condition and results of operations.
For example, in 2022, 2023 and 2024, our fourth quarter represented 32%, 30% and 29% of total revenue for the year, respectively.
For example, we experienced unusually high demand in the first and second quarters of 2021, which is inconsistent with normal seasonality patterns.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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