CRCT 10-K & 10-Q changes, risk factors and insider trading

•international risks, including regulation, tariffs that historicallyhave materially increasedincreased, and may continue to increase, our costs and the potential for further trade barriers;

•our inability to meet the challenges resulting from fast-paced changes in technologytechnology, including the use of artificial intelligence and machine learning;

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 declinebe comparedlower tothan 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 $886.3$765.1 million, $765.1$712.5 million, and $712.5$708.8 million for the years ended December 31, 2022,2023, 20232024 and 2024,2025, respectively. You should not rely on our revenue for any previous quarterly or annual period as any indication of our revenue or revenue growth in future periods. As we grow our business, we expect our revenue growth rates to decline compared to prior years due to a number of reasons, including more challenging comparisons to prior periods, slowing demand for our platform and products, increasing competition, a decrease in the growth of our overall market and our failure to capitalize on growth opportunities. 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, 20232023, 2024 and 2024.2025. 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 in a post-COVID-19 environment.revenue. Our rate of adding new users has declined over the last threefour years in comparison to 2020 and 2021, and the number of Paid Subscribers could remain flat or decline.

Our success in maintaining and increasing our user community depends on our ability to identify trends, as well as to anticipate and react to changing preferences, which cannot be predicted with certainty. If we are unable to introduce new or enhanced products, or additional designs and projects, in a timely manner, if such new offerings are not accepted by our user community or if our competitors introduce similar offerings faster than we do, our business may be adversely affected. We also need to successfully educate our users on new offerings or improvements to current offerings. Moreover, our new offerings may not receive market acceptance if preferences change rapidly to different types of personal DIY offerings or away from these types of offerings altogether. Our future success depends in part on our ability to anticipate and respond to these changes as well as to improve the user experience in each aspect of our business. For example, some users find our connected machines to be challenging to use or may require user education in order to operate them efficiently or have the best user experience. If we are not able to make our connected machines easier to use or improve user education and experience, it may have an adverse effect on our business. Alternatively, our more experienced users potentially may not appreciate our efforts to simplify or streamline the user experience they may be accustomed to. In addition, failure to anticipate and respond in a timely manner to changing user preferences could lead to, among other things, reduced word-of-mouth referrals, lower sales, lower subscription rates, pricing pressure, lower gross margins, discounting of our existing products and excess inventory levels.

Moreover, we must successfully manage the introduction of new or enhanced products and product offerings, which could adversely affect the sales of our existing products. For instance, users may choose to forgo purchasing existing connected machines in advance of new product launches, and we may experience higher returns from users of existing products after a new product launch occurs. As we introduce new or enhanced products, we may face additional challenges related to managing a more complex supply chain and manufacturing process, including the time and cost associated with onboarding and overseeing additional suppliers, contract manufacturers and third-party logistics partners. 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.expenses and other unanticipated expenses, including but not limited to, costs associated with potential increased AI usage and image storage. We may also face challenges managing the inventory of new or existing products, which could lead to excess inventory and discounting of such products. Users may negatively react to changes we introduce to products and product offerings. In addition, new or enhanced products may have varying selling prices and costs compared to legacy products, which could negatively impact our gross margins and results of operations.

We derive a significant portion of our revenue from sales of products, particularly our connected machines. Our connected machine revenue decreasedremained byflat $5.9 million, or 3.0%, toat $192.4 million for the year ended December 31, 20242025 fromand $198.3$192.4 million for the year ended December 31, 2023.2024. 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 continued decline in sales of our connected machines, which would adversely affect our future revenue and results of operations.

Our ability to accurately forecast demand could be affected by many factors, including changes in consumer demand for our products, changes in demand for the products of our competitors, unanticipated changes in general market or economic conditions or changes in consumer confidence in future economic conditions. This risk may be exacerbated by the fact that we domay 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, ifIf 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. If we underestimate demand or are otherwise unable to meet consumer demand, we could experience loss of revenue, reputational harm and damaged relationships, including through social media or other communications from our community, and adversely affect our business, financial condition and results of operations. If we forecast inventory levels in excess of consumer demand, this may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and premium nature of our brand image. While supply chain conditions have improved during 20232023, 2024 and 2024,2025, if our supply chain faces challenges again, it could continue to put pressure on margins.

If the financial condition of one or more of our key brick-and-mortar and online retail partners weakens, a key retailer stops selling our products or uncertainty regarding demand for some or all of our products causes one or more of these brick-and-mortar and online retail partners to reduce its ordering and marketing of our products, it could decrease revenue from sales to brick-and-mortar and online retail partners and adversely affect our total revenue. Financial difficulties for one or more of our key brick-and-mortar and online retail partners could also expose us to financial risk if such retailer were unable to pay for the products purchased from us. We may not be able to collect our receivables from our brick-and-mortar and online retail partners, or we may incur significant expense in attempting to collect receivables, which would materially and adversely affect our profitability and cash flows from operations. Cricut’s sales to customers are typically made on credit terms without collateral. A bankruptcy, financial distress, or restructuring of one of our brick-and mortar or online retail partners could result in our inability to collect receivables, and in some cases require us to return money previously received from the partner as directed by the bankruptcy court. For example, in January 2025, our customer JOANN, Inc. announced it had filed for Chapter 11 bankruptcy and in February 2025 announced that it would liquidate and discontinue business. All of JOANN, Inc.’s brick-and-mortar locations closed by the end of May 2025. While we do not currently expect JOANN, Inc.’s bankruptcy tohas havenot 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. In addition, current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products or otherwise, and changes in consumer spending preferences or buying trends could have an effect on sales through our brick-and-mortar and online retail partners.

Our ability to continue ourgrow 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. Our online sales include online sales through the websites of our brick-and-mortar and online retail partners as well as through our own website cricut.com.Cricut.com. In the year ended December 31, 2022,2023, 59%62% of our revenue was generated from these online channels. 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. There can be no assurance that online sales will remain at these levels in the future or that we will be able to continue to significantly grow our online channels.

As our product categories mature, new competitive forces and competitors may emerge. As we expand our product offerings, we may begin to compete in new product offerings with new competitors. Our competitors may develop, or have already developed, products, features, content, services or technologies that are similar to ours or that achieve greater market acceptance, undertake more successful product development efforts, create more compelling employment opportunities or marketing campaigns or may adopt more aggressive pricing policies. Our competitors may develop or acquire, or have already developed or acquired, intellectual property rights that significantly limit or prevent our ability to compete effectively in the public marketplace. In addition, our competitors may have significantly greater resources than we do or may introduce product features,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. IfWhile 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 machinesmachines, rangeextensions, fromaccessories $149.00and tomaterials $999.00and MSRP,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. Within our extensions, accessories and materials, our SKUs range in price from $1.99 to $999.00.

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. Accordingly, if a user runs out of materials during a project, they may opt to purchase a replacement from a competitor or other online retail partner, such as Amazon, to receive one or two-day shipping, which we may not be able to offer. In addition, many of our competitors discount our accessories and materials or competitors’ accessories and materials at significant levels, and, as a result, we may be compelled to change our discounting strategy, which could impact our business and results of operations. If in the future, due to competitor discounting, shipping or other marketing strategies, we significantly reduce our prices on our products without a corresponding increase in sales volume, it would negatively impact our revenue and could adversely affect our gross margins and overall profitability.

We have grown rapidly in prior years and haveface limitedrisks operatingassociated experiencewith atthe growth of our current scale of operations.business. If we are unable to manage our growth and the complexity of our business effectively, our brand, company culture and financial performance may suffer.

We have grown rapidly in prior years and havecontinue limitedto operatingappropriately experience atscale our currentbusiness size.as we implement our growth strategy. 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 2024.2024, and $708.8 million in 2025. In addition, between December 31, 20222023 and December 31, 2023,2024, our employee headcount decreased from over 775690 to over 690,640, and as of December 31, 2024,2025, our employee headcount was over 640.700. In March 2024, due to the challenging macroeconomic environment and with the goal of maintaining the health and sustainability of the company, we implemented a workforce reduction which impacted approximately 8% of Cricut employees. While we do not expect headcount growth to continue at the same pace as in recent years, we may choose to significantly increase headcount again in the future. Further, as we grow, our business becomes increasingly complex, particularly for a company of our relative size. 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. Our continued growth and complexity could strain our existing resources, and we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training and managing a diffuse and growing employee base. 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. If we do not adapt to meet these evolving challenges, including hiring and maintaining the right number of employees for each aspect of our business, or if our management team does not effectively scale with our growth, we may experience erosion to our brand, the quality of our products may suffer and our company culture may be harmed.

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 theThe 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.

Our business has historically been influenced by seasonal trends. We generate a disproportionate amount of sales activity related to our products during the fourth quarter, due in large part to seasonal holiday demand. For example, in 2022,2023, 20232024 and 2024,2025, our fourth quarter represented 32%,30%, 30%29% and 29% of total revenue for the year, respectively. Our promotional discounting activity is also higher in the fourth quarter, which negatively impacts gross margin during this period. Accordingly, adverse events that occur during these months could have a disproportionate effect on our results of operations for the entire fiscal year. In contrast, sales of accessories and materials typically slow in the second quarter of the year in connection with school summer holidays. Seasonality in our business can also be skewed by macroeconomic factors, such as inflation and reduction in consumer demand. In addition, seasonality can be affected by introductions of new or enhanced products, including the costs associated with such introductions. Furthermore, our rapid growth in prior years may obscure the extent to which seasonality trends have affected our business and may continue to affect our business. For example, we experienced unusuallysignificant high demandgrowth in thesales firstin 2020 and second2021 quartersbut ofhave 2021,seen whicha isreduction inconsistentin withsales normalin seasonality2022, patterns.2023, 2024, and 2025. Accordingly, yearly or quarterly comparisons of our results of operations may not be useful and our results in any particular period will not necessarily be indicative of the results to be expected for any future period. Moreover, we experienced a significant increase in sales after the outbreak of the COVID-19 pandemic, and the rollout of COVID-19 vaccines, lifting of restrictions on movement and/orbut 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. As a result of these factors, our rate of adding new users is declining in comparison to recent years and, in the short term, the number of Paid Subscribers could remain flat or decline. Accordingly, it can be difficult to predict the degree to which customer demand, seasonality, and uneven sales patterns of our customers will affect our business in the future.

Our quarterly results of operations and other operating metrics have fluctuated and may continue to fluctuate in the future.future, Additionally,which ourmay limited operating history at our current scale of operations makesmake it difficult to accurately forecast our future results. As a result, you should not rely on our past quarterly results of operations as indicators of future performance. Our financial condition, results of operations and operating metrics in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including those discussed in this Risk Factors section and:

•changes in business or macroeconomic conditions, including the impact of the COVID-19 pandemic, lower consumer confidence, recessionary conditions, inflationary pressures, increased unemployment rates or stagnant or declining wages.

We believe that our growth depends on our ability to reach our market opportunity in terms of our serviceable addressable market, or SAM, which includes active creatives who we address with our current products and price points, and our total addressable market, or TAM, which includes potential creatives who we believe we can reach over the long term as we make products for new uses and products that are more accessible, even easier to use and available at a broad set of price points. See the section titled “Business - Our Opportunity.” We assess our SAM and TAM in the United States and Canada, as well as internationally. We believe that in order to further penetrate our SAM and TAM, we must continually improve ease of use and user experience, launch new products in new categories and expand internationally. For example, some users find our connected machines to be challenging to use or may require user education in order to operate them efficiently or have the best user experience. If we are not able to make our connected machines easier to use or improve user education and experience, we may not be able to expand our SAM and TAM. Our SAM and TAM are representative of a broad demographic. However, historically we have served a largely female demographic representing 94% of our users as of December 31, 20242025. We continue to explore additional offerings that address new categories that will appeal to a wider demographic. Any new offerings may not appeal to current consumer preferences and may not be accepted by our user community or potential new users. While we believe our growth depends on our ability to expand our sales into our SAM and our TAM, we cannot be certain that we will be successful in doing so.

Our top seven brick-and-mortar and online retail partners, measured by the revenue we derive from them, accounted for 33%30% of total revenue for the year ended December 31, 20232024 and 30%31% for the year ended December 31, 2024.2025. Gross margins from sales to retailers may decline as a result of a number of factors outside our control, including inflationary pricing pressures, tariffs as a result of trade warstariffs, and our reliance on three primary contract manufacturers which hold influence over the supply chain. This may magnify the impact of variations in revenue and operating costs on our results of operations, which in turn could adversely affect our overall margins and profitability. We had in 2022,2023, 20232024 and 2024,2025, and may continue to have in the future, low gross margins in the early stages of our relationships with certain brick-and-mortar and online retail partners, particularly international brick-and-mortar and online retail partners that often require significant ramp-up periods, which has and may in the future adversely affect our total revenue. To compete effectively, we have been, and may in the future decide to offer significant discounts to large brick-and-mortar and online retail partners at lower margins or reduce or withdraw from existing relationships with smaller brick-and-mortar and online retail partners, which could negatively impact our revenue and could adversely affect our gross margins and overall profitability.

Additionally, the loss of any key personnel could make it more difficult to manage our operations and research and development activities, reduce our employee retention and revenue and impair our ability to compete. In connection with and subsequent to our initial public offering, we entered into employment letters with our key personnel. These letters have no specific duration and constitute at-will employment. We do not maintain key person life insurance policies on any of our employees.

We believe that our brand is important to our large and loyal community of users, many of whom become deeply engaged with our brand. Maintaining, protecting and enhancing our brand depends largely on the success of our marketing efforts, our ability to provide consistent, high-quality products, services, features, content and support and our ability to successfully secure, maintain and defend our rights to use the Cricut, Cricut Access, Cricut EasyPress, Cricut Explore, Cricut MakerMaker, Design Space, and DesignCricut SpaceMugPress marks and other trademarks important to our brand or that we develop in the future. Our brand value also depends on our ability to maintain a positive user perception of our corporate integrity and culture. We believe that the importance of our brand will increase as competition further intensifies and brand promotion activities may require substantial expenditures. Our brand could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity, including through social media or other communications from our community. Unfavorable publicity about us, including our products, technology, Cricut Member Care, content, and personnel could diminish confidence in, and the use of, our products. In addition, negative publicity about our suppliers, including as a result of actual or perceived unfair labor practices, labor disputes or violations of laws or other obligations or issues unknown to us, could also have a negative impact on our reputation. Such negative publicity also could adversely affect the size, engagement and loyalty of our user base or the effectiveness of word-of-mouth marketing, and result in decreased revenue, or require us to expend additional funds for marketing efforts, which could adversely affect our business, financial condition and results of operations.

Additionally, we have suffered and are vulnerable to service interruptions experienced by Amazon Web Services and other providers, and we expect to experience interruptions, delays or outages in service availability in the future due to a variety of factors, including infrastructure changes, human, hardware or software errors, hosting disruptions and capacity constraints. Outages and capacity constraints could arise from a number of causes such as technical failures, natural disasters, fraud or security attacks. The level of service provided by these providers, or regular or prolonged interruptions in that service, could also affect the use of, and our users’ satisfaction with, our products and services and could harm our business and reputation. In addition, hosting costs will increase as user engagement grows, which could harm our business if we are unable to grow our revenue faster than the cost of using these services or the services of other providers. Any of these factors could further reduce our revenue or subject us to liability, any of which could adversely affect our business, financial condition and results of operations.

We generally provide a one-year limited warranty on our connected machines and customer satisfaction guarantees on certain other products, and we permit returns of certain products for a full refund within 15 days of receipt of order. We also recently introducedoffer an extended warranty program in the United States. Additionally, our brick-and-mortar and online retail partners and distributors provide users with their own respective warranty and/or return policies relative to our connected machines, accessories and materials and other Cricut products they sell, which in turn flow down to us as a contractual obligation and/or allowance that we must honor. The occurrence of any material defects in our connected machines or certain other products, or the flow-down obligations for brick-and-mortar and online retail partner and distributor returns, could result in an increase in product returns or make us liable for damages and warranty claims and/or returns in excess of our current reserves, which could result in an adverse effect on our business prospects, liquidity, financial condition and cash flows if warranty claims were to materially exceed anticipated levels. In addition, we could incur significant costs to correct any defects, warranty claims or other problems, including costs related to product recalls. We have experienced negative publicity related to the perceived quality and safety of our products, including social media or other communications from our community, and we may experience such negative publicity in the future. Such negative publicity could increase the number of warranty claims made, affect our brand image, decrease user confidence and demand and adversely affect our financial condition and results of operations. Also, while our warranty is limited to repairs and returns, warranty claims may result in litigation, the occurrence of which could adversely affect our business, financial condition and results of operations.

In addition to warranties supplied by us, including the extended warranty option we recently introduced,offer, our brick-and-mortar and online retail partners may offer the option for users to purchase third-party extended warranty and services contracts in some markets, which creates an ongoing performance obligation for such third parties beyond our warranty period. Extended warranties are regulated in the United States on a state level and are treated differently by each state. Outside the United States, regulations for extended warranties vary from country to country. Changes in interpretation of the insurance regulations or other laws and regulations concerning extended warranties on a federal, state, local or international level may cause us to incur costs or have additional regulatory requirements to meet in the future. Our failure or the failure of third parties to comply with contractual obligations or past, present and future similar laws could result in reduced sales of our products, reputational damage, penalties and other sanctions, which could adversely affect our business, financial condition and results of operations.

Our products and platform services may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, consumer confidence in future economic conditions, fears of recession, the availability and cost of consumer credit, inflationary pressures, consumers’ individual savings-to-spend ratio, levels of unemployment, discretionary time and money available, tax rates and political factors, including war or other armed conflicts, including the current conflicts between Russia and Ukraine and in the Middle East. While we saw an increase in demand for our products and platform services during the COVID-19 pandemic in 2020 and 2021, our current revenue growth rates are declining compared to those years. 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.revenue. To date, our business has operated almost exclusively in a relatively strong economic environment. Current deteriorating general economic conditions, inflationary pressures affecting the pricing of our products, and changes in consumer spending preferences and buying trends are having an adverse effect on demand for our products. Further, a federal government shutdown resulting from failing to pass budget appropriations, adopt continuing funding resolutions, or raise the debt ceiling, and other budgetary decisions limiting or delaying deferral government spending, may negatively impact U.S. or global economic conditions, including corporate and consumer spending, and liquidity of capital markets. Unfavorable economic conditions or other related factors may lead consumers to delay or reduce purchases of our products and platform services, and consumer demand for our products and platform services may not grow as we expect. As a result of these factors, our rate of adding new users is declining in comparison to recent years and, in the short term, the number of Paid Subscribers could remain flat or decline. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and platform services could adversely affect our business, financial condition and results of operations.

As is the case generally with contract manufacturers, our contract manufacturers may be vulnerable to capacity constraints and reduced component availability, and our control over delivery schedules, manufacturing yields and costs, particularly when components are in short supply or when we introduce new products or features, is limited. In addition, we must rely on our contract manufacturers to manufacture our connected machines and other accessories and materials to our quality and performance standards and specifications. Delays, component shortages and other manufacturing and supply problems could impair the distribution of our connected machines and ultimately our brand, or could negatively affect our gross margins. Furthermore, certain of our contract manufacturers have in the past and may in the future experience adverse changes in their business conditions. Any adverse change in our contract manufacturers’ financial or business conditions could disrupt our ability to supply our products to our brick-and-mortar and online retail partners, distributors and online sales channels, and could negatively impact our ability to meet our forecasted consumer demand and to timely launch new products or features. In addition, our three contract manufacturers manufacture our connected machines at facilities located in Malaysia, with some manufacturing of certain accessoriessub-assemblies and materials conducted in the People’s Republic of China, or China. Our other contract manufacturers are located in Malaysia, China, Thailand and South Korea. Manufacturing in these countries, particularly Malaysia,countries may be subject to political, economic, widespread health outbreaks, labor constraints, border closures, social and legal uncertainties that may harm our relationships with these parties.parties, and may, in-turn increase supply risk, including the risk of supply interruptions. In particular, changes in Malaysia’s employment regulations, including increases to the national minimum wage and restrictions on migrant labor, could significantly harm our contract manufacturers’ ability to meet our expected manufacturing yields and costs. Our other contract manufacturers are also located in Malaysia, China, Thailand and South Korea, which may increase supply risk, including the risk of supply interruptions.

To ensure adequate inventory supply, we must forecast inventory needs and expenses and place orders with our contract manufacturers and component suppliers sufficiently in advance, based on our estimates of future demand for particular products. Failure to accurately forecast our needs may result in manufacturing delays, increased costs or excess inventory. Because we bear supply risk under our contract manufacturing arrangements, any such delays, increased costs or excess inventory could negatively impact our business. Failure to forecast appropriate demand, lead times, significant price fluctuations or shortages in materials or components, including the costs to transport such materials or components, the uncertainty of currency fluctuations against the U.S. dollar, increases in labor rates, limitations on the availability of labor, trade duties or tariffs and/or the introduction of new and expensive raw materials, some of which we expect in 2025,materials could adversely affect our contract manufacturers’ ability to manufacture our products in sufficient quantity and within sufficient time to meet our consumer demand, which would adversely affect our business, financial condition and operational results.

If we overestimate our production requirements, we or our contract manufacturers may purchase excess components and build excess inventory. If we, or our contract manufacturers at our request, purchase excess components that are unique to our products or build excess products, we could be required to pay for these excess components or products. In limited circumstances, we have agreed to reimburse our manufacturers for purchased components that were not used as a result of our decision to discontinue products or the use of particular components. If we incur costs to cover excess supply commitments, this would harm our business. If we underestimate our product requirements, our contract manufacturers may have inadequate component inventory, which could interrupt the manufacturing of our products and result in delays or cancellation of orders from brick-and-mortar and online retail partners, distributors and online sales channels. We may be required to incur higher costs to secure the necessary production capacity and components to meet unanticipated demand, which could result in lower margins. While supply chain conditions have improved during 2024,2023, 2024 and 2025, if our supply chain faces challenges again, it could put pressure on margins.

In the event of any significant interruption in service by shipping providers or at airports or shipping ports, we may be unable to engage alternative suppliers or to receive or ship goods through alternate sites in order to deliver our products in a timely and cost-efficient manner. As a result, we could experience delays, increased shipping costs and lost sales as a result of missed delivery deadlines and product demand cycles. For example, at times during the COVID-19 pandemic, shipping of our products was delayed, which inconvenienced our users and brick-and-mortar and online retail partners. We could experience shipping delays in the future as a result of shortages of containers and ships, local port challenges or for other reasons. Furthermore, if the cost of delivery or shipping services were to increase significantly and the additional costs could not be covered by product pricing, our results of operations could be adversely affected.

We are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which will requirerequires us to conduct due diligence on and disclose whether or not our products contain conflict minerals. The implementation of theseThese requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products. In addition, we willmay incur additional costs to comply with the potential disclosure requirements, including costs related to conducting diligence procedures to determine the sources of minerals that may be used or necessary to the production of our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such due diligence activities. It is also possible that we may face reputational harm if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to alter our products, processes or sources of supply to avoid such materials.

We are currently experiencing inflationaryInflationary pressures affectingimpact the prices of components for our products and transportation resources. Significant increases in commodity prices, such as base metals (e.g. copper), alloys or plastic resins, or inflation could adversely affect the costs of our component suppliers and contract manufacturers and result in higher costs to us if we are unable to pass on the increased costs to our brick-and-mortar and online retail partners or users. Furthermore, transportation costs have fluctuated as a result of a variety of factors, such as capacity shortages, higher fuel prices and labor shortages, and we may not be able to pass such costs on to our brick-and-mortar and online retail partners or users. Our results of operations may be adversely affected if we are unable to secure, or are able to secure only at significantly higher costs, components for our products or adequate transportation resources.

TradeOne Representative,of the contract manufacturers that produces our connected machines is wholly-owned by a Chinese parent company, and many of the components that go into the manufacturing of our products, including our accessories and materials, are sourced from third-party suppliers in China. Our business therefore could be affected by social, political, regulatory or economic developments in China. For example, since 2018, the USTR,U.S. has imposed additional tariffs of 10% or more on variousmany imports into the U.S. of Chinese-origin goods, including communications equipment products and components manufactured in and imported from China and China has also imposed tariffs on imports into China from the United States. (See also our risk factor “Recent and additional changes in U.S. taxes, tariffs, trade restrictions, or other trade policies affecting products produced in other countries, or similar recent or additional retaliatory changes by U.S. trading partners in response to these measures, could adversely affect our business.”) In addition, due to concerns with the security of products and services from certain telecommunications and video providers based in China, the United StatesU.S. government has enacted bans on the use of certain Chinese- and Russian-origin components, software, and systems either in items sold to the U.S. government or in the internal networks of government contractors and subcontractors (even if those networks are not used for government-related projects). ItThe U.S. government has already imposed, and it is possible that the U.S. government may in the future take futureadditional measures to imposeimpose, (a) stricter export controls on items destined for China; (b) additional restrictions on the testing and import of certain components, software, and/or systems from China; and (c) additional duties on shipments made from China. The likelihood of one or more of these actions occurring has materially increased in light of comments by the new U.S. presidential administration, which has repeatedly communicated an intention to impose additional duties on imports from China (as well as on imports from other countries). Any of these actions could affect the profitability and/or stability of the manufacturing activities conducted by our key third-party manufacturing partners or introduce other risks to our business, including supply chain interruptions, substantially delayed or lost shipments, or increased expenses. In addition, the U.S. government may add additional parties to the Entity List, the List of Specialty Designated Nationals, the FCC’s Covered List, or other restricted party lists, which could harm our business,business or increase the cost of conducting our operations in China, and/or result in retaliatory actions against U.S. interests. We also depend on semiconductors made in Taiwan, and a worsening of the geopolitical situation involving China and/or Taiwan could affect our ability to procure these semiconductors. Further, the U.S. government has introduced various regulatory changes to its export controls regime since 2022 that have significantly affected the semiconductor manufacturing and semiconductor manufacturing equipment industries. Continued deterioration in trade relations or adverse developments in political, social or economic conditions in or affecting China or future unforeseen problems, including health pandemics or regulatory changes, could affect deliveries of our products to our retail partners or users, possibly resulting in business interruptions, substantially delayed or lost sales, loss of inventory or increased expenses that cannot be passed on to brick-and-mortar and online retail partners or users, any of which could ultimately have a material adverse effect on our business and financial results. In such an eventuality, we could be forced to relocate certain of our manufacturing, either temporarily or permanently, to another potentially costlier location or find alternative potentially costlier methods of shipping our finished products to brick-and-mortar and online retail partners and users. If any of our China-based suppliers for any of our components are unable to supply the components that our manufacturers need to meet anticipated consumer demand, our business would be materially and adversely affected.

ChangesRecent additional changes in U.S. tax,taxes, tarifftariffs, trade restrictions, or other trade policypolicies regardingaffecting products produced in other countriescountries, or similar recent or additional retaliatory changes by U.S. trading partners in response to these measures, could adversely affect our business.

A predominant portion of the products we sell is originally manufactured in countries other than the United States. InternationalRecent tradeor disputesfurther changes in U.S. laws that result in increased tariffs andor other protectionisttrade measuresrestrictions could adversely affect our business, including disruption in and cost increases for sourcing our merchandise and increased uncertainties in planning our sourcing strategies and forecasting our margins. Importing and exporting has involved more risk since the beginning of 2018, as there has been increasing rhetoric, in some cases coupled with legislative or executive action, from several United States and foreignpolitical leaders regarding the imposition of additional or escalated tariffs againstaffecting foreign imports of certain materials. For example, beginning in September 2018, the U.S. Trade Representative (the “USTR”) enacted aadditional tariffSection on301 tariffs affecting the import of othermany Chinese products,products affecting items, with a combined import value of approximately $200$550 billion. SinceThe thatapplicable timeSection 301 tariffs on some of these products have further increased since these tariffs were originally imposed, and additional tariffs are forthcoming, and additional tariffs are forthcoming (including an additional, yet-to-be-announced tariff rate on certain Chinese-origin semiconductors beginning in 2027). Between February 2025 and February 2026, the U.S. government has continuedbegan to impose significant and increasingly largeadditional tariffs of 10 to 145% on a broaderbroad range of products imported from China and other countries based on authorities asserted under the International Emergency Economic Powers Act (“IEEPA”). These additional U.S. tariffs implemented under IEEPA were rescinded on February 24, 2026, following a Supreme Court decision invalidating the use of IEEPA to authorize these tariffs. The availability, timing, and amount of any related refunds remain uncertain and subject to further legal, regulatory, and administrative action. However, the U.S. government alsosubsequently hasannounced continuedplans to imposeimplement strictera exportnew controlsglobal “temporary import surcharge” of 15% on itemsmany destinedof the same imported products beginning February 24, 2026, under authorities provided for Chinain Section 122 of the Trade Act of 1974, supplementing existing non-IEEPA measures. Further tariffs may also be ultimately imposed following the initiation and completion of additional Section 301 tariff investigations. In addition, the Bureau of Industry and Security, or BIS, of the U.S. Department of Commerce hasis continuedcompleting Section 232 tariff investigations into imports of various products, including processed critical minerals and derivative products. In January 2026, the U.S. government placed an additional 25% Section 232 tariff on imports of certain advanced computing semiconductor chips. Additional tariffs may be imposed on these or additional products if the President deems such measures necessary based on the findings of these Section 232 tariff investigations. Considerable uncertainty remains regarding the scope, duration, and rate of current and newly announced tariffs, potential future modifications, and possible retaliatory or other actions that may be taken by U.S. trading partners in response to addrecent certain Chinese entitieschanges to U.S. liststrade of restricted parties including the Entity List, limiting the ability of U.S. companies to do business with those entities. In response to U.S. government measures, the Chinese government is expanding its control on exports, and these controls or other measures could impact our business. The U.S. government may continue to add additional parties to these restricted parties list, which could harm our business, increase the cost of conducting our operations in China or result in additional retaliatory actions against U.S. interests.policy.

In addition, the U.S. government has exercised additional trade-related powers in a manner that could have a material adverse impact on our business, financial condition or results of operations. For example, on May 15, 2019, then-President Trump issued an executive order that invoked national emergency economic powers to implement a framework to regulate the acquisition or transfer of information communications technology in transactions that imposed undue national security risks. On December 5, 2024, the U.S. Department of Commerce published final rules in the Federal Register, establishing the terms under which the Department of Commerce may investigate transactions involving the use of information communications technology products or services provided by persons owned or controlled by certain nations, including China, and potentially to modify or prohibit those transactions. These rules took effect as of February 4, 2025. In addition, the White House, the Department of Commerce and other executive branch agencies have implemented additional restrictions and may implement still further restrictions that would affect conducting business with certain Chinese companies. A substantial portion of our products are manufactured in China.

The trade and tariff policies of the U.S. and other countries are currently fluid and subject to further changes. As a result of recent changes to tariffs and other trade controls, our cost of goods imported from Chinanon-US sources increased substantially, and could increase further because of threatened increases in U.S. tariff rates on products fromimported China. The risk of such U.S. tariff increases has materially increased in light ofinto the new administration, which has repeatedly communicated an intention to impose additional duties on imports from China and a number of other countries.U.S. Although we continue to work with our vendors to mitigate ourthe exposureimpact toof current or potential tariffs, there can be no assurance that we will be able to offset any increased costs. Other changes in U.S. tariffs, quotas, trade relationshipsrelationships, tax provisions, or taxthe provisionsimposition of retaliatory tariffs on U.S. goods could also reduce the supply of goods available to us or increase our cost of goods. We may fail to effectively adapt to and manage the adjustments in strategy that would be necessary in response to those changes. In addition to the general uncertainty and overall risk from potential changes in U.S.the laws and policies,policies of the U.S. or its trading partners, as we make business decisions in the face of such uncertainty, we may incorrectly anticipate the outcomes, miss out on business opportunities or fail to effectively adapt our business strategies and manage the adjustments that are necessary in response to those changes. These risks could adversely affect our revenue, reduce our profitability and negatively impact our business.business, financial condition, and the results of operations.

Although legal mechanisms have been designed to allow for the transfer of personal data from the United Kingdom, the EEA, and Switzerland to the United States, uncertainty about compliance with such data protection laws remains and such mechanisms may not be available or applicable with respect to personal data processing activities undertaken in researching, developing and marketing our products and services. For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA, United Kingdom and Switzerland to the United States could result in further limitations on the ability to transfer personal data across borders, particularly if governments are unable or unwilling to reach agreement on or maintain existing mechanisms designed to support cross-border data transfers. Specifically, on July 16, 2020, the Court of Justice of the EU, or CJEU, invalidated the EU-U.S. Privacy Shield Framework. The same decision also imposed additional conditions with respect to use of the Standard Contractual Clauses, or the SCCs, to lawfully transfer personal data from Europe to the United States and most other countries. The Swiss Federal Data Protection and Information Commissioner also has stated that it no longer considers the Swiss-U.S. Privacy Shield adequate for the purposes of personal data transfers from Switzerland to the United States. On October 7, 2022, then President Biden signed an Executive Order on Enhancing Safeguards for United States Signals Intelligence Activities, directing the United States to take certain steps to implement the EU-U.S. Data Privacy Framework or the DPF. Following a July 10, 2023 adequacy decision issued by the European Commission, the DPF, along with a United Kingdom extension to the DPF that allows the transfer of personal data from the United Kingdom to the U.S., or UK DPF Extension, are available for companies to use to legitimize personal data transfers from the EEA and United Kingdom to the U.S. Further, a framework similar to the DPF, the Swiss-U.S. Data Privacy Framework, or Swiss-U.S. DPF, also has been established to facilitate the lawful transfer of personal data from Switzerland to the U.S. There have, however, legal challenges to the DPF, and it, the UK DPF Extension and the Swiss-U.S. DPF may be subject to legal challenges in the future from privacy advocacy groups or others .others. These and other developments may result in European data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from the EEA, United Kingdom, and Switzerland to the United States. We may be required to take additional steps to legitimize any impacted personal data transfers and may be subject to increased costs of compliance and limitations on our vendors, contractors, consultants and us. On June 4, 2021, the European Commission published new SCCs. The CJEU’s decision, the revised SCCs, regulatory guidance and opinions and other developments relating to cross-border data transfer may require us to implement additional contractual and technical safeguards for any personal data transferred out of the EEA, United Kingdom and Switzerland. More generally, we may find it necessary or desirable to modify our data handling practices, and our practices relating to cross-border transfers of data or other data handling practices, or those of our vendors, contractors and consultants, may be challenged and our business, financial condition and operating results may be adversely impacted. We continue to monitor and review the impact of any developments relating to cross-border data transfers from the EEA, United Kingdom and Switzerland that could affect our operations.

Further, the United Kingdom has established its own domestic regime with the UK General Data Protection Regulation, or UK GDPR, and other domestic data protection laws, such as the UK Data Protection Act of 2018, which provide for penalties for noncompliance of up to the greater of £17.5 million or 4% of worldwide revenues. Although the European Commission adopted an adequacy decision for the United Kingdom in June 2021 that allows for the continued flow of personal data from the EU to the United Kingdom, this decision may be revoked or modified and willrequires need to be renewedrenewal after four years from the date of adoption. In February 2022, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses, or the UK SCCs, to support personal data transfers out of the United Kingdom, which went into effect in March 2022. We may, in addition to other impacts, experience additional costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing personal data on our behalf or localize certain data. We cannot fully predict how United Kingdom data protection laws or regulations may develop in the medium to longer term or how the EU will treat the United Kingdom with respect to data protection issues, including those relating to data transfers to and from the United Kingdom. We continue to monitor and review the impact of any resulting changes to EU or United Kingdom law, or related developments, that could affect our operations. We may incur liabilities, expenses, costs and other operational losses relating to the GDPR and privacy laws of applicable EU Member States and the United Kingdom, including in connection with any measures we take to comply with them.

California has also enacted legislation affording consumers expanded privacy protections. The CCPA, which was amended by the CPRA, gives California residents various rights, including rights to access their personal information, request deletion of their personal information, opt out of certain sale sand sharing of their personal information, and receive detailed information about how their personal information is collected and used. The CCPA also provides for civil penalties for violations (up to $7,500 per violation), as well as a private right of action for certain data breaches that may increase data breach litigation. Numerous other states have also enacted or proposed similar data privacy laws. For example, Virginia, Colorado, Utah, Connecticut, Florida, Montana, Oregon, Texas Tennessee, Delaware, Iowa, Indiana, Maryland, Minnesota, Nebraska, New Hampshire, New Jersey, Kentucky and Rhode Island have enacted similar laws that have gone into effect, or will go into effect through 2026. The CCPA, these other state laws and other proposed laws at the state and federal level in the United States are far-reaching and in certain cases are overlapping but different l,different, resulting in further uncertainty and potentially requiring changes in our business practices and policies and our incurring, require us to incur additional costs and expenses in anour effortefforts to comply.

With laws and regulations such as the GDPR, LGPD and CCPA imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other laws and regulations, there is a risk that the requirements of these or other laws and regulations, or of contractual or other obligations relating to privacy, data protection orprotection, information security, or the storing, sharing, use, processing, transfer, disclosure and protection of data or other content, are interpreted or applied in a manner that is, or is alleged to be, inconsistent with our management and processing practices, our policies or procedures, or the features of our products and services. We may face challenges in addressing their requirements and making any necessary changes to our policies and practices, and we may find it necessary or appropriate to assume additional burdens with respect to data handling, to restrict our data processing or otherwise to modify our data handling practices and to incur significant costs and expenses in these efforts. Any failure or perceived failure by us to comply with our privacy policies, our privacy, data protectionprotection, data processing or information security-related obligations to brick-and-mortar and online retail partners, users or other third parties, or any of our other legal obligations relating to privacy, data protection orprotection, information security or the storing, sharing, use, processing, transfer, disclosure and protection of data or other content may result in governmental investigations or enforcement actions, litigation, claims or public statements against us by consumer advocacy groups or others, and could result in significant liability or cause our users to lose trust in us, which could adversely affect our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of our brick-and-mortar and online retail partners may limit the adoption and use of, and reduce the overall demand for, our products and services.

Additionally, if third parties we work with, such as vendors or developers, violate applicable laws or regulations or our contracts and policies, such violations may also put our users’ content and personal informationdata at risk and could in turn adversely affect our business. Any significant change to applicable privacy laws or relevant industry practices could increase our costs and require us to modify our platform, design apps and features, possibly in a material manner, which we may be unable to complete and may limit our ability to store and process user data or develop new design apps and features.

Information technology helps us operate more efficiently, interface with users and brick-and-mortar and online retail partners, offer features for our products and services, maintain financial accuracy and efficiency and accurately produce our financial statements. If we do not allocate and effectively manage the resources necessary to build, sustain and secure necessary information technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of brick-and-mortar and online retail partners or users, business disruptions or the loss of or unauthorized access to personal information or personal data or loss or damage to intellectual property through a cyberattack or other security breach or incident. Cyberattacks and other means of attempting and causing security breaches and incidents, are becoming increasingly sophisticated, including as a result of the proliferation of artificial intelligence and machine learning. The use of artificial intelligence and machine learning may result in cybersecurity incidents that implicate the personal data of end users of such applications. Any cybersecurity incidents related to our use of artificial intelligence and machine learning applications could adversely affect our reputation and results of operations. We have been subject to cyberattacks and security breaches and incidents in the past, and cyberattacks, security breaches and incidents could expose us to a risk of lost, exposed or corrupted information, unauthorized disclosure of information, litigation and possible liability to employees, users, brick-and-mortar and online retail partners and regulatory authorities. Geopolitical conflicts and tensions may also increase our risks from cyberattacks and security breaches and incidents. In addition, a significant portion of our data and information is hosted in a cloud-computing environment, where design apps and data are hosted, accessed and processed through a third-party provider over a broadband Internet connection. InCertain aof our third-party service providers in cloud-computing environment,environments wehave couldbeen beand in the future may be, subject to outages, security breaches and incidents and cyberattacks affecting the third-party service provider.cyberattacks. More of our and our service providers’ personnel arehave been working remotely in recent years than prior to the COVID-19 pandemic,years, which increases the risks of cyberattacks and security breaches and incidents.

Privacy laws and regulations restrict how we deploy our cookies, and this could potentially increase the number of Internet users that choose to proactively disable cookies on their systems. Federal, state and foreign governmental authorities continue to evaluate the privacy implications inherent in the practice of online tracking for behavioral advertising and other purposes. Governments in the United States and internationally have enacted, have considered or are considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ electronic tracking tools or the use of data gathered with such tools. For example, the European Commission has proposed a regulation, known as the Regulation of Privacy and Electronic Communications, or the ePrivacy Regulation, which would replace the current ePrivacy Directive. The ePrivacy Regulation remains in the negotiation stage. If adopted, the ePrivacy Regulation is anticipated to have broad potential impacts on the use of internet-based services and tracking technologies, such as cookies. We expect to incur additional costs to comply with the requirements of the ePrivacy Regulation and national implementation laws once they are enacted. In addition to the EU and United Kingdom, other regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem. For example, on January 13, 2022, the Austrian data protection authority published a decision ruling that the collection of personal data and transfer to the U.S. through Google Analytics and other analytics and tracking tools used by website operators violates the GDPR. In 2022, the Danish, French and Italian data protection authorities adopted similar decisions. On June 23, 2022, the Italian data protection authority adopted a similar decision. Other data protection authorities in the EU increasingly are focused on the use of online tracking tools and have indicated that they plan to issue similar rulings. In addition, the CCPA grants California residents the right to opt-out of a company’s sharing of personal information for advertising purposes in exchange for money or other valuable consideration.

•tariffs and other non-tariff trade barriers, such as quotas and local content rules, as well as tax consequences;

We have relatively limited experience with international regulatory environments and market practices and may not be able to penetrate or successfully operate in the markets we choose to enter. In addition, we may incur significant expenses as a result of our international expansion, and we may not be successful or may not execute our strategy successfully. We currently face limited brand recognition in certain parts of the world that could lead to non-acceptance or delayed acceptance of our products by consumers in new markets. Our failure to successfully manage these risks could harm our international operations and adversely affect our business, financial condition and results of operations.

In addition, changes related to Brexit could subject us to heightened risks in that region, including disruptions to trade and free movement of goods, services and people to and from the United Kingdom, disruptions to the workforce of our business partners, increased foreign exchange volatility with respect to the British pound and additional legal, political and economic uncertainty. If these actions impacting our international distribution and sales channels result in increased costs for us or our international partners, such changes could result in higher costs to us, adversely affecting our operations, particularly as we expand our international presence.

The United States and various foreign governments have imposed controls, license requirements and restrictions on the import and/or export of certain technologies, products, software and services. Compliance with applicable regulatory requirements regarding the export of our products and services may create delays in the introduction of our products and services in some international target markets, prevent our international users from accessing our products and services, and, in some cases, prevent the export of our products and services to some countries or users altogether.

Failure to comply with anti-corruptionanti-corruption, anti-bribery, and anti-money laundering laws, including the FCPA and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.

We operate a global business and may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act and possibly other anti-corruption and anti-bribery laws and anti-money laundering laws in countries in which we conduct activities. These laws prohibit companies and their directors, officers, employees and third-party business partners and intermediaries, representatives, contractors and agents from corruptly promising, authorizing, offering or providing, directly or indirectly, improper payments or anything of value to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person or securing any improper advantage.

If U.S. or foreign tax laws further change or the way in which such laws are implemented change, if our current or future structures and arrangements are challenged by a taxing authority, or if we are unable to appropriately adapt the manner in which we operate our business, we may have to undertake further costly modifications to our international structure and our tax liabilities and results of operations may be adversely affected. In addition, increases in corporate tax rates could increase our effective tax rate and have an adverse effect on our results of operations. For example, the United States enacted the Inflation Reduction Act inof 2022, which imposes a 1% excise tax on certain stock repurchases (including potentially pursuant to our stock repurchase program) and a 15% alternative minimum tax on adjusted financial statement income. In addition, the One Big Beautiful Bill Act (the “OBBB Act”) was signed into law on July 4, 2025 and introduced significant changes to U.S. federal tax law. We are continuing to evaluate the full impact of the OBBB Act on us. Further, the Organization for Economic Co-Development has proposed a global minimum tax of 15%,15% (“Pillar 2”), which has been and is being adopted by EU member countries effectiveand ascertain other jurisdictions. The United States has withdrawn support for Pillar 2, but the G7 and the U.S. Treasury Department announced an agreement that the U.S. international tax regime will operate “side-by-side” with Pillar 2 rules. We are continuing to monitor the enactment and implementation of JanuaryPillar 1,2 2024.legislation, and the impact on our financial position and results of operations.

The stock price of our Class A common stock may be volatile or may decline regardless of our operating performanceperformance.

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 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. Our users’ journeys typically begin with the purchase of a connected machine. We currently sell a portfolio of connected machines that cut, write, score and create other decorative effects using a wide variety of materials including paper, adhesive vinyl, iron-on vinyl, pens, and more. Our connected machines are designed in a variety of sizes for a wide range of uses and are available at a variety of price points (MSRPand byin machinea family asvariety of Decemberbundles 31,with 2024):accessories and materials, or with accessories and materials plus subscription.

As of December 31, 2024,2025, we had nearlyjust 3.0over 3.09 million Paid Subscribers to Cricut Access and Cricut Access Premium.

Since launching our first connected machine in 2014, we have built a loyal and growing community of users that has reached substantial scale. As of December 31, 2022,2023, 20232024 and 2024,2025, we had 5.8nearly 5.9 million, 5.9 million and nearly 5.9 million Active Users, respectively, representing 12%, 2% and2%, (1)% and 0% year-over-year growth, respectively. See the section titled “Key Business Metrics” for the definition of Active Users. We believe we are in the early stages of our growth and that we have a significant untapped opportunity in the United States and Canada, as well as globally.

Once we acquire a user, we often see strong engagement with them over time. We drive engagement through a highly interactive and fulfilling product experience and the strength of our community. We continuously innovate and improve our connected machines, design apps and accessories and materials, giving our users more to create. Once they have purchased connected machines, users inspire one another to create and use more of our digital content, subscriptions and accessories and materials. In turn, we learn from our users’ creativity, and may launch new products to help expand their creative horizons. We measure engagement by the number of Active Users and 90-Day Engaged Users interacting with our Platform. See the section titled “Key Business Metrics” for the definitions of Active Users and 90-Day Engaged Users and for information regarding those metrics over the last three years.

Many of our users choose to pay for our subscription offerings which include a subscription to images, fonts and projects as well as other member benefits, including exclusive software features and functionality, discounts, priority Cricut Member Care, and, in the case of Cricut Access Premium, preferred shipping. By subscribing to our offerings, users have access to a curated and growing design library of over one1.6 million images, thousands of templates, thousands of ready-to-make projects and hundredsover ofa thousand fonts. We believe that the number of Paid Subscribers is an indicator of the depth of our users’ engagement. See the section titled “Key Business Metrics” for the definition of Paid Subscribers and for information regarding that metric over the last three years. As of December 31, 2024,2025, we had nearlyjust 3.0over 3.09 million Paid Subscribers, representing 7%4% year-over-year growth. We aim to increase the number of our users that are Paid Subscribers over time.

We define Paid Subscribers as the number of users with a subscription to Cricut Access or Cricut Access Premium, excluding cancelled, unpaidunpaid, paused, or free trial subscriptions, as of the end of a period. Paid Subscribers is a key metric to track growth in our Platform revenue and potential leverage in our gross margin.

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, imagesimages, templates, and projects. Platform revenue is recognized on a ratable basis over time, during the subscription term for subscriptions, and at the point in time when control is transferred for à la carte digital content.

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, Maker 3 and Maker 34; Cricut Explore, which includes Explore Air 22, Explore 3 and Explore 34; 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 adhesive vinyl and iron-on.iron-on vinyl. Products revenue is recognized at the point in time when control is transferred, which is either upon shipment or delivery to the customer in accordance with the terms of each customer contract.

Research and development expenses consist primarily of costs associated with the development of our connected machines, software and accessories and materials, including personnel-related expenses for engineering, product development and quality assurance, as well as prototype costs, service fees incurred by contracting with vendors and allocated overhead. We expect our research and development expenses to increase in the near term as we refine our product roadmaps. We produced gross savings in research and development of approximately $3.2 million during 2024 as a result of the January 2024 restructuring plan.

Sales and marketing expenses consist primarily of the advertising and marketing of our products, third-party payment processing fees, personnel-related expenses, including salaries and bonuses, benefits and stock-based compensation expense, as well as customer rebates, professional services, promotional items, and allocated overhead costs. We expect our sales and marketing expenses as a percentage of revenue to fluctuate in the near term. We produced gross savings in sales and marketing of approximately $2.5 million during 2024 as a result of the January 2024 restructuring plan.

General and administrative expenses consist of personnel-related expenses for our finance, legal, human resources and administrative personnel, including salaries and bonuses, benefits and stock-based compensation expense, as well as the costs of professional services, any allocated overhead, information technology, impairment charges of unused equipment, and other administrative expenses. We expect our general and administrative expenses as a percentage of revenue to increase in the near term as we expand our operations, invest in systems enhancements, and incur expenses required of a public company. We produced gross savings in general and administrative of approximately $0.6 million during 2024 as a result of the January 2024 restructuring plan.

The Organization for Economic Co-operation and Development (“OECD”) Pillar Two Model Rules (“Pillar Two”) for a global 15% minimum tax are in the process of being adopted in a number of jurisdictions in which we operate. Pillar Two is applicable to us beginning January 1, 2024. Of the jurisdictions where Pillar Two has been adopted, the only jurisdictionjurisdictions where the top-up tax is applicable isare Switzerland and Singapore and the estimated tax is immaterial.

Platform revenue increased by $4.0$14.4 million, or 1%,5%, to $327.4 million for the year ended December 31, 2025 from $313.0 million for the year ended December 31, 2024 from $309.0 million for the year ended December 31, 2023.2024. The increase was primarily driven by growth of 7%4% in the number of Paid Subscribers from 2.8 million as of December 31, 2023 to nearly 3.0 million as of December 31, 2024. The increase was offset partially by increased promotional activity, increased mix shift2024 to annualjust subscriptions,over and3.09 increasedmillion mixas shiftof toDecember international31, subscriptions.2025.

Products revenue decreased by $56.6$18.2 million, or 12%,5%, to $381.4 million for the year ended December 31, 2025 from $399.6 million for the year ended December 31, 2024 from $456.1 million for the year ended December 31, 2023.2024. The decrease was primarily driven by fewer units of Accessoriesaccessories &and Materialsmaterials sold and increasedat promotionala activitylower duringaverage theselling period.price.

Platform cost of revenue increaseddecreased by $4.5$1.3 million, or 14%,3%, to $36.0 million for the year ended December 31, 2025 from $37.3 million for the year ended December 31, 2024 from $32.8 million for the year ended December 31, 2023.2024. The increasedecrease was primarily driven by increaseslower inamortization of capitalized software development costs and hosting fees.costs.

Gross margin for ProductsPlatform increased to 19%89% for the year ended December 31, 20242025 from 15%88% for the year ended December 31, 2023.2024. The increase was primarily driven by a reductiondecreases in inventoryamortization impairmentof chargescapitalized comparedsoftware todevelopment prior year, partially offset by increased promotional activity.costs.

Research and development expenses decreasedincreased by $4.6$6.1 million, or 7%,10%, to $66.5 million for the year ended December 31, 2025 from $60.4 million for the year ended December 31, 2024 from $65.0 million for the year ended December 31, 2023.2024. The decreaseincrease was primarily due to a $4.7 million decreaseincrease in personnel-relatedproduct expense.development expense and a $1.0 million increase primarily from software development contractors.

Sales and marketing expenses increased by $20.1$16.1 million, or 16%,11%, to $159.4 million for the year ended December 31, 2025 from $143.3 million for the year ended December 31, 2024 from $123.2 million for the year ended December 31, 2023.2024. The increase was primarily due to a $16.0 million increase in advertising and other marketing expense and a $4.8 million increase in personnel-related expense, partially offset by a decrease in software subscriptions expense.

General and administrative expenses decreased by $12.1$4.5 million, or 14%,6%, to $68.5 million for the year ended December 31, 2025 from $73.0 million for the year ended December 31, 2024 from $85.1 million for the year ended December 31, 2023.2024. The decrease was primarily due to a $13.3$4.7 million decreasenet in impairmentreversal of unused equipment, software, and inventory (see Note 2) and a $1.9 million decrease in professional services expense, partially offset by increases in personnel-related expense and bad debt expense.debt.

Other income, net increaseddecreased by $3.0$0.9 million, or 30%,7%, to a$11.9 netmillion incomefor ofthe year ended December 31, 2025 from $12.8 million for the year ended December 31, 2024 from a net income of $9.8 million for the year ended December 31, 2023.2024. The change was primarily related to a decrease in interest from marketable securities due to moreless favorable rates and higherlower cashmarketable security balances in 2024.2025.

Provision for income taxes decreasedincreased by $0.1$5.1 million, or 0%,20%, to $31.2 million for the year ended December 31, 2025 from $26.0 million for the year ended December 31, 2024 from $26.1 million for the year ended December 31, 2023.2024. This represents an effective tax rate of 29.3%28.9% and 32.8%29.3% for the years ended December 31, 20242025 and 2023,2024, respectively. The decrease in the tax rate is due mainly to a decrease in uncertainstock taxbased positionscompensation relateddifferences attributable to the release of reserves due to statute lapses and a decrease in returnstock toprice provisionupon adjustments.vesting versus the stock price at the grant date.

On July 19, 2022, our Board of Directors authorized a share repurchase program to repurchase up to $50 million of its outstanding Class A common stock which was completed during the six months ended June 30, 2024. On May 6,2, 20242025, the Company’s Boardboard of Directorsdirectors approved ana additionalreplenishing $50 million forof the share repurchase program authorizing the Company to purchase sharesup to an aggregate of $50 million of its outstanding Class A common stock depending on the Company’s continuing analysis of market, financial, and other factors. The share repurchase program may be suspended or discontinued at any time and does not have a predetermined expiration date.

The change in net cash flows from operating activities for the year ended December 31, 20242025 compared to year ended December 31, 20232024 is due to a net decrease in operating assets and liabilities of $57.3 million in 2025 compared to $130.0 million in 2024, due primarily to a reduction in inventory due to lower inventory purchases in 2025. In addition, there were non-cash adjustments of $66.3 million in 2025 compared to $72.1 million in 2024, due primarily to a decrease in payablethe balances,provision for inventory obsolescence in 2025 and a reductiondecrease in cashstock-based received from accounts receivablecompensation in 2024 compared to 2023. These decreases were partially2025, offset by loweran inventoryincrease purchasesin duringdeferred 2023income duetax toin higher beginning inventory balances combined with softening of consumer demand.2025.

The change in net cash flows from investing activities for the year ended December 31, 20242025 compared to year ended December 31, 20232024 was primarily due to aproceeds decrease in net purchases andfrom maturities of marketable securities duringin 20242025 comparednot used to 2023,purchase innew addition to a decrease in acquisitions of property and equipment.securities.

The change in net cash flows from financing activities for the year ended December 31, 20242025 compared to year ended December 31, 20232024 was primarily due to adividend decreasepayments of $202.1 million in dividends2025 compared to $110.0 million paid in 2024 compared to 2023, partially offset by an increase in repurchases of common stock .2024.

Inventories consist of finished goods and raw materials, which we purchase from contract manufacturers. We value our inventory at the lower of average cost or net realizable value. When our expectations indicate that average cost of inventory may exceed its net realizable value, we write-downwrite down our inventory to establish a new cost basis. We also periodically assess the value of our on-hand inventory for potential excess and/or obsolete inventory and when necessary, will write-downwrite down the value to account for estimated excess and/or obsolete inventory. We determine excess or obsolete inventory based on market conditions, age of inventory, an estimate of the future demand for our products within a specified time horizon, generally the greater of 24 months or remaining life of the product, and product life cycle status. Inventory write-downs are recorded as a component of cost of revenue in our consolidated statements of operations and comprehensive income. If actual demand is lower than our estimated demand, we could be required to write-downwrite down the value of additional inventory, which would have a negative effect on our gross profit.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in “Part I. Item 1A — Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2025, filed on March 4, 2026, and in “Part II. Item 1A — Risk Factors” in our Quarterly Report on Form 10-Q for the period ended March 31, 2026, filed on May 6, 2026, both of which are hereby incorporated by reference. The risks and uncertainties described in such risk factors and elsewhere in this report have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results and future prospects. Except as indicated below, weWe do not believe that there have been any material changes to the risk factors previously disclosed in our recent SEC filings, including our previously filed Form 10-K,10-K and 10-Q, as referenced above.

•Cricut Access Standard: Provides a subscription to fonts, images, templatestemplates, projects, and projectsAI credits as well as other member benefits, including exclusive software features and functionality, discounts, and priority Cricut Member Care. Cricut Access Standard is billed monthly starting at $9.99 per month or annually at $95.88 per year.

•Cricut Access Premium: Includes all of the benefits of Cricut Access Standard as well as additional discountsdiscounts, andadditional AI credits, and is billed monthly starting at $14.99 per month or annually at $119.88 per year.

As of MarchJune 31,30, 2026, we had nearly 3.1 million Paid Subscribers (as defined below) to Cricut Access Standard and Cricut Access Premium.

We sell our products through our brick-and-mortar and online retail partners, as well as through our website at Cricut.com. Our partners include Amazon, Hobby Lobby, Michaels, Target, Walmart and many others. We also sell our products, including subscriptions to Cricut Access Standard and Cricut Access Premium, on Cricut.com.

The current global macroeconomic environment, including regulation, tariffs that have materially increased, and may continue to increase,increase even after tariffs imposed under IEEPA were rescinded, our costs and the potential for further trade barriers, or additional retaliatory changes by U.S. trading partners may impact our business and international expansion. We are also beginning to seeexperience potentialsupply-chain disruptioncost pressure related to our supply chain stemming from the Middle East conflict, drivenprimarily largely bythrough higher fuel and petrochemical-related input costs. While we continue to evaluate actions to mitigate these pressures, the current environment requires a thoughtful and measured approach given the price sensitivity of the consumer.

We define Paid Subscribers as the number of users with a subscription to Cricut Access Standard or Cricut Access Premium, excluding cancelled, unpaid, paused, or free trial subscriptions, as of the end of a period. Paid Subscribers is a key metric to track growth in our Platform revenue and potential leverage in our gross margin.

We generate Platform revenue primarily from sales of subscriptions to Cricut Access Standard 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 Standard includes a subscription to fonts, images, fontstemplates, projects, and projectsAI credits 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 Standard as well as additional discounts and preferredAI shipping.credits. Digital content includes à la carte digital content purchases, including fonts, images, templates, and projects. Platform revenue is recognized on a ratable basis over time, during the subscription term for subscriptions, and at the point in time when control is transferred for à la carte digital content.

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

Three Months Ended MarchJune 31,30, 2026 and 2025

Platform revenue increased by $4.8$4.3 million, or 6%,5%, to $84.8$85.0 million for the three months ended MarchJune 31,30, 2026, from $80.0$80.7 million for the three months ended MarchJune 31,30, 2025. The increase was driven by an increase in Paid Subscribers from 3.0 million as of MarchJune 31,30, 2025 to nearly 3.1 million as of MarchJune 31,30, 2026.

Products revenue decreased by $7.9$20.1 million, or 10%,22%, to $74.7$71.3 million for the three months ended MarchJune 31,30, 2026, from $82.6$91.4 million for the three months ended MarchJune 31,30, 2025. The decrease was primarily driven by lower sales volume and lower average net selling prices onfrom Productsincreased promotional activity compared to the prior year.

Three Months Ended MarchJune 31,30, 2026 and 2025

Platform cost of revenue increaseddecreased by $0.7$2.9 million, or 8%,32%, to $9.4$6.0 million for the three months ended MarchJune 31,30, 2026, from $8.7$8.8 million for the three months ended MarchJune 31,30, 2025. The increasedecrease was primarily driven by increasesa infavorable hostinglegal fees and digital content costs.outcome.

Gross margin for Platform was 89%93% for the three months ended MarchJune 31,30, 2026, and 89% for the three months ended MarchJune 31,30, 2025. The increase was primarily driven by a favorable legal outcome.

Products cost of revenue increaseddecreased by $1.8$27.8 million, or 3%,45%, to $57.4$33.9 million for the three months ended MarchJune 31,30, 2026, from $55.6$61.8 million for the three months ended MarchJune 31,30, 2025. The increasedecrease was primarily driven by aIEEPA smallertariff reduction of inventory reserves compared to the prior year combined with higher tariffs, partially offset byrefunds, lower inventorysales procurementvolume, costs.and a favorable legal outcome.

Gross margin for Products was 23%52% for the three months ended MarchJune 31,30, 2026 and 33%32% for the three months ended MarchJune 31,30, 2025. The decreaseincrease was primarily driven by smallerIEEPA reductiontariff of inventory reserves compared to the prior year combined with higher tariffsrefunds and increaseda promotionalfavorable activity.legal outcome.

Research and development expenses increased by $0.9$0.1 million, or 6%,1%, to $16.6$16.9 million for the three months ended MarchJune 31,30, 2026 from $15.7$16.8 million for the three months ended MarchJune 31,30, 2025. The increase was primarily due to a $0.9$0.2 million increase in personnel-relatedproduct development expense.

Sales and marketing expenses decreasedincreased by $0.4$2.1 million, or 1%,6%, to $36.3$38.0 million for the three months ended MarchJune 31,30, 2026 from $36.7$35.9 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease was primarily driven by a $0.3$2.6 million decreaseincrease in advertising and other marketing costs and a $0.3 million decrease in professional services and a $0.2 million decrease in payment processing fees.expense. This was partially offset by a $0.6$0.4 million increasedecrease in softwarepayment subscriptions.processing fees.

General and administrative expenses increaseddecreased by $0.2$4.7 million, or 1%,25%, to $16.9$14.1 million for the three months ended MarchJune 31,30, 2026 from $16.7$18.8 million for the three months ended MarchJune 31,30, 2025. The increasedecrease was primarily driven by a $1.9$2.2 million reversaldecrease in professional services expense, a $2.0 million decrease of personnel related expenses and a $0.8 million reduction in bad debt expense in 2025.expense. This was partially offset by a $1.7$0.7 million decreaseincrease in professionalforeign servicescurrency expense.translation.

Other income, net decreased by $1.1$0.8 million or 33%23% to $2.2$2.9 million for the three months ended MarchJune 31,30, 2026 from $3.3$3.7 million for the three months ended MarchJune 31,30, 2025. The decrease was primarily driven by a decrease in interest income.

Provision for income taxes decreasedincreased by $3.9$1.9 million, or 45%,20%, to $4.8$11.3 million for the three months ended MarchJune 31,30, 2026 from $8.7$9.4 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease was primarily due to ana $16.5 million increase in thepre-tax researchbook and development credit and an increase in the deduction related to foreign derived deduction eligible income (“FDDEI”).income.

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 $236.5$266.9 million and $19.2$19.4 million, respectively, as of MarchJune 31,30, 2026, 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 semi-annual dividend and our continuing share repurchase program, our cash requirements have not changed materially since our Annual Report.

During the threesix months ended MarchJune 31,30, 2026, we paid dividends of $21.2 million to holders of Class A and Class B common stock. On July 21, 2026, we paid a dividend of $20.9 million to holders of Class A and Class B common stock.

The change in net cash flows from operating activities for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 is due to a net decrease in operating assets and liabilities of $5.2$2.0 million in 2026 compared to $32.0a net increase of $38.9 million in 2025, offset by ana net increase in non-cash operating expenses of $11.8$19.8 million in 2026 compared to $5.3a net increase of $10.0 million in 2025.

The change in net cash flows from investing activities for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 was due primarily to proceeds from maturities of marketable securities received in 2025. This was partially offset by higher capitalizablecapitalized software development costs in 2026 compared to 2025.

Net cash flows from financing activities for the threesix months ended MarchJune 31,30, 2026 compared to threesix months ended MarchJune 31,30, 2025 were comparable.