Cricut, Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Cricut sells connected crafting machines, subscriptions and accessories and materials through retail partners and online channels.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $886.3 million | $1,306.2 million |
| Gross profit / margin | $349.9 million / 39% | $457.5 million / 35% |
| Operating income / margin | $80.0 million / 9% | $192.4 million / 15% |
| Net income / diluted EPS | $60.7 million / $0.28 | $140.5 million / $0.64 |
| Operating cash flow | $117.7 million | $(104.9) million |
| Cash and cash equivalents | $224.9 million | $241.6 million |
| Marketable securities | $74.3 million | None reported |
Revenue fell 32% year over year; net income fell 57%. Gross margin improved to 39% from 35%, but operating margin and net margin declined. FY2022 cash and marketable securities totaled approximately $299.2 million. Current assets were $811.3 million versus current liabilities of $254.1 million. Inventory was $351.7 million, down from $454.2 million. Operating cash flow recovered from the prior-year outflow, principally as inventory purchases and receivables fell; accounts payable reductions partly offset the benefit. Investing cash outflow was $107.9 million, including purchases of marketable securities and capital expenditures; financing cash outflow was $26.2 million.
No borrowings were outstanding on the $300 million revolving credit facility at year-end; the full amount was available. The five-year facility matures in 2027, is secured by substantially all company assets, and includes financial covenants. The company reported compliance at year-end.
Business trends and material changes
| Revenue segment | FY2022 | Change from FY2021 |
|---|---|---|
| Connected machines | $252.6 million | Down 54% |
| Subscriptions | $272.3 million | Up 32% |
| Accessories and materials | $361.4 million | Down 35% |
Management attributed lower machine sales to elevated channel inventory entering the year and weaker retail and direct-to-consumer demand. Accessories and materials declined amid lower project-material, EasyPress and Mug Press sales, increased competition and higher sales incentives; launches of Autopress and Hat Press partly offset the decline. Subscription growth reflected a 28% increase in paid subscribers, to 2.6 million.
The user base reached 7.9 million, up 23%, but engagement softened: users creating on connected machines in the trailing 90 days declined to 51% from 60%. Annual accessories-and-materials ARPU fell to $50.54 from $102.91; subscription ARPU was $38.09 versus $38.37. FY2022 segment gross margins were 3% for connected machines, 90% for subscriptions and 26% for accessories and materials; the machine and accessories/materials margins fell from 12% and 38%, respectively, in FY2021.
Online channels generated 59% of revenue, up from 50%; brick-and-mortar sales accounted for 41%. No customer represented 10% or more of FY2022 revenue, although two customers each accounted for at least 10% of year-end receivables.
Outlook, risks and unusual items
- Outlook: No specific revenue or earnings guidance is provided. Management said it expects near- and long-term net margin to fluctuate and expects liquidity from cash, operating cash generation and the credit facility to cover anticipated needs for the next 12 months and beyond. Longer-term expense targets, as percentages of revenue, are 7–8% for R&D, 8–10% for sales and marketing, and 3–4% for general and administrative expense.
- Demand and competition: Management cited post-pandemic demand normalization, inflation, economic uncertainty and changing consumer spending. It warned that new-user additions were slowing and paid subscribers could remain flat or decline in the short term.
- Operations and supply chain: Most connected machines are made by one primary contract manufacturer, with manufacturing and key suppliers concentrated in Malaysia and China. Limited or sole-source components, tariffs, shipping costs, inventory forecasting and supplier disruption could affect availability and margins.
- Capital allocation and workforce: Cricut repurchased 2.35 million shares for $18.5 million in 2022 under a $50 million authorization. It declared a $0.35-per-share special dividend; $75.3 million in cash was paid in February 2023, with remaining dividend equivalents subject to vesting. In January 2023, the company reduced its workforce by approximately 8%.
- Unusual items: The company recorded $2.9 million of impairment charges for equipment tied to products it no longer planned to commercialize. FY2022 other income included income from marketable securities. A $36 million customer-rebate liability involved estimates of retailer sell-through data and was identified as a critical audit matter.
- Contingencies and governance: Cricut reported no material pending legal proceedings and said it was not aware of contingencies expected to materially affect its financial position, results or liquidity. It is pursuing a case challenging certain U.S. tariffs on China-origin goods. The company has a dual-class structure; Petrus and affiliates held approximately 69% of voting power, giving them significant influence.
- Audit and controls: The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at year-end.
Key facts for investors to verify
- Whether machine demand and channel inventory have stabilized, and whether declining engagement and accessories/materials ARPU are continuing.
- Whether subscription growth can offset weaker hardware and materials sales, considering subscriptions’ 90% gross margin versus 3% for machines.
- How the company manages inventory, retailer rebate estimates and the $36 million rebate liability, including any subsequent adjustments.
- Cash and liquidity after the special dividend, share repurchases and ongoing investment; confirm the facility remains undrawn and covenant-compliant.
- Exposure to its primary manufacturer, limited component suppliers, tariffs and international trade or shipping disruptions.
- The practical impact of workforce reductions and leadership changes, and the implications of Petrus’s voting control for minority shareholders.