Company: CRCT
Filing Date: 2025-03-05
Form Type: 10-K
Source: 0001828962-25-000039
Chunk: 76

Company: Cricut, Inc.
Filing Date: 2025-03-05
Form: 10-K
Item: Item 1A
Chunk 76
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 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 accessories and materials conducted in the People’s Republic of China, or China. Manufacturing in these countries, particularly Malaysia, 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. 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.

Our contracts with our three contract manufacturers do not obligate them to supply our connected machines in any specific quantity or at any specific price and allow us to enter purchase orders with such manufacturers. Entering into agreements requiring additional purchase orders is a typical part of our business and is common practice with other vendors that we may use from time to time. If our three contract manufacturers fail for any reason to continue manufacturing our connected machines in required volumes, in a timely manner, at high quality levels or at all, we may have to increase connected machine production at currently qualified contract manufacturers or engage acceptable alternative contract manufacturers, either of which would be time consuming, particularly given the complexity of our connected machines. Identifying, selecting and onboarding acceptable alternative contract manufacturers could also be costly. Alternative contract manufacturers may not be available to us when needed or may not be in a position to satisfy our production requirements at commercially reasonable prices or to our quality and performance standards. Any significant interruption in manufacturing at our three contract manufacturers would reduce our supply of connected machines, which could cause us to delay our orders or breach our purchase orders with our brick-and-mortar and online retail partners, distributors and online sales channels, which in turn would reduce our revenue and user growth. 

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If our third-party contract manufacturers are