Cricut, Inc.CRCT

Cricut, Inc. Income Taxes Disclosure

10-KFiled Mar 4, 20264 min read
Income Taxes
The reconciliation of income tax computed at the U.S. federal statutory tax rate to our effective income tax rate is as follows:
Year Ended December 31,
(in thousands)202520242023
AmountPercentAmountPercentAmountPercent
U.S. federal statutory tax rate$22,65821.0 %$18,66421.0 %$16,75521.0 %
State and local income taxes, net of federal income tax effect(a)
3,9573.7 3,4633.9 2,6393.3 
Foreign tax effects830.1 540.1 2930.4 
Effect of cross-border tax laws
Foreign derived intangible income(699)(0.7)(2,448)(2.8)(1,987)(2.5)
Other 1530.1 1500.2 0— 
Tax credits
Research and development tax credits(2,296)(2.1)(2,065)(2.3)(2,480)(3.1)
Foreign tax credits(24)— 0— 0— 
Nontaxable or nondeductible items
Share-based payment awards3,9983.7 7,0988.0 6,5448.2 
Nondeductible executive compensation1,7121.6 1,0181.1 7100.9 
Return to provision adjustments2,9942.8 8220.9 3,2884.1 
Other(170)(0.2)2640.3 560.1 
Changes in unrecognized tax benefits(1,178)(1.1)(973)(1.1)3290.4 
Effective income tax rate$31,18828.9 %$26,04729.3 %$26,14732.8 %
(a) State taxes in California, Pennsylvania and Utah made up the majority (greater than 50 percent) of the tax effect in this category for the years ended December 31, 2025 and 2023. California and Utah made up the majority (greater than 50 percent) of the tax effect in this category for the year ended December 31, 2024.
Differences between the Company’s effective tax rate and the statutory tax rate relate primarily to state income taxes, stock-based compensation, tax credits, prior year return to provision adjustments and changes in unrecognized tax benefits during the period. Deferred taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reporting and the amount used for income tax purposes.
Significant components of the Company’s net deferred tax assets are comprised of the following:
  December 31,
  20252024
(in thousands) 
Deferred tax assets:    
Inventories $7,731  $11,457 
Lease liability2,807 3,633
Accounts receivable 422  642 
Sales refund liability 579  689 
Deferred revenue 701  693 
Stock-based compensation 4,919  6,152 
Amortization 133  164 
Capitalized research expenditures2,306 22,291 
Net operating loss carryforwards 153  130 
Capital loss carryforwards61 102 
Tax credits 3,695  3,338 
Other (166) 879 
Total deferred tax assets 23,341  50,170 
Deferred tax liabilities:  
Depreciation and amortization (7,505) (7,658)
ROU lease asset(2,626)(3,326)
Total deferred tax liabilities (10,131) (10,984)
Net deferred tax assets $13,210  $39,186 
  Year Ended December 31,
  20252024 2023
(in thousands) 
Current: 
Federal $3,169 $24,854 $32,140 
State 1,477 5,108 4,695 
Foreign 485 403 549 
Total current 5,131 30,365 37,384 
Deferred: 
Federal 22,738 (3,692)(9,561)
State 3,341 (581)(1,713)
Foreign (22)(45)37
Total deferred 26,057 (4,318)(11,237)
Income tax provision $31,188 $26,047 $26,147 
Income taxes paid (net of refunds) are comprised of the following:
Year Ended December 31,
202520242023
(in thousands)
Federal$9,962$40,464$21,100
State
California1,000 **
Utah(3,585)**
Other states2,484 2,781 2,614 
Foreign594 626 297 
Total$10,455$43,871$24,011
* The amount of income taxes paid during the years ended December 31, 2024 and 2023 does not meet the 5% disaggregation threshold.
Income and expense from continuing operations are comprised of the following:
Year Ended December 31,
(in thousands)202520242023
Pretax income:
Domestic$105,817$87,050$78,392
Foreign2,076 1,827 1,391 
Total$107,893$88,877$79,783
Year Ended December 31,
(in thousands)202520242023
Income tax expense:
Federal $25,907$21,162$22,580
State4,818 4,527 2,982 
Foreign463 358 585 
Total$31,188$26,047$26,147
There are immaterial foreign net operating loss carryforwards set to expire in 2026. The Company establishes valuation allowances if it is more likely than not that deferred tax assets will not be realized. The Company believes that it will generate sufficient future taxable income to realize the net operating loss deferred tax asset and other net deferred tax assets recorded in our consolidated financial statements. Accordingly, the Company has not recorded a valuation allowance against net deferred tax assets for the years ended December 31, 2025 and 2024.
As of December 31, 2025, the Company has not recorded incremental income taxes for outside basis differences in our investments in foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations.
As of December 31, 2025, 2024, and 2023, $5.7 million, $6.4 million and $7.1 million, respectively, of unrecognized tax benefits would affect our effective tax rate if recognized. The total balance of unrecognized gross tax benefits for the years ended December 31, 2025 and 2024, resulted primarily from research and development credits, foreign derived intangible income differences, inventory basis differences and the release of reserves due to the expiration of statutes of limitation. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
  Year Ended December 31,
  2025 20242023
(in thousands) 
Unrecognized tax benefits at beginning of year $6,376 $7,148 $3,988 
Reductions based on prior year tax positions — — (159)
Additions based on prior year tax provisions 286 159 2,691 
Additions based on current year tax provisions 951 921 996 
Reductions due to tax authorities’ settlements— (98)— 
Reductions due to expirations of statutes of limitation(1,873)(1,754)(368)
Unrecognized tax benefits at end of year $5,740 $6,376 $7,148 
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. For the years ended December 31, 2025 and 2024, interest or penalties related to income tax matters included in the provision for income taxes have not been material.
The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations for tax years prior to 2022.

Historical Timeline

Fiscal YearFiled
2025Mar 4, 2026Showing above
2024Mar 5, 2025
2023Mar 6, 2024
2022Mar 13, 2023
2021Mar 9, 2022

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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