Cricut Inc.

11/05/2025 | Press release | Distributed by Public on 11/05/2025 05:04

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our interim condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed, or incorporated by reference, in the sections titled "Risk Factors" and "Note Regarding Forward-Looking Statements."
Overview of Our Business and History
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 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 for a wide range of uses and are available at a variety of price points (MSRP by machine family as of September 30, 2025):
•Cricut Joy family $179.00 - $199.00 MSRP
•Cricut Explore family $249.00 - $319.00 MSRP
•Cricut Maker family $399.00 - $429.00 MSRP
•Cricut Venture $999.00 MSRP
Our platform integrates our design apps and connected machines, allowing our users to create and share seamlessly. Our software is cloud-based, meaning that users can access and work on their projects anywhere, at any time, across desktops or mobile devices. We enable our users to be inspired, to create and share projects with the Cricut community and to follow others doing the same. On our platform, users can find inspiration, purchase or upload content like fonts and images, design a project from scratch or find a vast array of ready-to-make projects. Users can leverage the full power of our platform by using our connected machines together with our free design apps, in-app purchases and subscription offerings to design and complete projects. All users can access a select number of free images, fonts and projects from our design apps or upload their own. In addition, we offer a wider selection of images, fonts and projects for purchase à la carte, including licensed content from partners with well-known brands and characters, like major motion picture studios. We also have two subscription offerings:
•Cricut Access: Provides 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. Cricut Access is billed monthly for $9.99 per month or annually for $95.88 per year.
•Cricut Access Premium: Includes all of the benefits of Cricut Access as well as additional discounts and preferred shipping and is billed annually for $119.88 per year.
As of September 30, 2025, we had over 3.0 million Paid Subscribers to Cricut Access and Cricut Access Premium.
We sell a broad range of accessories and materials that bring our users' designs to life, from advanced tools like heat presses to Cricut-branded rulers, scoring tools, pens, paper and iron-on vinyl, all designed to work seamlessly with our connected machines. Designing and completing projects drives repeat purchases of Cricut-branded accessories and materials.
We design and develop our software and hardware products, and we work with third-party contract manufacturers to source components and finished goods and with third-party logistics companies to warehouse and distribute our products.
We sell our connected machines and accessories and materials through our brick-and-mortar and online retail partners, as well as through our website at cricut.com. Our partners include Amazon, Hobby Lobby, HSN, Michaels, Target, Walmart and many others. We also sell our products and subscriptions to Cricut Access and Cricut Access Premium on cricut.com.
Historically, we have experienced the highest revenue levels in the fourth quarter of the year, coinciding with the holiday shopping season in the United States. For example, in 2022, 2023 and 2024, our fourth quarter represented 32%, 30% and 29% of total revenue for the year, respectively. Our promotional discounting activity is higher in the fourth quarter as well, which negatively impacts gross margin during this period. For example, gross margin in the fourth quarter of 2024 was 45%, compared to gross margin of 50% for all of 2024. Additionally, sales of accessories and materials typically rise and fall with seasonal holiday crafting periods. As we continue to grow internationally, we expect we may experience seasonality in additional markets, which may differ from the seasonality experienced in the United States. The current global macroeconomic environment, including regulatory and economic uncertainty, adverse impacts from factors such as trade wars, heightened, scheduled or threatened tariffs, or by retaliatory trade measures taken by China or other countries, may impact our business and international expansion.
For more information regarding our business model, factors affecting our performance, and seasonality, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report, which is incorporated herein by reference.
Key Business Metrics
In addition to the measures presented in our interim condensed consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, identify trends and make strategic decisions.
As of September 30,
2025 2024
Active Users (in thousands) 5,874 5,894
90-Day Engaged Users (in thousands) 3,419 3,532
Paid Subscribers (in thousands) 3,004 2,838
As of September 30,
2025 2024
Platform ARPU $ 54.96 $ 52.86
Active Users
We define Active Users as registered users of at least one registered connected machine who have utilized their connected machine to create a project in the last 365 days. One user may own multiple registered connected machines but is only counted once if that user registers those connected machines by using the same email address. If possession of a connected machine is transferred to a new owner and registered by that new owner, the new owner is added to the total Active Users and the prior owner is removed from the total Active Users if the prior owner does not own any other registered connected machines. Active Users is a key indicator of the health of our business, because changes in the number of Active Users excludes non-users to better represent opportunities for us to drive additional platform and accessories and materials revenue.
90-Day Engaged Users
We define 90-Day Engaged Users as registered users of at least one registered connected machine who have utilized their connected machine to create a project in the last 90 days. One user may own multiple registered connected machines but is only counted once if that user registers those connected machines by using the same email address. If possession of a connected machine is transferred to a new owner and registered by that new owner, the new owner is added to the total 90-Day Engaged Users and the prior owner is removed from the total 90-Day Engaged Users if the prior owner does not own any other registered connected machines. 90-Day Engaged Users excludes non-users to better represent opportunities for us to drive additional platform and accessories and materials revenue.
Paid Subscribers
We define Paid Subscribers as the number of users with a subscription to Cricut Access or Cricut Access Premium, excluding cancelled, unpaid 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.
Platform ARPU
We define Platform ARPU as Platform revenue in a 12-month period divided by Active Users. Platform ARPU allows us to forecast Platform revenue over time and is an indicator of our ability to expand with users and of user engagement with our subscription offerings.
Components of our Results of Operations
We operate and manage our business in two reportable segments: Platform and Products. We identify our reportable segments based on the information used by management to monitor performance and make operating
decisions. See Note 15 to our unaudited consolidated financial statements included elsewhere in this filing for additional information regarding our reportable segments.
Revenue
Platform
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, images 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.
Products
We generate Products revenue from sales of connected machines and ancillary products, net of sales discounts, rebates 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 4; Cricut Explore, which includes Explore Air 2, Explore 3, and Explore 4; 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 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.
Cost of Revenue
Platform
Cost of revenue related to Platform consists primarily of hosting fees, digital content costs, amortization of capitalized software development costs, software maintenance costs, and royalties. We expect our cost of revenue related to Platform as a percentage of revenue to fluctuate in the near term as we expand our content offerings, including localized content for international target markets, and decrease over time as we drive greater scale and efficiency in our business.
Products
Cost of revenue related to Products consists of product costs, including costs of components, cost of contract manufacturers for production, inspecting and packaging, shipping, receiving, handling, warehousing and fulfillment, duties and other applicable importing costs, warranty replacement, excess and obsolete inventory write-downs, tooling and equipment depreciation and royalties. We expect our cost of revenue related to Products as a percentage of revenue to fluctuate in the near term as we continue selling through end of life machines, address global supply chain challenges and continue to invest in the growth of our business and to decrease over the long term as we drive greater scale and efficiency in our business.
Operating Expenses
Research and Development
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.
Sales and Marketing
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.
General and Administrative
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.
Other Income, Net
Other income, net consists primarily of interest income from our investments in marketable securities and cash and cash equivalents, offset by interest expense associated with our debt financing arrangements and amortization of debt issuance costs.
Provision for Income Taxes
Provision for income taxes consists of income taxes in the United States and certain state and foreign jurisdictions in which we conduct business. We have not recorded a valuation allowance against our deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will be realized.
Results of Operations
The following tables set forth the components of our interim condensed consolidated statements of operations for each of the periods presented and as a percentage of our revenue for those periods. The period-to-period comparison of results of operations is not necessarily indicative of results of future periods.
The following table is presented in thousands:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(in thousands)
Revenue:
Platform $ 82,783 $ 77,674 $ 243,466 $ 233,609
Products 87,654 90,216 261,717 269,620
Total revenue 170,437 167,890 505,183 503,229
Cost of revenue:
Platform(1)
8,957 10,000 26,441 27,647
Products(1)
67,384 80,527 184,759 216,785
Total cost of revenue 76,341 90,527 211,200 244,432
Gross profit 94,096 77,363 293,983 258,797
Operating expenses:
Research and development(1)
16,865 15,240 49,284 44,408
Sales and marketing(1)
37,467 35,278 110,029 101,662
General and administrative(1)
17,113 16,249 52,573 50,494
Total operating expenses 71,445 66,767 211,886 196,564
Income from operations 22,651 10,596 82,097 62,233
Other income, net 2,980 3,566 9,998 10,011
Income before provision for income taxes 25,631 14,162 92,095 72,244
Provision for income taxes 5,119 2,674 23,181 21,340
Net income $ 20,512 $ 11,488 $ 68,914 $ 50,904
(1) Includes stock-based compensation expense as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(in thousands)
Cost of revenue
Platform $ 246 $ 341 $ 786 $ 833
Products 11 170 26 566
Total cost of revenue 257 511 812 1,399
Research and development 2,636 4,266 9,432 11,519
Sales and marketing 2,149 3,474 8,000 9,398
General and administrative 2,342 3,628 9,278 10,939
Total stock-based compensation expense $ 7,384 $ 11,879 $ 27,522 $ 33,255
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024
Revenue
Three Months Ended September 30, Change Nine Months Ended September 30, Change
2025 2024 $ % 2025 2024 $ %
(dollars in thousands)
Revenue:
Platform $ 82,783 $ 77,674 $ 5,109 7 % $ 243,466 $ 233,609 $ 9,857 4 %
Products 87,654 90,216 (2,562) (3) % 261,717 269,620 (7,903) (3) %
Total revenue $ 170,437 $ 167,890 $ 2,547 2 % $ 505,183 $ 503,229 $ 1,954 - %
Three Months Ended September 30, 2025 and 2024
Platform revenue increased by $5.1 million, or 7%, to $82.8 million for the three months ended September 30, 2025, from $77.7 million for the three months ended September 30, 2024. The increase was driven by an increase in paid subscribers from 2.8 million as of September 30, 2024 to 3.0 million as of September 30, 2025.
Products revenue decreased by $2.6 million, or 3%, to $87.7 million for the three months ended September 30, 2025 from $90.2 million for the three months ended September 30, 2024. The decrease was primarily driven by fewer units of accessories and materials sold and at a lower average selling price, partially offset by more units of connected machines sold and at a higher average selling price.
Nine Months Ended September 30, 2025 and 2024
Platform revenue increased by $9.9 million, or 4%, to $243.5 million for the nine months ended September 30, 2025, from $233.6 million for the nine months ended September 30, 2024. The increase was driven by an increase in paid subscribers from 2.8 million as of September 30, 2024 to 3.0 million as of September 30, 2025.
Products revenue decreased by $7.9 million, or 3%, to $261.7 million for the nine months ended September 30, 2025 from $269.6 million for the nine months ended September 30, 2024. The decrease was primarily driven by fewer units of accessories and materials sold and at a lower average selling price, partially offset by more units of connected machines sold and at a higher average selling price.
Cost of Revenue, Gross Profit and Gross Margin
Three Months Ended
September 30, 		Change Nine Months Ended September 30, Change
2025 2024 $ % 2025 2024 $ %
(dollars in thousands)
Cost of Revenue:
Platform $ 8,957 $ 10,000 $ (1,043) (10) % $ 26,441 $ 27,647 $ (1,206) (4) %
Products 67,384 80,527 (13,143) (16) % 184,759 216,785 (32,026) (15) %
Total cost revenue $ 76,341 $ 90,527 $ (14,186) (16) % $ 211,200 $ 244,432 $ (33,232) (14) %
Gross Profit:
Platform 73,826 67,674 6,152 9 % 217,025 205,962 11,063 5 %
Products 20,270 9,689 10,581 109 % 76,958 52,835 24,123 46 %
Total gross profit $ 94,096 $ 77,363 $ 16,733 22 % $ 293,983 $ 258,797 $ 35,186 14 %
Gross Margin
Platform 89 % 87 % 89 % 88 %
Products 23 % 11 % 29 % 20 %
Three Months Ended September 30, 2025 and 2024
Platform cost of revenue decreased by $1.0 million, or 10%, to $9.0 million for the three months ended September 30, 2025, from $10.0 million for the three months ended September 30, 2024. The decrease was primarily driven by decreases in external digital content costs and amortization of capitalized software development costs.
Gross margin for Platform was 89% for the three months ended September 30, 2025, and 87% for the three months ended September 30, 2024. The increase was primarily driven by decreases in external digital content costs and amortization of capitalized software development costs.
Products cost of revenue decreased by $13.1 million, or 16%, to $67.4 million for the three months ended September 30, 2025, from $80.5 million for the three months ended September 30, 2024. The decrease was primarily driven by a reduction in net inventory impairment charges and lower inventory procurement costs.
Gross margin for Products was 23% for the three months ended September 30, 2025 and 11% for the three months ended September 30, 2024.The increase was primarily driven by a reduction in net inventory impairment charges and lower inventory procurement costs.
Nine Months Ended September 30, 2025 and 2024
Platform cost of revenue decreased by $1.2 million, or 4%, to $26.4 million for the nine months ended September 30, 2025, from $27.6 million for the nine months ended September 30, 2024. The decrease was primarily driven by lower amortization of capitalized software development costs.
Gross margin for Platform was 89% for the nine months ended September 30, 2025, and 88% for the nine months ended September 30, 2024. The increase was primarily driven by decreases in amortization of capitalized software development costs.
Products cost of revenue decreased by $32.0 million, or 15%, to $184.8 million for the nine months ended September 30, 2025, from $216.8 million for the nine months ended September 30, 2024. The decrease was primarily driven by a reduction in net inventory impairment charges and lower inventory procurement costs.
Gross margin for Products was 29% for the nine months ended September 30, 2025 and 20% for the nine months ended September 30, 2024. The increase was primarily driven by a reduction in net inventory impairment charges and lower inventory procurement costs.
Operating Expenses
Research and Development
Three Months Ended
September 30, 		Change Nine Months Ended September 30, Change
2025 2024 $ % 2025 2024 $ %
(dollars in thousands)
Research and development $ 16,865 $ 15,240 $ 1,625 11 % $ 49,284 $ 44,408 $ 4,876 11 %
As a percentage of total revenue 10 % 9 % 10 % 9 %
Research and development expenses increased by $1.6 million, or 11%, to $16.9 million for the three months ended September 30, 2025 from $15.2 million for the three months ended September 30, 2024. The increase was primarily due to a $1.3 million increase in product development expense and a $0.2 million increase in personnel-related expense.
Research and development expenses increased by $4.9 million, or 11%, to $49.3 million for the nine months ended September 30, 2025 from $44.4 million for the nine months ended September 30, 2024. The increase was primarily due to a $3.2 million increase in product development expense and a $1.5 million increase in professional services expense.
Sales and Marketing
Three Months Ended
September 30, 		Change Nine Months Ended September 30, Change
2025 2024 $ % 2025 2024 $ %
(dollars in thousands)
Sales and marketing $ 37,467 $ 35,278 $ 2,189 6 % $ 110,029 $ 101,662 $ 8,367 8 %
As a percentage of total revenue 22 % 21 % 22 % 20 %
Sales and marketing expenses increased by $2.2 million, or 6%, to $37.5 million for the three months ended September 30, 2025 from $35.3 million for the three months ended September 30, 2024. The increase was primarily driven by a $1.1 million increase in advertising and other marketing costs, a $0.7 million increase in software subscriptions, and a $0.4 million increase in payment processing fees.
Sales and marketing expenses increased by $8.4 million, or 8%, to $110.0 million for the nine months ended September 30, 2025 from $101.7 million for the nine months ended September 30, 2024. The increase was primarily driven by a $7.8 million increase in advertising and other marketing costs and a $1.1 million increase in payment processing fees, offset by a $0.8 million decrease in personnel-related expense.
General and Administrative
Three Months Ended
September 30, 		Change Nine Months Ended September 30, Change
2025 2024 $ % 2025 2024 $ %
(dollars in thousands)
General and administrative $ 17,113 $ 16,249 $ 864 5 % $ 52,573 $ 50,494 $ 2,079 4 %
As a percentage of total revenue 10 % 10 % 10 % 10 %
General and administrative expenses increased by $0.9 million, or 5%, to $17.1 million for the three months ended September 30, 2025 from $16.2 million for the three months ended September 30, 2024. The increase was primarily driven by a $0.6 million increase in professional services expense and a $0.5 million increase in foreign currency transaction losses.
General and administrative expenses increased by $2.1 million, or 4%, to $52.6 million for the nine months ended September 30, 2025 from $50.5 million for the nine months ended September 30, 2024. The increase was primarily driven by a $3.8 million increase in professional services expense, partially offset by a $1.3 million net reversal of bad debt.
Other Income, Net
Three Months Ended
September 30, 		Change Nine Months Ended September 30, Change
2025 2024 $ % 2025 2024 $ %
(dollars in thousands)
Other income, net $ 2,980 $ 3,566 $ (586) (16) % $ 9,998 $ 10,011 $ (13) 0 %
Other income, net decreased by $0.6 million or 16% to $3.0 million for the three months ended September 30, 2025 from $3.6 million for the three months ended September 30, 2024. The decrease was primarily driven by a decrease in interest income.
Other income, net decreased slightly for the nine months ended September 30, 2025.
Provision for Income Taxes
Three Months Ended
September 30, 		Change Nine Months Ended September 30, Change
2025 2024 $ % 2025 2024 $ %
(dollars in thousands)
Provision for income taxes $ 5,119 $ 2,674 $ 2,445 91 % $ 23,181 $ 21,340 $ 1,841 9 %
Provision for income taxes increased by $2.4 million, or 91%, to $5.1 million for the three months ended September 30, 2025 from $2.7 million for the three months ended September 30, 2024. The increase was primarily due to an increase to pre-tax book income of $11.5 million.
Provision for income taxes increased by $1.8 million, or 9%, to $23.2 million for the nine months ended September 30, 2025 from $21.3 million for the nine months ended September 30, 2024. The increase was primarily due to a decrease in stock based compensation differences attributable to the decrease in stock price upon vesting versus the stock price at the grant date offset by an increase to pre-tax book income of $19.9 million.
Liquidity and Capital Resources
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 $187.9 million and $19.2 million, respectively, as of September 30, 2025, 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 nine months ended September 30, 2025, we paid dividends of $202.1 million to holders of Class A and Class B common stock.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other growth initiatives, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our products and overall economic conditions, including the impact of regulatory and economic uncertainty, as well as heightened, new, or proposed tariffs. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.
Cash Flows
Nine Months Ended September 30,
2025 2024
(in thousands)
Net cash flows provided by operating activities
$ 117,798 $ 161,885
Net cash flows provided by (used in) investing activities 67,891 (14,436)
Net cash flows used in financing activities
(230,483) (147,402)
Operating Activities
The change in net cash flows from operating activities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 is due to a net decrease in operating assets and liabilities of $34.2 million in 2025 compared to $65.5 million in 2024, in addition to a reduction in non-cash adjustments of $14.7 million in 2025 compared to $45.5 million in 2024 due primarily to a reduction of the provision for inventory
obsolescence, a decrease in stock-based compensation and a decrease in depreciation and amortization. These were partially offset by an increase in net income.
Investing Activities
The change in net cash flows from investing activities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was due primarily to proceeds from maturities of marketable securities in 2025 not used to purchase new securities.
Financing Activities
The change in net cash flows from financing activities for the nine months ended September 30, 2025 compared to nine months ended September 30, 2024 was primarily due to dividend payments of $202.1 million in 2025 compared to $109.8 million in 2024.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements include those described in Note 2 of the notes to our condensed consolidated financial statements in the section titled "Summary of Significant Accounting Policies" in Part I, Item 1 of this Quarterly Report on Form 10-Q and in our Annual Report.
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