Credo Technology Group Holding Ltd (Nasdaq: CRDO), an innovator in
providing secure, high-speed connectivity solutions that deliver
improved power and cost efficiency as data rates and corresponding
bandwidth requirements increase throughout the data infrastructure
market, today reported financial results for the second quarter of
fiscal year 2024, ended October 28, 2023.
Second Quarter of Fiscal
Year 2024 Financial
Highlights
- Revenue of $44.0 million, grew by 25%
quarter over quarter
- GAAP gross margin of 59.3% and
non-GAAP gross margin of 59.9%
- GAAP operating expenses of $35.0
million and non-GAAP operating expenses of $27.1 million
- GAAP net loss of $6.6 million and
non-GAAP net income of $1.2 million
- GAAP diluted net loss per share of
$0.04 and non-GAAP diluted net income per share of $0.01
- Ending cash, cash equivalents and
short-term investment balance of $240.5 million
Management Commentary
Bill Brennan, Credo’s President and Chief
Executive Officer, stated, “For the second fiscal quarter ended
October 28, 2023, Credo reported revenue of $44.0 million,
representing 25% growth compared to the prior quarter. Going
forward, we expect continued growth and diversity across our family
of connectivity solutions and customer base. We remain enthusiastic
about our business given the market demand for exponentially
increasing bandwidth. This plays directly to Credo’s strengths and
we are one of few companies providing the necessary breadth of
connectivity solutions at these speeds while also optimizing for
energy efficiency and system cost.”
Third Quarter of Fiscal
2024 Financial Outlook
- Revenue is expected to be between
$51.0 million and $53.0 million
- GAAP gross margin is expected to be
between 58.8% and 60.8%, and non-GAAP gross margin is expected to
be between 59.0% and 61.0%
- GAAP operating expenses are expected
to be between $37.0 million and $39.0 million, and non-GAAP
operating expenses are expected to be between $28.0 million and
$30.0 million
Conference Call
Credo will conduct a conference call on
Wednesday, November 29, 2023, at 1:30 p.m. Pacific Time to
discuss its financial results for the second quarter of fiscal year
2024, ended October 28, 2023. Interested parties may join the
conference call by registering online at
https://register.vevent.com/register/BI1fb083d222464429bc4d1f05fbec6058.
After registering, a confirmation will be sent through email,
including dial-in details and a unique conference call code for
entry. It is recommended that participants register and dial in for
the call at least 10 minutes before the start of the call. A live
webcast of the conference call will be available on Credo’s
Investor Relations website at http://investors.credosemi.com. A
replay of the webcast will be available via the web at
http://investors.credosemi.com.
Discussion of Non-GAAP Financial
Measures
This press release contains references to the
non-GAAP financial measures of non-GAAP gross profit, non-GAAP
gross margin, non-GAAP operating expenses, non-GAAP operating
income (loss), non-GAAP operating income (loss) margin, non-GAAP
net income (loss) and non-GAAP diluted net income (loss) per share.
Reconciliations of these non-GAAP measures to their comparable GAAP
measures are included below. This non-GAAP information should not
be construed as an alternative to the reported results determined
in accordance with GAAP. The non-GAAP financial measures that Credo
presents may not be comparable to similarly titled measures of
other companies and other companies may not calculate such measures
in the same manner as we do.
Non-GAAP financial measures exclude the effect
of share-based compensation expenses, asset impairment and related
charges (if applicable), and the related tax effect adjustments to
the provision for income taxes.
Credo uses a full-year non-GAAP tax rate to
compute the non-GAAP tax provision. This full-year non-GAAP tax
rate is based on Credo’s annual GAAP net income (loss), adjusted to
exclude non-GAAP items, as well as the effects of significant
non-recurring and period-specific tax items which vary in size and
frequency. Credo’s non-GAAP tax rate is determined on an annual
basis and may be adjusted during the year to take into account
events that may materially affect the non-GAAP tax rate, such as
tax law changes, significant changes in Credo’s geographic mix of
revenue and expenses or changes to Credo’s corporate structure.
GAAP diluted net income (loss) per share is
calculated using GAAP basic weighted-average shares outstanding
when there is a GAAP net loss, and calculated using GAAP diluted
weighted-average shares outstanding when there is a GAAP net
income. Non-GAAP diluted net income (loss) per share is calculated
using GAAP basic weighted-average shares outstanding when there is
a non-GAAP net loss, and calculated using non-GAAP diluted
weighted-average shares outstanding when there is a non-GAAP net
income. Non-GAAP adjustment for the number of shares used in the
diluted net income (loss) per share calculations excludes the
impact of share-based compensation expenses expected to be incurred
in future periods and not yet recognized in the financial
statements, which would otherwise be assumed to be used to
repurchase shares under the GAAP treasury stock method.
Credo believes that the presentation of non-GAAP
financial measures provides important supplemental information to
management and investors regarding financial and business trends
relating to Credo’s financial condition and results of operations.
While Credo uses non-GAAP financial measures as a tool to enhance
its understanding of certain aspects of its financial performance,
Credo does not consider these measures to be a substitute for, or
superior to, financial measures calculated in accordance with GAAP.
Consistent with this approach, Credo believes that disclosing
non-GAAP financial measures to the readers of its financial
statements provides such readers with useful supplemental data
that, while not a substitute for GAAP financial measures, allows
for greater transparency in the review of its financial and
operational performance.
Externally, management believes that investors
may find Credo’s non-GAAP financial measures useful in their
assessment of Credo's operating performance and the valuation of
Credo. Internally, Credo's non-GAAP financial measures are used in
the following areas:
- Management’s evaluation of Credo’s
operating performance;
- Management’s establishment of internal
operating budgets; and
- Management’s performance comparisons
with internal forecasts and targeted business models.
Non-GAAP financial measures have limitations in
that they do not reflect all of the costs associated with the
operations of Credo’s business as determined in accordance with
GAAP. As a result, you should not consider these measures in
isolation or as a substitute for analysis of Credo’s results as
reported under GAAP. The exclusion of the above items from our GAAP
financial metrics does not necessarily mean that these costs are
unusual or infrequent.
Forward-Looking Statements under the
Private Securities Litigation Reform Act of 1995
This press release contains forward-looking
statements within the meaning of the federal securities laws. All
statements other than statements of historical fact could be deemed
forward-looking statements, including, but not limited to, any
statements regarding: launches of new or expansion of existing
products or services; technology developments and innovation; our
plans, strategies or objectives with respect to future operations;
future financial results; expectations regarding the markets and
industries in which Credo conducts business; and assumptions
underlying any of the foregoing. Words such as “anticipates,”
“expects,” “intends,” “plans,” “projects,” “believes,” “seeks,”
“estimates,” “can,” “may,” “will,” “would,” “outlook,” “forecast,”
“targets” and similar expressions, or their negatives, may identify
such forward-looking statements. These statements are not
guarantees of results and should not be considered as an indication
of future activity or future performance. Forward-looking
statements are predictions, projections and other statements about
future events that are based on current expectations and
assumptions and, as a result, are subject to risks and
uncertainties that may cause actual events or results to differ
materially from those described in this press release. Readers are
encouraged to review risk factors and all other disclosures
appearing in Credo’s Annual Report on Form 10-K as filed with the
Securities and Exchange Commission (SEC) on June 23, 2023, as well
as Credo’s other filings with the SEC, for further information on
risks and uncertainties that could affect Credo’s business,
financial condition and results of operation. Copies of these
filings are available from the SEC, Credo’s website or Credo’s
investor relations department. Forward-looking statements speak
only as of the date they are made. Credo assumes no obligation to
update or revise any forward-looking statements as a result of new
information, future events or otherwise, except as required by law.
Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date
herein.
About Credo
Our mission is to deliver high-speed solutions
to break bandwidth barriers on every wired connection in the data
infrastructure market. Credo is an innovator in providing secure,
high-speed connectivity solutions that deliver improved power and
cost efficiency as data rates and corresponding bandwidth
requirements increase exponentially throughout the data
infrastructure market. Our innovations ease system bandwidth
bottlenecks while simultaneously improving on power, security and
reliability. Our connectivity solutions are optimized for optical
and electrical Ethernet applications, including the 100G (or
Gigabits per second), 200G, 400G, 800G and emerging 1.6T (or
Terabits per second) port markets. Our products are based on our
proprietary Serializer/Deserializer (SerDes) and Digital Signal
Processor (DSP) technologies. Our product families include
integrated circuits (ICs), Active Electrical Cables (AECs) and
SerDes Chiplets. Our intellectual property (IP) solutions consist
primarily of SerDes IP licensing.
Investor Relations Contact:
Dan O’NeilIR@credosemi.com
|
Credo Technology Group Holding Ltd
Condensed Consolidated Statements of Operations
(Unaudited) (In thousands, except per share
amounts) |
|
|
Three Months Ended |
|
Six Months Ended |
|
October 28,2023 |
|
July 29,2023 |
|
October 29,2022 |
|
October 28,2023 |
|
October 29,2022 |
Revenue: |
|
|
|
|
|
|
|
|
|
Product sales |
$ |
34,247 |
|
|
$ |
30,028 |
|
|
$ |
44,349 |
|
|
$ |
64,275 |
|
|
$ |
79,612 |
|
Product engineering services |
|
2,434 |
|
|
|
2,293 |
|
|
|
3,750 |
|
|
|
4,727 |
|
|
|
4,574 |
|
IP license |
|
7,354 |
|
|
|
2,774 |
|
|
|
3,270 |
|
|
|
10,128 |
|
|
|
13,650 |
|
Total revenue |
|
44,035 |
|
|
|
35,095 |
|
|
|
51,369 |
|
|
|
79,130 |
|
|
|
97,836 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
Cost of product sales revenue |
|
17,346 |
|
|
|
13,868 |
|
|
|
22,658 |
|
|
|
31,214 |
|
|
|
40,183 |
|
Cost of product engineering services revenue |
|
171 |
|
|
|
293 |
|
|
|
418 |
|
|
|
464 |
|
|
|
518 |
|
Cost of IP license revenue |
|
401 |
|
|
|
144 |
|
|
|
334 |
|
|
|
545 |
|
|
|
1,513 |
|
Total cost of revenue |
|
17,918 |
|
|
|
14,305 |
|
|
|
23,410 |
|
|
|
32,223 |
|
|
|
42,214 |
|
Gross profit |
|
26,117 |
|
|
|
20,790 |
|
|
|
27,959 |
|
|
|
46,907 |
|
|
|
55,622 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
|
21,736 |
|
|
|
22,638 |
|
|
|
18,158 |
|
|
|
44,374 |
|
|
|
34,841 |
|
Selling, general and administrative |
|
13,256 |
|
|
|
12,543 |
|
|
|
11,540 |
|
|
|
25,799 |
|
|
|
22,738 |
|
Total operating expenses |
|
34,992 |
|
|
|
35,181 |
|
|
|
29,698 |
|
|
|
70,173 |
|
|
|
57,579 |
|
Operating loss |
|
(8,875 |
) |
|
|
(14,391 |
) |
|
|
(1,739 |
) |
|
|
(23,266 |
) |
|
|
(1,957 |
) |
Other income (expense), net |
|
2,702 |
|
|
|
2,157 |
|
|
|
(692 |
) |
|
|
4,859 |
|
|
|
(912 |
) |
Loss before income taxes |
|
(6,173 |
) |
|
|
(12,234 |
) |
|
|
(2,431 |
) |
|
|
(18,407 |
) |
|
|
(2,869 |
) |
Provision (benefit) for income taxes |
|
450 |
|
|
|
(537 |
) |
|
|
929 |
|
|
|
(87 |
) |
|
|
564 |
|
Net loss |
$ |
(6,623 |
) |
|
$ |
(11,697 |
) |
|
$ |
(3,360 |
) |
|
$ |
(18,320 |
) |
|
$ |
(3,433 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.04 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.02 |
) |
Weighted-average shares used
in computing net loss per share: |
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
150,232 |
|
|
|
149,277 |
|
|
|
146,012 |
|
|
|
149,755 |
|
|
|
145,545 |
|
|
Credo Technology Group Holding Ltd
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands) |
|
|
October 28,2023 |
|
April 29,2023 |
Assets |
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
128,986 |
|
|
$ |
108,583 |
|
Short-term investments |
|
111,526 |
|
|
|
109,228 |
|
Accounts receivable |
|
32,723 |
|
|
|
49,541 |
|
Inventories |
|
35,761 |
|
|
|
46,023 |
|
Contract assets |
|
12,042 |
|
|
|
9,445 |
|
Prepaid expenses and other current assets |
|
7,278 |
|
|
|
5,412 |
|
Total current assets |
|
328,316 |
|
|
|
328,232 |
|
Property and equipment, net |
|
44,971 |
|
|
|
40,222 |
|
Right of use assets |
|
13,544 |
|
|
|
14,860 |
|
Other non-current assets |
|
18,974 |
|
|
|
13,975 |
|
Total assets |
$ |
405,805 |
|
|
$ |
397,289 |
|
Liabilities and Shareholders' Equity |
Current liabilities: |
|
|
|
Accounts payable |
$ |
10,926 |
|
|
$ |
6,067 |
|
Accrued compensation and benefits |
|
4,898 |
|
|
|
6,471 |
|
Accrued expenses and other current liabilities |
|
16,579 |
|
|
|
14,454 |
|
Deferred revenue |
|
4,832 |
|
|
|
4,040 |
|
Total current liabilities |
|
37,235 |
|
|
|
31,032 |
|
Non-current operating lease liabilities |
|
11,610 |
|
|
|
12,869 |
|
Other non-current liabilities |
|
7,412 |
|
|
|
5,753 |
|
Total liabilities |
|
56,257 |
|
|
|
49,654 |
|
Shareholders' equity: |
|
|
|
Ordinary shares |
|
8 |
|
|
|
7 |
|
Additional paid in capital |
|
475,412 |
|
|
|
454,795 |
|
Accumulated other comprehensive loss |
|
(576 |
) |
|
|
(191 |
) |
Accumulated deficit |
|
(125,296 |
) |
|
|
(106,976 |
) |
Total shareholders' equity |
|
349,548 |
|
|
|
347,635 |
|
Total liabilities and shareholders' equity |
$ |
405,805 |
|
|
$ |
397,289 |
|
|
Credo Technology Group Holding Ltd
Reconciliations from GAAP to Non-GAAP (Unaudited)
(In thousands, except percentages and per share
amounts) |
|
|
Three Months Ended |
|
Six Months Ended |
|
October 28,2023 |
|
July 29,2023 |
|
October 29,2022 |
|
October 28,2023 |
|
October 29,2022 |
GAAP gross profit |
$ |
26,117 |
|
|
$ |
20,790 |
|
|
$ |
27,959 |
|
|
$ |
46,907 |
|
|
$ |
55,622 |
|
Reconciling item: |
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
250 |
|
|
|
189 |
|
|
|
149 |
|
|
|
439 |
|
|
|
453 |
|
Total reconciling item: |
|
250 |
|
|
|
189 |
|
|
|
149 |
|
|
|
439 |
|
|
|
453 |
|
Non-GAAP gross profit (A) |
$ |
26,367 |
|
|
$ |
20,979 |
|
|
$ |
28,108 |
|
|
$ |
47,346 |
|
|
$ |
56,075 |
|
|
|
|
|
|
|
|
|
|
|
GAAP gross margin |
|
59.3 |
% |
|
|
59.2 |
% |
|
|
54.4 |
% |
|
|
59.3 |
% |
|
|
56.9 |
% |
Non-GAAP gross margin |
|
59.9 |
% |
|
|
59.8 |
% |
|
|
54.7 |
% |
|
|
59.8 |
% |
|
|
57.3 |
% |
|
|
|
|
|
|
|
|
|
|
Total GAAP operating
expenses |
$ |
34,992 |
|
|
$ |
35,181 |
|
|
$ |
29,698 |
|
|
$ |
70,173 |
|
|
$ |
57,579 |
|
Reconciling item: |
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
(7,894 |
) |
|
|
(7,779 |
) |
|
|
(4,742 |
) |
|
|
(15,673 |
) |
|
|
(9,984 |
) |
Total reconciling item: |
|
(7,894 |
) |
|
|
(7,779 |
) |
|
|
(4,742 |
) |
|
|
(15,673 |
) |
|
|
(9,984 |
) |
Total Non-GAAP operating
expenses (B) |
$ |
27,098 |
|
|
$ |
27,402 |
|
|
$ |
24,956 |
|
|
$ |
54,500 |
|
|
$ |
47,595 |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating loss |
$ |
(8,875 |
) |
|
$ |
(14,391 |
) |
|
$ |
(1,739 |
) |
|
$ |
(23,266 |
) |
|
$ |
(1,957 |
) |
Non-GAAP operating income
(loss) (A-B) |
$ |
(731 |
) |
|
$ |
(6,423 |
) |
|
$ |
3,152 |
|
|
$ |
(7,154 |
) |
|
$ |
8,480 |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating loss
margin |
(20.2 |
)% |
|
(41.0 |
)% |
|
(3.4 |
)% |
|
(29.4 |
)% |
|
(2.0 |
)% |
Non-GAAP operating income
(loss) margin |
(1.7 |
)% |
|
(18.3 |
)% |
|
|
6.1 |
% |
|
(9.0 |
)% |
|
|
8.7 |
% |
|
|
|
|
|
|
|
|
|
|
GAAP net loss |
$ |
(6,623 |
) |
|
$ |
(11,697 |
) |
|
$ |
(3,360 |
) |
|
$ |
(18,320 |
) |
|
$ |
(3,433 |
) |
Reconciling items: |
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
8,144 |
|
|
|
7,968 |
|
|
|
4,891 |
|
|
|
16,112 |
|
|
|
10,437 |
|
Pre-tax total reconciling
item |
|
8,144 |
|
|
|
7,968 |
|
|
|
4,891 |
|
|
|
16,112 |
|
|
|
10,437 |
|
Other income tax effects and adjustments |
|
(358 |
) |
|
|
(992 |
) |
|
|
644 |
|
|
|
(1,350 |
) |
|
|
220 |
|
Non-GAAP net income
(loss) |
$ |
1,163 |
|
|
$ |
(4,721 |
) |
|
$ |
2,175 |
|
|
$ |
(3,558 |
) |
|
$ |
7,224 |
|
|
|
|
|
|
|
|
|
|
|
GAAP weighted-average shares -
basic |
|
150,232 |
|
|
|
149,277 |
|
|
|
146,012 |
|
|
|
149,755 |
|
|
|
145,545 |
|
GAAP weighted-average shares -
diluted |
|
150,232 |
|
|
|
149,277 |
|
|
|
146,012 |
|
|
|
149,755 |
|
|
|
145,545 |
|
Non-GAAP adjustment |
|
14,664 |
|
|
|
— |
|
|
|
12,789 |
|
|
|
— |
|
|
|
13,073 |
|
Non-GAAP weighted-average
shares - diluted |
|
164,896 |
|
|
|
149,277 |
|
|
|
158,801 |
|
|
|
149,755 |
|
|
|
158,671 |
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted net income (loss)
per share |
$ |
(0.04 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.02 |
) |
Non-GAAP diluted net income
(loss) per share |
$ |
0.01 |
|
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
$ |
0.05 |
|
|
Credo Technology Group Holding Ltd
Reconciliation of GAAP Forward-Looking
Estimates to Non-GAAP Forward-Looking Estimates(In
millions, except percentages) |
|
|
Outlook for Three Months EndedJanuary 27,
2024 |
|
Low |
|
High |
|
|
|
|
GAAP gross margin |
|
58.8 |
% |
|
|
60.8 |
% |
Reconciling item: |
|
|
|
Share-based compensation |
|
0.2 |
% |
|
|
0.2 |
% |
Total reconciling item: |
|
0.2 |
% |
|
|
0.2 |
% |
Non-GAAP gross margin |
|
59.0 |
% |
|
|
61.0 |
% |
|
|
|
|
|
|
|
|
Total GAAP operating
expenses |
$ |
37.0 |
|
|
$ |
39.0 |
|
Reconciling item: |
|
|
|
Share-based compensation |
|
9.0 |
|
|
|
9.0 |
|
Total reconciling item: |
|
9.0 |
|
|
|
9.0 |
|
Total Non-GAAP operating
expenses |
$ |
28.0 |
|
|
$ |
30.0 |
|
Credo Technology (NASDAQ:CRDO)
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