SAN JOSE, Calif.--(BUSINESS WIRE)--Credo Technology Group Holding Ltd (“Credo”) (Nasdaq: CRDO), an innovator in providing secure, high-speed connectivity solutions that deliver improved power efficiency as data rates and corresponding bandwidth requirements increase throughout the data infrastructure market, will be exhibiting in booth 316 at the Chiplet Summit Conference and Exhibition taking place February 6-8, at the Santa Clara Convention Center. The summit is an excellent platform for Credo representa ...

Credo Technology Group Holding Ltd. (CRDO) shares ended the last trading session 8.3% higher at $20.78. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 1.6% loss over the past four weeks.The surge in price can be attributed to the company's projected growth in revenues and gross margin, as outlined in its guidance. Additionally, the company's actual performance, aligning with its projections, serves as another fact ...

Company Participants Bill Brennan - CEO Conference Call Participants Thomas O'Malley - Barclays Karl Ackerman - BNP Paribas. Suji Desilva - ROTH MKM Quinn Bolton - Needham and Company Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Good afternoon and thank you all for joining us on our fiscal 2024 second quarter earnings call. Today I am joined by Credo's Chief Executive O ...

Cash and Cash Equivalents - Cash and cash equivalents increased to $128,986 thousand as of October 28, 2023, compared to $108,583 thousand as of April 29, 2023[28] - As of October 28, 2023, the company had $129.0 million in cash and cash equivalents, an increase from $108.6 million as of April 29, 2023[71] - Cash and cash equivalents at the end of the period were $128.99 million, down from $190.54 million at the end of the same period in 2022[36] Accounts Receivable - Accounts receivable decreased to $32,723 thousand as of October 28, 2023, from $49,541 thousand as of April 29, 2023[28] - Accounts receivable for Customer A decreased from 54% to 44% from April 29, 2023, to October 28, 2023, while Customer B and Customer C accounted for less than 10% of total accounts receivable[105][106] - Net cash provided by operating activities was $29.6 million for the six months ended October 28, 2023, driven by a $16.8 million decrease in accounts receivable and a $9.6 million decrease in inventory[74] Inventories - Inventories decreased to $35,761 thousand as of October 28, 2023, from $46,023 thousand as of April 29, 2023[28] - Inventory levels decreased from $46.023 million on April 29, 2023, to $35.761 million on October 28, 2023, with finished goods inventory dropping from $21.367 million to $12.605 million[116] Net Loss and Comprehensive Loss - Net loss for the three months ended October 28, 2023, was $6,623 thousand, compared to a net loss of $3,360 thousand for the same period in 2022[31] - Total comprehensive loss for the six months ended October 28, 2023, was $18,705 thousand, compared to $3,849 thousand for the same period in 2022[31] - Net loss for the six months ended October 28, 2023 was $18.32 million, compared to a net loss of $3.43 million for the same period in 2022[50] - Net loss of $6.6 million and $18.3 million for the three and six months ended October 28, 2023, respectively[190] Revenue - Total revenue for the six months ended October 28, 2023 was $79.13 million, a decrease from $97.84 million in the same period in 2022[50] - Product sales revenue for the six months ended October 28, 2023 was $64.28 million, down from $79.61 million in the same period in 2022[50] - IP license revenue for the six months ended October 28, 2023 was $10.13 million, compared to $13.65 million in the same period in 2022[50] - Revenue for the six months ended October 28, 2023, was $79.13 million, a decrease from $97.84 million in the same period in 2022[176] - Product sales for the six months ended October 28, 2023, were $64.275 million, down from $79.612 million in the same period in 2022[176] - IP license revenue for the six months ended October 28, 2023, was $10.128 million, compared to $13.65 million in the same period in 2022[176] - Generated $44.0 million and $79.1 million in total revenue for the three and six months ended October 28, 2023, respectively[190] - Product sales and product engineering services revenue comprised 83.3% and 87.2% of total revenue for the three and six months ended October 28, 2023, respectively[190] Research and Development Expenses - Research and development expenses increased to $44.37 million for the six months ended October 28, 2023, up from $34.84 million in the same period in 2022[50] - Research and development expenses for the three months ended October 28, 2023, were $4,664 thousand, up from $2,756 thousand in the prior year[163] - Research and development expense increased by $9.5 million for the six months ended October 28, 2023, compared to the same period in fiscal year 2023[208] Operating Activities and Cash Flow - Net cash provided by operating activities was $29.62 million for the six months ended October 28, 2023, compared to net cash used in operating activities of $10.46 million in the same period in 2022[36] - Net cash provided by operating activities was $29.6 million for the six months ended October 28, 2023, driven by a $16.8 million decrease in accounts receivable and a $9.6 million decrease in inventory[74] - The company's cash inflows from operating activities were partially offset by an $18.3 million net loss for the six months ended October 28, 2023[74] Total Assets and Liabilities - Total assets increased to $405,805 thousand as of October 28, 2023, from $397,289 thousand as of April 29, 2023[28] - Total liabilities increased to $56,257 thousand as of October 28, 2023, from $49,654 thousand as of April 29, 2023[28] - Shareholders' equity increased to $349,548 thousand as of October 28, 2023, from $347,635 thousand as of April 29, 2023[34] - Non-current liabilities increased to $7,412 thousand as of October 28, 2023, from $5,753 thousand as of April 29, 2023[152] Foreign Currency and Share-Based Compensation - Foreign currency translation loss for the three months ended October 28, 2023, was $223 thousand, compared to $320 thousand for the same period in 2022[31] - Share-based compensation expense for the three months ended October 28, 2023, was $8,144 thousand[34] Product and Market Focus - The company's products are optimized for optical and electrical Ethernet applications, including the 100G, 200G, 400G, 800G, and emerging 1.6T port markets[58] - The company's SerDes technology has scaled from 25Gbps/lane to 100Gbps/lane since its founding in 2008[168] - In 2021, the company launched new AEC solutions targeting ToR-to-NIC connections, enabling dual-ToR server racks to switch data traffic seamlessly[169] - Released 112G/lane AEC products including 400G, 800G, and 1.6T varieties in 2022, expanding AEC engagement to a second major hyperscaler[189] Revenue Recognition and IP Licensing - The company's IP license revenue consists of perpetual licenses, support and maintenance, engineering services, and royalties[44] - The company recognizes revenue upon transfer of control of promised goods and services, with transaction price allocated to multiple performance obligations on a relative standalone selling price basis[64] - IP license revenue is recognized at the point of IP delivery, with customer support revenue deferred and recognized ratably over the support period, typically one year[70] Customer Concentration and Revenue Distribution - The company's revenue is highly concentrated, with a significant portion derived from a limited number of customers[171] - Customer E accounted for 15% of revenue for the three and six months ended October 28, 2023[191] - Customer X accounted for 29% and 34% of revenue for the three and six months ended October 28, 2023, respectively[191] - Revenue concentration for Customer A decreased from 44% in October 2022 to 29% in October 2023, while Customer E's share remained stable at 15%[122] Gross Margin and Cost of Revenue - Gross margin for the six months ended October 28, 2023, was 59.3%, compared to 56.9% in the same period in 2022[176] - Gross margin increased to 59.3% for the six months ended October 28, 2023, compared to 56.9% in the same period in fiscal year 2023[206] - The company's cost of revenue for the three months ended October 28, 2023, was $250 thousand, compared to $149 thousand for the same period in the prior year[163] Selling, General, and Administrative Expenses - Selling, general, and administrative expenses for the three months ended October 28, 2023, were $3,230 thousand, compared to $1,986 thousand in the prior year[163] - Selling, general and administrative expense increased by $1.7 million for the three months ended October 28, 2023, compared to the same period in fiscal year 2023[209] Deferred Revenue and Contract Assets - Deferred revenue increased by $0.7 million during the six months ended October 28, 2023, due to billing milestones being met prior to revenue recognition[109] - Contract assets increased by $2.6 million during the six months ended October 28, 2023, driven by IP licensing and product engineering services arrangements[125] Future Commitments and Obligations - Total future non-cancelable purchase obligations as of October 28, 2023, are $32,691 thousand for manufacturing commitments and $11,399 thousand for technology license fees[153] - The company has purchase level commitments of at least $25.3 million for the remainder of fiscal year 2024 through fiscal year 2028 under a manufacturing supply capacity reservation agreement[154] - Total refundable deposits paid under the capacity reservation agreement amounted to $8.8 million as of October 28, 2023[154] Interest Income and Depreciation - Interest income recognized for the six months ended October 28, 2023, was $5.5 million, compared to $2.9 million for the three months ended the same date[114] - Depreciation and amortization expense for the six months ended October 28, 2023, was $6.6 million, up from $4.3 million for the same period in 2022[117] Effective Tax Rate - The company's effective tax rate for the three months ended October 28, 2023, differed from the prior year due to excluding zero-rate jurisdictions and a decrease in tax benefits from share-based compensation[148] - The company's effective tax rate for the six months ended October 28, 2023, was 0%, compared to -20% in the same period in 2022[183] Property and Equipment - Total property and equipment as of October 28, 2023, amounted to $44,971 thousand, compared to $40,222 thousand as of April 29, 2023[150] Working Capital - The company's working capital was $291.1 million as of October 28, 2023, slightly down from $297.2 million as of April 29, 2023[71] Share Issuance and ESPP - The company issued 204,761 shares under the ESPP during the six months ended October 28, 2023, compared to 154,053 shares in the prior year[162] Customer Warrant - As of October 28, 2023, 80,000 shares issuable upon exercise of the Customer Warrant were vested, with the remaining shares vesting based on global payments up to $201 million[110] Geographic Revenue Distribution - Total revenue for Mainland China decreased from $31.423 million in October 2022 to $5.425 million in October 2023, while the United States saw an increase from $6.422 million to $7.837 million over the same period[107] Risk Factors - The company's cash deposits exceed insured limits, and short-term investments are subject to counterparty risk[104] Future Revenue Expectations - The company expects to generate an increased proportion of revenue from product sales over time, leveraging improvements in operating leverage as the business scales[174] Decrease in Product Sales Revenue - Decrease in product sales revenue for the three and six months ended October 28, 2023, primarily due to reduced demand for AEC cables from a major customer[201]

FORM 10-Q (408) 664-9329 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth Large accelerated filer Non-accelerated filer Indicate by check mark whe ...

IP remains a strategic part of our business, but as a reminder, our IP results may vary from quarter to quarter. Driven largely by specific deliverables to preexisting contracts. While the mix of IP and product revenue will vary in any given quarter over time, our revenue mix in Q1 was 8% IP, below our long-term expectation for IP, which is 10% to 15% of revenue. We expect IP as a percentage of revenue to come in within our long-term expectations for fiscal '24. Our product business generated $32.3 million ...

Currency and Dividend Risks - The company's PRC subsidiaries generate revenue in Renminbi, which is not freely convertible, potentially limiting their ability to pay dividends due to currency exchange restrictions and a withholding tax rate of up to 10% on dividends payable to non-PRC resident enterprises[407] - The company is subject to foreign exchange control systems that could prevent it from obtaining sufficient foreign currencies to satisfy demands, potentially impacting its ability to pay dividends in foreign currencies[382] - The company does not intend to pay cash dividends on its ordinary shares for the foreseeable future, and any future dividends will depend on various factors, including business prospects and financial condition[463] - The company's cumulative undistributed earnings subject to withholding taxes were $12.3 million as of April 29, 2023, with the intention to reinvest these earnings indefinitely[866] Political and Legal Risks - The company faces potential political, legal, and economic instability in Hong Kong, which could adversely affect its business and results of operations[377][379] - The company may face challenges in enforcing U.S. court judgments in the Cayman Islands, where it is incorporated, due to differences in legal systems[452] - The company's intellectual property rights may be challenged or invalidated, and it may face difficulties in enforcing these rights in jurisdictions with weak legal protections[415] - The company may be subject to cybersecurity review requirements under PRC laws, and violations could result in administrative penalties, including fines and service suspension[398] - The company is subject to cybersecurity reviews in China if it processes personal information of over one million users and seeks foreign stock exchange listings[446] Operational and Financial Risks - The company relies on dividends and other distributions from its subsidiaries to fund cash and financing requirements, but there is no assurance that subsidiaries will be able to make such payments[380] - The company’s operations could be disrupted by natural disasters, power outages, or geopolitical events, particularly as its headquarters and key suppliers are located in active earthquake zones[473] - The company’s success depends on retaining key personnel, including executive officers and engineering teams, as it lacks long-term employment agreements with them[471] - The company’s share price may be volatile due to factors such as changes in customer demand, product life cycles, and economic conditions[458] - The company may issue equity or equity-linked securities for acquisitions, potentially diluting shareholder ownership[470] Regulatory and Compliance Risks - The company faces risks related to export control regulations, including potential violations of U.S. export control laws, which could result in criminal prosecution or administrative sanctions[368] - The company operates in multiple countries and is subject to anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and any violations could result in substantial fines and penalties[372] - Compliance with data privacy laws, including GDPR and CCPA, could result in regulatory fines of up to $2,500 per violation and $7,500 for willful violations, increasing compliance costs[445] Shareholder and Corporate Governance Risks - The company has the ability to issue 50,000,000 preferred shares and additional ordinary shares without shareholder approval, which could impede acquisition attempts or changes in control[443] - Anti-takeover provisions, such as the issuance of "blank check" preferred shares, may discourage acquisitions, potentially limiting shareholder opportunities to sell shares at a premium[464][465] - As of April 29, 2023, the company had 148,651,394 outstanding ordinary shares, with warrants and options covering an additional 20,748,004 shares, all potentially tradable in the public market[483] Tax and Financial Reporting - The company's total current tax expense for the year ended April 29, 2023, was $740,000, with a total deferred tax benefit of $2.107 million[864] - The company's total tax expense (benefit) for the year ended April 29, 2023, was $(1.367) million[864] - Unrecognized tax benefits as of April 29, 2023, were $2.9 million, which, if recognized, would affect the effective tax rate[867] - The company's unrecognized tax benefits as of April 30, 2022, were $1.8 million[867] - The company recognized $1.2 million of revenue in the year ended April 29, 2023, that was included in the deferred revenue balance as of April 30, 2022[783] Leasing and Facilities - The company's total leased facilities as of April 29, 2023, amount to 182,281 square feet, with the United States accounting for 89,727 square feet, Mainland China for 66,929 square feet, Taiwan for 18,537 square feet, and Hong Kong for 7,088 square feet[478] - Total lease payments for operating leases are projected at $18.815 million, with a present value of lease liabilities at $15.5 million[862] - The company's leases have remaining terms generally between one year and eight years, with no finance leases[860] - The company's operating lease expenses for fiscal year 2024 are projected at $3.456 million[862] Intellectual Property and Trade Secrets - The company's trade secrets and proprietary information are at risk of misappropriation, particularly in the semiconductor industry, which experiences high employee turnover[418]

Dan O'Neil - Vice President-Corporate Development & Investor Relations Conference Call Participants Suji Desilva - Roth Capital Good day, and thank you for standing by. Welcome to the Credo Q4 Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. Company Participants Dan Fleming - Chief Financial Officer Quinn Bolton - Needham & Company Vivek Arya - Bank of America I would now like to go ahead and turn the call over to Dan O'Neil. Ple ...

Credo Technology Group Holding Ltd (NASDAQ:CRDO) Q3 2023 Earnings Conference Call March 1, 2023 5:00 PM ET Dan O'Neil - Vice President-Corporate Development & Investor Relations Dan Fleming - Chief Financial Officer Toshiya Hari - Goldman Sachs Tore Svanberg - Stifel Vivek Arya - Bank of America Operator I would like turn the conference over to Dan O'Neil. Please go ahead, sir. Good afternoon, and thank you all for joining us today on our Fiscal 2023 Third Quarter Earnings Call. Joining me today from Credo ...

25 Technology Development We continue to evaluate trends within the industry that affect our business performance. We design and develop highspeed connectivity solutions that deliver improved power and cost efficiency for the data infrastructure market. This market is driven by hyperscalers, HPC and 5G infrastructure. Accordingly, our revenue and business performance are influenced by the deployment and timing of broader market adoption of next generation technologies in data centers, particularly by hypers ...