Credo Technology (US:CRDO)2023-03-02 03:05Financial Data and Key Metrics Changes - For Q3 2023, Credo reported revenue of $54.3 million, representing a 6% sequential growth and over 71% year-over-year growth [6][54] - Non-GAAP gross margin was reported at 59.3%, which was within guidance for Q3 [6] - The company delivered net income of $7.5 million in Q3, an increase of $5.1 million year-over-year and up 208% sequentially [57] - Cash and equivalents at the end of the quarter were $233 million, a decrease of $7.5 million from the previous quarter [29] Business Line Data and Key Metrics Changes - The revenue mix in Q3 was 23% from IP, above the long-term expectation of 10% to 15% [26] - Product revenue generated $41.7 million in Q3, down 13% sequentially but up 56% year-over-year, driven principally by AEC growth [55] - IP business reached $12.6 million in Q3, up 285% sequentially and 145% year-over-year [54] Market Data and Key Metrics Changes - The company is engaged with hyperscale data center operators and networking equipment OEMs, with a focus on the Ethernet market [16] - AECs are expected to become a multibillion-dollar market within four to five years, as they become the most prevalent solution for in-rack connectivity [8] Company Strategy and Development Direction - Credo remains focused on high-speed connectivity solutions, with ongoing engagements in advanced programs with major customers and hyperscalers [7] - The company is developing advanced AEC solutions for next-generation server rack and switch rack applications [9] - Credo aims to leverage its differentiated SerDes technology to deliver disruptive solutions to the optical market [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities despite a reduction in forecast due to macroeconomic headwinds [17] - The company believes that the fundamental connectivity technology trends remain consistent across the data infrastructure market [17] - Management noted that while there are delays in qualification and pushouts, they remain confident in their sole source position with their largest customer [32] Other Important Information - The company expects Q4 revenue to be between $30 million and $32 million, down 43% sequentially at the midpoint [58] - Operating expenses for Q4 are expected to be between $26 million and $28 million [58] Q&A Session Summary Question: What is driving the change in the near-term outlook for the largest customer? - Management indicated that the change is due to inventory adjustments and delays in qualification, not due to technical issues with products [32][46] Question: How does the revenue outlook for fiscal 2024 look? - The company is guiding to a flat revenue outlook for fiscal 2024, with two-thirds of the reduction related to the largest customer and one-third due to increased conservatism across the board [62] Question: What is the current mix of AECs in the sales? - AECs are expected to represent about 40% to 45% of the sales mix in fiscal 2023, with expectations for a similar mix in fiscal 2024 [114] Question: What is the timeline for moving from 12 to 5-nanometer products? - The company is actively working on 5-nanometer developments across all product segments, with tape-outs expected in the upcoming quarters and products likely available within the next 12 to 18 months [75] Question: Is there any obsolescence risk with current inventory? - Management does not expect any obsolescence risk in inventory, although they have increased reserves based on internal procedures [109]