Credo Technology (US:CRDO)2024-02-28 04:23Financial Data and Key Metrics Changes - The company reported Q3 revenue of $53.1 million, which is up 20% sequentially but down 2% year-over-year [11] - Non-GAAP gross margin for the product business was 62.2%, an increase of 235 basis points sequentially [82] - Non-GAAP net income for Q3 was $6.3 million, compared to $1.2 million in the previous quarter [13] - The company expects Q4 revenue to be between $59 million and $62 million, representing a 14% sequential increase at the midpoint [14] Business Line Data and Key Metrics Changes - The IP business generated $1.3 million in Q3, down 83% sequentially and down 90% year-over-year [11] - The product business generated $51.8 million in revenue in Q3, up 41% sequentially and up 24% year-over-year [82] - Non-GAAP operating income was $2.4 million in Q3, compared to a non-GAAP operating loss of $0.7 million last quarter [83] Market Data and Key Metrics Changes - The company anticipates that U.S. hyperscalers will continue to dominate AEC demand in the foreseeable future [70] - The optical DSP market is gaining traction, with production shipments to multiple global hyperscale end customers [77] - The company is engaged with five U.S. hyperscalers and other global hyperscalers for various applications [70] Company Strategy and Development Direction - The company is focused on innovation in its SerDes technology, which is critical for high-speed connectivity solutions [74] - There is an emphasis on developing AEC solutions for both front-end and back-end networks, with expectations for significant revenue growth [76] - The company is also working on 400-gig and 800-gig AEC solutions, which are expected to yield significant future revenue [76] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the increasing market demand for high-speed connectivity driven by AI applications [69] - The company expects an inflection point in the second half of fiscal '25, indicating a positive outlook for future revenue growth [16] - Management noted that the visibility into customer projects has improved, leading to greater confidence in revenue forecasts [100] Other Important Information - The company ended the quarter with cash and equivalents of $409.1 million, an increase of $168.6 million from the previous quarter [112] - Total non-GAAP operating expenses in Q3 were $30.6 million, up 13% sequentially and up 19% year-over-year [111] - The company is well-capitalized to continue investing in growth opportunities while maintaining a substantial cash buffer [112] Q&A Session Summary Question: What is the outlook for the AEC market? - Management indicated that the AEC market is heating up, with increasing interest from customers and expectations for broader adoption in the future [47][62] Question: How does the company view the competitive landscape in the optical DSP market? - Management noted that they are agnostic to customer preferences and are focused on delivering the right connectivity solutions for each hyperscale customer [28] Question: Can you provide insights on the chiplet business? - The chiplet business is expanding, with multiple customers engaging for designs, although it is still dominated by a single customer at this point [92] Question: What are the expectations for revenue visibility moving forward? - Management expressed increased confidence in revenue visibility due to a diversified customer base and product offerings [100][150]