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Published: 2023-11-29 16:09:41 ET
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EX-99.1 2 credoq22024ex-991.htm EX-99.1 Document

Exhibit 99.1
 


Credo Technology Group Holding Ltd Reports Second Quarter of Fiscal Year 2024
Financial Results


San Jose, Calif. (November 29, 2023) - 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’Neil
IR@credosemi.com


Credo Technology Group Holding Ltd
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
 
Three Months EndedSix Months Ended
October 28, 2023July 29, 2023October 29, 2022October 28, 2023October 29, 2022
Revenue:
Product sales$34,247 $30,028 $44,349 $64,275 $79,612 
Product engineering services2,434 2,293 3,750 4,727 4,574 
IP license7,354 2,774 3,270 10,128 13,650 
Total revenue44,035 35,095 51,369 79,130 97,836 
Cost of revenue:
Cost of product sales revenue17,346 13,868 22,658 31,214 40,183 
Cost of product engineering services revenue171 293 418 464 518 
Cost of IP license revenue401 144 334 545 1,513 
Total cost of revenue17,918 14,305 23,410 32,223 42,214 
Gross profit26,117 20,790 27,959 46,907 55,622 
Operating expenses:
Research and development21,736 22,638 18,158 44,374 34,841 
Selling, general and administrative13,256 12,543 11,540 25,799 22,738 
Total operating expenses34,992 35,181 29,698 70,173 57,579 
Operating loss(8,875)(14,391)(1,739)(23,266)(1,957)
Other income (expense), net2,702 2,157 (692)4,859 (912)
Loss before income taxes(6,173)(12,234)(2,431)(18,407)(2,869)
Provision (benefit) for income taxes450 (537)929 (87)564 
Net loss$(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 diluted150,232 149,277 146,012 149,755 145,545 



Credo Technology Group Holding Ltd
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
October 28, 2023April 29, 2023
Assets
Current assets:
Cash and cash equivalents$128,986 $108,583 
Short-term investments111,526 109,228 
Accounts receivable32,723 49,541 
Inventories35,761 46,023 
Contract assets12,042 9,445 
Prepaid expenses and other current assets7,278 5,412 
Total current assets328,316 328,232 
Property and equipment, net44,971 40,222 
Right of use assets13,544 14,860 
Other non-current assets18,974 13,975 
Total assets$405,805 $397,289 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable$10,926 $6,067 
Accrued compensation and benefits4,898 6,471 
Accrued expenses and other current liabilities16,579 14,454 
Deferred revenue4,832 4,040 
Total current liabilities37,235 31,032 
Non-current operating lease liabilities11,610 12,869 
Other non-current liabilities7,412 5,753 
Total liabilities56,257 49,654 
Shareholders' equity:
Ordinary shares
87
Additional paid in capital475,412 454,795 
Accumulated other comprehensive loss(576)(191)
Accumulated deficit(125,296)(106,976)
Total shareholders' equity349,548 347,635 
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 EndedSix Months Ended
October 28, 2023July 29, 2023October 29, 2022October 28, 2023October 29, 2022
GAAP gross profit$26,117 $20,790 $27,959 $46,907 $55,622 
Reconciling item:
Share-based compensation250 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 margin59.3 %59.2 %54.4 %59.3 %56.9 %
Non-GAAP gross margin59.9 %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 compensation8,144 7,968 4,891 16,112 10,437 
Pre-tax total reconciling item8,144 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)$7,224 
GAAP weighted-average shares - basic
150,232 149,277 146,012 149,755 145,545 
GAAP weighted-average shares - diluted
150,232 149,277 146,012 149,755 145,545 
Non-GAAP adjustment14,664 — 12,789 — 13,073 
Non-GAAP weighted-average shares - diluted
164,896 149,277 158,801 149,755 158,671 
GAAP diluted net income (loss) per share$(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 Ended January 27, 2024
LowHigh
GAAP gross margin58.8 %60.8 %
Reconciling item:
Share-based compensation0.2 %0.2 %
Total reconciling item:0.2 %0.2 %
Non-GAAP gross margin59.0 %61.0 %
Total GAAP operating expenses$37.0 $39.0 
Reconciling item:
Share-based compensation9.0 9.0 
Total reconciling item:9.0 9.0 
Total Non-GAAP operating expenses$28.0 $30.0