SAN JOSE, Calif., Aug. 31, 2022 (GLOBE NEWSWIRE) — 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 first quarter of fiscal year 2023, ended July 30, 2022.

Q1 FY23 Financial Highlights

  • Revenue of $46.5 million, grew by 24% quarter over quarter
  • GAAP gross margin of 59.5% and non-GAAP gross margin of 60.5%  
  • GAAP operating expenses of $27.9 million and non-GAAP operating expenses of $22.6 million
  • GAAP net loss of $0.1 million and non-GAAP net income of $5.4 million
  • GAAP net loss per share of $0.00 and non-GAAP diluted net income per share of $0.03
  • Ending Cash Balance of $243.8 million

Management Commentary

Bill Brennan, Credo’s President and Chief Executive Officer, stated, “In the fiscal quarter ended July 30, 2022, Credo continued our strong execution, delivering revenue of $46.5 million, a 24% increase from $37.5 million last quarter. Our product revenue, which is a key indicator we track closely, was up 37% sequentially, showing the strong progress we’re making ramping our AEC products. We continue to be excited about our progress with current customers and prospective new customers. We are also encouraged by the prospects of our next generation solutions based on strong customer feedback and engagement. We remain focused on delivering strong results in fiscal 2023, and continue to expect to achieve at least $200 million in revenue, which would represent annual growth of more than 88%.”

Second Quarter of Fiscal 2023 Financial Outlook

  • Revenue is expected to be between $48.5 million to $52.5 million, up 91% year over year at the midpoint
  • GAAP gross margin is expected to be between 58.5%-60.5% and non-GAAP gross margin is expected to be between 59.0%-61.0%
  • GAAP operating expenses are expected to be between $30.5 million to $32.5 million and non-GAAP operating expenses are expected to be between $23.5 million to $25.5 million

Conference Call

Credo will conduct a conference call on Wednesday, August 31, 2022, at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal year 2023, ended July 30, 2022. Interested parties may join the conference call beginning at 2:00 p.m. Pacific Time on Wednesday, August 31, 2022 by registering online at https://register.vevent.com/register/BI26f003f07f1146c086b6d09fdb6c8967. After registering, a confirmation will be sent through email, including dial-in details and unique conference call codes 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 non-GAAP financial measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share. Reconciliation of these non-GAAP measures to its comparable GAAP measure is included below. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with GAAP. It is provided solely to assist in an investor’s understanding of these items on the comparability of the Company’s operations.

Non-GAAP financial measures exclude the effect of share-based compensation expenses, warrant contra revenue, asset impairment charges (if applicable), and the related tax effect adjustment 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 income, 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 basic weighted average shares outstanding when there is a GAAP net loss, and calculated using diluted weighted average shares outstanding when there is a GAAP net income. Non-GAAP diluted net income per share is calculated using diluted weighted average shares outstanding.

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 that involve risks and uncertainties. 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 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. Actual events or results may differ materially from those described in this press release due to a number of risks and uncertainties. Readers are encouraged to review risk factors and all other disclosures appearing in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on June 8, 2022, 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, the Company’s website or the Company’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 emerging 100G (or Gigabits per second), 200G, 400G and 800G 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

Credo Technology Group Holding Ltd
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
 Three Months Ended
 July 30, 2022 April 30, 2022 July 31, 2021
Product sales$35,263  $25,298  $7,263 
Product engineering services 824   1,113   1,319 
IP license 10,380   11,115   1,030 
IP license engineering services       1,112 
Total revenue 46,467   37,526   10,724 
Cost of revenue:     
Cost of product sales revenue 17,525   13,646   4,357 
Cost of product engineering services revenue 100   111   865 
Cost of IP license revenue 1,179       
Cost of IP license engineering services revenue       322 
Total cost of revenue 18,804   13,757   5,544 
Gross profit 27,663   23,769   5,180 
Operating expenses:     
Research and development 16,683   15,461   9,693 
Selling, general and administrative 11,198   11,507   7,117 
Impairment charges    3,134    
Total operating expenses 27,881   30,102   16,810 
Operating loss (218)  (6,333)  (11,630)
Other expense, net (220)  (175)  (45)
Loss before income taxes (438)  (6,508)  (11,675)
Provision (benefit) for income taxes (365)  (1,153)  902 
Net loss$(73) $(5,355) $(12,577)
Net loss per share:     
Basic and diluted$  $(0.04) $(0.18)
Weighted-average shares used in computing net loss per share:     
Basic and diluted 145,077   144,501   68,409 
Credo Technology Group Holding Ltd
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
  July 30, 2022 April 30, 2022
Current Assets:    
Cash and cash equivalents $243,783  $259,322 
Accounts receivable  54,769   29,524 
Inventories  37,031   27,337 
Contract assets  6,027   10,071 
Prepaid expenses and other current assets  4,383   5,923 
Total current assets  345,993   332,177 
Property and equipment, net  38,209   21,844 
Right of use assets  16,226   16,954 
Other non-current assets  5,222   4,714 
Total assets $405,650  $375,689 
Liabilities and Shareholders’ Equity
Current Liabilities:    
Accounts payable $21,186  $8,487 
Accrued compensation and benefits  2,928   4,713 
Accrued expenses and other current liabilities  15,489   12,063 
Deferred revenue  3,004   1,234 
Total current liabilities  42,607   26,497 
Non-current operating lease liabilities  14,290   14,809 
Other non-current liabilities  6,848   220 
Total liabilities  63,745   41,526 
Shareholders’ equity:    
Ordinary shares  7   7 
Additional paid in capital  432,473   424,562 
Accumulated other comprehensive income  (73)  23 
Accumulated deficit  (90,502)  (90,429)
Total shareholders’ equity  341,905   334,163 
Total liabilities and shareholders’ equity $405,650  $375,689 
Credo Technology Group Holding Ltd
Reconciliations from GAAP to Non-GAAP (Unaudited)
(In thousands, except percentages and per share amounts)
 Three Months Ended
 July 30, 2022 April 30, 2022 July 31, 2021
GAAP gross profit$27,663  $23,769  $5,180 
Reconciling items:     
Warrant contra revenue 388   233    
Share-based compensation 304   40   87 
Total reconciling items: 692   273   87 
Non-GAAP gross profit$28,355  $24,042  $5,267 
GAAP gross margin 59.5%  63.3%  48.3%
Non-GAAP gross margin 60.5%  63.7%  49.1%
Total GAAP operating expenses$27,881  $30,102  $16,810 
Reconciling item:     
Share-based compensation (5,242)  (5,328)  (988)
Impairment charges    (3,134)   
Total reconciling items: (5,242)  (8,462)  (988)
Total Non-GAAP operating expenses$22,639  $21,640  $15,822 
GAAP net loss$(73) $(5,355) $(12,577)
Reconciling items:     
Warrant contra revenue 388   233    
Share-based compensation 5,546   5,368   1,075 
Impairment charges    3,134   
Pre-tax total reconciling items 5,934   8,735   1,075 
Other income tax effects and adjustments (424)  (611)  (617)
Non-GAAP net income/(loss)$5,437  $2,769  $(12,119)
GAAP weighted average shares – basic 145,077   144,501   68,409 
GAAP weighted average shares – diluted 145,077   144,501   68,409 
Non-GAAP adjustment 13,256   13,732    
Non-GAAP weighted average shares – diluted 158,333   158,233   68,409 
GAAP diluted net loss per share$  $(0.04) $(0.18)
Non-GAAP diluted net income/(loss) per share$0.03  $0.02  $(0.18)
Credo Technology Group Holding Ltd
Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates
(In millions, except percentages)
  Three Months Ended October 29, 2022
  Low High
GAAP gross margin  58.5%  60.5%
Reconciling items:    
Warrant contra revenue  0.4%  0.4%
Share-based compensation  0.1%  0.1%
Total reconciling items:  0.5%  0.5%
Non-GAAP gross margin  59.0%  61.0%
Total GAAP operating expenses $30.5  $32.5 
Reconciling item:    
Share-based compensation  7.0   7.0 
Total reconciling items:  7.0   7.0 
Total Non-GAAP operating expenses $23.5  $25.5 



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