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Credo Technology Group Holding Ltd Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Credo Technology Group Holding Ltd
Credo Technology Group Holding Ltd

SAN JOSE, Calif., May 31, 2023 (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 fourth quarter and full fiscal year 2023, ended April 29, 2023.

Fourth Quarter of Fiscal Year 2023 Financial Highlights

  • Revenue of $32.1 million, decreased by 14.5% year over year

  • GAAP gross margin of 57.9% and non-GAAP gross margin of 58.2%

  • GAAP operating expenses of $35.0 million and non-GAAP operating expenses of $27.2 million

  • GAAP net loss of $15.9 million and non-GAAP net loss of $5.7 million

  • GAAP diluted net loss per share of $0.11 and non-GAAP diluted net loss per share of $0.04

  • Ending cash and short-term investment balance of $217.8 million

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Management Commentary

Bill Brennan, Credo’s President and Chief Executive Officer, stated, “In fiscal 2023, Credo achieved just over $184M in revenue, a 73% increase compared to fiscal 2022. Most recently, the hyperscale landscape has shifted swiftly and dramatically. Compute is now facing a new horizon – generative AI. We see this shift accelerating the demand for energy-efficient connectivity solutions that perform at the highest speeds, which is exactly where Credo excels. We believe this technology acceleration increases the degree of difficulty and will naturally slim the field of market participants. We remain confident that our technology innovation and market leadership will fuel our growth as these opportunities materialize.”

First Quarter of Fiscal Year 2024 Financial Outlook

  • Revenue is expected to be between $33.0 million and $35.0 million

  • GAAP gross margin is expected to be between 57.8% and 59.8%, and non-GAAP gross margin is expected to be between 58.0% and 60.0%

  • GAAP operating expenses are expected to be between $34.0 million and $36.0 million, and non-GAAP operating expenses are expected to be between $26.0 million and $28.0 million

Webcast and Conference Call Information

Credo will conduct a conference call on Wednesday, May 31, 2023, at 2:00 p.m. Pacific Time to discuss its financial results for the fourth quarter and fiscal year 2023, ended April 29, 2023. Interested parties may join the conference call by registering online at https://register.vevent.com/register/BI2ecd39448de04c82b9f4003b106b134a. 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 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. Reconciliation of these non-GAAP measures to their comparable GAAP measures is included below. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with GAAP.

Non-GAAP financial measures exclude the effect of share-based compensation expenses, asset impairment and related 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 (loss) per share is calculated using 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 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 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, 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 Ended

 

Year Ended

 

April 29, 2023

 

January 28, 2023

 

April 30, 2022

 

April 29, 2023

 

April 30, 2022

Revenue:

 

 

 

 

 

 

 

 

 

Product sales

$

23,830

 

 

$

38,033

 

 

$

25,298

 

 

$

141,475

 

 

$

73,721

 

Product engineering services

 

2,571

 

 

 

3,635

 

 

 

1,113

 

 

 

10,780

 

 

 

7,741

 

IP license

 

5,265

 

 

 

11,715

 

 

 

11,115

 

 

 

29,444

 

 

 

23,309

 

IP license engineering services

 

422

 

 

 

887

 

 

 

 

 

 

2,495

 

 

 

1,706

 

Total revenue

 

32,088

 

 

 

54,270

 

 

 

37,526

 

 

 

184,194

 

 

 

106,477

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Cost of product sales revenue

 

13,127

 

 

 

21,833

 

 

 

13,646

 

 

 

75,143

 

 

 

40,082

 

Cost of product engineering services revenue

 

226

 

 

 

228

 

 

 

111

 

 

 

972

 

 

 

1,918

 

Cost of IP license revenue

 

 

 

 

 

 

 

 

 

 

1,179

 

 

 

 

Cost of IP license engineering services revenue

 

150

 

 

 

222

 

 

 

 

 

 

706

 

 

 

462

 

Total cost of revenue

 

13,503

 

 

 

22,283

 

 

 

13,757

 

 

 

78,000

 

 

 

42,462

 

Gross profit

 

18,585

 

 

 

31,987

 

 

 

23,769

 

 

 

106,194

 

 

 

64,015

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

21,403

 

 

 

20,530

 

 

 

15,461

 

 

 

76,774

 

 

 

47,949

 

Selling, general and administrative

 

13,574

 

 

 

11,936

 

 

 

11,507

 

 

 

48,248

 

 

 

34,900

 

Impairment charges

 

 

 

 

2,407

 

 

 

3,134

 

 

 

2,407

 

 

 

3,134

 

Total operating expenses

 

34,977

 

 

 

34,873

 

 

 

30,102

 

 

 

127,429

 

 

 

85,983

 

Operating loss

 

(16,392

)

 

 

(2,886

)

 

 

(6,333

)

 

 

(21,235

)

 

 

(21,968

)

Other income (expense), net

 

1,703

 

 

 

2,530

 

 

 

(175

)

 

 

3,321

 

 

 

(245

)

Loss before income taxes

 

(14,689

)

 

 

(356

)

 

 

(6,508

)

 

 

(17,914

)

 

 

(22,213

)

Provision (benefit) for income taxes

 

1,248

 

 

 

(3,179

)

 

 

(1,153

)

 

 

(1,367

)

 

 

(37

)

Net income (loss)

$

(15,937

)

 

$

2,823

 

 

$

(5,355

)

 

$

(16,547

)

 

$

(22,176

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

$

(0.11

)

 

$

0.02

 

 

$

(0.04

)

 

$

(0.11

)

 

$

(0.25

)

Diluted

$

(0.11

)

 

$

0.02

 

 

$

(0.04

)

 

$

(0.11

)

 

$

(0.25

)

Weighted average shares used in computing net income

 

 

 

 

 

 

 

 

 

(loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

148,212

 

 

 

146,908

 

 

 

144,501

 

 

 

147,145

 

 

 

88,398

 

Diluted

 

148,212

 

 

 

156,519

 

 

 

144,501

 

 

 

147,145

 

 

 

88,398

 


 

 

 

 

 

Credo Technology Group Holding Ltd

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

 

 

 

 

 

 

April 29, 2023

 

April 30, 2022

Assets

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

108,583

 

 

$

259,322

 

Short-term investments

 

 

109,228

 

 

 

 

Accounts receivable

 

 

49,541

 

 

 

29,524

 

Inventories

 

 

46,023

 

 

 

27,337

 

Contract assets

 

 

9,445

 

 

 

10,071

 

Prepaid expenses and other current assets

 

 

5,412

 

 

 

5,923

 

Total current assets

 

 

328,232

 

 

 

332,177

 

Property and equipment, net

 

 

40,222

 

 

 

21,844

 

Right-of-use assets

 

 

14,860

 

 

 

16,954

 

Other non-current assets

 

 

13,975

 

 

 

4,714

 

Total assets

 

$

397,289

 

 

$

375,689

 

Liabilities and Shareholders' Equity

Current liabilities:

 

 

 

 

Accounts payable

 

$

6,067

 

 

$

8,487

 

Accrued compensation and benefits

 

 

6,471

 

 

 

4,713

 

Accrued expenses and other current liabilities

 

 

14,454

 

 

 

12,063

 

Deferred revenue

 

 

4,040

 

 

 

1,234

 

Total current liabilities

 

 

31,032

 

 

 

26,497

 

Non-current operating lease liabilities

 

 

12,869

 

 

 

14,809

 

Other non-current liabilities

 

 

5,753

 

 

 

220

 

Total liabilities

 

 

49,654

 

 

 

41,526

 

Shareholders' equity:

 

 

 

 

Ordinary shares

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

454,795

 

 

 

424,562

 

Accumulated other comprehensive income (loss)

 

 

(191

)

 

 

23

 

Accumulated deficit

 

 

(106,976

)

 

 

(90,429

)

Total shareholders' equity

 

 

347,635

 

 

 

334,163

 

Total liabilities and shareholders' equity

 

$

397,289

 

 

$

375,689

 


 

 

 

 

Credo Technology Group Holding Ltd

Reconciliations from GAAP to Non-GAAP Results (Unaudited)

(In thousands, except percentages and per share amounts)

 

 

 

 

 

Three Months Ended

 

Year Ended

 

April 29, 2023

 

January 28, 2023

 

April 30, 2022

 

April 29, 2023

 

April 30, 2022

GAAP gross profit

$

18,585

 

 

$

31,987

 

 

$

23,769

 

 

$

106,194

 

 

$

64,015

 

Reconciling item:

 

 

 

 

 

 

 

 

 

Share-based compensation

 

83

 

 

 

98

 

 

 

40

 

 

 

634

 

 

 

220

 

Total reconciling item

 

83

 

 

 

98

 

 

 

40

 

 

 

634

 

 

 

220

 

Non-GAAP gross profit (A)

$

18,668

 

 

$

32,085

 

 

$

23,809

 

 

$

106,828

 

 

$

64,235

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

57.9

%

 

 

58.9

%

 

 

63.3

%

 

 

57.7

%

 

 

60.1

%

Non-GAAP gross margin

 

58.2

%

 

 

59.1

%

 

 

63.4

%

 

 

58.0

%

 

 

60.3

%

 

 

 

 

 

 

 

 

 

 

Total GAAP operating expenses

$

34,977

 

 

$

34,873

 

 

$

30,102

 

 

$

127,429

 

 

$

85,983

 

Reconciling items:

 

 

 

 

 

 

 

 

 

Share-based compensation

 

(7,827

)

 

 

(5,071

)

 

 

(5,328

)

 

 

(22,882

)

 

 

(8,968

)

Impairment and related charges

 

 

 

 

(4,151

)

 

 

(3,134

)

 

 

(4,151

)

 

 

(3,134

)

Total reconciling items

 

(7,827

)

 

 

(9,222

)

 

 

(8,462

)

 

 

(27,033

)

 

 

(12,102

)

Total Non-GAAP operating expenses (B)

$

27,150

 

 

$

25,651

 

 

$

21,640

 

 

$

100,396

 

 

$

73,881

 

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

$

(16,392

)

 

$

(2,886

)

 

$

(6,333

)

 

$

(21,235

)

 

$

(21,968

)

Non-GAAP operating income (loss) (A-B)

$

(8,482

)

 

$

6,434

 

 

$

2,169

 

 

$

6,432

 

 

$

(9,646

)

 

 

 

 

 

 

 

 

 

 

GAAP operating loss margin

(51.1)%

 

(5.3)%

 

(16.9)%

 

(11.5)%

 

(20.6)%

Non-GAAP operating income (loss) margin

(26.4)%

 

 

11.9

%

 

 

5.8

%

 

 

3.5

%

 

(9.1)%

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

$

(15,937

)

 

$

2,823

 

 

$

(5,355

)

 

$

(16,547

)

 

$

(22,176

)

Reconciling items:

 

 

 

 

 

 

 

 

 

Share-based compensation

 

7,910

 

 

 

5,169

 

 

 

5,368

 

 

 

23,516

 

 

 

9,188

 

Impairment and related charges

 

 

 

 

4,151

 

 

 

3,134

 

 

 

4,151

 

 

 

3,134

 

Pre-tax total reconciling items

 

7,910

 

 

 

9,320

 

 

 

8,502

 

 

 

27,667

 

 

 

12,322

 

Other income tax effects and adjustments

 

2,299

 

 

 

(4,952

)

 

 

(611

)

 

 

(2,433

)

 

 

(1,049

)

Non-GAAP net income (loss)

$

(5,728

)

 

$

7,191

 

 

$

2,536

 

 

$

8,687

 

 

$

(10,903

)

 

 

 

 

 

 

 

 

 

 

GAAP weighted average shares - basic

 

148,212

 

 

 

146,908

 

 

 

144,501

 

 

 

147,145

 

 

 

88,398

 

GAAP weighted average shares - diluted

 

148,212

 

 

 

156,519

 

 

 

144,501

 

 

 

147,145

 

 

 

88,398

 

Non-GAAP adjustment

 

 

 

 

3,837

 

 

 

13,732

 

 

 

13,838

 

 

 

 

Non-GAAP weighted average shares - diluted

 

148,212

 

 

 

160,356

 

 

 

158,233

 

 

 

160,983

 

 

 

88,398

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income (loss) per share

$

(0.11

)

 

$

0.02

 

 

$

(0.04

)

 

$

(0.11

)

 

$

(0.25

)

Non-GAAP diluted net income (loss) per share

$

(0.04

)

 

$

0.04

 

 

$

0.02

 

 

$

0.05

 

 

$

(0.12

)


 

 

 

Credo Technology Group Holding Ltd

Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates

(In millions, except percentages)

 

 

 

 

 

Three Months Ended July 29, 2023

 

 

Low

 

High

 

 

 

 

 

GAAP gross margin

 

 

57.8

%

 

 

59.8

%

Reconciling item:

 

 

 

 

Share-based compensation

 

 

0.2

%

 

 

0.2

%

Total reconciling item

 

 

0.2

%

 

 

0.2

%

Non-GAAP gross margin

 

 

58.0

%

 

 

60.0

%

 

 

 

 

 

 

 

 

 

 

Total GAAP operating expenses

 

$

34.0

 

 

$

36.0

 

Reconciling item:

 

 

 

 

Share-based compensation

 

 

8.0

 

 

 

8.0

 

Total reconciling item

 

 

8.0

 

 

 

8.0

 

Total non-GAAP operating expenses

 

$

26.0

 

 

$

28.0