Credo Technology Group Holding Ltd Reports First Quarter of Fiscal Year 2025 Financial Results

Rhea-AI Summary

Credo Technology Group Holding (Nasdaq: CRDO) reported its Q1 FY2025 financial results, ending August 3, 2024. The company achieved revenue of $59.7 million, a 70% year-over-year increase. Key highlights include:

- GAAP gross margin: 62.4%
- Non-GAAP gross margin: 62.9%
- GAAP net loss: $(9.5) million
- Non-GAAP net income: $7.0 million
- GAAP diluted net loss per share: $(0.06)
- Non-GAAP diluted net income per share: $0.04

Credo's product revenues reached a record $57.3 million, up 30% from the previous quarter. The company attributes its growth to AI infrastructure deployments and expects continued contributions from its high-speed connectivity solutions. For Q2 FY2025, Credo projects revenue between $65.0 million and $68.0 million.

Positive

• Revenue grew by 70% year-over-year to $59.7 million
• Record product revenues of $57.3 million, up 30% from previous quarter
• Non-GAAP net income of $7.0 million
• Strong cash position with $398.6 million in cash and short-term investments
• Projected Q2 FY2025 revenue between $65.0 million and $68.0 million, indicating continued growth

Negative

• GAAP net loss of $(9.5) million
• GAAP diluted net loss per share of $(0.06)

Insights

Financial Analyst

Credo's Q1 FY2025 results show strong growth, with revenue up 70% YoY to $59.7 million. The record product revenue of $57.3 million, up 30% QoQ, is particularly impressive. The company's focus on AI infrastructure is paying off, driving demand for their high-speed connectivity solutions.

While GAAP results show a net loss, non-GAAP figures are positive, indicating underlying profitability when excluding certain expenses. The robust gross margin of 62.9% (non-GAAP) suggests strong pricing power and efficient operations. With $398.6 million in cash and short-term investments, Credo has ample resources to fund growth initiatives.

The Q2 outlook projects continued growth, with revenue expected between $65-$68 million. This guidance, coupled with management's optimistic commentary on AI-driven demand, paints a positive picture for Credo's near-term prospects.

Tech Industry Analyst

Credo's performance underscores the booming demand for AI infrastructure. Their focus on energy-efficient, high-speed connectivity solutions positions them well in the rapidly evolving data center market. The 70% YoY revenue growth outpaces many peers, indicating market share gains.

The company's innovation in power and cost-efficient solutions is important as data centers grapple with increasing energy demands from AI workloads. Credo's ability to deliver on these fronts could be a significant competitive advantage.

However, the tech sector is notoriously cyclical. While AI is driving growth now, investors should monitor for any signs of market saturation or shifts in technology trends. Credo's continued R&D investments and ability to adapt to evolving customer needs will be critical for sustaining this growth trajectory.

Market Research Analyst

Credo's results reflect the broader trend of AI-driven infrastructure expansion. The company's 70% YoY revenue growth significantly outpaces the overall semiconductor market, suggesting they're capturing an outsized share of AI-related spending.

The strong gross margins (62.9% non-GAAP) indicate pricing power and efficient operations, important in the competitive semiconductor space. This, combined with the positive Q2 outlook, suggests Credo is well-positioned to capitalize on the ongoing AI boom.

However, investors should note the discrepancy between GAAP and non-GAAP results. While non-GAAP figures show profitability, the GAAP net loss highlights the impact of significant non-cash expenses, primarily share-based compensation. As Credo scales, managing these expenses will be important for long-term profitability.

SAN JOSE, Calif., Sept. 04, 2024 (GLOBE NEWSWIRE) -- Credo Technology Group Holding Ltd (Nasdaq: CRDO), an innovator in providing secure, high-speed connectivity solutions that deliver improved energy efficiency as data rates and corresponding bandwidth requirements increase through the data infrastructure market, today reported financial results for the first quarter of fiscal year 2025, ended August 3, 2024.

First Quarter of Fiscal Year 2025 Financial Highlights

• Revenue of $59.7 million, grew by 70% year over year
• GAAP gross margin of 62.4% and non-GAAP gross margin of 62.9%
• GAAP operating expenses of $51.7 million and non-GAAP operating expenses of $35.4 million
• GAAP net loss of $(9.5) million and non-GAAP net income of $7.0 million
• GAAP diluted net loss per share of $(0.06) and non-GAAP diluted net income per share of $0.04
• Ending cash and short-term investment balance of $398.6 million

Management Commentary

Bill Brennan, Credo’s President and Chief Executive Officer, stated, “For the first fiscal quarter ended August 3, 2024, Credo reported revenue of $59.7 million. This total included record product revenues of $57.3 million, an increase of 30% compared to the prior quarter. Our customers’ AI infrastructure deployments remain the catalyst for our recent and expected growth. Going forward in fiscal 2025 and beyond, we expect contributions from our entire suite of innovative, power and cost-efficient, high-speed connectivity solutions.”

Second Quarter of Fiscal 2025 Financial Outlook

• Revenue is expected to be between $65.0 million and $68.0 million
• GAAP gross margin is expected to be between 61.3% and 63.3%, and non-GAAP gross margin is expected to be between 62.0% and 64.0%
• GAAP operating expenses are expected to be between $51.3 million and $53.3 million, and non-GAAP operating expenses are expected to be between $36.0 million and $38.0 million

Conference Call

Credo will conduct a conference call on Wednesday, September 4, 2024, at 2:00 p.m. Pacific Time to discuss its financial results for the first quarter of fiscal year 2025, ended August 3, 2024. Interested parties may join the conference call by registering online at https://register.vevent.com/register/BIdb1b1dd41c9144fa8f424eb3f53fa7f1. 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. 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. 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 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; financial outlook; 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 24, 2024, 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
	August 3, 2024				April 27, 2024				July 29, 2023
Revenue:
Product sales	$	53,839			$	40,798			$	30,028
Product engineering services		3,486				3,341				2,293
IP license		2,389				16,643				2,774
Total revenue		59,714				60,782				35,095
Cost of revenue:
Cost of product sales revenue		21,884				20,372				13,868
Cost of product engineering services revenue		452				290				293
Cost of IP license revenue		95				154				144
Total cost of revenue		22,431				20,816				14,305
Gross profit		37,283				39,966				20,790
Operating expenses:
Research and development		30,409				26,921				22,638
Selling, general and administrative		21,325				20,161				12,543
Impairment charges		—				765				—
Total operating expenses		51,734				47,847				35,181
Operating loss		(14,451	)			(7,881	)			(14,391	)
Other income, net		5,533				5,163				2,157
Loss before income taxes		(8,918	)			(2,718	)			(12,234	)
Provision (benefit) for income taxes		622				7,759				(537	)
Net loss	$	(9,540	)		$	(10,477	)		$	(11,697	)
Net loss per share:
Basic and diluted	$	(0.06	)		$	(0.06	)		$	(0.08	)
Weighted-average shares used in computing net loss per share:
Basic and diluted		165,140				163,677				149,277

Credo Technology Group Holding Ltd Condensed Consolidated Balance Sheets (Unaudited) (In thousands)
	August 3, 2024				April 27, 2024
Assets
Current assets:
Cash and cash equivalents	$	103,900			$	66,942
Short-term investments		294,716				343,061
Accounts receivable		71,859				59,662
Inventories		31,557				25,907
Contract assets		24,400				21,562
Prepaid expenses and other current assets		15,921				13,131
Total current assets		542,353				530,265
Property and equipment, net		70,241				43,665
Right of use assets		15,860				13,077
Other non-current assets		16,411				14,925
Total assets	$	644,865			$	601,932
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	38,473			$	13,417
Accrued compensation and benefits		7,808				9,000
Accrued expenses and other current liabilities		20,218				18,301
Deferred revenue		2,917				3,902
Total current liabilities		69,416				44,620
Non-current operating lease liabilities		13,530				11,133
Other non-current liabilities		8,817				5,981
Total liabilities		91,763				61,734
Shareholders' equity:
Ordinary shares		8				8
Additional paid in capital		698,354				676,054
Accumulated other comprehensive loss		(375	)			(519	)
Accumulated deficit		(144,885	)			(135,345	)
Total shareholders' equity		553,102				540,198
Total liabilities and shareholders' equity	$	644,865			$	601,932

Credo Technology Group Holding Ltd Reconciliations from GAAP to Non-GAAP (Unaudited) (In thousands, except percentages and per share amounts)
	Three Months Ended
	August 3, 2024				April 27, 2024				July 29, 2023
GAAP gross profit	$	37,283			$	39,966			$	20,790
Reconciling item:
Share-based compensation		281				234				189
Total reconciling item:		281				234				189
Non-GAAP gross profit (A)	$	37,564			$	40,200			$	20,979
GAAP gross margin		62.4	%			65.8	%			59.2	%
Non-GAAP gross margin		62.9	%			66.1	%			59.8	%
Total GAAP operating expenses	$	51,734			$	47,847			$	35,181
Reconciling item:
Share-based compensation		(16,359	)			(14,344	)			(7,779	)
Impairment charges		—				(765	)			—
Total reconciling item:		(16,359	)			(15,109	)			(7,779	)
Total Non-GAAP operating expenses (B)	$	35,375			$	32,738			$	27,402
GAAP operating loss	$	(14,451	)		$	(7,881	)		$	(14,391	)
Non-GAAP operating income (loss) (A-B)	$	2,189			$	7,462			$	(6,423	)
GAAP operating loss margin	(24.2		)%		(13.0		)%		(41.0		)%
Non-GAAP operating income (loss) margin		3.7	%			12.3	%		(18.3		)%
GAAP net loss	$	(9,540	)		$	(10,477	)		$	(11,697	)
Reconciling items:
Share-based compensation		16,640				14,578				7,968
Impairment charges		—				765				—
Pre-tax total reconciling item		16,640				15,343				7,968
Other income tax effects and adjustments		(61	)			6,940				(992	)
Non-GAAP net income (loss)	$	7,039			$	11,806			$	(4,721	)
GAAP weighted-average shares - basic		165,140				163,677				149,277
GAAP weighted-average shares - diluted		165,140				163,677				149,277
Non-GAAP adjustment		15,894				15,463				—
Non-GAAP weighted-average shares - diluted		181,034				179,140				149,277
GAAP diluted net income (loss) per share	$	(0.06	)		$	(0.06	)		$	(0.08	)
Non-GAAP diluted net income (loss) per share	$	0.04			$	0.07			$	(0.03	)

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 November 2, 2024
	Low				High
GAAP gross margin		61.3	%			63.3	%
Reconciling item:
Share-based compensation		0.7	%			0.7	%
Total reconciling item:		0.7	%			0.7	%
Non-GAAP gross margin		62.0	%			64.0	%
Total GAAP operating expenses	$	51.3			$	53.3
Reconciling item:
Share-based compensation		15.3				15.3
Total reconciling item:		15.3				15.3
Total Non-GAAP operating expenses	$	36.0			$	38.0

FAQ

What was Credo's (CRDO) revenue for Q1 FY2025?

Credo (CRDO) reported revenue of $59.7 million for Q1 FY2025, representing a 70% year-over-year growth.

How much did Credo's (CRDO) product revenues grow in Q1 FY2025?

Credo's (CRDO) product revenues reached a record $57.3 million in Q1 FY2025, increasing 30% compared to the previous quarter.

What is Credo's (CRDO) revenue guidance for Q2 FY2025?

Credo (CRDO) expects revenue for Q2 FY2025 to be between $65.0 million and $68.0 million.

What was Credo's (CRDO) GAAP net loss for Q1 FY2025?

Credo (CRDO) reported a GAAP net loss of $(9.5) million for Q1 FY2025.

What is driving Credo's (CRDO) growth according to the Q1 FY2025 report?

Credo (CRDO) attributes its growth to customers' AI infrastructure deployments and expects continued contributions from its high-speed connectivity solutions.