Credo Technology Group Holding Ltd Reports Fourth Quarter and Fiscal Year 2022 Financial Results

Rhea-AI Summary

Credo Technology Group Holding Ltd (NASDAQ: CRDO) reported significant financial results for Q4 and the full fiscal year ended April 30, 2022. Revenue surged to $37.5 million, a 90% increase year-over-year, contributing to a total annual revenue of $106.5 million, up 80%. GAAP net loss was $5.4 million, while non-GAAP net income stood at $2.8 million, resulting in GAAP net loss per share of $0.04. Cash reserves reached $259.3 million. For Q1 FY2023, projected revenue is between $43.5 million and $47.5 million, implying a 324% year-over-year rise at the midpoint.

Positive

• Q4 revenue increased by 90% YoY to $37.5 million.
• Total fiscal year revenue reached $106.5 million, up 80% YoY.
• Non-GAAP net income of $2.8 million in Q4.
• Projected Q1 FY2023 revenue expected to rise 324% YoY.

Negative

• GAAP net loss of $5.4 million in Q4.
• GAAP net loss per share of $0.04.

SAN JOSE, Calif., June 01, 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 fourth quarter and full fiscal year, ended April 30, 2022.

Q4 Financial Highlights

• Revenue of $37.5 million, grew by 90.0% year on year
• GAAP gross margin of 63.3% and non-GAAP gross margin of 63.7%
• GAAP operating expenses of $30.1 million and non-GAAP operating expenses of $21.6 million
• GAAP net loss of $5.4 million and non-GAAP net income of $2.8 million
• GAAP net loss per share of $0.04 and non-GAAP diluted net income per share of $0.02
• During the quarter, Credo sold an additional three million ordinary shares in connection with its initial public offering and received net proceeds of $28.1 million after deducting underwriting discount and commission
• Ending Cash Balance of $259.3 million

Management Commentary

Bill Brennan, Credo’s President and Chief Executive Officer, stated, “Fiscal 2022 was a year of tremendous achievement for Credo. Our highlights included completing our initial public offering in January 2022 and achieving record revenue of $106.5 million, up more than 80% from prior year. We also delivered record results in the most recent quarter, despite the complexities we faced. During our fiscal fourth quarter, we recorded revenue of $37.5 million, a 90.0% increase year over year. We had growth in every of part of our business in fiscal 2022, and we expect the same in fiscal 2023.”

First Quarter of Fiscal 2023 Financial Outlook

• Revenue is expected to be between $43.5 million to $47.5 million, up 324% 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 $27.5 million to $29.5 million and non-GAAP operating expenses are expected to be between $21.5 million to $23.5 million

Conference Call

Credo will conduct a conference call on Wednesday, June 1, 2022, at 2:00 p.m. Pacific Time to discuss its financial results for the fiscal fourth quarter and fiscal year ended April 30, 2022. Interested parties may join the conference call beginning at 2:00 p.m. Pacific Time on Wednesday, June 1, 2022 via telephone by dialing 1-855-553-1968 in the U.S., or for international callers, by dialing 1-409-981-0977 and entering conference ID 4861225. A telephone replay will be available until June 8, 2022, by dialing 1-855-859-2056 in the U.S., or for international callers, 1-404-537-3406 with conference ID 4861225. 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 Prospectus as filed with the Securities and Exchange Commission (SEC) on January 26, 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
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 30, 2022				January 31, 2022				April 30, 2021				April 30, 2022				April 30, 2021
Revenue:
Product sales	$	25,298			$	22,706			$	8,747			$	73,721			$	27,477
Product engineering services		1,113				3,954				4,230				7,741				9,579
IP license		11,115				5,022				5,722				23,309				17,273
IP license engineering services		—				118				1,051				1,706				4,368
Total revenue		37,526				31,800				19,750				106,477				58,697
Cost of revenue:
Cost of product sales revenue		13,646				12,230				5,135				40,082				16,071
Cost of product engineering services revenue		111				410				874				1,918				3,168
Cost of IP license engineering services revenue		—				48				377				462				1,180
Total cost of revenue		13,757				12,688				6,386				42,462				20,419
Gross profit		23,769				19,112				13,364				64,015				38,278
Operating expenses:
Research and development		15,461				10,995				8,209				47,949				34,845
Selling, general and administrative		11,507				8,568				7,065				34,900				28,667
Impairment charges		3,134				—				—				3,134				—
Total operating expenses		30,102				19,563				15,274				85,983				63,512
Operating loss		(6,333	)			(451	)			(1,910	)			(21,968	)			(25,234	)
Other income (expense), net		(175	)			(80	)			(22	)			(245	)			(62	)
Loss before income taxes		(6,508	)			(531	)			(1,932	)			(22,213	)			(25,296	)
Provision (benefit) for income taxes		(1,153	)			(387	)			1,154				(37	)			2,215
Net loss	$	(5,355	)		$	(144	)		$	(3,086	)		$	(22,176	)		$	(27,511	)
Net loss per share:
Basic and diluted	$	(0.04	)		$	—			$	(0.05	)		$	(0.25	)		$	(0.40	)
Weighted-average shares used in computing net loss per share:
Basic and diluted		144,501				73,815				67,719				88,398				69,099

Credo Technology Group Holding Ltd
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

		April 30, 2022				April 30, 2021
Assets
Current Assets:
Cash and cash equivalents		$	259,322			$	103,757
Accounts receivable			29,524				13,645
Inventories			27,337				7,104
Contract assets			10,071				4,562
Prepaid expenses and other current assets			5,923				8,731
Total current assets			332,177				137,799
Property and equipment, net			21,844				14,231
Right of use assets			16,954				—
Other non-current assets			4,714				3,460
Total assets		$	375,689			$	155,490
Liabilities, Convertible Preferred Shares and Shareholders' Equity (Deficit)
Current Liabilities:
Accounts payable		$	8,487			$	3,590
Accrued compensation and benefits			4,713				1,549
Accrued expenses and other current liabilities			12,063				3,277
Deferred revenue			1,234				4,116
Total current liabilities			26,497				12,532
Non-current operating lease liabilities			14,809				—
Other non-current liabilities			220				424
Total liabilities			41,526				12,956
Convertible preferred shares			—				197,965
Shareholders' equity (deficit):
Ordinary shares			7				3
Additional paid in capital			424,562				12,592
Accumulated other comprehensive income			23				227
Accumulated deficit			(90,429	)			(68,253	)
Total shareholders' equity (deficit)			334,163				(55,431	)
Total liabilities, convertible preferred shares and shareholders' equity (deficit)		$	375,689			$	155,490

Credo Technology Group Holding Ltd
Reconciliations from GAAP to Non-GAAP (Unaudited)
(In thousands, except percentages and per share amounts)

	Three Months Ended												Year Ended
	April 30, 2022				January 31, 2022				April 30, 2021				April 30, 2022				April 30, 2021
GAAP gross profit	$	23,769			$	19,112			$	13,364			$	64,015			$	38,278
Reconciling items:
Warrant contra revenue		233				407				—				640				—
Share-based compensation		40				46				46				220				183
Total reconciling items:		273				453				46				860				183
Non-GAAP gross profit	$	24,042			$	19,565			$	13,410			$	64,875			$	38,461
GAAP gross margin		63.3	%			60.1	%			67.7	%			60.1	%			65.2	%
Non-GAAP gross margin		63.7	%			60.7	%			67.9	%			60.6	%			65.5	%
Total GAAP operating expenses	$	30,102			$	19,563			$	15,274			$	85,983			$	63,512
Reconciling item:
Share-based compensation		(5,328	)			(1,392	)			(872	)			(8,968	)			(13,723	)
Impairment charges		(3,134	)			—				—				(3,134	)			—
Total reconciling items:		(8,462	)			(1,392	)			(872	)			(12,102	)			(13,723	)
Total Non-GAAP operating expenses	$	21,640			$	18,171			$	14,402			$	73,881			$	49,789
GAAP net loss	$	(5,355	)		$	(144	)		$	(3,086	)		$	(22,176	)		$	(27,511	)
Reconciling items:
Warrant contra revenue		233				407				—				640				—
Share-based compensation		5,368				1,438				918				9,188				13,906
Impairment charges		3,134				—				—				3,134				—
Pre-tax total reconciling items		8,735				1,845				918				12,962				13,906
Other income tax effects and adjustments		(611	)			700				(121	)			(1,049	)			(300	)
Non-GAAP net income/(loss)	$	2,769			$	2,401			$	(2,289	)		$	(10,263	)		$	(13,905	)
GAAP weighted average shares - basic		144,501				73,815				67,719				88,398				69,099
GAAP weighted average shares - diluted		144,501				73,815				67,719				88,398				69,099
Non-GAAP adjustment		13,732				10,373				—				—				—
Non-GAAP weighted average shares - diluted		158,233				84,187				67,719				88,398				69,099
GAAP diluted net loss per share	$	(0.04	)		$	—			$	(0.05	)		$	(0.25	)		$	(0.40	)
Non-GAAP diluted net income/(loss) per share	$	0.02			$	0.03			$	(0.03	)		$	(0.12	)		$	(0.20	)

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 30, 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		$	27.5			$	29.5
Reconciling item:
Share-based compensation			6.0				6.0
Total reconciling items:			6.0				6.0
Total Non-GAAP operating expenses		$	21.5			$	23.5

FAQ

What were the Q4 2022 financial results for CRDO?

CRDO reported Q4 revenue of $37.5 million, a 90% increase YoY, with a GAAP net loss of $5.4 million.

What is the fiscal year 2022 revenue for Credo Technology?

Total fiscal year revenue for 2022 was $106.5 million, growing by 80% from the previous year.

What is the revenue outlook for Q1 FY2023 for CRDO?

CRDO expects Q1 FY2023 revenue between $43.5 million and $47.5 million, indicating a potential 324% year-over-year increase.

What are the GAAP earnings per share for CRDO in Q4 2022?

CRDO reported a GAAP net loss per share of $0.04 for Q4 2022.