Credo Technology Group Holding Ltd Reports Fourth Quarter and Fiscal Year 2024 Financial Results

Rhea-AI Summary

Credo Technology Group Holding (Nasdaq: CRDO) announced its Q4 and full fiscal year 2024 financial results. The company reported a significant revenue growth of 89.4% year over year, reaching $60.8 million for Q4. GAAP gross margin was 65.8%, and non-GAAP gross margin was 66.1%. GAAP operating expenses stood at $47.8 million, while non-GAAP operating expenses were $32.7 million. Q4 saw a GAAP net loss of $10.5 million, but a non-GAAP net income of $11.8 million. GAAP diluted net loss per share was $0.06 and non-GAAP diluted net income per share was $0.07. The company closed the fiscal year with a cash and short-term investment balance of $410 million. Looking ahead, Credo expects Q1 FY 2025 revenue to be between $58 million and $61 million, with GAAP gross margin between 62.3% and 64.3% and non-GAAP gross margin between 63.0% and 65.0%.

Positive

• Revenue grew by 89.4% year over year to $60.8 million in Q4.
• GAAP gross margin stood at 65.8%, and non-GAAP gross margin was 66.1%.
• Non-GAAP net income was $11.8 million in Q4.
• Record annual revenue of $193.0 million for fiscal year 2024.
• Strong cash and short-term investment balance of $410 million by year-end.
• Expected Q1 FY 2025 revenue range is between $58 million and $61 million.

Negative

• GAAP net loss amounted to $10.5 million for Q4.
• GAAP diluted net loss per share was $0.06.
• GAAP operating expenses were high at $47.8 million.
• Anticipated Q1 FY 2025 GAAP operating expenses between $49.4 million and $51.4 million.

Insights

Financial Analyst

Credo Technology Group Holding Ltd's financial results for Q4 and the fiscal year 2024 reveal significant growth and provide insightful details for investors. The revenue increase of 89.4% year-over-year to $60.8 million showcases strong market performance, likely propelled by heightened demand for their AI infrastructure solutions. Additionally, achieving a GAAP gross margin of 65.8% and a non-GAAP gross margin of 66.1% demonstrates effective cost management, which is impressive for a tech company focusing on high-speed connectivity solutions.

The divergence between GAAP and non-GAAP metrics, with a GAAP net loss of $10.5 million transitioning to a non-GAAP net income of $11.8 million, is noteworthy. This indicates significant adjustments due to share-based compensation and other factors, which investors should scrutinize. Non-GAAP measures often paint a more favorable picture but can obscure underlying issues if not carefully analyzed.

On the liquidity front, the ending cash and short-term investment balance of $410 million provides a robust cushion, ensuring operational and strategic flexibility. The forward-looking guidance also appears cautiously optimistic, with revenue expectations between $58 million and $61 million for Q1 2025, indicating sustained demand.

Investors should weigh the strong growth metrics and positive outlook against the net losses under GAAP and scrutinize the company's ability to maintain these margins and manage operating expenses effectively in the long term.

Market Research Analyst

From a market perspective, Credo's performance aligns with broader trends in the tech industry, particularly in the AI and high-speed connectivity sectors. The substantial revenue growth reflects the increasing adoption of AI technologies across various industries, which require advanced connectivity solutions like those provided by Credo. The management's commentary on future demand for AI infrastructure further supports this trend, as companies continue to invest in AI capabilities to enhance their competitive edge.

The company's focus on energy-efficient solutions is another critical point, aligning with growing market demand for sustainable technologies. This not only positions Credo favorably in the eyes of environmentally conscious customers but also can lead to cost savings and regulatory advantages over time.

However, the competitive landscape remains intense, with numerous players vying for market share in AI and connectivity solutions. Credo's ability to innovate and maintain a technological edge will be crucial. Investors should monitor developments in this area and assess how Credo's offerings compare with those of competitors.

Looking ahead, the forecasted revenue and margins for Q1 2025 suggest a stable demand environment. Still, potential investors should remain vigilant about market dynamics, including technological advancements and shifts in customer preferences.

SAN JOSE, Calif., May 29, 2024 (GLOBE NEWSWIRE) -- Credo Technology Group Holding Ltd (Nasdaq: CRDO) (“Credo”), an innovator in providing secure, high-speed connectivity solutions that deliver improved energy efficiency, today reported financial results for the fourth quarter and full fiscal year 2024, ended April 27, 2024.

Fourth Quarter of Fiscal Year 2024 Financial Highlights

• Revenue of $60.8 million grew by 89.4% year over year
• GAAP gross margin of 65.8% and non-GAAP gross margin of 66.1%  
• GAAP operating expenses of $47.8 million and non-GAAP operating expenses of $32.7 million
• GAAP net loss of $10.5 million and non-GAAP net income of $11.8 million
• GAAP diluted net loss per share of $0.06 and non-GAAP diluted net income per share of $0.07
• Ending cash and short-term investment balance of $410.0 million

Management Commentary

Bill Brennan, Credo’s President and Chief Executive Officer, stated, “In fiscal 2024, Credo achieved record revenue of $193.0M, with strong contributions from each of our product and license categories. The Company’s success in fiscal 2024 was primarily driven by our customers’ AI deployments. Looking forward, we anticipate accelerating demand for AI infrastructure. We believe customers will continue to choose Credo for their most complex connectivity needs, due to our customer centric focus on innovative, high-performance and energy-efficient solutions.”

First Quarter of Fiscal Year 2025 Financial Outlook

• Revenue is expected to be between $58.0 million and $61.0 million
• GAAP gross margin is expected to be between 62.3% and 64.3%, and non-GAAP gross margin is expected to be between 63.0% and 65.0%
• GAAP operating expenses are expected to be between $49.4 million and $51.4 million, and non-GAAP operating expenses are expected to be between $35.0 million and $37.0 million
  

Webcast and Conference Call Information

Credo will conduct a conference call on Wednesday, May 29, 2024, at 2:00 p.m. Pacific Time to discuss its financial results for the fourth quarter and fiscal year 2024, ended April 27, 2024. Interested parties may join the conference call by registering online at https://register.vevent.com/register/BI4d5e6455e2a74e7cb96ee9a521f664fb. 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; 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 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 Ended												Year Ended
	April 27, 2024				January 27, 2024				April 29, 2023				April 27, 2024				April 29, 2023
Revenue:
Product sales	$	40,798			$	39,975			$	23,830			$	145,048			$	141,475
Product engineering services		3,341				11,830				2,571				19,898				10,780
IP license		16,643				1,253				5,687				28,024				31,939
Total revenue		60,782				53,058				32,088				192,970				184,194
Cost of revenue:
Cost of product sales revenue		20,372				18,912				13,127				70,498				75,143
Cost of product engineering services revenue		290				1,471				226				2,225				972
Cost of IP license revenue		154				117				150				816				1,885
Total cost of revenue		20,816				20,500				13,503				73,539				78,000
Gross profit		39,966				32,558				18,585				119,431				106,194
Operating expenses:
Research and development		26,921				24,236				21,403				95,531				76,774
Selling, general and administrative		20,161				14,233				13,574				60,193				48,248
Impairment charges		765				—				—				765				2,407
Total operating expenses		47,847				38,469				34,977				156,489				127,429
Operating loss		(7,881	)			(5,911	)			(16,392	)			(37,058	)			(21,235	)
Other income, net		5,163				4,291				1,703				14,313				3,321
Loss before income taxes		(2,718	)			(1,620	)			(14,689	)			(22,745	)			(17,914	)
Provision (benefit) for income taxes		7,759				(2,048	)			1,248				5,624				(1,367	)
Net income (loss)	$	(10,477	)		$	428			$	(15,937	)		$	(28,369	)		$	(16,547	)
Net income (loss) per share:
Basic	$	(0.06	)		$	—			$	(0.11	)		$	(0.18	)		$	(0.11	)
Diluted	$	(0.06	)		$	—			$	(0.11	)		$	(0.18	)		$	(0.11	)
Weighted average shares used in computing net income (loss) per share:
Basic		163,677				157,155				148,212				155,091				146,556
Diluted		163,677				167,160				148,212				155,091				146,556

Credo Technology Group Holding Ltd
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
	April 27, 2024				April 29, 2023
Assets
Current assets:
Cash and cash equivalents	$	66,942			$	108,583
Short-term investments		343,061				109,228
Accounts receivable		59,662				49,541
Inventories		25,907				46,023
Contract assets		21,562				9,445
Prepaid expenses and other current assets		13,131				5,412
Total current assets		530,265				328,232
Property and equipment, net		43,665				40,222
Right-of-use assets		13,077				14,860
Other non-current assets		14,925				13,975
Total assets	$	601,932			$	397,289
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	13,417			$	6,067
Accrued compensation and benefits		9,000				6,471
Accrued expenses and other current liabilities		18,301				14,454
Deferred revenue		3,902				4,040
Total current liabilities		44,620				31,032
Non-current operating lease liabilities		11,133				12,869
Other non-current liabilities		5,981				5,753
Total liabilities		61,734				49,654
Shareholders' equity:
Ordinary shares		8				7
Additional paid-in capital		676,054				454,795
Accumulated other comprehensive loss		(519	)			(191	)
Accumulated deficit		(135,345	)			(106,976	)
Total shareholders' equity		540,198				347,635
Total liabilities and shareholders' equity	$	601,932			$	397,289

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 27, 2024				January 27, 2024				April 29, 2023				April 27, 2024				April 29, 2023
GAAP gross profit	$	39,966			$	32,558			$	18,585			$	119,431			$	106,194
Reconciling item:
Share-based compensation		234				458				83				1,131				634
Total reconciling item		234				458				83				1,131				634
Non-GAAP gross profit (A)	$	40,200			$	33,016			$	18,668			$	120,562			$	106,828
GAAP gross margin		65.8	%			61.4	%			57.9	%			61.9	%			57.7	%
Non-GAAP gross margin		66.1	%			62.2	%			58.2	%			62.5	%			58.0	%
Total GAAP operating expenses	$	47,847			$	38,469			$	34,977			$	156,489			$	127,429
Reconciling items:
Share-based compensation		(14,344	)			(7,874	)			(7,827	)			(37,891	)			(22,882	)
Impairment and related charges		(765	)			—				—				(765	)			(4,151	)
Total reconciling items		(15,109	)			(7,874	)			(7,827	)			(38,656	)			(27,033	)
Total Non-GAAP operating expenses (B)	$	32,738			$	30,595			$	27,150			$	117,833			$	100,396
GAAP operating loss	$	(7,881	)		$	(5,911	)		$	(16,392	)		$	(37,058	)		$	(21,235	)
Non-GAAP operating income (loss) (A-B)	$	7,462			$	2,421			$	(8,482	)		$	2,729			$	6,432
GAAP operating loss margin	(13.0)%				(11.1)%				(51.1)%				(19.2)%				(11.5)%
Non-GAAP operating income (loss) margin		12.3	%			4.6	%		(26.4)%					1.4	%			3.5	%
GAAP net income (loss)	$	(10,477	)		$	428			$	(15,937	)		$	(28,369	)		$	(16,547	)
Reconciling items:
Share-based compensation		14,578				8,332				7,910				39,022				23,516
Impairment and related charges		765				—				—				765				4,151
Pre-tax total reconciling items		15,343				8,332				7,910				39,787				27,667
Other income tax effects and adjustments		6,940				(2,438	)			2,299				3,152				(2,433	)
Non-GAAP net income (loss)	$	11,806			$	6,322			$	(5,728	)		$	14,570			$	8,687
GAAP weighted average shares - basic		163,677				157,155				148,212				155,091				146,556
GAAP weighted average shares - diluted		163,677				167,160				148,212				155,091				146,556
Non-GAAP adjustment		15,463				4,218				—				15,053				14,427
Non-GAAP weighted average shares - diluted		179,140				171,378				148,212				170,143				160,983
GAAP diluted net income (loss) per share	$	(0.06	)		$	—			$	(0.11	)		$	(0.18	)		$	(0.11	)
Non-GAAP diluted net income (loss) per share	$	0.07			$	0.04			$	(0.04	)		$	0.09			$	0.05

Credo Technology Group Holding Ltd
Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates
(In millions, except percentages)
	Three Months Ended August 3, 2024
	Low				High
GAAP gross margin		62.3	%			64.3	%
Reconciling item:
Share-based compensation		0.7	%			0.7	%
Total reconciling item		0.7	%			0.7	%
Non-GAAP gross margin		63.0	%			65.0	%
Total GAAP operating expenses	$	49.4			$	51.4
Reconciling item:
Share-based compensation		14.4				14.4
Total reconciling item		14.4				14.4
Total non-GAAP operating expenses	$	35.0			$	37.0

FAQ

What was Credo's revenue growth for Q4 of fiscal year 2024?

Credo reported an 89.4% year-over-year revenue growth, reaching $60.8 million for Q4 of fiscal year 2024.

What is Credo's stock symbol?

Credo's stock symbol is CRDO.

What were Credo's GAAP and non-GAAP gross margins for Q4 fiscal year 2024?

For Q4 fiscal year 2024, Credo's GAAP gross margin was 65.8%, and non-GAAP gross margin was 66.1%.

What were Credo's GAAP net loss and non-GAAP net income for Q4 fiscal year 2024?

In Q4 fiscal year 2024, Credo had a GAAP net loss of $10.5 million and a non-GAAP net income of $11.8 million.

What is the expected Q1 FY 2025 revenue for Credo?

Credo expects its Q1 FY 2025 revenue to be between $58 million and $61 million.