Credo Technology Group Holding Ltd Reports Second Quarter of Fiscal Year 2023 Financial Results

November 30, 2022 at 4:05 PM EST

SAN JOSE, Calif., Nov. 30, 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 second quarter of fiscal year 2023, ended October 29, 2022.

Q2 FY23 Financial Highlights

  • Revenue of $51.4 million, grew by 11% quarter over quarter
  • GAAP gross margin of 54.4% and non-GAAP gross margin of 54.9%  
  • GAAP operating expenses of $29.7 million and non-GAAP operating expenses of $25.0 million
  • GAAP net loss of $3.4 million and non-GAAP net income of $2.4 million
  • GAAP net loss per share of $0.02 and non-GAAP diluted net income per share of $0.02
  • Ending cash and short-term investment balance of $240.5 million

Management Commentary

Bill Brennan, Credo’s President and Chief Executive Officer, stated, “In the fiscal quarter ended October 29, 2022, Credo achieved record revenue of $51.4 million, an increase of 94% year over year and 11% compared to the prior quarter. Due to our current solutions in production, near and mid-term opportunities we are deeply engaged in, and longer-term opportunities in emerging markets, we remain highly optimistic about our future prospects. In our fiscal 2023 we continue to expect we will achieve at least $200 million in revenue for the full fiscal year, representing more than 88% growth compared to fiscal 2022.”

Third Quarter of Fiscal 2023 Financial Outlook

  • Revenue is expected to be between $54.0 million to $56.0 million, up 73% year over year at the midpoint
  • GAAP gross margin is expected to be between 58.7%-60.7% and non-GAAP gross margin is expected to be between 59.0%-61.0%
  • GAAP operating expenses are expected to be between $30.2 million to $32.2 million and non-GAAP operating expenses are expected to be between $25.0 million to $27.0 million

Conference Call

Credo will conduct a conference call on Wednesday, November 30, 2022, at 2:00 p.m. Pacific Time to discuss its financial results for the second quarter of fiscal year 2023, ended October 29, 2022. Interested parties may join the conference call beginning at 2:00 p.m. Pacific Time on Wednesday, November 30, 2022 by registering online at 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 A replay of the webcast will be available via the web at

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 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.

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 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. 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 Six Months Ended
29, 2022
 July 30,
31, 2021
29, 2022
31, 2021
Product sales$44,349  $35,263  $18,454  $79,612  $25,717 
Product engineering services 3,750   824   1,355   4,574   2,674 
IP license 2,084   10,380   6,142   12,464   7,172 
IP license engineering services 1,186      476   1,186   1,588 
Total revenue 51,369   46,467   26,427   97,836   37,151 
Cost of revenue:         
Cost of product sales revenue 22,658   17,525   9,849   40,183   14,206 
Cost of product engineering services revenue 418   100   532   518   1,397 
Cost of IP license revenue    1,179      1,179    
Cost of IP license engineering services revenue 334      92   334   414 
Total cost of revenue 23,410   18,804   10,473   42,214   16,017 
Gross profit 27,959   27,663   15,954   55,622   21,134 
Operating expenses:         
Research and development 18,158   16,683   11,800   34,841   21,493 
Selling, general and administrative 11,540   11,198   7,708   22,738   14,825 
Total operating expenses 29,698   27,881   19,508   57,579   36,318 
Operating loss (1,739)  (218)  (3,554)  (1,957)  (15,184)
Other expense, net (692)  (220)  55   (912)  10 
Loss before income taxes (2,431)  (438)  (3,499)  (2,869)  (15,174)
Provision (benefit) for income taxes 929   (365)  601   564   1,503 
Net loss$(3,360) $(73) $(4,100) $(3,433) $(16,677)
Net loss per share:         
Basic and diluted$(0.02) $  $(0.06) $(0.02) $(0.24)
Weighted-average shares used in computing net loss per share:         
Basic and diluted 146,012   145,077   69,094   145,545   68,751 

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

  October 29, 2022 April 30, 2022
Current Assets:    
Cash and cash equivalents $190,542  $259,322 
Short-term investments  50,000    
Accounts receivable  51,768   29,524 
Inventories  47,829   27,337 
Contract assets  6,434   10,071 
Prepaid expenses and other current assets  3,234   5,923 
Total current assets  349,807   332,177 
Property and equipment, net  40,664   21,844 
Right of use assets  16,132   16,954 
Other non-current assets  7,429   4,714 
Total assets $414,032  $375,689 
Liabilities and Shareholders' Equity
Current Liabilities:    
Accounts payable $23,273  $8,487 
Accrued compensation and benefits  5,373   4,713 
Accrued expenses and other current liabilities  19,447   12,063 
Deferred revenue  1,389   1,234 
Total current liabilities  49,482   26,497 
Non-current operating lease liabilities  14,081   14,809 
Other non-current liabilities  6,365   220 
Total liabilities  69,928   41,526 
Shareholders' equity:    
Ordinary shares  7   7 
Additional paid in capital  438,352   424,562 
Accumulated other comprehensive income  (393)  23 
Accumulated deficit  (93,862)  (90,429)
Total shareholders' equity  344,104   334,163 
Total liabilities and shareholders' equity $414,032  $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 Six Months Ended
29, 2022
 July 30,
31, 2021
29, 2022
31, 2021
GAAP gross profit$27,959  $27,663  $15,954  $55,622  $21,134 
Reconciling items:         
Warrant contra revenue 247   388      635    
Share-based compensation 149   304   47   453   134 
Total reconciling items: 396   692   47   1,088   134 
Non-GAAP gross profit (A)$28,355  $28,355  $16,001  $56,710  $21,268 
GAAP gross margin 54.4%  59.5%  60.4%  56.9%  56.9%
Non-GAAP gross margin 54.9%  60.5%  60.5%  57.6%  57.2%
Total GAAP operating expenses$29,698  $27,881  $19,508  $57,579  $36,318 
Reconciling item:         
Share-based compensation (4,742)  (5,242)  (1,260)  (9,984)  (2,248)
Total reconciling items: (4,742)  (5,242)  (1,260)  (9,984)  (2,248)
Total Non-GAAP operating expenses (B)$24,956  $22,639  $18,248  $47,595  $34,070 
GAAP operating loss$(1,739) $(218) $(3,554) $(1,957) $(5,184)
Non-GAAP operating income (loss) (A-B)$3,399  $5,716  $(2,247) $9,115  $(12,802)
GAAP operating loss margin(3.4)% (0.5)% (13.4)% (2.0)% (40.9)%
Non-GAAP operating income (loss) margin 6.6%  12.3% (8.5)%  9.3% (34.5)%
GAAP net loss$(3,360) $(73) $(4,100) $(3,433) $(16,677)
Reconciling items:         
Warrant contra revenue 247   388      635    
Share-based compensation 4,891   5,546   1,307   10,437   2,382 
Pre-tax total reconciling items 5,138   5,934   1,307   11,072   2,382 
Other income tax effects and adjustments 644   (424)  (521)  220   (1,138)
Non-GAAP net income/(loss)$2,422  $5,437  $(3,314) $7,859  $(15,433)
GAAP weighted average shares - basic 146,012   145,077   69,094   145,545   68,751 
GAAP weighted average shares - diluted 146,012   145,077   69,094   145,545   68,751 
Non-GAAP adjustment 12,789   13,256      13,073    
Non-GAAP weighted average shares - diluted 158,801   158,333   69,094   158,617   68,751 
GAAP diluted net loss per share$(0.02) $  $(0.06) $(0.02) $(0.24)
Non-GAAP diluted net income/(loss) per share$0.02  $0.03  $(0.05) $0.05  $(0.22)

Credo Technology Group Holding Ltd
Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates
(In millions, except percentages)

  Three Months Ended
January 28, 2023
  Low High
GAAP gross margin  58.7%  60.7%
Reconciling items:    
Warrant contra revenue  0.2%  0.2%
Share-based compensation  0.1%  0.1%
Total reconciling items:  0.3%  0.3%
Non-GAAP gross margin  59.0%  61.0%
Total GAAP operating expenses $30.2  $32.2 
Reconciling item:    
Share-based compensation  5.2   5.2 
Total reconciling items:  5.2   5.2 
Total Non-GAAP operating expenses $25.0  $27.0