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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number: 001-41249
Credo Technology Group Holding Ltd
(Exact name of registrant as specified in its charter)
Cayman IslandsN/A
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
c/o Maples Corporate Services, Limited,
PO Box 309, Ugland House
Grand Cayman, KY1-1104, Cayman Islands
N/A
(Address of principal executive offices)(Zip Code)
(408) 664-9329
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary shares, par value $0.00005 per shareCRDOThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filer  ☒ Smaller reporting company
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  ☐    No 

The registrant had 144,803,600 ordinary shares outstanding as of March 4, 2022.



Table of Contents
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2


Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements relating to our expectations, projections, beliefs, and prospects, which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “might”, “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they may relate to future expectations around growth, strategy and anticipated trends in our business, contain projections of future results of operations or financial condition or state other “forward-looking” information. These statements are only predictions based on our current expectations, estimates, assumptions, and projections about future events and are applicable only as of the dates of such statements. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors” included in our prospectus (the “Prospectus”) dated January 26, 2022 as filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, (the “Securities Act”), relating to our Registration Statement on Form S-1 (File No. 333-261982).
The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or will occur. Forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations, except as required by applicable law.
3


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Credo Technology Group Holding Ltd
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except per share amounts)
January 31,
2022
April 30,
2021
Assets
Current Assets:
Cash and cash equivalents$240,529 $103,757 
Accounts receivable21,693 13,645 
Inventories26,122 7,104 
Contract assets9,801 4,562 
Prepaid expenses and other current assets3,648 8,731 
Total current assets 301,793 137,799 
Property and equipment, net23,630 14,231 
Right of use assets3,618  
Other non-current assets5,185 3,460 
Total assets $334,226 $155,490 
Liabilities, Convertible Preferred Shares and Shareholders' Equity (Deficit)
Current Liabilities:
Accounts payable$7,017 $3,590 
Accrued compensation and benefits2,317 1,549 
Accrued expenses and other current liabilities10,322 3,277 
Deferred revenue6,184 4,116 
Total current liabilities 25,840 12,532 
Non-current operating lease liabilities2,274  
Other non-current liabilities423 424 
Total liabilities 28,537 12,956 
Commitments and contingencies (Note 7)
Convertible preferred shares, $0.00005 par value; 50,000 shares authorized; no shares issued and outstanding at January 31, 2022; and 50,809 shares authorized; 50,809 shares issued and outstanding at April 30, 2021 (Liquidation preference of $198,912 as of April 30, 2021)
 197,965
Shareholders' equity (deficit):
Ordinary shares, $0.00005 par value; 1,000,000 shares authorized; 141,020 shares issued and outstanding at January 31, 2022; and 136,658 shares authorized; 68,282 shares issued and outstanding at April 30, 2021
73
Additional paid in capital390,734 12,592 
Accumulated other comprehensive income22 227 
Accumulated deficit(85,074)(68,253)
Total shareholders' equity (deficit)305,689 (55,431)
Total liabilities, convertible preferred shares and shareholders' equity (deficit)$334,226 $155,490 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Credo Technology Group Holding Ltd
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
Three Months Ended January 31,Nine Months Ended January 31,
2022202120222021
Revenue:
Product sales$22,706 $6,178 $48,423 $18,730 
Product engineering services3,954 3,010 6,628 5,349 
IP license5,022 3,154 12,194 11,551 
IP license engineering services118 1,116 1,706 3,317 
Total revenue31,800 13,458 68,951 38,947 
Cost of revenue:
Cost of product sales revenue12,230 4,094 26,436 10,936 
Cost of product engineering services revenue410 1,023 1,807 2,294 
Cost of IP license engineering services revenue48 270 462 803 
Total cost of revenue12,688 5,387 28,705 14,033 
Gross profit19,112 8,071 40,246 24,914 
Operating expenses:
Research and development10,995 6,993 32,488 26,636 
Selling, general and administrative8,568 5,872 23,393 21,602 
Total operating expenses19,563 12,865 55,881 48,238 
Operating loss(451)(4,794)(15,635)(23,324)
Other income (expense), net(80)49 (70)(40)
Loss before income taxes(531)(4,745)(15,705)(23,364)
Provision (benefit) for income taxes(387)372 1,116 1,061 
Net loss$(144)$(5,117)$(16,821)$(24,425)
Net loss per share:
Basic and diluted$ $(0.08)$(0.24)$(0.24)$(0.35)
Weighted-average shares used in computing net loss per share:
Basic and diluted73,815 67,429 70,439 69,418 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Credo Technology Group Holding Ltd
Condensed Consolidated Statements of Comprehensive Loss
(unaudited, in thousands)
Three Months Ended January 31,Nine Months Ended January 31,
2022202120222021
Net loss$(144)$(5,117)$(16,821)$(24,425)
Other comprehensive income (loss):
Foreign currency translation gain (loss)(232)143 (205)413 
Total comprehensive loss$(376)$(4,974)$(17,026)$(24,012)
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


Credo Technology Group Holding Ltd
Condensed Consolidated Statements of Convertible Preferred Shares and Shareholders’ Equity (Deficit)
(unaudited, in thousands)
Convertible Preferred SharesOrdinary SharesAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Shareholders’ Equity (Deficit)
Number of SharesAmountNumber of SharesAmount
Balances at April 30, 202150,809$197,965 68,282$3 $12,592 $227 $(68,253)$(55,431)
Issuance of Series D+ convertible preferred shares, net of issuance costs1,2517,245 — — — — — 
Ordinary shares issued under employee share plan— 554— 461 — — 461 
Share-based compensation— — 1,075 — — 1,075 
Total comprehensive loss— — — (5)(12,577)(12,582)
Balances at July 31, 202152,060$205,210 68,836$3 $14,128 $222 $(80,830)$(66,477)
Ordinary shares issued under employee share plan
— 667— 587 — — 587 
Share-based compensation
— — 1,307 — — 1,307 
Total comprehensive loss— — — 32 (4,100)(4,068)
Balances at October 31, 202152,060$205,210 69,503$3 $16,022 $254 $(84,930)$(68,651)
Conversion of preferred shares into ordinary shares(52,060)(205,210)52,0603 205,207 — — 205,210 
Issuance of common stock in connection with initial public offering, net of offering costs, underwriting discounts and commissions— 18,3841 166,593 — — 166,594 
Ordinary shares issued under employee share plan— 1,073— 1,067 — — 1,067 
Share-based compensation— — 1,438 — — 1,438 
Warrant contra revenue— — 407 — — 407 
Total comprehensive loss— — — (232)(144)(376)
Balances at January 31, 2022$ 141,020$7 $390,734 $22 $(85,074)$305,689 
7



Convertible Preferred SharesOrdinary SharesAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Shareholders’ Deficit
Number of SharesAmountNumber of SharesAmount
Balances at April 30, 202032,245$98,617 72,545$4 $9,506 $(151)$(18,767)$(9,408)
Issuance of Series D convertible preferred shares, net of issuance costs9,93449,481 — — — — — 
Ordinary shares issued under employee share plan— 352— 237 — — 237 
Share-based compensation— — 391 — — 391 
Total comprehensive loss— — — 74 (4,840)(4,766)
Balances at July 31, 202042,179$148,098 72,898$4 $10,134 $(77)$(23,607)$(13,546)
Ordinary shares issued under employee share plan— 1,164— 558 — — 558 
Share repurchase— (6,876)(1)(934)(21,973)(22,908)
Share-based compensation— — 414 — — 414 
Total comprehensive loss— — — 196 (14,468)(14,272)
Balances at October 31, 202042,179$148,098 67,186$3 $10,172 $119 $(60,048)$(49,754)
Issuance of Series D+ convertible preferred shares, net of issuance costs8,63049,955 — — — — — 
Ordinary shares issued under employee share plan— 678— 353 — — 353 
Share-based compensation— — 847 — — 847 
Total comprehensive loss— — — 143 (5,117)(4,974)
Balances at January 31, 202150,809$198,053 67,864$3 $11,372 $262 $(65,165)$(53,528)
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


Credo Technology Group Holding Ltd
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Nine Months Ended January 31,
20222021
Cash flows from operating activities:
Net loss$(16,821)$(24,425)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization3,262 1,546 
Share-based compensation3,820 1,652 
Warrant contra revenue407  
Write-downs for excess and obsolete inventory1,256 1,028 
Changes in operating assets and liabilities:
Accounts receivable(8,049)5,167 
Inventories(20,274)(4,348)
Prepaid and other current assets(585)(807)
Other non-current assets(2,164)(434)
Accounts payable3,245 911 
Accrued expenses, compensation and other liabilities5,890 (7,932)
Deferred revenue, net of contract assets(3,179)(3,207)
Net cash used in operating activities (33,192)(30,849)
Cash flows from investing activities:
Purchases of property and equipment(7,932)(6,532)
Net cash used in investing activities (7,932)(6,532)
Cash flows from financing activities:
Proceeds from issuance of ordinary shares upon initial public offering, net of underwriter discounts171,889  
Payments for deferred offering costs(3,056) 
Proceeds from employee stock options exercises1,936 1,146 
Proceeds from issuance of convertible preferred shares, net of issuance costs7,245 99,436 
Payments for repurchase of ordinary shares (22,908)
Net cash provided by financing activities178,014 77,674 
Effect of exchange rate changes on cash(118)405 
Net increase in cash and cash equivalents136,772 40,698 
Cash and cash equivalents at beginning of the period103,757 73,908 
Cash and cash equivalents at end of the period$240,529 $114,606 
Supplemental cash flow information:
Property and equipment received and accrued in accounts payable$200 $134 
Conversion of convertible preferred share into ordinary share upon initial public offering$205,210 $ 
Deferred offering costs included in accounts payable and accrued expenses$2,239 $ 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of Business and Basis of Presentation
Credo Technology Group Holding Ltd was formed under the laws of the Cayman Islands in September 2014. Credo Technology Group Holding Ltd directly owns Credo Technology Group Ltd., which owns, directly and indirectly, all of the shares of its subsidiaries in mainland China, Hong Kong, and the United States (“U.S.”). References to the “Company” in these notes refer to Credo Technology Group Holding Ltd and its subsidiaries on a consolidated basis, unless otherwise specified.
The Company is an innovator in providing secure, high-speed connectivity solutions that deliver improved power and cost efficiency. The Company’s connectivity solutions are optimized for optical and electrical Ethernet applications, including the emerging 100G, 200G, 400G and 800G markets. The Company’s products are based on its Serializer/Deserializer (“SerDes”) and Digital Signal Processor (“DSP”) technologies. The Company’s product families include integrated circuits (“ICs”), Active Electrical Cables (“AECs”) and SerDes Chiplets. The Company’s intellectual property (“IP”) solutions consist primarily of SerDes IP licensing.
The ongoing COVID-19 pandemic has significantly impacted global economic activity and caused business disruption worldwide. The extent and nature of the impact of the COVID-19 pandemic on the Company’s business and financial performance will be influenced by a variety of factors, including the duration and spread of the pandemic, as well as future spikes of COVID-19 infections or the emergence of additional COVID-19 variants that may result in additional preventative and mitigative measures. These factors may affect the timing and magnitude of demand from customers and the availability of portions of the supply chain, logistical services and component supply and may have a material net negative impact on the Company’s business and financial results.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted as permitted by the SEC. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes as of and for the years ended April 30, 2021 and 2020 included in the Company’s final prospectus dated January 26, 2022 (the “Prospectus”) as filed with the SEC on January 27, 2022 pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”). The unaudited condensed consolidated financial statements include all adjustments, including normal recurring adjustments and other adjustments, that are considered necessary for fair presentation of the Company’s financial position and results of operations. All inter-company accounts and transactions have been eliminated. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for the entire year.
Initial Public Offering
On January 31, 2022, the Company completed an initial public offering (the “IPO”) of 20,000,000 of its ordinary shares, par value $0.00005 per share (the “Shares”), at a public offering price of $10.00 per share. The Company sold 18,383,800 Shares and certain existing shareholders sold an aggregate of 1,616,200 Shares. The Company received net proceeds of $171.9 million after deducting underwriting discounts and commissions.
Immediately prior to the Closing, all of the Company’s outstanding Series A convertible preferred shares, Series B convertible preferred shares, Series C convertible preferred shares, Series D convertible preferred shares and Series D+ convertible preferred shares (collectively, the “Preferred Shares”) automatically converted into ordinary shares on a one-for-one basis, and such Preferred Shares were cancelled, retired and eliminated from the shares that the Company is authorized to issue and shall not be reissued by the Company.
In connection with the IPO, the underwriters were granted a 30-day option to purchase from the Company up to an additional 3,000,000 of the Company’s ordinary shares at the public offering price, less underwriting discounts and commissions. On February 7, 2022, the underwriters exercised the option to purchase additional shares in full, which purchase closed on February 10, 2022. The Company received net proceeds of $28.1 million after deducting underwriting discounts and commissions.
2. Significant Accounting Policies
The Company believes that other than the adoption of new accounting pronouncements and the accounting policies as described below, there have been no significant changes during the nine months ended January 31, 2022
10

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
and 2021 to the items disclosed in Note 2, “Significant Accounting Policies,” included in the audited consolidated financial statements for the years ended April 30, 2021 and 2020 in the Prospectus.
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes.
The Company bases its estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future, given the available information. Estimates are used for, but not limited to, write-down for excess and obsolete inventories, asset lives for property and equipment, accrued liabilities, allowance for doubtful accounts, the standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, variable consideration from revenue contracts, incremental borrowing rate used in the Company’s operating lease calculations, determination of the fair value of share-based awards, valuation of ordinary shares, and the realization of tax assets and estimates of tax reserves. Actual results may differ from those estimates and such differences may be material to the financial statements. In the current macroeconomic environment affected by COVID-19, these estimates require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may change materially in future periods.
Reclassifications
Certain prior period balances were reclassified to conform to the current period’s presentation. None of these reclassifications had an impact on reported net income or cash flows for any of the periods presented.
Deferred Offering Costs
The Company capitalized certain legal, accounting and other third-party fees that were directly associated with in-process equity financings as deferred offering costs until such financings were consummated. Upon completion of the IPO, $5.3 million of such costs were recorded as a reduction of the proceeds generated from the offering which were recognized in additional paid-in capital. As of January 31, 2022, there were no deferred offering costs. As of April 30, 2021, the deferred offering costs recorded as other long-term assets on the condensed consolidated balance sheet were not material.
Amazon Warrant
The Company accounts for the warrant issued to Amazon.com NV Investment Holdings LLC as an equity instrument, based on the specific terms of the warrant agreement. When management determines that it is probable that a tranche of the warrant will vest and we recognize the related revenue, the grant date fair value of the associated tranche will be recognized in shareholders’ equity and the underlying expense will be amortized as a reduction of revenue in proportion to the amount of related revenue recognized.
Accounting Pronouncement Recently Adopted
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which requires lessees to record most leases on their balance sheets and to disclose key information about lease arrangements. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. The ASU makes 16 technical corrections to the new lease standard and other accounting topics, alleviating unintended consequences from applying the new standard. It does not make any substantive changes to the core provisions or principles of the new standard. In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. The ASU provides (1) an optional transition method that entities can use when adopting the standard and (2) a practical expedient that permits lessors to not separate non-lease components from the associated lease component if certain conditions are met. In March 2019, the FASB also issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which impacts transition disclosures related to the new guidance. The Company adopted the new lease accounting standard on May 1, 2021, using the modified retrospective approach by applying the new standard to leases existing at the date of initial application and not restating comparative periods. See “Note 9 - Leases” for additional information.
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service
11

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance is effective for the Company for its fiscal year beginning May 1, 2021 and interim periods within its fiscal year beginning May 1, 2022. The Company adopted this guidance on May 1, 2021 prospectively, and the impact on its consolidated financial statements was not material.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications made more recently. For trade receivables, loans and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for the Company for its fiscal year beginning May 1, 2023 and interim periods within its fiscal year beginning May 1, 2024. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in Topic 740 in order to reduce cost and complexity of its application. This new guidance is effective for the Company for its fiscal year beginning May 1, 2022 and interim periods within its fiscal year beginning May 1, 2023. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.
3. Concentrations
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Cash is deposited in major financial institutions around the world. The Company’s cash deposits exceed insured limits.
Historically, a relatively small number of customers have accounted for a significant portion of the Company’s revenue. The particular customers which account for revenue concentration have varied from period-to-period as a result of the addition of new contracts, completion of existing contracts, and the volumes and prices at which the customers have recently bought the Company’s products. These variations are expected to continue in the foreseeable future.
The following table summarizes the significant customers’ accounts receivable and revenue as a percentage of total accounts receivable and total revenue, respectively:
As of
Accounts ReceivableJanuary 31, 2022April 30, 2021
Customer A*35 %
Customer B63 %*
Customer C*11 %
Customer D*15 %
Customer E*11 %
Customer F11 %*
Three Months Ended
RevenueJanuary 31, 2022January 31, 2021
Customer A22 %30 %
Customer B40 %*
Customer C*15 %
Customer G*17 %
12

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
Nine Months Ended
RevenueJanuary 31, 2022January 31, 2021
Customer A18 %31 %
Customer B33 %*
Customer F13 %*
Customer H*16 %
Customer I*14 %
* Less than 10% of total accounts receivable or total revenue.
4. Revenue Recognition
The following table summarizes revenue disaggregated by primary geographical market based on destination of shipment and location of contracting entity, which may differ from the customer’s principal offices (in thousands):
Three Months Ended
January 31, 2022January 31, 2021
United States$5,924 $7,008 
Mexico2,401 2,500 
Malaysia1,134 1,483 
Hong Kong3,277 1,459 
China14,729 32 
Singapore2,380  
Rest of the World1,955 976 
$31,800 $13,458 
Nine Months Ended
January 31, 2022January 31, 2021
United States$18,999 $23,088 
Mexico6,282 5,930 
Malaysia2,257 4,867 
Hong Kong6,257 2,682 
China24,065 351 
Singapore7,342 12 
Rest of the World3,749 2,017 
$68,951 $38,947 
Contract Balances
The contract assets are primarily related to the Company’s fixed fee IP licensing arrangements and rights to consideration for performance obligations delivered but not billed as of January 31, 2022 and April 30, 2021.
During the three months ended January 31, 2022, the Company recognized $0.3 million of revenue that was included in the deferred revenue balance as of October 31, 2021. During the three months ended January 31, 2021, the Company recognized $1.4 million of revenue that was included in the deferred revenue balance as of October 31, 2020.
During the nine months ended January 31, 2022, the Company recognized $4.0 million of revenue that was included in the deferred revenue balance as of April 30, 2021. During the nine months ended January 31, 2021, the Company recognized $4.5 million of revenue that was included in the deferred revenue balance as of April 30, 2020.
13

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. The contracted but unsatisfied performance obligation was approximately $65.6 million and the satisfied but unrecognized obligation was approximately $17.1 million as of January 31, 2022, which the Company expects to recognize over the next three years. The amounts stated above include amounts relating to an IP licensing and development contract we entered into with a customer in September 2021, for total cash consideration of $43.5 million, which is receivable over an estimated period of three years upon meeting certain contractual milestones. As of January 31, 2022, we had billed $10.9 million and recognized revenue amounting to $5.7 million upon delivery of the first deliverable which was consistent with the meeting of the first milestone. We have applied constraints on the remaining milestones due to significant uncertainty relating to the delivery of those milestones as of January 31, 2022 associated with dependency on actions by the customer. The constraints will be re-evaluated at each future reporting period.
Amazon Warrant
On December 28, 2021, we issued a warrant to Amazon.com NV Investment Holdings LLC (Holder) to purchase an aggregate of up to 4,080,000 of our ordinary shares at an exercise price of $10.74 per share (the Warrant). The exercise period of the Warrant is through the seventh anniversary of the issue date. Upon issuance of the Warrant, 40,000 of the shares issuable upon exercise of the Warrant vested immediately and the remainder of the shares issuable will vest in tranches over the contract term based on the amount of global payments by Holder and its affiliates to us, up to $201.0 million in aggregate payments. No other tranches were vested as of January 31, 2022.
The grant date fair value of the Warrant share was determined at $4.65 per share using the Black-Scholes option pricing model. The grant date fair value of the Warrant share was estimated using the following assumptions:
At Grant Date
Expected volatility40.00%
Weighted-average expected term (in years)7.00
Risk-free interest rate1.41%
Dividend yield%
Fair value per ordinary share$10.74
During the three and nine months ended January 31, 2022, the Company recognized $0.4 million as contra revenue within the product sales revenue on the condensed consolidated statements of operations.
5. Fair Value Measurements
The carrying amount of the Company’s financial instruments, including cash equivalents, accounts receivable, and accounts payable, approximate their respective fair values because of their short maturities.
6. Supplemental Financial Information
Inventories
Inventories consisted of the following (in thousands):
January 31, 2022April 30, 2021
Raw materials$13,572 $2,177 
Work in process6,233 1,844 
Finished goods6,317 3,083 

$26,122 $7,104 

14

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
January 31, 2022April 30, 2021
Prepaid expenses$2,032 $1,313 
Advances to suppliers$140 6,276 
Other current assets$1,476 1,142 

$3,648 $8,731 
Property and Equipment, Net
Property and equipment consisted of the following (in thousands):
January 31, 2022April 30, 2021
Computer equipment and software$1,751 $1,606 
Furniture and fixtures242 215 
Laboratory equipment9,255 6,603 
Production equipment11,791 5,680 
Transportation equipment222 224 
Leasehold improvements1,437 1,349 
Construction in progress7,910 4,698 
32,608 20,375 
Less: accumulated depreciation and amortization(8,978)(6,144)
$23,630 $14,231 
Depreciation and amortization expense for the three months ended January 31, 2022 and 2021 was $1.3 million and $0.6 million, respectively. Depreciation and amortization expense for the nine months ended January 31, 2022 and 2021 was $3.3 million and $1.5 million, respectively. Construction in progress and production equipment primarily includes mask set costs capitalized relating to the Company’s new products already introduced or to be introduced.
Other Non-current Assets
Other non-current assets consisted of the following (in thousands):
January 31, 2022April 30, 2021
Non-current contract assets$1,877 $1,819 
Other non-current assets3,308 1,641 

$5,185 $3,460 
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
January 31, 2022April 30, 2021
Accrued expenses$8,031 $2,652 
Current portion of operating lease liabilities1,065  
Income tax payable1,226 625 

$10,322 $3,277 
The increase in accrued expenses was primarily due to the offering costs incurred in connection with the IPO that has not been paid as of January 31, 2022.
15

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
7. Commitments and Contingencies
Non-cancelable Purchase Obligations
The Company depends upon third party subcontractors to manufacture wafers and other inventory parts. The Company’s subcontractor relationships typically allow for the cancellation of outstanding purchase orders, but require payment of all expenses incurred through the date of cancellation. As of January 31, 2022, the total value of open purchase orders that were committed with the Company’s third party subcontractors was approximately $10.7 million.
Warranty Obligations
The Company has contractual commitments to various customers, which could require the Company to incur costs to repair an epidemic defect with respect to its products outside of the normal warranty period if such defect were to occur. The Company’s products carry a standard one-year warranty. The Company’s warranty expense has not been material in the periods presented.
Indemnifications
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors, directors, officers, employees and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third-parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnifications. Accordingly, the Company has no liabilities recorded for these agreements as of January 31, 2022 and April 30, 2021.
Legal Proceedings
From time to time, the Company may be a party to various litigation claims in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with legal counsel, the need to record a liability for litigation and contingencies. Accrual estimates are recorded when and if it is determined that such a liability for litigation and contingencies are both probable and reasonably estimable. As of the date of issuance of the condensed consolidated financial statements, the Company was not subject to any litigation. No accruals for loss contingencies or recognition of actual losses have been recorded in any of the periods presented.

8. Convertible Preferred Shares
The Company has previously issued Series A convertible preferred shares, Series B convertible preferred shares, Series C convertible preferred shares, Series D convertible preferred shares and Series D+ convertible preferred shares (collectively, the “Preferred Share”).
Immediately prior to the completion of the IPO, all of the then outstanding 52,059,826 shares of the Company’s convertible Preferred Share were automatically converted into an aggregate 52,059,826 shares of ordinary share on a one-for-one basis, and such Preferred Shares were cancelled, retired and eliminated from the shares that the Company is authorized to issue and shall not be reissued by the Company.
9. Ordinary Shares
The Company’s Articles of Association, as amended in March 2021, authorized the Company to issue 136,657,627 ordinary shares, par value $0.00005 per share. In connection with the consummation of the IPO, the Company filed the Amended and Restated Memorandum of Association with Cayman Islands, which authorized 1,000,000,000 ordinary shares and 50,000,000 convertible preferred shares.
Each ordinary share is entitled to one vote per share. The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available and when declared by the Company’s board of directors, subject to the prior rights of holders of all other classes of shares outstanding.
Share Repurchase Transaction
16

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
In July 2020, the Company offered to purchase up to an aggregate of 8,032,128 of its ordinary shares and options from certain ordinary shareholders, primarily initial investors, founders and current employees of the Company, at a cash price of $4.98 per share. The transaction was completed in August 2020. The total ordinary shares and options the Company repurchased was 6,875,822 at a total purchase price of $34.2 million. The excess of the repurchase price over the fair value of ordinary shares and options, which were originally issued to founders and current employees, was recorded as share-based compensation expense of $11.3 million for the nine months ended January 31, 2021.
For the excess of the fair value of ordinary shares and options over the par value of shares, the Company allocated the amount to both accumulated deficit and additional paid in capital. The portion allocated to additional paid in capital is determined by applying a percentage, determined by dividing the number of shares repurchased by the number of shares issued and outstanding, to the balance of additional paid in capital as of the date of share repurchase. In connection with the transaction, $0.9 million was allocated to additional paid in capital and $22.0 million was allocated to accumulated deficit.
10. Leases
Effective May 1, 2021, the Company adopted the new lease accounting standard using the modified retrospective approach. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the Company to carry forward the historical lease classification. The Company elected to apply the short-term lease measurement and recognition exemption in which right-of-use assets (“ROU”) and lease liabilities are not recognized for short-term leases. Adoption of this standard resulted in the recording of operating lease ROU assets of $4.0 million and corresponding operating lease liabilities of $4.0 million. The standard did not materially affect the condensed consolidated statements of operations and had no impact on cash flows.
The Company determines if an arrangement is a lease at inception. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. As the rate implicit in each lease is not readily determinable, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease payments. Lease expense for these leases is recognized on a straight line basis over the lease term. The Company's leases include office space located in the United States and other international locations, which are all classified as operating leases.
During the nine months ended January 31, 2022, the Company entered into a sublease agreement whereby the Company will lease an office space located in San Jose, California (the “HQ Lease”). The office space will serve as the Company’s corporate headquarters and include engineering, marketing and administrative functions. The HQ Lease has a term of 103 months from the commencement date in April 2022. Total future minimum lease payments under the lease is approximately $19.2 million. The HQ Lease is excluded from the Company’s right of use assets and operating lease liabilities as of January 31, 2022 as the commencement date does not start until the fourth quarter of fiscal 2022.
Lease expense and supplemental cash flow information are as follows (in thousands):
Three Months EndedNine Months Ended
January 31, 2022
Operating lease expenses$709 $2,064 
Cash paid for amounts included in the measurement of operating lease liabilities$697 $2,068 
Right-of-use assets obtained in exchange for lease obligation$1,154 $1,413 
17

Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
The aggregate future lease payments for operating leases, excluding the HQ Lease, as of January 31, 2022 are as follows (in thousands):
Fiscal YearOperating leases
Remainder of 2022$340 
20231,290 
20241,202 
2025652 
2026268 
Total lease payments3,752 
Less: Interest413 
Present value of lease liabilities$3,339 
The aggregate future lease payments for operating leases as of April 30, 2021 are as follows (in thousands):
Fiscal YearOperating leases
2022$2,421 
2023866 
2024846 
2025397 
Total lease payments$4,530 
As of January 31, 2022, the weighted average remaining lease term for the Company's operating leases is 2.04 years and the weighted average discount rate used to determine the present value of the Company's operating leases is 6.0%.

11. Share Incentive Plan
2021 Long-Term Incentive Plan
In January 2022, the Company adopted the 2021 long-term incentive plan (the “2021 Plan”). The 2021 Plan had 19,907,421 ordinary shares reserved for issuance thereunder as of January 31, 2022. Awards granted under the 2021 Plan may include, but are not limited to, options and restricted stock units (“RSU”). Options granted under the 2021 Plan generally have a term of 10 years and generally must be issued at prices equal to the fair market value of the share on the date of grant. RSU awards are denominated in shares of ordinary share, but may be settled in cash or shares upon vesting, as determined by the Company at the time of grant. Awards under the 2021 Plan generally vest over 4 years.
Restricted Stock Unit Awards
During the three and nine months ended January 31, 2022, 3,427,500 RSUs were granted under the 2021 Plan with a weighted average grant date fair value of $10.00. The aggregate intrinsic value of RSUs expected to vest as of January 31, 2022 was $41.4 million.
As of January 31, 2022, unamortized compensation expense related to RSUs was $39.2 million. The unamortized compensation expense for RSUs will be amortized on a straight-line basis and is expected to be recognized over a weighted-average period of 3.58 years.
Employee Stock Purchase Plan
In January 2022, the Company adopted the Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, participants can purchase the Company’s ordinary shares using payroll deductions, which may not exceed 15% of their total cash compensation. Participants will be granted the right to purchase ordinary shares at a price per share that is 85% of the lesser of the fair market value of the shares at (i) the participant’s entry date or (ii) the end of six-month purchase period.
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Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
Under the ESPP, no shares were issued as of January 31, 2022. As of January 31, 2022, 3,800,508 shares remained available for future issuance under the ESPP.
Stock Option Awards
A summary of information related to share option activity during the nine months ended January 31, 2022 is as follows:
Options Outstanding
Shares available for grantOutstanding Share OptionsWeighted-Average Exercise PriceWeighted-Average Remaining Contractual TermAggregate Intrinsic Value (in thousands)
Balance as of April 30, 20213,329,61414,120,179$1.577.87$62,613 
Options granted(721,500)721,500$6.01
Options exercised and vested(2,232,096)$0.93
Options canceled/ forfeited439,482(439,482)$2.85
Balance as of January 31, 20223,047,59612,170,101$1.907.34$124,356 
Vested as of January 31, 20226,342,760$1.056.16$70,230 
Exercisable as of January 31, 202211,589,567$1.917.32$118,280 
During the nine months ended January 31, 2022 and 2021, the total intrinsic value of options exercised, including options early exercised, was $25.0 million and $8.0 million, respectively.
As of January 31, 2022, the total unrecognized compensation cost was $11.1 million related to share options, which are expected to be recognized over a weighted-average period of 2.44 years.
The Company estimated the fair value of share options using the Black-Scholes option-pricing model. The fair value of employee share options is being amortized on a straight-line basis over the requisite service period of the awards. The fair values of the employee share options granted in the nine months January 31, 2022 and 2021 were estimated using the following weighted-average assumptions:
Nine Months Ended January 31,
20222021
Expected volatility
41.29% - 42.31%
40.12% - 42.62%
Weighted-average expected term (in years)5.965.95
Risk-free interest rate
0.69% - 1.23%
0.32% - 0.52%
Dividend yield%%
Weighted-average grant date fair value per share$6.26$1.60
Summary of Share-Based Compensation Expense
The following table summarizes share-based compensation expense included in the condensed consolidated statements of operations (in thousands):
Three Months EndedNine Months Ended
January 31, 2022January 31, 2021January 31, 2022January 31, 2021
Cost of revenue$46 $46 $180 $137 
Research and development711 381 1,872 7,291 
Selling, general and administrative681 420 1,768 5,560 
$1,438 $847 $3,820 $12,988 
12. Income Taxes
The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative
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Credo Technology Group Holding Ltd
Notes to Unaudited Condensed Consolidated Financial Statements
adjustment in such period. The Company’s quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in tax laws, the applicability of special tax regimes, changes in how we do business, and discrete items.
Provisions for income taxes for the three and nine months ended January 31, 2022 and 2021 were as follows (in thousands except percentages):
Three Months Ended January 31, 2022Effective Tax RateThree Months Ended January 31, 2021Effective Tax Rate
Provision (benefit) for income taxes$(387)72.90 %$372 (7.84)%
Nine Months Ended January 31, 2022Effective Tax RateNine Months Ended January 31, 2021Effective Tax Rate
Provision for income taxes$1,116 (7.11)%$1,061 (4.54)%
Our effective tax rate for the three months ended January 31, 2022 differs from the same period in the prior year primarily due to an increase in pretax book income for the current quarter and amended return to provision true-ups.
13. Net Loss Per Share
Net loss per share was determined as follows (in thousands, except per share amounts):
Three Months EndedNine Months Ended
January 31, 2022January 31, 2021January 31, 2022January 31, 2021
Numerator:
Net loss$(144)$(5,117)$(16,821)$(