01—Abstract
Summary
Summary of the 10-K filed June 8, 2022. Cited figures are marked; the original filing is the authoritative source.
Credo Technology Group Holding Ltd (CRDO) reported fiscal 2022 (year ended April 30, 2022) revenue of $106.5 milliona, up 81.4% from $58.7 million in fiscal 2021, driven mainly by a 168% surge in product sales to $73.7 million, which is now 69% of revenue.
The company remains unprofitable: net loss narrowed to $22.2 millionb from $27.5 million, gross margin fell to 60.1% from 65.2% as the mix shifted toward lower-margin product sales, and R&D spending rose 38% to $47.9 million. Operating cash burn was $30.8 million, but the January 2022 IPO raised roughly $194 million net, leaving $259.3 million in cash and equivalents and no debt, with management stating this is sufficient for at least the next 12 months. The investment case centers on secular demand for 100G/200G/400G/800G connectivity in hyperscale data centers, where Credo's HiWire active electrical cables (AECs) and optical DSPs are targeted.
Concentration risk is significant: two customers accounted for 52%c and 14% of fiscal 2022 revenue, and the top 10 customers represented about 84%. Most sales are on purchase orders without long-term commitments, and the company relies entirely on TSMC for wafer fabrication, with Taiwan geopolitical exposure. Greater China exposure is also material, with 35% of revenue from mainland China and 11% from Hong Kong, and the filing devotes extensive risk disclosure to PRC regulatory oversight, HFCAA-related delisting risk, and capital repatriation limits.
For investors, the key questions are whether product revenue can keep scaling without further margin erosion, whether design wins translate into diversified customer revenue, and how much regulatory risk tied to PRC operations and the audit-inspection regime will weigh on the shares. The company is an emerging growth company, and its share price is subject to lock-up expiration and volatility.
02—Key points
Key Highlights
- Revenue grew 81.4% to $106.5M in fiscal 2022, with product sales up 168.3% to $73.7M and now representing 69% of total revenue versus 47% a year earlier.
- Net loss narrowed to $22.2M from $27.5M, though gross margin declined to 60.1% from 65.2% due to the mix shift toward lower-margin product sales (product gross margin 45.6%).
- R&D expense increased 37.6% to $47.9M (45% of revenue), reflecting continued investment in SerDes, DSP, and 800G product development.
- Post-IPO balance sheet is strong: $259.3M in cash and equivalents, $305.7M working capital, and cash flow from financing of $204.2M, against $30.8M operating cash outflow.
- High customer concentration: two customers accounted for 52% and 14% of fiscal 2022 revenue, and the top 10 customers made up approximately 84%.
- Single-source manufacturing dependency on TSMC for all wafer fabrication, with a 9–12 month estimated transition period to alternative providers and no long-term supply contracts.
- Material China and Hong Kong exposure (35% and 11% of revenue, respectively) with extensive disclosed risks from PRC regulatory oversight, HFCAA audit-inspection requirements, and currency/dividend restrictions.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2022, Credo Technology Group Holding lost $0.21.
- Revenue$106.5M100.0%
- Cost of revenue−$42.5M39.9%
- Gross profit$64.0M60.1%
- Operating costs−$86.0M80.8%
- Operating income−$22.0M20.6%
- Interest, other & tax−$208,0000.2%
- Net income−$22.2M20.8%
04—Financials
Financial Highlights
Figures from 10-KFY2022filed June 8, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $106.48M$58.70M | +81.4% |
| Cost of Revenue | $42.46M$20.42M | +108.0% |
| Gross Profit | $64.02M$38.28M | +67.2% |
| R&D Expenses | $47.95M$34.84M | +37.6% |
| SG&A Expenses | $34.90M$28.67M | +21.7% |
| Operating Expenses | $85.98M$63.51M | +35.4% |
| Operating Income | -$21.97M-$25.23M | +12.9% |
| Net Income | -$22.18M-$27.51M | +19.4% |
| EPS (Basic) | $-0.25$-0.40 | +37.5% |
| EPS (Diluted) | $-0.25$-0.40 | +37.5% |
| Shares Outstanding (Basic) | 88.40M69.10M | +27.9% |
| Shares Outstanding (Diluted) | 88.40M69.10M | +27.9% |
05—Questions
Frequently Asked Questions
What drove the large increase in revenue in fiscal 2022?
Revenue rose $47.8M to $106.5M, mainly from product sales, which increased $46.2M to $73.7M. Management attributed this to a 118% increase in IC units sold and revenue from AEC cables introduced in fiscal 2021. IP license revenue also grew 34.9% to $23.3M, while engineering services revenue declined.
Why did gross margin decline even though revenue grew strongly?
Gross margin fell 5.1 percentage points to 60.1%, primarily because product sales, which carry lower margins (45.6% in fiscal 2022), became a larger share of revenue. IP licensing, which carries nearly 100% margins, shrank as a percentage of the total. Product sales margin itself improved 4.1 points as the business gained scale.
How concentrated is Credo's customer base, and what does that imply?
Very concentrated. Two customers accounted for 52% and 14% of fiscal 2022 revenue, and the top 10 accounted for about 84%. Sales are made on purchase orders without long-term commitments, so customers can cancel or delay orders with limited notice. Losing or reducing business with a major customer could materially affect results, though management expects concentration to decline as adoption broadens.
Does Credo have enough cash to fund operations, and is dilution a concern?
Management states that existing cash ($259.3M) and working capital will be sufficient for at least the next 12 months. The IPO in January 2022 provided about $194M net proceeds. Future capital needs are uncertain, and any additional equity raise would dilute shareholders. Notably, about 4.1M RSUs and 11.4M options were outstanding, and lock-up releases could add significant share supply.
What are the most significant regulatory and geopolitical risks for investors?
Key risks include PRC government oversight of operations and potential future CSRC filing requirements for overseas listings, HFCAA provisions that could lead to trading prohibition or delisting if the auditor cannot be inspected, restrictions on Renminbi conversion and dividend remittance, and U.S. export control exposure tied to Chinese entity listings. Taiwan-related tensions could also disrupt TSMC-dependent supply, and the company relies on TSMC in Taiwan for all wafer production.
06—Continue