10-QPeriod: Q2 FY2023

Credo Technology Group Holding Ltd Quarterly Report for Q2 Ended Oct 29, 2022

Filed December 1, 2022For Securities:CRDO

Summary

Credo Technology Group Holding Ltd (CRDO) reported its fiscal second-quarter 2023 results, showing significant year-over-year revenue growth driven by strong performance in product sales. Total revenue surged by 94.4% to $51.4 million for the quarter, and an impressive 163.3% to $97.8 million for the first six months. This growth was primarily fueled by increased unit shipments of Active Electrical Cables (AECs) and a substantial IP license deal contributing significantly to the six-month period. Despite the revenue surge, the company reported a net loss of $3.4 million for the quarter, an improvement from a $4.1 million loss in the prior year, and a net loss of $3.4 million for the six-month period, a considerable reduction from $16.7 million in the prior year. The company's gross margin saw a slight decrease to 54.4% in the quarter, attributed to a shift in revenue mix towards product sales which carry lower margins than IP licensing. Operating expenses, particularly in Research and Development and Selling, General & Administrative, increased due to higher personnel costs, share-based compensation, and investments in product development and public company compliance. The company ended the period with a solid cash position of $190.5 million, though net cash used in operating activities was $10.5 million for the six-month period, largely due to working capital movements.

Financial Highlights

46 data points
Beta

Revenue

$51.37M

54.4% Gross Margin

Net Income

-$3.36M

-6.5% Net Margin

EPS (Diluted)

$-0.02

Total Assets

$414.03M

Cash & Equivalents

$190.54M

Free Cash Flow

-$3.91M

Financial Statements
Beta
Revenue$51.37M
Cost of Revenue$23.41M
Gross Profit$27.96M
R&D Expenses$18.16M
SG&A Expenses$11.54M
Operating Expenses$29.70M
Operating Income-$1.74M
Net Income-$3.36M
EPS (Basic)$-0.02
EPS (Diluted)$-0.02
Shares Outstanding (Basic)146.01M
Shares Outstanding (Diluted)146.01M

Key Highlights

  • 1Total revenue for the second quarter of fiscal year 2023 increased by 94.4% to $51.4 million, driven primarily by a 140.3% increase in product sales.
  • 2For the six months ended October 29, 2022, total revenue more than doubled to $97.8 million, a 163.3% increase year-over-year, with product sales up 209.6%.
  • 3Net loss for the three months ended October 29, 2022, narrowed to $3.4 million from $4.1 million in the prior year's comparable period.
  • 4Gross margin for the quarter decreased to 54.4% from 60.4% in the prior year, primarily due to a shift in revenue mix towards product sales with lower gross margins compared to IP licensing.
  • 5Research and Development (R&D) expenses increased by 53.9% for the quarter and 62.1% for the six-month period, reflecting investments in product development and new hires.
  • 6The company ended the period with $190.5 million in cash and cash equivalents, indicating a healthy liquidity position.
  • 7Significant customer concentration exists, with specific customers accounting for a substantial portion of both revenue and accounts receivable, though this is expected to decrease over time.

Frequently Asked Questions

Credo Technology reported a significant increase in revenue for the second quarter of fiscal year 2023, up 94.4% to $51.4 million. This growth was largely driven by a substantial rise in product sales, which increased by 140.3% year-over-year.

While revenue grew significantly, Credo Technology reported a net loss of $3.4 million for the three months ended October 29, 2022. This represents an improvement compared to the net loss of $4.1 million reported in the same period last year.

The primary driver of revenue growth is the increase in product sales, particularly Active Electrical Cables (AECs), which saw increased unit shipments. Additionally, a significant IP license deal contributed to the revenue in the six-month period, and product engineering services also saw strong year-over-year growth.

The company is investing in future growth, as evidenced by the increase in Research and Development (R&D) expenses, up 53.9% for the quarter, and Selling, General & Administrative (SG&A) expenses, up 49.7%. These increases are attributed to higher personnel costs, share-based compensation, and investments in product development and compliance as a public company. Despite these investments, the net loss has narrowed compared to the prior year.

Credo Technology maintained a strong liquidity position, ending the quarter with $190.5 million in cash and cash equivalents. However, the company used $10.5 million in cash from operating activities during the six-month period, primarily due to working capital movements such as increases in accounts receivable and inventory, although this was partially offset by higher accounts payable.