01—Abstract
Summary
Summary of the 10-Q filed February 28, 2024. Cited figures are marked; the original filing is the authoritative source.
Credo Technology Group Holding Ltd (CRDO) reported its third-quarter fiscal year 2024 results, showing a slight sequential revenue decrease but highlighting a significant shift in revenue mix towards higher-margin product engineering services.
Total revenue for the quarter was $53.1 milliona, down 2.2% year-over-year, primarily due to a substantial decline in IP license revenue, which was partially offset by growth in product sales and a strong increase in product engineering services. The nine-month revenue also declined year-over-year, largely driven by lower product sales and IP license revenue, despite an increase in product engineering services. Despite the revenue dip, the company's gross margin improved to 61.4% for the quarter, up from 58.9% in the prior year period, driven by the favorable shift in revenue mix towards higher-margin services and improved product sales margins.
Financially, the company ended the period with $96.1 millionb in cash and cash equivalents and positive working capital of $471.2 million. The company also successfully completed a follow-on public offering in December 2023, raising $173.4 million in net proceeds, strengthening its liquidity position.
While the company experienced an operating loss for the quarter, the net income for the three-month period was positive at $0.4 millionc. Looking ahead, Credo anticipates its current cash and equivalents will be sufficient to meet its needs for at least the next 12 months.
02—Key points
Key Highlights
- Total revenue for Q3 FY24 was $53.1 million, a decrease of 2.2% year-over-year, impacted by a significant drop in IP license revenue.
- Product engineering services revenue surged by 225.4% year-over-year for the quarter, indicating a strategic shift towards higher-margin offerings.
- Gross margin improved to 61.4% in Q3 FY24, up from 58.9% in the prior year, driven by a more favorable revenue mix and improved product sales margins.
- The company reported a net income of $0.4 million for the quarter, a significant improvement from a net loss in the nine-month period.
- Cash and cash equivalents stood at $96.1 million as of January 27, 2024, with a healthy working capital of $471.2 million.
- Credo completed a follow-on public offering in December 2023, raising $173.4 million in net proceeds, enhancing its financial flexibility.
- Operating expenses, particularly R&D and SG&A, increased due to personnel growth and share-based compensation, while impairment charges were absent compared to the prior year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Credo Technology Group Holding kept $0.01.
- Revenue$53.1M100.0%
- Cost of revenue−$20.5M38.6%
- Gross profit$32.6M61.4%
- Operating costs−$38.5M72.5%
- Operating income−$5.9M11.1%
- Interest, other & tax$6.3M11.9%
- Net income$428,0000.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed February 28, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $53.06M$54.27M | −2.2% |
| Cost of Revenue | $20.50M$22.28M | −8.0% |
| Gross Profit | $32.56M$31.99M | +1.8% |
| R&D Expenses | $24.24M$20.53M | +18.1% |
| SG&A Expenses | $14.23M$11.94M | +19.2% |
| Operating Expenses | $38.47M$34.87M | +10.3% |
| Operating Income | -$5.91M-$2.89M | −104.8% |
| Net Income | $428K$2.82M | −84.8% |
| Shares Outstanding (Basic) | 157.16M146.91M | +7.0% |
| Shares Outstanding (Diluted) | 167.16M156.52M | +6.8% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the revenue decline in the nine-month period?
The primary driver behind the revenue decline in the nine-month period was a decrease in product sales revenue by $13.4 million and a decrease in IP license revenue by $14.9 million. This was partially offset by an increase in product engineering services revenue of $8.3 million.
How has the revenue mix shifted, and what is the impact on gross margin?
There has been a notable shift in the revenue mix. Product engineering services revenue has significantly increased year-over-year (225.4% for the quarter), while IP license revenue has decreased substantially. This shift, along with improved product sales margins, has led to an expansion of the overall gross margin to 61.4% for the quarter, up from 58.9% in the prior year.
What is the company's liquidity and capital position?
As of January 27, 2024, Credo Technology held $96.1 million in cash and cash equivalents and had a working capital of $471.2 million. The company also strengthened its liquidity by completing a public offering in December 2023, which generated $173.4 million in net proceeds. Management believes these resources are sufficient to meet its needs for at least the next 12 months.
Are there any significant customer concentration risks highlighted in this filing?
Yes, the company continues to derive a substantial majority of its revenue from a limited number of customers. The filing notes that the reduction in AEC cable shipments for the nine-month period was primarily due to reduced demand by one of its largest customers, highlighting the impact of customer concentration.
06—Continue