Did Credo return to profitability this quarter?

On a GAAP basis, Credo reported net income of $0.4 million, or $0.00 per diluted share, compared with a net loss of $6.6 million in the prior quarter. Non-GAAP net income was $6.3 million, or $0.04 per diluted share. Other income of $4.3 million, largely investment income, helped offset the operating loss of $5.9 million, and a tax benefit of $2.0 million also contributed.

Why did revenue growth come from different sources this quarter?

Product engineering services revenue jumped to $11.8 million from $2.4 million sequentially, and product sales rose to $40.0 million from $34.2 million. IP license revenue, however, dropped to $1.3 million from $7.4 million sequentially and $12.6 million a year earlier. Investors may want to understand how much of the engineering services revenue is recurring and whether licensing revenue will recover.

How strong is Credo's balance sheet?

Cash, cash equivalents and short-term investments totaled $409.1 million at January 27, 2024, up from $217.8 million at fiscal year-end April 29, 2023. Total liabilities were $58.5 million against shareholders' equity of $534.0 million. Additional paid-in capital increased to $659.2 million from $454.8 million, indicating significant equity-related inflows during the period.

What do the non-GAAP adjustments exclude?

Non-GAAP measures exclude share-based compensation, which was $8.3 million in pre-tax net income adjustments this quarter, and any asset impairment charges, along with related tax effects. Share-based compensation is a real and recurring cost, so investors should weigh GAAP results alongside non-GAAP figures. GAAP operating expenses were $38.5 million compared with $30.6 million on a non-GAAP basis.

CRDO 8-K: Earnings & Results

Q: What does management expect for the fourth quarter?

Management guided fourth-quarter revenue to $59.0 million to $62.0 million, GAAP gross margin to 63.2% to 65.2%, and GAAP operating expenses to $44.0 million to $46.0 million. Non-GAAP operating expenses are expected at $33.0 million to $35.0 million. Based on the midpoint of guidance, revenue would rise about 14% sequentially.

01—Abstract

Summary

Summary of the 8-K filed February 27, 2024. Cited figures are marked; the original filing is the authoritative source.

Credo Technology Group Holding Ltd (CRDO) reported results for its fiscal third quarter 2024, ended January 27, 2024.

Revenue was $53.1 million^a, up 20% from $44.0 million in the prior quarter but down from $54.3 million a year earlier. GAAP net income was $0.4 million, or $0.00 per diluted share, compared with a GAAP net loss of $6.6 million in the prior quarter. Non-GAAP net income was $6.3 million, or $0.04 per diluted share.

GAAP gross margin improved to 61.4% from 59.3% sequentially, and GAAP operating loss narrowed to $5.9 million^b from $8.9 million. The revenue mix shifted notably. Product sales rose to $40.0 million from $34.2 million, and product engineering services rose to $11.8 million from $2.4 million.

IP license revenue fell to $1.3 million^c from $7.4 million in the prior quarter and $12.6 million a year ago, so the quarter's growth came from product and engineering work rather than licensing. Other income of $4.3 million, largely from interest on the company's investments, was a meaningful contributor to pre-tax results. Cash, cash equivalents and short-term investments totaled $409.1 million, and total shareholders' equity rose to $534.0 million, partly reflecting an increase in additional paid-in capital from $454.8 million to $659.2 million.

For the fourth quarter of fiscal 2024, management guided revenue to $59.0 million to $62.0 million^d, GAAP gross margin to 63.2% to 65.2%, and GAAP operating expenses to $44.0 million to $46.0 million. Non-GAAP operating expenses are guided to $33.0 million to $35.0 million, with share-based compensation of about $11.0 million as the main difference.

Investors will want to watch whether the guided revenue growth holds, whether IP license revenue stabilizes, and whether operating expense growth outpaces revenue. The filing is an 8-K furnishing an earnings press release under Item 2.02, so the information is not deemed filed under Section 18 of the Exchange Act.

02—Key points

Key Highlights

Q3 FY2024 revenue of $53.1M, up 20% quarter over quarter but down from $54.3M a year earlier
GAAP net income of $0.4M ($0.00 per diluted share) versus a GAAP net loss of $6.6M in the prior quarter; non-GAAP net income of $6.3M ($0.04 per diluted share)
GAAP gross margin of 61.4%, up from 59.3% sequentially, and non-GAAP gross margin of 62.2%
Revenue mix shift: product engineering services rose to $11.8M from $2.4M, while IP license revenue fell to $1.3M from $7.4M sequentially and $12.6M a year ago
Cash, cash equivalents and short-term investments of $409.1M at quarter end, with GAAP operating loss narrowing to $5.9M from $8.9M
Q4 FY2024 guidance: revenue of $59.0M to $62.0M, GAAP gross margin of 63.2% to 65.2%, and GAAP operating expenses of $44.0M to $46.0M
The results were furnished under Item 2.02 of Form 8-K and are not deemed filed under Section 18 of the Exchange Act

03—Questions

Frequently Asked Questions

Did Credo return to profitability this quarter?
On a GAAP basis, Credo reported net income of $0.4 million, or $0.00 per diluted share, compared with a net loss of $6.6 million in the prior quarter. Non-GAAP net income was $6.3 million, or $0.04 per diluted share. Other income of $4.3 million, largely investment income, helped offset the operating loss of $5.9 million, and a tax benefit of $2.0 million also contributed.
Why did revenue growth come from different sources this quarter?
Product engineering services revenue jumped to $11.8 million from $2.4 million sequentially, and product sales rose to $40.0 million from $34.2 million. IP license revenue, however, dropped to $1.3 million from $7.4 million sequentially and $12.6 million a year earlier. Investors may want to understand how much of the engineering services revenue is recurring and whether licensing revenue will recover.
What does management expect for the fourth quarter?
Management guided fourth-quarter revenue to $59.0 million to $62.0 million, GAAP gross margin to 63.2% to 65.2%, and GAAP operating expenses to $44.0 million to $46.0 million. Non-GAAP operating expenses are expected at $33.0 million to $35.0 million. Based on the midpoint of guidance, revenue would rise about 14% sequentially.
How strong is Credo's balance sheet?
Cash, cash equivalents and short-term investments totaled $409.1 million at January 27, 2024, up from $217.8 million at fiscal year-end April 29, 2023. Total liabilities were $58.5 million against shareholders' equity of $534.0 million. Additional paid-in capital increased to $659.2 million from $454.8 million, indicating significant equity-related inflows during the period.
What do the non-GAAP adjustments exclude?
Non-GAAP measures exclude share-based compensation, which was $8.3 million in pre-tax net income adjustments this quarter, and any asset impairment charges, along with related tax effects. Share-based compensation is a real and recurring cost, so investors should weigh GAAP results alongside non-GAAP figures. GAAP operating expenses were $38.5 million compared with $30.6 million on a non-GAAP basis.

04—Continue

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