Credo Technology Group Holding Ltd - Fiscal Year 2024 Fourth Quarter and Year-End Earnings Report

Report Date: June 25, 2024

Executive Summary

Credo Technology Group Holding Ltd (NASDAQ: CRDO), a leading high-speed connectivity company, has released its financial results for the fourth quarter and fiscal year ending 2024. The fiscal year concluded with a record revenue totaling $193 million, demonstrating robust growth driven primarily by AI deployments across the product portfolio.

Financial Highlights

• Revenue: $193 million, up 5% year-over-year (YoY)
• Gross Profit Margin (Non-GAAP): 62.5%, up 448 basis points YoY
• Operating Income (Non-GAAP): $7.5 million in Q4, surpassing the $2.4 million reported in Q3
• Net Income (Non-GAAP): $11.8 million for Q4, compared to $6.3 million in the previous quarter
• EPS: $0.09 for the fiscal year, an improvement of $0.04 over FY '23

Detailed Financial Review

Q4 Performance:

• Record Revenue: $60.8 million, marking a 15% sequential increase and an 89% YoY growth.
• Gross Margin: Achieved 66.1% non-GAAP gross margin, a sequential improvement of 391 basis points.
• Product Business Revenue: $44.1 million, a 15% decline sequentially but a 67% increase YoY.
• IP Business Revenue: $16.6 million, up 193% YoY, signaling substantial growth and contribution to overall revenue.
• Customer Diversification: Top four customers generated over 10% each, with sectors including hyperscalers, large consumer companies, and leading chiplet customers.

Fiscal Year '24 Performance:

• Total Revenue: $193 million, a 5% YoY increase driven by an 8% rise in product revenue.
• Gross Profit: $119.43 million with a gross margin of 62.5%
• Operating Expenses: $155.72 million, primarily fueled by increased R&D and SG&A expenses.
• Net Income: Reported a net loss of $28.37 million, resulting in an EPS of $-0.18
• Financial Ratios: Gross Profit Margin stood at 60.13%, with Operating Profit Margin at -18.81%

Cash Flow and Balance Sheet Analysis

Credo reported significant cash reserves with cash and equivalents amounting to $410 million, reflecting a strong liquidity position capable of supporting future growth. The cash to debt ratio stands at 150.03%, with no long-term debt, indicating robust financial health and strategic financial management.

Strategy and Outlook

For Fiscal Year 2025, Credo projects significant acceleration in AI revenue, which is expected to double by Q4 FY '25. This growth is attributed to strategic wins and expansion across AI workloads, increased AEC customer engagements, and the growing demand for high-bandwidth, energy-efficient connectivity solutions due to ongoing AI deployments.

Additionally, gross margins are forecasted within the healthy range of 61% to 63%, further driving financial performance with AI contributing an increasingly significant portion of total revenue.

Analyst Commentary

During the earnings call, analysts commended the company's diversification efforts and robust financial performance amidst increasing market demands. Key takeaways included the impressive ramp in AI-driven revenues and sustained customer engagement, emphasizing Credo's competitive edge in delivering innovative connectivity solutions.

Conclusion

Overall, Credo Technology Group Holding Ltd has demonstrated considerable resilience and strategic success in a dynamic market, significantly driven by AI deployment. The company remains well-capitalized with strong liquidity and no long-term debt obligations, positioning it favorably for continued growth and innovation in FY '25.