Credo Technology Group Holding Ltd

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press star then 1 on your push button phone. I would now like to turn the conference over to Dan O'Neill. Please go ahead, sir.

Good afternoon, and thank you all for joining us today on our first earnings conference call as a public company. Joining me today from Credo are Bill Brennan, our chief executive officer, and Dan Fleming, our chief financial officer. I'd like to remind everyone that certain comments made in this call today may include forward-looking statements regarding expected future financial results, strategies and plans, future operations, the markets in which we operate, and other areas of discussion. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. It is not possible for the company's manager to predict all risks, nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement. In light of these risks, uncertainties, and assumptions, The forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call to conform to these statements, to actual results, or to changes in the company's expectations, except as required by law. Also, during this call, we will refer to certain non-GAAP financial measures, which we consider to be an important measure of the company's performance. These non-GAAP financial measures are provided in addition to and not as a substitute for or superior to financial performance prepared in accordance with U.S. GAAP. A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, as well as in our S-1, which both can be accessed using the investor relations portion of our website. With that, I'll now turn the call over to our CEO. Bill?

Thanks, Dan. I want to thank you all for joining our call. Since this is our first earnings call as a public company, I'd like to start with a brief description of what we do. Credo is a pure play high-speed connectivity company. Our goal is to deliver high-speed solutions to break bandwidth barriers on every wired connection in the data infrastructure market. We've initially targeted the leading-edge Ethernet market that's driven by the hyperscaler data centers. We're pursuing an exponential growth curve in speed, and that's driving a large, fast-growing market that, because of its degree of difficulty, is a natural filter on competition. We're building our connectivity solutions to enable these explosive bandwidth increases for every optical and copper connection in the data center. Market forecasters expect the high end of the Ethernet market to grow at almost 50% per year. And we expect this will create a $5 billion plus Ethernet TAM for us by 2025. Beyond data centers, we have seen other markets begin to experience exponentially increasing speed demands. And we see that as a great opportunity for us to expand beyond Ethernet. I'll talk a little bit more about that opportunity later. Core to our platform is our SERDES technology. High-speed SERDES is a very high-hurdle technology that requires leading-edge, high-performance analog design and signal processing. And it requires doing it with very low power. We are fortunate to have a team with decades of experience designing to just this type of challenge. With extraordinary focus on optimizing the mix of analog design and DSP, we can deliver differentiated connectivity solutions with optimized power efficiency and cost effectiveness at the highest speeds. This is why we've been successful engaging with a broad customer base that includes several major hyperscalers, networking OEMs and ODMs, as well as optical module manufacturers. I would like to give a brief overview of our Ethernet connectivity solutions. The first set of Credo solutions I'd like to talk about are active electrical cables, or AECs. We began development more than four years ago, and we've been the pioneer in establishing this new category of connectivity solutions. We targeted our first efforts to enable disaggregated racks in the switching and routing layers in the data center. The traditional way of making these connections has been with passive copper cables, known as DACs. Now, the problem with DACs when you move to 56-gig single-lane speeds to support either 400-gig or 200-gig ports, is that the signal integrity becomes a huge challenge. Also, the thickness, weight, and bend radius of the DACs make it very difficult to install and service, especially when you've got installers trying to route more than 200 large cables within very tight space in the front and the side of the rack. The loss of signal integrity though is the real issue with DACs. Now we see the 200 gig and 400 gig market as a crossover generation where some companies will commit to the struggle with DACs, but many others will move to AECs due to the signal integrity and form factor advantages. However, at 112 gig single aid speeds to support 800 gig ports, we firmly believe that DACs are dead. We also have a growing family of AEC solutions that target server racks with connections from the server NIC to the Tor switch. We're delivering highly innovative solutions driven by our hyperscaler partners. For example, in a collaborative effort with Microsoft, we recently introduced the switch AEC, which enables a hit list dual Tor architecture. Our switch AEC is able to detect when a Tor port is failing, and then instantly switch the data flow to the redundant Tor switch. This kind of innovation is simply not possible with DACs or active optical cables, known as AOCs. And over time, we're going to continue to add other equally innovative NIC to Tor AEC solutions to our portfolio. Next, I'd like to talk about our solutions for optical modules. The first products we developed are optical DSPs that cover all the optical module deployments today in the hyperscaler data centers, including 100 gig, 200 gig, and 400 gig, and in the future, 800 gig. In addition to our full family of optical DSPs that we're promoting to the data centers, we're also promoting single-lane 50 gig optical DSPs for the 5G infrastructure market, as well as 64-gig single-lane optical DSPs for the fiber channel market. Over time, you'll also see Credo expanding our optical solutions in the future, starting with laser drivers. This week at OFC in San Diego, we announced and are demonstrating our first laser driver solutions. Next, I would like to talk about our line card 5s. These are solutions optimized for the copper connections needed by switch line card makers for backplane and front panel connections. We also see emerging high-speed server applications as an opportunity. We're selling our retimers, gearboxes, as well as MACSEC devices, devices that provide encryption for applications where security is critical. We've got a complete family of solutions covering the 100 gig, 200 gig, and 400 gig port markets. And this week, we announced our products for the 800 gig and 1.6T port markets. Finally, Credo has Certi's IP license and chiplet solutions, which we've delivered to highly regarded customers across various end markets. While we are primarily a product company, we believe our IP and chiplet solutions are very strategic, enabling us to engage in highly collaborative relationships with industry-leading customers. We count more than 30 customers that have chosen our Certi's IP and chiplet solutions. When we talk about our competitive advantage, we start with a term called N-1 in reference to the process technology that we're using to deploy our solutions. For any given speed, we can engineer a solution in a more mature process, an N-1 process technology. And that gives us an advantage on development cost as well as our wafer cost. This is where optimizing analog and DSP architectures and doing it all with low power and very small die sizes results in a remarkable value proposition for our customers. This is a true differentiator for Credo. Next, we bring a purpose-built mentality to our solutions. We don't view every link as a one-size-fits-all technology challenge. We engineer solutions that are optimized for the many different links we serve. We've got optimized solutions for optical, as well as the many different types of copper links in the data center. We've got a wide range of certies architectures to address the many different links. We have both mixed signal and DSP architectures that are optimized for speed, power, as well as die size. We believe we're the world's leader in mixed signal architectures, and we believe we are the most highly differentiated company for DSP architectures. especially at 112 gig speeds and beyond. The final source of our competitive advantage is system expertise. We focus on delivering system level end-to-end signal integrity. We've also developed a tightly coupled firmware base that adds system design flexibility, and we're driving leading edge system level test solutions. I point to our AEC family as evidence of the fact that we've gone very far with our system level mentality. We're delivering a complete system solution versus just an IC solution. All of this boils down to Credo delivering optimized signal integrity, power efficiency, and cost effectiveness. This is really the key to our success. We feel that our customer engagement is the best validation of our differentiation because when our customers choose to engage with Credo, They're choosing to bet their next generation platform on our execution. Ultimately, it takes a huge amount of trust to make that kind of decision. We're engaged with five of the top seven hyperscalers, and we count more than 20 additional blue chip clients that include networking OEMs, ODMs, as well as optical transceiver manufacturers and many others. So I'm very happy with where we are with customers. Now let's talk about new opportunities that we see within our sites that are beyond the Ethernet market. Other connectivity standards in the data infrastructure market are also experiencing an exponentially increasing demand for higher speed and higher bandwidth. We're committed to serving the most demanding high-speed markets where we can deliver the same advantages in power efficiency and cost effectiveness. So in addition to the Ethernet market, Credo will deliver high-speed connectivity solutions for the USB and PCIe markets. Our solutions are targeting next-generation speeds, So it will be some time before we ramp our products. Our go-to-market strategy will be similar to our strategy for Ethernet, leading with IP licensing and following with products. I'm happy to say that we've signed our first major USB IP license, and that's with an industry leader in the consumer market. We expect these two markets will bring us more opportunity and diversity in our customer base, and we believe this will add roughly $3 billion in TAM in the 2025 timeframe. Of course, none of our goals would be attainable without our tremendous team of employees. We've scaled our organization very quickly over the past several years, and we now employ well over 350 people globally. This team enabled us to achieve strong results in fiscal third quarter and in January 31, 2022. During this most recent quarter, we achieved approximately $31.8 million in revenue and delivered gross margins at approximately 61%. With that introduction, I'd now like to turn the call over to Dan Fleming, our CFO, to provide more details on our January quarter results.