Credo Technology Group Holding Ltd

Good day, and thank you for standing by. Welcome to the KEDO Q4 fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to go ahead and turn the call over to Dan O'Neill. Please go ahead.

Good afternoon, and thank you all for joining us today for our fiscal 2023 fourth quarter and year-ending earnings call. 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's not possible for the company's management 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. Given 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 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 important measures 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, which 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, and good afternoon, everyone. Thank you for joining our Q4 fiscal 23 earnings call. I'll begin by providing an overview of our fiscal year 23 and fiscal Q4 results. I will then highlight what we see going forward in fiscal 24. Dan Fleming, our CFO, will follow my remarks with a detailed discussion of our Q4 and fiscal year 23 financial results. and share our outlook for the first quarter. Credo is a high-speed connectivity company delivering integrated circuits, system-level solutions, and IP licenses to the hyperscale data center ecosystem, along with a range of other data centers and service providers. All our solutions leverage our core series technology and our unique customer-focused design approach, enabling Credo to deliver optimized, secure, high-speed solutions with significantly better power efficiency and cost. Our electrical and optical connectivity solutions deliver leading performance with port speeds ranging from 50 gig up to 1.6 terabits per second. While we primarily serve the Ethernet market today, we continue to expand into other standards-based markets as the need for higher speed with more power-efficient connectivity increases exponentially. Credo continues to have significant growth expectations within the accelerating market opportunity for high-speed connectivity solutions. In fact, the onset of generative AI applications is already accelerating the need for higher speed and more energy-efficient connectivity solutions. And this is where Credo excels. I'll start with comments on our fiscal 2023 results. Today, Credo is reporting results from our first full fiscal year as a public company. In fiscal 23, Credo achieved just over $184 million in revenue, up 73% over fiscal 22, and we achieved non-GAAP gross margin of 58%. Product revenue increased 87% year over year, primarily due to the ramp of our active electrical cable solutions. License revenue grew 28% year over year, from $25 million to $32 million. Throughout fiscal 23, we had several highlights across our product lines. For active electrical cables, or AECs, we continued to lead the market Credo pioneered during the last several years. Our team continued to quickly innovate with application-specific solutions, and we've been successful in expanding our engagements to include multiple data centers and service providers. Our customer-focused innovation has led to more than 20 different versions of AECs shipped for qualification or production in the last year, and we remain sole sourced in all our wins. And while our significant power advantage was a nice-to-have a couple years ago, it's increasingly becoming imperative as our hyperscaler customers are pushed to lower their carbon footprint. For optical DSPs, Credo continued to build momentum by successfully passing qualification for 200 gig and 400 gig solutions at multiple hyperscalers with multiple optical module partners. In addition, Credo introduced our 800 gig optical DSPs, laser drivers, and TIAs, and we announced our entry into the coherent optical DSP market. For line card price, We continue to expand our market leadership. In particular, Credo built upon our position as the leader for MaxTech PHYs with over 50% market share. We also extended our performance and power efficiency advantages for 100 gig per lane line card PHYs with the introduction of our Screaming Eagle family of retimers and gearboxes with up to 1.6 terabits per second of bandwidth. For IP licensing, we continue to build on our offering of highly optimized series IP. In the year, we licensed CERTI's IP in several process nodes from 4 nanometer to 28 nanometer, with speeds ranging from 28 gig to 112 gig, and reach performance ranging from XSR to LR. We believe our ability to innovate to deliver custom solutions remains unparalleled. We maintain very close working relationships with hyperscalers, and we'll continue to collaborate with them to deliver solutions that are optimized to their needs. Despite recent macroeconomic headwinds in the data center industry, we believe the need for higher speed with better power efficiency will continue to grow. This plays perfectly to CREVA's strengths, which is why we remain optimistic about our prospects in fiscal 24 and beyond. I will now discuss the fourth quarter more specifically. In Q4, we delivered revenue of $32.1 million and non-GAAP gross margin of 58%. I'll now provide an overview of key business trends for the quarter. First, regarding AEC, market forecasters continue to expect significant growth in this product category due to the benefits of AECs compared to both legacy direct-attached copper cables and compared to active optical cables, which are significantly higher power and higher cost. With our largest customer, we're encouraged by our development progress on several new AEC programs, including an acceleration in their first 100 gig per lane AI program where they intend to deploy Credo AECs. We saw the initial ramp of a second hyperscale customer, which we expect to grow meaningfully throughout the year. We're ramping 50 gig per lane NIC to Tor AEC solutions for both their AI and compute applications. And I'm happy to report that Credo has been awarded this customer's first 100 gig per lane program. We're also actively working to develop several other advanced AEC solutions for their next-generation deployments. We continue to make progress with additional customers as well. We remain in flight with two additional hyperscalers and are also engaged in meaningful opportunities with service providers. We've seen momentum building for AEC solutions across AI, compute, and switch applications, and we continue to expect to benefit as speeds move quickly to 100 gig per lane. Regarding our progress on optical solutions, in the optical category, we've leveraged our CERTiS technologies to deliver disruptive products, including DSPs, laser drivers, and TIAs for 50 gig through 800 gig port applications. We remain confident we can gain share over time due to our compelling combination of performance, power, and cost. In addition to the hyperscalers that have previously production-qualified Credo's optical DSPs, we started the production ramp of a 400-gig optical DSP for a U.S. hyperscaler as the end customer. At OFC in March, we received very positive feedback on our market solutions, including our Dove 800 products, as well as on our announcement to enter the 100-gig ZR co-parent DSP market. We're well positioned to win hyperscalers across a range of applications, including 200-gig, 400-gig, and 800-gig port speeds. We're also engaged in opportunities for fiber channel, 5G, OTM, and PON applications with optical partners, service providers, and networking OEMs. Within our LionCard 5 category, during the fourth quarter, we saw growing interest in our solutions, specifically for our Screaming Eagle 1.6 terabit per second vibes. We've already been successful winning several design commitments from leading networking OEMs and ODMs for the Screaming Eagle devices. Credo was selected due to our combination of performance, signal integrity, power efficiency, and cost effectiveness. We also made significant development progress with our customer-sponsored next-generation 5-nanometer 1.6 terabit per second MaxTech PHY, which we believe will extend our leadership well into the future for applications requiring encryption. Regarding our CERTI's IP licensing and CERTI's chiplet businesses, Our IP deals in Q4 were primarily led by our 5 and 4 nanometer, 112 gig series IP, which according to customers, offers significant power advantage versus competition based on our ability to power optimize to the reach of an application. Our service chiplet opportunity continues to progress. Our collaboration with Tesla on their Dojo supercomputer design is an example of how connectivity chiplets can enable advanced next generation AI systems. We're working closely with customers and standard size, such as the UCIE consortium, to ensure we retain leadership as the chiplet market grows and matures. We believe the acceleration of AI solutions across the industry will continue to fuel our licensing and chiplet businesses. To sum up, the hyperscale landscape has shifted swiftly and dramatically in 2023. Compute is now facing a new horizon, which is generative AI. We expect this shift to accelerate the demand for energy-efficient connectivity solutions that perform at the highest speeds. From our viewpoint, this technology acceleration increases the degree of difficulty and will naturally slim the field of market participants. We remain confident that our technology innovation and market leadership will fuel our growth as these opportunities materialize. We expect to grow sequentially in Q1 and then continue with sequential quarterly revenue growth throughout fiscal 24. We believe our growth will be led by multiple customers across our range of connectivity solutions, which will result in a more diversified revenue base as we exit fiscal 24. I'll now turn the call over to our CFO, Dan Fleming, who will provide additional details. Thank you.