Credo Technology Group Holding Ltd

Ladies and gentlemen, thank you for standing by. At this time, all participants are in listen-only mode. Later, we conduct a question and answer session. At that time, if you have a question, you'll need to press the star 11 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 for joining us on our first quarter earnings call for fiscal 2024. Joining me today from Credo are our Chief Executive Officer, Bill Brennan, and our Chief Financial Officer, Dan Fleming. 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, 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. I'll now turn the call over to our CEO. Bill?

Thank you, Dan, and thank you all for joining our Q1 fiscal 24 earnings call. I'll begin by providing an overview of our fiscal Q1 results. I'll then highlight what we see going forward in the fiscal 24. Dan Fleming, our CFO, will follow my remarks with a detailed discussion of our Q1 financial results and share the outlook for the second quarter. We would then be happy to take questions. For Q1, Credo reported revenue of $35.1 million. Additionally, we reported non-GAAP gross margin of 59.8%. Our Q1 results and future growth are driven by the accelerating market opportunity for high-speed connectivity solutions. Our electrical and optical connectivity solutions deliver leading performance at port speeds ranging from 50 gigabits per second up to 1.6 terabits per second. While we primarily serve the data center Ethernet market today, we continue to extend into other standard-based markets as the need for higher speed and more power-efficient connectivity increases exponentially. The changing workloads in the data center, specifically with regards to the onset of generative AI applications, are driving the demand for higher bandwidth and higher density networking. This plays directly to Credo's strengths. All of Credo's connectivity solutions leverage our core Certis technology and our unique customer-focused design approach, enabling Credo to deliver optimized, secure, high-speed solutions with significant benefits in power efficiency and costs. Credo continues to see increasing customer engagements across our product and IP solutions, which include active electric cables, or AECs, optical DSPs, laser drivers, and TIAs, line card PHYs, SERDES chiplets, and SERDES IP licensing. I'll now review our overall business to give more perspective. First, regarding our AEC business, Credo remains a pioneer in the AEC market. Industry analysts forecast increasing AEC market penetration as port speeds increase for intra-rack connectivity. Our AEC solutions offer significant benefits compared to both passive direct attached copper cables, which are physically cumbersome, poor signal integrity at higher speeds, and active optical cables, or AOCs, which are significantly higher power and higher cost. Today, our largest customer deploys our AECs for both general compute and AI applications. Additionally, we continue to design custom AEC solutions to solve for their next generation deployments, including their first internally developed 100 gig per lane AI deployment. At our second hyperscaler customer, our production ramp for both general compute and AI programs remains on track, with expectations for continued growth throughout this fiscal year and fiscal 25. We also continue to make progress on their next generation platforms, with Credo receiving commitments for multiple 100 gig per lane AEC programs. We attribute much of our success at our existing customers to our system level approach to the AEC market. Our approach enables us to quickly respond to customers' requests and deliver innovative, feature-rich AEC solutions tailored to our customers' specific requirements. This approach has led us to making further progress with additional hyperscalers who are at various stages of valuation and qualification of our AECs. We've also seen a growing number of tier two data center operators and service providers adopting Credo AEC solutions. We have earned meaningful revenue from these customers to date and expect this customer category to grow in the future. In summary, we're happy with our progress with customers and we're encouraged by the accelerating market demand for 50 gig and 100 gig lane rates for in-rack connectivity. Regarding our optical solutions, within this market, we remain a disruptor. We leverage our Core 30s technology and customer-specific approach to deliver a compelling combination of performance, power, and cost. Credo's optical solutions comprise DSPs, laser drivers, and TIAs for 50 gig through 800 gig port applications, including optical transceivers and AOCs. We expect AI deployments to drive a large optical opportunity given the high density rack-to-rack connections with AOCs or optical transceivers in the backend RDMA network within a cluster. I'm pleased that during Q1, we started the ramp of our 400 gig optical DSP for a US hyperscaler. Our optical manufacturing partner is delivering 400 gig AOC solutions for an AI deployment at this hyperscaler. We expect the production ramp will continue throughout our fiscal 24 and into fiscal 25. We're also seeing demand restart from data centers in China. While too early to create meaningful expectations, Credo stands to benefit in spending returns in this market. Credo has designs in progress with several optical manufacturers and hyperscalers targeting next generation 800 gig and 400 gig programs. And we expect ongoing progress in winning production commitments. Beyond the hyperscalers, we see additional optical opportunities with networking OEMs and service providers. We remain engaged with many partners and prospective customers for fiber channel, 5G, OTN, and PON applications. The optical market seems to have turned a corner in the last couple of quarters. We aim to announce and demonstrate new optical solutions at upcoming optical trade shows later this calendar year, and we remain optimistic about our prospects for our optical solutions business. Within our LineCard 5 business, we're an established market leader with our LineCard 5 solutions for port speeds up to 1.6 terabits per second. We think our overall value proposition becomes even more compelling as the market is now accelerating for 100 gig per lane deployments. During the first quarter, we saw design engagements increasing, specifically with our Screaming Eagle 1.6 terabit per second fives. We have strong customer feedback that we have again achieved a leading combination of performance, signal integrity, and power efficiency. And we've already had success in winning design commitments from leading networking OEMs and ODMs. We've also made significant development progress with our customer-sponsored next-generation 1.6 terabits per second MACsec PHY, which we believe will extend our MACsec leadership well into the future for applications requiring encryption. Going forward, we expect to remain a leader in this category given our core technology differentiation and deep collaborative relationships with leading networking OEMs and ODMs, as well as hyperscalers directly. Regarding our Certis IP licensing and Certis chiplet business, while we see quarter-to-quarter variability in revenue for our Certis IP licensing business, our customer traction and funnel remain consistently strong. We've seen a breadth of wins in this category, including 50 gig and 100 gig lane speeds at process nodes ranging from 5 nanometer to 28 nanometer. End applications include networking, AI, 5G, as well as a wide range of other applications. In addition to IP, we've also developed Surge's chiplet solutions. With two high-profile lead customers reaching production, Frito is beginning to see meaningful revenue in our fiscal 24. One of our lead customers is Tesla, And as they've publicly presented, Credo is their connectivity partner for their Dojo supercomputer, delivering series IP for their D1 ASIC and series chiplets for off-tile connectivity. We're receiving increased interest in our series chiplets from additional customers and prospects, which supports industry expectations that chiplets will play an important future role in the highest performance designs. To sum up, we're happy with our results in fiscal Q1 and we're encouraged about demand drivers for the balance of the year and beyond. Credo's position as a market leader for high-speed connectivity solutions has been years in the making, and the market acceleration towards high-bandwidth solutions at low power with more networking density plays into our strengths. We continue to expect sequential growth throughout fiscal 24. We believe our growth will be led by multiple customers across our range of connectivity solutions, which would result in a more diversified revenue base as we exit fiscal 24. I'll now hand the call over to our CFO, Dan Fleming, who will provide additional details. Thank you.