10q10k10q10k.net

What changed in Credo Technology Group Holding Ltd's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Credo Technology Group Holding Ltd's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+360 added−495 removedSource: 10-K (2024-06-24) vs 10-K (2023-06-23)

Top changes in Credo Technology Group Holding Ltd's 2024 10-K

360 paragraphs added · 495 removed · 278 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+20 added−20 removed31 unchanged
Biggest changeWe offer a combination of competitive base salary, time-based equity incentives and discretionary bonuses, which have generally been linked to financial performance that are designed to motivate and reward personnel with annual grants of share-based incentive compensation awards to our employees, some of which vest over a period of four years, plus other benefits, in order to increase member value and the success of our company by motivating our team to perform to the best of their abilities and achieve both our short- and long-term objectives.
Biggest changeWe offer a combination of competitive base salary, time-based equity incentives and discretionary bonuses, generally linked to our financial performance, designed to motivate and reward our employees.
Similarly, with the global deployment of high-speed fixed-line and wireless networks, carriers are also increasingly seeking higher performance connectivity solutions to address their substantial growth in traffic. 5G wireless infrastructure has proliferated in some countries but still has much room for growth, and low earth orbit satellite IP solutions such as Starlink offer disruptive performance and cost for users who cannot access existing infrastructure.
Similarly, with the global deployment of high-speed fixed-line and wireless networks, carriers are also increasingly seeking higher performance connectivity solutions to address their substantial growth in traffic. 5G wireless infrastructure has proliferated in some countries but still has much room for growth, and low earth orbit satellite IP solutions such as Starlink offer disruptive performance and cost for users who cannot access the existing infrastructure.
The principal competitive factors in our market include: • success in identifying new and emerging markets, applications and technologies; • product performance, power efficiency and cost-effectiveness; 14 • ability to provide a broad range of connectivity products and solutions; • ability to deliver products in large volume on a timely basis at a competitive price; • ability to offer products and features previously not available in the marketplace; and • extent of IP protection and enforcement of rights.
The principal competitive factors in our market include: • success in identifying new and emerging markets, applications and technologies; • product performance, power efficiency and cost-effectiveness; • ability to provide a broad range of connectivity products and solutions; • ability to deliver products in large volume on a timely basis at a competitive price; • ability to offer products and features previously not available in the marketplace; and • extent of IP protection and enforcement of rights.
Fixed-line infrastructure speeds continue to grow, with the recent announcement of CableLabs DOCSIS 4.0 10Gb standards and proliferation of fiber-to-the-home. Beyond hyperscalers and 5G networking, the evolution of connectivity standards for servers such as Peripheral Component Interconnect Express (PCIe) and consumer devices such as Universal Serial Bus (USB) present an additional long-term opportunity.
Fixed-line infrastructure speeds continue to grow, with the announcement of CableLabs DOCSIS 4.0 10Gb standards and proliferation of fiber-to-the-home. Beyond hyperscalers and 5G networking, the evolution of connectivity standards for servers such as Peripheral Component Interconnect Express (PCIe) and consumer devices such as Universal Serial Bus (USB) present an additional long-term opportunity.
In addition, our trade secrets may otherwise become known or be independently discovered by competitors. Competition We believe we are the only company in our industry offering a complete suite of high-performance connectivity solutions. Our competitors typically compete with us with respect to some, but not all, of our solutions.
In addition, our trade secrets may otherwise become known or be independently discovered by competitors. Competition We believe we are the only company in our industry offering a complete suite of high-performance connectivity solutions. Our competitors typically compete with us with respect to some, but not all, of our 14 solutions.
Once developed, these tailored solutions can generally be broadly leveraged across our portfolio and we are able to sell the part or license the IP into the broader market. We have global sales, marketing and business development teams responsible for identifying and building our customer relationships.
Once developed, these tailored solutions can generally be broadly leveraged across our portfolio and we are able to sell the part or license the IP to the broader market. We have global sales, marketing and business development teams responsible for identifying and building our customer relationships.
In some cases, this involves speed shifting functionality where lane speeds are changed (e.g., one lane of 112G becomes 2 lanes of 56G), modulation 11 schemes are changes (e.g., PAM4 symbol becomes two non-return-to-zero (NRZ) symbols) and forward error correction is terminated and/or generated to ensure a plug and play bridge between two different speed hosts. • Credo HiWire CLOS AECs are specifically designed for high density in-rack or HPC rack-to-rack interconnect to support CLOS architectures, a type of non-blocking, multistage switching architecture that reduces the number of ports required in an interconnected fabric.
In some cases, this involves speed shifting functionality where lane speeds are changed (e.g., one lane of 112G becomes 2 lanes of 56G), modulation schemes are changed(e.g., PAM4 symbol becomes two non-return-to-zero (NRZ) symbols) and forward error correction is terminated and/or generated to ensure a plug and play bridge between two different speed hosts. • Credo HiWire CLOS AECs are specifically designed for high density in-rack or HPC rack-to-rack interconnect to support CLOS architectures, a type of non-blocking, multistage switching architecture that reduces the number of ports required in an interconnected fabric.
Our SerDes Chiplets are designed for high performance and low power from mature processes, allowing customers to fabricate their core logic in advanced processes and combine them in their MCM SoC. SerDes IP: SerDes IP is designed for the easy SoC integration of tens to hundreds of SerDes lanes.
Our SerDes Chiplets are designed for high performance and low power from mature processes, allowing customers to fabricate their core logic in advanced processes and combine them in their MCM SoC. 12 SerDes IP: SerDes IP is designed for the easy SoC integration of tens to hundreds of SerDes lanes.
Credo’s new low-power Screaming Eagle 112G/lane retimers and Dove800 DSPs are enabling our customers to achieve their technical objectives, as well as supporting the important ESG goals of our customers.
Credo’s low-power Screaming Eagle 112G/lane retimers and Dove800 DSPs are enabling our customers to achieve their technical objectives, as well as supporting the important ESG goals of our customers.
Our patent and patent application portfolio primarily relates to four main areas: Ethernet standard, network cable technology, chip manufacturing and MCM and SerDes cores. These issued patents, and any patents granted from such applications, are expected to expire between 2029 and 2043, without taking potential patent term extensions or adjustments into account.
Our patent and patent application portfolio primarily relates to four main areas: Ethernet standard, network cable technology, chip manufacturing and MCM and SerDes cores. These issued patents, and any patents granted from such applications, are expected to expire between 2029 and 2045, without taking potential patent term extensions or adjustments into account.
Our architectural approach enables design in a mature fabrication process while delivering leading-edge performance and power efficiency, which has led to our more than 30 IP licensing engagements.
Our architectural approach enables design in a mature fabrication process while delivering leading-edge performance and power efficiency, which has led to our more than 50 IP licensing engagements.
We partner with Microsoft on our HiWire Switch AEC and open-source implementation that helps realize Microsoft’s vision for a highly reliable network-managed dual-Top-of-Rack (ToR) architecture (a network architecture design in which computing equipment located within the same or an adjacent rack are, for redundancy, connected to two in-rack network switches, which are, in turn, connected to aggregation switches via fiber optic cables), overcoming complex and slow legacy enterprise approaches, simplifying deployment and improving connection reliability in the data center.
We partner with Microsoft on our HiWire Switch AEC and open-source implementation that helps realize Microsoft’s vision for a highly reliable network-managed dual-Top-of-Rack (ToR) architecture (a network architecture design in which computing equipment located within the same or an adjacent rack are, for redundancy, connected to two in-rack network switches, which are, in turn, connected to aggregation switches via fiber optic cables), overcome complex and slow legacy enterprise approaches, simplify deployment and improve connection reliability in the data center.
Our proprietary SerDes and DSP technologies enable us to achieve similar performance to leading competitors’ products but in a lower cost, more highly available legacy node (n-1 advantage). Beyond power and performance, Credo continues to innovate to solve customers’ system level requirements.
Our proprietary SerDes and DSP technologies enable us to achieve similar performance to leading competitors’ products but at a lower cost and more highly available legacy node (n-1 advantage). Beyond power and performance, Credo continues to innovate to address customers’ system level requirements.
We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, available free of charge at our website as soon as reasonably practicable after they have been filed with, or furnished to, the SEC.
We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, available free of charge on our website investors.credosemi.com as soon as reasonably practicable after they have been filed with, or furnished to, the SEC.
The multibillion-dollar data infrastructure market that we serve is driven largely by hyperscale data centers (hyperscalers), as well as general compute, Artificial Intelligence and Machine Learning (AI/ML) infrastructure, multi-service operators (MSOs), and mobile network operators (MNOs).
The multibillion-dollar data infrastructure market that we serve is driven largely by hyperscale data centers (hyperscalers), as well as general compute, AI/ML infrastructure, multi-service operators (MSOs), and mobile network operators (MNOs).
We have demonstrated our ability to sell multiple of our connectivity solutions to several of our Tier 1 customers, and we will continue to seek to extend and deepen our relationships with existing customers.
We have demonstrated our ability to sell multiple of our connectivity solutions to several of our major customers, and we will continue to seek to extend and deepen our relationships with existing customers.
These relationships with leading hyperscalers, OEMs, ODMs and optical module manufacturers give us insight and extensive visibility into product designs, design specifications, development, production timeline, product implementation and product innovation. Our direct relationships enable us to better anticipate our customer needs and will facilitate our ability to sell multiple connectivity solutions to our customers over time.
These relationships with leading hyperscalers, OEMs, ODMs and optical module manufacturers give us insight and extensive visibility into product designs, design specifications, development, production timelines, product implementations and product innovations. Our direct relationships enable us to better anticipate our customer needs and will facilitate our ability to sell multiple connectivity solutions to our customers over time.
We sell our products to hyperscalers and cloud infrastructure providers, as well as MNO, MSO, 5G wireless, enterprise networking and HPC customers.
We sell our products to hyperscalers and cloud infrastructure providers, as well as MNO, MSO, 5G wireless, enterprise networking, and high performance computing (HPC) customers.
Culture of Continuous Innovation: We have a history of innovation and pioneering new technologies including: • Early demonstration and productization of 112G SerDes for Optical and Electrical links • Pioneer in 100G, 200G, 400G, 800G and emerging 1.6T AEC market, establishing a new product category • Industry-leading low-power gearbox for 56G and 112G per lane applications • Delivering 112G XSR IP for MCM solutions • Production shipments of SerDes Chiplets, including two versions of 3.2Tbps Chiplets • Shipping industrial temperature (iTemp) PAM4 DSP for 5G market • First to deliver 40G PAM3 SerDes • Created HiWire Switch cable and open-sourced implementation with Microsoft in order to help realize their vision for a highly reliable network-managed dual-ToR architecture We believe our culture of continuous innovation positions us as a market leader with best-in-class products and IP solutions.
Culture of Continuous Innovation: We have a history of innovation and pioneering new technologies including: • Early demonstration and productization of 112G SerDes for Optical and Electrical links • Pioneer in 100G, 200G, 400G, 800G and emerging 1.6T AEC market, establishing a new product category • Industry-leading low-power gearbox for 56G and 112G per lane applications • Delivering 112G XSR IP for multi-chip module (MCM) solutions • Production shipments of SerDes Chiplets, including two versions of 3.2Tbps Chiplets • Shipping industrial temperature (iTemp) PAM4 DSP for 5G market • First to deliver 40G PAM3 SerDes • Created HiWire Switch cable and open-sourced implementation with Microsoft to realize their vision for a highly reliable network-managed dual-ToR architecture • Introduced World’s First 800G DSP for Linear Receive Optics, targeting Hyperscale and AI Data Centers We believe our culture of continuous innovation positions us as a market leader with best-in-class products and IP solutions.
We are engaged with all of the major hyperscalers, and our customer base includes over 20 blue chip clients, including more than 10 original equipment manufacturers (OEMs) and original design manufacturers (ODMs), over 10 optical module manufacturers and other leading enterprises. 8 During fiscal 2023 and 2022, we generated $184.2 million and $106.5 million in total revenue, respectively.
We are engaged with all of the major hyperscalers, and our customer base includes over 20 blue chip clients, including more than 10 original equipment manufacturers (OEMs) and original design manufacturers (ODMs), over 10 optical module manufacturers and other leading enterprises. During fiscal 2024 and 2023, we generated $193.0 million and $184.2 million in total revenue, respectively.
Hyperscaler General Compute Traffic Doubles Every 2-3 Years: Our hyperscale customers are beginning to deploy Network Interface Card (NIC) speeds of 200G in 2023 with 400G on roadmaps for 2024.
Hyperscaler General Compute Traffic Doubles Every 2-3 Years: Our hyperscale customers began to deploy Network Interface Card (NIC) speeds of 200G in calendar year 2023 with 400G on roadmaps for calendar year 2024.
Top Industry Talent and Experienced Leadership Team: We employ an engineering-focused workforce as well as a highly technical management team with deep industry experience and connectivity expertise. Our global team included 353 engineers as of April 29, 2023, while our international footprint allows us to continue attracting talent needed to support our business.
Top Industry Talent and Experienced Leadership Team: We employ an engineering-focused workforce as well as a highly technical management team with deep industry experience and connectivity expertise. Our global team included 407 engineers as of April 27, 2024, and our international footprint allows us to continue attracting talent needed to support our business.
Our HiWire AEC solutions include SWITCH, SPAN, SHIFT and CLOS AECs: • Credo HiWire SWITCH AEC enables a NIC to connect to two ToRs in an Active/Standby configuration for sub-millisecond failover that is fully network operating system managed.
Our HiWire AEC solutions include SWITCH, SPAN, SHIFT, and CLOS AECs, and Pluggable Patch Panel P3: • Credo HiWire SWITCH AECs enable a NIC to connect to two ToRs in an Active/Standby configuration for sub-millisecond failover that is fully network operating system managed.
(ASE) for packaging our IC products, King Yuan Electronics Company (KYEC) and TeraPower Technology Inc. (TeraPower) for testing our IC products and BizLink Technology, Inc. (BizLink) and Cheng Ui Precision Industry (Foxlink) for manufacturing our AEC products.
(ASE) for packaging our IC products, 13 King Yuan Electronics Company (KYEC) and Sigurd Microelectronics Corp. (Sigurd) for testing our IC products and BizLink Technology, Inc. (BizLink) and Cheng Ui Precision Industry (Foxlink) for manufacturing our AEC products.
Our hyperscale customers are deploying 50G per lane electrical PAM4 data rates today and expect to begin deployments of 100G per lane electrical PAM4 solutions in 2024. Energy efficiency is becoming a key concern for customers as increased data transfer speeds require more energy to power and cool their systems.
Our hyperscale customers have deployed 50G per lane electrical PAM4 data rates in 2023, and they have begun deployments of 100G per lane electrical PAM4 solutions in 2024. Energy efficiency is becoming a key concern for customers as increased data transfer speeds require more energy to power and cool their systems.
For all of our products, we use Taiwan Semiconductor Manufacturing Company Limited (TSMC) for semiconductor wafer production. • Package, Assembly and Testing : Upon the completion of processing at the foundry, we use third-party contractors for packaging, assembly and testing, including Amkor Technology Inc. (Amkor) and Advanced Semiconductor Engineering, Inc.
In fiscal year 2024, we exclusively used Taiwan Semiconductor Manufacturing Company Limited (TSMC) for semiconductor wafer production. • Package, Assembly and Testing : Upon the completion of processing at the foundry, we use third-party contractors for packaging, assembly and testing, including Amkor Technology Inc. (Amkor) and Advanced Semiconductor Engineering, Inc.
Our team members often leverage their professional networks, and we also use online search tools, specialized recruiting firms, internships and university hires to ensure a varied outreach approach for candidates.
Our objective is to attract and retain talented and experienced employees, advisors and consultants. Our team members often leverage their professional networks, and we also use online search tools, specialized recruiting firms, internships and university hires to ensure a varied outreach approach for candidates.
Our proprietary SerDes architectures have underpinned our products and IP solutions since our inception. We intend to continue investing in research and development in our SerDes design to expand our technology leadership. • Broaden our portfolio of products and IP solutions.
We intend to continue investing in research and development in our SerDes design to expand our technology leadership. 10 • Broaden our portfolio of products and IP solutions.
We rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, and contractual protections, to protect our core technology. As of April 29, 2023, we owned 62 issued patents and 18 pending patent applications in the United States, and 22 issued patents and 40 pending patent applications in mainland China.
We rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, and contractual protections, to protect our core technology. As of April 27, 2024, we owned 73 issued patents and 13 pending patent applications in the United States, and 31 issued patents and 35 pending patent applications in mainland China.
Our product families include integrated circuits (ICs), Active Electrical Cables (AECs) and SerDes Chiplets. Our intellectual property (IP) solutions consist primarily of SerDes IP licensing. Data generation has increased dramatically over the past ten years, creating new and complicated challenges in both circuit and system design.
Our intellectual property (IP) solutions consist primarily of SerDes IP licensing. Data generation has increased dramatically over the past ten years, creating new and complicated challenges in both circuit and system design.
Research and Development We view our technology as a competitive advantage and devote substantial resources to the research and development of new products and the improvement of existing products.
Research and Development We view our technology as a competitive advantage and devote substantial resources to the research and development of new products and the improvement of existing products. We have committed, and plan to continue to commit, significant resources to technology and product innovation and development.
Our architectural approach enables us to design in mature fabrication processes yet still deliver leading edge performance and power at a significantly lower cost. Our optimized SerDes architectures achieve industry-leading power efficiency on small die areas in cost-effective mature processes.
Best-in-Class Technology: We believe we are at the forefront of the high-performance connectivity market. Our architectural approach enables us to design in mature fabrication processes still deliver leading edge performance and power at a significantly lower cost. Our optimized SerDes architectures achieve industry-leading power efficiency on small die areas in cost-effective mature processes.
Industry Overview We believe we are well positioned to benefit from the strong secular tailwinds driving the data infrastructure market, which is being driven by several factors, including: AI/ML Drives an Explosion in Network Traffic: Our hyperscale customers are increasingly pursuing AI/ML infrastructure that requires rack scale interconnectivity densities that are significantly higher than their general compute infrastructure.
Product sales and product engineering services revenue comprised 85% and 83% of our total revenue in fiscal 2024 and 2023, respectively, and IP license revenue represented 15% and 17% of our total revenue in fiscal 2024 and 2023, respectively. 8 Industry Overview We believe we are well positioned to benefit from the strong secular tailwinds driving the data infrastructure market, which is being driven by several factors, including: AI/ML Drives an Explosion in Network Traffic: Our hyperscale customers are increasingly pursuing AI/ML infrastructure that requires rack scale interconnectivity densities that are significantly higher than their general compute infrastructure.
Nevertheless, as part of our commitment to long-term innovation, we continuously develop technology in cutting-edge fabrication processes such as 5nm in order to enhance our competitive position, and to serve the market of IP licensing customers whose logic requires cutting-edge fabrication processes. 12 Our Customers We sell our products to hyperscalers, OEMs, ODMs and optical module manufacturers, as well as into the enterprise and HPC markets.
Nevertheless, as part of our commitment to long-term innovation, we continuously develop technology in cutting-edge fabrication processes such as 3nm in order to enhance our competitive position, and to serve the market of IP licensing customers whose logic requires cutting-edge fabrication processes.
As these connectivity standards move to higher-speed data rates and higher order modulation, innovation in power efficiency and cost efficiency will be required to deliver competitive connectivity solutions.
As these connectivity standards move to higher-speed data rates and higher order modulation, innovation in power efficiency and cost efficiency will be required to deliver competitive connectivity solutions. We expect that demand for increasingly sophisticated connectivity solutions will grow alongside the evolution of these standards.
We believe that this fosters harmony within the company, as all teams are working together towards the same goals. We also comply with applicable laws and regulations regarding workplace safety and are subject to audits by entities such as the Occupational Safety and Health Administration in the United States.
We also comply with applicable laws and regulations regarding workplace safety and are subject to audits by entities such as the Occupational Safety and Health Administration in the United States.
Our global training and development program focuses on harassment-free workplace and diversity topics, as well as ethics and compliance. Our company-wide compensation structure is intended to align incentives with the success of Credo. This includes our executives, whose incentives are generally the same as the rest of our employees.
Our global training and development program focuses on harassment-free workplace and diversity topics, as well as ethics and compliance. Our company-wide compensation structure is intended to align incentives with the success of Credo. We believe that this fosters collaboration within the company, as all teams are working together towards 15 the same goals.
By engaging directly with the end user, we are able to better understand the needs of our customers and cater our solutions to their most pressing connectivity requirements.
Sales and Marketing We employ a two-pronged sales strategy targeting both the end users of our products, as well as the suppliers of our end users. By engaging directly with the end user, we are able to better understand the needs of our customers and cater our solutions to their most pressing connectivity requirements.
Our innovations ease system bandwidth bottlenecks while simultaneously improving on power, security and reliability. Our connectivity solutions are optimized for optical and electrical Ethernet applications, including the 100G (or Gigabits per second), 200G, 400G, 800G and emerging 1.6T (or Terabits per second) markets. Our products are based on our Serializer/Deserializer (SerDes) and Digital Signal Processor (DSP) technologies.
Our connectivity solutions are optimized for optical and electrical Ethernet applications, including the 100G (or Gigabits per second), 200G, 400G, 800G and emerging 1.6T (or Terabits per second) markets. Our products are based on our Serializer/Deserializer (SerDes) and Digital Signal Processor (DSP) technologies. Our product families include integrated circuits (ICs), Active Electrical Cables (AECs) and SerDes Chiplets.
Employees and Human Capital Resources As of April 29, 2023, approximately 81% of our 438 full-time equivalent employees were engineers. Of our employees, 174 were located in North America and 264 were located in Asia.
Employees and Human Capital Resources As of April 27, 2024, approximately 407 of our 500 full-time equivalent employees were engineers. Of our employees, 137 were located in North America and 270 were located in Asia.
Our teams of engineers are our most valuable assets. Our core philosophy is that our employees are our most important backers, investing their time and professional reputations in the company. We continually assess our business to identify our talent needs.
Our employees are our most valuable assets. Our core philosophy is that our employees are our most important backers, investing their time and professional reputations in the company. We continually assess our business to identify our talent needs. We have a diverse workforce that represents many cultures and we celebrate our diversity by fostering inclusion across our multinational organization.
HiWire AECs: HiWire AECs are copper interconnect cables designed for affordable, low-power operation at 100G, 200G, 400G, 800G and emerging 1.6T data speeds. HiWire AECs enable hyperscalers and 5G architects to accelerate the transition to Distributed, Disaggregated Chassis (DDC) by offering a high-performance alternative to short, thick Direct Attach Cables (DACs) and high-power, high-cost Active Optical Cables (AOCs).
HiWire AECs enable hyperscalers and 5G architects to accelerate the transition to Distributed, Disaggregated Chassis (DDCs) by offering a high-performance alternative to short, thick Direct Attach Cables (DACs) and higher-power, higher-cost Active Optical Cables (AOCs).
We designed our SerDes IP to optimally balance performance, power and manufacturing process costs and risks. Our patented mixed signal and DSP architectures are the foundation of our high-performance and low-power SerDes technology.
The IP range in performance for 1G to 112G per lane. Additionally, we developed USB4 Version 2 SerDes IP which has been adopted by a major OEM. We designed our SerDes IP to optimally balance performance, power and manufacturing process costs and risks. Our patented mixed signal and DSP architectures are the foundation of our high-performance and low-power SerDes technology.
Furthermore, our extensive knowledge and experience across a range of connectivity offerings better enables us to identify potential bottlenecks and design solutions to address them, differentiating us from competitors focused on point solutions. Best-in-Class Technology: We believe we are at the forefront of the high-performance connectivity market.
We believe we can provide superior service to our customers by serving as a single point of contact for various requirements. Furthermore, our extensive knowledge and experience across a range of connectivity offerings enables us to better identify potential bottlenecks and design solutions to address them, differentiating us from competitors focused on point solutions.
We work closely and have engagements with industry-leading companies across these segments. We currently rely and expect to continue to rely on a limited number of customers for a significant part of our revenue. In fiscal 2023, sales to our top 10 customers accounted for approximately 90% of our total revenue.
Our Customers We sell our products to hyperscalers, OEMs, ODMs and optical module manufacturers, as well as into the enterprise and HPC markets. We work closely and have engagements with industry-leading companies across these segments. We currently rely and expect to continue to rely on a limited number of customers for a significant part of our revenue.
Many of our executives have more than 20 years of semiconductor innovation experience and an extensive track record of successful leadership across multiple semiconductor companies. 10 Our Growth Strategy To further our mission of providing secure, high-speed connectivity solutions, we intend to focus on the following strategic areas: • Extend our leadership in SerDes technologies.
Our Growth Strategy To further our mission of providing secure high-speed connectivity solutions, we intend to focus on the following strategic areas: • Extend our leadership in SerDes technologies. Our proprietary SerDes architectures have underpinned our products and IP solutions since our inception.
We have committed, and plan to continue to commit, significant resources to technology and product innovation and development. 13 We have assembled a team of highly skilled engineers with deep signal processing expertise who are located in San Jose, California, mainland China and Taiwan. As of April 29, 2023, we employed 353 engineers.
We have assembled a team of highly skilled engineers with deep signal processing expertise who are located in San Jose, California, mainland China and Taiwan. As of April 27, 2024, we employed 407 engineers. Research and development expenses for fiscal 2024 and 2023 were $95.5 million and $76.8 million, respectively.
SerDes Chiplets: SerDes technology enables data transmission at high rates while minimizing the number of interconnects required. As the bandwidth of interconnects increase, the complexity of the design for signal transmission increases.
As the bandwidth of interconnects increase, the complexity of the design for signal transmission increases.
We rely on third parties to manufacture our products and require our suppliers to maintain a safe work environment, as described in further detail under “—Manufacturing and Suppliers.” Facilities We lease 87,608 square feet of office space in San Jose, California under a lease expiring on October 31, 2030.
We rely on third parties to manufacture our products and require our suppliers to maintain a safe work environment, as described in further detail under “—Manufacturing and Suppliers.” More information can be found on the ESG section of our website and in our annual ESG Report.
Our purpose-built mixed-signal and DSP architectures are the foundation of our high-performance, power-efficient and cost-effective connectivity solutions. We believe this IP portfolio provides us with a significant competitive advantage. Comprehensive Family of Connectivity Solutions: Our extensive solutions portfolio includes HiWire AECs, Optical PAM4 DSPs, Line Card PHYs, SerDes Chiplets for Multi-Chip Module (MCM) package integration and SerDes IP licensing.
Comprehensive Family of Connectivity Solutions: Our extensive solutions portfolio includes HiWire AECs, Optical PAM4 DSPs, Line Card PHYs, SerDes Chiplets for Multi-Chip Module (MCM) package 9 integration and SerDes IP licensing. Our products and technologies address our customers’ various bandwidth, power, cost, security, reliability and end-to-end signal integrity requirements.
Furthermore, we had three customers that each accounted for 10% or more of our total fiscal 2023 revenue with the three customers accounting for 46%, 13% and 12%, respectively. In fiscal 2023, 31% of our revenue was derived from customers based in North America, and 69% was derived from customers based in Asia and other regions.
In fiscal 2024, sales to our top 10 customers accounted for approximately 86% of our total revenue. Furthermore, we had two customers that each accounted for 10% or more of our total fiscal 2024 revenue with the two customers accounting for 39% and 15%, respectively.
We expect that demand for increasingly sophisticated connectivity solutions will grow alongside the evolution of these standards. 9 Our Competitive Strengths We believe our key competitive strengths include the following: Foundational Intellectual Property: We believe our technology leadership is based on our strong SerDes IP portfolio.
Our Competitive Strengths We believe our key competitive strengths include the following: Foundational Intellectual Property: We believe our technology leadership is based on our strong SerDes IP portfolio. Our purpose-built mixed-signal and DSP architectures are the foundation of our high-performance, and power-efficient connectivity solutions. We believe this IP portfolio provides us with a significant competitive advantage.
Dedicated and multi-mode Retimers, Gearboxes and MACsecs, each built around our low-power, high-performance SerDes IP, enable our customers to meet performance, power and price objectives. Our Line Card PHY product families include our Black Hawk and Bald Eagle products for Retimers and Gearboxes, as well as our Owl series for MACsec/IPSEC applications.
Our Retimers, Gearboxes and MACsec/IPSEC devices facilitate PAM4/NRZ backplane and line card connectivity at up to 112G per lane. Our components enable platforms with capabilities reaching 52.1 Terabits per second (Tbps), featuring 800G ports. Dedicated and multi-mode Retimers, Gearboxes and MACsecs, each built around our low-power, high-performance SerDes IP, enable our customers to meet performance, power and price objectives.
We are led by a team of seasoned semiconductor and connectivity experts.
We are led by a team of seasoned semiconductor and connectivity experts. Many of our executives have more than 20 years of semiconductor innovation experience and an extensive track record of successful leadership across multiple semiconductor companies.
With up to 50% less power than optical solutions and up to 75% less volume than DACs, these AECs enable CLOS cabling densities up to 1,000 cables per rack. Optical DSPs: We provide high-performance, low-power and cost-effective 50G to 800G PAM4 optical DSPs across a broad spectrum of use cases, speeds and bandwidths.
With up to 11 50% less power than optical solutions and up to 75% less volume than DACs, these AECs enable CLOS cabling densities up to 1,000 cables per rack. • Credo Pluggable Patch Panel P3 enables services providers and hyperscalers flexibility in deploying modern pluggable optics with new and legacy switches and routers.
Removed
Item 1. Business Mission Statement Our mission is to deliver high-speed solutions to break bandwidth barriers on every wired connection in the data infrastructure market. Company Overview Credo is an innovator in providing secure, high-speed connectivity solutions that deliver improved power and cost efficiency as data generation and corresponding bandwidth requirements increase exponentially throughout the data infrastructure market.
Added
Item 1. Business Company Overview Credo provides innovative, secure, high-speed and power-efficient connectivity solutions. Our solutions target the data infrastructure market, where bandwidth requirements are increasing exponentially, driven by the accelerating deployment of leading edge Artificial Intelligence infrastructure and applications. Our innovations ease system bandwidth bottlenecks while simultaneously improving on power, security and reliability.
Removed
Product sales and product engineering services revenue comprised 83% and 77% of our total revenue in fiscal 2023 and 2022, respectively, and IP license and IP license engineering services revenue represented 17% and 23% of our total revenue in fiscal 2023 and 2022, respectively.
Added
HiWire AECs®: HiWire Active Electrical Cables (AECs) are copper interconnect cables designed for affordable, low-power operation at 100G, 200G, 400G, 800G and emerging 1.6T data speeds.
Removed
Geographically, 31% and 36% of our total revenue in fiscal 2023 and 2022, respectively, was generated from customers in North America, and 69% and 64% of our total revenue in fiscal 2023 and 2022, respectively, was generated from customers in the rest of the world, primarily in Asia.
Added
The HiWire P3 is a single rack unit (1RU), 32 port QSFP-DD appliance that allows standard pluggable optics to directly connect to an AEC without the use of a switch chip, providing power, cooling, and control plane access.
Removed
During fiscal 2023 and 2022, we generated $16.5 million and $22.2 million in net loss, respectively.
Added
Optical DSPs: Credo optical digital signal processors (DSPs) are a key building block inside optical transceivers that are used in AI clusters, hyperscale data centers, service provider networks, enterprise networks, and 5G wireless infrastructure.
Removed
Our suite of products and technologies address our customers’ various bandwidth, power, cost, security, reliability and end-to-end signal integrity requirements. We believe we can provide superior service to our customers by serving as a single point of contact.
Added
Optical transceivers and active optical cables (AOCs) based on Credo DSPs provide Ethernet connectivity from 5m up to 10km+ and span rates from 50Gb/s to 800Gb/s and beyond.
Removed
The DSPs enable optical interconnect for cloud-scale, hyperscale and enterprise data center build-outs with 100G to 800G PAM4 optical modules and build-outs for 5G wireless service providers with 50G optical modules . These full-featured DSPs provide high-performance sensitivity and a low bit error rate (BER), allowing margin for optical alignment and crosstalk.
Added
Now in their fourth generation, Credo DSPs operating at 50G/lane and 100G/lane PAM4 offer an exceptional combination of performance, energy efficiency, and value by integrating such features as laser drivers, DSP based signal equalization, non-linear distortion compensation, transmitter signal conditioning and long reach capable host side SerDes. The Credo Seagull family of DSPs operate at 50G/lane.
Removed
They utilize our industry-leading transmitters and are optimized for cost-effective production. Our extensive optical product portfolio comprising our Dove and Seagull product families includes PAM4 DSPs for 50G, 100G, 200G, 400G and 800G PAM4 optical interconnects. Our proprietary DSP technology and equalization techniques help compensate for optical impairments to achieve optimal overall system performance, signal integrity and power efficiency.
Added
This comprehensive product family includes 1x50G, 2x50G, 4x50G and 8x50G product variants that enable transceivers and AOCs from 50Gb/s to 400Gb/s applications. Credo’s 50G/lane transimpedance amplifier (TIA) complements this family of devices and creates a compelling bundled solution of DSP, laser driver and TIA for new 50G/lane module designs.
Removed
Line Card PHYs: We are enabling data connectivity and security in hyperscale and enterprise data centers with leading edge, low-power line card PHY solutions. Our Retimers, Gearboxes and MACsec/IPSEC devices support PAM4/NRZ backplane and line card connectivity up to 112G per lane, supporting platforms up to 25.6 Terabits per second (Tbps) with 800G ports.
Added
Also included in the Seagull family is a unique product optimized for 64G Fibre Channel, used in storage networks. The Credo Dove family of DSPs operate at 100G/lane. This product family includes 4x100G and 8x100G DSPs each with a range of integrated laser driver options for silicon photonics, EMLs and VCSELs.
Removed
The percentages in the preceding sentence are calculated based on destination of shipment for products, and location of contracting entity for IP and engineer services, which may differ from the end customer’s principal offices. Sales and Marketing We employ a two-pronged sales strategy targeting both the end users of our products, as well as the suppliers of our end users.
Added
The range of laser drivers makes these DSPs suitable for both multi-mode and single-mode fiber applications operating at either 400Gb/s or 800Gb/s. The Dove 850 is the newest member of the Dove family and is the industry's first unidirectional 8x100G DSP specifically for Linear Receive Optics (LRO).
Removed
Research and development expenses for fiscal 2023 and 2022 were $76.8 million and $47.9 million, respectively.
Added
LRO is an innovative new concept that removes DSP functionality from the module receiver to dramatically improve energy efficiency in high volume AI deployments. Line Card PHYs: We are enabling data connectivity and security in hyperscale and enterprise data centers with leading edge, low-power line card PHY solutions.
Removed
We have a diverse workforce that represents many cultures and we celebrate our diversity by fostering inclusion across our multinational organization. We consider our global employee relations to be good. Our objective is to attract and retain talented and experienced employees, advisors and consultants.
Added
Our Line Card PHY product families include our Bald Eagle, Black Hawk and Screaming Eagle products for Retimer and Gearboxes, as well as our Owl and Osprey products for MACsec/IPSEC applications. SerDes Chiplets: SerDes technology enables data transmission at high rates while minimizing the number of interconnects required.
Removed
We also lease approximately 56,348 square feet of office space in Shanghai, mainland 15 China under leases expiring November 30, 2024 (with an option to extend), and approximately 18,537 square feet of office space in Zhubei City, Taiwan, under a lease expiring June 30, 2023.
Added
Sustainability Our sustainability initiatives are a corporate priority and strongly supported by our Board of Directors (Board) and leadership team. More information can be found on the Environmental, Social and Governance (ESG) section of our website and in our annual ESG Report.
Removed
We lease additional small spaces in mainland China and the United States to support local staff. We believe that our existing facilities are sufficient for our current needs. We intend to add new facilities and expand our existing facilities as we continue to add employees and grow our business.

… 15 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

162 edited+42 added−132 removed321 unchanged
Biggest changeSAFE Circular 37 requires PRC residents (including PRC citizens and other persons that are deemed PRC residents) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities before making a contribution to an enterprise directly established or indirectly controlled by the PRC residents 44 outside of the PRC for the purpose of overseas investment or financing with their legally owned domestic or offshore assets or equity interests, referred to in SAFE Circular 37 as a “special purpose vehicle,” and also requires the foreign invested enterprise that is established through round-trip investment to truthfully disclose its controller(s).
Biggest changeSAFE Circular 37 requires PRC residents (including PRC citizens, PRC corporate entities and other persons that are deemed PRC residents) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents.
Due to the interdependence of various components in the systems within which our products and the products of our competitors operate, customers are unlikely to change to another design, once adopted, until the next generation of a technology.
Due to the interdependence of various components in the systems within which our products and the products of our competitors operate, customers are unlikely to change to another design, once adopted, until the next generation of a technology.
We depend on satisfactory wafer foundry manufacturing capacity, wafer prices and production yields, as well as timely wafer delivery to meet customer demand and enable us to maintain gross margins. The fabrication of our products is a complex and technically demanding process.
We depend on satisfactory wafer foundry manufacturing capacity, wafer prices and production yields, as well as timely wafer delivery to meet customer demand and enable us to maintain satisfactory gross margins. The fabrication of our products is a complex and technically demanding process.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of the Nasdaq.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of Nasdaq.
Our executive officers and other employees who are PRC citizens or residents and who have been or will be granted incentive shares or options may be subject to these regulations. Failure to complete the SAFE registrations may subject our PRC subsidiaries or our executive officers and other employees to fines and legal sanctions.
Our employees who are PRC citizens or residents and who have been or will be granted incentive shares or options may be subject to these regulations. Failure to complete the SAFE registrations may subject our PRC subsidiaries or our executive officers and other employees to fines and legal sanctions.
Our corporate affairs are governed by our memorandum and articles of association, as amended from time to time, the Cayman Islands the Companies Act (as amended) and the common law of the Cayman Islands.
Our corporate affairs are governed by our memorandum and articles of association, as amended from time to time, the Cayman Islands Companies Act (as amended) and the common law of the Cayman Islands.
The courts of the Cayman Islands are unlikely: (i) to recognize or enforce against the Company judgments of courts of the United States predicated upon the certain civil liability provisions of the securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against the Company predicated upon the civil liability provisions of the securities laws of the United States or any State, so far as liabilities imposed by those provisions are penal in nature.
The courts of the Cayman Islands are unlikely: (i) to recognize or enforce against the Company judgments of courts of the United States predicated upon certain civil liability provisions of the securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against the Company predicated upon the civil liability provisions of the securities laws of the United States or any State, so far as liabilities imposed by those provisions are penal in nature.
Market conditions and changing circumstances, some of which may be beyond our control, could impair our ability to access our existing cash, cash equivalents and investments and to timely pay key vendors and others.
Market conditions and changing circumstances, some of which may be beyond our control, could impair our ability to access our existing cash, cash equivalents and investments and to timely pay key vendors and others.
Relying on third-party manufacturing, assembly and testing presents significant risks to us, including the following: • failure by us, our customers or their end customers to qualify a selected supplier; • capacity shortages during periods of high demand; • reduced control over delivery schedules and quality; • shortages of materials; • third parties infringing, misappropriating or otherwise violating our intellectual property rights; • impairment of the operation or security of our products if errors or other defects occur in the third-party technologies we use, and difficulties correcting such errors or defects because the development and maintenance of those technologies is not within our control; • limited warranties on wafers or products supplied to us; and • potential increases in prices or reduced yields.
Relying on third-party manufacturing, assembly and testing presents significant risks to us, including the following: • failure by us, our customers or their end customers to qualify a selected supplier; • capacity shortages during periods of high demand; 22 • reduced control over delivery schedules and quality; • shortages of materials; • third parties infringing, misappropriating or otherwise violating our intellectual property rights; • impairment of the operation or security of our products if errors or other defects occur in the third-party technologies we use, and difficulties correcting such errors or defects because the development and maintenance of those technologies is not within our control; • limited warranties on wafers or products supplied to us; and • potential increases in prices or reduced yields.
In addition, as part of their corporate social and environmental responsibility programs, as well as the Dodd-Frank Wall Street Reform and Consumer Protection Act, which imposes disclosure requirements regarding the use in components of products of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries, whether the components of such products are manufactured by them or third parties, an increasing number of OEMs are seeking to source products that do not contain minerals sourced from areas where proceeds from the sale of such minerals are likely to be used to fund armed conflicts, such as in the Democratic Republic of Congo.
In addition, as part of their corporate social and environmental responsibility programs, as well as the Dodd-Frank Wall Street Reform and Consumer Protection Act, which imposes disclosure requirements regarding the use in components of products of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries, whether the components of such products are manufactured by them or third parties, an increasing number of OEMs are seeking to source products that do not contain minerals sourced from areas where proceeds from the sale of such minerals are likely to be used to fund armed 35 conflicts, such as in the Democratic Republic of Congo.
However, such rights are not available in respect of the shares of any class for which an open market exists on a recognized stock exchange or recognized interdealer quotation system at the expiry date of the period allowed for written notice of an election to dissent where, upon the merger or the consolidation, the shareholder receives, amongst other things, either (a) shares of a surviving or consolidated company, or depository receipts in respect thereof; or (b) shares of any other company, or depository receipts in respect thereof, which shares or depository receipts at the effective date of the merger or consolidation, are either listed on a national securities exchange or designated as a national market system security on a recognized interdealer quotation system or held of record by more than two thousand holders.
However, such rights are not available in respect of the shares of any class for which an open market exists on a recognized stock exchange or recognized interdealer quotation system at the expiry date of the period allowed for written notice of an election to dissent where, upon the merger or the consolidation, the shareholder receives, amongst other things, either: (a) shares of a surviving or consolidated company, or depository receipts in respect thereof; or 47 (b) shares of any other company, or depository receipts in respect thereof, which shares or depository receipts at the effective date of the merger or consolidation, are either listed on a national securities exchange or designated as a national market system security on a recognized interdealer quotation system or held of record by more than two thousand holders.
Any acquisition involves a number of risks, many of which could harm our business, including: • difficulty in integrating the operations, technologies, products, existing contracts, accounting and personnel of the acquired company or business; • not realizing the anticipated benefits of any acquisition; • difficulty in transitioning and supporting customers of the acquired company; • difficulty in transitioning and collaborating with suppliers of the acquired company; • diversion of financial and management resources from existing operations; • the risk that the price we pay or other resources that we devote to the acquisition may exceed the value we realize, or the value we could have realized if we had allocated the purchase price or other resources to another opportunity; • potential loss of key employees, customers and strategic alliances from either our current business or the acquired company’s business; • inability to successfully bring newly acquired products to market or achieve design wins with such products; • fluctuations in industry trends that change the demand or purchasing volume of newly acquired products; • assumption of unanticipated problems or latent liabilities, such as problems with the quality of the acquired products; • inability to generate sufficient revenue to offset acquisition costs; 60 • the dilutive effect on our ordinary shares as a result of any acquisitions financed through the issuance of equity; • inability to successfully complete transactions with a suitable acquisition candidate; and • in the event of international acquisitions, risks associated with accounting and business practices or regulatory requirements that are different from applicable U.S. practices and requirements.
Any acquisition involves a number of risks, many of which could harm our business, including: • difficulty in integrating the operations, technologies, products, existing contracts, accounting and personnel of the acquired company or business; • not realizing the anticipated benefits of any acquisition; • difficulty in transitioning and supporting customers of the acquired company; • difficulty in transitioning and collaborating with suppliers of the acquired company; • diversion of financial and management resources from existing operations; • the risk that the price we pay or other resources that we devote to the acquisition may exceed the value we realize, or the value we could have realized if we had allocated the purchase price or other resources to another opportunity; 52 • potential loss of key employees, customers and strategic alliances from either our current business or the acquired company’s business; • inability to successfully bring newly acquired products to market or achieve design wins with such products; • fluctuations in industry trends that change the demand or purchasing volume of newly acquired products; • assumption of unanticipated problems or latent liabilities, such as problems with the quality of the acquired products; • inability to generate sufficient revenue to offset acquisition costs; • the dilutive effect on our ordinary shares as a result of any acquisitions financed through the issuance of equity; • inability to successfully complete transactions with a suitable acquisition candidate; and • in the event of international acquisitions, risks associated with accounting and business practices or regulatory requirements that are different from applicable U.S. practices and requirements.
We may not at all times be fully informed of the identities of all the PRC residents holding direct or indirect interests in our company, and we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities, or all of our executive officers and other employees who are PRC citizens or residents and who have been or will be granted incentive shares or options, have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations.
We may not at all times be fully informed of the identities of all the PRC residents holding direct or indirect interests in our company, and we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities, or all of our executive officers and other employees who are PRC citizens or residents and who have been or will be granted incentive shares or options, have 40 complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations.
Moreover, laws, regulations or industry standards that develop in response to generative AI technologies may be burdensome or may prohibit the deployment of generative AI technologies for one or more uses, any of which could result in lower than anticipated demand from hyperscalers for connectivity solutions in the AI/ML infrastructure market. • Ethical Considerations and Public Perception: Generative AI technologies raise ethical concerns related to privacy, transparency, fairness, and potential misuse.
Moreover, laws, regulations or industry standards that develop in response to generative AI technologies may be burdensome or may prohibit the deployment of generative AI technologies for one or more uses, any of which could result in lower than anticipated demand from hyperscalers for connectivity solutions in the AI/ML infrastructure market. 34 • Ethical Considerations and Public Perception: Generative AI technologies raise ethical concerns related to privacy, transparency, fairness, and potential misuse.
We base our 58 estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources.
As a result, if we fail to introduce new or enhanced products that meet prevailing industry standards and the needs of our customers or penetrate new markets in a timely fashion, and our designs do not gain acceptance, we will lose market share and our competitive position, potentially on an extended basis, and our operating 26 results will be adversely affected.
As a result, if we fail to introduce new or enhanced products that meet prevailing industry standards and the needs of our customers or penetrate new markets in a timely fashion, and our designs do not gain acceptance, we will lose market share and our competitive position, potentially on an extended basis, and our operating results will be adversely affected.
Further, in the event of a recession or threat of a recession our manufacturing partners, suppliers, distributors or other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect 19 receivables or otherwise harm our business.
Further, in the event of a recession or threat of a recession our manufacturing partners, suppliers, distributors or other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect receivables or otherwise harm our business.
In addition, our design cycle from initial engagement to volume shipment is typically two to three years, so even after securing a design win, we may experience delays in generating revenue from our products as a result of the lengthy development cycle. 22 Our customers may take several months or more than a year to evaluate our products and solutions.
In addition, our design cycle from initial engagement to volume shipment is typically two to three years, so even after securing a design win, we may experience delays in generating revenue from our products as a result of the lengthy development cycle. Our customers may take several months or more than a year to evaluate our products and solutions.
In any potential dispute involving patents or other intellectual property, our customers and vendors could also become the target of litigation. Our agreements with customers and vendors generally include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement.
In any potential dispute involving patents or other intellectual property, our customers and vendors could also become the target of litigation. Our agreements with customers and vendors generally include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for certain losses suffered or incurred as a result of claims of intellectual property infringement.
Although we monitor our use of such open source code to avoid subjecting our products to unintended conditions, such use, under certain circumstances, could materially adversely affect our business, financial condition and operating 54 results and cash flow, including if we are required to take remedial action that may divert resources away from our development efforts.
Although we monitor our use of such open-source code to avoid subjecting our products to unintended conditions, such use, under certain circumstances, could materially adversely affect our business, financial condition and operating results and cash flow, including if we are required to take remedial action that may divert resources away from our development efforts.
After our products are qualified, it can take several months or more before the customer commences volume production of components or systems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, to qualify our products with customers in anticipation of sales.
After our products are qualified, it can take several months or more before the customer commences volume production of components or systems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, 21 sales, marketing and management efforts, to qualify our products with customers in anticipation of sales.
In addition, any significant future cancellations or deferrals of product orders or the return of previously sold products due to manufacturing defects could materially and adversely impact our profit margins, increase our write-offs due to product obsolescence and restrict our ability to fund our operations. 20 We face intense competition and expect competition to increase in the future.
In addition, any significant future cancellations or deferrals of product orders or the return of previously sold products due to manufacturing defects could materially and adversely impact our profit margins, increase our write-offs due to product obsolescence and restrict our ability to fund our operations. We face intense competition and expect competition to increase in the future.
The 25 process of identifying a defective or potentially defective product in systems that have been widely distributed may be lengthy and require significant resources, and may divert the attention of our engineering personnel from our product development efforts. We may test the affected product to determine the root cause of the problem and to determine appropriate solutions.
The process of identifying a defective or potentially defective product in systems that have been widely distributed may be lengthy and require significant resources, and may divert the attention of our engineering personnel from our product development efforts. We may test the affected product to determine the root cause of the problem and to determine appropriate solutions.
If we are unable to continue to develop or maintain these relationships, our products and solutions would become less desirable to our customers, our sales would suffer and our competitive position could be harmed. Average selling prices of our products generally decrease over time, which could negatively impact our revenue and gross margins.
If we are unable to continue to develop or maintain these relationships, our products and solutions would become less desirable to our customers, our sales would suffer and our competitive position could be harmed. 27 Average selling prices of our products generally decrease over time, which could negatively impact our revenue and gross margins.
This in turn could have a material adverse effect on our supply chain or the demand for our products or the systems into which our products are incorporated. Multiple factors relating to our international operations and to particular 37 countries in which we operate could negatively impact our business, financial condition and results of operations.
This in turn could have a material adverse effect on our supply chain or the demand for our products or the systems into which our products are incorporated. Multiple factors relating to our international operations and to particular countries in which we operate could negatively impact our business, financial condition and results of operations.
Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources.
Many of the companies with which we compete for experienced personnel have greater resources than we have. If 53 we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources.
Failure to achieve widespread acceptance and generate significant revenues from generative AI technologies could negatively impact our financial condition and results of operations. 35 • Technical Limitations and Failures: The development of generative AI technologies is complex, and there are technical challenges associated with achieving the desired level of accuracy, efficiency, and reliability.
Failure to achieve widespread acceptance and generate significant revenues from generative AI technologies could negatively impact our financial condition and results of operations. • Technical Limitations and Failures: The development of generative AI technologies is complex, and there are technical challenges associated with achieving the desired level of accuracy, efficiency, and reliability.
The market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders have instituted securities class action litigation following periods of market volatility.
In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders have instituted securities class action litigation following periods of market volatility.
Further, changes in immigration policies may negatively impact our ability to attract and retain personnel, including personnel with specialized technical expertise. If we fail to attract new personnel or fail to retain or motivate our current personnel, our business, financial condition and results of operations could be adversely affected. 61 Catastrophic events may disrupt our business.
Further, changes in immigration policies may negatively impact our ability to attract and retain personnel, including personnel with specialized technical expertise. If we fail to attract new personnel or fail to retain or motivate our current personnel, our business, financial condition and results of operations could be adversely affected. Catastrophic events may disrupt our business.
In addition, we face cyber threats from entities that may seek to target us through our customers, vendors, subcontractors, employees, and other third parties with whom we do business. We may experience cybersecurity threats such as viruses and attacks by hackers targeting our information technology systems.
In addition, we face cybersecurity threats from entities that may seek to target us through our customers, vendors, subcontractors, employees, and other third parties with whom we do business. We may experience cybersecurity threats such as viruses and attacks by hackers targeting our information technology systems.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, financial condition, and results of operations. 57 Substantial future sales of our ordinary shares could cause the market price of our ordinary shares to decline.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, financial condition, and results of operations. Substantial future sales of our ordinary shares could cause the market price of our ordinary shares to decline.
Any future change in export or import regulations, economic sanctions or related legislation, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products and solutions by, or in our decreased ability to export or sell products and solutions to, existing or potential customers with international operations.
Any future change in export or import regulations, economic sanctions or related legislation, or change in the countries, governments, persons or technologies targeted by such regulations, could 38 result in decreased use of our products and solutions by, or in our decreased ability to export or sell products and solutions to, existing or potential customers with international operations.
Claims that our products, processes or technology infringe, misappropriate or otherwise violate third-party intellectual property rights, regardless of their merit or resolution, could be time-consuming or costly 47 to defend or settle and could divert the efforts and attention of our management and technical personnel.
Claims that our products, processes or technology infringe, misappropriate or otherwise violate third-party intellectual property rights, regardless of their merit or resolution, could be time-consuming or costly to defend or settle and could divert the efforts and attention of our management and technical personnel.
In addition to the time and expense required for us to supply support or indemnification to our customers, any such litigation could severely disrupt or shut down the business of our customers or vendors, which in turn could hurt our relations with them and cause the 48 sale of our products to decrease.
In addition to the time and expense required for us to supply support or indemnification to our customers, any such litigation could severely disrupt or shut down the business of our customers or vendors, which in turn could hurt our relations with them and cause the sale of our products to decrease.
If we are unable to continue to use or license these technologies on reasonable 27 terms, or if these technologies fail to operate properly, we may not be able to secure alternatives in a timely manner or at all, and our ability to remain competitive would be harmed.
If we are unable to continue to use or license these technologies on reasonable terms, or if these technologies fail to operate properly, we may not be able to secure alternatives in a timely manner or at all, and our ability to remain competitive would be harmed.
Depending on the magnitude of such effects on our manufacturing, assembling, testing, and packaging activities or the operations of our manufacturing partners, suppliers, distributors, sub-contractors and customers, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships.
Depending on the magnitude of such effects on our manufacturing, assembling, testing, and packaging activities or the operations of our manufacturing partners, suppliers, distributors, sub- 28 contractors and customers, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships.
In addition, our competitors or others may design around our protected patents or other intellectual property rights. Effective intellectual property protection may be unavailable or more limited in foreign jurisdictions relative to those protections available in the United States, or may not be applied for in one or more relevant jurisdictions.
In addition, our competitors or others may design around our protected patents or other intellectual property rights. Effective intellectual property protection may be unavailable or more limited in foreign jurisdictions relative to those protections available in the United States, or may not be applied for in one or 43 more relevant jurisdictions.
In that event, we may be required to expend significant time and resources to redesign our technology, products or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis.
In that event, we may be required to expend significant time and resources to redesign our technology, products or the methods for manufacturing them or to develop 44 or license replacement technology, all of which may not be feasible on a technical or commercial basis.
Any disputes with our licensing partners with respect to such agreements could narrow what we believe to 50 be the scope of our rights to the relevant intellectual property, increase our obligations under such agreements or restrict our ability to develop and market our current or new products and services.
Any disputes with our licensing partners with respect to such agreements could narrow what we believe to be the scope of our rights to the relevant intellectual property, increase our obligations under such agreements or restrict our ability to develop and market our current or new products and services.
If we inaccurately forecast demand for our products, we may be unable to obtain adequate and cost-effective foundry or assembly capacity from TSMC or our other third-party manufacturers or suppliers to meet our customers’ delivery requirements, or we may accumulate excess inventories.
If we 25 inaccurately forecast demand for our products, we may be unable to obtain adequate and cost-effective foundry or assembly capacity from TSMC or our other third-party manufacturers or suppliers to meet our customers’ delivery requirements, or we may accumulate excess inventories.
Accordingly, if competition 28 increases in our target markets, we may need to reduce the average unit price of our products in anticipation of competitive pricing pressures, new product introductions by us or our competitors and for other reasons.
Accordingly, if competition increases in our target markets, we may need to reduce the average unit price of our products in anticipation of competitive pricing pressures, new product introductions by us or our competitors and for other reasons.
In other cases, customer products are delayed due to incompatible deliverables from other vendors. We incur significant design and development costs in connection with designing our products for customers’ products that may not ultimately achieve market acceptance.
In other cases, customer products are delayed due to incompatible deliverables from other vendors. We incur significant design and development costs 23 in connection with designing our products for customers’ products that may not ultimately achieve market acceptance.
Significant judgment is required in determining our provisions for taxes, and there are many transactions and calculations where the ultimate tax determination is uncertain. The 33 amount of income tax we pay is subject to ongoing audits by tax authorities.
Significant judgment is required in determining our provisions for taxes, and there are many transactions and calculations where the ultimate tax determination is uncertain. The amount of income tax we pay is subject to ongoing audits by tax authorities.
We may also in the future be subject to claims by our suppliers, employees, consultants or contractors asserting an ownership right in our patents or patent applications, as a result of the work they performed on our behalf.
We may also in the future be subject to claims by our 41 suppliers, employees, consultants or contractors asserting an ownership right in our patents or patent applications, as a result of the work they performed on our behalf.
Also, it is possible that we may be required to pay substantial damages or settlement costs which could have a material adverse effect on our business, financial condition and results of operations.
Also, it is possible that we may be required to pay substantial damages, penalties, or settlement costs which could have a material adverse effect on our business, financial condition and results of operations.
If any such claims were to succeed, we might be forced to pay damages on behalf of our customers or vendors that could increase our expenses, disrupt our ability to sell our solutions and reduce our revenue.
If any such claims were to succeed, we might be forced to pay damages on behalf of our customers or vendors that could increase our expenses, disrupt our ability to sell our solutions and reduce 42 our revenue.
Our future revenue growth, if any, will depend in part on our ability to expand within our existing markets, our ability to continue to penetrate emerging markets, such as the 5G market, and our ability to enter into new markets.
Our future revenue growth, if any, will depend in part on our ability to expand within our existing markets, our ability to continue to penetrate emerging markets, such as the 5G communications market, and our ability to enter into new markets.
Any of the foregoing could harm our business, financial condition, and results of operations. Risks related to the protection of our intellectual property, particularly outside the United States. We use a significant amount of intellectual property in our business.
Any of the foregoing could harm our business, financial condition, and results of operations. We face risks related to the protection of our intellectual property, particularly outside the United States. We use a significant amount of intellectual property in our business.
Any actual or perceived security incident could harm our business and operating results and could result in, among other things, unfavorable publicity, governmental inquiry and oversight, difficulty in marketing our services, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties including our customers and possible financial obligations for damages related to the theft or misuse of such information or inventory, any of which could negatively impact our business, financial condition and results of operations.
Any actual or perceived cybersecurity incident could harm our business and operating results and could result in, among other things, unfavorable publicity, governmental inquiry and oversight, difficulty in marketing our services, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties including our customers and possible financial obligations for damages related to the theft or misuse of such information or inventory, any of which could negatively impact our business, financial condition and results of operations.
President also issued Executive Order 13936 pursuant to which existing license exceptions and preferential status for Hong Kong under relevant U.S. export control laws and regulations were revoked.
President also issued Executive 39 Order 13936 pursuant to which existing license exceptions and preferential status for Hong Kong under relevant U.S. export control laws and regulations were revoked.
Global economic downturns have caused in the past, and may cause in the future, a significant reduction in capital spending on data infrastructure equipment, which could materially and adversely affect our business, financial condition and results of operations. 34 We may be unable to make the substantial and productive research and development investments, which are required for our business to remain competitive.
Global economic downturns have caused in the past, and may cause in the future, a significant reduction in capital spending on data infrastructure equipment, which could materially and adversely affect our business, financial condition and results of operations. 33 We may be unable to make the substantial and productive research and development investments, which are required for our business to remain competitive.
A breach of our information technology systems or physical security systems, or any actual or perceived violation of privacy or data protection laws, could harm our business and operating results.
A breach of our information technology systems or physical security systems, or any actual or perceived violation of privacy, data protection or cybersecurity laws, could harm our business and operating results.
The trading price and volume of our ordinary shares is likely to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including but not limited to: • actual or anticipated fluctuations in our results of operations due to, among other things, changes in customer demand, product life cycles, pricing, ordering patterns and unforeseen operating costs; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates or ratings by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors; • announcements by our significant customers of changes to their product offerings, business plans or strategies; • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of other technology companies generally, or those in the data infrastructure industry; • timing and seasonality of the end-market demand; • cyclical fluctuations in the data infrastructure market; • price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • new laws or regulations or new interpretations of existing laws, or regulations applicable to our business; • changes in our management; • general economic and market conditions; • lawsuits threatened or filed against us; and • other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
The trading price and volume of our ordinary shares is likely to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including but not limited to: • actual or anticipated fluctuations in our results of operations due to, among other things, changes in customer demand, product life cycles, pricing, ordering patterns and unforeseen operating costs; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts or industry analysts to initiate or maintain coverage of us, publish negative research or reports, changes in financial estimates or ratings by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors; • announcements by our significant customers of changes to their product offerings, business plans or strategies; • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of other technology companies generally, or those in the data infrastructure or semiconductor industry; • timing and seasonality of the end-market demand; • cyclical fluctuations in the data infrastructure market and semiconductor industry; • price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; 49 • new laws or regulations or new interpretations of existing laws, or regulations applicable to our business; • changes in our management; • general economic and market conditions; • lawsuits threatened or filed against us; and • other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
As the COVID-19 pandemic reaches endemic stages, due to the continued uncertainty regarding its severity and duration (including resurgences or mutations of the virus), related public health measures and macroeconomic impacts, at this time we are unable to predict its full impact on our business, financial condition, operating results and cash flows.
As the COVID-19 pandemic reaches endemic stages, due to the continued uncertainty regarding its severity and duration (including resurgences or mutations of the virus), related public health measures and macroeconomic impacts, at this time we are unable to predict its full impact on our business, cash flows, financial condition, and results of operation.
While it is uncertain whether we will be deemed a “special purpose vehicle” as regulated by SAFE Circular 37, in practice, our shareholders or beneficial owners who are PRC residents may be required to conduct the registration, which registrations are yet to be completed, sometimes due to reasons beyond their control.
While it is uncertain whether we will be deemed a “special purpose vehicle” as regulated by SAFE Circular 37, our shareholders or beneficial owners who are PRC residents may be required to conduct the registration, which registrations are yet to be completed, sometimes due to reasons beyond their control.
We currently outsource all of our IC manufacturing to TSMC, with the remaining assembly and testing processes outsourced to other subcontractors primarily in Asia. We also use third-party contract manufacturers for a significant majority of our assembly and test operations, including Amkor, ASE, KYEC, and TeraPower for our IC products, and BizLink and Foxlink for 23 our AEC products.
We currently outsource all of our IC manufacturing to TSMC, with the assembly and testing processes outsourced to other subcontractors primarily in Asia. We also use third-party contract manufacturers for a significant majority of our assembly and test operations, including Amkor, ASE, KYEC, and TeraPower for our IC products, and BizLink and Foxlink for our AEC products.
This in turn may enable them to better withstand adverse economic or market conditions, such as those caused by uncertainty as a result of the recent macroeconomic environment, which has been characterized by rising interest rates and inflation, geopolitical instability, public health measures, and supply chain uncertainty.
This may enable them to better withstand adverse economic or market conditions, such as those caused by uncertainty as a result of the recent macroeconomic environment, which has been characterized by rising interest rates and inflation, geopolitical instability, public health measures, and supply chain uncertainty.
Any of these events could negatively impact our business, financial condition and results of operations. Further, certain of our vendor agreements contain provisions permitting the vendor to become a party to, or a beneficiary of, a source code escrow agreement under which we place certain proprietary source code in escrow with a third party.
Any of these events could negatively impact our business, financial condition and results of operations. Further, certain of our agreements contain provisions permitting the other party to become a party to, or a beneficiary of, a source code escrow agreement under which we place certain proprietary source code in escrow with a third party.
In addition, in connection with operating as a public company, we incur additional significant legal, accounting and other expenses that we did not incur as a private company. If our revenue does not increase to offset these increases in our expenses, we may not achieve or maintain 30 profitability in future periods.
In addition, in connection with operating as a public company, we incur additional 29 significant legal, accounting and other expenses that we did not incur as a private company. If our revenue does not increase to offset these increases in our expenses, we may not achieve or maintain profitability in future periods.
Risks Relating to Investments in Cayman Islands Companies We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than that under U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.
Risks Relating to Investments in Cayman Islands Companies We are a Cayman Islands exempted company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you may have less protection for your shareholder rights than you would under U.S. law.
Our ability to compete successfully will depend on a number of factors, including: • our ability to define, design and regularly introduce new products and solutions that anticipate the functionality and integration needs of our customers’ next-generation products and applications; • our ability to build strong and long-lasting relationships with our customers and other industry participants; • our ability to capitalize on, and prevent losses due to, vertical integration by significant customers; • our products’ performance, power efficiency and cost-effectiveness relative to those of competing products; • our ability to achieve design wins; • the effectiveness and success of our customers’ products utilizing our products or solutions within their competitive end markets; • our research and development capabilities to provide innovative products and solutions and maintain our product roadmap; • the strength of our sales and marketing efforts and our brand awareness and reputation; • our ability to deliver products in large volume on a timely basis at competitive prices; • our ability to withstand or respond to significant price competition; • our ability to grow and maintain international operations in a cost-effective manner; 21 • our ability to obtain, maintain, protect and enforce our intellectual property rights, including obtaining intellectual property rights from third parties that may be necessary to meet the evolving demands of the market; • our ability to defend against potential patent infringement claims from third parties; • our ability to promote and support our customers’ incorporation of our products or solutions into their products; and • our ability to retain high-level talent, including our management team and engineers.
Our ability to compete successfully will depend on a number of factors, including: • our ability to define, design and regularly introduce new products and solutions that anticipate the functionality and integration needs of our customers’ next-generation products and applications; • our ability to build strong and long-lasting relationships with our customers and other industry participants; • our ability to capitalize on, and prevent losses due to, vertical integration by significant customers; • our products’ performance, power efficiency and cost-effectiveness relative to those of competing products; • our ability to achieve design wins; • the effectiveness and success of our customers’ products utilizing our products or solutions within their competitive end markets; • our research and development capabilities to provide innovative products and solutions and maintain our product roadmap; • the strength of our sales and marketing efforts and our brand awareness and reputation; • our ability to secure capacity with our foundry and assembly partners to manufacture and assemble our products; • our ability to deliver products in large volume on a timely basis at competitive prices; • our ability to withstand or respond to significant price competition; • our ability to grow and maintain international operations in a cost-effective manner; • our ability to obtain, maintain, protect and enforce our intellectual property rights, including obtaining intellectual property rights from third parties that may be necessary to meet the evolving demands of the market; • our ability to defend against potential patent infringement claims from third parties; • our ability to promote and support our customers’ incorporation of our products or solutions into their products; and • our ability to retain high-level talent, including our management team and engineers.
We are subject to numerous, and sometimes conflicting, legal regimes of the United States and foreign national, state and provincial authorities on matters as diverse as anti-corruption, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, environmental impact, securities regulation, anti-competition, data security, privacy, labor relations, wages and severance and health care requirements.
We are subject to numerous, and sometimes conflicting, legal regimes of the United States and foreign national, state and provincial authorities on matters as diverse as anti-corruption, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, environmental impact, securities regulation, anti-competition, data protection, cybersecurity, privacy, labor relations, wages and severance and health care requirements.
However, trade secrets can be difficult to protect and some courts are less willing or unwilling to protect trade secrets. We rely on contractual protections with our customers, suppliers, employees and consultants, and we implement security measures designed to protect our trade secrets.
However, trade secrets can be difficult to protect and some courts are less willing or unwilling to protect trade secrets. We rely on contractual protections with our customers, suppliers, employees and consultants, and we implement cybersecurity measures designed to protect our trade secrets.
Supply of raw materials may be negatively impacted by an unfavorably macroeconomic environment, including as a result of increased tensions between the United States and its trading partners, particularly the PRC.
Supply of raw materials may be negatively impacted by an unfavorable macroeconomic environment, including as a result of increased tensions between the United States and its trading partners, particularly the PRC.
Compliance with U.S. and international data protection laws and regulations could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.
Compliance with U.S. and international privacy, data protection and cybersecurity laws and regulations could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.
Under these source code escrow agreements, our source code may be released to the vendor upon the occurrence of specified events, such as in situations of our bankruptcy or insolvency or our failure to support or maintain our source code.
Under these source code escrow agreements, our source code may be released to the party upon the occurrence of specified events, such as in situations of our bankruptcy or insolvency or our failure to support or maintain our source code.
If we fail to comply with these laws, we and our employees could be subject to civil or criminal penalties, including the possible loss of export privileges, monetary penalties and, in extreme cases, imprisonment of responsible employees for knowing and willful violations of these laws.
If we fail to comply with Trade Controls laws, we and our employees could be subject to civil or criminal penalties, including the possible loss of export privileges, monetary penalties and, in extreme cases, imprisonment of responsible individuals for knowing and willful violations of these laws.
We cannot assure you that our contractual protections and security measures have not been or will not be breached or that we will have adequate remedies for any such breach.
We cannot assure you that our contractual protections and cybersecurity measures have not been or will not be breached or that we will have adequate remedies for any such breach.
Our 17 revenue and operating results have, and could in the future, fluctuate materially and have, and could in the future, be materially and disproportionately impacted by purchasing decisions of our customers, including our larger customers.
Our revenue and operating results have, and could in the future, fluctuate materially and have, and could in 17 the future, be materially and disproportionately impacted by the purchasing decisions of our customers, especially our larger customers.
Changes in our products and solutions, or future changes in the export and import control regulations of the United States or other countries, may prevent our users with international operations from utilizing our products and solutions globally or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether.
Changes in our products and solutions, or future changes in Trade Controls regulations of the United States or other countries, may prevent our users with international operations from utilizing our products and solutions globally or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether.
Compliance with environmental, health and safety requirements could, among other things, require us to modify our manufacturing processes, restrict our ability to expand our facilities or require us to acquire pollution control equipment, all of which can be very costly.
Compliance with environmental, health and safety requirements could, among other things, restrict our ability to expand our facilities or require us to acquire pollution control equipment, all of which can be very costly.
We are subject to a variety of local, state, national and international laws, directives and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data in the different jurisdictions in which we operate.
We are subject to a variety of local, state, national and international laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal information in the different jurisdictions in which we operate.
The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly defined as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less prescriptive body of securities laws than to the United States.
The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly defined as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less prescriptive body of corporate laws than most jurisdictions in the United States.
Monitoring unauthorized use of our intellectual property is difficult and costly. Unauthorized use of our intellectual property may have occurred or may occur in the future. Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwise adequately protect our intellectual property would adversely affect our business.
Unauthorized use of our intellectual property may have occurred or may occur in the future. Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwise adequately protect our intellectual property would adversely affect our business.
We may not accurately anticipate market trends and changing industry standards, and if we fail to adequately address these trends or prevailing industry standards on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.
We may not accurately anticipate market trends and changing industry standards, and if we fail to develop and introduce products to adequately address these trends or prevailing industry 24 standards on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.
Credo Technology Group Holding Ltd is a holding company incorporated as an exempted company under the laws of the Cayman Islands with no operations of its own. We conduct substantially all of our operations through our indirect, wholly-owned subsidiaries in the United States and internationally.
Credo Technology Group Holding Ltd is a holding company incorporated as an exempted company under the laws of the Cayman Islands. We conduct substantially all of our operations through our indirect, wholly-owned subsidiaries in the United States and internationally.
In the event of a major earthquake, hurricane, flooding or other catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack, political, social or economic unrest or disease outbreak, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, breaches of data security or loss of critical data, any of which could have an adverse effect on our business, financial condition or results of operations.
In the event of a major earthquake, hurricane, flooding or other catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack, political, social or economic unrest or disease outbreak, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, cybersecurity breach or loss or other unauthorized processing of data, any of which could have an adverse effect on our business, financial condition or results of operations.
These factors are causing companies across the semiconductor industry to reduce spending and tighten inventory controls, which could negatively impact our business, financial condition, and results of operations.
These factors cause companies across the semiconductor industry to reduce spending and tighten inventory controls, which could negatively impact our business, financial condition, and results of operations.
Any of these factors, alone or in combination with others, could harm our business, financial condition, and results of operations and result in a loss of market share and an increase in pricing pressure. We may incur substantial expenses to develop, market, and qualify products that may not generate any revenue.
Any of these factors, alone or in combination with others, could lead to an increase in pricing pressure, more variability in our operating results, a loss of market share and could harm our business, financial condition, and results of operations. We may incur substantial expenses to develop, market, and qualify products that may not generate any revenue.
We face significant political risks associated with doing business in Taiwan, particularly due to the tense relationship between Taiwan and mainland China, that could negatively affect the trading price of our ordinary shares. We conduct a portion of our business in Taiwan, and our Taiwanese suppliers are critical within our supply chain.
We face significant economic and political risks associated with doing business in Taiwan, particularly due to the geopolitical tension between Taiwan and mainland China, that could negatively affect our business and the trading price of our ordinary shares. We conduct a portion of our business in Taiwan, and our Taiwanese suppliers are critical within our supply chain.

… 256 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeProperties The following table presents the approximate square footage of our significant leased facilities as of April 29, 2023: 62 (Square Feet) Locations Primary Use Leased Facilities (1) United States Research and design, sales and marketing, administration and operations 89,727 Mainland China Research and design, administration and operations 66,929 Taiwan Research and design, administration and operations 18,537 Hong Kong Administration and operations 7,088 Total 182,281 (1) Lease terms expire in various years from 2023 through 2030.
Biggest changeProperties The following table presents the approximate square footage of our significant leased facilities as of April 27, 2024: (Square Feet) Locations Primary Use Leased Facilities (1) United States Research and design, sales and marketing, administration and operations 88,896 Mainland China Research and design, administration and operations 66,929 Taiwan Research and design, administration and operations 52,057 Hong Kong Administration and operations 7,088 Total 214,970 (1) Lease terms expire in various years from 2024 through 2030, and generally include renewals at our option.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+3 added−1 removed0 unchanged
Biggest changeItem 3. Legal Proceedings The information set forth under “Note 7 - Commitments and Contingencies” in our notes to the consolidated financial statements set forth in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
Biggest changeThe information set forth under “Note 7 - Commitments and Contingencies” in our notes to the consolidated financial statements set forth in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference. For a discussion of certain risks associated with legal proceedings, please see Part I, Item 1A, “Risk Factors” above. Item 4.
Removed
For a discussion of certain risks associated with legal proceedings, please see Part I, Item 1A, “Risk Factors” above. Item 4. Mine Safety Disclosures Not Applicable. 63 PART II
Added
Item 3. Legal Proceedings From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on us.
Added
The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Added
Mine Safety Disclosures Not Applicable. 57 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−2 removed2 unchanged
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our ordinary shares have been traded on the Nasdaq Global Select Market under the symbol “CRDO” since January 27, 2022, the first trading day following our IPO. Holders On June 15, 2023, there were 103 shareholders of record holding our ordinary shares.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Since our initial public offering in January 2022, our ordinary shares have been traded on the Nasdaq Global Select Market under the symbol “CRDO”. Prior to that time, there was no public market for our ordinary share.
The graph below compares the cumulative total return on our ordinary shares with the cumulative total return of the NASDAQ Composite Index and the Philadelphia Semiconductor Index during the period from January 27, 2022 to April 29, 2023.
The graph below compares the cumulative total return on our ordinary shares with the cumulative total return of the NASDAQ Composite Index and the Philadelphia Semiconductor Index during the period from January 27, 2022 to April 27, 2024.
There has been no material change in the planned use of the proceeds from our IPO as described in our final prospectus filed with the SEC on January 27, 2022. 64 Issuer Purchases of Equity Securities None. Item 6. [Reserved]
There has been no material change in the planned use of the proceeds from our follow-on offering as described in our final prospectus filed with the SEC on December 5, 2023. Issuer Purchases of Equity Securities None. Item 6. [Reserved]
We cannot estimate the number of beneficial owners since many brokers and other institutions hold our ordinary shares on behalf of shareholders. Dividends We have never declared or paid any cash dividends on our ordinary shares and do not currently intend to do so in the foreseeable future.
Dividends We have never declared or paid any cash dividends on our ordinary shares and do not currently intend to do so in the foreseeable future.
All of the shares sold were registered under the Act pursuant to a registration statement on Form S-1 (File No. 333-261982) (the Registration Statement), which became effective on January 26, 2022. The offering resulted in proceeds to us of approximately $194.2 million, net of underwriting discounts and offering costs.
All of the shares sold were registered under the Act pursuant to a registration statement on Form S-3 (File No. 333-275894), which became effective on December 5, 2023. The Company received net proceeds of $173.4 million after deducting offering costs.
Removed
Use of Proceeds from Our IPO On January 31, 2022, we closed our IPO, in which we issued and sold 18,383,800 of our ordinary shares and certain of our existing shareholders sold an aggregate of 1,616,200 of our ordinary shares at an offering price of $10.00 per share.
Added
Holders On June 17, 2024, there were 73 shareholders of record holding our ordinary shares. We cannot estimate the number of beneficial owners since many brokers and other institutions hold our ordinary shares on behalf of shareholders.
Removed
On February 10, 2022, we issued and sold an additional 3,000,000 of our ordinary shares pursuant to the underwriters’ option to purchase additional shares from us at an offering price of $10.00 per share.
Added
Use of Proceeds On December 8, 2023, the Company completed a public offering of 11,500 thousand of its ordinary shares, par value of $0.00005 per share, at $17.50 per share. The Company sold 10,440 thousand 58 shares and certain existing shareholders sold an aggregate of 1,060 thousand shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

51 edited+15 added−62 removed35 unchanged
Biggest changeResults of Operations Years Ended April 29, 2023 and April 30, 2022 73 The following table sets forth information derived from our consolidated statements of operations expressed as a percentage of total revenue: Year Ended April 29, 2023 April 30, 2022 Revenue: Product sales 76.8 % 69.2 % Product engineering services 5.9 % 7.3 % IP license 16.0 % 21.9 % IP license engineering services 1.3 % 1.6 % Total revenue 100.0 % 100.0 % Cost of revenue: Cost of product sales revenue 40.8 % 37.6 % Cost of product engineering services revenue 0.5 % 1.8 % Cost of IP license revenue 0.6 % — % Cost of IP license engineering services revenue 0.4 % 0.5 % Total cost of revenue 42.3 % 39.9 % Gross margin 57.7 % 60.1 % Operating expenses: Research and development 41.7 % 45.0 % Selling, general and administrative 26.2 % 32.8 % Impairment charges 1.3 % 2.9 % Total operating expenses 69.2 % 80.7 % Operating loss (11.5) % (20.6) % Other income (expense), net 1.8 % (0.2) % Loss before income taxes (9.7) % (20.8) % Benefit for income taxes (0.7) % — % Net loss (9.0) % (20.8) % Comparison of Years Ended April 29, 2023 and April 30, 2022 Revenue Year Ended % Change April 29, 2023 April 30, 2022 (in thousands, except percentages) Product sales $ 141,475 $ 73,721 91.9 % Product engineering services 10,780 7,741 39.3 % IP license 29,444 23,309 26.3 % IP license engineering services 2,495 1,706 46.2 % Total revenue $ 184,194 $ 106,477 73.0 % Revenue for fiscal 2023 increased by $77.7 million primarily due to increases in product sales and IP license revenues, which increased by $67.8 million and $6.1 million, respectively.
Biggest changeResults of Operations Years Ended April 27, 2024 and April 29, 2023 63 The following table sets forth information derived from our consolidated statements of operations expressed as a percentage of total revenue: Year Ended April 27, 2024 April 29, 2023 Revenue: Product sales 75.2 % 76.8 % Product engineering services 10.3 % 5.9 % IP license 14.5 % 17.3 % Total revenue 100.0 % 100.0 % Cost of revenue: Cost of product sales revenue 36.5 % 40.8 % Cost of product engineering services revenue 1.2 % 0.5 % Cost of IP license revenue 0.4 % 1.0 % Total cost of revenue 38.1 % 42.3 % Gross margin 61.9 % 57.7 % Operating expenses: Research and development 49.5 % 41.7 % Selling, general and administrative 31.2 % 26.2 % Impairment charges 0.4 % 1.3 % Total operating expenses 81.1 % 69.2 % Operating loss (19.2) % (11.5) % Other income (expense), net 7.4 % 1.8 % Loss before income taxes (11.8) % (9.7) % Provision (benefit) for income taxes 2.9 % (0.7) % Net loss (14.7) % (9.0) % Comparison of Years Ended April 27, 2024 and April 29, 2023 Revenue Year Ended % Change April 27, 2024 April 29, 2023 (in thousands, except percentages) Product sales $ 145,048 $ 141,475 2.5 % Product engineering services 19,898 10,780 84.6 % IP license 28,024 31,939 (12.3) % Total revenue $ 192,970 $ 184,194 4.8 % Revenue for fiscal 2024 increased by $8.8 million primarily due to increases in product engineering services revenue of $9.1 million.
Costs of revenue includes cost of product sales revenue, cost of product engineering services revenue, cost of IP license revenue and cost of IP license engineering services revenue.
Costs of revenue includes cost of product sales revenue, cost of product engineering services revenue and cost of IP license revenue.
Where an arrangement includes multiple performance obligations, the transaction price is allocated to these on a relative standalone selling price (SSP) basis. We determine the SSP based on an observable standalone 70 selling price when it is available, as well as other factors, including the price charged to customers and our overall pricing objectives, while maximizing observable inputs.
Where an arrangement includes multiple performance obligations, the transaction price is allocated to these on a relative standalone selling price (SSP) basis. We determine the SSP based on an observable standalone selling price when it is available, as well as other factors, including the price charged to customers and our overall pricing objectives, while maximizing observable inputs.
Product Sales - We transact with customers primarily pursuant to standard purchase orders for delivery of products and generally allow customers to cancel or change purchase orders within limited notice periods prior to the scheduled shipment date. We offer standard performance warranties of twelve months after product delivery and offer limited product return rights to certain distributors.
Product Sales - We transact with customers primarily pursuant to standard purchase orders for delivery of products and generally allow customers to cancel or change purchase orders within limited 61 notice periods prior to the scheduled shipment date. We offer standard performance warranties of twelve months after product delivery and offer limited product return rights to certain distributors.
Impairment Charges Impairment charges consist primarily of impairment on property and equipment for assets no longer in service. 72 Other Income and Expense, Net Other income and expense, net consists primarily of interest income from significant financing components related to IP license revenue contracts, and foreign exchange gains and losses.
Impairment Charges Impairment charges consist primarily of impairment on property and equipment for assets no longer in service. Other Income and Expense, Net Other income and expense, net consists primarily of interest income from significant financing components related to IP license revenue contracts, and foreign exchange gains and losses.
Cash Flows Used in Investing Activities Net cash used in investing activities of $130.9 million in fiscal 2023 was attributable to purchases of property and equipment of $21.7 million and investment in certificates of deposit of $159.2 million, partially offset by maturities of investment in certificates of deposits of $50.0 million.
Net cash used in investing activities of $130.9 million in fiscal 2023 was attributable to purchases of property and equipment of $21.7 million and investment in certificates of deposit of $159.2 million, partially offset by maturities of investment in certificates of deposits of $50.0 million.
Components of Our Operating Results Revenue Our revenues consist of sale of our products, licensing of our IP and providing product engineering and IP license engineering services. Product sales primarily consists of shipment of our ICs and AEC products. IP license revenue includes fees from licensing of our SerDes IP and related support and royalties.
Components of Our Operating Results Revenue Our revenues consist of sale of our products, licensing of and providing engineering services related to our IP and providing product engineering services. Product sales primarily consists of shipment of our ICs and AEC products. IP license revenue includes fees from licensing of our SerDes IP and related engineering and support fees and royalties.
Our future capital requirements will depend 76 on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, customer demand and the continuing market acceptance of our solutions.
Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, customer demand and the continuing market acceptance of our solutions.
When we determine that it 78 is probable that a tranche of the warrant will vest and we recognize the related revenue, the grant date fair value of the associated tranche will be recognized in shareholders’ equity and the underlying expense will be amortized as a reduction of revenue in proportion to the amount of related revenue recognized.
When we determine that it is probable that a tranche of the warrant will vest and we recognize the related revenue, the grant date 68 fair value of the associated tranche will be recognized in shareholders’ equity and the underlying expense will be amortized as a reduction of revenue in proportion to the amount of related revenue recognized.
In the event that we need to borrow funds or issue additional equity, we cannot assure you that any such additional financing will be available on terms acceptable to us, if at all. If we are unable to raise additional capital when we need it, our business, results of operations and financial condition would be adversely affected.
In the event that we need to borrow funds or issue additional equity, we cannot be assured that any such additional financing will be available on terms acceptable to us, if at all. If we are unable to raise additional capital when we need it, our business, results of operations and financial condition would be adversely affected.
The determination of the SPP for certain of our IP requires fair value estimate under income approach, involving the estimation of future cash flow expected to be generated from the IP. Our policy is to record revenue net of any applicable sales, use or excise taxes.
The determination of the SSP for certain of our IP requires an estimate of the fair value under the income approach, involving the estimation of future cash flow expected to be generated from the IP. Our policy is to record revenue net of any applicable sales, use or excise taxes.
Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors.” A discussion regarding our financial condition and our results of operations for the fiscal year ended April 29, 2023 compared to the fiscal year ended April 30, 2022 is presented below.
Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors.” A discussion regarding our financial condition and our results of operations for the fiscal year ended April 27, 2024 compared to the fiscal year ended April 29, 2023 is presented below.
Product engineering and IP license engineering services revenue consists of engineering fees associated with integration of our technology solutions into our customers’ products and IP, respectively. Our customers are primarily OEMs who design and manufacture end market devices for the communications and enterprise networks markets. Our revenue is driven by various trends in these markets.
Product engineering consists of engineering fees associated with integration of our technology solutions into our customers’ products. Our customers are primarily OEMs who design and manufacture end market devices for the communications and enterprise networks markets. Our revenue is driven by various trends in these markets.
A discussion regarding our results of operations for the fiscal year ended April 30, 2022 compared to the fiscal year ended April 30, 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, filed with the SEC on June 8, 2022.
A discussion regarding our results of operations for the fiscal year ended April 29, 2023 compared to the fiscal year ended April 30, 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended April 29, 2023, filed with the SEC on June 23, 2023.
The cash outflows from working capital for fiscal 2022 were primarily driven by (a) an increase in accounts receivable of $15.9 million primarily due to increased sales in the fiscal 2022 compared to fiscal 2021 and timing of collection; (b) an increase in inventory of $21.7 million to better support unfulfilled backlog and related new product ramps; (c) and an increase in contract assets of $4.7 million primarily driven by certain IP licensing and engineering services arrangements where certain billing milestones had not yet been reached but the criteria for revenue had been met.
The cash outflows from working capital for fiscal 2023 were primarily driven by (a) an increase in accounts receivable of $20.0 million primarily due to increased sales in the fiscal 2023 compared to fiscal 2022 and timing of collection; (b) an increase in inventory of $24.4 million to better support unfulfilled backlog and related new product ramps; (c) and an increase in contract assets of $1.6 million primarily driven by certain IP licensing and engineering services arrangements where certain billing milestones had not yet been reached but the criteria for revenue had been met.
We consider an accounting policy to be critical if the policy is subject to a material level of judgment and if changes in those judgments are reasonably likely to materially impact our results.
The accounting policies discussed in this section are those that we consider to be the most critical. We consider an accounting policy to be critical if the policy is subject to a material level of judgment and if changes in those judgments are reasonably likely to materially impact our results.
This was offset by increases in accounts payable of $4.7 million and accrued expenses, compensation and other liabilities of $9.6 million due to amounts payable relating to increased purchases of inventory to support growing demand for our products.
This was offset by increases in accounts payable of $3.8 million and accrued expenses, compensation and other liabilities of $0.5 million due to amounts payable relating to increased purchases of inventory to support growing demand for our products.
Product sales and product engineering services revenue comprised 83% and 77% of our total revenue in fiscal 2023 and 2022, respectively, and IP license and IP license engineering services revenue represented 17% and 23% of our total revenue in fiscal 2023 and 2022, respectively.
Product sales and product engineering services revenue comprised 85% and 83% of our total revenue in fiscal 2024 and 2023, respectively, and IP license and IP license engineering services revenue represented 15% and 17% of our total revenue in fiscal 2024 and 2023, respectively.
As of April 29, 2023 and April 30, 2022, we had cash and cash equivalents of $108.6 million and $259.3 million, respectively, and working capital of $297.2 million and $305.7 million, respectively. Our principal use of cash is to fund our operations and invest in research and development to support our growth.
As of April 27, 2024 and April 29, 2023, we had cash and cash equivalents of $66.9 million and $108.6 million, respectively, and working capital of $485.6 million and $297.2 million, respectively. Our principal use of cash is to fund our operations and invest in research and development to support our growth.
When SSPs are not directly observable, we use the adjusted market assessment approach or residual approach, if applicable. We also consider the constraint on estimates of variable consideration when estimating the total transaction price.
When SSPs are not directly observable, we use the adjusted market assessment approach or residual approach, if applicable. We also consider the constraint on estimates of variable consideration when estimating the total transaction price. Our policy is to record revenue net of any applicable sales, use or excise taxes.
Impairment Charges Year Ended % Change April 29, 2023 April 30, 2022 (in thousands, except percentages) Impairment charges $ 2,407 $ 3,134 (23.2) % % of total revenue 1.3 % 2.9 % Impairment charges incurred in fiscal 2023 and 2022 were primarily related to the impairments on property and equipment that did not reach production qualification.
Impairment Charges Year Ended % Change April 27, 2024 April 29, 2023 (in thousands, except percentages) Impairment charges $ 765 $ 2,407 (68.2) % % of total revenue 0.4 % 1.3 % Impairment charges incurred in fiscal 2024 and 2023 were primarily related to the impairments on property and equipment, and third-party IP license that did not reach production qualification.
Our policy is to record revenue net of any applicable sales, use or excise taxes. Changes in our contract assets and contract liabilities primarily result from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products or services in exchange for consideration from the customer.
Changes in our contract assets and contract liabilities primarily result from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products or services in exchange for consideration from the customer.
We record liabilities for amounts that are collected in advance of the satisfaction of performance obligations under deferred revenue. 71 Cost of Revenue Cost of revenue includes cost of materials, such as wafers processed by third-party foundries, cost associated with packaging and assembly, testing and shipping, cost of personnel, including stock-based compensation, depreciation of equipment associated with manufacturing support, logistics and quality assurance, warranty cost, amortization of intellectual property purchased from third parties, write-down of inventories and amortization of production mask costs.
Cost of Revenue Cost of revenue includes cost of materials, such as wafers processed by third-party foundries, cost associated with packaging and assembly, testing and shipping, cost of personnel, including share-based compensation, depreciation of equipment associated with manufacturing support, logistics and quality assurance, warranty cost, amortization of intellectual property purchased from third parties, write-down of inventories and amortization of production mask costs.
We partner with Microsoft on our HiWire Switch AEC and open-source implementation that helps realize Microsoft’s vision for a highly reliable network-managed dual-Top-of-Rack (ToR) architecture (a network architecture design in which computing equipment located within the same or an adjacent rack are, for redundancy, connected to two in-rack network switches, which are, in turn, connected to aggregation switches via fiber optic cables), overcoming complex and slow legacy enterprise approaches, simplifying deployment and improving connection reliability in the data center.
We partner with Microsoft on our HiWire Switch AEC and open-source implementation that helps realize Microsoft’s vision for a highly reliable network-managed dual-Top-of-Rack (ToR) architecture (a network architecture design in which computing equipment located within the same or an adjacent rack are, for redundancy, connected to two in-rack network switches, which are, in turn, connected to aggregation switches via fiber optic cables), overcome complex and slow legacy enterprise approaches, simplify deployment and improve connection reliability in the data center. 59 The multibillion-dollar data infrastructure market that we serve is driven largely by hyperscale data centers (hyperscalers), as well as general compute, AI/ML infrastructure, multi-service operators (MSOs), and mobile network operators (MNOs).
Such royalties are reported to us on a quarterly basis. We estimate the sales-based royalties earned each quarter primarily based on our customers’ reporting of sales activity incurred in that quarter. We recognize the estimated royalty revenue when it is probable that reversal of such amounts will not occur.
We estimate the sales-based royalties earned each quarter primarily based on our customers’ reporting of sales activity incurred in that quarter. We recognize the estimated royalty revenue when it is probable that reversal of such amounts will not occur. Any differences between actual royalties owed by a customer and the quarterly estimates are recognized when updated information becomes available.
Benefit for Income Taxes Year Ended % Change April 29, 2023 April 30, 2022 (in thousands, except percentages) Benefit for income taxes $ (1,367) $ (37) 3594.6 % % of total revenue (0.7) % — % Benefit for income taxes in fiscal 2023 increased by $1.3 million compared to the same period in fiscal 2022.
Provision (benefit) for Income Taxes Year Ended % Change April 27, 2024 April 29, 2023 (in thousands, except percentages) Provision (benefit) for income taxes $ 5,624 $ (1,367) (511.4) % % of total revenue 2.9 % (0.7) % Provision for income taxes in fiscal 2024 increased by $7.0 million compared to the same period in fiscal 2023.
We recognize product sales when we transfer control of promised goods in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods, net of accruals for estimated sales returns and rebates. IP License Revenue - Our IP license revenue consists of perpetual licenses, support and maintenance and royalties.
We recognize product sales when we transfer control of promised goods in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods, net of accruals for estimated sales returns and rebates. Product Engineering Services Revenue - Some product revenue contracts include non-recurring engineering services deliverables.
Selling, General and Administrative Expenses Selling expenses consist of personnel costs including salaries, benefits and share-based compensation expense, field application engineering support, samples to customers, shipping costs and travel and entertainment costs. We expect selling expenses to increase in absolute dollars as we increase our sales and marketing personnel and continue to expand our customer engagement.
We believe that continued investments in our products are important to our future growth and, as a result, we expect our research and development expenses to continue to increase in absolute dollars. 62 Selling, General and Administrative Expenses Selling expenses consist of personnel costs including salaries, benefits and share-based compensation expense, field application engineering support, samples to customers, shipping costs and travel and entertainment costs.
The increase was due primarily to a $3.8 million increase in personnel costs as a result of higher selling, general and administrative headcount, a $0.9 million increase in professional services spending, a $1.3 million increase in facility-related costs, a $1.6 million increase in director and officer insurance cost as a result of being a public company and a $5.6 million increase in share-based compensation expense driven by increased amortization expense from new equity awards granted to employees.
The increase was due primarily to a $2.6 million increase in personnel costs as a result of higher selling, general and administrative headcount, a $7.0 million increase in share-based compensation expense driven by increased amortization expense from new equity awards granted to employees, a $1.1 million increase in legal expenses and a $0.6 million increase in software licenses.
Geographically, 31% and 36% of our total revenue in fiscal 2023 and 2022, respectively, was generated from customers in North America, and 69% and 64% of our total revenue in fiscal 2023 and 2022, respectively, was generated from customers in the rest of the world, primarily in Asia.
Geographically, 31% of our total revenue in both fiscal 2024 and 2023 was generated from customers in North America, and 69% of our total revenue in both fiscal 2024 and 2023 was generated from customers in the rest of the world, primarily in Asia. During fiscal 2024 and 2023, we generated $28.4 million and $16.5 million of net loss, respectively.
Research and Development Year Ended % Change April 29, 2023 April 30, 2022 (in thousands, except percentages) Research and development $ 76,774 $ 47,949 60.1 % % of total revenue 41.7 % 45.0 % Research and development expenses for fiscal 2023 increased by $28.8 million compared to fiscal 2022.
Research and Development Year Ended % Change April 27, 2024 April 29, 2023 (in thousands, except percentages) Research and development $ 95,531 $ 76,774 24.4 % % of total revenue 49.5 % 41.7 % Research and development expenses for fiscal 2024 increased by $18.8 million compared to fiscal 2023.
See also Note 7 to our consolidated financial statements included in this Annual Report on Form 10-K for a further discussion of our cash requirements under non-cancelable purchase obligations. We believe our existing cash and cash equivalents and other components of working capital will be sufficient to meet our needs for at least the next 12 months.
See also Note 7 to our consolidated financial statements included in this Annual Report on Form 10-K for a further discussion of our cash requirements under non-cancelable purchase obligations.
The increase was primarily due to an increase in tax benefit of share-based compensation in fiscal 2023, compared to that in fiscal 2022. Liquidity and Capital Resources Our activities consist primarily of selling our products, licensing our IP, providing IP customization services and conducting research and development of our products and technology.
The increase was primarily due to the establishment of a full valuation allowance to offset U.S. deferred tax assets in fiscal 2024. Liquidity and Capital Resources Our activities consist primarily of selling our products, licensing our IP, providing IP customization services and conducting research and development of our products and technology.
Gross Profit and Gross Margin Year Ended % Change April 29, 2023 April 30, 2022 (in thousands, except percentages) Gross profit $ 106,194 $ 64,015 65.9 % Gross margin 57.7 % 60.1 % Gross margin decreased by 2.4 percentage points in fiscal 2023 primarily driven by an increase in our product sales revenue as a percentage of overall revenue as noted above given that our product sales has lower gross margin in relation to other revenue streams.
Gross Profit and Gross Margin Year Ended % Change April 27, 2024 April 29, 2023 (in thousands, except percentages) Gross profit $ 119,431 $ 106,194 12.5 % Gross margin 61.9 % 57.7 % Gross margin increased by 4.2 percentage points in fiscal 2024 primarily driven by (a) an increase in our high-margin product engineering services revenue as a percentage of overall revenue; and (b) an increase of product sales gross margin as noted above.
However, if estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to losses or gains that could be material.
However, if estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, we may be exposed to losses or gains that could be material. Recent Accounting Pronouncements For more information, see Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Purchases of property and equipment primarily related to mask sets purchases for new products introduced or in process of being introduced, and computer equipment and software used for research and development purposes. Net cash used in investing activities of $17.6 million in fiscal 2022 was attributable to purchases of property and equipment, including third-party licenses.
Purchases of property and equipment primarily relate to mask sets purchases for new products introduced or in process of being introduced, and computer equipment and software used for research and development purposes.
Critical Accounting Estimates We prepare our financial statements in conformity with GAAP. The preparation of financial statements in accordance with GAAP requires certain estimates, assumptions and judgments to be made that may affect our consolidated financial statements.
The preparation of financial statements in accordance with GAAP requires certain estimates, assumptions and judgments to be made that may affect our consolidated financial statements. Accounting policies that have a significant impact on our results are described in Note 2 to our consolidated financial statements included elsewhere in this filing.
Our intellectual property (IP) solutions consist primarily of SerDes IP licensing. Data generation has increased dramatically over the past ten years, creating new and complicated challenges in both circuit and system design. Our proprietary SerDes and DSP technologies enable us to achieve similar performance to leading competitors’ products but in a lower cost, more highly available legacy node (n-1 advantage).
Our intellectual property (IP) solutions consist primarily of SerDes IP licensing. Data generation has increased dramatically over the past ten years, creating new and complicated challenges in both circuit and system design.
The increase was due primarily to a $9.8 million increase in personnel costs as a result of new hires for product development, an $8.3 million increase in share-based compensation expense driven by increased amortization expense from new equity awards granted to employees, a $3.6 million increase in design activities and higher engineering activities relating to testing and laboratory supplies for new product development, a $3.6 million increase in depreciation expense driven by increased computer equipment and software and laboratory equipment utilized in research and development activities, and a $1.4 million increase in information technology and facilities costs. 75 Selling, General and Administrative Year Ended % Change April 29, 2023 April 30, 2022 (in thousands, except percentages) Selling, general and administrative $ 48,248 $ 34,900 38.2 % % of total revenue 26.2 % 32.8 % Selling, general and administrative expenses for fiscal 2023 increased by $13.3 million compared to the same period in fiscal 2022.
The increase was due primarily to a $7.0 million increase in personnel costs primarily as a result of new hires for product development, an $8.0 million increase in share-based compensation expense driven by increased amortization expense from new equity awards granted to employees, a $2.2 million increase in depreciation expense driven by increased computer equipment and software and laboratory equipment utilized in research and development activities, and a $1.5 million increase in information technology and facilities costs.
Year Ended April 29, 2023 April 30, 2022 (in thousands) Net cash used in operating activities $ (24,615) $ (30,832) Net cash used in investing activities $ (130,941) $ (17,580) Net cash provided by financing activities $ 4,885 $ 204,181 Cash Flows Used in Operating Activities Net cash used in operating activities was $24.6 million for fiscal 2023.
The following table summarizes our cash flows for the periods indicated. 66 Year Ended April 27, 2024 April 29, 2023 (in thousands) Net cash provided by (used in) operating activities $ 32,737 $ (24,615) Net cash used in investing activities $ (249,485) $ (130,941) Net cash provided by financing activities $ 175,276 $ 4,885 Cash Flows Provided by (Used in) Operating Activities Net cash provided by operating activities was $32.7 million for fiscal 2024.
In connection with the license arrangements, we offer support to assist customers in qualifying their final product. Revenue from customer support is deferred and recognized ratably over the support period, which is typically one year. In certain cases, we also charge licensees royalties related to the distribution or sale of products that use our technologies.
In connection with the license arrangements, we offer support to assist customers in qualifying their final product. Revenue from customer support is deferred and recognized ratably over the support period, which is typically one year. Some IP license revenue contracts also include non-recurring engineering services deliverables, which were not material for any of the periods presented.
Purchases of property and equipment primarily related to mask sets purchases for new products introduced or in process of being introduced, and laboratory equipment used for research and development purposes. 77 Cash Flows Provided by Financing Activities Net cash provided by financing activities of $4.9 million for fiscal 2023 was primarily attributable to $5.5 million in proceeds from exercises of employee share options and the issuance of shares under our employee share purchase plan.
Net cash provided by financing activities of $4.9 million in fiscal 2023 was primarily attributable to $5.5 million in proceeds from exercises of employee share options and the issuance of shares under our employee share purchase plan. Critical Accounting Estimates We prepare our financial statements in conformity with GAAP.
We develop standard solutions we can sell broadly to our end markets and also develop tailored solutions designed to address specific customer needs. Once developed, these tailored solutions can generally be broadly leveraged across our portfolio and we are able to sell the part or license the IP into the broader market.
Once developed, these tailored solutions can generally be broadly leveraged across our portfolio and we are able to sell the part or license the IP to the broader market. During fiscal 2024 and 2023, we generated $193.0 million and $184.2 million in total revenue, respectively.
Net cash used in operating activities was $30.8 million for fiscal 2022. The cash outflows from operating activities for fiscal 2022 were primarily due to $22.2 million of net loss and $29.6 million of cash outflows for working capital purposes, partially offset by $21.0 million of non-cash items.
The cash inflows from operating activities for fiscal 2024 were primarily due to a net loss of $28.4 million adjusted for the following non-cash items: share-based compensation expense of $39.0 million, depreciation and amortization of $13.8 million, and other non-cash items of $9.0 million. This was offset by $0.7 million of cash outflows for working capital purposes.
During fiscal 2023 and 2022, we generated $16.5 million and $22.2 million in net loss, respectively. 66 We derive the substantial majority of our revenue from a limited number of customers, and we anticipate we will continue to derive a significant portion of our revenue from a limited number of customers for the foreseeable future.
We derive the substantial majority of our revenue from a limited number of customers. We anticipate we will continue to derive a significant portion of our revenue from a limited number of customers for the foreseeable future. We expect that as our products are more widely adopted and as our number of customers increase, customer concentration will decrease.
Net cash provided by financing activities of $204.2 million in fiscal 2022 was primarily attributable to $194.2 million in proceeds from our IPO, net of underwriting discounts and commissions and offering costs, $2.7 million in proceeds from exercises of share options and $7.2 million in proceeds from the issuance of convertible preferred shares, net of issuance costs.
Cash Flows Provided by Financing Activities Net cash provided by financing activities of $175.3 million for fiscal 2024 was primarily attributable to $173.4 million proceeds from issuance of ordinary shares in connection our follow-on public offering, net of offering costs, $7.1 million in proceeds from exercises of employee share options and the issuance of 67 shares under our employee share purchase plan, offset by $3.1 million in payments for long-term technology license obligations.
We design, market and sell both product and IP solutions. We help define industry conventions and standards within the markets we target by collaborating with technology leaders and standards bodies. We contract with a variety of manufacturing partners to build our products based on our proprietary SerDes and DSP technologies.
We contract with a variety of manufacturing partners to build our products based on our proprietary SerDes and DSP technologies. We develop standard solutions we can sell broadly to our end markets and also develop tailored solutions designed to address specific customer needs.
We believe the input method, based on time spent by our engineers, best depicts the efforts expended to transfer services to the customers. Certain contracts may include multiple performance obligations for which we allocate revenue to each performance obligation based on relative SSP. We determine SSPs based on observable evidence.
We believe the input method, based on time spent by our engineers, best depicts the efforts expended to transfer services to the customers. IP License Revenue - Our IP license revenue consists of perpetual licenses, support and maintenance, engineering services and royalties.
Cost of Revenue Year Ended % Change April 29, 2023 April 30, 2022 (in thousands, except percentages) Cost of product sales revenue $ 75,143 $ 40,082 87.5 % Cost of product engineering services revenue 972 1,918 (49.3) % Cost of IP license revenue 1,179 — N/A Cost of IP license engineering services revenue 706 462 52.8 % Total cost of revenue $ 78,000 $ 42,462 83.7 % Cost of product sales revenue increased by $35.1 million in fiscal 2023 primarily due to higher product sales during the same period, which resulted in the higher product sales revenue as discussed above, and a $4.2 million increase of write-downs for excess and obsolete inventory.
As a result, the product mix was more diverse in fiscal 2024 than in fiscal 2023. 64 Cost of Revenue Year Ended % Change April 27, 2024 April 29, 2023 (in thousands, except percentages) Cost of product sales revenue $ 70,498 $ 75,143 (6.2) % Cost of product engineering services revenue 2,225 972 128.9 % Cost of IP license revenue 816 1,885 (56.7) % Total cost of revenue $ 73,539 $ 78,000 (5.7) % Cost of revenue decreased by $4.5 million primarily due to $4.6 million decrease in cost of product sales revenue.
The cash outflows from working capital for fiscal 2023 were primarily driven by (a) an increase in accounts receivable of $20.0 million primarily due to increased sales in the fiscal 2023 compared to fiscal 2022 and timing of collection; (b) an increase in inventory of $24.4 million to support unfulfilled backlog and related new product ramps; and (c) an increase in other non-current assets of $8.0 million primarily due to refundable deposit payments for manufacturing commitments and an increase in deferred tax assets position.
The cash outflows from working capital for fiscal 2024 were primarily driven by (a) an increase in accounts receivable of $10.1 million primarily due to increased sales in the fiscal 2024 compared to fiscal 2023 and timing of collection; (b) and an increase in contract assets of $12.1 million primarily driven by certain IP licensing and engineering services arrangements where certain billing milestones had not yet been reached but the criteria for revenue had been met.
We expect that as our products are more widely adopted and as our number of customers increase, customer concentration will decrease. Our Business Model We are a product-focused business with a strong foundation in IP, pioneering comprehensive connectivity solutions that deliver bandwidth, scalability, and end-to-end signal integrity for next-generation platforms.
As a supplement to our financial statement footnote disclosure, and to provide further insight into our end customer concentration, the following table summarizes our revenue by customer as a percentage of total revenue based on end customer profile, rather than based on the contracting parties who place purchase orders or sign revenue contracts with us: Year Ended April 27, 2024 April 29, 2023 Revenue: Customer Z 26 % 55 % Customer Y 20 % * Customer B 15 % * Customer C * 12 % Customer E * 13 % * Less than 10% of total revenue. 60 Our Business Model We are a product-focused business with a strong foundation in IP, pioneering comprehensive connectivity solutions that deliver bandwidth, scalability, and end-to-end signal integrity for next-generation platforms.
Removed
Overview Credo is an innovator in providing secure, high-speed connectivity solutions that deliver improved power and cost efficiency as data rates and corresponding bandwidth requirements increase exponentially throughout the data infrastructure market.
Added
Overview Credo provides innovative, secure, high-speed and power-efficient connectivity solutions. Our solutions target the data infrastructure market, where bandwidth requirements are increasing exponentially, driven by the accelerating deployment of leading edge Artificial Intelligence infrastructure and applications.
Removed
Beyond power and performance, Credo continues to innovate to solve customers’ system level requirements.
Added
Our proprietary SerDes and DSP technologies enable us to achieve similar performance to leading competitors’ products but at a lower cost and more highly available legacy node (n-1 advantage). Beyond power and performance, Credo continues to innovate to address customers’ system level requirements.
Removed
The multibillion-dollar data infrastructure market that we serve is driven largely by hyperscale data centers (hyperscalers), as well as general compute, Artificial Intelligence and Machine Learning (AI/ML) infrastructure, multi-service operators (MSOs), and mobile network operators (MNOs).
Added
The demands for increased bandwidth, improved power and cost efficiency and heightened security have simultaneously and dramatically expanded as work, education and entertainment have rapidly digitized across myriad endpoint users. We design, market and sell both product and IP solutions. We help define industry conventions and standards within the markets we target by collaborating with technology leaders and standards bodies.
Removed
The demands for increased bandwidth, improved power and cost efficiency and heightened security have simultaneously and dramatically expanded as work, education and entertainment have rapidly digitized across myriad endpoint users. 65 Since our founding in 2008, we have achieved several significant milestones: • From 2008 to 2012, we developed our proprietary, low-power, mixed-signal SerDes architecture which could scale from 25Gbps/lane to 50Gbps/lane and ultimately to 100Gbps/lane. • In 2013, we began commercializing our core SerDes technology by providing connectivity solutions for the electrical and optical links in data centers. • In 2014, we signed our first product contract with Non-Recurring Engineering (NRE) services as well as our first IP licensing contract. • In 2016, we commenced production shipments of our Line Card PHY products. • In 2017, we developed a 3.2Tbps chiplet for high bandwidth 12.8Tbps switches.
Added
We sell our products to hyperscalers, original equipment manufacturers (OEMs), original design manufacturers (ODMs) and optical module manufacturers, as well as to companies in the enterprise and HPC markets. We work closely and have engagements with industry-leading companies across these segments.
Removed
This chiplet included 64 lanes of 50Gbps SerDes and was built in 28nm using Chip-on-Wafer-on-Substrate (CoWoS) packaging technology from TSMC. • In 2018, we created AECs, a new category of datacenter system products, beginning with developing 400G DDC solutions up to seven meters in length. • In 2019, we developed new DSP SerDes architectures optimizing the performance and power trade-offs for 400G and 800G solutions targeting Line Card PHYs, Optical PAM4 DSPs, and AECs. • In 2020, we demonstrated the industry’s first 40Gbs PAM3 SerDes in silicon.
Added
A relatively small number customers have historically accounted for and continue to account for a significant portion of our revenue. We report revenue by customer in our financial statement disclosure based on the contracting parties who place purchase orders or sign revenue contracts with us.
Removed
In addition, we engineered breakthrough Line Card PHYs and Optical PAM4 DSPs with leading performance and power for 50G/lane and 100G/lane solutions. • In 2021, we launched new AEC solutions targeting ToR-to-NIC connections.
Added
See Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. However, certain of our end customers have their contract manufacturing partners place orders with us. As a result, the contract manufacturers, rather than the end customers, are reported as our customers for financial reporting purposes.
Removed
Our solutions enabled dual-ToR server racks to seamlessly “switch” data traffic to the redundant ToR if a ToR port failed. • In 2022, we released our 112G/lane AEC products including 400G, 800G and 1.6T varieties and expanded our AEC engagement to a second major hyperscaler, who awarded us with its next generation NIC-TOR AEC program and completed qualification. • In 2023, we expanded our AEC engagements to include all seven of the leading hyperscalers in the world, with additional program awards and qualifications.
Added
We recognize revenue from these agreements similar to the method described under the caption “Product Engineering Services Revenue” above. In certain cases, we also charge licensees royalties related to the distribution or sale of products that use our technologies. Such royalties are reported to us on a quarterly basis.
Removed
During fiscal 2023 and 2022, we generated $184.2 million and $106.5 million in total revenue, respectively. Product sales and product engineering services revenue comprised 83% and 77% of our total revenue in fiscal 2023 and 2022, respectively, and IP license and IP license engineering services revenue represented 17% and 23% of our total revenue in fiscal 2023 and 2022, respectively.
Added
The increase in product engineering services revenue was primarily due to Credo entering into two new non-recurring engineering contracts, one of which was entered into in fiscal 2024 and which saw significant ramp-up in the year, resulting in revenue recognition of $15.5 million.
Removed
Revenue Mix and Associated Gross Margins We are a product-focused business with a strong foundation in IP and, as such, our customers engage with us through the purchase of our products or the licensing of our IP. In some instances, customers will engage us to develop tailored products or IP licenses to meet their specific application requirements.
Added
The increase in product sales revenue was driven by growth in Chiplet and Optical products, offset by a modest decline in AEC products.
Removed
We charge these customers incremental fees for this tailored development which are in addition to product sales or IP license revenue, and we recognize these additional fees as product engineering or IP license engineering services revenue.
Added
The decrease was driven by improvement of our product sales gross margin from 46.9% in fiscal 2023 to 51.4% in fiscal 2024 as a result of increased product sales that drove the economies of scales.
Removed
By providing tailored engineering services to our customers, we believe we strengthen our customer relationships, enable additional sales and establish ourselves for potential long-term revenue opportunities from associated product sales or IP license revenue. 67 A summary of our revenue and associated gross margin by these revenue sources for fiscal 2023 and 2022 is presented below (in thousands, except percentages): Year Ended April 29, 2023 April 30, 2022 Revenue: Product sales $ 141,475 $ 73,721 Product engineering services 10,780 7,741 Total product sales and product engineering services 152,255 81,462 IP license 29,444 23,309 IP license engineering services 2,495 1,706 Total IP license and IP license engineering services 31,939 25,015 Total revenue $ 184,194 $ 106,477 Gross margin: Product sales 46.9 % 45.6 % Product engineering services 91.0 % 75.2 % Total product sales and product engineering services 50.0 % 48.4 % IP license 96.0 % 100.0 % IP license engineering services 71.7 % 72.9 % Total IP license and IP license engineering services 94.1 % 98.2 % Total gross margin 57.7 % 60.1 % Over time, we anticipate that our revenues from product sales and IP license will become a larger proportion of total revenue relative to engineering services.
Added
Selling, General and Administrative Year Ended % Change April 27, 2024 April 29, 2023 (in thousands, except percentages) Selling, general and administrative $ 60,193 $ 48,248 24.8 % % of total revenue 31.2 % 26.2 % 65 Selling, general and administrative expenses for fiscal 2024 increased by $11.9 million compared to the same period in fiscal 2023.
Removed
We incur certain costs associated with introducing new products to market which impact the gross margin associated with product sales. Over time, as revenue from our product sales increases, we expect these product introduction costs to decrease as a percentage of product sales revenue, resulting in a higher gross margin on product sales revenue.
Added
We believe our existing cash and cash equivalents and other components of working capital will be sufficient to meet our needs for at least the next 12 months and in the longer term.
Removed
Factors Affecting Our Performance Our results of operations and financial condition have been, and will continue to be, affected by a number of factors including the following: Design Wins With New and Existing Customers Our solutions enable our end customers to differentiate their product offerings and position themselves to meet the demands of increasingly advanced networks.
Added
This was offset by a decrease in inventory of $15.8 million primarily driven by tightened production management and increased product sales compared to fiscal 2023. Net cash used in operating activities was $24.6 million for fiscal 2023.
Removed
We work closely with our end customers to understand their product roadmaps and strategies and help them develop new products. Our goal is to develop solutions that support their product roadmap and development.
Added
Cash Flows Used in Investing Activities Net cash used in investing activities of $249.5 million in fiscal 2024 was attributable to purchases of property and equipment of $15.7 million and investments in certificates of deposit of $169.8 million, partially offset by maturities of investment in certificates of deposit of $403.6 million.
Removed
If an end customer has tested our product, verified that it meets their requirements and the customer has informed us that the end customer intends to have our customer build it into their product, we consider it a design win. We consider design wins important to our future success.

… 48 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed7 unchanged
Biggest changeIf the U.S. dollar weakened by 10%, our operating expense in fiscal 2023 would have increased by approximately 2%. Interest Rate Risk We maintain an investment policy that requires minimum credit ratings and diversification of credit risk. We invest our excess cash primarily in money market mutual funds and time deposits.
Biggest changeIf the U.S. dollar weakened by 10%, our operating expense in fiscal 2024 would have increased by approximately 2%. 69 Interest Rate Risk We maintain an investment policy that requires minimum credit ratings and diversification of credit risk. We invest our excess cash primarily in money market mutual funds and time deposits.
Increases in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to 79 other currencies could result in our suppliers raising their prices to continue doing business with us.
Increases in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our suppliers raising their prices to continue doing business with us.
The fair market value of fixed-rate securities may be adversely impacted due to a rise in interest rates, while floating-rate securities may produce less income than predicted if interest rates fall. 80
The fair market value of fixed-rate securities may be adversely impacted due to a rise in interest rates, while floating-rate securities may produce less income than predicted if interest rates fall. 70

Other CRDO 10-K year-over-year comparisons