Credo Technology Group Holding Ltd at Barclays Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : Thank you for being here. Let's start off with the 30,000-foot view. You guys just had a remarkable quarter, and the stock has reflected that over the past couple of days. But what product portfolios did you focus on when you guys first went public? And as you've moved through these couple of years, how has the world sort of played into the areas of the world in which you decided to focus on only a couple years ago?

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : No. no. It was a great summary. I think if I think back about the inception of at least the public version of the company was the transition to 100-gig lanes in the front end, and then AI had really taken off I guess. What I thought was always interesting, and I guess the question that I have now, is you started with the HiWire alliance, and you set a standard, and you're a pioneer in kind of developing the market which you kind of own today. And now, we're almost at the second phase of that transition where you said, there's always going to be customers and competitors that come to this market that are going to compete with us. This is not a market where we're going to have a monopoly. So you're starting to see -- and I think this is a good thing that you generally refer to more people talking about this, right? Bigger companies talking about this. So when you think about your competitive dynamic versus those companies who haven't been talking about it as much but are now definitely highlighting it as a major driver for them, one, how do you feel you're able to differentiate? Because those companies have talked about being first as an important thing in other markets. And two, what is your validation of the size of this market moving forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, CRDO.OQ - Credo Technology Group Holding Ltd at Barclays Global Technology Conference

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : So supply chain ecosystem, how you set up your business in a really big market, I think you see that starting to play out in the customer diversification, right? So up until this past quarter, you had a customer ramp up to a majority of your revenue, then ramp down, and a second customer ramp up to over 50% of revenue and then slightly tick down. And with that customer ticking down, you still grew that business. And that's a testament to the fact that you now have three material customers in the AEC business. So can you talk about, with that expansion -- you mentioned some up-and-coming hyperscalers already, but with that expansion, are you seeing similar problems addressed across those customers? Or are you seeing a diverse set of applications? And maybe spend a little time walking people through like what problems you're solving with those customers.

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : So when you think about that scale-up opportunity, there's a couple of differences between that scale-out opportunity. Obviously, you're closer in terms of distance. So passive copper has just hung around for longer. But then you have the -- I would say, the clashing heads of protocols, right? You have Ethernet, which has come down very effectively thus far and now the advent -- well, not really the advent, but the extension of PCIe offboard to certain connections as well. And you guys have started talking more about PCIe as well. So when you look at that battle, I ask this question to companies, and they're always like, we're agnostic. We'll go either way. We check all the boxes. But could you maybe walk through where you see positives and negatives to each? I know that PCIe was a protocol designed onboard. I know that Ethernet obviously was not preferable for AI, and there was always an InfiniBand solution even before NVIDIA bought Mellanox. But just walk me through where you maybe see the world going and where Credo wins and loses in both of those scenarios?

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : Fair enough. How about we pivot a little bit to the optical DSP portion of the business? So you've seen increasing success there. You've always described yourself as kind of an n-minus-one up until this point like the world was still growing and relatively dominated by a single provider. But as you're making this transition to 1.6T, I think that you're seeing a diversification. I think the companies that are incumbents are also admitting that as well. So can you talk about when you think about your optical DSP in the future -- and I think I will point to myself and raise my hand as making a fault. When we first talked about this at CES this year, you talked about the two-pronged strategy at 3 nanometer, right? You had the full 3 nanometer and then you had to cut down 3 nanometer DSP for LRO. And I was like, I don't understand this, and the world has really moved to that. So when you look at the opportunity in optical DSP, do you see more dollars going in the 3 nanometer full DSP or kind of a cut-down LRO product?

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : Super helpful. One more on the AEC side. I was thinking about second half, obviously, going to be driven by a customer that you've previously had -- big ramp up in the second half. A common debate that's had out there right now is when you look at the architectural decisions that are being made by hyperscalers, whether that's to use general-purpose silicon or to use more customized ASICs, which direction do those customers go in longer term? I think generally people agree that down the road, people will use more customized product. But today, we're very early days in this market. And so there's some split. When you think about your ability to attach to an accelerator or to be part of a solution that's using an accelerator, whether that's a general-purpose accelerator or a customized piece of silicon, is there any difference in that attach rate? I think people sometimes maybe make the mistake that if you're deploying a GPU from NVIDIA that you won't find yourself in that solution. Can you maybe walk me through how much of that ramp may be associated with each?

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : One more for you and then a couple of CFO questions. You talked more about PCIe as a product portfolio over cables. The retimer market has been talked more and more about by the people in your ecosystem. Is there a realistic time that you could intersect that market? You talked about Gen6 in the past. It felt always more like cabling was the first area that you would attack. But on board retiming, is that something that makes sense for you guys to go into?

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : Helpful. All right. Just a couple of quick CFO ones. So you have a warrant agreement with Amazon.

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : If you are tracking that customer's exposure, it looks like near the end of this fiscal year, you may come up to the entire term of the agreement. What does that mean from a financial perspective, potentially, in Q4? And then second part of the question -- not to do all multiparter here -- but you were making the comment at earnings that even with a licensing business that you moderated -- essentially de-risked, you could still see gross margins in your originally guided range. What's changed there that's allowed you to get that gross margin leverage?

Question: Tom O'Malley - Barclays Capital Inc. - Analyst : Super helpful. Just one more here. You've probably been more mobile than any other company in my space in terms of changing direction as a private company and then a public company. When you think about what's on the horizon, clearly, there's been a ton of new announcements from you guys recently on the PCIe side. But is there a place that investors should be looking for kind of the next transition? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 11, 2024 / 10:30PM, CRDO.OQ - Credo Technology Group Holding Ltd at Barclays Global Technology Conference It sounds like you're talking about scale-up architecture and the solutions there is kind of the hot spot. Anything that you would point to as a potential next chapter in terms of development?