What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-06-24 compared with 2023-06-23 · 202 added, 218 removed, 707 unchanged (37% of the section changed)

16 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 27, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 24, 2024 expressed an unqualified opinion thereon.

Adoption of ASU No.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended April 30, 2022 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842), and the related amendment.

Basis for Opinion

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The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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In our opinion, Credo Technology Group Holding Ltd (the Company) maintained, in all material respects, effective internal control over financial reporting as of April 27, 2024, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Credo Technology Group Holding Ltd (the Company) as of April 29, 2023 and April 30, 2022, the related consolidated statements of operations, comprehensive loss, convertible preferred shares and shareholders' equity (deficit) and cash flows for each of the three years in the period ended April 29, 2023, and the related notes and our report dated June 22, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of April 27, 2024 and April 29, 2023, the related consolidated statements of operations, comprehensive loss, convertible preferred shares and shareholders' equity (deficit) and cash flows for each of the three years in the period ended April 27, 2024, and the related notes and our report dated June 24, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Shareholders' equity:

Convertible preferred shares, $ 0.00005 par value;

50,000 shares authorized;

no shares issued and outstanding at April 29, 2023 and April 30, 2022

Ordinary shares, $ 0.00005 par value;

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Additional paid in capital 676,054 454,795

Accumulated other comprehensive income (loss) ( 191 ) 23

Accumulated other comprehensive loss ( 519 ) ( 191 )

Accumulated deficit ( 135,345 ) ( 106,976 )

9 unchanged sentences

IP license 28,024 31,939 25,015

IP license engineering services 2,495 1,706 4,368

Total revenue 192,970 184,194 106,477

3 unchanged sentences

Cost of IP license revenue 816 1,885 462

Cost of IP license engineering services revenue 706 462 1,180

Total cost of revenue 73,539 78,000 42,462

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Net loss $ ( 28,369 ) $ ( 16,547 ) $ ( 22,176 )

Other comprehensive income (loss):

Foreign currency translation gain (loss) ( 214 ) ( 204 ) 378

Other comprehensive loss:

Foreign currency translation loss ( 328 ) ( 214 ) ( 204 )

Total comprehensive loss $ ( 28,697 ) $ ( 16,761 ) $ ( 22,380 )

7 unchanged sentences

Issuance of Series D convertible preferred shares, net of issuance costs 1,251 7,245 — — — — — —

Issuance of Series D+ convertible preferred shares, net of issuance costs 8,630 49,883 — — — — — —

Conversion of preferred shares into ordinary shares ( 52,060 ) ( 205,210 ) 52,060 3 205,207 — — 205,210

Issuance of ordinary shares in connection with initial public offering, net of offering costs — — 21,384 1 194,204 — — 194,205

Ordinary shares issued under employee share incentive plans — — 3,029 — 2,731 — — 2,731

Repurchase of ordinary shares — — ( 6,876 ) ( 1 ) ( 932 ) — ( 21,975 ) ( 22,908 )

Share-based compensation — — — — 9,188 — — 9,188

Warrant contra revenue — — — — 640 — — 640

Total comprehensive gain (loss) — — — — — ( 204 ) ( 22,176 ) ( 22,380 )

Balances at April 30, 2022 — $ — 144,755 $ 7 $ 424,562 $ 23 $ ( 90,429 ) $ 334,163

Issuance of Series D+ convertible preferred shares, net of issuance costs 1,251 7,245 — — — — — —

Conversion of preferred shares into ordinary shares ( 52,060 ) ( 205,210 ) 52,060 3 205,207 — — 205,210

Issuance of ordinary shares in connection with initial public offering, net of offering costs, underwriting discounts and commissions — — 21,384 1 194,204 — — 194,205

Ordinary shares issued under employee share incentive plans

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— — — — 23,516 — — 23,516

Convertible Preferred Shares Ordinary Shares Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders’ Equity (Deficit)

Number of Shares Amount Number of Shares Amount

Warrant contra revenue — — — — 1,220 — — 1,220

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Balances at April 29, 2023 — $ — 148,651 $ 7 $ 454,795 $ ( 191 ) $ ( 106,976 ) $ 347,635

Convertible Preferred Shares Ordinary Shares Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders’ Equity (Deficit)

Number of Shares Amount Number of Shares Amount

Issuance of common stock in connection with secondary public offering, net of offering costs — — 10,440 1 173,415 — — 173,416

Ordinary shares issued under employee share incentive plans — — 5,329 — 7,055 — — 7,055

Tax withheld related to RSU settlement — — ( 115 ) — ( 2,158 ) — — ( 2,158 )

Share-based compensation — — — — 39,022 — — 39,022

Warrant contract revenue — — — — 1,220 — — 1,220

Warrant contra revenue — — — — 3,925 — — 3,925

Total comprehensive loss — — — — — ( 328 ) ( 28,369 ) ( 28,697 )

22 unchanged sentences

Deferred revenue ( 391 ) 3,186 ( 2,882 )

Net cash used in operating activities ( 24,615 ) ( 30,832 ) ( 42,361 )

Net cash provided by (used in) operating activities 32,737 ( 24,615 ) ( 30,832 )

Cash flows from investing activities:

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Cash flows from financing activities:

Proceeds from issuance of ordinary shares upon initial public offering, net of underwriter discounts and offering costs — 194,205 —

Proceeds from issuance of ordinary shares in connection with public offering, net of offering costs 173,431 — 194,205

Payments on technology license obligations ( 3,052 ) ( 616 ) —

Proceeds from employee share incentive plans 7,055 5,501 2,731

Tax withheld related to RSU settlement ( 2,158 ) — —

Proceeds from issuance of convertible preferred shares, net of issuance costs — — 7,245

Payments for repurchase of ordinary shares — — ( 22,908 )

Net cash provided by financing activities 175,276 4,885 204,181

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Income taxes paid $ ( 1,054 ) $ ( 1,204 ) $ ( 427 )

Purchase of property and equipment included in accounts payable, accrued expenses and other liabilities $ 10,909 $ 168 $ 19

Purchases of property and equipment included in accounts payable, accrued expenses and other liabilities $ 8,287 $ 10,909 $ 168

Conversion of convertible preferred shares into ordinary shares upon initial public offering $ — $ — $ 205,210

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Description of Business and Basis of Presentation

Credo Technology Group Holding Ltd was formed under the laws of the Cayman Islands in September 2014.

Credo Technology Group Holding Ltd was formed as an exempted company under the laws of the Cayman Islands in September 2014.

Credo Technology Group Holding Ltd directly owns Credo Technology Group Ltd., which owns, directly and indirectly, all of the shares of its subsidiaries in mainland China, Hong Kong, and the United States (U.S.).

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Effective May 1, 2022, the Company changed its fiscal year to a 52- or 53-week period ending on the Saturday closest to April 30.

The additional week in a 53-week year is added to the first quarter, making such quarter consist of 14 weeks.

Accordingly, every fifth or sixth fiscal year will have a 53-week period.

Our fiscal year ended April 27, 2024 (fiscal year 2024) is a 52-week fiscal year.

The first quarter of our fiscal year 2023 ended on July 30, 2022, the second quarter ended on October 29, 2022 and the third quarter ended on January 28, 2023.

Fiscal year 2025, ending May 3, 2025, is a 53-week fiscal year.

Reclassifications

Certain prior period balances were reclassified to conform to the current period’s presentation.

None of these reclassifications had an impact on reported net income (loss) or cash flows for any of the periods presented.

Initial Public Offering

On January 31, 2022, the Company completed an initial public offering (the “IPO”) of 20,000,000 of its ordinary shares, par value $ 0.00005 per share (the “Shares”), at a public offering price of $ 10.00 per share.

The Company sold 18,383,800 Shares and certain existing shareholders sold an aggregate of 1,616,200 Shares.

None of these reclassifications had an impact on reported net loss or cash flows for any of the periods presented.

Public Offering of Shares

On January 31, 2022, the Company completed an initial public offering (the “IPO”) of 20,000 thousand of its ordinary shares, par value $ 0.00005 per share (the “Shares”), at a public offering price of $ 10.00 per share.

The Company sold 18,384 thousand Shares and certain existing shareholders sold an aggregate of 1,616 thousand Shares.

The Company received net proceeds of $ 171.9 million after deducting underwriting discounts and commissions.

Immediately prior to the Closing, all of the Company’s outstanding Series A convertible preferred shares, Series B convertible preferred shares, Series C convertible preferred shares, Series D convertible preferred shares and Series D+ convertible preferred shares (collectively, the “Preferred Shares”) automatically converted into ordinary shares on a one -for-one basis, and such Preferred Shares were cancelled, retired and eliminated from the shares that the Company is authorized to issue and shall not be reissued by the Company.

In connection with the IPO, the underwriters were granted a 30-day option to purchase from the Company up to an additional 3,000,000 of the Company’s ordinary shares at the public offering price, less underwriting discounts and commissions.

In connection with the IPO, the underwriters were granted a 30-day option to purchase from the Company up to an additional 3,000 thousand of the Company’s ordinary shares at the public offering price, less underwriting discounts and commissions.

On February 7, 2022, the underwriters exercised the option to purchase additional shares in full, which purchase closed on February 10, 2022.

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Notes to Consolidated Financial Statements

incurred total IPO offering costs of $ 5.7 million, which were recorded as a reduction in additional paid-in capital as of April 30, 2022.

Company incurred total IPO offering costs of $ 5.7 million, which were recorded as a reduction in additional paid-in capital as of April 30, 2022.

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 shares and certain existing shareholders sold an aggregate of 1,060 thousand shares.

The Company received net proceeds of $ 173.4 million after deducting offering costs.

Significant Accounting Policies

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The Company bases its estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future, given the available information.

Estimates are used for, but not limited to, write-down for excess and obsolete inventories, the standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, variable consideration from revenue contracts, determination of the fair value of share-based awards and customer warrant, valuation of ordinary shares, the realization of tax assets and estimates of tax reserves, impairment of long-lived assets, and incremental borrowing rate used in the Company’s operating lease calculations.

Estimates are used for, but not limited to, write-down for excess and obsolete inventories, the standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, variable consideration from revenue contracts, determination of the fair value of share-based awards and customer warrant, the realizability of tax assets and estimates of tax reserves, impairment of long-lived assets, and incremental borrowing rate used in the Company’s operating lease calculations.

Actual results may differ from those estimates and such differences may be material to the financial statements.

As of the date of issuance of these consolidated financial statements, the Company is not aware of any specific event or circumstance related to the pandemic that would require management to update the significant estimates and assumptions used in the preparation of the consolidated financial statements .

As new events continue to evolve and additional information becomes available, any changes to these estimates and assumptions will be recognized in the consolidated financial statements as soon as they become known.

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These investments are recorded at amortized cost basis.

If the cost of an individual investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent

If the cost of an individual investment exceeds its fair value, we evaluate, among other factors,

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

and ability to hold the investment.

general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment.

Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established.

25 unchanged sentences

Production equipment 5

Transportation equipment 4

The Company determines if an arrangement is a lease at inception.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Operating lease ROU assets also include any initial direct costs and

Operating lease right-of-use (ROU) assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

Operating lease ROU assets also include any initial direct

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

prepayments less lease incentives.

costs and prepayments less lease incentives.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

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The Company determines 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 the Company’s overall pricing objectives, while maximizing observable inputs.

The determination of the SPP for certain of the Company’s IP requires fair value estimate under income approach, involving the estimation of future cash flow expected to be generated from the IP.

When SSPs are not directly observable, the Company uses the adjusted market assessment approach or residual approach, if applicable.

The determination of the SSP for certain of the Company’s 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.

The Company also considers the constraint on estimates of variable consideration when estimating the total transaction price.

The Company’s policy is to record revenue net of any applicable sales, use or excise taxes.

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Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional.

The Company recognizes deferred revenue when it has received consideration or an amount of consideration is due from the customer and it has a future obligation to transfer products or services.

The Company recognizes deferred

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

revenue when it has received consideration or an amount of consideration is due from the customer and it has a future obligation to transfer products or services.

Product Sales - The Company transacts with customers primarily pursuant to standard purchase orders for delivery of products and generally allows customers to cancel or change purchase orders within limited notice periods prior to the scheduled shipment date.

2 unchanged sentences

As of April 27, 2024 and April 29, 2023, the sales returns and rebate reserves were not material.

IP License Revenue - The Company’s IP license revenue consists of perpetual licenses, support and maintenance, and royalties.

Product Engineering Services Revenue - Some product revenue contracts include non-recurring engineering services deliverables.

The Company recognizes revenue from these agreements over time as services are provided or at point in time upon completion and acceptance by the customer of contract deliverables, depending on the terms of the arrangement.

Revenue is deferred for any amounts billed or received prior to delivery of services.

The Company believes the input method, based on time spent by its engineers, best depicts the efforts expended to transfer services to the customers.

IP License Revenue - The Company’s IP license revenue consists of perpetual licenses, support and maintenance, engineering services and royalties.

The Company enters into perpetual semiconductor IP license agreements, that have a fixed fee, whereby licensees pay a fixed fee for the right to incorporate the Company’s IP technologies into the licensee’s products.

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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.

The Company recognizes revenue from these agreements similar to the method described under the caption “Product Engineering Services Revenue” above.

In certain cases, the Company also charges licensees royalties related to the distribution or sale of products that use its technologies.

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Any differences between actual royalties owed by a customer and the quarterly estimates are recognized when updated information becomes available.

Product and IP License Engineering Services Revenue - Some product and IP revenue contracts include non-recurring engineering services deliverables.

Revenue is deferred for any amounts billed or received prior to delivery of services.

The Company believes the input method, based on time spent by its engineers, best depicts the efforts expended to transfer services to the customers.

Certain contracts may include multiple performance obligations for which the Company allocates revenue to each performance obligation based on relative SSP.

The Company determines SSPs based on observable evidence.

When SSPs are not directly observable, the Company uses the adjusted market assessment approach or residual approach, if applicable.

The Company also considers the constraint on estimates of variable consideration when estimating the total transaction price.

The Company records liabilities for amounts that are collected in advance of the satisfaction of performance obligations under deferred revenue.

Customer Warrant

The Company accounts for the warrant issued to Amazon.com NV Investment Holdings LLC as an equity instrument, based on the specific terms of the warrant agreement.

When management determines that it 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 (deficit) and the underlying expense will be amortized as a reduction of revenue in proportion to the amount of related revenue recognized.

Cost of Revenue

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

underlying expense will be amortized as a reduction of revenue in proportion to the amount of related revenue recognized.

Cost of Revenue

Cost of revenue includes cost of materials, including 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 and impairment of production equipment no longer in use.

Cost 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.

assurance, warranty cost, amortization of intellectual property purchased from third-parties, write-down of inventories, and amortization and impairment of production equipment no longer in use.

Cost of revenue includes cost of product sales revenue, cost of product engineering services revenue and cost of IP license revenue.

Shipping and Handling Costs

Shipping and handling costs incurred for delivery to customers are expensed as incurred and are included in selling and marketing expenses in the Company’s Consolidated Statements of Operations.

Shipping and handling costs incurred for delivery to customers are expensed as incurred and are included in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations.

Research and Development

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The Company recorded all shares of convertible preferred shares at their respective fair values less issuance costs on the dates of issuance.

Prior to fiscal 2022, the convertible preferred shares were recorded outside of shareholders’ equity (deficit) because, in the event of certain liquidation events considered not solely within the Company’s control, such as a change in control event and sale of all or substantially all of the Company’s assets, the convertible preferred shares would have become redeemable at the option of the holders.

Share-Based Compensation

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The Company estimates the expected life of options granted based on the simplified method.

The Company estimates the volatility of its ordinary shares on the date of grant based on the average historical share price volatility of comparable publicly traded companies in the Company’s industry group.

The Company has not paid and does not expect to pay dividends.

The Company estimates the volatility of its ordinary shares on the date of grant based on the Company’s historical stock price volatility.

The Company has not paid and has no current plans to pay dividends.

The Company accounts for forfeitures as they occur.

The fair value of each restricted share unit is estimated based on the market price of the Company’s ordinary share on the date of grant.

The fair value of each share issued under the Company’s employee share purchase plan is estimated based on Black-Scholes option pricing model.

Prior to the IPO, the absence of an active market for the Company’s ordinary shares required its board of directors, the members of which the Company believed had extensive business, finance and

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

venture capital experience, to determine the fair value of its ordinary shares for purposes of granting options and for calculating share-based compensation expense for the periods presented.

The fair value of each share issued under the Company’s employee share purchase plan is estimated based on the Black-Scholes option pricing model.

Prior to the IPO, the absence of an active market for the Company’s ordinary shares required its board of directors, the members of which the Company believed had extensive business, finance and venture capital experience, to determine the fair value of its ordinary shares for purposes of granting options and for calculating share-based compensation expense for the periods presented.

The Company obtained contemporaneous third-party valuations to assist the board of directors in determining fair value.

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All options granted were intended to be exercisable at a price per share not less than the fair value of the shares underlying those options on their respective dates of grant.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

The Company is subject to income taxes in the United States and certain foreign jurisdictions.

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See “Note 14 — Segment and Geographic Information” for the Company’s revenue by country and location of long-lived assets.

Accounting Pronouncement Recently Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in Topic 740 in order to reduce

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis.

This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

The Company is evaluating the impact that this new standard will have on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures , which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.

This standard is effective for fiscal years beginning after May 4, 2025, and may be

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

cost and complexity of its application.

This new guidance was effective for the Company for its fiscal year beginning May 1, 2022.

The Company adopted this guidance on May 1, 2022 prospectively, and the impact on its consolidated financial statements was not material.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications made more recently.

For trade receivables, loans and other financial instruments, the Company is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable.

Credit losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

This guidance is effective for the Company for its fiscal year 2023.

The Company adopted this guidance during the year ended April 29, 2023 prospectively, and the impact on its consolidated financial statements was not material.

applied on a retrospective or prospective basis.

The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and disclosures.

Concentrations

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Customer C * 22 %

Customer D 22 % *

Revenue April 27, 2024 April 29, 2023 April 30, 2022

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Customer F * * 10 %

Customer G * * 12 %

* Less than 10% of total accounts receivable or total revenue.

** Both customers A and B were distributors who sold the Company’s products to the same end customer.

The Company believes that the concentration of credit risk in its trade receivables is substantially mitigated by the high level of credit worthiness of its customers and the relatively short collection terms.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

The Company performs ongoing credit evaluations of its customers’ financial conditions and limits the amount of credit extended when deemed necessary based upon payment history and the customer’s current credit worthiness, but generally require no collateral.

The Company operates in markets that are highly competitive and rapidly changing.

Significant technological changes, shifting customer needs, the emergence of competitive products with new capabilities, general economic conditions worldwide, the ability to safeguard patents and other intellectual property in a rapidly evolving market and reliance on assembly and test subcontractors, third-party wafer fabricators and other factors could affect the Company’s financial results.

The Company currently outsources all of its integrated circuit manufacturing to Taiwan Semiconductor Manufacturing Company Limited with the remaining assembly and testing processes outsourced to other subcontractors primarily in Asia.

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The contract assets are primarily related to the Company’s fixed-fee IP licensing arrangements and rights to consideration for performance obligations delivered but not billed as of April 27, 2024 and April 29, 2023.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

During the year ended April 27, 2024, the Company recognized $ 4.1 million of revenue that was included in the deferred revenue balance as of April 29, 2023.

1 unchanged sentence

During the year ended April 30, 2022, the Company recognized $ 4.0 million of revenue that was included in the deferred revenue balance as of April 30, 2021.

During the year ended April 29, 2023, the decrease in contract assets of $ 1.6 million was primarily driven by IP licensing and engineering services arrangements where certain billing milestones were reached during fiscal 2023 while the criteria for revenue had previously been met.

During the year ended April 29, 2023, the increase in deferred revenue of $ 3.2 million was primarily due to customer advances related to product support services.

During the year ended April 27, 2024, the increase in contract assets of $ 12.9 million was primarily driven by IP licensing and engineering services arrangements where certain billing milestones were reached during fiscal 2024 while the criteria for recognition of revenue had previously been met.

During the year ended April 27, 2024, the decrease in deferred revenue of $ 0.4 million was primarily due to revenue recognized from a customer advance.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.

The contracted but unsatisfied performance obligation was approximately $ 9.2 million and the satisfied but unrecognized performance obligation was approximately $ 10.1 million as of April 29, 2023, which the Company expects to recognize over the next fiscal year.

The amounts stated above include amounts relating to an IP licensing and development contract we entered into with a customer in its fiscal year ended April 30, 2022 (“fiscal year 2022”), for a total cash consideration of $ 43.5 million, which is receivable over an estimated period of three years upon meeting certain contractual milestones.

As of April 29, 2023, we had billed $ 33.1 million and recognized revenue amounting to $ 33.2 million upon delivery of the deliverables which were consistent with the meeting of the first three milestones.

We have applied constraint on a remaining milestone due to significant uncertainty relating to the delivery of the milestone as of April 29, 2023 associated with dependency on actions by the customer.

The constraints will be re-evaluated at each future reporting period.

The contracted but unsatisfied performance obligation was approximately $ 11.6 million and the satisfied but unrecognized performance obligations was approximately $ 1.5 million as of April 27, 2024, which the Company expects to recognize over the next fiscal year.

The Company applied a performance constraint on the satisfied but unrecognized performance obligation due to uncertainty around the collectability of milestone payments.

The Company had previously applied performance constraints on certain milestones relating to an IP licensing and development contract for a total cash consideration of $ 43.5 million, executed in fiscal 2022.

As of April 27, 2024, the Company released the constraint on the last milestone, resulting in recognition of $ 10.0 million of revenue in the year ended April 27, 2024.

Customer Warrant

During fiscal year 2022, the Company issued a warrant to Amazon.com NV Investment Holdings LLC (“Holder”) to purchase an aggregate of up to 4,080,000 of our ordinary shares at an exercise price of

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

$ 10.74 per share (the “Customer Warrant”).

During fiscal year 2022, the Company issued a warrant to Amazon.com NV Investment Holdings LLC (Holder) to purchase an aggregate of up to 4,080 thousand of our ordinary shares at an exercise price of $ 10.74 per share (the “Customer Warrant”).

The exercise period of the Warrant is through the seven th anniversary of the issue date.

Upon issuance of the Warrant, 40,000 of the shares issuable upon exercise of the Warrant vested immediately and the remainder of the shares issuable will vest in tranches over the contract term based on the amount of global payments by Holder and its affiliates to us, up to $ 201.0 million in aggregate payments.

A total of 80,000 and 40,000 Warrant shares were vested as of April 29, 2023 and April 30, 2022, respectively.

Upon issuance of the Warrant, 40 thousand of the shares issuable upon exercise of the Warrant vested immediately and the remainder of the shares issuable will vest in tranches over the contract term based on the amount of global payments by Holder and its affiliates to us, up to $ 201.0 million in aggregate payments.

A total of 1,080 thousand and 80 thousand Warrant shares were vested as of April 27, 2024 and April 29, 2023, respectively.

The grant date fair value of the Warrant share was determined at $ 4.65 per share using the Black-Scholes option pricing model.

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Fair value per ordinary share $ 10.74

During the fiscal years ended April 29, 2023 and April 30, 2022, the Company recognized $ 1.2 million and $ 0.6 million, respectively, as contra revenue within the product sales revenue on the consolidated statements of operations.

During the fiscal years ended April 27, 2024, April 29, 2023 and April 30, 2022, the Company recognized $ 3.9 million, $ 1.2 million and $ 0.6 million, respectively, as contra revenue within the product sales revenue on the consolidated statements of operations.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Fair Value Measurements

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The Company measures the fair value of money market funds using Level 1 inputs.

The Company’s certificates of deposit are classified as a held-to-maturity security as the Company intends to hold until their maturity dates.

The Company’s certificates of deposit are classified as held to maturity securities as the Company intends to hold until their maturity dates.

The certificates of deposit are valued using Level 2 inputs.

Pricing sources may include industry standard data providers, security master files from large financial institutions, and other third -party sources used to determine a daily market value.

The following table presents the fair value of the financial instruments measured on a recurring basis as of April 29, 2023 (in thousands).

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

The following tables present the fair value of the financial instruments measured on a recurring basis as of April 27, 2024 and April 29, 2023 (in thousands).

April 27, 2024

3 unchanged sentences

Short-term investments:

Certificate of deposit — 109,228 — 109,228

Certificates of deposit

— 343,061 — 343,061

Total cash equivalents and short-term investments $ 57,175 $ 343,061 $ — $ 400,236

April 29, 2023

Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 99,119 $ — $ — $ 99,119

Short-term investments:

Certificates of deposit

— 109,228 — 109,228

Total cash equivalents and short-term investments $ 99,119 $ 109,228 $ — $ 208,347

The carrying amount of the Company’s financial instruments, including cash equivalents, short-term investments, accounts receivable and accounts payable, approximate their respective fair values because of their short maturities.

As of April 29, 2023, there were no unrealized loss or gains associated with the Company’s financial instruments.

The interest income recognized during the year ended April 29, 2023 was $ 4.7 million.

As of April 27, 2024 and April 29, 2023, there were no unrealized loss or gains associated with the Company’s financial instruments.

The interest income recognized during the years ended April 27, 2024 and April 29, 2023 was $ 15.3 million and $ 4.7 million, respectively.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Supplemental Financial Information

18 unchanged sentences

Depreciation and amortization expense, excluding the assets impairment charges, for the years ended April 27, 2024, April 29, 2023 and April 30, 2022, was $ 13.8 million, $ 9.5 million, and $ 4.8 million, respectively.

Construction in progress and production equipment primarily includes mask set costs capitalized relating to the Company’s new products to be introduced or yet to be in production.

During the year ended April 29, 2023, the Company recorded $ 2.4 million impairment charges primarily related to the impairment on property and equipment.

Impairment charges were presented under operating expenses in the consolidated statements of operations for equipment that did not reach production qualification.

During the year ended April 30, 2022, the Company recorded $ 4.9 million

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

impairment charges primarily related to the impairment on property and equipment.

Impairment charges of $ 1.8 million were presented as part of cost of product sales revenue in the consolidated statements of operations as it related to a production equipment no longer in service and impairment charges of $ 3.1 million were presented under operating expenses in the consolidated statements of operations for equipment that did not reach production qualification.

There were no impairment charges of long-lived assets for the year ended April 30, 2021.

Other Non-current Assets

Other non-current assets consisted of the following (in thousands):

April 29, 2023 April 30, 2022

Refundable deposits $ 5,180 $ —

Other non-current assets 8,795 4,714

$ 13,975 $ 4,714

Construction in progress and production equipment primarily includes mask set costs capitalized relating to the Company’s products.

During the years ended April 27, 2024, April 29, 2023 and April 30, 2022, the Company recorded impairment charges of $ 0.8 million, $ 2.4 million and $ 4.9 million, respectively.

Generally, the impairment charges were related to impairment of property and equipment or third-party IP licenses for future products that did not reach production qualification.

Accrued Expenses and Other Current Liabilities

4 unchanged sentences

Current portion of operating lease liabilities 2,741 2,630

Income tax payable 960 1,312

$ 18,301 $ 14,454

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Other Non-current Liabilities

8 unchanged sentences

Total future non-cancelable purchase obligations as of April 27, 2024 were as follows (in thousands):

Fiscal Year Purchase Commitments to Manufacturing Vendors Technology License Fees

Fiscal Year Purchase Commitments to Manufacturing Vendors Technology License Fees Total

2025 $ 42,588 $ 7,888 $ 50,476

2 unchanged sentences

2028 12,417 350 12,767

2029 2,153 350 2,503

Thereafter — — —

Total unconditional purchase commitments $ 74,062 $ 17,735 $ 91,797

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Technology license fees include the liabilities under agreements for technology licenses between the Company and various vendors.

Under the Company’s manufacturing relationships with its foundry partners, cancellation of outstanding purchase orders is allowed but requires payment of all costs and expenses incurred through the date of cancellation.

As of April 29, 2023, the total value of non-cancelable purchase orders payable within the next one year that were committed with the Company’s third-party subcontractors was approximately $ 5.1 million.

As of April 27, 2024, the total value of non-cancelable inventory purchase orders payable within the next one year that were committed with the Company’s third-party subcontractors was approximately $ 39.6 million.

Such purchase commitments are included in the preceding table.

The Company entered into a manufacturing supply capacity reservation agreement with an assembly subcontractor during the fiscal year April 29, 2023 due to the current global supply shortage environment.

Under this arrangement, the Company agreed to pay refundable deposits to the supplier in exchange for reserved manufacturing production capacity over the term of the agreement, which approximates five years .

Additionally, the Company has committed purchases of production mask sets amounting to $ 27.0 million, relating to future products yet to be released, which will be capitalized into product equipment when they are received.

The Company has a manufacturing supply capacity reservation agreement with an assembly subcontractor as of April 27, 2024.

Under this arrangement, the Company has paid refundable deposits to the supplier in exchange for reserved manufacturing production capacity over the remaining term of the agreement, which approximates five years .

In addition, the Company committed to certain purchase levels that were in line with the capacity reserved.

2 unchanged sentences

Such purchase commitments are included in the preceding table.

In addition, refundable deposits of $ 5.4 million were paid as of April 29, 2023, and refundable deposits payable under this arrangement is $ 3.4 million in fiscal year 2024.

In addition, the Company had refundable deposits of $ 8.6 million as of April 27, 2024, of which $ 0.4 million was recorded in prepaid expenses and other

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

current assets and $ 8.2 million was recorded in other non-current assets on the consolidated balance sheets.

Warranty Obligations

14 unchanged sentences

No accruals for loss contingencies or recognition of actual losses have been recorded in any of the periods presented.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Convertible Preferred Shares

The Company had previously issued Series A convertible preferred shares, Series B convertible preferred shares, Series C convertible preferred shares, Series D convertible preferred shares and Series D+ convertible preferred shares (collectively, the “Preferred Shares”).

Immediately prior to the completion of the IPO, all of the then outstanding 52,059,826 shares of the Company’s convertible Preferred Shares were automatically converted into an aggregate 52,059,826 shares of ordinary share on a one -for-one basis, and such Preferred Shares were cancelled, retired and eliminated from the shares that the Company is authorized to issue and shall not be reissued by the Company.

Immediately prior to the completion of the IPO, all of the then outstanding 52,060 thousand shares of the Company’s convertible Preferred Shares were automatically converted into an aggregate 52,060 thousand shares of ordinary share on a one -for-one basis, and such Preferred Shares were cancelled, retired and eliminated from the shares that the Company is authorized to issue and shall not be reissued by the Company.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

A summary of the preferred shares prior to the conversion into ordinary shares consisted of the following:

Series Shares Authorized Shares Issued and Outstanding Per Share Liquidation Preference Aggregate Liquidation Preference (in thousands)

Series Shares Authorized (in thousands) Shares Issued and Outstanding (in thousands) Per Share Liquidation Preference Aggregate Liquidation Preference (in thousands)

Series A 8,313 8,313 $ 1.00 $ 8,313

13 unchanged sentences

no dividends had been declared by the board of directors from inception through the date of conversion into ordinary shares.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Liquidation Rights - In the event of any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company or the exclusive license of all or substantially all of the Company’s intellectual property used in generating all or substantially all of the Company’s revenues, reorganization, consolidation, acquisition, merger, liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of preferred shares shall be entitled to receive in preference to the holders of ordinary shares, an amount per share equal to the liquidation preference, plus any declared but unpaid dividends.

After payment of the liquidation preference to holders of preferred shares, the remaining assets of the Company were available for distribution on a pro rata basis to the holders of ordinary shares.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Voting Rights - The holders of the convertible preferred shares were entitled to the number of votes equal to the number of ordinary shares into which such convertible preferred shares could be converted on the record date.

Ordinary Shares

In connection with the consummation of the IPO, the Company filed the Amended and Restated Memorandum of Association with Cayman Islands, which authorized 1,000,000,000 ordinary shares, par value $ 0.00005 per share and 50,000,000 convertible preferred shares.

In connection with the consummation of the IPO, the Company filed the Amended and Restated Memorandum of Association with Cayman Islands, which authorized 1,000,000 thousand ordinary shares, par value $ 0.00005 per share and 50,000 thousand convertible preferred shares.

Each ordinary share is entitled to one vote per share.

4 unchanged sentences

In regard to the ordinary shares purchased, but not vested, the Company has the right to repurchase shares at the original issue price in the event of termination of services.

As of April 29, 2023, 98,631 shares from share option early exercises remained subject to the Company’s repurchase rights.

As of April 30, 2022, 442,787 such ordinary shares, consisting of 16,667 shares from RSA and 426,120 from share option early exercises, remain subject to the Company’s repurchase rights.

As of April 27, 2024, 17 thousand shares from share option early exercises remained subject to the Company’s repurchase rights.

As of April 29, 2023, 99 thousand shares from share option early exercises remained subject to the Company’s repurchase rights.

These shares are excluded from ordinary shares outstanding.

Share Repurchase Transaction

In July 2020, the Company offered to purchase up to an aggregate of 8,032,128 of its ordinary shares and options from certain ordinary shareholders, primarily initial investors, founders and current employees of the Company, at a cash price of $ 4.98 per share.

The transaction was completed in August 2020.

The total ordinary shares and options the Company repurchased was 6,875,822 at a total purchase price of $ 34.2 million.

The excess of the repurchase price over the fair value of ordinary shares and options, which were originally issued to founders and current employees, was recorded as share-based compensation expense of $ 11.3 million for the year ended April 30, 2021.

For the excess of the fair value of ordinary shares and options over the par value of shares, the Company allocated the amount to both accumulated deficit and additional paid in capital.

The portion allocated to additional paid in capital was determined by applying a percentage, determined by dividing the number of shares repurchased by the number of shares issued and outstanding immediately prior to the share repurchase, to the balance of additional paid in capital as of the date of share repurchase.

In connection with the transaction, $ 0.9 million was allocated to additional paid in capital and $ 22.0 million was allocated to accumulated deficit.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Share Incentive Plan

3 unchanged sentences

The 2015 Plan provided both for the direct award or sale of ordinary shares (RSAs) and for the grant of options to purchase ordinary shares.

Options granted under the 2015 Plan were Incentive Stock Options (“ISOs”) intended to qualify under Code Section 422 or Nonstatutory Stock Options (“NSOs”) which were not intended to so qualify.

Options granted under the 2015 Plan were Incentive Stock Options (ISOs) intended to qualify under Title 26 U.S.

Code Section 422 or Non-qualified Stock Options (NSOs) which were not intended to so qualify.

Only employees, outside directors and consultants of either the Company or a subsidiary of the Company, were eligible for the grant of NSO or the direct award or sale of ordinary shares.

1 unchanged sentence

As of January 27, 2022, the 2015 Plan has ceased to be available for grants of new awards.

Prior to the aforementioned cessation of the 2015 Plan for new grants and as of April 30, 2022, 26,000,000 ordinary shares were authorized for issuance under the 2015 Plan.

Prior to the aforementioned cessation of the 2015 Plan for new grants and as of April 30, 2022, 26,000 thousand ordinary shares were authorized for issuance under the 2015 Plan.

Options under the 2015 Plan may be granted for periods of up to ten years and at prices no less than 100% of the estimated fair value of the shares on the date of grant as determined by the Company’s Board of Directors.

Both RSAs and options granted generally vest over four years and vest at a rate of 25 % upon the first anniversary of the issuance date and 1/48th per month thereafter.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

A summary of information related to share option activity, excluding options early exercised, is as follows:

Options Outstanding

Outstanding Share Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands)

Outstanding Share Options (in thousands) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in millions)

Balances as of April 30, 2021 14,120 $ 1.57 7.87 $ 62.6

6 unchanged sentences

Balances as of April 29, 2023 8,870 $ 2.02 6.22 $ 0.1

Options exercised and vested ( 2,291 ) $ 1.98

Options canceled/ forfeited ( 158 ) $ 4.64

Balances as of April 27, 2024 6,421 $ 1.97 5.30 $ 106.5

Vested or expected to vest as of April 27, 2024

6,421 $ 1.97 5.30 $ 106.5

Exercisable as of April 27, 2024

During the years ended April 29, 2023, 2022 and 2021, the total intrinsic value of options exercised, including options early exercised, was $ 22.2 million, $ 28.4 million and $ 4.7 million, respectively.

The weighted-average grant date fair value of options vested was $ 1.41 , $ 1.36 and $ 0.65 per share for the year ended April 29, 2023, April 30, 2022 and April 30, 2021, respectively.

The total grant date fair value of share options that vested was $ 15.6 million, $ 4.5 million and $ 2.1 million as of April 29, 2023, 2022 and 2021, respectively.

6,404 $ 1.97 5.30 $ 106.2

During the years ended April 27, 2024, April 29, 2023 and April 30, 2022, the total intrinsic value of options exercised, including options early exercised, was $ 36.2 million, $ 22.2 million and $ 28.4 million, respectively.

The weighted-average grant date fair value of options vested was $ 1.52 , $ 1.41 and $ 1.36 per share for the years ended April 27, 2024, April 29, 2023 and April 30, 2022, respectively.

The total grant date fair value of share options that vested was $ 13.3 million, $ 15.6 million and $ 4.5 million as of April 27, 2024, April 29, 2023 and April 30, 2022, respectively.

As of April 27, 2024, the total unrecognized compensation cost was $ 2.0 million related to share options, which are expected to be recognized over a weighted-average period of 0.72 years.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

The Company estimated the fair value of share options using the Black-Scholes option-pricing model.

The fair value of employee share options is being amortized on a straight-line basis over the requisite service period of the awards.

The fair value of employee share options is amortized on a straight-line basis over the requisite service period of the awards.

The fair values of the employee share options granted in the years presented were estimated using the following weighted-average assumptions:

April 30, 2022 April 30, 2021

April 30, 2022

Expected volatility 41.29 % - 42.31 %

40.12 % - 42.84 %

Weighted-average expected term (in years) 5.96

Risk-free interest rate 0.69 % - 1.23 %

0.32 % - 1.19 %

Dividend yield — %

2 unchanged sentences

In December 2021, the Company adopted the 2021 long-term incentive plan (the “2021 Plan”).

Upon the adoption, the 2021 Plan had 19,907,421 ordinary shares reserved for issuance.

Upon the adoption, the 2021 Plan had 19,907 thousand ordinary shares reserved for issuance.

Awards granted under the 2021 Plan may include, but are not limited to, options and restricted share units (RSU).

Options granted under the 2021 Plan generally have a term of 10 years and generally must be issued at prices equal to the fair market value of the share on the date of grant.

RSU awards are denominated in shares of ordinary shares, but may be settled in cash or shares upon vesting, as determined by the Company at the time of grant.

RSU awards are denominated in ordinary

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

shares, but may be settled in cash or shares upon vesting, as determined by the Company at the time of grant.

None of the awards granted under the 2021 Plan as of April 27, 2024 allowed cash settlement.

1 unchanged sentence

A summary of RSU activity is as follows:

Number of shares Weighted-Average Grant Date Fair Value Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands)

Number of shares (in thousands)

Weighted-Average Grant Date Fair Value Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (in millions)

Balances as of 4/30/2022 4,134 $ 10.26 1.65 $ 45.6

3 unchanged sentences

Balances as of 4/29/2023

7,798 $ 11.66 1.65 $ 63.2

Granted 5,393 $ 20.08

2 unchanged sentences

Balances as of 4/27/2024

10,139 $ 16.11 1.52 $ 188.2

Expected to vest as of April 27, 2024

As of April 29, 2023, 18,864,769 shares remained available for future issuance under the 2021 Plan.

10,139 $ 16.11 1.52 $ 188.2

As of April 27, 2024, 22,309 thousand shares remained available for future issuance under the 2021 Plan.

As of April 27, 2024, unamortized compensation expense related to RSUs was $ 151.9 million.

2 unchanged sentences

In January 2022, the Company adopted the Employee Stock Purchase Plan (ESPP).

Under the ESPP, a total of 3,800,508 shares have been authorized for the grant of options and participants can purchase the Company’s ordinary shares using payroll deductions, which may not exceed 15 % of their

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

total cash compensation.

Under the ESPP, a total of 3,801 thousand shares have been authorized for the grant of shares and participants can purchase the Company’s ordinary shares using payroll deductions, which may not exceed 15 % of their total cash compensation.

Pursuant to the terms of the ESPP, the “look-back” period for the share purchase price is 24 months.

1 unchanged sentence

Participants will be granted the right to purchase ordinary shares at a price per share that is 85 % of the lesser of the fair market value of the shares at (i) the participant’s entry date into the two-year offering period or (ii) the end of each six-month purchase period within the offering period.

During the year ended April 29, 2023, 246,660 shares were issued under the ESPP.

During the years ended April 27, 2024 and April 29, 2023, 281 thousand and 247 thousand shares were issued under the ESPP, respectively.

No shares were issued during the year ended April 30, 2022.

As of April 29, 2023, 3,553,848 shares remained available for future issuance under the ESPP.

The following weighted-average assumptions were used for the year ended April 30, 2022 to calculate the fair value of ordinary share to be issued under the ESPP on the date of grant using the Black-Scholes option pricing model:

April 29, 2023 April 30, 2022

As of April 27, 2024, 6,207 thousand shares remained available for future issuance under the ESPP.

The following weighted-average assumptions to calculate the fair value of ordinary shares to be issued under the ESPP on the date of grant using the Black-Scholes option pricing model in the periods presented:

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

April 27, 2024 April 29, 2023 April 30, 2022

Estimated fair value 6.04 4.27 4.56

3 unchanged sentences

Expected dividend yield — % — % — %

Share-Based Compensation Associated with Awards to Employees

Summary of Share-based Compensation Expense

The following table summarizes share-based compensation cost included in the consolidated statements of operations (in thousands).

4 unchanged sentences

$ 39,022 $ 23,516 $ 9,188

Effective May 1, 2021, the Company adopted the new lease accounting standard using the modified retrospective approach.

The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows the Company to carry forward the historical lease classification.

The Company elected to apply the short-term lease measurement and recognition exemption in which right-of-use assets (“ROU”) and lease liabilities are not recognized for short-term leases.

Adoption of this standard resulted in the recording of operating lease ROU assets of $ 4.0 million and corresponding operating lease liabilities of $ 4.0 million.

The standard did not materially affect the consolidated statements of operations and had no impact on cash flows.

The Company determines if an arrangement is a lease at inception.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

As the rate implicit in each lease is not readily determinable, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

lease payments.

Lease expense for these leases is recognized on a straight line basis over the lease term.

The Company's leases include office space located in the United States and other international locations, which are all classified as operating leases.

2 unchanged sentences

The Company does not have any finance leases.

During the year ended April 30, 2022, the Company entered into a sublease agreement whereby the Company will lease an office space located in San Jose, California (the “HQ Lease”).

The office space serves as the Company’s corporate headquarters and includes engineering, marketing and administrative functions.

The HQ Lease has a term of 103 months from the contract commencement date in April 2022.

The ROU assets and operating lease liabilities associated with the HQ Lease as of April 29, 2023 were $ 12.4 million and $ 13.1 million, respectively.

Lease expense and supplemental cash flow information are as follows (in thousands):

3 unchanged sentences

Right-of-use assets obtained in exchange for lease obligation $ 978 $ 649

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

The aggregate future lease payments for operating leases as of April 27, 2024 are as follows (in thousands):

5 unchanged sentences

As of April 27, 2024, the weighted average remaining lease term for the Company's operating leases was 5.89 years and the weighted average discount rate used to determine the present value of the Company's operating leases was approximately 5.96 %.

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

Income (loss) before provision (benefit) for income taxes consists of the following (in thousands):

12 unchanged sentences

International 684 116 ( 223 )

Total deferred tax benefit ( 2,107 ) ( 1,528 ) 1,369

Total deferred tax expense (benefit) 4,135 ( 2,107 ) ( 1,528 )

Total tax expense (benefit) $ 5,624 $ ( 1,367 ) $ ( 37 )

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

The tax effects of significant items comprising the Company’s deferred taxes are as follows (in thousands):

6 unchanged sentences

Lease liability 3,154 3,487

Intangibles 157 —

Total deferred tax assets 27,117 17,025

2 unchanged sentences

Right of use assets ( 2,980 ) ( 3,353 )

Others ( 8 ) —

Total deferred tax liabilities ( 4,762 ) ( 4,485 )

2 unchanged sentences

A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized.

The valuation allowance increased by $ 4.1 million in fiscal year 2023.

As of April 27, 2024, the Company recorded $ 23.3 million of valuation allowance.

In fiscal year 2024, the valuation allowance increased by $ 14.0 million.

The Company continues to maintain a valuation allowance on its U.S.

R&D credits and recorded an increase to its valuation allowance of $ 6.7 million.

During the fourth quarter of fiscal year 2024, the Company determined that utilization of its net deferred tax assets in the U.S.

was limited and accordingly recorded an increase to its valuation allowance of $ 7.3 million.

This determination was made after evaluating both the positive and negative evidence regarding the recoverability of the Company’s net U.S.

deferred tax assets.

The Company considers all available evidence such as its earnings history including the existence of cumulative income or losses, reversals of taxable temporary differences, projected future taxable income, and tax planning strategies and determined that negative evidence overweighted positive evidence with respect to the ability to realize its net U.S.

deferred tax assets.

The Company will continue to assess the future realization of its deferred tax assets in each applicable jurisdiction and adjust the valuation allowance accordingly.

As of April 27, 2024, the Company had U.S.

federal and state net

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

operating loss of approximately $ 4.9 million and $ 1.4 million, respectively.

federal net operating loss can be carried forward indefinitely.

federal and state net operating loss carryforwards of approximately $ 18.7 million and $ 7.4 million, respectively.

federal net operating loss carryforwards can be carried forward indefinitely.

The state net operating loss carryforwards will begin to expire in fiscal 2043.

As of April 29, 2023, the Company had US federal and state research credits of $ 7.0 million and $ 6.3 million, respectively.

As of April 27, 2024, the Company had U.S.

federal and state research credits of $ 12.6 million and $ 9.6 million, respectively.

The federal research credits will begin to expire in 2039.

The state research credits have no expiration date.

As it is not more likely than not that the Company will be able to utilize the federal and state research credits, the Company recorded $ 9.3 million of valuation allowance.

As of April 27, 2024, the Company had no foreign tax credit carryover.

Internal Revenue Code Section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company.

In the event that we had a change of ownership, utilization of the net operating loss and tax credit carryforwards may be restricted.

A summary activity of the valuation allowance is as follows (in thousands):

Credo Technology Group Holding Ltd

Notes to Consolidated Financial Statements

April 27, 2024 April 29, 2023 April 30, 2022

Beginning valuation allowance

$ 9,306 $ 5,170 $ 3,706

13,952 4,136 1,464

Ending valuation allowance

$ 23,258 $ 9,306 $ 5,170

Foreign earnings may be subject to withholding taxes in local jurisdictions if they are distributed.

1 unchanged sentence

The Company intends to reinvest these earnings indefinitely.

The Company consists of a Cayman parent holding company with various international and U.S.

The Company consists of a Cayman Islands parent holding company with various international and U.S.

subsidiaries.

The applicable statutory rate in Cayman is zero for the Company for the years ended April 29, 2023, April 30, 2022 and April 30, 2021.

The applicable statutory rate in Cayman Islands is zero for the Company for the years ended April 27, 2024, April 29, 2023 and April 30, 2022.

For purposes of the reconciliation between the provision for income taxes at the statutory rate and the effective tax rate, a U.S.

15 unchanged sentences

Subtractions for tax positions taken in the prior year ( 210 ) ( 60 )

Lapses in statute of limitations ( 69 ) —

Ending gross unrecognized tax benefits $ 4,574 $ 2,865

The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on such position’s technical merits as of the reporting date and only in an amount more likely than not to be sustained upon review by the tax authorities.

Included in the balance of unrecognized tax benefits as of April 29, 2023 and April 30, 2022 were potential benefits of $ 2.9 million and $ 1.8 million, respectively, which if recognized, would affect the effective tax rate.

Included in the balance of unrecognized tax benefits as of April 27, 2024 and April 29, 2023 were potential benefits of $ 4.6 million and $ 2.9 million, respectively, which if recognized, would potentially affect the effective tax rate.

If the unrecognized tax benefits were recognized, it would result in additional deferred tax assets, which are expected to require a full valuation allowance based on the Company’s current valuation allowance position.

5 unchanged sentences

The Company files U.S.

state and foreign jurisdictions income tax returns with varying statutes of limitations.

The Company does not have any tax years under income tax examination by taxing authorities.

federal and state and non-U.S.

income tax returns with varying statutes of limitations.

The Company’s tax returns continue to remain subject to examination by U.S.

10 unchanged sentences

Under the treasury stock method, potential ordinary shares outstanding are not included in the computation of diluted net loss per share if their effect is anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computations of diluted weighted average shares outstanding for the years ended April 29, 2023, April 30, 2022 and April 30, April 30, 2021 because such securities have an anti-dilutive impact due to losses reported:

The following potentially dilutive securities outstanding have been excluded from the computations of diluted weighted average shares outstanding for the years ended April 27, 2024, April 29, 2023 and April 30, 2022 because such securities have an anti-dilutive impact due to losses reported:

April 27, 2024 April 29, 2023 April 30, 2022

Options and RSAs 10,081 10,766 10,309

RSUs 4,985 870 —

Share-based compensation awards 16,777 15,194 11,636

Customer warrant 4,080 4,080 1,386

Convertible preferred shares — — 44,803

20,857 19,274 13,022

3 unchanged sentences

As discussed in “Note 2 — Significant Accounting Policies,” the Company operates in one reportable segment.

The following table summarizes revenue disaggregated by primary geographical market 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 (in thousands):

The following table summarizes revenue disaggregated by primary geographical market based on destination of shipment for products, and location of contracting entity for IP and engineering services, which may differ from the end customer’s principal offices (in thousands):

April 27, 2024 April 29, 2023 April 30, 2022

Hong Kong $ 70,162 $ 9,646 $ 11,696

United States 49,569 44,253 27,696

Mainland China 28,264 96,935 37,699

Mexico 13,097 10,140 8,118

Hong Kong 9,646 11,696 4,492

Taiwan 21,286 5,363 4,429

Rest of World 23,689 27,997 24,957

3 unchanged sentences

Property and equipment, net:

United States $ 8,791 $ 4,266

Taiwan $ 24,874 $ 14,625

Mainland China 2,657 2,593

United States 11,150 8,791

Hong Kong 5,208 14,149

Mainland China 2,433 2,657

$ 43,665 $ 40,222

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data