Credo Technology Group Holding Ltd (CRDO) 2023 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Credo Semiconductor Second Quarter Fiscal Year 2023 Earnings Conference Call. (Operator Instructions) I would now like to turn the call over to Dan O'Neil. Please go ahead, sir.

女士們先生們，感謝大家的支持並歡迎參加 Credo Semiconductor 2023 財年第二季財報電話會議。 （接線生指示）我現在想將電話轉給 Dan O'Neil。請繼續，先生。

Good afternoon. Thank you for joining us today on our earnings call for our fiscal 2023 second quarter. Joining me today from Credo are Bill Brennan, our Chief Executive Officer; and Dan Fleming, our Chief Financial Officer. I'd like to remind everyone that certain comments made in this call today may include forward-looking statements regarding expected future financial results, strategies and plans, future operations, the markets in which we operate and other areas of discussion. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC.

午安.感謝您今天參加我們 2023 財年第二季的財報電話會議。今天從 Credo 加入我的是我們的執行長 Bill Brennan；和我們的財務長丹·弗萊明。我想提醒大家，今天的電話會議中發表的某些評論可能包括有關預期未來財務業績、策略和計劃、未來營運、我們營運的市場以及其他討論領域的前瞻性陳述。這些前瞻性陳述受到風險和不確定性的影響，這些風險和不確定性在我們向 SEC 提交的文件中進行了詳細討論。

It's not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call to conform these statements to actual results or to changes in the company's expectations except as required by law.

公司管理階層不可能預測所有風險，公司也無法評估所有因素對其業務的影響，或任何因素或因素組合可能導致實際結果與任何前瞻性陳述中包含的結果有重大差異的程度。鑑於這些風險、不確定性和假設，本次電話會議中討論的前瞻性事件可能不會發生，實際結果可能與預期或暗示的結果有重大不利差異。除法律要求外，本公司沒有義務在本次電話會議之後以任何理由公開更新前瞻性陳述，以使這些陳述符合實際結果或公司預期的變更。

Also, during this call, we will refer to certain non-GAAP financial measures, which we consider to be important measures of the company's performance. These non-GAAP financial measures are provided in addition to and not as a substitute for or superior to financial performance prepared in accordance with U.S. GAAP. A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, which can be accessed using the Investor Relations portion of our website.

此外，在本次電話會議中，我們將提及某些非公認會計準則財務指標，我們認為這些指標是衡量公司績效的重要指標。這些非公認會計原則財務指標是根據美國公認會計原則編制的財務績效的補充，而不是替代或優於根據美國公認會計原則編制的財務業績。我們今天發布的收益報告中討論了我們為什麼使用非公認會計原則財務指標以及我們的公認會計原則和非公認會計原則財務指標之間的調節，您可以透過我們網站的投資者關係部分訪問該報告。

With that, I'll now turn the call over to our CEO. Bill?

現在，我將把電話轉給我們的執行長。帳單？

Thank you, Dan. Good afternoon and thank you to everybody for joining the call. During this call, I'll review Credo's fiscal Q2 results and share why we remain excited about our future prospects. After I conclude, Dan Fleming, our Chief Financial Officer, will provide a detailed review of our financial results and expectations moving forward. Credo is a pure-play high-speed connectivity company. We built our first solutions for the Ethernet market and are extending into other standards-based markets as the need for higher speed connectivity increases exponentially.

謝謝你，丹。下午好，感謝大家加入通話。在這次電話會議中，我將回顧 Credo 的第二季財務業績，並分享為什麼我們對未來前景仍然感到興奮。在我結束演講後，我們的財務長 Dan Fleming 將詳細審查我們的財務業績和未來的預期。 Credo 是一家純粹的高速連結公司。我們為乙太網路市場建立了第一個解決方案，並且隨著對更高速連接的需求呈指數級增長，我們正在擴展到其他基於標準的市場。

Today, our product families include Integrated Circuits, or ICs, Active Electrical Cables or AECs and SerDes Chiplets. Our intellectual property or IP solutions consist primarily of SerDes licensing. Our connectivity solutions address both electrical and optical applications at port speeds currently ranging from 50 gigabits per second, up to 1.6 terabits per second. All our product and IP solutions leverage our unique application-specific SerDes portfolio, enabling us to deliver optimized, secure and high-speed solutions with better power efficiency and cost. This has led to high growth rates with hyper-sale customers and ecosystem of suppliers that provide the infrastructure for these data centers.

如今，我們的產品系列包括積體電路、主動電纜或 AEC 以及 SerDes 小晶片。我們的智慧財產權或 IP 解決方案主要包括 SerDes 授權。我們的連接解決方案可滿足電氣和光學應用的需求，連接埠速度目前範圍為每秒 50 吉比特到每秒 1.6 太比特。我們所有的產品和 IP 解決方案都利用我們獨特的特定於應用的 SerDes 產品組合，使我們能夠提供優化、安全和高速的解決方案，並具有更好的功效和成本。這導致了超額銷售客戶和為這些資料中心提供基礎設施的供應商生態系統的高成長率。

Credo continues to be one of the fastest-growing companies in the semiconductor industry, and I'm pleased to report that we achieved record revenue of $51.4 million in the October quarter, an increase of 94% year-over-year and 11% sequentially. I'll now give a brief update on our progress across our various solutions, starting with AEC. For AECs, we continued to deliver strong execution as the pioneer of this product category. In-rack, low-speed cable connections have historically been made with passive copper DACs. As single-lane speeds increased 100 gigabits per second, DACs become obsolete due to signal integrity and physical size constraints.

Credo 仍然是半導體行業中成長最快的公司之一，我很高興地報告，我們在 10 月季度實現了創紀錄的 5,140 萬美元收入，年增 94%，環比增長 11% 。現在，我將簡要介紹我們各種解決方案的進展情況，首先是 AEC。對於 AEC，我們作為該產品類別的先驅，繼續提供強大的執行力。機架內的低速電纜連接歷來都是使用被動銅質 DAC 進行的。隨著單通道速度增加 100 GB/秒，DAC 由於訊號完整性和物理尺寸限製而變得過時。

The industry assumption has been that when DACs are dead, optical cables or AOCs would take their place. Credo saw an opportunity to develop a broad product family of AECs that deliver half the power, half the cost and with 10x better reliability than AOCs. We also saw the opportunity to offer compelling functionality that enables our customers to innovate on server rack and switch rack architectures. Industry analysts are now forecasting AECs to grow to a multibillion dollar market in the next four to five years. We continue to ramp volumes with our first customer as they broaden deployments of the new dual-ToR architecture enabled by the Credo AEC.

業界的假設是，當 DAC 失效時，光纜或 AOC 將取代。 Credo 看到了開發廣泛的 AEC 產品系列的機會，與 AOC 相比，其功率和成本只有一半，可靠性提高了 10 倍。我們還看到了提供引人注目的功能的機會，使我們的客戶能夠在伺服器機架和交換器機架架構上進行創新。產業分析師目前預測，AEC 市場將在未來四到五年內成長到數十億美元的市場。隨著我們的第一個客戶擴大由 Credo AEC 支援的新雙 ToR 架構的部署，我們將繼續增加與他們的合作量。

We expect the ramp to continue into calendar '23, and we're developing multiple AEC solutions to solve for their future road map of higher speed deployments. I'm happy to report that Credo has completed the stringent qualification with our second hyperscale customer. We expect to begin our revenue ramp near the end of this fiscal year and expect meaningful contribution in fiscal '24. In addition, we are engaged in developing advanced AEC solutions with this customer for their next-generation server rack and switch track applications as they move to 100 gig single lane speeds.

我們預計這種成長將持續到 23 年，並且我們正在開發多種 AEC 解決方案，以解決他們未來更高速部署的路線圖。我很高興地報告，Credo 已經完成了我們第二個超大規模客戶的嚴格資格認證。我們預計將在本財年末開始增加收入，並預計在 24 財年做出有意義的貢獻。此外，我們也致力於與該客戶一起開發先進的 AEC 解決方案，用於他們的下一代伺服器機架和交換器軌道應用，以幫助他們向 100 gig 單通道速度邁進。

We have also further broadened our traction in the market. We're currently in qualification with a third hyperscale customer for a 400 gig port switch rack application. And yet with another hyperscale customer, we're engaged in developing AECs for two future architectural deployments. Although hyperscalers are clearly our primary focus, we've sold our AECs to dozens of customers, including data centers, 5G carriers, networking OEMs and ODMs as well as others in the Ethernet ecosystem. Finally, Credo is very proud to have introduced the industry's first 1.6 terabit per second connectivity solution in OCP, which will be a critical enabler for the 51 terabit per second switch generation.

我們也進一步擴大了市場吸引力。我們目前正在與第三家超大規模客戶進行 400 GB 連接埠交換器機架應用的資格認證。然而，我們正在與另一家超大規模客戶合作，為兩種未來的架構部署開發 AEC。雖然超大規模顯然是我們的主要關注點，但我們已將 AEC 出售給數十家客戶，包括資料中心、5G 營運商、網路 OEM 和 ODM 以及乙太網路生態系統中的其他客戶。最後，Credo 非常自豪地推出了業界首個 OCP 每秒 1.6 太比特連接解決方案，這將成為每秒 51 太比特交換機世代的關鍵推動者。

This reinforces Credo as the leader in the AEC market. Now moving to our Optical Solutions category; as we do across all our product solutions, Credo focuses on delivering disruptive solutions that are optimized for speed, reach, power and cost. Our optical solutions include DSPs, laser drivers and TIAs found in both optical modules and AOCs and span the breadth of applications with 50 and 100 gigabits per second single at speeds, including 50 gig, 64 gig, 100 gig, 200 and 400 gig modules. In the October quarter, we announced several new 100 gig per lane products, including our Dove 800 and 400 optical DSPs with integrated drivers, and they've been met with great customer enthusiasm.

這鞏固了 Credo 在 AEC 市場領導者的地位。現在轉向我們的光學解決方案類別；正如我們在所有產品解決方案中所做的那樣，Credo 專注於提供針對速度、範圍、功率和成本進行最佳化的顛覆性解決方案。我們的光學解決方案包括光學模組和 AOC 中的 DSP、雷射驅動器和 TIA，涵蓋單速率為每秒 50 和 100 GB 的應用範圍，包括 50 GB、64 GB、100 GB、200 GB 和 400 GB 模組。在十月季度，我們發布了幾款新的每通道 100 gig 產品，包括帶有集成驅動器的 Dove 800 和 400 光學 DSP，並且受到了客戶的極大熱情。

In addition to engaging the optical module customer base directly, our go-to-market strategy has grown to include the Joint Development Model or JDM that is focusing on the end customers of our optical module manufacturing partners. These include data center, 5G, PON and fiber channel end customers as a means to have the end customer pull Credo through to design wins by specifying our solution. To-date, we've been successful with JDM engagements with two hyperscalers and a Tier 1 OEM. We are now actively engaging all data center customers directly and teaming with optical module partners to jointly pursue our end customers.

除了直接接觸光模組客戶群之外，我們的市場進入策略還包括聯合開發模式或 JDM，該模式專注於我們的光模組製造合作夥伴的最終客戶。其中包括資料中心、5G、PON 和光纖通道最終客戶，作為讓最終客戶透過指定我們的解決方案來推動 Credo 獲得設計勝利的一種手段。迄今為止，我們已成功與兩家超大規模企業和一家一級 OEM 進行 JDM 合作。我們現在正積極與所有資料中心客戶直接接觸，並與光模組合作夥伴合作，共同爭取我們的最終客戶。

I'm pleased with our progress as we now have line of sight on new engagements with several data center and 5G customers across a wide range of applications, including 200 gig, 400 gig, 800 and 50 gig solutions. I'll note that we see the process from initial win to qualification to volume ramp as taking longer in the current environment than we had anticipated a year ago. With that, our rent to material revenue shifted somewhat, but our opportunity remains the same. We continue to play the role of disruptor in the optical market, and we will gain share over time given the distinct efficiencies we deliver in the combination of performance, power and cost.

我對我們的進展感到滿意，因為我們現在與多個資料中心和 5G 客戶在廣泛的應用領域達成了新的合作，包括 200 GB、400 GB、800 GB 和 50 GB 解決方案。我要指出的是，我們認為在當前環境下，從最初的獲勝到資格再到銷售提升的過程比我們一年前的預期要長。這樣，我們的租金與物質收入之間的關係發生了一些變化，但我們的機會保持不變。我們將繼續在光學市場中扮演顛覆者的角色，並且鑑於我們在性能、功耗和成本方面所提供的獨特效率，我們將隨著時間的推移獲得更多的份額。

Based on our increasing customer traction, we look forward to announcing meaningful customer wins and growth in our Optical business. Regarding our Line Card PHY solutions, Credo has established leadership for Ethernet Line Card PHY solutions at 50 and 100 gig per lane speeds. This includes MACsec PHYs for high-security applications needing encryption as well as Retimer and Gearbox solutions. Our customers, again, include leading hyperscalers and networking OEMs and ODMs. As single lane speeds increased to 100 gig, the demand for Line Card PHYs increases due to the signal integrity challenges that come with higher speed copper connections.

基於我們日益增長的客戶吸引力，我們期待宣布有意義的客戶贏得和光學業務的成長。關於我們的線路卡 PHY 解決方案，Credo 已在每通道 50 和 100 GB 速度的乙太網路卡 PHY 解決方案方面確立了領先地位。這包括用於需要加密的高安全性應用程式的 MACsec PHY 以及重新計時器和 Gearbox 解決方案。我們的客戶同樣包括領先的超大規模供應商以及網路 OEM 和 ODM。隨著單聲道速度增加至 100 GB，由於高速銅連接帶來的訊號完整性挑戰，對線路卡 PHY 的需求也隨之增加。

We also see a trend toward greater demand for encryption driving increased demand for MACsec PHYs. A highlight from the OCP show in October was Meta showing the use of our Osprey 800 MACsec PHY in one of their critical deployments. Also in October, we announced our Screaming Eagle 100 gig per lane solution, a long-reach DSP retimer device with 1.6 terabits per second bandwidth. This product has received great market reception due to its combination of performance and power efficiency. We have sampled it to many leading OEMs and ODMs and are already kicking off design engagements.

我們也看到加密需求增加的趨勢，推動了 MACsec PHY 需求的增加。 10 月 OCP 展會的一大亮點是 Meta 展示了我們的 Osprey 800 MACsec PHY 在其關鍵部署之一中的使用。同樣在 10 月，我們發布了 Screaming Eagle 每通道 100 gig 解決方案，這是一個長距離 DSP 重定時器設備，頻寬為每秒 1.6 太比特。該產品因其性能和功效的結合而受到廣泛的市場歡迎。我們已向許多領先的 OEM 和 ODM 提供了樣品，並且已經開始設計工作。

Based on our current market position, product positioning and customer engagements, we expect solid growth and continued share gain in the market. And finally, I'd like to give an update on our SerDes IP licensing in SerDes Chiplet business. We've received very positive feedback from customers on our 5- and 4-nanometer 112-gig SerDes IP announcement, and it confirms that Credo's solution offers a 40% to 50% power advantage over our competition, depending on the reach required in the application. This highlights that Credo has extended what we refer to as our N minus 1 process advantage, which means to compete with the power efficiency of Credo's 5- and 4-nanometer solutions, our competitors will need to move to 3 nanometer.

基於我們目前的市場地位、產品定位和客戶參與度，我們預期市場將實現穩健成長和份額持續成長。最後，我想介紹一下我們在 SerDes Chiplet 業務中 SerDes IP 授權的最新情況。我們收到了客戶對我們的 5 奈米和 4 奈米 112g SerDes IP 公告的非常積極的回饋，這證實了 Credo 的解決方案比我們的競爭對手提供了 40% 到 50% 的功率優勢，具體取決於應用。這凸顯出 Credo 已經擴展了我們所說的 N-1 製程優勢，這意味著為了與 Credo 的 5 奈米和 4 奈米解決方案的功率效率競爭，我們的競爭對手將需要轉向 3 奈米。

As every industry seeks to lower its carbon footprint, Credo's ToR series technology is delivering on the need to lower electricity use. We're also an early leader in the chiplet market and are in production with multiple customers. Notably, Tesla selected Creo SerDes IP and chiplets for their Dojo supercomputer program. Going forward, we're excited about the prospects for chiplets in light of the UCIe consortium. This Intel-led consortium where we're a contributing member is coalescing to standardize the broad use of chiplets inside servers.

隨著每個行業都尋求降低碳足跡，Credo 的 ToR 系列技術正在滿足降低用電量的需求。我們也是小晶片市場的早期領導者，並與多個客戶合作生產。值得注意的是，Tesla 為其 Dojo 超級電腦程式選擇了 Creo SerDes IP 和小晶片。展望未來，我們對 UCIe 聯盟的小晶片前景感到興奮。這個由英特爾領導的聯盟正在聯合起來，以標準化伺服器內部小晶片的廣泛使用，我們是該聯盟的貢獻成員。

In summary, we remain highly encouraged about Credo's prospects due to our current solutions in production, near- and mid-term opportunities we're deeply engaged in and longer-term opportunities in emerging markets. Today, we remain focused on delivering strong execution in our fiscal '23, and we continue to expect to achieve at least $200 million in revenue, representing more than 88% growth compared to fiscal '22.

總而言之，由於我們目前的生產解決方案、我們深入參與的近期和中期機會以及新興市場的長期機會，我們對 Credo 的前景仍然感到非常鼓舞。今天，我們仍然專注於在 23 財年提供強有力的執行力，我們繼續預計實現至少 2 億美元的收入，與 22 財年相比增長 88% 以上。

I'll now turn the call over to our CFO, Dan Fleming, to provide more details on our second quarter and to give guidance on Q3.

我現在將把電話轉給我們的財務長 Dan Fleming，以提供有關我們第二季的更多詳細資訊並為第三季提供指導。

Thank you, Bill, and good afternoon. I will first review our Q2 fiscal '23 results and then discuss our outlook for Q3 of fiscal '23. As a reminder, the following financials will be discussed on a non-GAAP basis, unless otherwise noted. I'm pleased to share with you that in Q2, we achieved another quarter of record revenue at $51.4 million, up 11% sequentially and up 94% year-over-year. Sequential growth was driven by strong revenue growth of our products, which also reached a record of $48.1 million for the quarter, up 33% sequentially and up 143% year-over-year. This growth in product revenue was led by a continued wave of AEC adoption.

謝謝你，比爾，下午好。我將首先回顧我們 23 財年第二季的業績，然後討論我們對 23 財年第三季的展望。提醒一下，除非另有說明，否則以下財務數據將在非公認會計原則的基礎上進行討論。我很高興與您分享，第二季我們的營收再次創紀錄，達到 5,140 萬美元，季增 11%，年增 94%。連續成長是由我們產品的強勁收入成長推動的，該季度的營收也達到創紀錄的 4,810 萬美元，比上一季成長 33%，較去年同期成長 143%。產品收入的成長是由持續的 AEC 採用浪潮帶動的。

The fundamental driver of our product growth, a strong HSDC expansion outlook at the highest speeds remains in place in the face of an uncertain economic and geopolitical landscape. Our IP business generated $3.3 million of revenue in Q2. IP remains a strategic part of our business. But as a reminder, our IP results may vary from quarter-to-quarter, driven largely by specific deliverables to preexisting contracts. While the mix of IP and product revenue will vary in any given quarter over time, our revenue mix in Q2 was 6% IP, well below our long-term expectation for IP, which is 10% to 15% of revenue as the timing of IP deliverables and therefore, IP revenue recognition shifted during the quarter.

面對不確定的經濟和地緣政治格局，HSDC 以最高速度強勁擴張的前景仍然是我們產品成長的根本驅動力。我們的 IP 業務在第二季創造了 330 萬美元的收入。知識產權仍然是我們業務的策略部分。但提醒一下，我們的智慧財產權結果可能每季都會有所不同，這主要是由現有合約的具體交付成果所驅動的。雖然IP 和產品收入的組合在任何特定季度都會隨著時間的推移而變化，但我們第二季度的收入組合為IP 的6%，遠低於我們對IP 的長期預期，即佔收入的10%至15%。

We continue to expect IP as a percentage of revenue to come in above our long-term expectations for the fiscal year. Due to the revenue mix between product and IP this quarter, our gross margin came in at 54.9%, below our guidance range. However, more importantly, our product gross margin was 52.6% in the quarter, up 80 basis points sequentially and up 4.8 percentage points year-over-year. This product margin expansion is principally due to leverage from our strong product growth. Total operating expenses in the second quarter were $25 million, within our guidance range and up 37% year-over-year as we scale the organization for growth.

我們仍預期知識產權佔收入的百分比將高於我們對本財年的長期預期。由於本季產品和 IP 之間的收入組合，我們的毛利率為 54.9%，低於我們的指導範圍。但更重要的是，本季我們的產品毛利率為52.6%，較上季成長80個基點，較去年同期成長4.8個百分點。產品利潤率的擴大主要得益於我們強勁的產品成長。第二季的總營運費用為 2,500 萬美元，在我們的指導範圍內，並且隨著我們擴大組織規模以實現成長，年增 37%。

I think it's important to note that this is considerably below our 94% year-over-year revenue growth. We generally expect that our top line will grow at least twice as fast as our OpEx for the foreseeable future. With this, we expect to continue to deliver considerable leverage in the business. Our OpEx increase was driven by a 38% year-over-year increase in R&D as we continue to invest in the resources to deliver innovative solutions. Our SG&A was up 34% year-over-year as we continue to build out public company infrastructure. We delivered operating income of $3.4 million in Q2, an improvement of $5.6 million year-over-year but down 41% sequentially.

我認為值得注意的是，這遠低於我們 94% 的同比收入成長。我們普遍預計，在可預見的未來，我們的營收成長速度將至少是營運支出的兩倍。藉此，我們預計將繼續在業務中提供相當大的影響力。我們的營運支出成長是由研發年增 38% 推動的，因為我們繼續投資資源以提供創新解決方案。隨著我們繼續建造上市公司基礎設施，我們的 SG&A 年比成長 34%。第二季我們實現營業收入 340 萬美元，年增 560 萬美元，但季減 41%。

Our operating margin was 6.6% in the quarter, an improvement of 15.1 percentage points year-over-year, but down 561 basis points sequentially due to revenue mix that resulted in lower gross profit. We delivered net income of $2.4 million in Q2, an increase of $5.7 million year-over-year and down 55% sequentially. Cash flow from operations in the second quarter was $1.8 million, an increase of $27.7 million year-over-year and an increase of $14 million sequentially. CapEx was $5.7 million in the quarter, driven by production mask spending. And free cash flow was negative $3.9 million, an increase of $25.7 million year-over-year and an increase of $13.6 million sequentially.

本季我們的營業利潤率為 6.6%，年增 15.1 個百分點，但由於收入組合導致毛利下降，季減 561 個基點。第二季我們淨利 240 萬美元，年增 570 萬美元，季減 55%。第二季營運現金流為180萬美元，較去年同期增加2,770萬美元，較上季增加1,400萬美元。在生產掩模支出的推動下，本季資本支出為 570 萬美元。自由現金流為負 390 萬美元，年增 2,570 萬美元，季增 1,360 萬美元。

We ended the quarter with cash and equivalents of $240.5 million, a decrease of $3.2 million from the first quarter. This decrease in cash was a result of continued working capital investments to support our top line revenue growth. Our accounts receivable balance decreased 5.5% sequentially to $51.8 million, while days sales outstanding decreased to 92 days, down from 107 days in Q1. Our Q2 ending inventory was $47.8 million, up $10.8 million sequentially as we continue our product ramp.

本季末，我們的現金及等價物為 2.405 億美元，比第一季減少 320 萬美元。現金減少是由於持續進行營運資本投資以支持我們的收入成長。我們的應收帳款餘額較上季下降 5.5%，至 5,180 萬美元，而應收帳款天數從第一季的 107 天減少至 92 天。我們第二季期末庫存為 4,780 萬美元，隨著我們繼續提高產品產量，季增了 1,080 萬美元。

Now turning to our guidance for the third quarter; we currently expect revenue in Q3 fiscal '23 to be between 54 and $56 million, up 7% sequentially at the midpoint and 73% year-over-year. We expect Q3 gross margin to be within a range of 59% to 61%. We expect Q3 operating expenses to be between 25 and $27 million. And finally, we expect Q3 weighted average diluted share count to be approximately 160 million shares.

現在轉向我們對第三季的指導；我們目前預計 23 財年第三季的營收將在 5,400 至 5,600 萬美元之間，中位數比上一季成長 7%，年增 73%。我們預計第三季毛利率將在 59% 至 61% 之間。我們預計第三季營運支出將在 25 至 2,700 萬美元之間。最後，我們預計第三季加權平均稀釋後股票數量約為 1.6 億股。

And with that, I will open it up for questions.

接下來，我將開放提問。

(Operator Instructions) Our first question comes from the line of Quinn Bolton with Needham & Company.

（操作員說明）我們的第一個問題來自 Needham & Company 的 Quinn Bolton。

Congratulations on the strong product results. Bill, I guess, I wanted to start on the AEC business. Several questions there. It sounds like you continue to expand your hyperscale relationships, but wondering if you can sort of talk about the growth in the -- I think you mentioned a couple of these guys looking at switch applications rather than server applications and was hoping you could expand on that thought? Is this the distributed to segregated switch chassis applications for the third and the fourth hyperscaler, as well as I think you mentioned the switch application for your second hyperscaler?

祝賀您取得了強勁的產品成果。比爾，我想，我想開始 AEC 業務。有幾個問題。聽起來您正在繼續擴展您的超大規模關係，但想知道您是否可以談談 - 我認為您提到了其中一些人正在關注交換機應用程序而不是服務器應用程序，並希望您可以擴展那個想法？這是第三個和第四個超大規模伺服器的分散式到隔離交換器機箱應用程式嗎？

Yes. Let me say that we really have two opportunities for AECs within the switching hierarchy and the server racks as well. So the largest opportunity that we see are server racks and the market forecaster show that, that market in comparison to the disaggregated chassis or what we call switch racks market, it's probably a five to one. Now in the switching architecture, it's really a big choice between sticking with what has traditionally been most popular, which is a big chassis filled with switches connected internally over a backplane to disaggregation, which means pulling those switches out of the chassis and basically stacking them vertically in a rack.

是的。我想說的是，我們在交換層次結構和伺服器機架中確實有兩個 AEC 機會。因此，我們看到的最大機會是伺服器機架，市場預測員表明，該市場與分類機箱或我們所說的交換器架市場相比，可能是五比一。現在在交換架構中，堅持傳統上最流行的方式確實是一個很大的選擇，即一個大機箱，裡面裝滿了通過背板內部連接的交換機，以進行分解，這意味著將這些交換機從機箱中拉出並基本上將它們堆疊起來垂直放置在機架中。

Those backplane connections become connections between the switches within the rack, 2.5 meters or less. And so we fully expect that over time each data center customer is going to make their own decision about the architecture that they pursue, but it's good. We're encouraged with the fact that as switching lane speeds increase to 50 and 100 gig that for those customers that are moving or have been using switch racks, compared to chassis that our solution is naturally getting picked up.

這些背板連接成為機架內交換器之間的連接，長度為 2.5 公尺或更短。因此，我們完全希望隨著時間的推移，每個資料中心客戶都會對他們追求的架構做出自己的決定，但這很好。我們感到鼓舞的是，隨著交換車道速度增加到 50 和 100 gig，對於那些正在移動或已經使用交換機架的客戶來說，與底盤相比，我們的解決方案自然會被採用。

Understood. Second question just on the competitive landscape for the NIC to ToR application, I know the first couple of hyperscale you're working with, I believe you're using proprietary or non-standard cables? Are you seeing any evidence that those customers are looking to second source those designs or do you feel pretty comfortable that Credo remains the sole source of those cables for the foreseeable future, which hopefully would extend that at least a few quarters?

明白了。第二個問題是關於 NIC 到 ToR 應用程式的競爭格局，我知道您正在使用的前幾個超大規模，我相信您正在使用專有或非標準電纜？您是否看到任何證據表明這些客戶正在尋求第二來源這些設計，或者您是否對 Credo 在可預見的未來仍然是這些電纜的唯一來源感到滿意，這有望將這種情況至少延長幾個季度？

So I think that there's still question that the data center customers generally speaking want multiple sources. So that's absolutely part of the world that we live in. My feeling is that more and more as the data center customers recognize that they can add functionality to an AEC that they haven't even been able to think about with DACs or optical solutions. The idea of having this fabric become more intelligent, it's natural that the team that we've built, which is a large team of engineers and different functions to be able to entertain specific requests for added functionality to the AEC. So we're open for business. If the engineers within the data centers that we're working with have ideas, we'll entertain those ideas as a way to make their jobs easier, make the innovations better from their end from a server rack or switch rack perspective.

因此，我認為資料中心客戶總體上需要多個來源仍然存在問題。所以這絕對是我們生​​活的世界的一部分。讓這種結構變得更加智慧的想法，是我們建立的團隊的自然想法，這是一個由工程師和不同職能組成的大型團隊，能夠滿足對 AEC 附加功能的特定請求。所以我們開門營業了。如果與我們合作的資料中心內的工程師有想法，我們將採納這些想法，讓他們的工作變得更輕鬆，從伺服器機架或交換機機架的角度出發，讓創新變得更好。

Now competitively, we've talked about the competitive moat that we've established and the fact that I've got the team that's doing the full system integration. It's not as if selling a chip to a copper cable manufacturer really opens that door for this kind of innovation. So I think that, yes, we naturally see competitors, we naturally see our customers wanting to second source. And I think that we still haven't seen competitors in the wild in the labs at our customers. We've heard about competitors' attention to enter the market.

現在，在競爭方面，我們已經討論了我們已經建立的競爭護城河，以及我擁有正在進行完整系統整合的團隊。向銅電纜製造商出售晶片並不能真正為這種創新打開大門。所以我認為，是的，我們自然會看到競爭對手，我們自然會看到我們的客戶想要第二來源。我認為我們在客戶的實驗室中仍然沒有看到競爭對手。我們聽說競爭對手正在關注進入該市場。

We've seen static demos where they'll have a cable that's not hooked up to anything and they will describe what the cable does. And we've seen demos with eval boards that are connected to passive copper cables. So these are far from actual qualification of hyperscaler. And I think that, I think when we look at the OCP Conference in October, it was a really great measure of our leadership, especially in contrast to the other competitors. I think that anybody that attended the conference could not avoid seeing purple, which is the color of our cables. We were -- the purple AECs were ubiquitous from end-to-end on the show floor.

我們已經看過靜態演示，其中他們將使用一條未連接任何東西的電纜，並且他們將描述電纜的用途。我們已經看到了連接到無源銅纜的評估板的演示。所以這些距離超大規模的實際資格還很遠。我認為，當我們回顧 10 月的 OCP 會議時，這確實是對我們領導力的一個很好的衡量，特別是與其他競爭對手相比。我認為參加會議的任何人都無法避免看到紫色，這是我們電纜的顏色。我們——紫色 AEC 在展廳中從頭到尾無處不在。

And to note the progress that we've made year-over-year, last year we showed the world's largest router to-date, a three rack deployment that made up of 350 terabits per second router. This is built with 400 gig ports, each with eight lanes of 56 gig or 50 gig. This year, we showed the clear benefit of going faster from the lane speed and wider with the number of lanes. And so we introduced our 1.6 terabits per second AEC at this show, 16 lanes of 100 gig and we demonstrated that same capacity or that same bandwidth, the 350 terabits per second in a single rack deployment. And so this was one of many, many demonstrations that we gave and it was just clear anybody to show that just physically if you can see it, we're far ahead of our competition.

值得注意的是我們逐年取得的進展，去年我們展示了迄今為止世界上最大的路由器，這是一個三機架部署，由每秒 350 太比特的路由器組成。該連接埠由 400 個 gig 連接埠構建，每個連接埠有 8 個 56 gig 或 50 gig 通道。今年，我們展示了車道速度加快和車道數量增加的明顯好處。因此，我們在本次展會上推出了每秒 1.6 太比特的 AEC，16 個通道 100 GB，並且我們展示了相同的容量或相同的頻寬，即在單機架部署中每秒 350 太比特。因此，這是我們進行的眾多演示之一，很明顯，任何人都可以證明，只要您能看到它，我們就遠遠領先於我們的競爭對手。

And our next question comes from the line of Toshiya Hari with Goldman Sachs.

我們的下一個問題來自 Toshiya Hari 與高盛的對話。

First one for you Bill, based on the fact that you're reiterating the full-year guide, you guys are clearly doing really well. But curious if you've sensed any change in customer behavior, whether it'd be the large hyperscalers or some of the enterprise OEMs across your business? Have you seen any projects get pushed out or downsized or is the adoption of AEC for instance too strategic and too important for your customers to really tweak projects even going into fiscal year '24? Thanks.

第一個是給你的，比爾，基於你重申全年指南的事實，你們顯然做得非常好。但想知道您是否感覺到客戶行為有任何變化，無論是大型超大規模企業還是您企業中的一些企業 OEM？您是否看到任何專案被推遲或縮小規模，或者採用 AEC 是否過於戰略性且過於重要，以至於您的客戶甚至無法在進入 24 財年時真正調整專案？謝謝。

Yes, I think that what we see in our customer base is really two different threads. We have seen a reduction in CapEx and a delay within our Chinese hyperscale customers. There's no question about that over the past quarter. We've seen kind of a shift in the ramp to high volume on the next generation optical. And that's I think everybody is well aware of the macro situation in China. And these hyperscalers don't necessarily serve a wide customer base globally.

是的，我認為我們在客戶群中看到的確實是兩種不同的線索。我們看到中國超大型客戶的資本支出減少，並且出現了延遲。過去一個季度的情況毫無疑問。我們已經看到了下一代光學產品向大批量生產的轉變。我想大家都很清楚中國的宏觀情勢。這些超大規模企業並不一定能夠為全球廣泛的客戶群提供服務。

And so the second part is really the U.S. hyperscalers, and although we've heard that there may be a slight bending of the curve. We haven't heard that anyone is going to decrease spending year-over-year. And these are with the customers that we're engaged with that we've ramped production and we will ramp production with, so it might be a slowing of the growth, but the growth still is very significant.

因此，第二部分實際上是美國的超大規模企業，儘管我們聽說曲線可能會略有彎曲。我們還沒聽說有人會逐年減少支出。這些是我們與之合作的客戶，我們已經提高了產量，我們將提高產量，因此成長可能會放緩，但成長仍然非常顯著。

I will reiterate that for us, it looks a little bit different, because we haven't reached the point of saturation and so every new product ramp that we see is next generation better than the current generation technology. And so if anything, there's still a fierce competition amongst data centers to deliver better services to their customer base in order to win market share. And so we see that there is a very, very consistent pull for next generation better than technology to get better productivity, to get better performance. And even an environment like this at a macro level, that becomes critical to be able to differentiate. So we still remain quite bullish on the customers that we're ramping. We haven't seen any major shifts.

我要重申的是，對我們來說，它看起來有點不同，因為我們還沒有達到飽和點，所以我們看到的每一個新產品都是下一代比當前一代技術更好的產品。因此，如果有的話，資料中心之間仍然存在激烈的競爭，為客戶群提供更好的服務，以贏得市場份額。因此，我們看到，下一代技術比技術有一種非常非常一致的推動力，以獲得更好的生產力和性能。即使在宏觀層面上這樣的環境，要實現差異化也至關重要。因此，我們仍然非常看好我們正在擴大的客戶。我們還沒有看到任何重大轉變。

And then as my follow-up, on the second customer in your AEC business, you talked about revenue recognition toward the end of this fiscal year and then a meaningful ramp in fiscal year '24. I understand you can't give too specific with these customers, but I was hoping you could compare and contrast the ramp that you're expecting in fiscal year '24 with the second customer vis a vis what you've experienced so far with the first customer. I think you've talked about a potential uplift in pricing just given the complexity. But if you can kind of level set us on your thoughts there into fiscal year '24 twenty that would be super helpful?

然後，作為我的後續行動，關於您 AEC 業務中的第二個客戶，您談到了本財年末的收入確認，以及隨後在 24 財年的有意義的增長。我知道您不能對這些客戶提供太具體的信息，但我希望您能夠將您在 24 財年與第二個客戶的預期增長與您迄今為止與第二個客戶的經歷進行比較和對比第一個客戶。我認為您已經談到了考慮到複雜性而可能提高定價的可能性。但是，如果您能讓我們了解您對 24 財年 20 財年的想法，那會非常有幫助嗎？

As a contrast, I think we've been relatively pleased with what we've been seeing from the second customer in a sense that over a year ago, we engaged with them. We delivered samples -- for samples of this unique cable that we've built in December of last year. And we've now finished a very stringent qualification. And so it's a full green light on ramping as soon as they're ready. Their schedule has been really consistent over the past several quarters, and the contrast there is that with our first customer, our solution was enabling a new architecture, but it wasn't necessarily that the servers were changing.

相較之下，我認為我們對從第二位客戶看到的情況相對滿意，從某種意義上說，一年多前，我們與他們進行了接觸。我們交付了樣品——去年 12 月我們製造的這種獨特電纜的樣品。我們現在已經完成了非常嚴格的資格認證。因此，一旦他們準備好，坡道就完全綠燈了。在過去的幾個季度中，他們的時間表非常一致，與我們的第一個客戶形成鮮明對比的是，我們的解決方案正在啟用新的架構，但伺服器不一定會發生變化。

So they had a high volume stream of deployments and what they were trying to do is shift to an architecture that gave them much, much better utilization of floor space and much better utilization of equipment. But it wasn't like it was the next generation server, and so we kind of naturally saw the customer kind of dual passing it and trying to cut it over in an orderly fashion. And so it was a little bit delayed, compared to what their first objectives were. So that's kind of the big contrast is that the second customer, this is a brand new generation. And so there's extremely small -- extremely strong pull to deploy and deploy on time, so that's something that we're pretty encouraged about.

因此，他們進行了大量的部署，他們試圖轉向一種能夠更好地利用佔地面積和設備的架構。但這不像是下一代伺服器，所以我們自然地看到客戶雙重傳遞它並試圖以有序的方式切換它。因此，與他們的最初目標相比，這個計劃有點延遲。因此，最大的對比是第二個客戶，這是全新的一代。因此，部署和按時部署的吸引力非常小——非常強大，所以這是我們非常鼓勵的事情。

And our next question comes from the line of Vivek Arya with Bank of America.

我們的下一個問題來自 Vivek Arya 與美國銀行的聯繫。

I actually had two. For the first one, Bill you mentioned the engagements for the third and fourth hyperscaler also that seems like a positive. I'm curious the adoption of AEC seems like a no brainer on surface. What is the main pushback that you get? Is it just a matter of time? Is it the ramp of a certain speed? Is it 400 gig or 800 gig? What do you think drives that sharp inflection upwards with multiple customers?

我實際上有兩個。對於第一個，比爾，您提到了第三個和第四個超大規模企業的參與，這似乎也是積極的。我很好奇，表面上看，採用 AEC 似乎是理所當然的。您遇到的主要阻力是什麼？這只是時間問題嗎？是一定速度的斜坡嗎？是400G還是800G？您認為是什麼推動了多個客戶的急劇上升？

I think there's really two catalysts to cause people to think about the AEC solution. One catalyst that we've seen first is added functionality, and that's a real differentiation and that's why you've seen our first customer ramp with 25 gig lanes, which clearly if you were doing something special, you could get the job done with DACs. Our second customer is a combination of functionality as well as speed. And so as the world goes to 50 gig lanes for a large number of customers that we're talking to, they don't want to fight the signal integrity and form factor challenges of staying with the DAC.

我認為確實有兩個催化劑促使人們思考 AEC 解決方案。我們首先看到的一個催化劑是附加功能，這是真正的差異化，這就是為什麼您看到我們的第一個客戶增加了25 個演出通道，顯然，如果您正在做一些特殊的事情，您可以使用DAC 來完成工作。我們的第二個客戶是功能和速度的結合。因此，當我們所接觸的大量客戶的世界走向 50 個演出通道時，他們不想再繼續使用 DAC 來應對訊號完整性和外形尺寸方面的挑戰。

And so speed is the other catalyst. And so where we see the 50 gig per lane market being, kind of, a crossover generation where some will battle the deployment with DACs. Others becomes a very -- almost a default decision at this point. Because they see a solution that's half the power, half the cost, way more reliable, way more rugged than in AOC, and so for short in-rack connections, we don't really see a big decision making that has to occur. If they're not going to fight the challenges of DACs, they're going to use AECs and we've seen it across the board.

因此速度是另一個催化劑。因此，我們看到每個通道 50 GB 的市場在某種程度上是一個跨界一代，其中一些將與 DAC 的部署進行競爭。在這一點上，其他的決定幾乎成為預設的決定。因為他們看到的解決方案比 AOC 的功耗、成本都低一半，而且更可靠、更堅固，因此對於短的機架內連接，我們實際上並不認為必須做出重大決策。如果他們不打算應對 DAC 的挑戰，他們就會使用 AEC，我們已經全面看到了這一點。

As we progress towards 100 gig, which is -- it's just a function of time, for sure, there is no DACs and now it becomes just a question about AECs versus ASCs, and I think we've established that, that game is over. People will choose AECs just because of the huge CapEx and OpEx advantage, right? If you look at the total cost of ownership, it hands down a better idea. And with the fact that you throw the fact that the installers aren't going to break the cables routing a huge number of them in a very tight space. So it's a much more rugged design.

隨著我們向 100 gig 邁進，這只是時間的函數，當然，沒有 DAC，現在它只是關於 AEC 與 ASC 的問題，我認為我們已經確定，遊戲已經結束。人們會因為龐大的資本支出和營運支出優勢而選擇 AEC，對吧？如果你看看總擁有成本，你會發現一個更好的想法。事實上，安裝人員不會破壞在非常狹小的空間內佈線的大量電纜。所以這是一個更堅固的設計。

Got it. And for my follow-up, maybe one for you Dan, in your Q2, it seems like IP sales were $5 million to $7 million, kind of, below expectations, but you're more than made up for it, because of the upside on the product side. I'm curious what is the expectation for this IP in Q3? And do you expect to make up for that $5 million to $7 million shortfalls that you had in Q2, because I think you mentioned something about a shift. So is the Q3 just that the missing part of the IP revenue from Q2 that comes into Q3 or just how should we look at Q3 and what happened to that missing IP revenue from Q2?

知道了。對於我的後續行動，也許是給你的，丹，在你的第二季度，IP 銷售額似乎為500 萬至700 萬美元，有點低於預期，但你已經彌補了這一點，因為有好的一面在產品方面。我很好奇這個IP在第三季的預期是什麼？您是否希望彌補第二季 500 萬至 700 萬美元的缺口，因為我認為您提到了有關轉變的內容。那麼，第三季度是否只是第二季度 IP 收入中缺失的一部分進入第三季度，或者只是我們應該如何看待第三季度以及第二季度缺失的 IP 收入發生了什麼？

So the important thing to note here is that there is no change in our expectation for IP revenue for the full-year. So in other words, our revenue mix for fiscal year '23 is exactly what we have expected it to be for the year plus that we've been talking. And also bear in mind that for the full-year, we expect IP revenue to be above our long-term target, which is 10% to 15% of the overall revenue mix. But we've talked a lot about historically about the quarter-to-quarter variability in revenue when it comes to IP.

因此，這裡需要注意的重要一點是，我們對全年知識產權收入的預期沒有改變。換句話說，我們 23 財年的營收組合正是我們今年的預期加上我們一直在談論的。另請記住，我們預計全年 IP 收入將高於我們的長期目標，即佔整體收入組合的 10% 至 15%。但我們在歷史上已經討論過很多關於 IP 營收季度與季度變化的問題。

And this is largely driven by ASC 606 and the way the revenue recognition rules work around license revenue where we recognize the lion's share of the contract value on most of our contracts at the point of delivery of that IP database. So the last two quarters, Q4 of fiscal '22 and Q1 of fiscal '23 we happen to be on the higher end of revenue contribution from IP, but that of course swings both ways.

這在很大程度上是由 ASC 606 以及圍繞許可收入的收入確認規則的工作方式推動的，在該方式中，我們在交付該 IP 資料庫時確認了大多數合約中合約價值的最大份額。因此，在過去兩個季度，即 22 財年第四季度和 23 財年第一季度，我們恰好處於知識產權收入貢獻的較高端，但這當然是雙向波動的。

One of the things that we track critically from a gross margin perspective of course is our product gross margin and that has continued to expand as we've increased our product shipment volumes. In fact, it was up 80 basis points the product gross margin. So we're quite pleased with our margins for the quarter and we're exactly where we expect to be for the full-year. Hopefully, that helps.

當然，我們從毛利率角度嚴格追蹤的事情之一是我們的產品毛利率，隨著我們產品出貨量的增加，毛利率持續擴大。事實上，產品毛利率上升了 80 個基點。因此，我們對本季的利潤率非常滿意，也正是我們預期的全年利潤率。希望這會有所幫助。

And our next question comes from the line of Richard Shannon with Craig-Hallum.

我們的下一個問題來自理查德·香農和克雷格·哈勒姆的對話。

Dan, I guess, I want to follow-up on the topic of product gross margins. If I'm running my numbers right here and if I exclude the product NRE from the calculation, it looks like our product margins were actually down very slightly. Am I calculating this right? And if so, can you help us understand the dynamics that took that down slightly?

丹，我想我想跟進一下產品毛利率的話題。如果我在這裡運行我的數字，並且如果我從計算中排除產品 NRE，那麼看起來我們的產品利潤率實際上略有下降。我這個計算對嗎？如果是這樣，您能幫助我們了解導致這種情況略有下降的動力嗎？

Yeah. I wouldn't read too much into that. We look at product gross margin a little bit more holistically. And if you look at the elements that come into the other cost of goods sold bucket, that similar to our IP revenue can vary quite a bit quarter-over-quarter. So the way our view is that from an overall product gross margin perspective as our volume continues to increase at this stage, where we are as a company, we should have that a slight uptick in our product gross margin. But you're right, that excluding NRE in this particular quarter, it did tick down a little bit if you just look at the product margin.

是的。我不會對此進行太多解讀。我們更全面地看待產品毛利率。如果您查看其他銷售商品成本中的要素，您會發現與我們的智慧財產權收入類似，每個季度可能會有很大差異。因此，我們的觀點是，從整體產品毛利率的角度來看，隨著我們現階段的銷售量持續增加，作為一家公司，我們的產品毛利率應該會略有上升。但你是對的，排除這個特定季度的 NRE，如果你只看產品利潤率，它確實會下降一點。

Okay. And then as we go forward especially if I think most people are assuming that your AEC mix is going to increase here, we should expect those product gross margins excluding NRE again to grow if very slightly, is that fair?

好的。然後，當我們繼續前進時，特別是如果我認為大多數人都假設您的 AEC 組合會在這裡增加，我們應該預計不包括 NRE 的這些產品毛利率會再次略有增長，這公平嗎？

Yes, that's fair. Our long-term model remains the same, so -- and just to reiterate what that is 10% to 15% of our overall revenue mix will be IP, the remainder being product. And from a gross margin perspective, 63% to 65% gross margin in that long-term model. So what is long-term? We really view that as a three-plus-year model. And we've stated in the past that this fiscal year we expect the gross margins to expand purely out of increasing scale. There are subsequent factors in FY '24 and '25 that will increase the product margin as well.

是的，這很公平。我們的長期模式保持不變，所以重申一下，我們整體收入組合的 10% 到 15% 將是 IP，其餘的是產品。從毛利率的角度來看，長期模型的毛利率為 63% 至 65%。那什麼是長期呢？我們確實認為這是一個三年多的模型。我們過去曾表示，本財年我們預期毛利率將純粹由於規模的擴大而擴大。 24 財年和 25 財年的後續因素也將增加產品利潤。

One notable difference if you kind of read into some of Bill's comments for the year -- AEC has been ramping faster than we initially expected. So if you look out a year from now in our FY '24 that has an implicit margin impact. And with optical taking a little bit longer to ramp than we initially expected again somewhat of an impact in FY '24. So overall, our corporate gross margin in FY '24 is probably going to be similar to what it is for the full-year of fiscal '23.

如果您仔細閱讀了 Bill 今年的一些評論，您會發現一個顯著的差異——AEC 的發展速度比我們最初預期的要快。因此，如果您從現在起一年後的 24 財年中觀察，您會發現對利潤率有隱性影響。由於光學的成長時間比我們最初預期的要長一些，因此在 24 財年再次產生了一定的影響。因此，整體而言，我們 24 財年的企業毛利率可能與 23 財年全年的毛利率相似。

Okay, perfect. Thanks for that detail, Dan. Bill, maybe a big picture question for you. Obviously, Ethernet is your dominant protocol standard you're supporting and obviously a lot of growth opportunities there. But you've talked about USB and PCIexpress in the past and I think you've even alluded here recently to cable opportunities, AEC opportunities that exist with one or both of those. Maybe you can just kind of give us a big picture on your thought process on when those technologies and products start contributing more meaningfully to your outlook?

好的，完美。謝謝你的詳細信息，丹。比爾，也許對你來說是一個大問題。顯然，乙太網路是您支援的主要協議標準，顯然那裡有很多成長機會。但您過去曾談論過 USB 和 PCIexpress，我認為您最近甚至在這裡提到了電纜機會，以及與其中之一或兩者同時存在的 AEC 機會。或許您可以向我們介紹您的思考過程，了解這些技術和產品何時開始對您的前景做出更有意義的貢獻？

For PCIe, our intent is to really enter the market in a big way when the market moves to Gen 6. Of course, we'll build a product that is compatible with earlier generations and we expect to get traction earlier to get cycles prior to Gen 6. But that's really what we expect is the point when we're going to enter the market in a big way. And so we see that being in the '25, '26 timeframe. And it's really dependent on the schedules, the servers decibels and hopefully things get back on track and the world goes faster. So I'll say that our view of the overall market opportunity for PCIe and it can be measured from a PCIe retimer within the server and also within the UCI equipment. We view this as a very large market opportunity.

對於PCIe，我們的目的是當市場轉向第6 代時真正大規模進入市場。世代之前獲得周期。所以我們看到這是在 25 年、26 年的時間範圍內。這實際上取決於時間表、伺服器分貝，希望事情能回到正軌，世界變得更快。因此，我想說的是，我們對 PCIe 整體市場機會的看法，可以透過伺服器以及 UCI 設備內的 PCIe 重定時器來衡量。我們認為這是一個非常大的市場機會。

On the USB front, it's probably the same kind of timeframe that we see the [CIO 80] or 80 giga's per second or two lanes of 40 gig PAM 3. It's probably the same timeframe that we see that opportunity. Now as it relates to the AEC opportunity, we definitely see opportunity within both segments or both standards and it's a very natural extension for us to look at that opportunity, the same way that we look at AECs for Ethernet. Now for USB, I'll tell you that the consumer market will probably not be the one -- the company building cables will probably go straight to a reference design model.

在 USB 方面，它可能與我們看到的 [CIO 80] 或每秒 80 GB 或 40 GB PAM 3 的兩個通道相同的時間範圍。現在，由於它與AEC 機會相關，我們肯定在兩個細分市場或兩個標準中都看到了機會，對我們來說，看待這個機會是一個非常自然的延伸，就像我們看待以太網的AEC一樣。現在，對於 USB，我將告訴您消費市場可能不會是這樣的——製造電纜的公司可能會直接進入參考設計模型。

Thank you. And our next question comes from the line of Suji Desilva from ROTH Capital.

謝謝。我們的下一個問題來自羅斯資本 (ROTH Capital) 的 Suji Desilva。

Hi, Bill. Hi, Dan. So question specifically on the revenue breakout perhaps for Dan. The product engineering services would -- I know it's a smaller part of the revenue, but would growth in that revenue be a lead indicator of activity you have with hyperscalers where you see are those, kind of, indicators as you go from one to two to three or four hyperscalers, would that grow? Is that the way to read that line?

嗨，比爾。嗨，丹。因此，具體問題可能是丹的收入突破。產品工程服務 - 我知道它只佔收入的一小部分，但收入的增長是否會成為超大規模活動的主要指標，當你從一個到兩個時，你會看到這些指標到三到四個超大規模，這個數字還會成長嗎？這是閱讀該行的方式嗎？

I would not read it that way. It's we've -- from day one as a company, we've been able to capture some NRE dollars from customers as we've developed chips and solutions for them. It really speaks to the innovative nature of our solutions. And longer term, we don't expect that to grow necessarily in absolute dollars. And just like our IP revenue, it can vary quite a bit quarter-over-quarter. So it's not -- I wouldn't really read it as a lead indicator for anything such as that.

我不會那樣讀。從作為一家公司的第一天起，我們就能夠從客戶那裡獲得一些 NRE 資金，因為我們為他們開發了晶片和解決方案。它確實體現了我們解決方案的創新本質。從長遠來看，我們預計其絕對值不一定會成長。就像我們的知識產權收入一樣，它每季的變化可能很大。所以它不是——我真的不會把它當作這類事情的先行指標。

And then the second question perhaps for Bill. You talked about the TAM for AEC being to $4 billion to $5 billion, I think, I heard the number correct -- I heard it correctly. Is that the vast majority of that hyperscaler or is there a meaningful non-hyperscale part that could kick in as you kind of evolve your offering beyond these initial customers?

然後第二個問題可能是問比爾的。你談到 AEC 的 TAM 為 40 億至 50 億美元，我想，我聽到的數字是正確的——我聽到的是正確的。這是超大規模企業的絕大多數，還是當您將產品擴展到這些初始客戶之外時，是否有一個有意義的非超大規模部分可能會發揮作用？

Yes. Just to clarify, I referenced a multi-billion dollar market that the market forecasts are forecasting and it's really in the four to five year timeframe.

是的。為了澄清一下，我引用了市場預測所預測的數十億美元的市場，而且它實際上是在四到五年的時間內。

Four to five year, okay.

四、五年就可以了

Yes, I definitely see the hyperscaler market as the market that's going to drive the near-term growth. But I can say that as the enterprise moves higher speed, there's going to be an opportunity there. I would say that even markets that are outside of what we consider hyperscalers, I think, there can be significant contribution from a revenue standpoint. We're already engaged with the first 5G carriers and that's about the same order of magnitude as hyperscalers.

是的，我確實認為超大規模市場將推動近期成長。但我可以說，隨著企業發展速度加快，機會就會出現。我想說，即使是我們認為的超大規模市場以外的市場，我認為從收入的角度來看也可以做出重大貢獻。我們已經與首批 5G 營運商合作，其數量級與超大規模營運商大致相同。

But if we look at the different engagements that we've kind of quickly converted into customers, I think collectively, they can look like one of the major hyperscalers in the total size of revenue for us. So I don't think there is -- in the near-term, I guess, our very, very primary focus is on the hyperscalers to drive the revenue quickly. But we are engaging across the board with many others that again collectively can add significant revenue for us.

但如果我們看看我們快速轉換為客戶的不同業務，我認為總的來說，它們看起來像是我們總收入規模中的主要超大規模提供者之一。因此，我認為短期內我們的主要重點是讓超大規模企業快速增加收入。但我們正在與許多其他公司進行全面合作，這些公司再次共同為我們增加了可觀的收入。

Thank you. And our next question comes from the line of Vijay Rakesh with Mizuho.

謝謝。我們的下一個問題來自 Vijay Rakesh 和 Mizuho 的對話。

Just a quick question on the quarter, I know, the IP came in light, but it looks like you made it up well with the product side. Just wondering where the strength was, was it in cable or optical, if you can give us some color? And was it specific to some customers or markets?

我知道，關於本季的一個簡單問題，IP 已經曝光，但看起來你在產品方面做得很好。只是想知道優勢在哪裡，是在電纜還是光纖方面，您能給我們一些建議嗎？它是否特定於某些客戶或市場？

So it was a strength in AEC as you would expect. And that has been with our lead customer that we've discussed in the past.

因此，正如您所期望的那樣，這是 AEC 的優勢。我們過去曾與我們的主要客戶討論過這一點。

Got it. And then on the JDM side, the joint development program, do you expect that to become a bigger mix of your distribution as you look at calendar '23 or fiscal '24, would those have similar margins to your direct sales?

知道了。然後，在 JDM 方面，即聯合開發計劃，當您查看 23 日曆年或 24 財年時，您是否期望它成為更大的分銷組合，這些利潤率是否與您的直接銷售類似？

Definitely, when we talk about a joint development model, what we're really referring to is that the hyperscaler would be involved in the selection of the DSP or other components. Typically even under a JDM model, we would be selling to the optical module manufacturer. And so I do expect that this JDM model or if we kind of back up and we say, the model where the hyperscaler gets involved in the decision making, I expect that to be more and more popular as we go forward for Credo.

當然，當我們談論聯合開發模型時，我們真正指的是超大規模廠商將參與 DSP 或其他組件的選擇。通常，即使在 JDM 模式下，我們也會向光模組製造商銷售。因此，我確實希望這個 JDM 模型，或者如果我們進行備份，我們說，超大規模參與決策的模型，我希望隨著 Credo 的發展，這種模型會越來越受歡迎。

If we kind of look at it from a Credo development perspective in the market, how we've been progressing. Really, our view is that, first, we succeeded in engaging 3 JDM customers, where the end customer really selected the DSP component from Credo. Now the ramp to high volume looks delayed, due to the first 2 hyperscalers being in China, but kind of in the second phase here, we've gained traction among tier-1s, we're talking with all of them directly on high volume deployments. And so we see multiple programs in sight on 200 to 400, and the major benefit that we give is a refresh, that's got a better combination of performance, power and cost.

如果我們從 Credo 市場發展的角度來看，我們是如何取得進展的。事實上，我們的觀點是，首先，我們成功吸引了 3 個 JDM 客戶，其中最終客戶真正選擇了 Credo 的 DSP 組件。現在，由於前兩家超大規模企業都在中國，因此大容量的成長看起來被推遲了，但在第二階段，我們已經在一級供應商中獲得了關注，我們正在與所有這些公司直接就大容量進行對話部署。因此，我們看到 200 到 400 多個專案即將推出，我們提供的主要好處是更新，即效能、功耗和成本的更好組合。

And it's becoming more important to hyperscalers and the optical companies running high volumes. CapEx and OpEx are more and more of focus recently, and so if there's low hanging fruit, it seems like it makes sense. And I might have mentioned in the last call, but I feel even more confident that we're going to officially engage with a tier-1 hyperscaler in the U.S. on a 400 gig optical solution, and it will include the DSP with an integrated driver, as well as the TIA, and so that's more than kind of line of sight. That's basically a few stages left to entering a contract with them.

對於超大規模企業和大量生產的光學公司來說，這一點變得越來越重要。資本支出和營運支出最近越來越受到關注，因此，如果有唾手可得的成果，那麼這似乎是有道理的。我可能在上次電話會議中提到過，但我更有信心我們將正式與美國的一家一級超大規模提供商合作開發 400 GB 光學解決方案，其中將包括帶有集成驅動器的 DSP以及TIA，所以這不僅僅是一種視線。基本上還剩幾個階段才能與他們簽訂合約。

And then I would say that, kind of the third phase of this is for the next generation or 800 gig, and now that we've opened up conversations, about their existing high volume deployments. The same kind of compelling performance power and cost benefit that we offer, added to that will be the fact that we're on time. Our time-to-market is good for the 800 gig devices and for the 800 gig market. And so the first testing that's been done by the customer base has been very well received. So they see very clearly, the performance is clearly good enough. The power is clearly good enough and the cost is compelling in a sense, because we're building in 12 nanometer versus a more advanced process like 7 or 5.And so given the fact that we've established market credibility through our first 3 engagements and the engagements that we're pursuing on existing programs, I expect the wins for 800 gig to come, as the market takes off.

然後我想說，第三階段是針對下一代或 800 場演出，現在我們已經就他們現有的大量部署展開了對話。我們提供的同樣引人注目的性能和成本優勢，除此之外，我們還能夠準時到達。我們的上市時間對於 800 gig 設備和 800 gig 市場是有利的。因此，客戶群所做的首次測試受到了好評。所以他們看得很清楚，表現顯然已經夠好了。從某種意義上說，功率顯然足夠好，成本也很有吸引力，因為我們採用的是12 奈米工藝，而不是7 奈米或5 奈米等更先進的工藝。次合作建立了市場信譽以及我們在現有項目上追求的參與度，我預計隨著市場的起飛，800 場演出的勝利將會到來。

Got it. And just a quick question, I know China is again going back into COVID restrictions and all that. And looks like you have been -- you have successfully resolved many of your supply constraints it feels like, because it didn't really come up on the commentary. So can you talk to what you're doing in terms of might be diversifying your supply chain, I think, you talked about maybe Vietnam or Philippines, or what you're doing there in terms of getting around this whole restriction?

知道了。我想問一個簡單的問題，我知道中國將再次恢復對新冠病毒的限制等。看起來你已經成功地解決了許多供應限制，因為它並沒有真正出現在評論中。那麼，您能否談談您正在做的可能使您的供應鏈多樣化的事情，我想，您可能談到了越南或菲律賓，或者您正在做的事情是為了繞過整個限制？

So I feel good about where we are today, even if we face disruptions in China, we've signaled that we're going to build inventory. That's a surefire way of making sure that we've got the product that our customers need as they ramp. We're going to continue to be in that mode, until we can land ourselves in something -- in a location that's not dependent on China. We've made progress in the last 90-days, and my expectation is that we will be in production in less than a year in alternative locations for our current supply chain. And I think that, that kind of matches with what the customer base is looking for as well.

因此，我對我們今天的處境感到滿意，即使我們在中國面臨混亂，我們也已表示將建立庫存。這是確保我們獲得客戶成長所需的產品的可靠方法。我們將繼續保持這種模式，直到我們能夠到達一個不依賴中國的地方。我們在過去 90 天內取得了進展，我的期望是我們將在不到一年的時間內在當前供應鏈的替代地點投入生產。我認為，這也符合客戶群的需求。

And our next question comes from the line of Tore Svanberg with Stifel.

我們的下一個問題來自 Tore Svanberg 和 Stifel。

Congrats on the record results, I have a non-AEC related question. You talked about the UCIexpress opportunity and I do recognize that this is kind of further out, but as we think about chiplets and licensing, how should we think about this playing out for you over the next few years?

恭喜獲得記錄結果，我有一個與 AEC 無關的問題。您談到了 UCIexpress 機會，我確實認識到這有點遙遠，但當我們考慮小晶片和授權時，我們應該如何考慮在未來幾年內為您帶來的影響？

So, I think that's we -- first of all, we kind of classified chiplets as a product, because we're building and selling those. And so as it relates to the IP, I think our long-term guidance, kind of, fits in the 10% to 15% range that Dan has articulated. For the UCIe chiplets, we see this -- I mean, we were very early on in chiplets. We're by far ahead of the rest of the competition. Given that we kind of saw this move towards disaggregation early. It didn't really play out, but now that we see UCIe on the horizon, we're very big believers.

所以，我認為這就是我們——首先，我們將小晶片歸類為一種產品，因為我們正在建立和銷售這些產品。因此，就智慧財產權而言，我認為我們的長期指導在某種程度上符合 Dan 所闡述的 10% 到 15% 的範圍。對於 UCIe 小晶片，我們看到了這一點——我的意思是，我們在小晶片方面處於非常早期的階段。到目前為止，我們遠遠領先其他競爭對手。鑑於我們很早就看到了這種分解的趨勢。它並沒有真正發揮作用，但現在我們看到 UCIe 即將出現，我們非常相信。

If you look at the consortium that Intel has really driven and you look at what they're doing today, chiplets are going to be popular in high volume in -- I think they are relatively near-term. So as speeds move to 32 gig to 64 gig, this can become more and more popular. And I think that if you look within a server, you can see 8 to 16 chiplets per server in the future. And so with that kind of volume, it becomes -- you can do the math, it's going to be a very large revenue opportunity.

如果你看看英特爾真正推動的聯盟以及他們今天所做的事情，你會發現小晶片將會大量流行——我認為它們是相對近期的。因此，隨著速度達到 32 GB 到 64 GB，這種技術會變得越來越流行。我認為，如果你觀察伺服器內部，你會發現未來每台伺服器有 8 到 16 個小晶片。因此，有了這樣的數量，你可以算一下，這將是一個非常大的收入機會。

That's very exciting. And then to follow-up on AEC and the sort of the second hyperscaler that's expected to launch, sounds like you have a lot of confidence in the timing there. I was just hoping you could give us a little bit more background information, I mean, obviously, when we think about the hyperscalers cutting CapEx, I'm sure there's some priority CapEx and some not so priority CapEx. So I mean would this fall into like, the really highest end priority for that particular customer, is that how we should think about it?

這非常令人興奮。然後是 AEC 的後續行動以及預計將推出的第二個超大規模器，聽起來您對那裡的時機很有信心。我只是希望您能給我們更多背景信息，我的意思是，顯然，當我們考慮超大規模企業削減資本支出時，我確信有一些優先資本支出和一些不那麼優先的資本支出。所以我的意思是，對於該特定客戶來說，這是否屬於真正最高的最終優先級，我們應該如何考慮它？

That's the way that I think about it. For sure, I view this program as something that is a strategic imperative as they talk about it within the supply chain, as well as within our customer base. So I feel pretty confident that this is going to be mainstream. And although they have been pretty consistent with their schedule, of course, things can happen that might cause a delay. We're not seeing any signs of that and the closer we get, obviously, the more confidence we have in the ramp. But it's not as if I can make a firm commitment on exactly when they're going to go to production. But it feels like no change from our end.

我就是這麼想的。當然，我認為這個計劃是戰略上的當務之急，因為他們在供應鏈以及我們的客戶群中談論它。所以我非常有信心這會成為主流。儘管他們與日程安排相當一致，但當然，可能會發生一些可能導致延誤的事情。我們沒有看到任何跡象，顯然，我們越接近，我們對坡道的信心就越大。但我似乎無法對它們何時投入生產做出堅定的承諾。但感覺我們的結局沒有改變。

That's very fair. Last question for Dan. Dan, you signaled last quarter you would build inventory, you did that. Inventory days now are just over 100. Based on Bill's comment about sort of to keep building inventory until you feel better about the whole China lockdown situation, how high should we expect inventory days to potentially get to, before you feel like you got the situation under control?

這非常公平。丹的最後一個問題。丹，您上季度表示將建立庫存，您做到了。現在的庫存天數剛剛超過 100。嗎？

Well, I don't expect that the days will increase from where they are right now, or if they do, it would be a very small increase. We were essentially flat quarter-over-quarter. Even though it looked like a significant increase in inventory, it was actually kind of in line with our product growth quarter-over-quarter. So bearing that in mind, we're comfortable with where we are, we continue to build an excess amount of days of inventory, of cable inventory, to ensure that we don't run into in a situation that we had back in Q4, when that COVID lockdown kind of interrupted our fulfillment of demand. So we're comfortable with where we are right now, and I wouldn't expect any major deviation from a days of inventory perspective. Longer term, of course, that will settle down to maybe 100 days of inventory, but that's off in the future.

嗯，我不認為天數會比現在增加，或者即使增加，也只是很小的增加。我們季度環比基本持平。儘管看起來庫存大幅增加，但實際上與我們的產品季度環比增長相符。因此，考慮到這一點，我們對目前的狀況感到滿意，我們繼續建立過多的庫存天數和電纜庫存，以確保我們不會遇到第四季度的情況，當新冠疫情封鎖有點打斷了我們滿足需求時。因此，我們對目前的狀況感到滿意，並且我預計從幾天的庫存角度來看不會出現任何重大偏差。當然，從長遠來看，庫存可能會穩定在 100 天，但這在未來是不可能的。

And our next question comes from the line of Matt Ramsay with Cowen.

我們的下一個問題來自馬特拉姆齊 (Matt Ramsay) 和考恩 (Cowen) 的對話。

Hi. This is Lannie on for Matt Ramsay, I wanted to extend my congratulations for the quarter as well. Going back to the optical solutions, could you confirm that the push out was mostly due to your first 2 customers being Chinese hyperscalers, and is there any line of sight as to how long that program is and where you are in terms of the qualification to product volume ramp?

你好。我是蘭尼 (Lannie) 為馬特拉姆齊 (Matt Ramsay) 發言，我也想對本季度表示祝賀。回到光學解決方案，您能否確認，推出主要是由於您的前 2 個客戶是中國超大規模企業，以及該計劃的持續時間以及您在資格方面的狀況是否有任何看法？

Yes, I will confirm that the first 2 hyperscaler customers are Chinese data centers, and during the last quarter, we were told that there is going to be a shift in the timing of the deployment. I haven't got clarity on specifics on when that's going to ramp, and when it's -- I mean, from my perspective, it's really when it goes to high volume. And so we might be doing small volume, but our focus is really on how long is the shift to high volume. I will say in the efforts that we're making with the U.S. hyperscalers, we continue to make progress, and if anything, I think, that that's -- we got more clarity on that, even though it might be a bit further and I think that's going to drive higher volume as well.

是的，我將確認前 2 個超大規模客戶是中國資料中心，在上個季度，我們被告知部署時間將會改變。我還不清楚何時會增加，以及何時 - 我的意思是，從我的角度來看，這實際上是當它達到高容量時。因此，我們可能會做小批量，但我們的重點實際上是轉向大批量需要多長時間。我想說的是，在我們與美國超大規模企業所做的努力中，我們繼續取得進展，如果有的話，我認為，那就是——我們對此更加清晰，儘管可能會更進一步，而且我我認為這也會推動銷量的增加。

Understood. That's helpful. Thank you. And I know in past earnings calls, you've mentioned a consumer customer for USB-C, I believe for licensing. Any updates there that we should know about, in terms of progress?

明白了。這很有幫助。謝謝。我知道在過去的財報電話會議中，您提到了 USB-C 的消費者客戶，我相信是為了許可。在進展方面有什麼我們應該了解的更新嗎？

Yes. We're hip-deep in executing on that IP license, we were selected by this large consumer company as the partner for this really important next generation USB standard, which is 80 gigabits, total bandwidth 2 lanes of 40 gig and PAM modulation. I think it's reflective of the fact that our architecture is unique. We delivered lower power than anybody in the industry. So it's really a great confirmation that they would select us as their partner. And this goes back to even 4 years ago, that they were doing due diligence and we signed the contract finally a little more than a year ago. But yes, we're hip-deep on execution and we expect to be wrapping up the technical part of the work, really within the next 6 months and then we'll absolutely be there, as they move from their own samples to production.

是的。我們非常積極地執行該 IP 許可，這家大型消費公司選擇我們作為這一非常重要的下一代 USB 標準的合作夥伴，該標準為 80 GB、總頻寬 2 通道 40 GB 和 PAM 調製。我認為這反映了我們的建築是獨一無二的事實。我們提供的功率比業內任何人都低。因此，他們選擇我們作為合作夥伴確實是一個很好的確認。這甚至可以追溯到四年前，他們正在進行盡職調查，我們最終在一年多前簽署了合約。但是，是的，我們正在全力執行，我們希望在接下來的 6 個月內完成工作的技術部分，然後我們絕對會在那裡，因為他們從自己的樣品轉向生產。

And our next question comes from the line of Quinn Bolton with Needham & Company.

我們的下一個問題來自 Quinn Bolton 與 Needham & Company 的對話。

A quick couple of follow-ups. First Dan, could you give us a sense, your lead customer, what percent of revenue was in the quarter? I know they've been above 10% for the past several quarters? And then a follow-up for Bill, as you look to the PCIe market, wondering if that also includes opportunities in CXLs, since CXL does run on the PCIe electricals?

一些快速的後續行動。首先，Dan，您的主要客戶能否為我們介紹一下該季度收入的百分比是多少？我知道過去幾季他們的成長率都在 10% 以上？ Bill 的後續行動是，當您展望 PCIe 市場時，想知道這是否也包括 CXL 的機會，因為 CXL 確實在 PCIe 電氣設備上運行？

Yes. So Quinn, so what you'll see in our Q as we file it in a day or 2, is that we had 3, 10% customers in the quarter, the largest of which was 44% then there was a 19% and a 16% customer. So you can kind of fill in the blanks from there. We don't disclose the specifics of who those customers are. But in the 44% case, it's pretty obvious.

是的。 Quinn，所以你會在我們在一兩天內提交的問題中看到，我們在本季度有 3 個 10% 的客戶，其中最大的是 44%，然後是 19% 和一個16% 的顧客。所以你可以從那裡填補空白。我們不會透露這些客戶的具體情況。但在 44% 的情況下，這一點就非常明顯了。

And to answer -- yes, to answer your question on PCIe, we definitely include CXL, we kind of talk about that collectively.

是的，為了回答您關於 PCIe 的問題，我們肯定包括 CXL，我們集體討論這一點。

Thank you. There are no further questions at this time. Mr. Brennan, I'll turn the call back over to you.

謝謝。目前沒有其他問題。布倫南先生，我會將電話轉回給您。

I'd like to thank everybody for joining the call. I appreciate all the thoughtful questions and with that, we will end the call. Thank you very much.

我要感謝大家加入這通通話。我感謝所有深思熟慮的問題，我們將結束通話。非常感謝。

This concludes today's conference call. You may now disconnect.

今天的電話會議到此結束。您現在可以斷開連線。