乐鑫科技:Espressif Systems Q1 2022 Report

Contents
3 About Espressif
4 Business Highlights (Unaudited)
6 Management Report
6 Business Strategy
7 Developer Community Metrics
8 Ownership of Securities
9 Risks and Uncertainties
10 Financial Statements (Unaudited)
10 Consolidated Balance Sheet
11 Consolidated Income Statement
13 Consolidated Cash Flow Statement
14 Further Information
14 Terms and Conditions of the Report
15 List of abbreviationsESPRESSIF SYSTEMS｜Q1 2022 REPORT｜ ABOUT ESPRESSIF
About Espressif
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A Leading AIoT Solution Provider
Espressif Systems is a public multinational fabless semiconductor company focused
on developing cutting-edge wireless-communication low-power chipsets. By
leveraging wireless computing we provide green versatile and cost-effective AIoT
solutions. We have accomplished a hardware-and-software closed-loop development
cycle for a series of core technologies including RF Wi-Fi & Bluetooth LE network
protocol stacks RISC-V MCUs AI instruction sets and algorithms operating systems
toolchains compilers IoT software application frameworks Cloud etc.We have a diverse team of engineers from around the world. All company branches
employ more than 500 members of staff from almost 30 countries and regions +75% of
whom are based in our Research & Development Department. We have eight R&D
centers in five countries including China (4 out of 8) India the Czech Republic Brazil
and Singapore. The company’s increasing reputation in recent years has been
instrumental in attracting talented engineers from across the world. Being united by our
passion for technology our diversity is our strength as it allows the creative blending of
different kinds of knowledge perspectives and ways of thinking.TOP 1
global Wi-Fi MCU
market share*
China
products distributed Czechia
all over the world Shanghai｜Suzhou
Wuxi｜Hefei
India
millions of users
Brazil Singapore
3
* Market share data from TSRESPRESSIF SYSTEMS｜Q1 2022 REPORT｜BUSINESS HIGHLIGHTS (UNAUDITED)
Business Highlights (Unaudited)
Key Financial Data (Unaudited)
Three Months Ended Fiscal Year
CNY March 31 2022 March 31 2021 2021
Consolidated Statement of Income Data
Revenue 288948065 270513645 1386371541
Gross profit 118589940 108219817 549025732
Selling expenses 9194881 9789393 41815693
General and administrative expenses 13404541 12202888 55485146
Research and development expenses 74848290 58890426 271689981
Net income 27852092 33999375 198427708
Earnings per share:
Basic 0.3475 0.4248 2.4775
Diluted 0.3475 0.4248 2.4566
March 31 2022 December 31 2021
Consolidated Balance Sheet Data
Cash cash equivalent and investments 1027717008 1114558363
Working capital 1791815378 1749605271
Total assets 2094943752 2129056143
Long-term obligations 66739721 68244392
Total shareholders’ equity 1874366128 1823017913
Three Months Ended Fiscal Year
March 31 2022 March 31 2021 2021
Consolidated Cash Flow Data
Net cash flow from operating activities -36870506 -13498498 31460857
Non-GAAP Adjustment
Stock-based compensation 4825008 5423960 21787964
Non-GAAP net income 32677101 39423335 220215672
Key Financial Indicators (Unaudited)
Three Months Ended Fiscal Year
March 31 2022 March 31 2021 2021
Gross margin 41.04% 40.01% 39.60%
R&D-to-sales ratio 25.90% 21.77% 19.60%
EBITDA margin 11.67% 13.71% 16.78%
Weighted ROE 1.51% 2.07% 11.52%
4ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜BUSINESS HIGHLIGHTS (UNAUDITED)
Financial Analysis
$
Revenue and Gross Margin
Business
Espressif’s revenue during the first quarter of 2022 was CNY 288.95 million which
marked an increase of 6.81% compared to the same period of last year. The Internet of
Things industry is still growing but the first quarter of 2022 was an off-peak period for
the company. In addition the ongoing global pandemic and the impact of the Omicron
variant in particular resulted in extended lockdowns for several Chinese cities which
has affected the downstream demand. Thus the company sales increased only slightly
compared with last year's same period. The gross margin for the reporting period was
41.04%.
Developer
Research and Development Expenses
The R&D expenditure in Q1 2022 was CNY 74.85 million that is 27.10% up compared
with the same period of last year. In fact the company's development expanded
significantly and it now includes the integration of "Wireless SoC + AI + Software +
Cloud" which has required substantial R&D investment. At the same time the company
is focused on improving the efficiency of its research-and-development with the aim to Business
speed up the release of new products. The two series of chips released in 2020 ESP32-
S3 and ESP32-C3 have contributed to the company’s financial performance in Q1
2022 and the three new chips released in 2021 ESP32-H2 ESP32-C2 and ESP32-C6
will enter the stage of mass production and marketing promotion soon. Our cloud
platform ESP Rainmaker will also contribute to the revenue that will be accumulated
throughout 2022.Inventories
The closing inventory balance at the end of Q1 2022 was CNY 396.18 million thus
increasing by 21.46% since the end of the previous year. Considering the following
factors collectively the company has maintained an active stocking strategy while raw
materials and finished products increased during the reporting period.* We expect that wafer supply will remain tight in the current year.* We continue to explore new business opportunities such as enterprise-wide business
applications (e.g. industrial automation healthcare energy control etc.) which have
already started integrating Internet connectivity into their offerings. Additionally it is
expected that consumption by individuals will recover as soon as the pandemic is
controlled in China.* The life cycle of Espressif products is fairly long. We provide a longevity commitment
of up to 12 years and the company is strong enough to manage any inventory
backlog.The cumulative inventory has led to a net cash outflow from operating activities during
the first quarter of 2022. 5ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜MANAGEMENT REPORT
Management Report
Business Strategy
Espressif Systems’ business strategy emanates from our four key capabilities and our
four key services/products. More specifically the four key capabilities include
Espressif’s connectivity and chip design OS-level development software solutions and
our engagement with our ecosystem. Our four key services and products include our
development environment software tools cloud services and detailed documentation
support. The above-mentioned structure ensures that our products are the heart of
numerous commercial AIoT applications in different markets including smart home
consumer electronics industrial automation healthcare etc.IoT Overview
Amazon Google Apple Microsoft Internet HomeKit Azure XiaoMi Baidu Alibaba Tencent Platform
Smart Consumer Industrial
Home Electronics Automation Healthcare
Internet of Energy Business
Vehicles Management Education … Application
Developer Open-source Social Video- Developer
Ecosystem Platform Platform Techblog sharing TPPS …Platform Ecosystem
AI Voice AI Image Peripheral Connect Remote Software
Recognition Recognition Driver Control Mesh Monitor … Solution
ESP IoT OS Support for Other OS Operating
ESP-IDF NuttX / Zephyr / Vela / OpenHarmony System
Wi-Fi 4/Wi-Fi 6 BLE 5.0/BLE 5.2 Thread/Zigbee Connectivity
Technology
&
Wireless SoC RISC-V AI Security Chip DesignAccelerator Encryption
* ESP RainMaker，an AIoT cloud platform that enables customers to quickly build their own solutions based onenterprise-grade cloud computing with a single-click deployment.
6
Cloud Service *
Documentation
Development Environment
Tools SoftwareESPRESSIF SYSTEMS｜Q1 2022 REPORT｜MANAGEMENT REPORT
Developer Community Metrics
ITEM April 27 2022 Dec 31 2021 change%
GitHub (Worldwide open-source development platform)
ESP32 Projects 32742 29007 13%
ESP8266 Projects 36438 35055 4%
Gitee (Chinese open-source development platform)
ESP32 Projects 2719 2592 5%
ESP8266 Projects 1926 1867 3%
CSDN (Chinese Tech-blog platform)
Search results for ESP32 83381 79188 5%
Search results for ESP8266 31055 30033 3%
Hackaday (open-source hardware platform)
ESP32 projects 4029 3816 6%
ESP8266 projects 5871 5789 1%
Reddit
ESP32 group members 49758 46540 7%
ESP8266 group members 55168 53523 3%
bilibili (Chinese video-sharing platform)
Official account followers 18996 17502 9%
Official account views 455506 390000 17%
YouTube
Official account subscribers 11800 11600 2%
Official account views 567465 556846 2%
ESP32 community videos 522995 466459 12%
ESP8266 community videos 725961 687155 6%
Views of most watched ESP32 community video around 2.5m around 1.5m
Views of most watched ESP8266 community video around 1.5m around 1.5m
N.B.：
Statistical data derived from different platforms may be based on different collecting methods. It is possible for
certain platforms to modify their algorithms from time to time and therefore impact the resulting statistical data.The above-mentioned data resulted from the Company’s research.
7ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜MANAGEMENT REPORT
Ownership of Securities
Basic information of securities
Share types Ordinary share
Share capital 80374966 (as of March 31 2022)
Listing Shanghai Stock Exchange (SSE)
Ticker 688018.SH
Listing Date 2019-07-22
Shareholder Structure as of Mar 31 2022
Shareholder Share Numbers Percentage (%)
Espressif (Hong Kong) Investment Ltd. 34860000 43.37
Shinvest Holding Ltd. 2804446 3.49
Yadong Beichen Investment Management Co. Ltd. 2568484 3.20
MERRILL LYNCH INTERNATIONAL 2056361 2.56
BOC - Franklin Templeton Sealand Fund 1791489 2.23
ABC - Franklin Templeton Sealand Fund 1251882 1.56
Ningbo Meishan Free Trade Port Le Tun Investment Management
Partnership (Limited Partnership) 1046030 1.30
MORGAN STANLEY & CO. INTERNATIONAL PLC. 940162 1.17
CMB－Franklin Templeton Sealand Fund 915473 1.14
BOC - Cathay Pacific CES Semiconductor Chip ETF 886724 1.10
Top ten shareholders 49121051 61.12
Other public shareholders 31253915 38.88
Total of outstanding shares 80374966 100.00
8ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜MANAGEMENT REPORT
Risks and Uncertainties
Financial Risk
The Company performs periodic credit evaluations of its customers’ financial condition
and generally requires no collateral from its customers. The Company provides an
allowance for expected credit losses based on the net amount expected to be collected
on such receivables. Losses have not been significant for any of the periods presented.R&D Risk
Espressif’s research and development strategy is focused on leveraging new technologies
for the creation of innovative AIoT products. Any delays or changes in the development of
these technologies by our industry partners or a failure of our products to achieve market
acceptance could compromise our competitive position.Competitors
As the market for AIoT products grows we face an increasing antagonism from relatively
large competitors such as Realtek MediaTek Infineon NXP Qualcomm and others.Intense competition from current players as well as new entrants may reduce our product
sales and market share.Suppliers
A significant portion of the Company’s products is fabricated by Taiwan Semiconductor
Manufacturing Co. (TSMC). The inability of TSMC to deliver wafers to the Company in a
timely manner could impact the production of the Company’s products for a substantial
period of time which could have an adverse effect on the Company’s business financial
condition results of operations and cash flow.Customers
The Company sells directly to end customers distributors solution providers and contract
manufacturers. Our customers are a mix of several big customers and numerous small
customers. The concentration ratio for our top-five customers was 29.05% 42.18% and
50.96% during the fiscal years of 2021 2020 and 2019 respectively. None of the
customers accounted for greater than 10% of our revenue during the fiscal year of 2021.
9ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜ FINANCIAL STATEMENTS (UNAUDITED)
Financial Statements (Unaudited)
Consolidated Balance Sheet (Unaudited)
CNY March 31 2022 December 31 2021
Assets
Current assets:
Cash and bank balances 414614465 367149078
Transactions of monetary assets 613102542 747409285
Notes receivable 6894036 11600177
Accounts receivable net 235629926 306823758
Prepayments 13725689 8172703
Other receivables 9483712 9519869
Including: Interest receivable 761091 298796
Inventories 396178543 326168928
Other current assets 256024366 210555311
Total current assets 1945653280 1987399110
Non-current assets:
Investment in other equity assets 56595200 56600700
Fixed assets 48801038 46176368
Construction work in progress
Right-of-use assets 21254676 21731123
Intangible assets 2996581 3191335
Long-term deferred expenses 7195129 7582637
Deferred income tax assets 12447849 6374870
Total assets 2094943752 2129056143
00
10ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜ FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheet (Unaudited)
CNY March 31 2022 December 31 2021
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable 73929814 138572198
Contract liabilities 23482662 17184196
Payroll payable 29624227 66168763
Taxes payable 8169446 6472494
Other payable 7662710 754261
Non-current liabilities due within one year 10969044 8641928
Total current liabilities 153837902 237793839
Non-current liabilities:
Lease liabilities 11149143 12116036
Deferred income tax liabilities 55590578 56128356
Total liabilities 220577623 306038230
Owners’ equity (or shareholders' equity):
Share capital 80374966 80158963
Capital reserves 1291696374 1266771034
Other comprehensive income -17356799 -15711579
Surplus reserves 33462951 33462951
Retained earnings 486188636 458336543
Total shareholder equity 1874366128 1823017913
Total liabilities and shareholders' equity 2094943752 2129056143
11ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜ FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Income Statement (Unaudited)
Three Months Ended
CNY March 31 2022 March 31 2021
Revenue 288948065 270513645
Cost of Revenue 170358125 162293828
Gross Profit 118589940 108219817
Taxes and surcharges 518433 669524
Selling expenses 9194881 9789393
General and administrative expenses 13404541 12202888
Research and development expenses 74848290 58890426
Financial expenses 568027 -1084134
Including: Interest expenses 212682
Interest income 696647 1056570
Add: Other income 252748 211159
Investment income (mark"-" for loss) 3180588 3824922
Incomes from changes in fair value (mark"-" for loss) 3076241 1721331
Credit impairment losses (mark"-" for loss) 8531
Assets impairment losses (mark"-" for loss) -412271 -186230
Assets disposal income (mark"-" for loss)
Operating Income 26153075 33331433
Add: Non-operating revenues
Less: Non-operating expenses 23470
Income before income taxes 26153075 33307963
Provision (benefit) for income taxes -1699018 -691412
Net Income 27852092 33999375
00
Earnings per share
Basic 0.3475 0.4248
Diluted 0.3475 0.4248
Three Months Ended
CNY March 31 2022 March 31 2021
Net Income 27852092 33999375
Other comprehensive income (mark"-" for loss) after tax
Changes to the fair value of investment in other equity instruments -5500 9280
Currency translation reserves -1639720 2769633
Other comprehensive income (mark"-" for loss) -1645220 2778913
Comprehensive income 26206872 36778288
12ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜ FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Cash Flow Statement (Unaudited)
Three Months Ended
CNY March 31 2022 March 31 2021
Operating Activities
Cash from sales of merchandise and provision of services 392796778 296301671
Tax refund 27316374 14728575
Other received cash related to operational activities 9288587 1533905
Subtotal of cash inflow from operational activities 429401738 312564150
Cash paid for merchandise and services 336017954 214649468
Cash paid to and for employees 107719618 89711836
Cash paid for taxes and surcharges 6938817 5945478
Other paid cash related to operational activities 15595855 15755867
Subtotal of cash outflow from operational activities 466272244 326062649
Net cash flow provided by operating activities -36870506 -13498498
Investment activities
Cash arising from disposal of investments 833768443 858355385
Cash arising from investment income 1427583
Net cash arising from disposal of fixed assets intangible assets and other 5510
lOotnhge-rt erermce aivsesde tcsash related to investment activities
Subtotal of cash inflow from investment activities 835196026 858360895
Cash paid for purchase and construction of fixed assets intangible assets
and other long-term assets 12606551 4900519
Cash paid for investments 755100000 909770000
Other paid cash relating to investment activities
Subtotal of cash outflow from investment activities 767706551 914670519
Net amount of cash flow provided by investment activities 67489475 -56309624
Financing activities
Cash arising from the issuance of common stocks 20316335
Including: Cash arising from subsidiaries absorbing investments by
Subtomtianlo orift yc asshhar ienhflooldwe rfsrom financing activities 20316335
Cash paid for the distribution of dividends and profits or payment of 32742816
intedreivsitdsends and profits to minority shareholders by subsidiaries
Other cash payments relating to financing activities 1236611 1936027
Subtotal of cash outflow from financing activities 1236611 34678843
Net cash flow provided by financing activities 19079723 -34678843
Impact of fluctuation in exchange rate on cash and cash equivalents -2226953 3047730
Net increase in cash and cash equivalents 47471739 -101439235
Add: Cash and cash equivalents at the commencement of the period 367142726 503239843
Cash and cash equivalents at the end of the period 414614465 401800608
13ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜ FURTHER INFORMATION
Further Information
Terms and Conditions of the Report
Responsibility Statement
The Board of Directors the Board of Supervisors and executive management of the
Company warrant that the contents of this report are true accurate and complete and
do not contain any false information misleading statements or material omissions
severally and jointly accepting any legal responsibility thereof.Shanghai 29 April 2022
Espressif Systems
Board of Directors Board of Supervisors
Teo Swee Ann Lv Zhihua
Founder and Chairman Employee-elected
Ng Pei Chi Fu Hanyu
Information Technology Officer Shareholder-elected
Teo Teck Leong Wang Yiwen
Shareholder-elected Shareholder-elected
Xu Xin
Shareholder-elected Executive Management
Lan Yuzhe Teo Swee Ann
Independent Director Founder and CEO
Koh Chuan Koon Wang Jue
Independent Director Deputy General Manager
Lee Sze Chin Shao Jingbo
Independent Director Financial Director
Forward-looking Statements
This report contains forward-looking statements and/or assessments about the SPRESE SIF
business financial condition performance and strategy of the Espressif Group. These
statements and/or assessments are based on assumptions and management
expectations resting upon currently available information and current estimates. These Declaration
are subject to a multitude of uncertainties and risks many of which are partially or
entirely beyond Espressif’s control. Espressif’s actual business development financial S
condition performance and strategy may therefore differ from what is discussed in this YSTEMS
report.
14ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜ FURTHER INFORMATION
List of abbreviations
AI Artificial Intelligence
AIoT Artificial Intelligence and Internet of Things
Bluetooth LE Bluetooth Low Energy
CEO Chief Executive Officer
CES Consumer Electronics Show
EBITDA Earnings Before Interest Taxes Depreciation and Amortization
Espressif ESPRESSIF SYSTEMS (SHANGHAI) CO. LTD.ETF Exchange Traded Fund
G&A General and Administrative
GM Gross Margin
IoT Internet of Things
R&D Research & Development
RF Radio Frequency
RISC-V MCU Reduced Instruction Set Computer-V Microcontroller Unit
ROE Return on Earnings
SG&A Selling General and Administrative
SH Shanghai
SoCs System on Chips
TPPS Third-Party Plugins
TSR Techno Systems Research
15ESPRESSIF SYSTEMS｜Q1 2022 REPORT｜
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Investor Relations
ir@espressif.com
Official Platforms
www.espressif.com
AIoT
blog.espressif.com
github.com/espressif
esp32.com I esp8266.com I bbs.espressif.com
Social Media
twitter.com/EspressifSystem
facebook.com/espressif
linkedin.com/company/espressif-systems
youtube.com/EspressifSystems
instagram.com/espressif_systems_official
bilibili.espressif.com
Copyright ? 2022 Espressif Systems (Shanghai) Co. Ltd. All rights reserved. All trade names trademarks and registered trademarks mentioned in this
document are property of their respective owners and are hereby acknowledged. The term “Espressif” refers to Espressif Systems (Shanghai) Co.Ltd. and/or its subsidiaries. This report is prepared in Chinese and English respectively. In case of any discrepancies between Chinese and foreign
interpretations the Chinese version shall prevail.