ÀÖöοƼ¼£ºEspressif Systems Q12024Report

Q12024

REPORT

Contents

AboutEspressif

BusinessHighlights

ManagementReport

ConsolidatedFinancialStatements(Unaudited)

FurtherInformation

FACTS ABOUT ESPRESSIFESPRESSIF SYSTEMS | Q1 2024 REPORT |

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 andcost-effective AIoT solutions. We have accomplished a hardware-and-software, closed-loop development cycle for aseries of core technologies, including RF, Wi-Fi & Bluetooth LE network protocol stacks, RISC-V MCUs, AI instructionsets 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 about 630 members ofstaff from almost 30 countries and regions, +78% of whom are based in our Research & Development Department.We have eight R&D centers in ?ve countries, including China (4 out of 8), India, the Czech Republic, Brazil andSingapore. The company¡¯s increasing reputation in recent years has been instrumental in attracting talentedengineers from across the world. Being united by our passion for technology, our diversity is our strength, as itallows the creative blending of different kinds of knowledge, perspectives and ways of thinking.

About Espressif

ABOUT ESPRESSIFESPRESSIF SYSTEMS | Q1 2024 REPORT |

global Wi-Fi MCU

market leader

Hefei

HefeiCzechRepublic

CzechRepublicOur R&D Centers

Our R&D CentersBrazil

BrazilWuxi

WuxiShanghai

Singapore

SingaporeIndia

IndiaChina

ChinaCampinas

CampinasBrno

BrnoPune

over 1 billion globalIoT chip shipments

millions ofdevelopers

BUSINESS HIGHLIGHTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2024 REPORT |

Key Financial Data (Unaudited)Business Highlights (Unaudited)

Gross margin

Key Financial Indicators (Unaudited)

Earnings per share:

March 31, 2024

Three Months Ended

Non-GAAP Adjustment

BUSINESS HIGHLIGHTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2024 REPORT |

Financial AnalysisEspressif¡¯s total revenue in the ?rst quarter of the current ?scal year (2024) was CNY 387.19 million, marking anincrease of 21.71% from CNY 318.12 million in the ?rst quarter of 2023, due to the expansion of product categories.Therefore, the net income was CNY 53.92 million, which marked an increase of 73.43% year-on-year, mainly due tothe increase of revenue.The overall gross margin was 41.93% and remained stable. Customers in China¡¯s mainland prefer purchasing chips,while customers from the rest of the world and their OEM or ODM in China¡¯s mainland prefer modules. We keep thechip gross margin at a reasonable level, in order to support our future R&D expenditure.

26.8%

26.8%

7.2%

7.2%

16.0%

16.0%

38.1%

38.1%

47.1%

47.1%

41.9%

41.9%

26.9%

26.9%

8.2%

8.2%

10.8%

10.8%

36.7%

36.7%

48.4%

48.4%

40.7%

Q1 2023Q1 2024

Revenue byArea in Q1 2024

Revenue by SalesMode in Q1 2024

Top-5 CustomerConcentration Rate,2020 - Q1 2024

Revenue by Product Category in Q1 2024

Key Financial Indicators in Q1 2024

40.7%

Q1 2024

Q1 2024Q1 2023

56.7%

56.7%

34.2%

34.2%

42.7%

ChipModuleOthers

0.6%

1.2%

42.7%

72.3%

72.3%

China'sMainland

Rest ofthe World

China'sMainland

Rest ofthe World2020

28.6%

26.4%

26.4%

29.0%

29.0%

42.2%

42.2%

69.1%

69.1%

DirectIndirect

Business Strategy

Espressif Systems¡¯ business strategy emanates from our service/product areas and our engagement with thedeveloper ecosystem.Our product and service areas include AIoT chips, OS-level development environments, software tools, applicationsolutions, and value-added services, such as Cloud and Matter. The above-mentioned products ensure that we arein the heart of numerous commercial AIoT applications in different markets, including smart home, consumerelectronics, industrial automation, healthcare, etc.

Management Report

SoCs

SoCsModules

ModulesDevKits

DevKitsHMI SmartDisplays

FaceRecognition

Cloudservice

CloudserviceMatterSolution

MatterSolution

OS-level development environments & software tools

OS-level development environments & software toolsCustomers

Customers

Brands

¡­

ESPRESSIF SYSTEMS | Q1 2024 REPORT |Core Technologies

SoCs

AI

MANAGEMENT REPORTESPRESSIF SYSTEMS | Q1 2024 REPORT |

ESP8266, ESP32, ESP32-S, ESP32-C, ESP32-H and ESP32-P Series

Espressif offers integrated, reliable, andenergy-ef?cient SoCs for Wi-Fi,Bluetooth Low Energy, Thread and Zigbeeto various segments of the IoT market.

CloudESP RainMaker

A comprehensive, development-free andmaintenance-free AIoT solution for privateCloud deployment.It is an all-inclusive solution that coverseverything from the underlying chip to device?rmware, third-party voice-assistantintegrations, mobile apps and the dashboard.Customers can build their own AIoT devicesand ecosystem, with ESP RainMaker.

Software

MatterOne-stop Matter SolutionThis is the culmination ofEspressif¡¯s ongoing contribution tothe Matter platform in variousareas, including protocolformulation, core stackimplementation and certi?cationtest events.

OSESP-IDF

Espressif¡¯s of?cial IoT DevelopmentFramework.It provides a self-suf?cient SDK for anygeneric application-development on theseplatforms, using programming languages suchas C and C++.ESP-IDF currently powers millions of devicesin the ?eld, and enables building a variety ofnetwork-connected products, ranging fromsimple light bulbs and toys to major appliancesand industrial devices.

With our open-source software,such as Espressif's IoTDevelopment Framework ESP-IDF,Audio Development FrameworkESP-ADF, Mesh DevelopmentFramework ESP-MDF, CloudConnectivity Platform ESPRainMaker, Facial RecognitionDevelopment Framework ESP-WHO, and Voice-ControlledAssistant ESP-Skainet, we havedeveloped a framework for buildingAIoT applications, which is bothcomplete and innovative.

3A Audio Algorithmsincluding Acoustic Echo Cancelation (AEC),Audio Noise Suppression (ANS) andAutomatic Gain Control (AGC), whichsigni?cantly reduce noise and echo in calls,keeping high-quality voice intercoms stable atall times.

AFE (Audio Front-End) Algorithmsquali?ed as aªË¡°Software Audio Front-EndSolution¡± for Amazon Alexa Built-in devices.

Key TechnologiesWi-Fi 6E

RISC-V MCU

Technical Breadth

Technical BreadthIn progress

In progress32-bit Multiple-Core

32-bit Multiple-Core

Technical Depth

Technical DepthConnectivity

ConnectivityComputing

ComputingMedium Range

Medium RangeAI

Thread

Short Range

Short RangeBluetooth 5.2 (LE)

Bluetooth 5.3 (LE)

Bluetooth 5.3 (LE)Bluetooth 5.4 (LE)

Bluetooth 5.4 (LE)AI

Multimedia

MANAGEMENT REPORTESPRESSIF SYSTEMS | Q1 2024 REPORT |

Key Products - AIoT Chips

Espressif is recognized as a market leader in the ?eld of Wi-Fi MCUs. We released our ?rst Wi-Fi MCU in 2014, andour ?rst Wi-Fi/Bluetooth LE combo chip in 2016. In 2020, we successfully developed our own RISC-V MCU core,adding it to our product portfolio, while in 2021, we released our ?rst Thread/Zigbee/Bluetooth LE 5 combo chip anda 2.4GHz Wi-Fi 6 chip. In 2022, we released our ?rst 2.4 & 5GHz Wi-Fi 6 chip. In 2023, we revealed ESP32-P4, adual-core RISC-V MCU, expanding the current portfolio to address the high-performance computation needs of IO-Rich, HMI, and AIoT applications. In 2024, we announced ESP32-H4, a low-power SoC with 802.15.4 & Bluetooth 5.4(LE), which caters to increasing demands for low-power wireless devices, boasting signi?cant upgrades in powerconsumption, connectivity features, and memory expansion capabilities.ªËIn fact, we have been constantly diversifying our product portfolio, introducing new solutions through our numerousinvestments. Thus, we now have various product lines in the main short- and medium-range connectivitytechnologies and our product range has expanded to AIoT SoCs. Our core technologies are self-developed,including connectivity IPs, RF components, RISC-V IPs, software frameworks, tools, AI functions etc.We also provide IoT modules based on our chips. The bene?t for customers is that they can get direct support fromus, shortening and optimizing their supply chain, even in case of chip shortages.

MANAGEMENT REPORTESPRESSIF SYSTEMS | Q1 2024 REPORT |Key Products - Product Map

High-Performance

Cost-Effective

NewRelativelyNewClassic

ESP

8266

C2

C232-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

C3

C332-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

H2

H232-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

C6

C632-bit Xtensa MCU

32-bit Xtensa MCUESP32 -

ESP32 -

S2

S232-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

P4

P4

H.264 encoding

H.264 encodingAI

AI32-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

C5

C532-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

H4

H4ESP

ESP

MarketThe market for wireless SoCs is truly diverse, including applications for smart homes (e.g., smart lights, airconditioners, ovens, coffee machines, etc.), consumer electronics (e.g., smart speakers, drones, etc.), industrialautomation (e.g., mechanical arms), smart agriculture (e.g., soil PH detector, CO2 detector, etc.), healthcare (e.g.,monitoring devices for diabetes, blood pressure, etc.), energy control (solar energy devices, EV chargers, etc.), theinternet of vehicles (OBD devices, dashboards, etc.), and education (talking pens, interactive whiteboards, etc.).We seem to be witnessing an economic recovery, with both new and existing customers showing growth inbusiness. At the same time, we have also seen the emergence of applications in new areas, such as beautydevices. After experiencing the low point of 2023, clients in the new energy sector have also begun to show signs ofrecovery.

Smart Home

Smart Ovens

IndustrialAutomation

IndustrialAutomationMechanical Arms

Mechanical ArmsHealthcare

HealthcareMedical Detectors

Medical Detectors

Intelligentinstrument panel

Intelligentinstrument panelTalking Pens

Talking PensSmartAgriculture

SmartAgricultureSoil PH Detector

Soil PH DetectorInternet ofVehicles

ConsumerElectronics

ConsumerElectronicsEducation

EducationSmart Solar

Panels

Developer Community Contents

N.B.£º

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 totime and, therefore, impact the resulting statistical data. The above-mentioned data resulted from the Company¡¯s research at the end of each quarter reported here,unless otherwise stated.The search results of the keyword "ESP32" include the ESP32 series, ESP32-C series, ESP32-S series, and ESP32-H series.[1] Due to the unpredictable adjustments in CSDN search results, which have rendered them non-comparable over time, we have ceased tracking this data.[2] [3] As the quantity of YouTube videos pertaining to ESP32 and ESP8266 surpasses the maximum retrieval limit of 1,000,000 imposed by our API, we havesuspended the updating of this dataset

Business Model

Espressif has deployed the Business-to-Developer type of marketing, not only because it has gained prominence inrecent years, but also because it has proven to be more effective since the in?uence of developers on organizationsof all sizes has gained traction. In other words, most developers are R&D employees in various companies and bringforth business opportunities from the companies they work for.ªËThis way, the developer ecosystem we have created at Espressif demonstrates how the value of networks can growexponentially:

?The more developers we attract as customers, the more hardware and software solutions we generate.?The more successful hardware and software solutions we create, the more our reputation spreads with positivefeedback from happy customers/developers.?The above-mentioned interaction between people in our network prompts the creation of more content, which -inturn- attracts more users/developers searching for new content.

?Likewise, other third-party development platforms join our ecosystem and bring in new developers, as ourin?uence continues to grow.Having successfully applied the B2D2B model, Espressif can now focus on R&D investments, while maintaining asmall business team that supports a large number of customers directly. In fact, most of our revenue is gainedthrough direct sales.

Business-to-Developer-to-Business (B2D2B)

Books about ESP Products

TEXT

TEXT

More than 200 books on how to use ESP products can be found in the developer community and cover over adozen languages.

Ownership of Securities

Shareholder Structure as of Mar 31, 2024

Basic information of securities

Espressif (Hong Kong) Investment Ltd.

Espressif Systems (Shanghai) Co., Ltd. Repurchase SpecialSecurities Account

Risks and Uncertainties

Financial Risk

The Company performs periodic credit evaluations of its customers¡¯ ?nancialcondition and generally requires of its customers no collateral. The Companyprovides an allowance for expected credit losses, based on the net amountexpected to be collected on such receivables. Losses have not beensigni?cant for any of the periods presented in this report.

R&D RiskEspressif¡¯s research and development strategy is focused on leveraging newtechnologies for the creation of innovative AIoT products. Any delays orchanges in the development of these technologies by our industry partners, ora failure of our products to achieve market acceptance, could compromise ourcompetitive position.CompetitorsAs the market for AIoT products grows, we face an increasing antagonism fromrelatively large competitors, such as Realtek, MediaTek, In?neon, NXP,Qualcomm and others. Intense competition from current players, as well as newentrants, such as Silicon Labs and Nordic, may reduce our product sales andmarket share.

SuppliersA signi?cant portion of the Company¡¯s products is fabricated by the TaiwanSemiconductor Manufacturing Company Limited (TSMC). The inability of TSMCto deliver wafers to the Company in a timely manner could impact the productionof the Company¡¯s products for a certain period of time, which could have anadverse effect on the Company¡¯s business, ?nancial condition, results ofoperations and cash ?ow.

CustomersThe Company sells directly to end customers, distributors, solution providers andcontract manufacturers. Our customers are a mix of several big customers andnumerous small customers. The concentration ratio for our top-?ve customerswas 28.59% in the ?rst quarter of 2024.

MANAGEMENT REPORTESPRESSIF SYSTEMS | Q1 2024 REPORT |

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2024 REPORT |

Consolidated Balance Sheet (Unaudited)

Consolidated FinancialStatements (Unaudited)

Assets

AssetsCurrent assets:

Total current assets

Non-current assets:

Non-current assets:

Debt investment

Total assets

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2024 REPORT |

Consolidated Balance Sheet (Unaudited)

Liabilities & Shareholders¡¯ Equity

Liabilities & Shareholders¡¯ EquityCurrent liabilities:

Non-current liabilities:

Owners¡¯ equity (or shareholders' equity):

Total liabilities and shareholders' equity

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2024 REPORT |

Consolidated Income Statement (Unaudited)

Revenue

Taxes and surcharges

Add: Other income

Net Income

Earnings per share

Three Months Ended

Net Income

Comprehensive income

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2024 REPORT |

Consolidated Cash Flow Statement (Unaudited)

Operating Activities

Cash paid for merchandise and services

Investing activities

Financing activities

Cash paid for the distribution of dividends and pro?ts, or payment of interests

Impact of ?uctuation in exchange rates on cash and cash equivalents

Cash and cash equivalents at the end of the period

Forward-looking Statements

This report contains forward-looking statements and/or assessments about the business,?nancial condition, performance and strategy of the Espressif Group. These statements and/orassessments are based on assumptions and management expectations resting upon currentlyavailable information and current estimates. These are subject to a multitude of uncertaintiesand risks, many of which are partially or entirely beyond Espressif¡¯s control. Espressif¡¯s actualbusiness development, ?nancial condition, performance and strategy may, therefore, differ fromwhat is discussed in this report.

FURTHER INFORMATIONESPRESSIF SYSTEMS | Q1 2024 REPORT |

Terms and Conditions of the Report

The Board of Directors, the Board of Supervisors and executive management of the Company warrant that thecontents of this report are true, accurate and complete, and do not contain any false information, misleadingstatements or material omissions, severally and jointly accepting any legal responsibility thereof.Shanghai, 18 April 2024Espressif Systems

Further Information

Responsibility Statement

ESPRESS

I

F

Declaration

S

Y

STEM

S

Board of Directors

Board of Directors

Teo Swee Ann

Ng Pei Chi

Wang Jue

Teo Teck Leong

Lan Yuzhe

Koh Chuan Koon

Lee Sze Chin

Board of Supervisors

Board of SupervisorsLv Zhihua

Fu Hanyu

Wang Yiwen

Executive Management

Executive Management

Teo Swee Ann

Wang Jue

Shao Jingbo

FURTHER INFORMATIONESPRESSIF SYSTEMS | Q1 2024 REPORT |

List of abbreviations

Investor Relations

Copyright ? 2024 Espressif Systems (Shanghai) Co., Ltd. All rights reserved. All trade names, trademarks and registeredtrademarks mentioned in this document are the 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 written in both Chinese andEnglish. In case of any discrepancies between Chinese and foreign interpretations, the Chinese version shall prevail.All amounts presented in these condensed Consolidated Financial Statements are shown in CNY unless stated otherwise. Slightdiscrepancies between the amounts presented may occur due to rounding.

Social Mediair@espressif.comOf?cial Platforms

ªÏ.espressif.comblog.espressif.comgithub.com/espressifesp32.com

twitter.com/EspressifSystemfacebook.com/espressiflinkedin.com/company/espressif-systemsyoutube.com/EspressifSystemsinstagram.com/espressif_systems_of?cialbilibili.espressif.com