Earnings Call Transcript - GGR Q1 2022

Operator, Operator

Welcome to the Gogoro Inc. First Quarter 2022 Earnings Call. This session will be recorded. All participants are currently muted during the question-and-answer session. If your question is selected, your microphone will be muted so that you can ask your question. I would like to introduce Bruce Aitken, CFO of Gogoro, who will kick us off.

Bruce Aitken, CFO

Thanks, operator, and thanks to everyone for taking the time to join us today. I'm Bruce Aitken, CFO of Gogoro, and I'm pleased to welcome you to our first-ever quarterly earnings call. Hopefully, by now, you've seen our earnings release. If you haven't, it is available on the Investor Relations tab of our website at www.investor.gogoro.com. We will also be displaying materials on the webcast screen as we go along. Given that this is our first earnings call, our Chairman and CEO, Horace Luke will provide a quick company introduction before we review Q1 results. We're pleased with our Q1 results, and we look forward to sharing those with you, as well as giving some guidance into what we're seeing as the outlook for Q2 and the balance of 2022. Before Horace shares, I'd like to introduce Michael Bowen, who will share the process for today's call and provide some important disclosures.

Michael Bowen, Investor Relations

Thanks, Bruce. As a reminder, you are all currently on mute, but we will move into a Q&A session after the prepared remarks, and we'll answer as many questions as time allows. After Horace has given a brief overview of Gogoro's business highlights from Q1, Bruce will delve deeper into the Q1 financial results. Before we get started, allow me to remind you that during the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements about our second quarter and fiscal 2022 results. Management's expectations for our future financial and operational performance, the capabilities of our technology, projections of market opportunity, market share, and potential growth statements related to the expected impact of the COVID-19 pandemic, statements about strategic collaborations, partnerships, joint ventures, as well as regulatory developments and our plans, prospects, and expectations are not promises or guarantees. They are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed prior to the market open today and in our SEC filings. We undertake no obligation to update forward-looking statements, except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-IFRS financial measures should be considered in addition to, not as a substitute for or in isolation from IFRS measures. Additional information about these non-IFRS measures, including the reconciliation of non-IFRS to comparable IFRS, is included in our press release and investor presentation provided today. Now over to Horace.

Horace Luke, CEO

Thanks, Bruce and Michael. This is our first earnings call as a publicly traded company, and we're thrilled to have this opportunity to meet with you all today. We completed our business combination with Poema Global on April 4 and began trading on the NASDAQ under the ticker GGR on April 5. I'd like to begin today by giving you a brief introduction to Gogoro and our business model. Perhaps it is well known to some of you today, but it may be new for others on the call. So I want to spend a little time on a quick introduction and set the stage for our business priorities for 2022. Gogoro was founded in 2011 with a mission to put smart swappable electric power within reach of every urban rider in the world. We believe that electric mobility adoption is inevitable and that 2-wheelers will drive this transformation faster than any other mode of transportation. In urban centers worldwide, where millions of people live in close quarters, battery swapping is the only viable solution for these small agile two-wheelers. By developing our technology in a customer-centric, vertically integrated way, we gain a unique advantage over our competitors. By partnering with some of the world's most recognized 2-wheel OEMs, we can reach over 500 million riders in the world's largest 2-wheeler markets. Think of Gogoro as a technology and platform provider. Yes, we build and sell our own branded vehicles, which continue to be among the best-performing electric 2-wheelers available in the market today, but we also enable a total of 10 brands to sell over 47 different SKUs of vehicles on our battery swapping platform, allowing them to use the battery swapping network we have developed and deployed. These SKUs include both 2-wheelers and 3-wheelers. They can be lighter, lower-speed vehicles powered by a single battery or 125 CC equivalent vehicles powered by two batteries or even larger 13-kilowatt 3-wheelers that use a total of four battery packs. Our model is that customers purchase a Gogoro or a partner vehicle without the battery included. This provides dual benefits: the battery cost, which is approximately 35% to 45% of the BOM cost for many EVs, can now be excluded from the vehicle price. Instead of purchasing the battery, customers can select from a variety of subscription plans that meet their needs. Those plans resemble data plans for a cellphone. In Taiwan, the entry-level plans are approximately $10 a month, while an all-you-can-ride plan costs around $40 a month. Customers accumulate rapidly and generate recurring revenue over the roughly ten-year lifespan of the vehicle. We believe with battery swapping, we have addressed the biggest concerns of our customers regarding safety, riding range, battery charging time, and cost. By placing efficient Go stations across cities, we created a unique end-to-end user experience that has been recognized as the best of its kind in the world. We are very successful in launching Gogoro branded and partner vehicles and services in Taiwan, where we now have over 467,000 subscribers and over 2,185 Go stations. We have handled over 277 million total battery swaps to date. Our automated system manages over 350,000 swaps each day. Combined, our riders have accumulated over 5 billion kilometers traveled using battery swapping and saved hundreds of thousands of tons of CO2 emissions. The Gogoro battery swapping system is robust and we're ready to continue our growth in Taiwan while also expanding into new markets. Between Taiwan, China, and India alone, there is a total available market of approximately 60 million to 65 million units per year. We have established great partnerships and we're excited for our upcoming expansion and growth. Additionally, Gogoro will continue to invest in R&D. Approximately 22% of our workforce is engaged in either hardware or software product development. We have self-developed all our hardware and software capabilities. Today, we manufacture vehicles as well as powertrains and battery packs in our own highly automated facilities. Self-developed technology is at the core of who Gogoro is. We believe we have the right business model and building blocks for scale, and we're ready to go. Despite experiencing some impacts from COVID in mid-2021, we ended the year with $366 million in revenue, $39 million overall guidance, slightly up from 2020. We exited 2021 with over 450,000 subscribers, a 23% increase from the year before. We have been EBITDA positive since 2019 and have built a company with real technology, real products, and real revenue. I invite you to review the materials on our investor site and other online content for a deeper perspective on Gogoro. We are passionate about our mission. We're making it attractive for customers to be responsible. Let me now shift gears a bit and fill you in on our macro strategy for 2022. We have three areas of focus. First, we'll continue to expand our vehicle and hardware sales in Taiwan by increasing our penetration, broadening our coverage, and growing sales to B2C, B2B, and B2G customers. Secondly, we will further develop our Global Solutions business. We will build on the success of our Gogoro component kits to enable our partners to diversify their product offerings and launch multiple SKUs in China and India. Last but not least, we'll grow our Gogoro network business both in Taiwan and internationally. We will increase Go station density, improve network efficiency, and launch services in additional cities in China and India, as well as grow the pilot in Indonesia. Combined, we expect this strategy to result in an estimated $460 million to $500 million in revenue in 2022 and set the stage for further success and expansion. Bruce will now walk us through our business and financial highlights for Q1 2022.

Bruce Aitken, CFO

Thanks, Horace. Q1 2022 was a record revenue quarter for Gogoro and another solid quarter of execution. We saw a large increase in vehicle and hardware sales versus previous years and continued to accumulate subscribers on our Taiwan network. Additionally, we expanded our network offering in China to three cities and are continuing to make progress in other markets. Let me unpack each of those in terms of our Q1 progress. According to statistics published by Taiwan's Department of Motor Vehicles, there were 12,806 Gogoro vehicles registered in Q1, up from 8,120 in 2021, a 57.7% increase. Additionally, partner vehicles, which are tracked under each brand's individual sales, represented additional volume in Q1. We extended our Taiwan channel, and now Gogoro vehicles are for sale in a total of 310 traditional scooter sales locations, making Gogoro vehicles broadly available and increasing customer touchpoints. Our market share in the six biggest cities in Taiwan was 9.2% during Q1, up from 5.8% in Q1 2021. Our partners launched several new vehicles in Q1, perhaps most notably the Yamaha EMF and the A-motor-AI-4. In China, after initially launching in Hangzhou in Q4 of 2021, we launched additional network services in Wuxi and Kunming. We now have more than 100 active stations in Hangzhou, 40 in Wuxi, and 35 Go Stations operational in Kunming. Unfortunately, China's current COVID circumstances create uncertainty with regards to the balance of 2022, but our plans are to enter six cities before the year ends. There are currently six SKUs of the ID vehicles available. Yadea plans to launch more than ten SKUs by year-end. DaChangJiang, another partner in China, will launch a battery-powered vehicle this year as well. Providing customers with sufficient choice of power, price, and styling is critical for scaling the I.1 ph] JV network, which is invested in by Yadea and DaChangJiang. We continue to progress towards a late 2022 network launch in India, where consumer adoption of EVs was trending positively until a recent spate of battery fires. Working with India's largest vehicle OEM Hero Motor Corp, we believe the Gogoro battery swap solution serves an unmet need in the second-largest 2-wheeler market in the world. In Q1, while we were still a privately held company, we worked towards our business combination with Poema Global. Our business combination included a PIPE, which was heavily oversubscribed and included investment from existing shareholders, large new strategic shareholders, and new institutional investors. These investments came without discount and resulted in a total of $344.8 million delivered to Gogoro's balance sheet before transaction expenses. This cash provides ample capital for planned expansion into China, India, and other future markets. We continued to focus on product development, both on vehicles and batteries, announcing several important milestones in Q1. At our core, we are an innovation and technology company. The self-developed SmartCore technology provides high-speed computing power with an expandable open architecture that enhances processing speed and connectivity of the electronic control unit and motor control unit, increasing memory, long-distance monitoring, and IO control. The SmartCore platform provides three times the computing power available on Gogoro's current smart scooters today, enabling a new generation of smart 2-wheel vehicles. We produced our 1 millionth battery pack during Q1 and are able to maintain full forward and backward compatibility. The millionth battery pack powers the first Gogoro vehicle ever manufactured, and the oldest battery pack in our network can power the latest and most advanced vehicle just shipped. Additionally, we introduced two second-life use cases for our batteries being deployed in smart street lights and smart parking meters. Finally, in the policy area, important progress was made. The Taiwan government announced a renewed commitment to banning the sales of ICE vehicles with the plan to mandate that no-emission vehicles comprise 30% of all 2-wheelers sold by 2030, 70% by 2035, and a complete ban on internal combustion engine vehicle sales by 2040. We believe this is made possible partly due to the popularity of our swap-and-go battery swapping network successfully deployed in Taiwan today. The Indian government published draft guidance on battery swapping standards. In Singapore, we collaborated with the government to release TR25, a battery swapping technical reference. These documents indicate a clear move towards the need for safe, scalable battery swapping solutions, and Gogoro's solutions align well within these guidelines. We expect to continue meaningful dialogue with a variety of governments to explore how Gogoro technology can support the faster adoption of safe battery swapping solutions for urban centers in the region. With that summary of our business highlights, let me shift our focus specifically to our financial performance. We've accomplished much in Q1, and I'm pleased to share our financial metrics. Let me add some context into revenue, gross margin, EBITDA, and net loss results, as well as provide guidance for the balance of 2022. We typically experience seasonality in the first quarter of the fiscal year due primarily to weather and the Chinese New Year holidays, resulting in Q1 revenue typically being lower than that of the other quarters of the year. Government-reported registration of all scooters in Q1 over the last three years has ranged from approximately 18% to 21% in Taiwan, and seasonality impacts hardware sales. For the first quarter, revenue was $94.5 million, up 61% from $58.7 million in the same quarter last year. Sales of hardware and other revenues for the first quarter were $65.1 million, up from $34.8 million in the same quarter last year, primarily due to increased market share in Gogoro branded scooter sales in Taiwan. Government-reported registrations of Gogoro vehicles increased by 57.7% compared to the first quarter of 2021. Gogoro Network revenue for the first quarter was $29.4 million, up 23% from $23.9 million in the same quarter last year. This growth reflects a continuation in the electric transport market growth in Taiwan and an increase in our subscriber base. For the first quarter, gross margin was 13.7%, up from 12.7% in the same quarter last year. For the first quarter, non-IFRS gross margin was 14.2%, up from 12.7% in the same quarter last year. Gross margin and non-IFRS gross margin were driven by favorable changes in product mix and a decrease in production cost per electric scooter as our production scales. The first quarter 2022 net loss was $21.7 million, an increase of $2.5 million from $19.2 million in the same quarter last year. The additional net loss was primarily driven by employee share-based compensation and expenses associated with our merger with Poema Global. Adjusted EBITDA was $13.5 million, up 124.1% from $6 million in the same quarter last year. The increase was primarily due to our market share growth and hardware sales, accompanied by an increase in Gogoro Network subscribers, excluding non-cash share-based compensation and one-time nonrecurring costs related to our merger with Poema Global. Gogoro raised $344.8 million in gross proceeds from the completion of our merger with Poema Global on April 4, 2022. This cash allows us to invest in growth markets, and you will see us begin to deploy this capital in various ways, including investments in manufacturing, expansion of our networks, and other activities. We're pleased with our Q1 results, but we are also aware of various macroeconomic conditions, pandemics, and other global factors and current events, which could impact our results for the remainder of 2022. China is experiencing significant COVID uncertainty. Taiwan is currently facing a new wave of COVID. Global supply chains are under pressure, inflation is rising, and we have been impacted and may continue to be impacted. So we're providing guidance for revenue in the range of $460 million to $500 million for the full year 2022, which represents an anticipated increase of 25.7% to 36.6% compared to the full year 2021. Q2 revenue is expected to contribute around 20% of full-year revenue. Given the uncertainty regarding COVID's impact in both Taiwan and international markets and the associated foreign exchange downside risk from local versus U.S. dollars, we estimate that we will generate 90% to 95% of the full-year revenue from the Taiwan market. It has been a very eventful quarter for Gogoro, and we look forward to continuing to work hard to introduce battery swapping capabilities to new markets and new customers.

Operator, Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from the line of Fone Zhong from Benchmark Company. Please go ahead.

Unidentified Analyst, Analyst

Thanks for taking my questions. First, Bruce, hi. Congrats on a very strong quarter. My first question is regarding the guidance. I understand there are a lot of moving parts right now, especially given the COVID issue. I'm just wondering what assumptions you have baked in terms of low-end versus high-end guidance, and how impactful the COVID situation has been for the second quarter specifically? Secondly, your bottom line has been improving. I'm curious about what's the assumption for your guidance for 2022 bottom line on the EBITDA side and the key drivers behind it, if that's possible.

Bruce Aitken, CFO

So given the external headwinds we've mentioned, including COVID and other macroeconomic factors, we decided to provide a revenue range as we thought that was a conservative approach. We don't know what will happen exactly in the second half of the year in China or Taiwan. We're excited about the products we're offering and our technology, so we've chosen to give full-year guidance of $460 million to $500 million. EBITDA will continue to grow this year, and we’re providing only revenue projections going forward. However, we are excited again about the prospects. We do believe that there will be healthy EBITDA growth, and we'll be happy to share those results as they come across every quarter.

Unidentified Analyst, Analyst

Understood. Thanks, Bruce. My second question is regarding your international expansion. You mentioned you're on track to launch in India before year-end. Can you share any additional insights at this point? Also, I saw that you guys are scheduled to launch in Israel, I guess, in the summer. What's the market opportunity there and potential P&L contribution either this year or in the future?

Bruce Aitken, CFO

Sure. With our India expansion, as mentioned, we're on track to launch services towards the tail end of 2022. You may have seen recently that a number of different organizations have been slowing their electric transitions in India. We believe our battery swapping solution offers a great opportunity for customers in India to have a safe battery swap solution. We're excited to launch there, and vehicle development is underway alongside early stages of network development as well.

Unidentified Analyst, Analyst

Thank you, Bruce. I'll go back to the line.

Operator, Operator

Thank you. We have a follow-up question from Fone Zhong from Benchmark Company. Please go ahead.

Unidentified Analyst, Analyst

A few follow-ups on my side. First, have you observed any potential disruptions on the supply chain side? What is the current observation and what are your expectations from here?

Horace Luke, CEO

Thanks, Fone. It's Horace. Yes, there are potential disruptions due to the COVID impact and everything happening globally. For the next quarter, we do not foresee significant impacts, but we are very aware of the risks and are always prepared to mitigate them. So while we are cautious, we are also well-prepared.

Unidentified Analyst, Analyst

Understood. Thanks, Horace. My second follow-up is about Southeast Asia. It seems like there are continued partnerships with local governments. What's the roadmap for scaling up in that market? I understand some pilot studies are ongoing, but what are the potential scale-up opportunities?

Horace Luke, CEO

Yes. In Southeast Asia, especially with the pilot we launched in Jakarta with GoTo and the Gojek team, the idea was really to test whether the battery swapping solution would be well-received, particularly for commercial use cases. I'm pleased to report that the feedback has been outstanding regarding usability and battery swapability. We even had the pilot showcased to the President of Indonesia, who was very enthusiastic about electrification and its potential impact on the country. We will continue to work with the GoTo and Gojek team, as well as Foxconn and the Indonesian government to prepare for a successful launch in that market. We're excited to explore additional opportunities to meet the diverse needs in that market.

Unidentified Analyst, Analyst

Very helpful. Thanks, Horace. My last question is about your capital deployment. You mentioned there are several directions you’re considering. Can you elaborate on the major technology upgrades or product upgrades we might expect? Additionally, any thoughts on M&A?

Horace Luke, CEO

Absolutely. As we consider our product and technology offerings, we're progressing on various fronts, particularly on the vehicle side. Recently, we've launched a solid-state battery prototype for our swappable batteries. We are committed to innovation not just for user experience, but for the entire system. For example, our launch in Israel and Jakarta was achieved without sending any boots on the ground. We were able to manage everything remotely using our telematics and other systems developed over the years. This exemplifies our view on technology from end-to-end, not merely as enabling technology for users but also encompassing everything that manages the entire swapping, billing, and operations process. Regarding M&A, Gogoro is always interested in expanding our capabilities, both internally and through partnerships or other opportunities. We're keeping our eyes open, especially in this decade of clean mobility advancement and the electrification of vehicles. Many passionate companies are out there that we could potentially partner with. Nothing specific to report at this time, but we remain vigilant.

Unidentified Analyst, Analyst

Understood. That's very helpful. Thanks, Horace, and congrats on the quarter.

Operator, Operator

Thank you. This concludes our question-and-answer session. I would like to turn the conference back to Horace and Bruce for any closing remarks.

Horace Luke, CEO

Thanks, operator. Thank you, Bruce, and thank you, Michael. Thanks, everybody, for joining us on this call. Gogoro has had a record revenue quarter. We have seen growth across multiple fronts. We will continue to develop new technology, as I mentioned, improve our efficiency, and focus on growing our user base on our Taiwan network while also expanding internationally into markets where we have established partnerships. With our recent merger with Poema Global, we are well-positioned, and we're excited to share our vision with over 500 million riders in the countries we're entering. I look forward to updating you on future results. Thank you all for joining the call today. I'm very excited to be speaking with you.

Operator, Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.