Gogoro Inc. (GGR) on Q1 2022 Results - Earnings Call Transcript
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: 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. 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: Thanks, Bruce. As a reminder, you are all currently on mute, but we will then 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 and some of the business highlights from Q1. Bruce will go a bit 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 regarding 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 and market share and our potential growth statements related - relating to the expected impact of the COVID-19 pandemic, statements relating to the potential of our strategic collaborations, partnerships and joint ventures, statements regarding regulatory developments and our plans, prospects and expectations. These statements are not promises or guarantees and 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 IFSR measures. Additional information about these non-IFSR measures, including reconciliation of non-IFRS to comparable IFRS is included in our press release and investor presentation provided today. Now over to Horace
Horace Luke: 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 they may be new for others that are on the call. So I do want to spend a little time on a quick introduction and set the stage for business priorities for 2022. Gogoro was founded in 2011 with a mission to put smart swappable electric power in reach of every urban riders 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 around the world where millions of people are living on top of each other, where space and time is really hard to come by, battery swapping is the only viable solutions to review these small agile two-wheelers. And by developing our own technology in a very customer-centric, vertically integrated way, it gives us a unique advantage over other competitors. And lastly, by partnering with some of the world's most well-known 2-wheel OEMs, we're able to reach over 0.5 billion 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 to take advantage of the battery swapping network we have developed and deployed. These SKUs are both 2-wheel and 3 wheelers. They can be lighter, lower speed vehicles powered by a single battery or 125 CC equivalent vehicles powered by 2 batteries or even larger 13-kilowatt 3-wheelers, which uses a total of 4 battery subtracts. Our model is that the customer purchased a Gogoro or a partner vehicle with the battery not included. This provides dual benefits. The cost of the battery, which is approximately 35% to 45% of the BOM cost for many EVs can now be excluded from the vehicle price. And instead of buying the battery, customers can select from a wide variety of swapping subscription plans that meet their needs. Those plans elect data plans for a cellphone. And in Taiwan, the ranging price from entry-level plants at approximately $10 a month to an all-you-can-ride plant, which costs around $40 a month. Customer accumulate quickly and generate reoccurring revenue for the roughly 10-year life span of the vehicle. We believe with battery swapping, we have addressed the biggest concern of our customers when it comes to 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. Moving very successful launching Gogoro branded and partner vehicles and services in Taiwan, where we now have over 467,000 subscribers and over 2,185 gold stations. We handled over 277 million total battery swaps a date. And every day, our automated system manages over 350,000 swaps. Combined, our riders have accumulated over 5 billion kilometers written using battery swapping and save hundreds of thousands of tons of CO2 from emitting into the air. The Gogoro battery swapping system is rugged and we're ready to continue our growth in Taiwan, while also expanding into new markets. Between Taiwan, China and India alone, there's 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. And 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 what and 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 impact from COVID in mid-2021, we ended the year with $366 million in revenue, $39 million overall guidance and slightly up from 2020. We exited 2021 with over 450,000 subscribers and 23% increase from a year before. We've 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 to get a deeper perspective on Gogoro. We are passionate about what we do. We make it resistible for customers to be responsible. Let me now shift gear 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 of B2C, B2B and B2G customers. Secondly, we will further develop our Global Solutions business. We'll build on the success of our Gogoro component kits to enable our partners to further diversify product offerings and launch multiple SKUs in China and India. Last but not least, we'll grow our Gogoro network business in Taiwan and internationally. We'll increase go station density and continue to 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 2022 Q1.
Bruce Aitken: Thanks, Horace. Q1 2022 was a record Q1 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 a bit 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 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 the customer touch points is important. 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 also the A-motor-AI-4. In China, after initially launching in Hangzhou in Q4 of 2021, additional network services were launched in Wuxi and in Quinming. 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 end of this year. There are currently 6 SKUs of the ID vehicles available. Yadea plans to launch a total of more than 10 SKUs by year-end. DaChangJiang, another partner in China, will launch a one battery-powered emote this year as well. Providing customers with sufficient choice of power, price and styling is important to the scaling of the I.1 ph] JV network, which is invested 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 together 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. We were still a privately held company in Q1, working 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 at no discount and resulted in a total of $344.8 million delivered to Gogoro's balance sheet before transaction expenses. This cash gives us ample capital for planned expansion into China, India and future markets. We continued to focus heavily on product development, both on vehicles and on batteries and announced a few new 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. The world's first 2-wheel solid-state battery pack developed in conjunction with Prologium, increases battery density by approximately 40%. While it will take some time for this technology to be commercially scalable, Gogoro continues to show what is possible in electric power 2-wheelers. We manufactured our 1 millionth battery pack during Q1 and continue to be able to have full forward and backwards compatibility. The millionth battery pack power is the first Gogoro vehicle ever manufactured, and the oldest battery pack in our network can power the latest and greatest vehicle just shipped. To demonstrate the myriad of opportunities that exist for battery packs and the true interoperable nature of our hardware, we introduced two second life use cases for our batteries being deployed in smart street lights and smart parking meters. Finally, in the area of policy, important progress was made. The Taiwan government announced a new - renewed commitment to the banning of sales of ICE vehicles with the planned to - mandate, 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 based on the popularity of our swap and go battery swapping network successfully deployed in Taiwan today. The Indian government has published draft guidance on battery swapping standards. And in Singapore, we successfully worked 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 fall within these guidelines. We expect to continue meaningful dialogue with a variety of governments to see how Gogoro technology can aid in the faster adoption of safe battery swapping solutions for urban centers around the region. With that summary of our business highlights, let me shift our focus specifically to our financial performance. We've accomplished so much in Q1, and I'm happy to share our financial metrics. Let me specifically add some color into revenue, gross margin, EBITDA and net loss results, as well as providing some guidance for the balance of 2022. We typically experience seasonality in the first quarter of the fiscal year due primarily to weather and to the Chinese New Year holidays, resulting in Q1 revenue typically being lower than the other quarters of the year. Government reported registration of all scooters in Q1 versus full year during the last 3 years range 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 last - in the same quarter last year. Sales of hardware and other revenues for the first quarter was $65.1 million, up $87.1 million from $34.8 million in the same quarter last year, primarily as a result of increased market share in Gogoro branded scooter sales in Taiwan. Government reported registrations of government 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 of growth in the electric transport market in Taiwan and an increase in our subscriber base in Taiwan. 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 we scale our production. 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 an increase in our market share and sales of hardware accompanied by an increase of Gogoro Network subscribers, excluding non-cash share-based compensation and onetime nonrecurring costs associated with 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 gives us the ability to invest in growth markets, and you will see us begin to deploy this capital in a variety of ways, investments in manufacturing, expansion of our networks and other activities. We're pleased with our Q1 results, but at the same time, we're cognizant of a variety of macroeconomics, pandemics and other global factors and current events, which could cause our results in the balance of 2022 to be impacted. China is experiencing a great deal of COVID uncertainty. Taiwan is currently experiencing a coved weight. Global supply chains are under pressure, inflation is increasing, and we have been and could continue to be impacted. So we're providing guidance of 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 full year 2021. Q2 revenue is expected to contribute around 20% of full year revenue. And given the uncertainty from COVID impact in both Taiwan and international markets and the associated foreign exchange downside risk from local versus U.S. dollar currency, we estimate that we will generate 90% to 95% of the full year revenue from the Taiwan market. It has been a super 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, I will hand it over to you for Q&A.
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: 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 just given the COVID issue. So just wonder what are the assumptions you have baked in - in terms of low end versus your high end of the guidance, even how impactful, I guess, the COVID situation has been for the second quarter specifically? And secondly, your bottom line has been improving. Just wonder what's the assumption for our guidance for 2022 bottom line on the EBITDA side. And the key drivers behind it, if that’s possible.
Bruce Aitken: So given the external headwinds on, that we mentioned, including COVID, some macroeconomic factors and those kinds of things, 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. We don't know exactly what will happen in Taiwan. We're excited about the products that we've got. We're excited about our technology. And so we've chosen to give the full year guidance of $460 million to $500 million. EBITDA will continue to grow this year. We're providing only revenue projections going forward. But we're excited again about the prospects. We do believe that there is going to be healthy EBITDA growth, and we'll be happy to share those results as we come across them every quarter.
Unidentified Analyst: Understood. Thanks, Bruce. Second question is in regards to your international expansion. You mentioned that you're on track to launch in India before year-end. Just wonder any additional color you could share at this point. In addition, I saw that you guys are scheduled to launch in Israel, I guess, in the summer. Just wonder what's the market opportunities there and potential, I guess, P&L contribution whether this year or probably more in the future?
Bruce Aitken: Sure. So 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 that our battery swapping solution provides a great opportunity for customers in India to have a really safe battery swap solution. And so we're excited to launch there. Vehicle development underway and early stage development of network underway as well. In terms of the announcements we made
Unidentified Analyst: Thank you, Bruce. I'll go back to the line.
Operator: Thank you. We have a follow-up question from Fone Zhong from Benchmark Company. Please go ahead.
Unidentified Analyst: A few follow-up on my side. First of all, any potential disruptions you guys have observed on the supply chain side, I just wonder what's the current observation and what expectation from here?
Horace Luke: Thanks, Fong. Its Horace. So yes, there are obviously with the COVID impact and with all that's happening on - in the world, there are always a possibility of disruption. For the next quarter, we don't see much of that coming in and impacting us. However, we are very cognizant of that, and we're always watching out for anything that we need to do to kind of mitigate the risk. So on our side, I think we are cautious, but also at the same time, we are well prepared for it.
Unidentified Analyst: Understood. Thanks, Horace. Second follow-up is actually on your Southeast Asia. It seems like there's continued partnership with local governments there. I just wonder what's the road map on your side for further – I understand some pilot study going on. But I just wonder what are the potential scaling up to you in that market?
Horace Luke: Yeah Obviously, with a market like Southeast Asia, especially with the pilot we launched in Jakarta with GoTo and Gojek team, the idea was really to test out whether or not the thing as well reset will be well received by the riders, especially for the commercial use that the right will be using for their very demanding use cases during the day. I would say that I'm happy to report that the feedback has been outstanding from just overall the in-writers usability and the swapability of the battery. We had also launched the pilot with the President of Indonesia showing up. And I would say that you were extremely excited about seeing electrification and how this could really impact his country. So we'll continue to work with not only the GoTo and the Gojek team, but also with Foxconn, as well as the Indonesian government to ensure that we have a very successful preparation for that market. I would say that we're excited about continuing to find out what we can do in addition to what we are currently offer today to be able to address all that diversity varies in that market.
Unidentified Analyst: Very helpful. Thanks, Horace. Last question on my side, it's about your capital deployment. You mentioned that there are a couple of directions you're thinking. Just wondering, it seems like company is very committed on the R&D side. Just wonder what are the major - what technology upgrades or product upgrades are we potentially expecting from here? And secondly, any potential consideration on the MAA side?
Horace Luke: Okay. Great. I think as we look at our - what we offer from you can call product offering or technology offering, it goes from all the way from the vehicle side. So, of course, most recently, you've seen us launching for solid-state battery prototype for swappable battery. We'll continue to push forward in the end user side of it a user side of the innovation. But also at the same time, there's been a lot of innovation and a lot of work, hard work on the backside of the entire system. A great example is the question you asked earlier about Israel. The amazing thing we did with Israel is that we're able to launch both Israel and Jakarta without using sending any sort of call boots on the ground. We're able to do that all remotely with both a telematic system that's on this station, but also at the same time with all services and tools that we've been working so hard to prepare for over the last several years as we kind of refine our system in Taiwan going through, as Bruce mentioned earlier, generations of batteries and generations of stations and generations of AI tools and machine learning system in the backside to be able to launch successfully in both of those markets earlier this year. Now that is a great demonstration as to kind of how we're thinking about technology and innovation holistically from end-to-end, not just necessary from enabling technology or end user experience technology but also at the same time, the technology that's behind it that runs all of it. How do you ensure that you provide the right swap, have the right billing system, have the right O&M and management and ticketing system so that the entire network and infrastructure can be managed in a very smooth and efficient and low-cost kind of way. So that's the part on the technology side. And then as M&A, of course, Gogoro is always interested in looking at growing our abilities, not only within internally but also through partnerships or other possibilities. So we're always keeping an eye out, and I think this is a great decade. As we transition to clean mobility and electrification of vehicles, there is a lot of technologies and a lot of passionate companies out there that we can definitely partner with. So nothing to report here other than we of course, keep our eyes out. And I think over time, Gogoro has, of course, been the first mover in this market, and we'll continue to try and stay ahead with technology that are groundbreaking.
Unidentified Analyst: Understood. That's very helpful. Thanks, Horace. That’s all my questions. And congrats on the quarter.
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: 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 grew on a number of fronts. We'll continue to develop new technology, as I mentioned, increase our efficiency and focus on growing the user base on our Taiwan network and also expand internationally into markets that we already have established partnerships in. With a recent merger with Poema Global, we are well summit and excited to stick our vision to over 0.5 billion riders in the countries that we're going into it. I can't wait to report any future results. So thank you, everybody, for joining the call today. I'm super excited to be talking to you guys. Thank you.
Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
