Welcome to the Gogoro Inc. 2023 Q2 Earnings Call. This session will be recorded. I’d like to introduce Bruce Aitken, CFO of Gogoro who will kick us off.

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 second quarter 2023 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, investor.gogoro.com. We will also be displaying the materials on the webcast screen as we go. We’re looking forward to sharing our Q2 results, as well as providing guidance on what we’re seeing as the outlook for 2023. But before our CEO, Horace Luke shares, I’d like to introduce Michael Bowen of ICR who will share the process for today’s call and provide some important disclosures. Michael?

Thanks, Bruce. I’m sure you’re all looking forward to hearing from Horace and Bruce on behalf of Gogoro. But before that, allow me to remind you of a few things. You are all currently on mute. If you have a specific question, please use the chat function in the system to submit the questions and we’ll answer as many as time allows. After Horace has given a brief overview of Gogoro and some of the business highlights from Q2, Bruce will go a bit deeper into the Q2 financial results. 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 2023 results. Management’s expectations for our future financial and operational performance, the capabilities of our technology, projections of market opportunity and market share, our potential growth, statements relating to the expected impact of the COVID-19 pandemic, supply chain issues, and other headwinds facing the company; the company’s business plans including its expansion plans; the company’s expectations relating to its growth in overseas market; statements related 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 IFRS measures. Additional information about these non-IFRS measures, including reconciliation of non-IFRS to comparable IFRS is included in our press release and investor presentation provided today. Now, over to Horace.

Thanks Michael. Thanks for joining our call today. We're pleased to have this opportunity to meet with you and provide an update on the second quarter 2023 results and guidance for the rest of 2023. As we mentioned last quarter, 2023 started off with a very challenging macroeconomic environment and set of economic data. While we continue to see strong overall interest in the markets that we serve, the macro environment in Taiwan remained relatively weak. We fully believe that the foundational work we are conducting will ultimately result in electric vehicle demand, but it's always difficult to accurately predict the timing and degree of EV adoption – in which we compete already have a large installed base of ICE vehicles. Each market will transition to electric vehicles based on a combination of factors, government support, product availability, pricing, infrastructure readiness and customer willingness to adopt EVs. We believe that this shift in mindset will occur in conjunction with market awareness of our product and services. The long-term future remains bright in the face of some near-term challenges, and we remain excited for the future of vehicle and infrastructure electrification. We continue to see strong interest across the region and around the world for sustainable two-wheeler transportation. And when our products are reviewed and tested, our battery swapping hardware, platform technology, and our vehicles constantly are being chosen for both B2B and B2C deployment in a variety of countries and for a variety of business models. While hardware is critical, it is our end-to-end software ecosystem and our network optimization, security and integrated operating tools and platform, which really sets Gogoro apart. On track for market availability in India and the Philippines later this year. In India, we announced a strategic agreement, the first was kind with India state of…

Thanks Horace. As Horace indicated, the Taiwan two-wheeler market has grown in the first half of 2023, but EV volume is slightly down. In Q2, the total number of registered scooters in Taiwan was 186,549, up 13.4% from Q2 of 2022. In the first half of 2023, the total number of registered scooters was 363,747, up 11.6% compared with the first half of 2022. The total number of registered electric scooters in Q2 in Taiwan was 20,118 units, down slightly from 21,195 in Q2 of last year. Of these electric scooters, approximately 16,400 were Gogoro and partner-branded vehicles and 14,118 were Gogoro branded. Despite the overall scooter market in Taiwan witnessing a slight uptrend, the pace of electrification has not mirrored the growth in ICE vehicle sales. This situation is largely driven by ICE competitors aggressively reducing prices to spur growth. Our retail sales strategies are unchanged. We continue to increase our presence via growing our store count from the current 91 to a planned 100 stores by the end of the year, and we believe that the products we have planned for the incoming quarters will improve our competitiveness versus ICE vehicles in the future. In addition, we're targeting 150 Gogoro Quick and service community stores by the end of the year, up from approximately 79 such stores that are already operating with clearly many more to follow. We continue to make good progress in other international markets. In the Philippines, together with our partners, the Ayala Group, Globe Telecom and 917 Ventures, we expect to open a Gogoro Experience Center in the coming months, and our pilot is already up and running. In Korea, to support growth, our partner Bikebank has expanded the battery swapping network to seven additional cities beyond Soul and currently have over 84 GoStations…

Thanks, Horace and Bruce for the business update, details on financial results and forward guidance. As attendees are formulating your questions, I will ask three questions, which I think are likely on everyone's minds, given what you've just shared. With that said, question number one. You've updated your guidance for the full year. Can you shed a bit more light on why and what leads you to have confidence that you will meet your revised guidance for 2023? And what are your preliminary thoughts for 2024?

Thanks, Michael. Well, to be clear, we're really bullish on the global transition from EV from traditional ICE vehicles. Individual markets, we transition at various time and speed based on a number of different factors: government policy, consumer awareness of environmental issues, cost of vehicle and energy, et cetera. We believe that in that transition, battery swapping will emerge as the best technology in terms of speed and convenience of swapping as well as the standpoint of helping power grids, which are increasingly pressure to manage and support the transition. We have clearly seen this in Taiwan and also through our pilots overseas. In any given quarter of the year, there will be external factors, which will impact that transition. In Taiwan at the moment, a mix of macroeconomic factors and aggressive pricing by ICE vehicle makers is creating some short-term headwinds for Gogoro. We don't believe we've maxed up on Taiwan's vehicle sales, but we did experience a slight drop in the unit sales in the first half. We have a lineup of vehicle we expect to launch this year and early next year that we believe will really help. As far as meeting our updated guidance, we're working hard to grow our retail footprint and our customer touch points. We're expecting normal seasonal uptick in sales in the second half, and we have vehicle launches planned. These factors combined make us confident we will hit these new targets. 95% of revenue is expected to be from Taiwan, but we should also start seeing more revenue from international markets in the second half as compared to last year.

Okay. Thank you. We'll move on to question number two. So, you talked about new vehicle launches in the second half and about ongoing improvements in your batteries and stations. Can you share a bit more detail, will these vehicles and improve battery swapping technology to be deployed in India and other places in addition to Taiwan? Thanks.

Sure. India is a critical market for us and getting products, partners and pricing right for India is really, really important. We're fully committed to India. We're localizing our supply chain and preparing for local manufacturing, both of which will create substantial cost reduction opportunities and qualifies for Indian subsidies. We're always working to improve our battery and station technology. Safety and quality are always first on our mind. The cost, capacity, and other factor matters a lot also as well. We have a number of product improvements we'll be introducing over the coming months. When we develop vehicles, we design for global markets. But at times, we need to localize for local market to meet pricing expectation, logo regulation, or other factors. The vehicles that we have slated for launch cater to the needs of a broad range of customers. We have vehicles, which will satisfy customer concern about affordability, we have vehicles which will appeal to an early adopter of technology, and also we have vehicles who had -- to B2B and B2C customers as well.

Okay. Thank you. Next question is despite a drop in hardware revenue, you mentioned as you've met a number of other financial metrics. What metrics are you tracking? And what are your expectations for the second half for margin, EBITDA and other metrics that you can share?

Thanks Michael. There are always external factors that are difficult for us to control. But what we're trying to focus on is the internal cost structure, which we have control over. So, we're continuing to invest for international expansion. But despite doing that, we're really focused on cost savings opportunities. We're keeping marketing cost per vehicle flat. We're tightly controlling OpEx, we're generating healthy EBITDA, and we're tracking the healthy growth in battery swapping service revenue. We haven't provided specific EBITDA or margin targets for the second half. We're really focused on establishing solid financial discipline and a solid foundation such that both in Taiwan and as we begin our international expansion, we can continue on that solid financial grounding.

All right. Thank you, Bruce. Operator, at this point, let's go ahead and open up the line for the Q&A session. Thank you.

Thank you. [Operator Instructions] Our first question comes from the line of Angelina Chen with JPMorgan. Your line is now open.

Hello. Thank you, Horace and Bruce. I'm Angelina from JPMorgan, and I'm filling in for Bill. Can you hear me?

Yes, we can hear you, Angelina.

Great. So just two questions from us. First of all, when does the company expect to turn operating profits profitable? And the second one is regarding international revenue exposure. What percentage of the revenue do you expect from overseas business in 2024 and beyond? Thank you.

I'll take the second part first, Angelina. As you know, we're saying that, this year we're 95% of our revenue will be Taiwan-based. That leaves the small balance to come from international markets. We will be launching vehicles. We will be launching service in multiple markets in the second half of this year. So we do expect the 2024 percentage to increase pretty substantially. We're not giving out targets on that quite yet. I guess, I can say stay tuned for the November call where we'll try to provide some guidance on 2024. But we do expect substantial growth, specifically from India, but potentially from other markets as well. In terms of operating profit, again, as mentioned to Michael's question just a minute ago, our goal is really to set ourselves up for a tight financial structure in Taiwan as we think about the future. All of our R&D costs are born in Taiwan. All of our corporate overhead is born in Taiwan. So when we add international business, it comes with very low overhead and should contribute to our being able to meet our operating profit goals more quickly.

Thank you. Thank you.

Thank you. [Operator Instructions]

All right, operator. In the meantime, this is Michael Bowen again from ICR. We do have a write-in question from Daniel at UBS. I'll start with the first one. There is a second one. But the first one is, could you please give us some color on the competitive landscape of electric two-wheelers in India and what are Gogoro's strengths and weaknesses compared with the other brands?

Great, thanks. I'll take that question, Michael. So, as we look at the landscape in India, one of the first thing we saw was it was clearly a play for a more sophisticated, proven, high-powered battery swapping technology to really help service at the very beginning the B2B segment. There's a lot of vehicles today that are very, very low power with batteries that are what we call swap-outable instead of really swappable. They would have -- lots of cables that actually connect with different connector where -- a user would have to remove certain piece of the vehicle in order to swap out the battery to really mimic a swap-out experience. For us, with Gogoro, we've been really focused on swapping experience from ever since we founded the company. And that means of doing in just seconds has really blown away most of our -- the people that have actually written and touched and swapped the battery without pilot. And I think there's a huge opportunity for us when it comes to providing proper two-wheelers that is powerful, that is durable and then as well as very usable and cost effective in that market. So I think that as we look around, there really wasn't too many direct comps, so to speak. But as we look at dollar for every kilometer, we certainly see that we have a very, very great opportunity ahead of us.

All right. Thanks, Horace. And the second question from Daniel at UBS is as the network expansion might need significant CapEx. How does Gogoro convince local partners in the overseas markets to make such a move?

Great question. So as you look at Taiwan, one of the fundamental reasons -- several fundamental reason where we do actually carried CapEx in Taiwan. The first really had to do with the fact that we're such an early mover that we had to actually prove out the technology, prove out the fact that we can actually have sticky subscribers on our network. They are paying for these batteries over time. And today, I think we've been able to do that very successfully. The second thing is that led us to make a decision to carry the CapEx on the network in Taiwan is because in Taiwan, very much like Japan and other parts of kind of the Northeast Asia, the interest rate and the cost of capital is just so low when it comes to basically debt capital. So for us, the ability to actually leverage that and actually create more value in the company was -- definitely was something that we talked about a lot and we made a conscious decision to carry CapEx in Taiwan. But when it comes to going overseas, a place like India where easily, it sells 20 times more vehicle per year than the island of Taiwan or in markets like Southeast Asia, where there will be just a lot of other, I would say, markets that are also very much larger than Taiwan. Putting that all on gearing that CapEx on our own would not only be not -- doesn't make financial sense, but also as well as very expensive. So for us, we've been actually in talks with several partners in which they -- we would then basically divide and conquer, in which we will be able to actually have partners also put in the capital to do such -- to deploy the network. So I can't speak too much detail about as to how we're going to do that. But the idea is for Gogoro to expand, not using our own capital going into those markets but instead, basically creating a winning situation with the partner to do so.

Operator, do we have any teed up? We have another online question, if not?

[Operator Instructions] I'm showing no phone questions at this time.

Okay. We have another online question. So the question is, could Gogoro sell batteries, energy storage solutions directly to customers and businesses around the world and say, like the way Tesla has their energy storage products like Powerwall and Powerpack Europe and US are huge markets for battery energy storage. So, could you elaborate on that? thank you.

Great. Our main focus when we started the company is really to progress sustainability and apply every technology and every product that we do to do so. In Taiwan's case, I'll use Taiwan is an example first, in Taiwan's case, the primary use of the battery and you have to remember, they're kind of portable power packs at the moment, the primary use is really for mobility where somebody would use the battery to basically go from point A to point B and in the vehicle mainly. But on the side, waiting for the soft our batteries are idling on the -- on what we call the rack side, which is the station side. There's plenty of opportunity for those batteries to really work in partner with the grid to do ancillary services such as demand response or frequency response. That's -- really think of it as a complementary business in that particular case. Now, batteries -- on our batteries, there is a lot of life left actually after mobility. For us, the ability for the battery pack to power a family of two up a very, very steep bill, will require the battery to be in a certain amount of state of health in order to not have that voltage drop. Now, the ability for us to actually use that battery post that life, there's still plenty of actually cycles and life left in those batteries. We're now working on a lot of solution to enable, as Bruce said earlier in the call, to use that battery pack to also create both UPS solution or our backup solutions as well as storage solutions. Don't have too much to share other than we're working on that technology because there's just so much more life left in the batteries that we have in the field today. Since we launched the platform, not many battery packs have actually been retired off the network. And for us to actually see that in volume, it was going to take many more years in order to do that. But in a sense, we're preparing to that. Now, when it comes to can we actually create battery packs and create solutions there storage and sell it. I think that there's always room for a lot of technologies to apply to sustainability. We are one of the largest consumers of battery cell in our industry because the sheer size of the deployment that we have, we have now over 1 million battery packs deployed. And we will continue to work on creating these packs and enabling different parts of the world to take advantage of them.

Thank you. [Operator Instructions] And I'm showing no current questions in the queue. I'll hand it back to you, Michael.

Thank you, operator. At this time, I will hand the conference back over to Horace for a few closing remarks. Horace?

Great. Thanks, Michael. If I could leave you guys with three simple takeaways, they would be, number one, we continue to work tirelessly to open the India market. I'm proud of the work that the team on the ground has put in and we're on the verge of great things in India. We're thankful for the support of the Maharashtra government. The program they created for us and the amount of support financially they have actually lend us, it really is a program, first of its kind in India. And I think that will really help us achieve a successful launch in India overall, not just in the state of Maharashtra, but overall in India. The second point I want you guys to take away is that the Taiwan EV market and our sticky subscriber base will continue to grow, and the trend to electrification will continue both in Taiwan and in other countries. We're pleased to work with the government in both Taiwan and India to assist in this transition. Number three, product and technology improvements and upgrades are important, and localizing manufacturing will also help reduce cost. Our technology and platform ecosystem remains best in class, and we look forward to making that ecosystem available more broadly as we expand internationally. Thanks for calling in, and thanks for supporting Gogoro as we seek to make smart, swappable energy available to every urban rider in the world. Thank you, everyone.

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