Welcome to the Gogoro Inc. 2024 Q1 Earnings Call. This conference call is now being recorded and broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. I'd like to turn the call over to the Gogoro team.

Welcome to Gogoro's 2024 Q1 earnings conference call hosted by our CEO, Horace Luke; and CFO, Bruce Aitken. Hopefully by now you've seen our earnings release. If you haven't, it is available on the Investor Relations tab of our website, investors.gogoro.com. We are hosting our earnings conference call via live webcast through Gogoro's website, where you can also download all of their earnings release materials. We will also be displaying the materials on the webcast screen as we go. If you're joining us through the conference call, your dial-in lines are in listen-only mode. After Horace provides some of the business highlights from Q1, Bruce will go a bit deeper into the Q1 financial results. And then we will open the line for Q&A and answer as many questions as time allows. As usual, we would like to remind everyone that today's discussions may contain forward-looking statements that are subject to risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the forward-looking statements that appear in our press release and investor presentation provided today. And now I would like to turn the call over to Horace.

Thanks for joining our call today. We're pleased to have this opportunity to meet with you and provide a summary of our first quarter 2024 results. Gogoro's mission has always been to change the world via innovation, so I'm especially pleased and proud of the entire Gogoro team for contributing to the development of technology and products, which resulted in Fast Company naming Gogoro the most innovative company in the Asia-Pacific and the number 37 most innovative company in the world. This is another major recognition after MIT Technology Review naming Gogoro as 1 of the 15 climate tech companies to watch in 2023. We are focused on the long-term impact of our technology and our innovation, while we also focus on growing key financial matrix for both Taiwan and international markets. In order to facilitate that growth, we've always indicated that we plan to expand via a more asset-light business model, which allows Gogoro to work with many different local infrastructure owners and diversify capital risk in each location. In Taiwan today, due to the availability of low-cost bank debt and the need to have to proof-of-concept network fully operational at scale, we own all battery packs and most of the Go Station infrastructure, which makes up the Gogoro network in Taiwan. With the announcement we just made last week related to the non-binding memorandum of understanding with Sumitomo Corporation and Sumitomo Mitsui Finance and Leasing Company Limited, those plans and that asset-light business model takes a huge step toward being realized. Expansions into large regions like India and Southeast Asia will require scale greater than that of Taiwan. Sumitomo, who has been a shareholder since we were a private company, is well positioned to aid in that expansion. And with the support and the financial background of Sumitomo…

Thanks for the business updates, Horace. Q1 is really a tale of 2 sets of figures. On an IFRS basis, revenue, gross margin and net loss are challenged, but at an operational level, we are on track to our expectations for 2024. I'll explain a bit more about some of the critical numbers. For the first quarter, total revenue was $69.7 million, down 12.1% year-over-year and down 9% year-over-year on a constant currency basis. Had foreign exchange rates remained constant with the average rate of the same quarter last year, revenue would have been up by an additional $2.4 million. We had more than 5,000 backlog orders for JEGO in the first quarter with a total value of approximately $8.6 million. Customers have the right to cancel these orders prior to delivery and the large quantity of backlog orders is primarily the result of robust demand for JEGO, coupled with the need to balance manufacturing capacity across multiple vehicles and the need to balance our supply chain accordingly. Battery swapping service revenue for the first quarter was $32.5 million, up 0.6% year-over-year and up 4.1% year-over-year on a constant currency basis. Total subscribers at the end of the first quarter exceeded 595,000, up 10.6%, from 538,000 subscribers at the end of the same quarter last year. We provided rebates to some customers in the first quarter of 2024 associated with minor vehicle recall and battery upgrades. Such rebates totaled $1.7 million and were accounted for as contra revenue. The year-over-year increase in battery swapping service revenue was primarily due to our larger subscriber base, compared to the same quarter last year and the higher retention rate of our subscribers. Sales of hardware and other revenues for the quarter were $37.2 million, down 20.8% year-over-year and down 18.1% year-over-year on a…

Thank you, Horace and Bruce for the detailed updates. As attendees are formulating their questions, I will ask 2 questions that we have collected from analysts. Question 1, can you provide an update on the latest progress in India?

Sure. Thanks, [ Annie ]. There are 3 things we'll focus on in India. Getting our battery factory ready, getting vehicles ready and establishing strong solid partnerships. We continue to build up our battery factory in Pune. We began fill out of an empty shell and since then we have created a world-class battery pack factory. All equipment has been received and is installed. We are working to qualify all equipment and complete all aspects of finalization of the factory, including all necessary government approvals. We expect to be ready to ship battery packs beginning in Q3. Having locally made batteries is an important part of the puzzle, because only with locally manufactured battery packs can any vehicle qualify for government incentives. On the vehicle side of things, we're working on 2 initiatives. We're enabling our OEMs in India to develop vehicles using Gogoro technologies and battery swapping solutions. Our kit of components allow existing motor to be powered by Gogoro smart batteries, offering flexibility and customization for local Indian electric vehicle OEMs. These vehicles are compatible with our network and will take advantage of all the benefits of the Gogoro ecosystem, whether riding data, battery utilization, life optimization data and other data. This approach is consistent with our successful Taiwan powered by Gogoro network program. We now have over 50 different vehicle types available to the local market, ranging from small, affordable, single battery powered vehicle to large 3-wheel transport vehicles, which are powered by 4 batteries. Any form factor, any motor size, any price point. In India, we'll work with a variety of OEM to enable a similar business model and expect to see Indian PBGN vehicles in the second half of 2024. Our own vehicle, the GX250, has helped us create a local supply chain. It is specifically built for high mileage per day use case, where ruggedness and safety are important. We can also export these vehicles, as you have recently seen with us doing to Nepal, to initiate service there. Indian manufacturing can act as a hub for other parts of South Asia as well. As the battery factory comes online, we'll be able to ramp up vehicle sales. On the partnership front, we continue to work with B2B fleet operators and demand generators and partners like HPCL, which is India's second largest gasoline station company, who have now occasion to place Go Station as we grow in Delhi as well as partners who help us grow in asset-light business model. Our very recent MoU announcement with both Sumitomo Corporation and Sumitomo Mitsui Finance and Leasing Company, otherwise known as SMFL, sets the stage for expansion into India.

Thanks, Horace. Question #2. Can you provide some color and implications on margin for this year?

Sure. As everyone I think knows, external market conditions continue to be challenging. All we can do and what we're focused on is controlling the things we can control. So we're engaging in measured spending and really trying to ensure we're efficient in our spending. We're balancing those savings against wise investments that we believe will drive revenue growth over time. Those can be in the form of product R&D, could be investments in brand building or other investments. And with the launch of our 2 new vehicles in Q1, the Pulse and the JEGO, what we've demonstrated is a willingness to spend to create a great riding experience for our customers and a great overall swapping experience for our customers as well. So far the market response has been positive to both of those vehicle launches and we're encouraged by that. Those back orders, as we mentioned during the body of the discussion, will be booked as revenue only when those vehicles are delivered to customers and we do have a large backlog order quantity. So in terms of the margin, our goal is always to maintain a stable margin profile. In Q1, we were impacted by traditional seasonality as always happens. Vehicle volumes are always lower than other quarters. There were also other impacting factors, including the battery upgrades that we mentioned. So our expectation going forward is to continue to focus on margin improvement via cost controls and via increased volumes. And we'll continue to make that a real priority as we go into Q2 in the rest of the year.

Operator, please open the line for Q&A session.

[Operator Instructions] Our first question comes from Fang Jiang with The Benchmark Company.

I just want to follow-up a bit more on your commentary on India markets. It seems like you guys are on track to open up your battery manufacturing there. I guess the question here was the current capacity, manufacturing capacity we are looking for in that specific, I think, site. And secondly, for your GX250, any color on the preorder as well as the preorder for your local partner, the hardware tools, toolkit you guys providing. So any color, essentially any color on a monetization opportunity for Indian in the second half of the year?

Sure, Fang. I'll take a crack at it. I think I'm in, Bruce can help some more color as well. The first question was about the India battery pack factory and its capacity. We're looking, we're on the final stages of installation and testing. We are expecting it to come live at the end of Q2, beginning of Q3. We're now awaiting some final inspection as well as government certifications for us to go live. Same as Taiwan, the battery line is actually fully automated, almost fully automated. It's an improvement on the line that we have today in Taiwan that we call [ RoboFab ]. The capacity it has is roughly around 400,000 battery packs a year. We see that as enough to meet new term needs as we ramp up and the lines can be there enough, basically there's enough demand. It's easy for us to replicate such a production line. The second question was around the PBGN kit that we mentioned. There's a wide range of kits that we have developed, due to the needs of emerging market like India where cost is very, very important and local manufacturing and partner enablement is also very, very important. Our kits range from as simple as some of our listeners also knows that our battery, is a smart battery that has a lot of wireless capability and security built into the battery pack itself. The simplest kit that we have is simply a connector plus a -- basically think of it as a non-energized tag where the battery can actually read the tag and authenticate itself to discharge power. When the security is -- tag is not matched, our security will kick in and ensure that battery is swapping. The battery security is turned on so that we can ensure that battery is secured to that particular rider. And then a set of, up from that would be a bidirectional communication unit that allows us to do a little bit more and get a little more power out of the battery as well as the vehicle. Certainly more sophisticated, but very cost-effective. And then the third kit that we have is the kit that we already have for Taiwan and we have enabled that for Taiwan over the last couple of years already. So it's a proven kit that we'll also enable local partners to use. All the way up to a full-term key kit includes motor, motor controller, et cetera. There's always been the mission of Gogoro to become the Android of EV where any parts and components in technology we develop, we see it as an open platform to engage and empower both vehicle makers and any other needs of portable battery pack makers to actually use our system. So with that, I think I answered both your question, Fang and Bruce -- if you have more questions. Okay, go ahead.

You mentioned that your partnership with Sumitomo alone, I guess any color in terms of in-war format we are looking for your collaboration, specific Indian, any potential, any color. All your partnership and how will that help you to ramp up with your capacity or your market penetration?

Great. The question is about Sumitomo and SMFL. We've actually been engaging with Sumitomo since 2017, when we were still a private company, when they actually invested in the round previous to the IPO. They've been a partner of ours through a number of different projects before. And as we discussed with them about our international expansion, we've always had the idea that we need to actually enable a win-win situation where partners with large capability and large asset pool can actually help Gogoro scale. While Gogoro stay focused really on the technology side of the business and where somebody else can take the capital risk as well as deploy their capital that is needed and they want to deploy to in order for them to actually penetrate into a market using battery swapping. Sumitomo, of course, is a very established trading company and a manufacturing company with over 800 subsidiaries all over the world. They're in almost every country that we would love to be in. And so we're partnering up to develop those markets as well as SMFL is Sumitomo Mitsui Finance and Leasing, which is one of the world's largest leasing company with assets like airplanes and infrastructure. And so with their support and Sumitomo alone, we're looking to work together to explore ways in which we can commercialize in partnership into not only India, but also other parts of the world such as Southeast Asia and many other countries to follow. So I hope to have more color to share in the future, as we develop that discussion. And -- but we're very excited that we have the opportunity to work with such a great company and great capable teams which has mass market, a mass amount of human capital deployed as well as cash capital ready to deploy.

Ready to switching gears back to your Taiwan market? I think at the beginning of the year, you guys mentioned few pretty tough macro environment and consumer, the big, big sentiment. I just wonder where things are as of now. And it seems like we saw some setback of electrification adoption last year, but you guys seem to be pretty positive about electrified, electrified power 2-liter growth this year. That seems to suggest reverse of the market share of penetration gains. So just wonder what gives you the confidence the drivers behind it and also for your new product to go? Understand is the lower ASP product. Just wonder how would that impact your profitability, or your economic structure going forward?

I'll take the first part. And I think Bruce can take the financial side of the question. What gives me confidence is a couple of things. Number one is the car moratorium on ICE e-vehicles that now has been established in Taiwan, with some goals by 2030 as well as 2040. Having such clear goals defined by the government gives a lot of direction for both the industry as well as the public. I would say that's really the first one. The second one that gives me great confidence on our ability to achieve success this year has to do with the fact that as you mentioned, we did kind of redefine the entry level with a product that is really great feature, really great performance, really good design and ergonomics and usability. Basically, there's nothing you can complain about that vehicle. And on top of that, we have some great promotional plan that has went out to really excite the market. And we've seen great momentum there as Bruce mentioned. That's about 6,500 units. And we're working really hard to make sure those units are delivered as soon as we can. Now as far as recapturing the imagination of what the public perceive is possible with electric, especially from coming from some of us, who actually are the engineers of smartphone. It's all about the smartphone technology and also partnerships like the ones we have with Qualcomm onto a vehicle phone factor, more than just electrification. But now intelligent and connectivity being a key milestone, like a key pillar of why you want to go electric, something that we can do with electric vehicle that you couldn't do with an ICE, traditional ICE e-vehicle. Having that connectivity and interactivity and usability is uniquely different and hope to see -- we're looking for that vehicle and we've received a lot of great media feedback. We've received a lot of sight unseen order of the vehicle where we believe that that vehicle in itself will be the aspirational product in the market. So with the bookends on both the high side of the business and the industry side of the business, as well as the entry level that really can convert a traditional commuter, ICE user, to convert to an electric solution, we think we're pretty confident that and we've seen good momentum there and we've seen good excitement in the market. We've seen good excitement with the media as well as we've seen good excitement as we deliver the first set of vehicle to the consumer. They're definitely talking about and sharing about the great experience. So it gives us pretty good confidence that the balance of the year will perform to our expectation.

In terms of the ASP side of the question, Fang. Horace mentioned the bookends. I think it's a good way to think about it. JEGO at the low end with an ASP that's a little bit under USD 2,000. Obviously there's SKUs that can take you a little bit above $2,000. But that's offset or balanced by the Pulse vehicle at the very high end of the price, about $3,500 or even $4,000 per vehicle. So we like the fact that we've got a brand new product with a high ASP, excellent riding experience and a brand new product at the lower end of the ASP range and they kind of balance each other out. So we don't expect a great deal of downward pressure on ASP across the board. And then the second part is, obviously our goal has always been to use vehicles as a means to accumulate subscribers on the Gogoro network. And we kind of have one battery pack of subscribers and battery pack subscribers. And as long as we get more and more subscribers who over time continue to pay a healthy amount of our crew on a monthly basis and we do, as you know, we see our crew stay relatively flat, quarter-on-quarter and year-on-year, then the goal is to get as many subscribers on that network. If they come riding a high-end vehicle, that's great. If they come riding a [ B-train ], you can go to a Gogoro mix or a Gogoro mix XL, that's great. If they come in riding a JEGO vehicle, we're okay with that too; 1 battery pack, 2 battery pack. There's kind of room for everybody to find a plan that meets their needs. And as long as we get accumulating riders on the network, then we're thrilled with that.

Got you. Bruce, just a quick follow-up on that. For the 6,500 units in the backlog, once you expect to deliver and also any concern, because you mentioned that you balanced the struggle a little bit with the manufacturer capacity, any constraints you foresee for the balance of the year?

Yes. And so 6,500 is the current backlog at the end of Q1, just for transparency sake, that backlog was about 5,000 units, right. So when we talk about the potential for $8.6 million in the revenue that we'll book in Q2, which is kind of associated with the backlog of our members, then that's again 5,000 and the 6,500 is the number that's current as of today, kind of end of April. So first clarification there. In terms of the delivery times for the backlog units, we are ramping up production in our factory just a little bit. We'll begin to see those backlog get trimmed during Q2. Obviously, we hope that the Q2 order volume stays high. So I do expect that we'll exit Q2 with some backlog units as well, hard to give you an accurate forecast on that. And in terms of dramatically increasing capacity, really our goal is to balance production across the entire year and across all different vehicle types. So no constraints in that true sense of the word, more just an effort to ensure that we're running factories efficiently, that we're fulfilling all the orders that customers have, whether they're for these 2 new vehicles or for an existing vehicle type.

Our next question comes from Angelina Chen with JPM.

You all can hear me?

A little bit hard to hear, Angelina, if you could speak up a bit, it'd be great. Yes, go ahead.

So I just have 2 questions. First of all, since Thai Power has started to increase the electricity price, would you have any plans to raise the battery swap service fees? And if you are not planning to raise the price, would you increase the electricity price and margin of the swap business? And second of all, we are treating the rising bicycle sales in China. So do you see the demand improvement for 2-wheelers in China? And what is the company's strategy for China in the next 1 to 2 years?

I can take the question about electricity, Angelina. So the first thing is that you're absolutely right. Thailand government is increasing power rates and clearly power is one of the components of our Gogoro network service that we provide to customers, because when a customer brings in a battery pack, regardless of how full or empty it is, we recharge it and then we issue it to the next customer, full. So there's kind of good news and not so good news. The good news is that the battery, the energy that we consume from the grid to recharge those batteries is a smallish percentage of our overall cost to operate. The single biggest cost is depreciation. We have rental for the sites where the Go Stations are located. We have O&M. We have all those different kinds of costs. And electricity is part, but it's not a major part of our overall cost structure. We are analyzing what should we do from a pass that cost onto consumer basis. And what we're hoping to do is maybe increase price slightly, but give customers a rebate so that they feel bought into the process. We're still discussing those plans internally. At this stage, if worst case scenario, we chose not to pass any cost onto consumer. The percentage there is small enough that it would not have a dramatic impact on our margin. And so balancing between internal cost pressure versus asking customers to pay a little bit extra is the challenge. Frankly, customers in the electric recharging kind of battery-swapping world don't think of their bill as having a component being the cost of power from the grid. Somehow, despite the fact that in the external market for traditional gas, the prices go up and down, but in our world, people are really, really, really cost-conscious. So what that means is it's difficult for us to pass those costs directly onto consumers at this time.

Angelina, I think you were cutting out on the second question. I might not have heard it clear enough. Can you restate your question again, please?

So my question was, is the company's overall progress in China -- so we're seeing, increasing bicycle sales in China. And I was wondering if you guys also see improvements for E2 wheeler in China as well and what is the company's plan and strategy in China for the next couple of years?

Okay. Well, as you know, we have established our partnership with [ Yadi ] and [ Da Changjiang ], but Yadi being the largest e-cycle company in China and Da Changjiang being the largest ICE e-vehicle 2 wheeler in China. Over the last -- over the duration of the partnership, Yadi has created multiple vehicles using our battery-swapping system. The partnership is really a joint venture between Yadi and Da Changjiang, leveraging Gogoro's technology while we provide hardware components and enabling technology to enable them to build vehicles that are swapping ready. And I would say that the -- overall in China, the ramp is still not as dramatic as we first thought it would be. We are operational in Hangzhou, where riders are mainly doing B2B delivery, because of the need for battery swapping. When it comes to vehicles that are being built by Yadi, we see the usability as we expected. And then also there's all kinds of discussion about how to expand that broader and acquire more customers.

At this time, I would take an online question that would submit it. Renewable energy are currently cheaper than fossil fuels. Solar and wind farms will require large-scale energy storage. This is why companies like Tesla are selling power wall and power packs using lithium-iron phosphate to customers to help create our smart grid. Does Gogoro plan to enter this market by selling a smaller 10-battery slot swapping station to customers and allowing people around the world to build their own energy network using Gogoro smart batteries?

The answer is, as we look at our -- what batteries and what batteries can do, we do see great opportunities, especially around energy storage as well as power backup. With the Gogoro network today in Taiwan, we have, of course, 1.4 million batteries in circulation. A portion of that battery is sitting on the sideline, getting ready for a swap. But at the same time, we work with the Taiwan Power Company to develop technology and also refine our technology so that we can do everything from demand response to frequency response. And with the most recent, if you were keeping track with Taiwan kind of news, you'll find that we also have been working with Thai Power to take out kind of batteries that we're retiring in the future to store them in large racks where we can use the battery to serve as an industrial-grade UPS, similar to what you're speaking of, of a power wall. Of course, there's many other applications we can think about. And as we look into the future, I think batteries, both new batteries as well as consumed batteries that are kind of first-life useful mobility can certainly be something that we can leverage to build the product that you're speaking of in the future.

We have time for one more online question. Does Gogoro have any plans to open up your battery ecosystem so that third-party manufacturers can create new vehicle applications such as drones, forklifts, golf carts, to be powered by Gogoro batteries? Customers and third-party manufacturers can purchase Gogoro batteries and charging hardware as well to expand your revenue beyond scooters.

Absolutely. As we look at our batteries, think of our battery as just a very large battery. It can power everything from 2-wheelers to 3-wheelers to micro 4-wheelers as we have demonstrated in the Tokyo Auto Show with our partner M Mobility through a consortium called MIH which is a Foxconn-led mobility platform doing a micro-compact 4-wheeler that uses Gogoro battery as an augmented power source to extend range. Of course, we have investigated and prototyped many different type of vehicle including some of those vehicle types that you have mentioned. Absolutely. If somebody wants to use our battery and use our components, we welcome the opportunity and we think that swappable, but frequent power just about anything. So absolutely. We think that's something that we hope to see in the future.

Thank you, Horace. At this time, I'll ask Horace to give us a few closing remarks. Great.

Thanks, Annie. Our 2 vehicle launches in Taiwan have both been very well received. But the most important thing about those 2 vehicles is the fact that those 2 vehicles represent two brand new platforms on which we can extend and build future vehicles on. Similar to about 5 years ago, 6 years ago, when we launched the Gogoro II, it created a platform for us to build vehicles that you see today. As we move into Q2, we expect to continue positive momentum to deliver against our 2024 full year forecast. Both Taiwan and international market have lots of room to grow and we look forward to providing periodic updates to you all on our progress throughout the balance of the year. Thanks for calling in today on the webcast. Thank you, everyone.

Thank you for your participation. This does conclude the program. You may now disconnect.