REFINITIV STREETEVENTS

EDITED TRANSCRIPT

Q2 2023 Gogoro Inc Earnings Call

EVENT DATE/TIME: AUGUST 10, 2023 / 12:00PM GMT

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AUGUST 10, 2023 / 12:00PM GMT, Q2 2023 Gogoro Inc Earnings Call

CORPORATE PARTICIPANTS

Bruce Morrison Aitken Gogoro Inc. - CFO

Hok-SumLuke Gogoro Inc. - Founder, CEO & Chairman

CONFERENCE CALL PARTICIPANTS

Angelina Chen

Michael George Bowen ICR, LLC - MD

PRESENTATION

Operator

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.

Bruce Morrison Aitken Gogoro Inc. - 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 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 the balance of 2023. Before our CEO of 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?

Michael George Bowen ICR, LLC - MD

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 currently on mute. If you have a specific question, please use the chat function in the system to submit 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 markets, 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 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.

Hok-SumLuke Gogoro Inc. - Founder, CEO & Chairman

Hi, 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 is 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.

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AUGUST 10, 2023 / 12:00PM GMT, Q2 2023 Gogoro Inc Earnings Call

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 2-wheel 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. We're on track for market availability in India and the Philippines later this year. In India, we announced a strategic agreement, the first is kind with India state of Maharashtra to manufacture our Smartscooters, Smart Batteries and Gogoro Station in the state as well as deploy Gogoro battery swapping across the state. For Gogoro's effort and investment to bring the new industry of battery swapping to the state, Gogoro has been offered unprecedented subsidies and financial support. The state of Maharashtra is leading India's transition to electrification, and we're pleased to help. As we said in our earnings release, financial results for the second quarter and for the first half of 2023 are roughly tracking to our forecasts. We've managed cost effectively and have increased gross margin and adjusted EBITDA for the first half of 2023.

We also continued our growth in battery swapping service revenue and saw a slight increase in our overall revenue on a consistent currency basis versus Q2 of last year. Despite these positive results, our Taiwan sales were slightly below the same quarter last year. And as Taiwan represents approximately 95% of our revenue, there is a direct correlation between Taiwan sales performance and our revenue. We aren't standing still. We're aggressively investing in our Taiwan marketing and retail channel expansion with the opening of 79 Gogoro Express locations in addition to our existing locations, with lots more opening later this year. And we'll continue to build out our product portfolio and have several important vehicle introductions in the coming quarters that will expand our product portfolio, increase sales and grow revenue in both Taiwan and our other markets that we're entering.

Taiwan vehicle registration in the first half of 2023 have exceeded those of both 2022 and 2021, and it appears that total vehicle volume for 2023 could return to the pre-pandemic level of approximately 800,000 units though that much of this uptick is in lower cost, more affordable ICE vehicles as consumers continue to exercise conservative financial decisions in light of the global economic situation. This consumer conservatism is highlighted by a very low consumer confidence index in Taiwan, which was at a 10-year low in Q1 2023. Electric 2-wheel sales have not mirrored the growth in the overall market. It is not in our long-term financial interest to aggressively mark down our vehicle prices as ICE OEMs are doing today. To do so, we jeopardize our product experience and the quality of service that our customer enjoys today.

We're focused on maintaining our financial performance on important metrics despite the strong short-term competition and continue to believe that we are well positioned for the inevitable shift from ICE vehicle to now electric vehicles. Sadly, every ICE vehicle purchased now is likely to be in use and contributing to the substantial carbon emissions for the next 10 years or so. But given that Taiwan is effectively a replacement market with approximately 700,000 to 800,000 vehicles replaced every year. We are still optimistic about our opportunity to convert ICE owners to electric vehicle owners as we build more products to address even broader market segments.

Getting consumers to feel they can personally and directly play a role in a cleaner environment is important. While purchasing an electric vehicle may be perceived as carrying a higher upfront cost, the total cost of ownership over time continues to favor electric vehicles and the other long-term benefits to health as well as to the environment significantly outweigh any concern consumer, delivery riders, fleet operators or government may have about electrification. All of these factors combined mean that despite achieving solid financial results so far in 2023, uncertainty in the market leads us to a conservative second half outlook, and we are predicting a seasonality-driven second half. Given the potential for an ongoing softness in the Taiwan market, we're updating our full year guidance to a revenue forecast of $340 million to $370 million.

Our India plans while progressing are not likely to result in substantial revenue in 2023. To address this reality, we've been actively developing multiple new vehicles that will be launched in the next several quarters, both at the high performance and at the affordable

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AUGUST 10, 2023 / 12:00PM GMT, Q2 2023 Gogoro Inc Earnings Call

end of our product and price spectrum. We're developing for product market fit, not just in Taiwan, but in other countries as well. We continue to learn valuable data and insights through our ongoing pilots. All of this information informs our upcoming vehicle designs and launches. While I can't say much more about these vehicles, they will appeal to a variety of riders continue to demonstrate and extend our technology leadership and offer increased versatility to riders. Additionally, we are testing ways to improve our battery packs, our battery swapping station and our software capabilities and reduce costs for hardware and operations.

International expansion is important as we seek to diversify our revenue base. We've been quietly making great progress behind the scene on our expansion into India and other countries. We're localizing supply chains and manufacturing capabilities, increasing our team size and continue to operate pilots, which are receiving great feedback and inform our market launches direction and plans. And perhaps most importantly, we have formalized our investment agreement with the government of the state of Maharashtra, a $1.5 billion investment by Gogoro and our partners, which will enable the electrification of India's largest state by GDP contribution and the second largest state by population with over 110 million people.

In June, we announced Gogoro would be entering into an ultra mega project agreement to manufacture vehicles, smart battery packs and battery swapping stations and deploy an open and accessible battery swapping infrastructure in the state of Maharashtra. This follows the MOU that was signed back in January 2023. This project is one of the largest EV investments in India's history with a $1.5 billion investment plan to bring Gogoro's ecosystem into India. Ultra mega projects are strategic investment for over $500 million supported by financial incentives from the Maharashtra government. We are focused on creating a domestic supplier ecosystem that allows for domestic growth and foreign market expansion.

Our Swap & Go pilot has been live in India for an exciting three months. We've tallied some impressive numbers so far. The total distance travel has accumulated over 430,000 kilometer, which is equivalent to over 10 trips around the earth. Over 8,500 battery swaps, over 33,000 kilograms of CO2 saved. We are also happy to see that our swapping solution has helped delivery riders in India to increase delivery efficiency and in some cases, as much as doubling their monthly earnings. Perhaps the most compelling data collected during the pilot is that our battery packs and go stations are performing very well under high use, high temperature and unpredictable road condition.

In addition, we are also proving that there is additional energy capacity available if the battery chemistry is consumed more quickly via high utilization. We can make that extra energy available to consumers at reduced cost or we can use the extra energy for second life use cases, and we believe we can extract additional value from packs by recycling them at the end of life. We will have an Indian locally manufactured assembled a new vehicle ready for launch in the coming months and will begin deliveries to key customers soon. Locally manufactured battery packs will also begin production in late Q4 2023 or early 2024.

To support these local operations, we have substantially increased our employee presence in India as well. We're fully committed to the Indian market. Success in India depends on having vehicles, battery packs and go stations that meet aggressive cost target. Depending on factors like vehicle performance and range, our target pricing ranges will be very competitive to the local market. We're aiming to introduce vehicles that meet these pricing thresholds and rival others ICE and electric products already available in the market by Q4 2023 or Q1 2024.

Additionally, developing local supply chain for our battery packs and our go station means that we can reduce costs substantially on the order of 20% to 30%. This will also help us reduce operating costs overall. The issue of climate change has become even more urgent, pushing governments, businesses and individuals to prioritize sustainability and environmental responsibility. Sustainability and green mobility are Gogoro's core value. And in Q2, we continue to make progress towards our objectives of making smart swappable energy available to urban consumers everywhere. Gogoro users have collectively reduced carbon emissions by over 680 million kilograms. We achieved sustainability by utilizing 100% recyclable polypropylene as the shell material for most of our Smart Scooters, promoting resource regeneration and eco-friendly recycling.

Furthermore, since 2022, we incorporated 40% renewable energy in our factories and certain designated Gogoro stores now operate on 100% green electricity. These efforts marked a significant stride towards the ultimate goal of transitioning to 100% renewal energy usage by 2050. We're the first among our peers to make such a commitment. We recently collaborated with Japanese designer Naoto

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AUGUST 10, 2023 / 12:00PM GMT, Q2 2023 Gogoro Inc Earnings Call

Fukasawa and MUJI, the Tokyo-based consumer goods and lifestyle company on newly designed Gogoro Smart Scooters along with a range of merchandise and accessories.

Using iconic MUJI design elements and recycled polypropylene plastic, the new Gogoro VIVA and VIVA MIX ME promotes simplicity and sustainability and is part of the joint recycle for -- Good Sustainability Initiative. The Smart Scooter, under the personal curation of Fukasawa, presents minimalist design incorporating recycled polypropylene body components. This initiative aims to inspire consumers in Taiwan to engage in recycling polypropylene plastic waste at Gogoro and MUJI stores and empowers them to contribute small, but meaningful steps towards creating a more sustainable future.

While we promote sustainability on the consumer side, the government was also taking actions. In Taiwan, government bureaus and agencies are taking an initiative to commit to sustainable energy and transportation, while implementing corresponding strategies to control pollution by replacing aged government-owned scooters with Gogoro Smart Scooters, which has accumulated over 8,000 vehicles since the program began. We thank various branches of the Taiwan government for their partnership and look forward to extending that partnership both in Taiwan and in other countries as well.

Recently, a variety of state governments in India, including the government of Goa, Maharashtra, Delhi, Haryana, and Andhra Pradesh have made commitments to transition last-mile delivery fleets, last-mile connectivity fleets, and tourism fleets to electric vehicles.

I'd like to invite Bruce to provide more detail on Taiwan and a few of our other international markets and financial update.

Bruce Morrison Aitken Gogoro Inc. - CFO

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 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 Seoul and currently have over 84 GoStations operational across Korea. Our Smartscooters and battery swapping solutions have been used for food deliveries in Seoul since 2019 and has received widespread attention and acceptance. We'll continue to work closely with Bikebank to accelerate the transformation of urban mobility and promote sustainable transportation in Korea.

Over the past four months, our pilot program in Singapore has achieved remarkable success, thanks to the support from our partners, Jardine Cycle & Carriage Singapore as well as Foodpanda Singapore. With over 10,000 kilograms of CO2 saved total distances of over 110,000 kilometers driven and over 2,700 battery swaps, we're gathering lots of data from our pilot in Singapore. Extending the use of batteries through second life is important. We've deployed smart traffic lights at a number of major intersections in Taipei Q2 in partnership with Far EasTone Telecommunications, one of Taiwan's leading mobile operators. We're excited to work with Far EasTone on this project to address the risk of traffic signal failure due to sudden power outages in the city.

Gogoro took the lead in partnering with Far EasTone to develop the smart traffic signal uninterruptible power system at the end of 2021.

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Gogoro Inc. published this content on 17 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 August 2023 08:05:08 UTC.