Gogoro Inc. (“Gogoro,” “the Company” or “We”) (Nasdaq: GGR), a global technology leader in battery swapping ecosystems that enable sustainable mobility solutions for cities, today released its financial results for its third quarter ended September 30, 2024.
Third Quarter 2024 Summary
- Revenue of $86.9 million, down 5.3% year-over-year and down 3.4% on a constant currency basis.
- Battery swapping service revenue of $34.9 million, up 3.8% year-over-year and up 6.0% on a constant currency basis.
- Sales of hardware and others revenue of $52.0 million, down 10.6% year-over-year and down 8.8% on a constant currency basis.
- Our newest vehicles continue to be in high demand with approximately 3,800 backlog orders in the third quarter; these backlog orders in the third quarter will not be recognized as revenue until vehicles are delivered, which is expected to occur in the fourth quarter of 2024.
- Gross margin of 5.4%, down from 18.3% in the same quarter last year. Non-IFRS gross margin of 14.7%, down 4.5% year-over-year.
- Net loss of $18.2 million as compared to a net loss of $3.1 million in the same quarter last year.
- Adjusted EBITDA of $14.1 million, up from $13.1 million in the same quarter last year.
“Q3 presented us with an opportunity to reevaluate our business strengths and priorities and establish a plan that will take us into a new era for the company. Growing into a mature and execution-oriented business requires a shift in our mindset, a clear vision and a new level of discipline for how we operate as a business. We are focused on establishing a business that can become profitable over time,” said Henry Chiang, Interim CEO of Gogoro. “We have strengths to build on and problems that are solvable and in our control. Gogoro’s next phase of growth must leverage these existing strengths and focus on taking care of our riders, simplifying our business and delivering an unparalleled battery swapping experience. We are getting back to our core beliefs and vision for enabling the mass transition of gas-powered scooters to electric Smartscooters. This is what our battery swapping network was created to do.”
“Our financial performance is disappointing and did not meet our expectations for this quarter and the year-to-date, but our top line execution in the third quarter of 2024 outperformed the same quarter last year in terms of number of scooter orders, including our backlog orders. Additionally, we continue to accumulate new Gogoro Network subscribers, and that business continues to grow in line with subscriber growth. We ended the third quarter with more than 625,000 accumulated subscribers, up from 570,000 subscribers at the end of the same quarter last year, and had $34.9 million in battery swapping service revenue,” said Bruce Aitken, CFO of Gogoro. “Our stock price and financial performance in the third quarter of 2024 were impacted by three significant challenges. We recently announced our receipt of a Nasdaq Listing Compliance Notice, our CEO’s resignation, and we’ve had a government inquiry into our potential use of imported parts in two vehicle models. The leadership team has responded quickly and outlined a strategic path forward that we believe will solidify our leadership position in Taiwan and grow our business overseas.”
Third quarter 2024 Financial Overview
Operating Revenues
For the third quarter, the total revenue was $86.9 million, down 5.3% year-over-year and down 3.4% year-over-year on a constant currency basis[1]. Had foreign exchange rates remained constant with the average rate of the same quarter last year, revenue would have been up by an additional $1.8 million. We had about 3,800 backlog orders for vehicles in the third quarter, although customers have the right to withdraw those backlog orders before deliveries. These backlog orders primarily came from customers’ robust demands for our new models, coupled with our needs of balancing manufacturing capacities over multiple models and related supply-chain resources.
- Battery swapping service revenue for the third quarter was $34.9 million, up 3.8% year-over-year, and up 6.0% year-over-year on a constant currency basis1. Total subscribers at the end of the third quarter exceeded 625,000, up 9.6% from 570,000 subscribers at the end of the same quarter last year.
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 high retention rate of our subscribers.
- Sales of hardware and other revenues for the third quarter were $52.0 million, down 10.6% year-over-year, and down 8.8% year-over-year on a constant currency basis1. The year-over-year decrease in sales of hardware and other revenues was driven by a combination of factors: (i) a decrease of average selling price (“ASP”) due to a higher proportion of sales volume generated from entry-level models, (ii) a significant increase in the level of undelivered backlog orders compared to the same quarter last year, and (iii) a decrease in sales revenues associated with selling accessories, parts, and performing maintenance.
The backlog orders for vehicles we received in the third quarter are not reflected in the vehicle registration data published by the Taiwan government for the third quarter, nor did Gogoro recognize any revenue for these vehicles, despite receiving full payment from customers or approved financing from third-party financing companies. Gogoro will account for the vehicle revenue upon deliveries to customers.
- The government-reported registration volume of powered two-wheelers (“PTW”) in the Taiwan market in the third quarter was down 11.4% year-over-year. While registrations of total electric PTW were reported to be up by 14.5% compared to the same quarter last year, those of Gogoro’s sales volume grew by 1.6%. Had we delivered the outstanding backlog orders, Gogoro’s year-over-year sales volume growth rate would have been 26.5%.
Gross Margin
For the third quarter, gross margin was 5.4%, down from 18.3% in the same quarter last year while non-IFRS gross margin1 was 14.7%, down from 19.2% in the same quarter last year. The decline in gross margin was primarily driven by a combination of factors: (i) a $2.7 million derecognition expenses on components removed from the battery pack and $4.9 million costs associated with our battery upgrade initiatives, (ii) a decrease in ASP associated with an increase in sales of lower-priced models, (iii) higher excess capacity costs due to reduced sales volume, (iv) a one-time free upgrade cost in certain vehicle models associated with product warranty in the third quarter of 2024, and (v) a lower margin contribution from Gogoro OEM parts.
Gogoro has always viewed ourselves as an energy platform company. Every year we invest heavily in growing and updating our Gogoro Network by deploying new GoStations, battery packs, and software updates. Over the last three years, that investment has been approximately $107 million annually.
Additionally, for the last few quarters, we have been undertaking a program to carry out one-time, voluntary upgrades on certain battery packs which are expected to take several quarters to complete, continuing into 2025. These upgrades provide multiple benefits — more efficient deployment of our resources than replacing battery packs, increasing lifetime capacity of each battery pack (including extending its first mobility use-case useful life) and solidifying the extra lifetime capacity of each battery pack to validate our second-life thesis. These upgrades are expected to create economic benefits in the long run but do generate a short-term reduction in our gross margin as we continue carrying out these upgrades. We expect our cash position, gross profit and gross margin will continue to be impacted by the costs of these upgrades during 2024 and 2025. In order to improve our customers’ experiences, and to extend battery life, we plan to continue to upgrade a substantial quantity of our battery packs which are already in circulation and to improve designs of our battery packs to make them more rugged, long-lasting, and enhance their safety.
Net Loss
For the third quarter, net loss was $18.2 million, representing an increase of $15.1 million from a net loss of $3.1 million in the same quarter last year. The increase in net loss was due to a $11.1 million decrease of the favorable change in the fair value of financial liabilities associated with outstanding earnout shares, earn-in shares and warrants compared to the same quarter last year and the decrease of $12.1 million in gross profit. The increase in net loss was partially offset by the decrease of $7.5 million in operating expenses, primarily consisting of (i) a $5.4 million decrease in share-based compensation, (ii) a $2.6 million decrease in general and administrative expenses as a result of our cost management efforts, (iii) a $1.8 million decrease in research and development expenses, and (iv) a $3.1 million increase in a customer care package.
Adjusted EBITDA
For the third quarter, adjusted EBITDA1 was $14.1 million, representing an increase of $1.0 million from $13.1 million in the same quarter last year. The increase was primarily due to a $5.4 million decrease in operating expenses (excluding share-based compensation and customer care package) associated with various cost-saving initiatives, and a $1.4 million increase in other income, net. The increase was partially offset by a $4.8 million decrease in non-IFRS gross profit and a $0.9 million increase in share of loss of investments accounted for using equity method compared to the same quarter last year.
Liquidity
We continued to generate operating cash inflow in the third quarter through tightening our business operations and reducing working capital. In the third quarter, we generated an operating cash inflow of $8.5 million, repaid $9.4 million in bank loans, and invested $18.8 million in long-lived assets. We remain committed to investing in growth of our battery-swapping infrastructure. With a $119.2 million cash, a $55.1 million cash set aside as temporary surety deposit, and the additional credit facilities that are available to us, we believe we have sufficient sources of funding to meet our near-term business growth objectives.
Customer Experience Enhancement Programs
We will roll out a variety of customer experience enhancement programs over the next 12 months, including battery upgrades, specific vehicle extended warranty programs, software upgrades, and others.
Cost Reduction/Efficiency Plans
We are developing a series of specific plans to rebuild and realign Gogoro’s focus on products and solutions and improve the overall efficiency of our organization. These plans, which will be discussed in more detail in the fourth quarter when we have completed our strategies and assessments, will include cost savings in 2025 from improving inventory management and the use of standard components; lowering logistics and warehousing costs; reducing warranty costs as vehicle production stabilizes; reducing corporate and manufacturing overheads; streamlining manufacturing capacity; and other similar initiatives. These initiatives aim to optimize resources, manage risks, and improve profitability across operations. We expect these initiatives to begin in the fourth quarter of 2024 and extend into 2025.
Improved Internal Controls
We continue to strengthen our internal control policies and practices over our development and supply chain to enhance compliance with the requirements of local subsidies in all countries that we operate in.
Updated 2024 Guidance
We are adjusting our revenue expectations for the year to a level lower than previously expected. The overall performance of the two-wheeler market in Taiwan is softer than anticipated. With the combination of ASP pressure from entry-level models and delays in realizing anticipated international sales in the second half of 2024, we adjusted our guidance for full year revenue and are expecting to generate between $305 million to $315 million in 2024. We expect our gross margin will be materially negatively impacted in the short-term as a result of our ongoing and accelerated battery upgrade initiatives.
Conference Call Information
Gogoro’s management team will hold an earnings Webcast on November 14th, 2024, at 7:00 a.m. Eastern Time to discuss the Company’s third quarter 2024 results of operations and outlook.
Investors may access the webcast, supplemental financial information and investor presentation at Gogoro’s investor relations website (https://investor.gogoro.com) under the “Events” section. A replay of the investor presentation and the earnings call script will be available 24 hours after the conclusion of the webcast and archived for one year.
