Hello, and thank you for standing by. Welcome to the Lucid's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Maynard Um. You may begin.

Thanks, Towanda, and welcome to Lucid Group’s third quarter 2022 earnings call. Joining me today are Peter Rawlinson, our CEO and CTO; and Sherry House, our CFO. Before handing the call over to Peter, let me remind you that some of the statements on this call, include forward-looking statements under federal securities laws. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, macroeconomic and industry trends, company initiatives and other future events. These statements are based on predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our quarterly report on Form 10-Q for the quarter ended September 30, 2022, and the forward-looking statements on Page two of our investor deck available on the Investor Relations section of our website at ir.lucidmotors.com. In addition, management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results is available in our earnings press release issued earlier this afternoon, as well as in the investor deck. With that, I'd like to turn the call over to Lucid's CEO and CTO, Peter Rawlinson. Peter, please go ahead.

Thank you, Maynard, and thank you, everyone for joining us for our third quarter earnings call. Now, I'm delighted to say, that we've made significant progress towards achieving our 2022 production targets of 6,000 to 7,000 vehicles. In Q3, we achieved a record quarterly production of 2,282 vehicles, more than triple that of and deliveries of 1,398, which is more than double that of Q2. I want to extend a heartfelt thank you to everyone at Lucid, your collective efforts, which has been central to driving these meaningful increases, as we scale and ramp production and deliveries. You continue to play a key role in the progress of our production ramp and in so doing, help getting more customers behind the wheel of their new Lucid Air. Now, in Q2, we weren't in a position to give you a figure for a weekly production number. But today, I'm pleased to announce that we've now proven our ability to produce 300 cars a week. And even more importantly, we have a visible pathway to our next incremental production rate. And this has been a huge team effort drawing upon talent from right across the company. We've made some difficult decisions and some systematic changes to the organizational structure. And I think now that the results are beginning to speak for themselves. We're working very hard to control what we can control, but the supply chain situation remains fluid. In fact, even now, we're experiencing a challenge with one particular item that will lead to some very temporary time-out for the line. However, we believe we can still achieve our 6,000 to 7,000 production guidance for 2022 despite this particular issue. And during this time, we'll implement a whole batch of improvements that will further enable us to produce even more cars.…

Thank you, Peter, and thank you to those who are taking the time to join us today. Before sharing our Q3 results, I'd also like to extend my sincere gratitude to our customers as well as our entire Lucid team members, our partners and our suppliers. In Q3, we scaled across every corner of our business, from manufacturing and engineering to G&A, sales and service. We've made tremendous strides in our production ramp. We launched our new Sapphire brand, introduced additional product features and worked to enhance our customer experience through our expanding sales and service network. All of this strong progress was only possible through the perseverance and collaboration of each and every one of you, and I'm incredibly proud to work alongside you. Now, turning to our third quarter financial results. As Peter mentioned, we produced 2,282 vehicles, more than triple our Q2 production numbers and delivered 1,398 vehicles, which was more than double Q2. The variance between production and deliveries was primarily a function of vehicles distributed across three areas of the delivery process, vehicles in transit, vehicles awaiting pre-delivery inspection and vehicles awaiting delivery to a customer. As we mature as a business, we'll continue to learn and refine our in-transit inspection and delivery processes. So in the near to medium term, we expect vehicles produced to placed at a higher volume than vehicle deliveries as we accelerate our production and we initiate international deliveries in the fourth quarter, the latter which requires longer in-transit times. We continue to have strong demand with more than 34,000 reservations as of November 7. To put the reservation number in context, this value equates to the amount of our current annual tool capacity in AMP-1. This also compares to the over 37,000 reservations we had in Q2. The reservation…

Thanks, Sherry. We'll now start the Q&A portion of the call. Today's Q&A will feature some questions from some of our retail investors who are an important constituency of our shareholder base through the Say Technologies platform. We'll follow that by live analyst questions and close it out with a couple of statements if we have time. So let's start with the first question. What is the production target for 2023?

So we will be providing a detailed outlook for 2023 today, we will likely provide this information in our next earnings call, which will cover our Q4 and full year performance and expectations for 2023. As we said in our prepared remarks, we're intently focused on ramping production. We have line of sight into our next incremental ramp-up, and we're delivering as many vehicles to our customers as possible. So by next year, we expect to be producing our full line of Air from our highest performing Air Sapphire to our most affordable Air Pure. And we plan to begin delivering some of these vehicle variants internationally. We're also planning on unveiling our Gravity SUV. So we're very excited about 2023.

Thanks, Sherry. We’ll move to the next question. When are you planning to start building and utilizing the railway transportation in the Casa Grande factory to reduce transportation costs for suppliers and cars delivery.

Yes. So as I mentioned, we're working across the company to identify and execute on cost efficiency opportunities generally. There's a number of opportunities we could pursue in which they make more sense to pursue as we ramp volume. If it makes financial sense, we, of course, will consider them, including the use of the railway transportation, which is right in our backyard.

Yes. I think I'd want to add that Arizona and the City of Casa Grande have been incredible partners, and we're always looking for additional opportunities to drive our business, whilst at the same time helping to spur jobs and economic growth in this region.

Thank you. And let's move to the next question. It looks like there's about 1,000 cars that have been produced and not delivered. Why is that? And where are these cars stored?

Yes. Well, I mean this is a function of the cadence by which we've ramped up. We've made a remarkable strides in ramping up. And naturally, there's going to be a phase lag between producing the cars and getting them out to our dear customers. So it’s very much a cadence issue and a phase lag phenomenon.

Yes. As I said in my prepared remarks, in the near to medium term, we expect vehicles produced to pace at a higher volume in vehicle deliveries is we're accelerating production, and we're also going to be initiating our international deliveries in the fourth quarter, and that requires longer in-transit time.

Great. Next question is, what is your current development progress of the current CarPlay version? Is it still planned to be released by end of year? And are you planning on partnering with Apple to add their upcoming fully integrated CarPlay in the next year?

Yes. Well, we're most cognizant of the demand for this and the team is working on it. All I can say right now is we are pushing hard to get it to market as soon as we possibly can.

Great. We'll move to the next question. The report of Q3 deliveries and confirmation of 2022 delivery targets was helpful. Going forward, does Lucid plan to provide more transparency to investors between earnings calls?

Yes. So it is our intention to release our production and delivery numbers each quarter ahead of earnings and the hope of providing greater transparency. We know this has been important to the retail and the institutional shareholders. And we really appreciate your feedback, and I'm glad to have the confirmation of this information was helpful.

Great. I think we'll move to questions on the phone in the interest of timing getting everyone's questions in. Operator, I just wonder if we could take the first question, please.

Thank you. Our first question, please stand by. [Operator instructions] Our first question comes from the line of John Murphy. Mr. Murphy with Bank of America, you line is open.

Good evening, everybody. Just a couple of quick ones. Sherry, can you remind us of what you think the minimum cash level is you need to keep on the balance sheet along with liquidity. And how do you think about the key drivers of the improvement of cash flow through the end of next year? I mean, there's a lot going on here on product investments, capacity expansion. So I mean it would be understandable that cash burn would stay fairly high in this growth mode, but it seems like you're indicating that improve materially as we go through the end of next year. So just curious on minimum cash and how we should think about cash burn improvement?

Yes. So as I said in the prepared remarks, John, we got cash of $3.85 billion already on the book. And then when you look at the availability under the ABL on available borrowing, that is shift to $4.2 billion. And as even before you look at the fact that we've access to the SIDF program and that's the Saudi Investment Development Fund, which has $1.4 billion loan capacity. We've drawn down on none of that. And so, as we expand next year, a lot of our CapEx is going to be kind of split between both Saudi and then also here in the United States, and so all those Saudi dollars were able to draw down against the loan as well. So as we said, we're good well into Q4 of next year, so you can kind of complete the math there kind of for yourself on minimum cash needs. As for key drivers of it, we're going to continue to keep a watchful eye on manufacturing overhead and labor, we’re looking at our bond cost reductions, keeping an eye on things like raw market -- raw material inflation. And then, of course, a big part of this is our intentional growth, right? We're deciding as a company to expand rapidly, quadrupling the size of our Casa Grande facility and then also the big build-out of our first international facility. So that CapEx spend is what's driving a lot of this spend for next year. And again, that is our decision.

Okay. That's helpful. And then just a second question around the product, Peter. You sound equally excited about the Sapphire and the Pure, which are kind of two ends of the spectrum for Air. I'm just curious, as you think about mix and pricing next year, if you balance the launch of those two products, ones at the high-end, ones at the lower end of the Air, still a high-mix product. How should we think about that, Peter? And if you look at Sapphire, are there volume limits on that, or if the order book is thousands and thousands, will you feel that? Is there a limit on where Sapphire volume could be capped?

Well, any quick side John, for different reasons. I mean the key message here is we're going to use our in-house technology to drive down the cost per mile of making an electric car through efficiency. And Pure is a big step forward in advance in that march. It's going to be an example of us making a more affordable car, a more attainable price point and a fundamentally better car, we're going to get match the 4.6 miles per kilowatt hour that you see with a more expensive model with Grand Touring. But we're also going to have a better rear seat ergonomics, because we have a smaller battery pack, we're going to have class-leading range from this thing. I think it's going to be an amazing product in a character of its own. And it's part of our relentless drive to make more affordable products. And I'll touch on that in my closing remarks. I think for Sapphire, it's really important, because it's a halo product. It's our performance driver focused brand. It shows how far the Lucid brand can go. But it's really important as a market to demonstrate to the world the sheer prowess, the Performance prowess, the drive-ability, that a state-of-the-art, high – ultra-high voltage, homegrown electric powertrain can deliver. I mean Sapphire is the most satisfying driving machine. I mean, I've driven -- I had the luxury of driving phenomenal cars, throughout my entire career. I think this is truly the pinnacle of driving machinery. So there you have a really nice bandwidth from right up to $250,000, and it's a great, great price range to operate in.

Yeah. So we're going to continue to see strong mix with the nice mix of products. And just a helpful indicator to you for informing ASP is the reservations book. And so we've got the 34,000 reservation that equates to greater than $3.2 billion in corresponding revenue. And so that's a helpful indicator as you're looking to build out your models.

It's helpful. Thank you very much guys.

Thank you.

Thank you.

…Next question please.

[Operator Instructions] Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald. Your line is open.

Hi Peter. Hi, Sherry. Thank you for taking my question and congrats on another strong quarter, I just wanted to better understand the CapEx. So it looks like the 2022 guidance was lower to $1.2 billion from $2 billion. You mentioned on the call that this reduction is primarily due to timing. So I'm just wondering I know you haven't disclosed the CapEx for 2023, but should we assume an additional $800 million in CapEx for 2023, or how should we think about that as we go into next year? Thank you.

Yeah. No, thank you for the question, I'd be thinking more of it in terms of a shifting in the way that we estimate for CapEx for both kind of 2022 and if we look at it in 2023, we took a really conservative estimate of all of the exposure that we would have. But as the payment schedules come in, the work is completed, it's been a little bit slower on the payment side. So that -- those dollars that are going to go into 2023, we see that a similar amount of dollars are going to exit 2023 and actually go into 2024. So we don't really see it as incremental per se. We see a little bit more as a shifting of dollars based on the way we did our computations for CapEx. So we'll be giving some more guidance on that in February, when we do our Q4 performance and then also providing some guidance for 2023 then.

Got it. Thank you, Sherry. That's very helpful. And maybe for my quick follow-up is just in regards to the agreement with the government of Saudi Arabia for the up to 100,000 vehicles. I'm wondering if you can maybe give a bit more color there regarding the timing. I think in the past, you've said that, the vehicle deliveries for the agreement are expected to begin no later than second quarter of 2023 with initial orders in the range of between 1,000 and 2,000 vehicles annually. Is there any additional color there that you could provide, or just trying to get a sense of how to think about it going forward. Thank you.

Yes, I would say that that's exactly right. I don't have any updates to that guidance. We were just over in Saudi a couple of weeks ago meeting with the Ministry of Finance on the very initiatives. So we're firming up the details. They're starting to pick trends. We're working on schedules. So all of the others coming together really nicely and that same number that we said, it's going to start a little bit slower. And remember, this is a 10 year agreement that they're next making with us. So just a tremendous commitment from KSA, and that's going to extend across multiple of our vehicle variants. It's going to start with the Air and then move to the Gravity and also to the Lucid platform thereafter.

Yes, indeed, I think that that 10-year commitment just underscores what a great long-term partnership that we've got, particularly with the Public Investment Fund, this is a long-term relationship we're planning for a very successful long-term future together.

Wonderful. Thank you so much and again, congrats on the quarter. I will pass it on. Thank you.

Thank you.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Charles Coldicott with Redburn. Your line is open.

Hi. Thanks for taking my questions. My first one was on the order book. So maybe it was a bit surprising to see it decrease in length since [Technical Difficulty] I appreciate deliveries were higher in the past three months than in prior periods. But I guess that still implies that order intake has slowed materially. Why do you think that is? And do you think that the order backlog will continue to decrease as you deliver more vehicles in Q4. Perhaps you could comment on what you think is ideal order backlog is for Lucid either in units or days of sales?

Yes. So let me just add a little bit. Yes, you absolutely understood it correctly. The reservation does net out all of the deliveries that we had in Q3 as well as up to now in Q4. We did have some cancellations as well. So they've continued to be quite modest, low single-digit level of -- low single-digit percentage amount of cancellations. What we did see, just to give you a little bit more context and a lot of people are asking about this is in August after we announced the bring down to the 6,000 to 7,000, we think some of the folks felt that they might be pushed out a little bit too far, and we did see a bit of a spike in August, the still low single-digit in terms of cancellations. But now that's normalized to a much more normal rate. We also think folks are getting excited for Gravity, and that's going to be coming here in early 2023. We're going to be opening up the order book. So, frankly, Peter can speak to this as well, but I'm quite satisfied with where we are when you think about.

Charles, yes. I mean there's a good number to hear. We don't want people working too long. There's a perception here, the more is better. I think, there's a good number. We've got great, great order book here. I think that, some folks we might have lost a few because our Q2 production was lacking, and there was perhaps an anticipation that the wait would be too long. But we're addressing that now with a dramatic increase in production rates. And also, as Sherry has said, I think the big one for us is going to be Gravity. Gravity is absolutely going to be awesome. And that many people are saying, look, I'm just holding back now. I want to see what this Gravity is going to be like because it's really SUV that I'm hankering after. And if that can deliver the same sort of space concept, the range, the efficiency, the performance, I'm waiting for the order book to open on that one.

Okay. Understood. Thank you.

The cancellations to, we're finding as we do research on that, a lot of it's from the people that order early. So what Peter is talking about that wait time and the proper size that really is important for us to manage.

Got it. Thanks. And then my second question on the gross profit margin. So despite the increase in volumes, there wasn't much improvement in the gross margin versus Q2. Could you maybe comment on that? And sort of more big picture. During the SPAC process, I think your financial guidance at the time indicated that the gross margin would be positive once you were delivering 20,000 units a year. Obviously, a lot has changed since then, including the material costs. But is 20,000 units anywhere near the scale that you think you require to get to gross margin breakeven? And if not, how much higher?

Yes. So first, let me comment on the quarter. So you're right, the gross margin to go a little bit more negative. But a lot of that is related to us ramping up the business, increasing the inventory, the way that lower cost or net realizable value calculation works is you got to take your inventory, you got to then assume that you put into that all the additional dollars needed to make it scalable. You look at what your mix is and then you do that analysis for the impairment. So the impairment had gone up, which is a big kind of driver of that number. We are seeing a lot of positive progress on the gross margin as we go into next year, I'm not ready to comment on that fully yet. We're working through the budget, we might provide some guidance on that in February. But a lot of the things that we're looking at is we're looking at for continued ability to bring our bond cost down, which we're continuing to see. We're also seeing that really coming into effect with our gravity program as well as we're sourcing some of the components. So as we're moving into the future, we're seeing that as well. And you're right, there are some things that are different than when we went out with the SPAC. The raw material prices have been high. We think -- they may have peaked in Q3, and we're starting to see what we believe is going to be some settling in Q4 and beyond, but that definitely hit us hard. And then also freight cost, although we've been able to do within our control to take anything that was an air and transported to sea, freight costs are still high. So we're looking for that to continue to normalize, which is going to really start to enable the types of numbers that we were thinking about previously. So more to come on that probably in our next call. Thank you very much for the question.

Can I just sneak one last one in. The CapEx reduction for this year, what are the projects specifically that have been delayed into next year?

So it's more the payments and most of the spend this year is based on our AMP-1 facility. So this whole quadrupling of the facility that's happening here in Casa Grande, Arizona that's where most of it's happening. Q – Charles Coldicott: Got it. Thank you.

Thank you. Our next question comes from the line of Adam Jonas with Morgan Stanley. Your line is open. Q – Adam Jonas: Thanks, everybody. Just a question on cost cutting. You added about 1,000 new employees in the quarter. I'm just wondering, in addition to some of the delayed CapEx into 2023 and 2024, whether there is an opportunity to maybe slow that pace of hiring? Could we see some of the OpEx or the curvature of it also maybe be flattened a bit sequentially, or how should we think about that as you kind of plow forward with the quadrupling of the size of the facility? A – Sherry House: Yeah. I think that's a keen observation, Adam. I'd say that we're keeping a really watchful eye on this. So we want to make sure that we are scaling in the OpEx really commensurate with the progress in the business. And if the business is progressing at a certain level, we want to make sure that rate is making up. So we'll continue to look at SG&A in particular. But you remember, part of the SG&A is the sales component and so building out that footprint for our studios and our service centers, which is a really important part of our customer service experience. So we don't want to cut ourselves short there, but certainly in other areas of the business we're keeping a very watchful eye on spend. A – Peter Rawlinson: Yeah. I think that's absolutely right, Adam. I think we're balancing our growth trajectory with prudence here. A – Sherry House: You're going to continue to see as the revenue is going up and with a doubling of revenue that we have this quarter. Obviously, as a percentage, the OpEx came down quite a bit,…

Our next question comes from the line of Vikram Bagri with Needham. Your line is open.

Good evening, everyone. Thanks for taking my question. I wanted to quickly touch on order book and potential revenue as well. The potential revenues dropped $300 million from approximately $3.5 billion in 2Q to $3.2 billion in 3Q. Third Quarter revenues of $200 million do not explain the drop fully. I was wondering if -- what the gap of $100 million here is? Am I reading too much in these approximate figures or early high-priced orders were replaced by lower-priced orders during the quarter, or was there something else like impact of ForEx? What explains that $100 million additional drop in potential revenues?

I'm not necessarily following it. Our deliveries increased by about double and our revenue increased a little bit more than double. So we saw a really nice linear relationship between deliveries and revenue. Our reservation mix continues to be quite high right now because, remember, we've been largely producing the GTs, which is one of our higher-priced products, higher performance products. And as we move forward, we're going to start seeing more of the Touring and Pure entering into the equation. So you will see the mix changing over time, but then we're also bringing the Sapphire and some of the GTP as well there’s some counterbalancing. So, I didn't see any kind of disconnect from my vantage point between the revenue number and the delivery number.

Okay, great. And the second question was I wanted to ask about the resiliency of the 10,000 vehicle order from the Kingdom. There is a lot of talk about Kingdom looking to have their own EV brand. How does it affect your relationship with the government? Is there increased urgency to deliver those vehicles quickly? Are there -- is there a sense of urgency to have some safeguards in place to protect that order in any other way? How should we think about that large order from Kingdom of Saudi Arabia?

I think that it's a testament to the long-term relationship that we have and the support that we've enjoyed from Saudi Arabia. I think we typically, [indiscernible] here, the electric car company. And I think there are potentially some synergies with supply chain in the Kingdom as well. But I think that our relationship, it spans across many ministries within the Kingdom. They committed to 50,000 preorders and with an option up to 100,000 over long-term period of 10 years. So, I am very confident and I think we can very comfortably coexist and benefit, actually mutually benefit from each other's existence and growth.

And I see that they really view us as very vital to the growth of the auto ecosystem overall. And that's why we have such a strong relationship building across SIDF, the HRDF, the Ministry of Finance, the MISA organization and especially the Public Investment Fund.

Great.

I think the other thing to recognize is we're in different parts of the market where with the luxury on higher end. So I think we've got some sort of complementary strength here. But I just think that we can work together to reduce costs with the supply chain. I'm looking at a synergistic opportunity here.

Great. And if I can sneak one more in. Sherry, you mentioned that you will start international deliveries in the fourth quarter. I was wondering if you can talk about what does, it do to the margins, especially your cost of deliveries will go up and U.S. dollar is pretty strong. So how should we think about margins in fourth quarter with higher rte, higher headcount, international deliveries and so forth?

Yeah. So we're just going to be starting the international deliveries in Q4, and that's going to be going to Europe and Saudi Arabia first. So we haven't announced all of our pricing in those regions yet. So stay tuned for that, and you'll be able to see what we're going to be doing there.

It's a lot of opportunity. That's the way I'm looking at.

Great. Thank you.

I'm showing no further questions in the queue. I would now like to turn the call back over to Peter for closing remarks.

Great. Actually, before we go to the closing remarks and maybe we'll mix them together. Let's go to one more say question. And the last question in orders that you guys tend to make cheaper cars like Tesla in the future. But this wraps in, I think, very nicely to -- another question, which is what can shareholders expect within the next year to two years from Lucid Motors?

Essentially. I mean this is what it's all about. Our vision is to capitalize and inspire and accelerate the adoption of sustainable mobility, sustainable energy. And to do that, we're developing our own ultra-high technology in-house to create more efficient electric vehicles because not only these are created equal and that enables us to travel further with less, batteries, because batteries are the highest single cost item. That's where we can drive the cost of EVs down. That may seem a great paradox, because right now, we're making starting the luxury product, but mid-decade, we're going to bring our midsized platform in. That's going to be an awesome product and much more affordable. So watch this space. That's what this is all about, making EVs more affordable through high technology in this tech race? And maybe to that point, what do we expect to see? Well, I mean, this year, we're going to see Touring and Pure. Pure is a particular favorite of mine, it's elemental Air truly, and we're going to show more of that on our Lucid launch event in November 15th of this year. So please tune into that. And we're going to have Touring and Pure. Then we're going to have this monumental driving machine Sapphire, which I'm personally testing, finding the performance truly satisfactory at the moment. That's going to come out in the first half of next year. And then, the real big one on the near horizon, which is looming, is Gravity. And I think Gravity is going to be really transformative as a high-tech, high-efficiency, truly sporting SUV. It's a sporting SUV. And I just can't wait to show that to everybody. So that's planned for calendar year 2024. And we'll have a sneak peak of that on November 15. And then, we will move towards sort of late mid-decade, on midsized platform, which is what it's going to be about the real gelling of all this technology to make a car, which is truly much more affordable mid-price range.

Great. Well, thank you, everyone. This concludes Lucid's Third Quarter 2022 Earnings Conference Call. Thank you all for joining us today. And you may now disconnect.