Good day and thank you for standing by. Welcome to the Lucid Group Second 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.

Thank you, and welcome to Lucid Group's second 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, particularly those regarding the future financial performance of the company, production and delivery volumes, macroeconomic and industry trends, company initiatives and other future events, are based on the information that we have as of today and include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to numerous risks, uncertainties and other factors that could cause actual results to differ from expectations, and we refer you to the cautionary language and the risk factors in our quarterly report on Form 10-Q for the quarter ended June 30, 2022, as well as other documents filed or to be filed with the SEC for a full discussion of such risks, uncertainties and other factors. Forward-looking statements made during today's call speak only as of the time they are made, and we are under no obligation and expressly disclaim any obligation to update, alter or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required by law. You are cautioned not to place undue reliance on these forward-looking statements. 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 available on the Investor Relations section of our website at ir.lucidmotors.com. 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. In Q2, we continued to see strong customer demand for our vehicles, with over 37,000 customer reservations as of today. That's an increase of more than 7,000 in the quarter, up from 30,000 reservations as we reported last quarter. Now this 37,000 figure does not include our agreement with the Government of Saudi Arabia to purchase up to 100,000 vehicles, which is entirely incremental, nor indeed does it include potential reservations for our forthcoming SUV, the Project Gravity, nor even potential reservation for Lucid Air in markets outside of North America, Middle East and Europe. As such, we are very pleased with the reaction from customers and excitement surrounding Lucid Air. And we believe that as we get more of our vehicles into our customers' hands and expand our test drive program that our momentum will just continue to build. We're also pleased to report that Lucid Air continues to garner many industry accolades vesting some very well-established luxury car brands. Now for example, we debuted the 1,050 horsepower Lucid Air grand touring performance in June at the Goodwood Festival of Speed in the UK, which features some of the world's fastest vehicles. Although Lucid Air grand touring performance recorded a Goodwood Hill time climb of 50.79 seconds in the shoot-out, and that's the fastest time of any production road car at the event and the 12th fastest time overall, which included many racing cars. Now to be clear, only racing cars were faster at the event and many of the racing cars were not as fast. Now this demonstrable performance advantage lies in Lucid's in-house EV powertrain technology. Lucid designs, develops and manufactures all our core EV body in-house. This vertical integration differentiates Lucid from virtually every other car manufacturer today. However, with all that positive…

Thank you, Peter, and thank you, all those for taking the time to join us today. I want to echo Peter's excitement about our future product and technology road map and customer demand. We remain incredibly excited to bring new versions of the Lucid Air to customers this year. And it put the reservation number of over 37,000 in context, this represents potential future revenue of approximately $3.5 billion, and that's before including the up to 100,000 vehicle deal with Saudi Arabia and the future reservations for the Gravity since we've not yet opened the order book for our upcoming SUV. Our future reservations taken together with our growing customer base, brand awareness and number of industry accolades gives us the conviction to continue to invest in the rapid expansion of our business. Turning to our second quarter financial results. Our second quarter revenue was $97.3 million, which represented a quarter-over-quarter increase of 69%. This included $96.1 million in automotive revenue from the delivery of 679 vehicles. We also recorded other revenue of approximately $1.2 million, which includes sales to Formula E. As Peter mentioned, the Formula E drivetrain agreement is the natural next step in our relationship, and it's a true testament to our advanced technology differentiation. Cost of revenue was $292.3 million. Similar to last quarter, this expected increase was primarily related to personnel and overhead costs as we ramp up production offset by lower freight costs quarter-over-quarter due to our ability to ship the vast majority of our international shipments from air to ocean freight. We recorded an impairment charge of $81.7 million in the second quarter, primarily as a result of these increased costs being capitalized into inventory. This is fairly typical in initial production ramps. And just as we saw a decline from Q1 to…

Thank you, Sherry. I want to close by thanking all our employees for their dedication and hard work, our customers and investors who put their trust in us and our suppliers and partners who are tirelessly helping us on our journey. I'm more convinced than ever that this is a technology race and that we are well positioned with our enhanced developed advanced technology. But I want to be clear that right now, my relentless focus is with this great team right here in Arizona, in helping resolving our logistics challenges and in ramping up production. I remain confident that we shall overcome these near-term challenges with a relentless tenacity and a steely determination. And in so doing, put in place appropriate processes and methodologies that will serve us well for the future. And make no mistake, that future is hugely exciting because right now, more than ever, the world needs the new Lucid products and technology advancements that we have yet to bring to market. And with that, let me turn it back to Maynard to get to your questions.

Thank you, Peter. We'll now start the Q&A portion of the call. Before we take questions from those on the phone, we want to post some questions from our retail investors sent them through the Say Technologies platform. The first question, straight to it. We all want to know is there a possibility for a partnership with Apple in the future. And we also have another related question regarding partners that will include, which is Hertz went with Tesla would Lucid think about something like a partnership with car rental companies to get the brand out there?

Thanks, Maynard. So we don't have anything to announce today regarding any new partnerships. That said, we recognize the attractiveness of our product and tech platform for other companies, and we're keenly open to discussing partnership options. With regard to fleet or rental cars specifically, our vehicle line very strongly with the operational and financial metrics that these operators care about. For instance, we are industry-leading in efficiency, which is measured in miles per unit of energy and hence miles per dollar. Our charge time and range are also leading the market, which translates to higher vehicle uptime, which both customers and fleet operators desire, and we can also enable fleet operators to manage and run predictive analytics on the fleet and communicate with the fleet given we've installed an OTA-enabled software platform in every car that we've sold.

Yes, indeed, Sherry. Even from a -- I guess, from a vehicle architecture perspective, our Lucid Air space concept provides additional room for luggage or cargo or in the case of an autonomous vehicle like sharing fleets, which are configured with the extra computer hardware and equipment. We have more room for that equipment and -- equipment. So, I think for many of these characteristics and attributes would potentially make us a fantastic partner for one of these groups today. And frankly, even more, I guess, over time as we introduce more affordable models in the future, such as the Air Pure, another variants. I mean, what can I say? Well, look, we've got the perfect current platform for such opportunities, I guess.

Great. We'll move to the next question. Any plans for an EV in the $40,000 to $50,000 range to compete with other EVs in that price range? And there's another question related, which is will Lucid offer cheaper models for a broader market?

Yes, this is good. And I think there's a sort of kind of a popular sort of widespread misconception that Lucid only wants to be playing in the high-end luxury segment of the market, and that's simply not true. In order to have a more meaningful impact to the climate, we just need to be in the higher volume segments in the market. That's how we're going to really make that impact. And one of the first steps, I see Pure as a stepping stone to a more affordable car. That's one so passionate about the Lucida Air Pure. And I mean, looking a little further ahead, we'll see our midsized vehicle platform just mid-decade, which is going to be a further advance in our technology efficiency story. And I just want to explain, we deliberately chose to start off at the high end because we were defining a brand, a super called brand with -- from its California DNA, and this is just the starting position. I mean we start off by creating our tech flagships such as Lucid Air and Gravity first. And we focused the technical efficiency, we set new benchmarks. And then we're going to make more affordable products, and that's what really excites me. Remember that we design, we develop, we manufacture all our power training in our factory in Arizona. And we think we can become even more efficient, and that's going to drive down cost of easy ownership and accelerate and capitalize widespread adoption, which is my passion.

And we'll move to the next question. Does Lucid plan to pay out dividends in the future?

We don't currently have plans to do so, but let me give you a little bit of perspective. We believe that our EV technology platform is amongst the best in-house developed technology available in the market today. And so our primary focus is to continue investing behind the strength and the growth of that platform so that we can fulfill our mission, which is to bring sustainable technologies to the world. Therefore, we don't anticipate paying a cash dividend in the foreseeable future.

Thanks, Sherry. And our next question from the same platform. Is Lucid currently working with Apple to implement the new car play with iOS 16 that will be released in 2023 to utilize all Lucid Caustic displays?

Well, that's a very specific question, I guess. Maybe allow me to explain this more broadly perhaps. And of course, I can't speak for Apple's future product line here. But we're always evaluating new technologies as they come to market. And of course, we will continue to do so. Look, we've got an awesome car from a hardware and mechanical perspective. And what I can talk about is some very exciting software updates coming throughout the year that will really sort of match the prowess from the hardware side, and we will continue to provide new features via over-the-air software updates. And specifically, with regards to car play, we're actually in a beta testing phase of validating right now. And actually, we plan to release the final version in the near future. So, stay tune and wait for that.

Great. Our next question, how is Lucid planning to combat inflation and a potential recession in the short term? How will this affect the Gravity SUV that's coming out in 2023 and potentially a $50,000 EV in 2025? And Sherry, maybe you can take the first part, and Peter, you can take the second.

Thanks, Maynard. Well, the entire industry has been experiencing inflationary cost environment, and we're certainly not immune from that. With respect to the actions that we've specifically taken in June, we increased the prices of the Lucid Air. And it was the first time that we announced – since that we announced prices back in September 2020. And we're not going to see a material impact from that action until 2023, given that we honor the prior prices on the reservations made through May 31 and orders of the grand touring, which were confirmed in June. As I mentioned in the prepared remarks, we're still in the growth stages of our company investing behind our strategic priorities. So, large scale blanket cost-cutting initiatives aren't necessarily appropriate in our case. That said, I want to be clear that, we're allocating capital in a very prudent and methodical manner. We're instilling a culture of cost consciousness. We're working side-by-side with our talented team members to identify and then execute on cost efficiency opportunities. It often takes time to get processes to be best-in-class in efficiency. So there is definitely more work that we can do to rein in costs. Like others in the industry, we're running at various downside scenarios, and we'll act accordingly based on market conditions.

Yeah. And I think the second part of the question was, is everything on track for Gravity release? Yeah, as we stated, our Project Gravity SUV is on track for start of production in the first half of 2024. And actually, we're currently in the process of leasing engineering data for our prototype builds. And I'm hugely excited about that, and have been closely interacting with that whole process. And we also happen to mention that our midsized platform, of course, is on track for just past mid-decade as well. Now of course, it's important to recognize, but to sync with the start of production of gravity of pools, but at the same time, we're readying our factory through the Phase 2 here of AMP-1 right here in Arizona. And particularly, we're expanding the north end of the body shop ready for Project Gravity, and the south side of the building the new assembly halls where we'll run both air and gravity down that line. Now, we have customers asking us all the time for SUV and Gravity can do for the SUV market, just what Air did for the luxury sedan market, and we're going to take the same concept, the range, the efficiency, the technology and design and performance and apply all the great stuff to an SUV. And I think it probably doesn't surprise a lot of people. I'm not a great SUV fan, but this finally is the SUV for me. It's actually going to happen. And we finally met the SUV love, and that's a Project Gravity.

Great. Thank you. So now we'd like to take a few questions from the phone lines. Towanda, can we take the first question?

Thank you. [Operator Instructions] Our first question comes from the line of John Murphy with Bank of America. Your line is open.

Good afternoon and good evening, guys. I actually have three quick ones. First, Peter, you mentioned that there were finished vehicles that were held at the factory and that factor gated and ordered as finished. I'm just curious how many those were and how many of those are close to being finished? Second, as we think about the logistics center being brought on-site in Casa Grande, what the incremental cost for that would be and does that have any impact on capacity? And then the third question, Sherry, what is the ABL borrowing base that's backstopping the new $1 billion loan or ABL facility? And you mentioned that might be upsize. So what other assets could be pledged for that ABL?

Thank you, John. Peter here. Yes, I mean, the first question was the cars that we held back through Q2 at the factory. But we did that to really ensure that the quality was just perfect. And it was just fit and finish adjustments on what we call flush and gap, the hood to the fenders, the -- just the finer points of finessing that you would expect features and the quality commensurate with our luxury automobile. And although -- and many of those cars were meeting some of standards of my quality team, I took the decision that I really want to up the game here and get things right. Now we're actually releasing a lot of those cars, we’re directing them to our service centers right now and then they're finding themselves their way to customers having had that attendance, love and attention and care. And I think they'll be delighted with our best efforts to make them as perfect as they can be. You also asked about the logistics center at Casa Grande. Now, this was -- this was preplanned. Part of the massive 2.85 million square foot expansion does include several hundred square feet, 100,000 square feet of logistics space. What we're doing is just accelerating that at a very modest outlay. Just getting that a little bit quicker, because the closer we can bring the buffer soft in the materials to the line that is key to create a more efficient flow of material within our own plant. So this is nothing new. It's just an acceleration of what we've already planned.

Yes, right. So no real incremental cost to speak of with respect to that LOC. You asked about the ABL. I mean, we are just delighted to put that in place with this world-class group of banks in our syndicate. The borrowing base, the initial committed part of it is $1 billion, okay? And then we can borrow up to about a-quarter of that billion right now based on eligible assets. That, we will grow into more over time as inventory goes up as other of our assets go up, and that is something that is going to be available to us on a growing basis just as we move forward and mature as a company. The neat feature about this ABL was it also has an accordion feature. So, although the second part of it, the accordion part is not committed yet, it is up to an additional $500 million that's going to be available for that.

Thank you. [Operator Instructions] Our next question comes from the line of Itay Michaeli with Citi. Your line is open.

Great. Thanks. Good afternoon, everybody. Also a quick ones for me. First, it sounds like on logistics issues, you've identified the problems and the team is in place. Hoping just you can elaborate more level of confidence in the second half of the year. Maybe talk about what you expect production split between Q3 and Q4, and degree of confidence you have in to growing that for next year? And then secondly, I was hoping you could also comment on the rate of reservations that you saw after the June price hike. Just curious on what you saw for demand there. And lastly, Sherry, maybe you could comment on the minimum cash balance you'd like to have as you kind of plan out liquidity into 2023?

Hi, Itay. Peter here. I think it's a really excellent question. We based our guidance. Based upon a mindset, which is neither super, dually optimistic or dually pessimistic, a very balanced approach, and we've taken a very comprehensive and very thorough analytical approach to the risks and opportunities that we see and which confronts us. This is a perfect size and in precise area. But the entire executive, analyze this very thoroughly, and we have a very high degree of concurrence in our collective thinking, which has led to this revised guidance.

So let me talk to the reservations question. So as you can expect, when we announced in May at our May earnings release that we’re going to keep the prices, the oil prices in effect through the end of May and not have them go into effect until June 1. That did bring forward some reservations. So we had a very large spike that happened in May. You see that as we went from 30,000 to 37,000 that's the largest growth that we've ever had in a three-month. So that did happen as expected. I'd say that pull ahead had a little bit more pure in it than others, which you also would find as being intuitive that the lower price points might be a little bit more price sensitive, so looking to lock in that rate. Now, what was really interesting, as we move ahead the next couple of quarters and we looked at the reservations that have come in, in June and July, if we take that June and July base that we've had and then we add to it the increase, that the over normalized increase that we got in May, we are still way ahead of where we would typically be if we were just normalize through June and July. So that pull ahead, we're seeing really might have been a bit of a bump up, just kind of like a marketing event almost, if you will. The other thing that was interesting is we booked at the June and July reservations that are coming in is that they continue to be allocated across the same mix allocations that we saw pre-price hike. So you're still seeing Pure highest followed by Grand Touring and then Touring. So Grand Touring continues to be above Touring as well. So we're seeing -- what I would say is very encouraging response and reservations following similar patterns. And when you take the bump in May with the reduction we've seen in June and July, we're sitting in a really great place.

Thank you.

And then third, I think you had a question about minimum cash balance. So that one's interesting. There's a lot of different ways to model this because the way we are looking at the $4.6 billion. And when I talk about going -- when I talk about being well into 2023, I'm talking about going in accordance to our full plan, which is investing in Saudi Arabia, investing in all of our vehicle variants, investing after the swift pace that we have chosen to do. We have some options there, right? So when you think about the minimum balance, you could stretch that out if you want. So I mean, I'm not really going to provide any guidance with respect to how much cash we want to the bank, but I just want you to know that you're going to continue to see from us the same type of proactive kind of opportunistic behavior that you've seen every quarter, we're coming to you, and we're telling you about something interesting that we've done in the capital markets, we did the convertible bond offering. Now we've done the ABL. We put in place $3.4 billion in Saudi Arabia. So I think you're going to continue to see that kind of action taking place from us monitoring the markets and making sure that we're doing what is prudent on behalf of all investors.

We'll take the next question, please.

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

Hi. Thanks for taking my question. I've also got three, please. So firstly, again, sorry, on the production. I'm wondering, can you help reassure us a little bit on the ramp-up by giving us an idea of what your weekly production rates exited Q2 at and what it is today? My second question on order intake, Sherry, you just mentioned there that if you smooth out the last three months, it was actually ahead of what you expected. But if I look at it, I think I'm right in saying that you've averaged about 78 orders a day in the last period since you updated us? And in the three-month period before that, which is March to May, it was basically the same as that. So I'm wondering is the sort of explanation that there were cancellations and so the gross order intake was significantly above or maybe the expectation is that the order intake would slow? And thirdly, Sherry, I think there was $1.4 billion of purchase of securities in Q2. Can you just tell us what that is and whether or not we should treat it as being as liquid as cash when it comes to your funding requirements? Thank you.

Hi, Charles, it's Peter here. I really love to provide guidance on weekly production rates, and this is because it can be so misleading. There's a whole host of factors. If we can delay production a little bit to improvements to our line side supply, which, for example, can improve rate in the future. And once we start cherry-picking specifically weekly production rates, I think we get into this territory. And I think that the numbers we provide you give the most broad and honest description of our ability to have produced cars through this relevant quarter. And our guidance of 6,000 7,000 cars for the year, I believe, is a very balanced and a realistic guide for the future. So I'm sorry, I don't think it's wise to me to give you or weekly production rate right now.

Let me cover off a couple of your questions as well. So you were asking about the short-term and long-term investments. So you're right, we took some of our cash, and we parked it in short-term and long-term investments in separately managed funds. And we did this because we didn't need access to all the cash right now, and we wanted to be able to get a little bit higher return on our money. Those dollars are accessible to us at any time that we don't intend to use them right away and we plan to let them mature and garner the interest rates, which is the purpose why we put them there. But they are absolutely acceptable to us. I don't want people to get confused when they see the cash balance, the cash line on the balance sheet going down quarter-over-quarter. Some of that was moved into short-term and long-term investments. Our assets are still there. It wasn't that we spent all that. And I definitely don't want there to be confusion on that point. Secondarily, you asked a bit about just the reservation. So when we booked at that normalized curve, I was talking about, we did exactly what you said, I look back three months and I look back six months and nine months. And I kind of looked at what does that normalization look like, and we are definitely well above that when you look at May, June and July kind of taken together. Cancellations came down slightly. So we've actually seen some improvement there as well. But what you are going to see as we go forward is that the deliveries are going to be increasing substantially. So I don't know you're going to continue to see that kind of growth because you're going to have a lot of deliveries coming out of that number. Now we will be opening up the gravity order book at some point, then we expect we're going to get another large spike to get, right? So there's going to be some dynamic nature to these reservation numbers going forward, and we'll be sure to be as transparent as we can about that in future earnings calls.

Great. Thanks. And we'll close out with the last question from the, say platform, which is what is the plan for growth? How do you plan to take more market share in the EV market?

Well, I mean, first of all, I have to say this. I think there is no such thing as a market for EVs. There's a market of cars. So we're not competing for this sort of artificial construct of EV market share. I think that's a fantasy. We're competing for the rest of the marketplace, which is huge, the white space, which is currently occupied by outdated gasoline cars. And that's what we're competing with the penetration into that market. But I would also say that this is a technology race, and we're in it. And this is yet to play out because not all EVs are created equal. And I'd also like to add, I mean, with Lucid Air, we're addressing specific issues that have been sort of resistance points, I guess, to customer adoption with EVs in the past. I mean we've got the longest range. We're the fastest time to charge. We've got incredible space in interior design. It's really leveraging so much more than just an EV. It's a leverage all those advantages that electrification can provide. And I think we can sell more cars, the cost we address these key resistance points. But furthermore, I guess there's a bigger issue at stake here. And I'm glad you asked the question because I mean it allows me to address this. The world's precious battery materials are really scarce, and our technology allows us to make more cars with less batteries and this is a point that's really missed because we can make more cars less -- with less resources because we can go further for a given amount of energy because we've got more efficiency. I mean, for example, we believe we could endow Lucid Air appeal with over 400 miles range with a battery pack size of less than 90 kilowatt hours. That's what's going to make Lucid Air Pure really awesome similar range, but fewer batteries than compared with EVs for others. And that is the future. That is the consequence of being in the tech race.

Great. Thank you. And I think that's a great way to end. This concludes Lucid's first quarter 2022 Earnings Conference Call. Thank you all for joining us today, and you may now disconnect.