Good day and thank you for standing by. Welcome to Lucid Third Quarter 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] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Head of Investor Relations, Maynard Um. Please go ahead.

Thank you. And welcome to Lucid Group's third quarter 2023 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 law. These include without limitation statements regarding the future financial performance of the company, production and delivery volumes, financial and operating outlook and guidance, 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 and our most recent filings with the SEC, and forward-looking statements on Page 2 of our Investor deck available on the investor relations sections of our site of our website at ir.lucidmotors.com. In addition, management will make reference to non-GAAP financial measures during this this call. The 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 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. In Q3 we delivered on a number of the key milestones that we set out to achieve. In September, we started production of Air Pure rear-wheel drive, as we said we do and we are currently in the process of ramping up its production. Now the Air Pure rear-wheel drive is our most attainable air with a starting price of just $77,400. However, it sacrifices absolutely nothing for the style and technology, range and performance, space and practicality, ot has it all. The pure rear-wheel drive can charge up to 150 miles in just 12 minutes, and has an official EPA estimated range of 419 miles, more than any other electric car currently available, besides other Lucid Air models. But most importantly for me, it's incredibly delightful and engaging to drive. And we continue to push the boundaries of our technology with a pure rear-view drive efficiency of approximately 4.74 miles per kilowatt hour and this is further widening the gap against our competitors. Now for customers, this means the ability to go further with less batteries. And because the battery is smaller, which means the car weighs less is more agile, and can cost less than a vehicle of similar range with a larger battery pack, so you get a greater distance smaller battery less raw material, lower running costs, immense interior space, and it's much better for the environment. We also started production of Lucid Air Sapphire in September, and we delivered the first cars to customers at a special event in early October. The Air Sapphire is the world's first fully electric luxury super sports sedan, achieving a north of 60 miles per hour time of just 1.89 seconds, a north…

Thank you, Peter. And thank you to those who are taking the time to join us today. I'd like to start by acknowledging our employees for their perseverance, dedication, and especially their hard work, and our suppliers and partners for their deep commitment. We've endured through the pandemic, global supply chain disruptions, and now an uneven macro environment. Despite all of this, we gained almost 300 basis points the U.S. market share in the premium luxury sedan market year-to-date as of September 30, versus the same period in 2022. We opened manufacturing locations in two continents, and we launched our full lineup of Air variants. We believe we have the best car on the market, and we're equally excited to redefine the SUV market with Gravity. Before turning to Q3 results, let me speak about the Aston Martin agreement. We're pleased to close the deal in pursuant to the terms of the agreement, we received approximately 28.35 million ordinary shares in the first cash installment of $33 million. Excluding the Aston Martin shares this deal is anticipated to be worth in excess of $350 million. Turning to our cost control program. As you recall, this was one of our top two priorities we highlighted at the beginning of this year. That five-part cost control program that we implemented in the first half of this year is yielded significant operational improvements and cost savings through inventory level drawdowns as well as vehicle direct cost freight and overhead cost reductions. We've been able to draw down our raw material inventory levels by approximately 10% from the start of Q3 through improvements made in material planning and inventory management. Particularly, we've been able to improve foreign currency of our inbound shipping channels and optimize inventory entitlement through the course of the program. These…

Thanks, Sherry. We'll start the Q&A portion. Before we get to questions on the phone, we're going to post some questions from our retail investors through the safe platform. So we'll start with the first question. What is the plan for Lucid to expand their operations and start becoming a profitable company?

Thanks, Maynard. Well, I think we answered the question about our expansion plans already with our discussion of the AMP-1 Phase 2 expansion in Arizona, with the AMP-2 in Saudi Arabia as well as the expansion of our studio and service network. The second part of your question refers to our path to profitability. This is where our cost control program and the efficiencies that we're looking to adapt through every part of our organization is a core part of our company's focus. Our most important areas of focus continue to be, build on material cost-out initiatives manufacturing labor and overhead cost down initiatives, automation of key process and expansion of core system capabilities. All of this is to be coupled with our extensive demand generation activities globally. As we ramp production and with Gravity company coming, we believe it will start to really show the strength of our business model. And of course, we'll have midsize to look forward to as we exit in the decade.

Great. Second question, are there any plans to stop the current slide of stock prices? What are the efforts Lucid is doing for it?

Well, as you know, stock movement is a function of a number of factors. And some factors are clearly beyond any company's control. There are things like interest rates, supply chain issues and other macro conditions, I can make it extremely challenging for any company to offer the kind of predictability that investors would like to see. Now that said, what is within our control is continuing to deliver on our product rollout promises to continue to innovate, to invest and to make important progress against our plan. We'll also continue to push the revenue opportunities beyond automobiles, whether in technology, emission credits and indeed software. So quite simply, we have to execute. And the announcement today of the org structure changes, I believe, will help us really, really tremendously.

Thanks, Peter. The third question, I think we answered in our prepared remarks, as it relates to any guidance for 2024. Sherry mentioned, the outlook is typically something we give on our Q1 earnings call. So we'll move to the next question. What will Lucid do to prevent cash burn per vehicle?

Great. Well, first, let me just start with the cash and liquidity that we have on hand. In my prepared remarks, I think I might have just said $5.54 billion should have said $5.45 billion. So I just want to get that correct on the record. But this particular question, a lot out there today that is misleading and frankly misunderstood as it relates to this question. First off, it conflicts cost with investment. And this particular question is specifically asking about our cash burn for vehicle. It's really important to note that there's a number of non-cash expenses that are in our P&L, things that we've already paid for that are showing up in the P&L. So the largest ones include depreciation. This is not just of our manufacturing and studio service center expansion efforts, but also for all other depreciation related to facilities, investment in our new program tools as well. Additionally, we talk about the impairment we refer to it as the LCNRV, which looks not yet today, but it also includes us today that are related to future quarters. So it's conflating future costs in the current period, which can give a misleading interpretation of these numbers. So with that as a backdrop, there are a number of things that we are doing today at a company level and at a per vehicle level. And those are as follows. And some of them I just talked about. Some cost reduction, manufacturing labor and overhead reduction, efficiencies across all areas of our business, importantly, also enabling the flywheel effect that we expect to naturally occur is more of our cars are in the market and in people's driveways and our fantastic customers have the ability to drive enthusiasm in their neighborhoods and on the street. So what is important here is that we have a plan and we are working diligently across every area of our business to reduce costs, drive enthusiasm for our brand and bring profitability to our investors as quickly as possible.

Thanks, Sherry. Maggie, I would like to turn to the phone lines for questions.

No worries. Thank you very much. [Operator Instructions]. Our first question comes from John Murphy from Bank of America. Please go ahead.

Good morning, everybody. Just a first question, Peter and Sherry, just about the Saudi SKD units. It's 700 plus in the quarter, and I would imagine there'll be some more that come in the fourth quarter. Sort of an optimist might say, hey, that's the significant reading you have the guide down on production units, but sort of customers might say, hey, those aren't included. So I'm just trying to understand where these units are ultimately going to be accounted for. And if we think about the 700,000 units going to Saudi, I would imagine Air effectively presold. I mean there's no question that there's orders there. So I would imagine that the revenue recognition and the sale would occur almost immediate upon final assembly there. So just how are these being accounted for? And how should we think of that relative to the guide down in production for the year?

So first off, the SKD units, as we said, are not showing up in production for this quarter. So we'll be building those out presumably over the next quarter. So they'll show up in production numbers likely mostly in Q4, right? So that's the first part of your question. With respect to being presold, I can't really speak to the exact transaction dynamics with us in the Ministry of Finance. We really don't speak about the specific transaction elements of any of our customers. But what I can say is that part of these units will be for the government and part of it for retail. We have already begun deliveries to the government, as we said in the 10-Q, though that was not material for this last quarter, and we expect to increase going forward.

Okay. Sherry, maybe just to follow up on that. I mean there will be a reload on this in the fourth quarter, right? So I mean, it does seem like you're selling yourself short or being a little bit too humble on what was executed this quarter and what might be executing in the fourth quarter. Would it be fair to assume that these -- you're calling the SKD, I call CKD, whatever on these knockdown kits we'll continue to reload for the foreseeable future until that AMI is really up and running?

Yeah. So we'll be establishing a quarterly cadence over time. I think that's fair to say. And it's going to be important for us to introduce other product variants into the region. So we've been producing new product variants that will also be shipped over to Saudi as well. Some of those will be produced in the quarter. Some of those are going to be in ships at the end of the quarter or not yet into production numbers. But yes, I mean you're going to be sending vehicles over there, producing them into finished units and then delivering them and then completing that process each quarter.

Yeah. I think we'll reach an equilibrium point, John, where those units in transit, equalize out. It's -- a lot of this is due to the shipping time, getting those kits from Arizona right around the world to the Kingdom. And I think that we -- you have to remember that those are incomplete units. So they have to be counted as work in progress, they cannot be counted as factory gated. They might leave the factory in Arizona, but that doesn't count factory gated until they're reassembled and that moment of leaving the factory in Saudi Arabia, that's when for accounting purposes, we can count them has produced.

Yeah. And it far -- if you look at total inventory. You would have noticed that went down by 6%. Raw material went down about 12 that was due to some of the better material planning we had talked about as well as inventory management. Finished goods actually went down as well around that same amount. But we're in processing up and that went up because of these specific SKDs. But again, on the whole, you're down about 6% on an inventory basis. You're just going to see a different composition of it now going forward.

Okay. That's real helpful. And then just, Peter, just real quickly, a second one. The idea of licensing powertrain technology seems like it should be coming more and more appealing to the industry at large is everybody is struggling to get these EVs launched profitably. It's not just you, but it's literally everybody. Has anything changed in the tenor of discussions? Or is there anything new you can say directly on this? And maybe you could kind of confirm that you might be having these conversations [Indiscernible] in Korea, Japan, Europe and North America, maybe all the major regions and China, obviously, too.

There's nothing specific I can talk to, but I will say this. We've closed successfully like to close our agreement with Aston Martin. And that's indeed, awareness of that has definitely catalyzed a degree of inbound interest. Now that said, the sort of technology we've got right now suits pretty high-end cars like Aston Martin. But as we transition to our technology, which is appropriate for a midsized platform, that's when we are -- we will be in a position to attract a whole new strata of clientele. More family cars, more affordable Echelon altogether. And so really, we're looking at how could we accelerate that technology for the powertrain to midsize that we could be in a position to capture any inbound interest in that position of the market.

And I want to provide maybe an ecosystem productive on this as well. I mean we're not going to prognosticate about what other OEMs are going to do. But if you read a lot of the earnings scripts that just came out. People are starting to look at the portfolio they have of ICE products and EV and you hear some hinting as to possible pull back a bit on EV. If that were to be the case, we're not saying that it is we do think that us having this technology licensing program puts us in an advantaged position. We can possibly help some of these OEMs as a partner.

And I think there's also a recognition as well, John. It's relatively straightforward to do a kind of average okay EV, because you just buy the parts of the shelf. But that is going to be unacceptable is already. And I think it's such a recognition that we got something very special with our technology. And theirs is more and they still haven't got the message out, just how affordable our technology is in its own rights. But when you overlay the true power of efficiency that our efficiency of drive units and our whole system means we can go further with less batteries. This is a drive cost of the battery. And I think because our growing was of this, which is our strategic advantage and our customers can leverage this, Aston martin can leverage this. And it can mean that Aston Martin can be light at the same range because it's got less battery. And that's an incredibly valuable attribute for the super sports car like Aston.

Very helpful. Thank you, guys.

Thank you. Our next question comes from Steve Fox -- Steven Fox from Fox Advisors, LLC. Please go ahead.

Yeah, good afternoon. I wanted to ask a question. I think I've asked in a different way. The company has definitely battened down the hatches in terms of costs and done a lot to leverage technology and the paper start you've had with the production. All of that is -- you should receive applaud for how you've reacted to higher interest rates. However, I mean, to me, it seems like the company might need to take some drastic steps in the future. Given that interest rates look like they're going to stay higher, maybe move higher to sort of modify your ambitions. What would trigger such an event in your mind, Peter? Like it just seems like it's a more niche-y market for a longer time for Lucid unless you can argue the opposite for, say, the next 12 to 18 months.

I think we're taking a very prudent, very not view. Sherry is a great job in leading the imperative cost -- cost optimization. We're looking at all measures here, looking at our efficiency of making the cars, looking our working capital, looking at inventory all aspects of the business. We're also pushing like crazy to improve our delivery numbers. Now I think that we're looking at Gravity, which is going to be a transformative product just around a year from now, late 2024 with a considerably greater market, market potential than on a growing market potential in SUV. And I think that's going to have a transformative impact within the company. We've always taken a veruy prudent annoyance view for cost control and cost effectiveness within the company. And all I can say that, that will continue as an absolute core cornerstone of our thinking and our very being here at Lucid.

And the other thing I would just say about the interest rate environment. I mean, it is known that it is more expensive right now for customers to buy ours. We know that. And that is why we are offering some support there. But there is another side to the interest rate environment for Lucid in particular. We're sitting on a very large cash balance and we have a lot of this invested. So we've actually been experiencing quite a bit of interest income associated with those costs or with the cash balance as well in the interest rate environment. So there is another side to it as well as it pertains to us in particular.

That's helpful. And if I could just ask maybe a more upbeat question and I look forward to seeing the Gravity next week. But like when you think about ramping revenues from the SUV, how complementary do you think you can make it to the existing models out there, existing stores so that like the incremental cost to ramp Gravity is more on the production side and less on the sales side? Thanks.

I mean I think that we configured on stores to have room for a Gravity alongside it here. It's always been a part of our sort of cohesive strategy that we've implemented. We're investing in our retail network, but a lot of that is built out and ready for Gravity. And I think we also should think of the very considerable investment we've already made in Phase 2 of our factory in Arizona ready for the gravity. I think another point here, Steven, is just have different products Gravity is from air. When we look at cannibalization, of course, we took the decision not to just base gravity upon Air platform and therefore, result in some kind of car-like sort of compromise. We really designed gravity as a true SUV with its own new platform. We made that investment to create two very, very distinct product lines between Air and Gravity. So I think we can really capture people's imagination into very distinct markets from two very distinctly different products as a consequence of that.

And then just from a financial perspective, the way I think about it is much higher asset utilization, not just at the stores, of the service centers, to the sales staff. But also we're sharing a paint shop. We're sharing powertrain, we're sharing general assembly. So there's going to be a number of areas where this is just going to give us more flexibility as a company to really respond to the demand signals that we're seeing in the market.

Absolutely. I mean Air and Gravity will go down the same line. So you'll actually have the same production line that we built in the factory, you might see one Air and a couple of Gravities, a couple of hours, three or four Gravities and they'll be coming live alongside each other. And that's a real economy of scale.

Great. That's all very helpful. Thank you.

Thank you. Thank you.

Thank you. Just a moment our next question please. Next, we have James Picariello from BNP Paribas from Exane. Please go ahead.

Hi, guys. This is Jake on for James. So first, just looking at -- just looking at your liquidity, it looks like we're looking at about a $900 million cash burn in the -- per quarter in '25. First, can you confirm if that's accurate? And then how much of that is tied to the Gravity launch versus just continued run rate on the Air?

Sure. So the free cash flow this quarter is actually lower than what you just cited by a couple of hundred million. And then your second question was about the Gravity launch. And what was the question related to the Gravity launch?

Just how much the cash burn is tied to the Gravity launch versus continued run rate on the Air?

Sure. So -- maybe I'll answer that a little bit on the CapEx side. So you'll see that we guided our CapEx down to $1 billion to $1.1 billion for the balance of the year. Now we're not giving guidance, but you can do the math. You can see that we started the year with a capital CapEx guidance of around $1.5 billion to $1.75 billion. What we were able to effectively do is we were able to move roughly $500 million of that CapEx for 2023 into 2024. So when you get into 2024, we do expect to have about $500 million of CapEx spend to finish the launch in the facilities as well as the machinery tooling and equipment associated with that Gravity onboarding. And so we did recognize some savings. So that's why it's not as high as $1.75 billion. In totality, but that will be related to the Gravity. We also have some vendor tooling as we move into next year. Probably spent about third of the vendor tooling in 2023, about two thirds of that yet in 2024. So the Air, the majority of the spend has already occurred, of course, you have people that continue to be on carryover product, continuing to make advancements and improve the product but the spend on an engineering level and an R&D level is really shifting into Gravity and then also the midsize as well.

Perfect. Very helpful. And then loss looks like ASPs in the third quarter took a pretty big step down as pure mix ramped up. How should we expect that to trend in the fourth quarter as we see more Saudi shipments and you guys strip the stock higher? Thank you.

Yeah, you're right. So as we went from Q2 to Q3, we had an ASP drop. That was partly expected, as I guided last quarter, I talked about how we were going to be introducing the Pure and larger numbers in the U.S. in that we were also going to be ramping shipments and deliveries into Europe and KSA, but that's small on a comparison, a percentage basis as it relates to the U.S. deliveries in Q3. So as we move to Q4, we continue to see the U.S. as being the dominant market. We do see KSA and Europe increasing. But I would guide that it's going to be relatively flat. I think it will be a similar mix as you're seeing in Q3, as you'll see in Q4.

Okay, thank you.

Thank you. I would now like to pass back to Maynard for closing remarks. Thank you.

Thank you. So this concludes Lucid's third quarter 2023 earnings conference call. Thanks, everyone, for joining us today. And you may now disconnect.