Q4 2021 Lucid Group Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Lucid group fourth quarter and full year 2021 earnings Conference call. Please be advised today's conference is being recorded.

You object to the recording you may disconnect at this time.

Later, we will conduct a question and answer session instructions on how to queue. Further questions will be given at that time I would now like to turn the conference over to Lauren Sloane Investor Relations of lucid. Mr. Long you may begin.

Thank you and welcome to lucid group's fourth quarter and fiscal year 2021 earnings call. Thank you for joining us today.

On the call, we have Peter Robinson, our CEO , and CTO and Sherry House our CFO .

10-K was filed in the earnings release was issued after the close of market earlier today.

Both are posted on our website.

Before we get started we want to emphasize that some of our statements made on this call, particularly those regarding our future financial performance of the company industry trends company initiatives and other future events.

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 1095.

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 included in the risk factors in our annual report on Form 10-K for the year ended December 31, 2021, as well as other documents filed or to be filed with the SEC for a fuller discussion.

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 culture or otherwise revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law.

And not to place undue reliance on these forward looking statements.

In addition management will make reference to non-GAAP financial measures during this call.

Discussion of why we use non-GAAP financial measures and information regarding the reconciliation of GAAP versus non-GAAP results currently available in our earnings press release issued earlier this afternoon as well as in the appendix of our investor deck and available in the Investor Relations section of our website at IR Dot loosened motors Dot com.

And now I'd like to turn the call over to lucid CEO and CTO Peter Robinson.

Please go ahead.

Thank you Lauren.

Thank you on Luke's is tremendous progress in the fourth quarter.

For the full year of 2021.

During the fourth quarter, we reached a significant milestone Felicia.

We commenced customer deliveries of the worlds most advanced EV sedan.

As of year end 2021. This included 125 Kohl's in customers' hands.

We produced over 400 vehicles in total as of today.

And all of these over 300 have now been delivered to customers.

We accomplished these deliveries against the backdrop of extraordinary supply chain and supplier quality challenges.

We could have chosen to build faster, but we elected not to sacrifice quality.

Given our unwavering commitment to the highest standards.

These first deliveries of lucid and validate our mission to inspire the adoption of sustainable energy.

By designing and building kept to electric.

Electric vehicles centered around the human experience.

While the delivery of our first cohort of costs to consumers is important in its own right.

It also represents the first real will stress testing other critical path of the customer journey.

From reservation to order to production delivery.

After sales support including the over the updates to the lucid as onboard software.

When you step back and think about it we put both a full EV powertrain.

Vehicles into production across two separate and distinct factories, which only believed to be the very first time that's ever been done.

So we were able to run two parallel tracks simultaneously in our manufacturing.

Using our proprietary powertrain and battery packs one sites.

And then fully assembling the call a little way down the road.

M pay factory.

Extraordinary achievement.

And having worked through all of this we are more confident than ever that we are building a quality foundation on which we can scale, our business and build long term growth.

Starting and beginning to ramp production was a significant step in moving from concept to reality.

And delivering on our mission to create a future where there is no longer an artificial choice between between doing great things and doing the right thing.

The initial feedback from customers and third parties has been resoundingly positive.

So many customers are saying that theyre lucid is.

He is the best.

They have ever driven and praised the quality of the build enjoying engaging dynamic driving experience whilst also relishing the luxurious interior ambiance.

At the time of our last call loosely the had just been named motor trends 2022 call of the year.

Since then we've continued to rack up industry accolades, we would named best New counter by in 2022 by Green current reports, but 2022 luxury green car of the year by Green car Journal and motor week 2020 to grind.

This choice award for the Best EV.

The EPA has officially certified the lucid Dream addition, with the longest range of any EV at 520 miles.

And subsequent to the end of the quarter installing evs conducted a real world driving tests to validate.

500 mile range at a steady 70 miles per hour.

I encourage you to take a look at that coverage, which is posted online.

In addition, we have the fastest charging EV available today independently very select to be capable of charging 300 miles and just 22 minutes.

And as I recently told the New York Times, we've replaced range anxiety with range confidence now.

On that note I do want to emphasize a point, which is being all too long overlooked here.

Our transformative range and efficiency.

As much due to our in house software.

In hardware.

We truly are becoming as much a software company as a hardware company and I believe our efficiency in miles per kilowatt hour is an appropriate and valid metric for this.

These metrics reinforce that our powertrain is the most efficient in the market in the real world.

In customers' hands and this is a critical point.

Enhanced technology, enabling more miles from a smaller battery size will allow us to shrink pack sizes with future products, whilst maintaining a highly competitive range.

And this is particularly advantageous for the lucid.

Pure variant.

All of this is translating to significant demand for our products.

As of today, we have over 25000 reservations for lucid.

Representing a 47% increase from <unk>.

17000 reservations in mid November .

Our reservation book represents a healthy mix across our products from a higher rent trends through to a pure model.

The Lucid Dream addition was heavily oversubscribed and is completely settled out.

We continue to see strong demand across our highest performance productivity is actually we are considering how best to address this demand.

We are gratified that customers recognize the exceptional quality of outcomes with the industry, leading independently certified range exceptional performance and handling and unmatched efficiency.

To address the rising demand for our products, we are actively working to expand our manufacturing facility in Arizona.

This is an imperative for us increased production capacity is essential to drive mass electrification and meet customer appetite from vehicles.

We continue to make good progress on the addition of two 8 million square feet of manufacturing capacity as part of phase two and Sherry will provide further details.

And as we discussed ramping up our manufacturing footprint.

We are also excited to announce plans for new factory in Saudi Arabia.

Our first international production facility.

Lucid estimates that the selection of KSA as the location of its first international manufacturing plants May result in financial benefits Seleucid of up to three $4 billion.

15 years.

This facility will be a world class manufacturing center with the ability to produce up to 150000 vehicles annually at full capacity.

We appreciate the efforts of the Ministry of investment to Saudi Arabia, The Saudi Industrial development fund and the King Abdullah economic activity to finalize this game changing collaboration.

We are thrilled that this collaboration will allow us to introduce the world's most advanced electric vehicles to more people.

Additional markets in the coming years.

It also enables us to further our shared ambition to transform the economy of the KSA to sustainable transportation energy.

We look forward to breaking ground shortly and expect the facility to begin production in 2025.

In the more immediate term like many manufacturers all production has been and indeed continues to be impacted by supply chain challenges.

As you saw from our press release today, we have updated our 2022 production outlook pellucid.

To a range of 12000 to 14000 vehicles.

As a vertically integrated company, our technology and Engineering Foundation gives us significant advantages, we have control over both software and hardware and the proprietary powertrain and battery pack technology have been holistically designed for scalability of automated.

Manufacturing.

And because we have a clean sheet approach without the constraints of managing our legacy internal combustion based business, we've been able to pivot and adapt quickly.

<unk> ability of certain components is disruptive.

As an example, we have been able to manage the chip shortage in partnership with suppliers.

The supply chain issues that we're experiencing from factors, including components shortages, our insistence on the highest quality parts and logistics issues.

Some cases dependent.

Our teams could not visit on suppliers in person to ensure alignment on engineering specifications and tooling.

As travel has opened back up supplier quality teams have been able to address many of these issues.

I will note that these issues are impacting only a handful of approximately 250 suppliers.

And are not affecting critical single source or dual source components like semiconductors all batteries.

Instead, it's been commodity items like glass cockpits, and we've adapted by changing our specifications or indeed switching vendors if needed.

In some limited cases, we are evaluating additional opportunities to move production in <unk>.

House to drive further efficiencies.

We believe we will move past the key bottlenecks were experiencing in the next few months with further improvement in the second half.

We are continuing to augment our skills and capabilities and refine our processes in supply chain and logistics.

Startup our priority is to gain efficiency and improve as we scale.

None of this is possible without an experienced team that brings decades of experience in the automotive industry, including in manufacturing and the supply chain.

We recently added Ralph Jacobs.

Churn of Audi and Volkswagen as Vice President of program management to <unk>.

Help spearhead our launch efforts alongside our existing leadership team.

Overall, while we are optimistic that our current shortages will ease over the coming quarters. We also know the unexpected issues will arise in the future.

And we are confident that we have and continue to augment the right team in place to manage them.

We are at an inflection point in terms of consumer interest in and adoption of electric vehicles.

Which means our timing as we scale simply couldnt be better.

<unk> com is going electric.

One need not look further than the six Super Bowl ads for electric vehicles to note that the tightest trend.

Whether it's Bentley planning to be all EV by 2030, GM and Renault Nissan investing significant sums to build EV capacities over the next few years, although those effort to become the first all electric legacy automaker.

We started with viral heading.

And I like our odds.

As we put the first lucid dream edition called into customers' hands.

Forefront of one of the most significant transitions in mobility in generations.

Now Knoxville E. These equal.

Our technology supports the greatest efficiency as well as the <unk> interior and exterior footprint of our size.

And with the growing interest in Evs the opportunity is enormous.

We are well positioned to targets and expanding global market in the years ahead.

We are attracting all types of consumers not just luxury traditional car buyers, but also early <unk> adopters.

<unk> seeking performance and consumers focused on sustainability.

I Hope you will stop by one of our studios to see our products up close and learn more.

Indeed, you haven't already.

As we look ahead, we have continued to expand our retail footprint with our first studios in Europe and Middle East planned to open later this year in.

In addition, we're making progress in the development of new models, such as gravity SUV.

We continue to experienced Ernest interest in gravity and our ambition is to make gravity.

Outstanding as our first product in the <unk> category.

We now expect gravity production to begin in the first half of 2024, which will help ensure it meets our commitment to high quality standards.

This will also provide us additional time to implement learnings and best practices from.

Launch.

I continue to personally oversee the engineering developments of gravity and all and becoming increasingly excited by it she a disruptive potential.

Closing I am confident we have the right combination of technology people products and funding to continue to break new ground in the large and growing market for electric vehicles.

We have a significant cash position and a strong balance sheet to support the scaling of our business and to capture the tremendous growth ahead.

We have great confidence that our technology will lead the industry in development of new products that will redefine consumers' expectations of Evs.

2021 was a great year for lucid.

The same time, we're only getting started.

While I certainly have been frustrated by the supply chain and logistics setbacks that we've experienced.

Our conviction and proof points.

We can accomplish has never been greater.

I'm incredibly proud of our team and everything that we've achieved to date.

With that let me turn it over to Sherry for an update on our financials Sherry.

Thank you Peter today, I'll share, our Q4 and full year results, which demonstrate the progress in our business model and conviction in our future opportunities.

Peter mentioned 2021 was a critical year in establishing the foundation of our business operationally, which is reflected in our financial results.

We're very excited to start deliveries in the fourth quarter. Our Q4 revenue was $26 4 million, including $21 3 million from the initial 125 deliveries after lucid Evergreen edition, which began in October .

We also recorded $4 9 million in revenues from battery pack sales from the Formula E Racing series.

Our results in the fourth quarter reflects the inflection point, we are at beginning to scale production and delivering vehicles, while investing substantially in our future promise for the company.

Cost of revenues were $151 5 million, which includes direct parts material shipping and handling overhead and estimated warranty cost launch customer a meaningful part of this number in Q4, we brought in additional manufacturing and quality personnel to ramp up production.

This represent our commitment to the highest possible quality standards.

Also experienced increased logistic costs and expedited freight due to supply chain disruption as a result of these increased costs. We recorded an impairment charge of $48 9 million in the fourth quarter to reduce inventory to their net realizable value less the cost to sell.

In 2022, as we continue to ramp production, we expect increased freight and overhead will result in impairment charges that could negatively impact cost of sales.

This impact should lessen over time.

If an item further down the P&L. We also incurred on December 31, the 583 million noncash expense related to the mark to market gain on private warrants.

R&D costs in 2021 totaled $750 million, which was in line with our expectations. These efforts are focused primarily on the development of the battery and powertrain technology that boosted air project gravity and future generations of our electric vehicles, we will continue to invest in our technology leadership.

Yep.

<unk> spring eds to market. It is critical that we maintain our competitive advantages by delivering a unique combination of hardware and software.

Set apart.

Our Q4 SG&A cost of 197 million were comprised in part of expenses related to growing our retail studio and service network, along with investment to build out our global E Commerce platforms.

<unk> and other G&A system.

We opened six additional studios in service centers and have higher personnel in North America, Europe , and the Middle East as we prepare the business for international sales and service in 2022.

Over the next several quarters, we will continue to build out our core business systems and direct to consumer digital and physical infrastructure.

Transact with customers in new countries. Additionally.

Additionally, operating expenses were impacted by stock based compensation in the amount of $151 million in Q4, including testing under the CEO equity Award agreements.

We expect that additional shares will vest under the CEO of equity Award agreement in early March.

We've also strengthened our leadership team with key hires in accounting and finance, we appointed Gorgon Zimbra as vice President of accounting and internal control and principal accounting officer and Mr. Ali Hussein is managing director Global Treasurer, and head of financial services together, they bring decades of strategic.

Nick leadership experience and building accounting and financial functions at multinational public companies.

Attracting and retaining talented experienced people that want to be part of this new wave of transportation will be key to our success.

So far despite constraints on the labor market generally we've been able to add talented colleagues to the lucid team across geographies and levels in the organization.

Overall and as reflected in our financial results, we continue to invest in best in class technology processes personnel and systems.

This is a theme you will continue to hear throughout 2022, if we create the infrastructure necessary to scale globally and operate effectively if a large public company.

Yeah.

As we prioritize scaling our business, we've executed strongly against our strategic objectives.

Setting the stage for another growth surge in 2022 commensurate with the increasing demand for the <unk>.

You heard from Peter we successfully produced 400 vehicles and delivered approximately 300 cars to our customers and our total reservations have increased over 25000 as of today.

Receive multiple prestigious third party accolades and while there's great feedback from customers to precede their cars.

We continue to see strong demand for our premium products in fact, the demand for Grand touring at 139000 is even higher than our lower priced touring model.

We also have seen increasing reservations for the lucid are pure trim level, which we are targeting a price point of less than $70000 for consumers in the U S. After the impact of tax incentives.

With our reservations, reflecting estimated revenues of more than $2 $4 billion, we're accelerating our plans for growth as quickly as possible.

Retail footprint grew significantly in 2021, and we reached our goal of opening 20 studios and service centers by the end of the year with additional new locations planned for 2022.

In addition, we're seeing strong progress to increase our total capacity from 34000 units to 90000 units with the phase two expansion of A&P, one in Arizona coming online in late 2023.

Phase two which is an additional 285 million square feet will include an in factory Logistics Center onsite stamping facility and the relocation of our powertrain center to A&P, one from another location in Arizona, thereby helping to speed the assembly.

Finished goods and improve our overall efficiency.

In addition to the groundbreaking announcement, we made today about our plans to build a new manufacturing facility. We continue to explore additional sites in China and possibilities in Europe all.

All of these efforts underscore our global ambitions and reflect the interest we are seeing for our products around the world.

As mentioned by Peter we are managing through supply chain challenges that you've heard about at numerous companies across industries to 13th season.

<unk> said, we have the right experience and resources to help mitigate these issues in some cases were buying ahead to reduce the risk of part shortages.

This will be a use of cash in the coming year as some items now require more than a year lead time.

In situations and suppliers have not been able to deliver there are multiple options to resolve these issues and we've executed on all of them as needed to effectively deal with the current situation, including collaborating with existing suppliers to improve throughput and quality.

<unk> suppliers, if we deem that the best approach and necessary enhancements cannot be executed to our satisfaction and bringing the manufacturing in house.

Our holistic approach is a key competitive advantage and when A&P. One phase two comes online it will allow us to become even more nimble in the quarters ahead.

We considered lucid global market opportunity.

Turning to our balance sheet as a leading asset.

Building upon our successful listing on NASDAQ, we issued $2 billion in Green convertible bonds. In December we were also selected to the NASDA Q1 00 and December .

As a result of our successful fundraising initiatives in 2021, we ended the year with over $6 2 billion of cash on hand, which ensures we are funded well into 2023.

We have multiple options for additional funding to further solidify our position, which will enable us to continue to be opportunistic in the market.

Balance sheet strength and financial discipline are central to our approach as we build our infrastructure and execute on the massive opportunity ahead.

In all we invested $421 million in Capex in 2021, and the foundational investments will help deliver on the promise of electrification.

All in with everything we've accomplished recently, we have the elements in place to execute successfully on our plans the core pillars for future scalability and growth.

Now turning to guidance.

We're updating our outlook for 2022 production to a range of 12000 to 14000 vehicles.

This projection represents our best estimate is we analyzed our relationship with our suppliers and where the bottleneck still exists in the supply chain as well as our own internal plans to improve logistics.

We expect to remain supply chain constrained in select parts of the business in the coming months and project improvement in the second half of the year.

As we look at our operating expenses for the year, we expect to continue to see investment in our vehicle programs as well as investment in our retail operation planning and business support functions.

We will also be supporting our entry into the European and Middle East markets during 2022.

We anticipate capital expenditures in the range of $2 billion in 2022, which includes investment to support our manufacturing facilities and associated machinery tooling and equipment and retail network and service development, both domestically and internationally as well as software and technology.

<unk> investments.

This represents a nearly five X increase compared to our spending in 2021 as we worked to dramatically scale our business.

We are considering other acceleration and opportunistic projects and we'll act on them as they make sense during the year.

We remain committed to our business model of starting with the production of higher trim products before moving into other tiers.

With this in mind, we will be starting production of pure later, this year, which will lead to higher volumes and scaling.

In closing we are still in the early innings of the electric vehicle Revolution, and believe that we are well positioned to emerge as one of the winners were confident that we have the right technology.

People products and funding trajectory to succeed.

In just a moment Peter will make some final comments and begin the Q&A portion of today's call.

Today's Q&A will feature questions fielded from some of our retail investors with the aid of the same technology platform consistent with our commitment in November to introduce some mechanism to include question from this important part of our shareholder base. We're excited to address those questions here.

With that I'd like to turn the call back to Peter.

Thank you.

Thank you Sherry.

I hope, it's clear why with so energized by what we've accomplished in the past few months and by how much opportunity is still ahead of us.

We're looking forward to continuing our dialogue with all of you in the months ahead as we build momentum in the business.

And with that let me turn it back to Lauren to get your questions.

Thank you Peter It is now time for our Q&A session. We will start by taking a few questions. We received from investors who submitted questions on this day technology platform.

We've implemented this platform to enable shareholders to post questions directly to our management team and we have chosen questions, which address topics that we felt were not discussed in our prepared remarks, we.

We will also take questions from our research analysts.

Yes.

And the first question, we received from our retail investors as it related to lease that is current and forward looking competitive strategy.

Do you have any strategies in mind to compete with Tesla.

No.

Fascinating point actually I will in front, we don't see ourselves competing directly with any particular companies.

My goal is to make the very best cost we want to make the very best electric cars in the world.

One is to inspire the adoption of sustainable energy.

I actually believe the looser there is the best product in the World already I believe we're at the forefront of that technology.

Proof points that we have the most efficient TV with the highest range certified by the EPA given high school pitched the fastest.

And these are also proof and validation.

By real World third parties and customers.

But what makes me the most is we advancing state to beyond.

Im really confident we can do that because.

I know the product roadmap for me its product.

Got it.

Thank you Peter and our next question is supply chain related how his mindset approaching the chip shortage.

As Peter mentioned in his prepared remarks to date, we have not experienced the gating issue with semiconductors and this is really for several reasons first lucid has significant electrical and hardware engineering talent and we defined many but not all of our printed circuit boards in house, hence when certain of these shortages have.

Surface, we've been able to adjust our designs and re validate and resource promptly largely using our existing direct relationship means second we stay in close contact with our supply base to understand any critical shortages and we do periodically leverage the spot market to secure chips that are at risk and we purchased ahead, where it makes good business.

In fact, just recently I approved the purchase Rockbridge chip that required a 72 week lead time.

This is not a trivial process to actively manage the chip shortage situation and it does continue to evolve but listed is really well positioned to deal with these sort of challenges because of our deep subject matter expertise and the direct relationships that we enjoy with many of the semiconductor leaders.

Thank you Gary and our next question any update on the Applecart discussion.

Been asked this question a number of times in the past.

We have nothing to provide related to discussions with Apple.

Any of the potential partners at this point, but I would say that said, we do recognize the attractiveness of our product and technology tools such companies and we're always open to discuss.

I think our efficiency on connectivity.

<unk> suites, a significant point to the traction for such partnerships in the autonomous vehicle space.

As it relates to other intervene monetization opportunities.

I think I think we really recognize that we are in the process of <unk>.

<unk> seen elucidate a computer on wheels.

And the software development is.

A huge part of that.

Thanks Lucas.

Developing software as much as hardware in the past year, we brought in significantly to format.

And other disruptive technology companies.

To take this.

Digital engineering leadership.

We remain very open minded on this front.

Scientists at about potential component issues.

Thank you.

We remain open minded on this front and all excited about potential for partnership.

I will now take a question from John Murphy with Bank of America.

Line is open.

Good afternoon everybody.

Thanks for the information I'd sure like.

Two quick ones.

First Peter as you think about.

The causal factors for the reduction in your planned production this year.

You are citing supply chain.

It appears that maybe some of the capacity expansion and reorganization has put.

Put forth or been prioritized over ramping volume in the near term for the benefit of the long term.

And there might be some other micro issues that we can't see I was just wondering if you could kind of bucket those or maybe rank those in order of sort of impact and then also as we think about this does this change your outlook for 2023 volumes or is this sort of short term pain for long term gain.

This is interesting points I mean first of all I would say this.

We have been primarily constraint we've got about 250 suppliers worldwide Notionally about 3000 pounds and this has been really.

A phenomenon of just a small handful of 250 suppliers power docs typically we'd be mainly impacted our commodity supply.

Our pumps for example finished parts twin pumps for the exterior glass and so.

So it's not the core technologies of the vehicle does it being.

Largely impacting us here and we have you're right we've chosen.

Let's see over volume, we don't want to get into a myopic view of short term numbers with building our brands with a 10 year plan and our customers have been really.

Grateful and appreciative of the call, let's say.

Built into our car the build quality, so we prioritize quality over numbers.

For 2023, and just to provide a little bit of context, there. The supply chain situation is quite dynamic and we will share guidance as we experienced more of the following quarters and won't be doing that in Q4 for sure will be tendency, though is that the tooling is coming on nicely within a factor.

<unk> for phase two and that is enabling us to be able to produce up to 53000 boosted errors.

We are.

Bye bye.

The end of 2023, so we do have the ability to.

We are bringing on the tooling that's going to enable continued availability of production exactly.

By way of risk mitigation John .

Yes.

Supplying particular support.

Suppliers too.

The processes and bring them in line with our quality expectations. Some we're actually re.

Ill, let taking the supply to new suppliers.

Some instances, we're actually bringing processes.

Manufacturing in house.

So that we can have vertically integrated control of quality and volume.

Okay. That's very helpful. And then just a second question around the Saudi facility.

Do you expect the financing to come from internal funds that you have or do you think the public investment fund will.

You will be a key component funding that capacity addition, I should say even expansion, but the incremental addition of that facility in Saudi Arabia, just sounds like there will be a lot of interest in the diversification from their standpoint, so they might be able to or willing to put more capital in I'm. Just curious what your expectations are there.

Well first of all we ended the year with six $2 6 billion of cash in the balance sheet.

And in of itself funds, that's really well into 2023, so as we look to launch these efforts here in 2022.

We're already we already have the cash available to us to be able to use <unk>.

We move forward with our forward business plan.

We plan to.

To leverage many sources of capital it could come from.

Governments that could come from the capital markets, whether it be debt or equity and right now we see just a tremendous number of opportunities for fund. So we're going to look at what's going to be in the best interest of the shareholders and be really opportunistic looking for cash that is efficient.

Okay. That's great helpful. Thank you guys.

Yes.

Thank you.

Our next question comes from the lineup.

Hey, Michael Lee with Citi. Your line is open.

Great. Thanks, everybody couple of questions, just first going back to the supply chain pressures.

Hoping you could maybe articulate it sounds like you expect most of the coverage.

Second half of the year maybe.

Maybe talk about how much visibility you have over the next few months with some of the suppliers you mentioned and just the degree of confidence of how to think about the cadence of improvement in production throughout the year.

Yes, we have.

Lucas.

Dressing some of the supply chain challenges, we see them to continue for the next few months, but we see.

And uptake in the second half of the year. So we're really optimistic.

We're going to be able to resolve these and again. This is a small handful of suppliers, we're not talking about fundamental technologies here, we're talking largely paradoxically commodity suppliers finishes carpet.

Ross and things like that and unfortunately, you cant sell a single quality count unless those particularly those visible parts absolutely perfect.

So we're very optimistic that we will resolve but its going to take a few months and the second half will be we'll see a significant uptake.

And already in.

We placed upon that premise.

That's very helpful. Thanks for that color Peter just a quick follow up on the 25000, plus reservations, hoping you can give a bit more context around the regional breakdown kind of where youre seeing the most incremental demand coming from.

I don't feel any at DTE.

On which other vehicles or segment. Some of these reservation holders are kind of coming from and any additional color helpful. So we announced we've got over 25000 reservations.

Reservations last time, we announced we had over 17000 mid November so thats well over 40% uptake I think what's really important to recognize here is that that is just for lucid. This isn't we havent reservations for gravity and this is a reservations only opened in North America.

Europe and the Middle East.

The lion's share of those reservations.

Our home market here in the U S and also we have a fantastic mix.

Of course.

The dream additions, so that we've actually started making Glenn to earnings.

Turing is coming later this year and reaching to something really excites me the pillow before the end of this year and we've got a really healthy mix.

Orders.

Those modules, Moreover, I should say because.

The Green addition was resoundingly selling will go how we're.

We're looking at how we can address that actual.

Good latent demand that they have for our higher end products.

That's all very helpful. Thank you Peter.

Thank you.

Our next question comes from the line of Charles <unk> with Redburn. Your line is open.

Thank you guys. So my first question to Sherry.

So capex thanks for the guidance of $2 billion. This year I have in mind, one stage last year, you were intending to spend $900 million in 'twenty two.

And then I think in July you announced the plans to accelerate some spending but nevertheless, the $2 billion.

Those like US further raise on that acceleration. So can you talk to us a little bit about where that additional spending is going.

And the benefits that should come from it.

Yes, maybe I'll start with that.

Yes of course actually we were planning to spend closer to $900 million in 2021 and that was before we did that June update.

In 2021, we ended up spending $421 million in Capex and it wasn't that anything is.

Is delayed it's just the payment of some of the Capex ended up being shifted out by about a quarter. So a lot of that.

$500 million essentially is now moving into 2022, so that is increasing the base amount.

That youre seen originally in 2022 and actually are our amount in 2020 to the prior guidance was higher than that it was I believe closer to $1 3 billion originally and so now we're bringing in that 500, and then as you might recall on that June press release, we had.

Asked about taking some of the spend $350 million of spend from 2025, and six and moving it into the earlier years with an overall increase in capex of 6% to 7%, so really youre not seeing anything different from that guidance that we provided before youre seeing this kind of shift.

It's happening.

Okay wonderful thank you and my second question.

You mentioned some <unk>.

Cost inflation, maybe around logistics, obviously, we've seen it more broadly from raw materials.

I'm wondering what sort of impact we should expect from that this year.

Are you intending to offset any or maybe all of it with.

With price rises.

Like many of the Oems right now we are definitely studying price and making sure that the value that we're providing to the customers makes sense in the context of the price that we're charging and there may be opportunity there and that's something we're going to continue to study over the future quarters potentially to offset some of these increases but also.

It just may make good business sense, so more to come on that we're analyzing that on the cost side, we do we do see.

This continuing logistics cost increases both in air as well as land.

And.

And C and so part of what we're trying to do.

As we are starting to stabilize and moving out of some of the early launches to move more of our parts from air to sea, which will bring down some of our costs, but despite our actions there the costs are high regardless. So we are planning to still see these high cost.

Throughout 2022, and we do expect that that is going to result in a negative gross margin for us through 2022 due to these these impact the supply chain and logistic issues and it's just going to end up attaching itself to the inventory cost, which is going to cause we anticipate.

Further impairment charges within within the.

Within the cost of goods sold but we do see that lessening as the year goes by and we're taking lots of mitigating actions as I mentioned things like that our oversea components moving them from.

Air to see and we're looking at.

Getting early analysis on some of the shipping channels that we have looking at how we can aggregate shipments. So lots of actions are in the works there.

Great. Thank you.

Thank you.

Our next question comes from the line of Ali <unk> with Guggenheim Partners. Your line is open.

Great. Good afternoon, thanks for taking my questions.

First just a quick clarification on the air production ramp when do you expect to finish the Dream addition, deliveries and start delivering the grand touring.

Well, we've actually started delivering the grand touring already.

And as soon as we're able to <unk>.

Secure sufficient pumps of sufficient quality, we will complete delivery to our customers.

Dream edition.

That can't happen soon enough for me.

Great. Thank you Peter and then on the gravity SUV production launch now being expected in 2024 versus 2023. Prior could you provide us a bit more color on why you're pushing out the launch at this point I think is there anything specific you'd highlight that makes you feel like it's going to take longer to get that you'd be out of the door.

Seem like most of the supply chain issues impacting production now should be transitory.

Exactly so I just want to make it a better product I'm really excited with the way it's developing it just going to be also has taken a few twists and turns in its development to make it even better than we had anticipated so I'm super pumps, and I think it needs deserves just a little bit longer we also want to.

Integrated a lot of the learnings.

<unk> production realization from lucid into that program.

Healthy feedback loop.

Integrating those learnings we're going to have.

<unk> formative SUV, which is grow in both the core DNA product DNA displaced concepts are more compatible me outside more space more practicality more luxury on the inside and we are going to have an ultra high efficiency, STB, which nobody has ever done before.

Thank you Peter.

And we will next take our Investor question through the <unk> technology platform.

What's the future plan in terms of expanding sales and charging stations.

Thanks, Lauren Yeah, we're actively and thoughtfully investing in our retail studio in service center footprint to support our customers throughout their customer journey and that's everything from discovery and initial interactions with our product and technology all the way through over the air updates and post sales and service.

As we disclosed we have increased our studio and service center footprint to 20 locations by the end of 2021 all of those are in North America, and we brought our first Canadian.

Operation online in Q4, and we're excited to be entering the European and Middle East markets. In 2022, we have started work on our Munich location and we expect to open. This spring and then we also have several other domestic and international announcements planned throughout this year.

I should also mention that we have mobile vans deployed in over a dozen major metropolitan areas already and we're going to be expanding that throughout the year as well.

The charging front first off we're fortunate to have the longest range and the fastest charging vehicles that are charging frequency and duration is shortening.

That said.

We're continuing to enjoy the partnership that we've established with Electrify America and we're actively studying whether it makes sense to deploy specific high speed charging infrastructure on a case by case basis.

We're also watching the deployment plans for charging infrastructure, that's funded by the U S government and we're excited to hear that with the joint office, it's being develop between transportation and energy that they are looking to get some of these first.

Charging infrastructure in place and online as soon as the end of this year and so that's also going to benefit all of us in the EV sector. So we're excited about that as well.

Great. Thank you Sherry and then the last question, we will take from the say technology platform. What are the next plans for the company and where do you see it in 10 years.

Well as we discussed in.

In our previous remarks, right now we are focused on ramping up production and <unk>.

<unk> delivery targets.

And we've got a laser focus on that the whole team. The company is just laser focused on that as well.

We seek to fulfill what is now 20000 reservations over 25000.

Could've been place when customers, who just the lucid.

So now we've got Grand touring and production in the next product.

Is already taking place than tooling coming later this year.

The one that I'm really excited about is pure pure is on schedule for late this year. The appeal version of lucid.

Sure.

Affordable food.

And we're expanding our manufacturing footprint as well and both now through the expansion of it.

A&P one factory in Arizona, III phase III that we will add $2 8 million square feet to our production footprint.

That will increase.

Adoption capacity in Arizona.

292000 vehicles per annum.

And in addition, we'll be building out A&P to our second factory in the Kingdom of Saudi Arabia.

Assembly sites overseas, and therefore will add another 150000 vehicle production per annum.

As discussed we continue to currently see gravity that contract for the first half of 'twenty four.

We're pretty excited about how disruptive and it's EV this is going to be.

Overall, we have the industry's leading EV sedan.

We started customer deliveries, it's a significant achievement for our company.

Next step is really about scaling scaling scaling scaling and capturing the tremendous opportunities ahead, just as consumer interest in Christianity leases, reaching this inflection point.

From a product going it's going to be scale scale scale product.

This is a technology race.

But.

Wrap up I'd like to just say a few words on how grateful we are to all our stakeholders to the employees to investors to our suppliers.

Helping us.

Progress.

So help think realizing risks.

Mission.

Thank you ladies.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Yes.

Yes.

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Ladies and gentlemen, thank you for standing by and welcome to the leasing group fourth quarter and full year 2021 earnings conference call.

Please be advised that today's conference is being recorded.

If you object to the recording you may disconnect at this time.

Later, we will conduct a question and answer session and instructions on how to queue for the questions will be given at that time I would now like to turn the conference over to Lauren Sloane Investor Relations of Lucid Mis alone you may begin.

Thank you and welcome to lucid group's fourth quarter and fiscal year 2021 earnings call. Thank you for joining us today.

On the call, we have Peter Robinson, our CEO , and CTO and Sherry House our CFO .

10-K was filed in the earnings release issued after the close of market earlier today.

Both are posted on our website.

Before we get started I want to emphasize that some of our statements made on this call, particularly those regarding our future financial performance of the company industry trends company initiatives and other future events.

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 1990 part.

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 included in the risk factors in our annual report on Form 10-K for the year ended December 31st 2021.

And the other documents filed or to be filed with the SEC for a fuller discussion.

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 culture 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.

<unk> of why we use non-GAAP financial measures and information regarding reconciliation of GAAP versus non-GAAP results is currently available in our earnings press release issued earlier this afternoon as well as in the appendix of our investor deck and available in the Investor Relations section of our website at IR Dot loosened Motors dotcom.

And now I'd like to turn the call over to loosen CEO and CTO Peter Robinson Peter.

Peter Please go ahead.

Thank you Lauren we were excited to update you on at least is tremendous progress in the fourth quarter.

For the full year of 2021.

During the fourth quarter, we reached a significant milestone for lucid.

We commenced customer deliveries of the worlds most advanced easy sedan.

As of year end 2021. This included 125 calls in customers' hands.

We produced over 400 vehicles in total as of today.

Yes.

300 have now been delivered to customers.

We accomplished these deliveries against the backdrop of an extraordinary supply chain and supplier quality challenges.

Indeed, we could have chosen to build faster, but we elected not to sacrifice quality given our unwavering commitment to the highest standards.

These first deliveries of lucid and validates our mission to inspire the adoption of sustainable energy by designing and building captivating electric vehicles centered around the human experience.

While the delivery of our first cohort of costs to consumers is important in its own right.

It also represents the first real will stress testing other critical path all of the customer journey.

From reservation to order to production delivery.

After sales support including the over the air updates to the lucid as onboard software.

When you step back and think about it we've put both a full EV powertrain.

Vehicles into production across two separate and distinct factories, which I believe to be the very first time that's ever been done.

So we were able to run two parallel tracks simultaneously in our manufacturing.

Using our proprietary powertrain and battery packs one side.

And then fully assembling the call a little way down the road.

M pay factory.

And extraordinary achievement.

And having worked through all of this we are more confident than ever that we are building a quality foundation on which we can scale, our business and build long term growth.

Starting and beginning to ramp production was a significant step in moving from concept to reality.

And delivering on our mission to create a future where there is no longer an artificial choice between between doing great things and doing the right thing.

The initial feedback from customers and third parties has been resoundingly positive.

So many customers are saying that theyre lucid is.

Is the best call.

If ever driven and price the quality of the build enjoying engaging dynamic driving experience whilst also relishing the luxurious interior ambiance.

At the time of our last call Lucida had just been named motor trends 2022 call of the year.

Since then we've continued to rack up industry accolades, we would named best New car to buy in 2022.

Green car reports, the 2022 luxury green car of the year by Green car Journal.

Most of the week 2022 Grinders Choice award for the Best EV.

The EPA has officially certified the lucid Dream addition, with the longest range of any EV at 520 miles.

And subsequent to the end of the quarter installing evs conducted a real world driving test to validate.

500 mile range at a steady 70 miles per hour.

I encourage you to take a look at that coverage, which is posted online.

In addition, we have the fastest charging EV available today independently verified to be capable of charging 300 miles and just 22 minutes.

As I recently told the New York Times, we've replaced range anxiety with range confidence now.

On that note I do want to emphasize a point, which is being all too long overlooked here.

Our transformative range and efficiency.

As much due to our in house software.

In hardware.

We truly are becoming as much a software company as a hardware company and I believe our efficiency in miles per kilowatt hour is an appropriate and a valid metric for this.

These metrics reinforce that our powertrain is the most efficient in the market in the real world and in customers' hands and this is a critical point.

In house technology, enabling more miles from a smaller battery size will allow us to shrink pack sizes with future products, whilst maintaining a highly competitive range.

And this is particularly advantageous for the lucid.

<unk> variant.

All of this is translating to significant demand for our products.

As of today, we have over 25000 reservations for lucid.

Representing a 47% increase from <unk>.

17000 reservations in mid November .

Our reservation book represents a healthy mix across our products from a hiring trends through to a pure model.

The Lucid Dream addition was heavily oversubscribed and is completely settled out.

We continue to see strong demand across our highest performance productivity is actually we are considering how best to address this demand.

We are gratified that customers recognize the exceptional quality of our calls with the.

Industry, leading independently certified range exceptional performance and handling and unmatched efficiency.

To address the rising demand for our products. We are actively working to expand our manufacturing facility in Arizona A&P. One. This is an imperative for US increased production capacity is essential to drive mass electrification and meet customer appetite from vehicle.

<unk>.

We continue to make good progress on the addition of two 8 million.

Million square feet of manufacturing capacity as part of phase two and Sherry will provide further details.

And as we discussed ramping up our manufacturing footprint.

We are also excited to announce plans for a new factory in Saudi Arabia.

Our first international production facility.

Lucid estimates that the selection of KSA as the location of its first international manufacturing plants May result in financial benefits Seleucid of up to $3.4 billion.

15 years.

This facility will be a world class manufacturing center with the ability to produce up to 150000 vehicles annually at full capacity.

We appreciate the efforts of the Ministry of investment to Saudi Arabia, The Saudi Industrial development Fund and the King Abdullah economic subsidy to finalize this game changing collaboration.

We are thrilled that this collaboration will allow us to introduce the world's most advanced electric vehicles to more people.

Additional markets in the coming years.

It also enables us to further our shared ambition to transform the economy of the KSA to sustainable transportation energy.

We look forward to breaking ground shortly and expect the facility to begin production in 2025.

In the more immediate term like many manufacturers all production has been and indeed continues to be impacted by supply chain challenges.

As you saw from our press release today, we have updated our 2022 production outlook for lucid.

To a range of 12000 to 14000 vehicles.

As a vertically integrated company, our technology and Engineering Foundation gives us significant advantages, we have control over both software and hardware and the proprietary powertrain and battery pack technology has been holistically designed for scalability of automated.

Manufacturing.

And because we have a clean sheet approach without the constraints of managing a legacy internal combustion based business, we've been able to pivot and adapt quickly.

Availability of certain components is disruptive.

As an example, we have been able to manage the chip shortage in partnership with our suppliers.

The supply chain issues that we're experiencing from factors, including components shortages, our insistence on the highest quality parts and logistics issues in some cases dependent.

Our teams could not visit our suppliers in person to ensure alignment on engineering specifications and tooling.

As travel has opened back up supplier quality teams have been able to address many of these issues.

I will note that these issues are impacting only a handful of approximately 250 suppliers.

And are not affecting critical single source or dual source components like semiconductors or batteries.

Instead, it's been commodity items like glass cockpits, and we've adapted by changing our specifications or indeed switching vendors if needed.

In some limited cases, we are evaluating additional opportunities to move production in <unk>.

House to drive further efficiencies.

We believe we will move past the key bottlenecks were experiencing in the next few months with further improvement in the second half.

We are continuing to augment our skills and capabilities and refine our processes in supply chain and logistics.

Startup our priority is to gain efficiency and improve as we scale.

None of this is possible without an experienced team that brings decades of experience in the automotive industry, including in manufacturing and the supply chain.

We recently added Ralph Jacobs.

Churn of Audi and Volkswagen as Vice President of program management to help spearhead our launch efforts alongside our existing leadership team.

Overall, while we are optimistic that our current shortages will ease over the coming quarters. We also know the unexpected issues will arise in the future.

And we are confident that we have and continue to augment the right team in place to manage them.

We are at an inflection point in terms of consumer interest in and adoption of electric vehicles.

Which means our timing as we scale simply couldnt be better.

Telecom market is growing electric.

One need not look further than the six Super Bowl ads for electric vehicles to note that the tightest turned.

Whether it's Bentley planning to be all EV by 2030, GM Renault and Nissan investing significant sums to build EV capacities over the next few years, although those effort to become the first all electric legacy automaker.

We started with arrow heading.

And I like our odds.

As we put the first lucid dream edition called into customers' hands.

Forefront of one of the most significant transitions in mobility in generations.

Now Knoxville Evs.

Cool.

Our technology supports the greatest efficiency as well as the <unk> interior and exterior footprint of our size.

And with the growing interest in Evs the opportunity is enormous and we are well positioned to targets and expanding global market in the years ahead.

We are attracting all types of consumers not just luxury traditional car buyers, but also early <unk> adopters.

<unk> is seeking performance and consumers focused on sustainability.

I Hope you will stop by one of our studios to see our products up close and learn more if indeed you haven't already.

As we look ahead, we have continued to expand our retail footprint with our first studios in Europe and Middle East planned to open later this year in.

In addition, we are making progress in the development of new models, such as our gravity SUV.

We continue to experienced Ernest interest in gravity and our ambition is to make gravity.

Outstanding as our first product in the sedan category.

We now expect gravity production to begin in the first half of 2024, which will help ensure it meets our commitment to high quality standards.

This will also provide us additional time to implement learnings and best practices from.

Launch.

I continue to personally oversee the engineering developments of gravity and all and becoming increasingly excited by it she the disruptive potential.

Closing I am confident we have the right combination of technology people products and funding to continue to break new ground in the large and growing market for electric vehicles.

We have a significant cash position and a strong balance sheet to support the scaling of our business and to capture the tremendous growth ahead.

We have great confidence that our technology will lead the industry in development of new products that will redefine consumers' expectations of Evs.

2021 was a great year for lucid.

At the same time, we're only getting started.

While I certainly have been frustrated by the supply chain and logistics setbacks that we've experienced.

Our conviction and proof points and what we can accomplish has never been greater.

I'm incredibly proud of our team and everything that we've achieved to date.

With that let me turn it over to Sherry for an update on our financials Sherry.

Thank you Peter today, I'll share, our Q4 and full year results, which demonstrate the progress in our business model and conviction in our future opportunities.

Peter mentioned 2021 was a critical year in establishing the foundation of our business operationally, which is reflected in our financial results.

We're very excited to have started deliveries in the fourth quarter. Our Q4 revenue was $26 4 million, including $21 3 million from the initial 125 deliveries at the lucid Evergreen edition, which began in October . We also recorded $4 9 million in revenues from battery.

<unk> sales from the Formula E Racing series.

Our results in the fourth quarter reflects the inflection point, we are at beginning to scale production and delivering vehicles, while investing substantially in our future promise of the company.

Cost of revenues were $151 5 million, which includes direct parts material shipping and handling overhead and estimated warranty cost launch cost are a meaningful part of this number in Q4, we brought in additional manufacturing and quality personnel to ramp up production. This step.

This represent our commitment to the highest possible quality standards. We also experienced increased logistic costs and expedited freight due to supply chain disruption.

As a result of these increased costs, we recorded an impairment charge of $48 9 million in the fourth quarter to reduce inventory to their net realizable value less cost to sell.

In 2022, as we continue to ramp production, we expect increased freight and overhead will result in impairment charges that could negatively impact cost of sales.

This impact should lessen over time.

If an item further down the P&L. We also incurred on December 31, the 583 million noncash expense related to the mark to market gain on private warrants.

Our R&D costs in 2021 totaled $750 million, which was in line with our expectations. These efforts are focused primarily on the development of the battery and powertrain technology. The lucid Air project gravity and future generations of our electric vehicle, we will continue to invest in our technology leadership.

Yep.

Borrow spring eds to market. It is critical that we maintain our competitive advantages by delivering a unique combination of hardware and software that set it apart.

Our Q4 SG&A costs of $197 million.

Comprised in part of expenses related to growing our retail studio and service network, along with investment to build out our global E Commerce platform.

<unk> and other G&A system.

We opened six additional studios in service centers and have higher personnel in North America, Europe , and the Middle East, Yes, we prepare the business for international sales and service in 2022.

Over the next several quarters, we will continue to build out our core business systems and direct to consumer digital and physical infrastructure.

Transact with customers in new countries. Additionally.

Additionally, operating expenses were impacted by stock based compensation in the amount of $151 million in Q4, including vesting under the CEO equity award agreements.

We expect that additional shares will vest under the CEO Equity Award agreement in early March.

We've also strengthened our leadership team with key hires in accounting and finance, we appointed Gorgon Zimbra as vice President of accounting and internal control and principal accounting officer and Mr. Ali Hussein is managing director Global Treasurer, and head of financial services together, they bring decades of strategic.

Nick leadership experience and building accounting and financial functions at multinational public companies.

Attracting and retaining talented experienced people that want to be part of this new wave of transportation will be key to our success.

So far despite constraints on the labor market generally we've been able to add talented colleagues to the lucid team across geographies and levels in the organization.

Overall and as reflected in our financial results, we continue to invest in best in class technology processes personnel and systems.

This is a theme you will continue to hear throughout 2022, as we create the infrastructure necessary to scale globally and operate effectively if a large public company.

As we prioritize scaling our business, we've executed strongly against our strategic objectives.

Setting the stage for another growth surge in 2022 commensurate with the increasing demand for the lucid air.

You heard from Peter we successfully produced 400 vehicles and delivered approximately 300 cars to our customers and our total reservations have increased over 25000 as of today we are.

Receive multiple prestigious third party accolades as well as great feedback from customers to precede their cars.

Continue to see strong demand for our premium products in fact, the demand for Grand touring at 139000 is even higher than our lower priced touring model.

We also have seen increasing reservations for the lucid are pure trim level, which we are targeting at a price point of less than $70000 for consumers in the U S. After the impact of tax incentives.

With our reservations, reflecting estimated revenues of more than $2 $4 billion.

We're accelerating our plans for growth as quickly as possible.

Our retail footprint grew significantly in 2021, and we reached our goal of opening 20 Studios and service centers by the end of the year with additional new locations planned for 2022.

In addition, we're seeing strong progress to increase our total capacity from 34000 units to 90000 units with the phase two expansion of A&P, one in Arizona coming online in late 2023.

Phase two which is an additional 285 million square feet will include an in factory Logistics Center.

On site stamping facility and the relocation of our powertrain center to A&P, one from another location in Arizona there.

By helping to speed the assembly of finished goods and improve our overall efficiency.

In addition to the groundbreaking announcement, we made today about our plans to build a new manufacturing facility. We continue to explore additional site in China and possibilities in Europe . All of these efforts underscore our global ambitions and reflect the interest we are seeing for our products around the world.

As mentioned by Peter we are managing through supply chain challenges that you've heard about at numerous companies across industries to 13th season at lucid, we have the right experience and resources to help mitigate these issues.

In some cases were buying ahead to reduce the risk of part shortages.

This will be a use of cash in the coming year as some items now require more than a year lead time.

In situations and suppliers have not been able to deliver there are multiple options to resolve these issues and we've executed on all of them as needed to effectively deal with the current situation, including collaborating with existing suppliers to improve throughput and quality.

<unk> suppliers, if we deem that the best approach and necessary enhancements cannot be executed to our satisfaction and bringing the manufacturing in house.

Our holistic approach is a key competitive advantage when A&P one phase two comes online it will allow us to become even more nimble in the quarters ahead.

We consider lucent global market opportunity the strength of our balance sheet as a leading asset.

Building upon our successful listing on NASDAQ, we issued $2 billion in Green convertible bonds. In December we were also selected to the NASDA Q1 00 and December .

As a result of our successful fundraising initiatives in 2021, we ended the year with over $6 2 billion of cash on hand, which ensures we are funded well into 2023.

We have multiple options for additional funding to further solidify our position, which will enable us to continue to be opportunistic in the market.

Balance sheet strength and financial discipline are central to our approach as we build our infrastructure and execute on the massive opportunity ahead.

In all we invested $421 million in Capex in 2021, any foundational investments will help deliver on the promise of electrification.

All in with everything we've accomplished recently, we have the elements in place to execute successfully on our plans the core pillars for future scalability and growth.

Now turning to guidance, we're updating our outlook for 2022 production to a range of 12000 to 14000 vehicles.

This projection represents our best estimate is we analyzed our relationship with our suppliers and where the bottleneck still exists in the supply chain as well as our own internal plans to improve logistics.

We expect to remain supply chain constrained in select parts of the business in the coming months and project improvement in the second half of the year.

As we look at our operating expenses for the year, we expect to continue to see investment in our vehicle programs as well as investment in our retail operations planning and business support functions.

We will also be supporting our entry into the European and Middle East markets during 2022.

We anticipate capital expenditures in the range of $2 billion in.

In 2022, which includes investment to support our manufacturing facilities and associated machinery, tooling and equipment and retail network and service development, both domestically and internationally as well as software and technology investments.

This represents a nearly five X increase compared to our spending in 2021 as we worked to dramatically scale our business.

We are considering other acceleration and opportunistic projects and we'll act on them if they make sense during the year.

We remain committed to our business model of starting with the production of higher trim products before moving to other tiers.

With this in mind, we will be starting production of pure later, this year, which will lead to higher volumes and scaling.

In closing we are still in the early innings of the electric vehicle Revolution, and believe that we are well positioned to emerge as one of the winners were confident that we have the right technology people products and funding trajectory to succeed.

In just a moment Peter will make some final comments and begin the Q&A portion of today's call.

Today's Q&A will feature questions fielded from some of our retail investors with the aid of the same technology platform consistent with our commitment in November to introduce some mechanism to include question from this important part of our shareholder base. We're excited to address those questions here.

With that I'd like to turn the call back to Peter.

Thank you.

Thank you Sherry.

I hope, it's clear why with so energized by what we've accomplished in the past few months and by how much opportunity is still ahead of us.

We're looking forward to continue dialogue with all of you in the months ahead as we build momentum in the business.

And with that let me turn it back to Lauren to get your questions.

Thank you Peter and it is now time for our Q&A session. We will start by taking a few questions. We received from investors who submitted questions on this day technology platform.

We have implemented this platform to enable shareholders to post questions directly to our management team and we have chosen questions, which address topics that we felt were not discussed in our prepared remarks, we.

We will also take questions from our research analysts.

Yeah.

And the first question, we received from our retail investors as it related to lease that is current and forward looking competitive strategy.

Do you have any strategies in mind to compete with Tesla.

Good luck.

Fascinating point actually I will in fact, we don't see ourselves competing directly with any particular companies I'll go a molecule at least.

To make the very best cost, we want to make the very best electric cars in the world.

One is to inspire the adoption of sustainable energy.

I actually believe the loser there is the best product in the World already I believe we're at the forefront of that technology.

Proof points that we have the most efficient TV with the highest range certified by the EPA given the high school pitch the fastest.

And these also proven validated outside by real World third parties and customers.

But what makes me the most is we advancing state of the art I'm really confident we can do that because.

No.

To me its product.

Okay.

Thank you Peter and our next question is supply chain related how his mindset approaching the chip shortage.

Yes, Peter mentioned in his prepared remarks to date, we have not experienced the gating issue with semiconductors and this is really for several reasons first lucid has significant electrical and hardware engineering talent and we designed many but not all of our printed circuit boards in house, hence when certain of these shortages have sir.

We've been able to adjust our designs and re validate and resource promptly largely using our existing direct relationship means second we stay in close contact with our supply base to understand any critical shortages and we do periodically leveraged the spot market to secure chips that are at risk and we purchased ahead, where it makes good business.

In fact, just recently I approved the purchase Rockford shifts that required a 72 week lead time this.

This is not a trivial process to actively manage the chip shortage situation and it does continue to evolve, but we're just really well positioned to deal with these sort of challenges because of our deep subject matter expertise and the direct relationships that we enjoy with many of the semiconductor leaders.

Thank you Sir and our next question any update on the Apple card discussion.

I've been asked this question a number of times in the past.

We have nothing to provide related to discussions with apple or any other potential partners at this point.

I would say that said, we do recognize the attractiveness of our product and technology for such companies and we're always open to discuss.

I think our efficiency on connectivity.

<unk> suite of significant points of attraction for such partnerships in the autonomous vehicle space.

As it relates to other income being monetization opportunities.

I think I think we really recognize that we are in the pool.

<unk> Suisse.

<unk> elucidate a computer on wheels.

Software development is.

A huge part of that.

Been focused on developing software as much as hardware in the past year, we brought in significant leadership program.

And other disruptive technology companies.

To take.

Digital engineering leadership.

We remain very open minded on this front.

You talked about potential for pump issues.

Thank you.

We remain open minded on this front and all excited about potential for partnership.

I will now take a question from John Murphy with Bank of America.

Line is open.

Good afternoon, everybody. Thanks.

Thanks for the information I'd sure like.

Two quick ones.

First Peter as you think about.

The causal factors for the reduction in your planned production this year.

You are citing supply chain.

It appears that maybe some of the capacity expansion and reorganization has.

Put forth or been prioritized over ramping volume in the near term for the benefit of a long term.

And there might be some other micro issues that we can't see I was just wondering if you could kind of bucket those or maybe rank those in order of sort of impact and then also as we think about this does this change your outlook for 2023 volumes or is this sort of short term pain for long term gain.

This is interesting points I mean.

First of all I would say this.

We have been primarily constraint we've got about 250 suppliers worldwide Notionally about 3000 pounds and this has been really.

A phenomenon of just a small handful of 250 suppliers powered oxishly, we'd be mainly impacted our commodity supply.

Our parts for example finished parts twin pumps for the exterior even grow.

So it's not the core technologies of the vehicle that have been.

Largely impacting us here and we have you're right we've chosen.

Quality over volume, we don't want to get sucked into a myopic view.

Short term numbers with building our brands with a 10 year plan and our customers have been really.

Im grateful and appreciative of the call, let's say.

<unk>.

Built into our call the build quality, so we prioritize quality over numbers.

Sure.

For 2023, and just to provide a little bit of context, there. The supply chain situation is quite dynamic and we will share guidance as we experience more of the following quarters and won't be doing that in Q4 for sure. What we can say, though is that the tooling is coming on nicely.

Factory for phase, two and that is enabling us to be able to produce up to 53000 lucid errors.

Our.

Bye bye.

End of 2023, so we do have the ability to.

We are bringing on the tooling that's going to enable continued availability of production exactly.

It's risk mitigation John .

Supplying particular support.

Suppliers too.

That processes and bring them in line with our quality expectations some were actually really.

Taking the supply to new suppliers.

Instances, we're actually bringing processes.

Manufacturing in house, so that we can have vertically integrated control of quality and volume.

Okay. That's very helpful. And then just a second question around the Saudi facility.

Do you expect the financing to come from internal funds.

Or do you think the public investment fund will.

You will be a key component.

Funding that capacity addition, I should say even expansion, but the incremental addition of that facility in Saudi Arabia, just sounds like there will be a lot of interest in the diversification from their standpoint, so they might be able to or willing to put more capital in I'm. Just curious what your expectations are there.

Well first of all we ended the year with $6 6 billion of cash on the balance sheet, so that in and of itself funds, that's really well into 2023. So as we look to launch these efforts here in 2022.

We're already we already have the cash available to us to be able to use I mean, as we move forward with our forward business plan.

We plan to.

To leverage many sources of capital it could come from.

Governments that could come from the capital markets, whether it be debt or equity and right now we see just a tremendous number of opportunities for fund. So we're going to look at what's going to be in the best interest of the shareholders and be really opportunistic looking for cash that is efficient.

Okay, that's great and helpful. Thank you guys.

Yes.

Thank you.

Our next question comes from the lineup.

Hey, Michael Lee with Citi. Your line is open.

Great. Thanks, everybody couple of questions, just first going back to the supply chain pressures.

Just hoping you could maybe articulate it sounds like you expect most of the recovery to happen in the second half of the year.

Can you talk about how much visibility you have over the next few months with some of the suppliers you mentioned and just the degree of confidence of how to think about the cadence of improvement in production throughout the year.

Yes, we have.

<unk> focus on addressing some of the supply chain challenges, we see them to continue for the next few months.

We see.

And uptake in the second half of the year. So we're really optimistic.

That we're going to be able to resolve these and again. This is a small handful of suppliers, we're not talking about fundamental technologies here, we're talking largely paradoxically commodity suppliers finishes.

Carpet.

And things like that.

Unfortunately, you cant sell a single Quantico, unless those particularly those visible parts absolutely perfect.

So we're very optimistic that we will resolve but its going to take a few months and the second half of the year.

We will see a significant uptake.

And already in.

Based upon that premise.

That's very helpful. Thanks for that color Peter just a quick follow up on the 25000 plus reservation, hoping you can give a bit more context around the regional breakdown kind of where youre seeing the most incremental demand coming from.

I don't have any detail on which other vehicles or segment. Some of these reservation holders are kind of coming from and any additional color helpful. So we announced we've got over 25.

Reservations last time, we announced we had over 17000 mid November so thats well over 40% uptake I think what's really important to recognize here is that that is just for lucid. This isn't we havent opened reservations with gravity and this is a reservations only opened in north.

Erica Europe and the Middle East.

The lion's share of those reservations.

Our home market here in the U S and also we have a fantastic mix.

Of course.

The dream of issues, so that we've actually started making grand touring.

And touring is coming later this year and reach into something really excites me the pure before the end of this year and we've got a really healthy mix.

Orders between those modules. Moreover, I should say because.

The agreement issue, so resoundingly selling will go how we're looking at how we can address that actual.

Latent demand out there for our higher end products.

That's all very helpful. Thank you Peter.

Thank you.

Our next question comes from the line of Charles <unk> with Redburn. Your line is open.

Thank you guys. So my first question to Sherry.

So capex thanks for the guidance of $2 billion. This year I have in mind, one stage last year, you were intending to spend $900 million in 'twenty two.

And then I think in July you announced the plan to accelerate some spending but nevertheless, the $2 billion feels like it's further raise on that acceleration. So can you talk to us a little bit about where that additional spending is going.

And the benefits that should come from it.

Yes, maybe I'll start with that.

Yes of course.

We were planning to spend closer to $900 million in 2021 and that was before we did that June update.

2021, we ended up spending $421 million in Capex and it wasn't that anything is.

Is delayed it's just the payment of some of the Capex ended up being shifted out by about a quarter. So a lot of that.

$500 million essentially is now moving into 2022.

That is increasing the base amount.

Youre seeing originally in 2022 and actually are our amount in 2020 to the prior guidance was higher than that it was I believe closer to $1 3 billion originally and so now we are bringing in that 500, and then as you might recall on that June press release, we had talk.

About taking some of the spend $350 million of spend from 2025, and six and moving it into the earlier years with an overall increase in capex of 6% to 7%. So really you are not seeing anything different from that guidance that we provided before youre seeing this kind of shift.

It's happening.

Okay wonderful thank you and my second question.

You mentioned some.

Input cost inflation, maybe around logistics, obviously, we've seen it more broadly from raw materials.

Wondering what sort of impact we should expect from US. This year are you intending to offset any or maybe all of it.

Price rises.

Yes, like many of the Oems right now we are definitely studying price and making sure that the value that we're providing to the customers makes sense in the context of the price that we're charging and there may be opportunity there and that's something we're going to continue to study over the future quarters potentially to offset some of these increases but also it.

Just may make good business sense, so more to come on that we're analyzing that.

The cost side, we do we do see.

This continuing logistics cost increases.

Both in air as well as land and.

And C and so part of what we're trying to do.

We are starting to stabilize and moving out of some of the early launches to move more of our parks from air to sea, which will bring down some of our cost, but despite our actions there the costs are high regardless. So we are planning to still see these high cost.

Throughout 2022, and we do expect that that is going to result in a negative gross margin for us through 2022.

These these impact the supply chain and logistic issues and it's just going to end up attaching itself to the inventory cost, which is going to cause we anticipate further impairment charges within within the.

Within the cost of goods sold but we do see that lessening as the year goes by and we're taking lots of mitigating actions as I mentioned things like that our oversea components moving them from.

Air to see when we're looking at.

Getting early analysis on some of the shipping channels that we have looking at how we can aggregate shipments. So lots of actions are in the works there.

Great. Thank you.

Thank you.

Our next question comes from the line of Ali <unk> with Guggenheim Partners. Your line is open.

Great. Good afternoon, thanks for taking my questions.

First just a quick clarification on the air production ramp when do you expect to finish the Dream addition, deliveries and start delivering the Grand touring Tran.

Well, we've actually started delivering the grand touring already.

And as soon as we're able to <unk>.

Secure sufficient parts of sufficient quality, we will complete delivery to our customers.

Dream addition.

That can't happen soon enough for me.

Great. Thank you Peter and then on the gravity SUV production launch now being expected in 2024 versus 2023. Prior could you provide us a bit more color on why you're pushing out the launch at this point I think is there anything specific you'd highlight that makes you feel like it's going to take longer to get that you'd be out of the door.

Seem like most of the supply chain issues impacting production now should be transitory.

Exactly so I just wanted to make it a bunch of product I'm really excited with the way. It's developing it's just going to be also has taken a few twists and turns in its development to make it even better than we had anticipated so I'm super pumps, and I think it needs.

Just a little bit longer we also want to.

Integrated a lot of the learnings.

Production realizations from lucid into that program.

Healthy feedback loop.

Integrating those learnings we're going to have.

Formative SUV, which is growing in both the core DNA product DNA displace concepts are more compatible me outside most place more <unk> more luxury on the inside and we're going to have an ultra high efficiency.

<unk>, which nobody has ever done before.

Thank you Peter.

And we will next take our Investor question through the state technologies platform, what's the future plan in terms of expanding sales and charging stations.

Thanks, Lauren Yeah, we are actively and thoughtfully investing in our retail studio in service center footprint to support our customers throughout their customer journey and that's everything from discovery and initial interactions with our product and technology all the way through over the air updates and post sales and service.

We disclosed we have increased our studio and service center footprint to 20 locations by the end of 2021 all of those are in North America, and we brought our first Canadian.

Operation online in Q4, and we're excited to be entering the European and Middle East markets. In 2022, we have started work on our Munich location and we expect to open. This spring and then we also have several other domestic and international announcements planned throughout this year.

I should also mention that we have mobile fans deployed in over a dozen major metropolitan areas already and we're going to be expanding back throughout the year as well.

On the charging front first off we're fortunate to have the longest range and the fastest charging vehicles are charging frequency and duration is shortened.

That said.

We're continuing to enjoy the partnership that we've established with Electrify America and we're actively studying whether it makes sense to deploy specific high speed charging infrastructure on a case by case basis.

We're also watching the deployment plans for charging infrastructure, that's funded by the U S government and we're excited to hear that with the joint office, that's being developed between transportation and energy that they are looking to get some of these first charging infrastructure in place and online as soon as the end of the.

This year and so that's also going to benefit all of us in the EV sector. So we're excited about that as well.

Great. Thank you Sherry and then the last question, we'll take from the say technology platform.

What are the next plans for the company and where do you see listed in 10 years, well well as we discussed in our.

Previous remarks, right now we are focused on ramping up production and achieving delivery targets.

And we've got a laser focus on that the whole team that come from me is just laser focused on that as we seek to fulfill what is now 20000 reservations over 25000 that.

That are in place when customers, who just the lucid.

So now we've got Grand touring and production in the next quarter.

Is already taking place.

Tooling coming later this year, but the one that I'm really excited about as pure pure is on schedule for late this year. The appeal version of lucid.

Sure.

Affordable food.

And we're expanding our manufacturing footprint as well and both now through the expansion of it.

A&P one factory in Arizona, III phase II that will add $3 8 million square feet to our production footprint.

We will increase our nu.

Auction capacity in Arizona.

92000 vehicles per annum.

In addition, we will be building out A&P to our second factory in the Kingdom of Saudi Arabia.

Assembly sites overseas.

And another 150000 vehicle production.

Donna.

As discussed we continue to clearly see gravity that contract for the first half of 'twenty four.

We are pretty excited about how disruptive and SUV this is going to be.

Overall, we have the industry's leading EV sedan.

And we started customer deliveries, it's a significant achievement for our company.

The next step is really about scaling scaling scaling scaling and capturing the tremendous opportunities ahead.

First of all consumers interestingly visa's, reaching this inflection point.

From a product going it's going to be scale scale scale product.

This is a technology race.

To wrap up I'd like to just say a few words on how grateful we are to.

To all our stakeholders to the employees to investors to our suppliers our partners for helping us in the progress for.

For helping realizing risks all important mission.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.