Q3 2022 Lucid Group Inc Earnings Call
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Hello, and thank you for standing by welcome to Lucid third quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. So ask the question. During the session you will need to press star one one on your telephone.
I'd now like to hand, the conference over to your speaker for today Maynard you may begin.
Thanks, Rhonda and welcome to lucid group's third quarter 2022 earnings call. Joining me today are Peter Robertson, 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.
The company's production and delivery volumes macroeconomic and industry trends company initiatives and other future events. These statements are based on predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language in the risk factors in our quarterly report on Form 10-Q for the quarter.
Ended September 32022, and forward looking statements on page two of our investor deck available on the Investor Relations section of our website at IR Dot Lucid Motors Dot Com. In addition management will make reference to non-GAAP financial measures. During this call a discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non.
GAAP results is available in our earnings press release issued earlier this afternoon as well as in the Investor deck.
With that I'd like to turn the call over to lucid CEO and CTO Peter Robinson Peter Please go ahead.
Thank you Mei and thank you everyone for joining us for our third quarter earnings call.
Just wanted to say that we've made significant progress towards achieving our 2022 production target of 6000 to.
7000 vehicles.
In Q3, we achieved a record quarterly production of two times.
282 vehicles more than triple grants in Q2.
And deliveries of 1398, which is more than double that of Q2.
I want to extend a heartfelt thank you to.
Every lease it to your collective efforts, which are being central to growing these meaningful increases as we scale and ramp production and deliveries.
<unk> continued to play.
We will in the progress of our production ramp.
And in so doing help getting more customers behind the wheel of the new lucid Ed.
Now in Q2, we werent in a position to give you a figure for weekly production number but today I am pleased to announce that we've now proven our ability to produce 300 calls a week.
And even more importantly, we have a visible path way to our next incremental production rates.
And this has been a huge team effort drawing upon talent from across the company.
We've made some difficult decisions.
Some systematic changes to the organizational structure.
And I think now the results are beginning to speak for themselves.
We're working very hard to control, what we can control, but the supply chain situation remains fluid.
In fact, even now were experiencing a challenge with one particular item that will lead to some very temporary time out for the line.
We believe we can still achieve our six to 7000 production guidance for 2022. Despite this particular issue.
And during this time, we will implement a whole batch of improvements that will further enable us to produce even more.
Turning to logistics, we believe we've made significant progress in our plan to bring our logistics operation in house and to restructure our logistics and manufacturing organization.
We addressed some of the primary gating factors that impacted production in the second quarter.
Steven David and the new leaders, we put in place have been doing a very good job providing valuable leadership in executing this transition.
But we're also I am pleased with our progress we do have more work to do.
But it is my privilege to continue to push really lead this important effort along side incredible team here in Arizona.
So in fact I am joining today's earnings call once again from A&P, one in Arizona right off the factory floor, where we've been very busy just last week, we commenced production of the listed at touring.
I'm looking forward to personally deliver the very first one to a customer next week sorry.
Turing is a 620 horsepower dual mode. So all wheel drive version of the App with the zero to 60 of around three two seconds.
I'm also very excited to be able to offer more affordable version of the air with Turing.
Equally as excited by illicit appeal, which will be our most affordable.
Areas with up to 480 horsepower.
We are on track to start production of pure suite and expect to start delivering the first of these vehicles before year end.
So stay tuned next week for our lucid launch event for a lot more details.
But I'll give you a little sneak peek with some numbers, we've talked about grand touring during an industry, leading four six miles per kilowatt hour.
And now I'm happy to say that touring we will be able to match a landmark for six miles per kilowatt hour efficiency of the grin, sorry, albeit at a more affordable price point and Thats, an important incremental step to bringing.
Efficient in these more attainable.
And we will continue to push relentlessly to get closer to what is our aspirational target of <unk>.
So the five miles per kilowatt hour for lucid.
No. This incredible efficiency is driven in large part by our in house developed patch right now.
Many of you heard me say this before this truly is a technology race.
And new tool E. These are created equal.
Lucid enabled more miles per kilowatt hour battery and this allows us to provide will lead in range with a smaller battery.
So offer exceptional receipts ergonomics with a deeper foot well in both the touring and pure models.
And we continue to garner external validation of our technology progress through such recent awards as top 10, best engines and propulsion systems.
Okay.
But we're not stopping that in Q3, we introduced the Sapphire brands with its new high performance driver focus brands.
Sarcoma represents the pinnacle of electric performance.
Finally, achieving satisfactory performance that I, so long searched for.
As I thought it will be the very first lucid products to bear risk.
And we will build upon our technical prowess to take electric high performance to next level.
At the heart of lucid as Sapphire.
Is the three mode to powertrain the first from lucid.
Featuring a brand new twin moats, a rear drive units.
A single months front drive units.
All of the manufactured enhanced by lucid.
A link to a mistake.
The performance efficiency and competitiveness I believe these are truly state of the art.
Between when we deem it introduces new heat exchanger technology.
The flow rates.
In addition, the battery system has upgraded for higher power and more precise thermal logic.
And with over 1200 horsepower listed as that part is not only the most powerful electric sedan in the world. It is the most powerful sedan in the world.
We are regularly testing staff why now in fact, I'm currently personally test driving sapphire and I'm satisfied with the progress it's making.
We expect to start production in the first half of 2023.
We're also delighted to say that project gravity SUV will be ready to be unveiled will soon we're planning events in early 2023, and we will begin taking reservations from that movement ahead of the start of production in calendar year 2024.
I'd go so far to say that I believe the performance metrics of gravity are gonna be unsurpassed within 12 months.
Further demonstrating our technology price.
We're going to take some.
<unk> space concept range efficiency technology design elements and performance and applaud all lots.
To create what I believe will be truly a landmark SUV.
We're running a factory three phase sitting here at one in.
In Arizona.
Specifically, we are expanding the north end of the body shop to get ready for protect gravity and Lasalle side of the building.
The New Assembly holds well run both air and gravity down that line.
I believe gravity can have as much if not even greater impact upon the SUV market than that.
As for the luxury sedan markets.
And I cannot wait to share more details in the not too distant future.
Stay tuned for a launch event next week, we will go through the lucid airline and provide a sneak peek on the gravity SUV.
Now while I'm very excited by our vehicle roadmap I'm also thrilled with our software progress and in particular.
Our latest <unk> two <unk> release.
We've made a very conscious decision to design lifted from.
From the beginning it's purely software defined vehicle.
The synergistic integration of software and hardware engineering, resulting in a vehicle that can get better overtime long after a customer takes delivery through simply receiving over the air update.
Now during the third quarter, we released 14 over the air software upgrades more than one per week.
Our latest over the air software updates is the most extensive today.
With significant announcements improvements across the vehicles.
New features include instant home glass cockpits and pilot panel displays.
<unk> of highway assist for the Dream drive advanced driver assistance system improved on screen layouts and many other features.
But I think it's very important to highlight that lucid has always had world class software.
Likely just never seen it it's a software that drives the powertrain the software that manages the batteries or software that controls the critical components of the vehicle in.
In addition to our in House manufacturing Technology software is a key element, so lucid as unheralded performance and efficiency.
Put simply we would never have achieved an EPA estimated 520 miles in the case of the Dream addition range had it not been for this software.
And of course these components are all over the year updates adult as well.
Our World Class software team led by Mike Bell will be releasing many more features in the very near future.
Just last week, we announced Sirius is X and radio audio entertainment experience will be a standard in dash feature across the full lineup of lease vehicles.
The data will be available at no cost to lucid owners and in 2023, we expect to deliver the full implementation.
Lucid owners will receive a full three month trial subscription.
As everyone may be aware with bigger picture vision has always been to establish a lucid group of companies, let me come to us not just cars, but energy ecosystem as well as the technology licensing and these are the three pillars. If you will.
So we recently launched a lucid vehicle assessors, which includes the lucid connected home charging station the first step into the company's future energy ecosystem.
This is home charging solution can support up to $19 two kilowatts of.
Electrical power, which enables charging of up to 80 miles per hour to match lucid as industry, leading thoughts AC charging rates.
The whole station will effectively double the rates at which Seleucid AD can be charged when installed at full power compared to the concluded charging cable.
Now the charging station is also equipped with hardware ready for bi directional electric power and his wife enables the future over the air updates.
Turning to our battery strategy.
I'm delighted to announce that we recently validated battery cells with another global battery supply.
We expect this agreement along with our existing agreements with LG and Samsung.
Give us sufficient self supply both in 2022 as well as 2023.
And we're working on long term supply arrangements with numerous suppliers.
Indeed, I'd like to take this environment to thank all of our suppliers, who work very hard with us during these challenging times.
So to sum up I'm incredibly proud of the leadership team and what we've accomplished despite the many challenges that we and the industry faced in just a short amount of time, we brought our logistics operations in house, we restructured all logistics and manufacturing operation we brought in.
Exceptional leadership, we've addressed some of the gating factors impacting Q2 production and we delivered on our software experience one would expect diluted at.
<unk> launched our technology Division.
I believe we're only just getting started.
We'll deliver variance across the performance and affordability spectrum with Sapphire touring and pure.
We will begin on our global expansion with the first deliveries into Europe and into Saudi Arabia by the end of the year will.
We unveiled project gravity SUV early next year, and we will continue to focus on extending our unsurpassed technology leadership.
Lastly, and most importantly.
Like to thank our customers for your faith in US I've met a number of you and your families and your feedback and delight really a part of what drives me and the whole team here to deliver the quality and experience the truly deserve.
We're ramping production as quickly as we can to get more vehicles into the hands of our customers and I want to reiterate that I firmly believe.
To achieve our 6000 to seven styles in vehicle production guidance for 2022, and with that let me turn it over to Sherry for an update on our financials.
Peter and thank you to those sort of taken the time to join US today, but for sharing our Q3 results I'd also like to extend my sincere gratitude to our customers.
Our entire team members our partner suppliers in Q3, we scaled across every corner of our business from manufacturing and engineering to G&A sales and service we've made tremendous strides in our production ramp we launched our new SaaS Firebrand introduced additional product features in <unk>.
To enhance our customer experience through our expanding sales and service network.
All of that strong progress with only possible due to persevere I think collaboration of each and every one of you and I'm incredibly proud to work alongside you.
Now turning to our third quarter financial results.
Peter mentioned, we produced 2282 vehicles more than triple our Q2 production numbers until deferred 1398 vehicles, which was more than double Q2, the variance between production and deliveries is primarily a function of vehicles distributed across three areas. So that's a great process.
Vehicles in transit vehicles awaiting pre delivery inspection in vehicles awaiting delivery to a customer.
As we mature the business well continue to learn and refine our in transit infection and delivery processes.
In the near to medium term, we expect vehicles Purdue to pace at a higher volume in vehicle delivery as we accelerate our production and we initiate international deliveries in the fourth quarter, the latter which requires longer and transit time.
We continue to have strong demand with more than 34000 reservation as of November seven.
To put the reservation number in context this value equates to the amount of our current annual towards capacity and Amp one.
Also compares to the over 37000 reservations, we got in Q2 the.
The reservation calculation include new reservation nets out all delivery that we accomplished in Q3 and Q4 to date and also net thought cancellations.
It's important to note that this number does not include the up to 100000 vehicles under the agreement with the government of Saudi Arabia, We expect deliveries to start next year.
<unk> been ongoing with the government and we're actively working on schedule into the first delivery.
We also have not opened up preservation for project gravity SUV, we expect to start taking reservations in early 2023 opening up what we believe will be a very large and incremental addressable market for us.
Our ultimate goal is to sustain a healthy reservation bank balancing wait times and delivery until our supply increases with our expanding factory footprint.
Turning to our P&L.
Q3 revenue with just over 195 million, which represented a quarter over quarter increase of 101% we.
We remain intently focused on scaling the business and continue to expect to see significant growth in revenue, yes delivery volumes ramp.
We're also excited about our recent launch of listed vehicle accessories.
Andy might have accessories that serve as a stylish compliments to the entire lucid air vehicle lineup. In addition to the lucid connected home charging station that Peter mentioned, we also announced a number of other accessories, including a cargo capsule that many customers have been asking for.
Turning to our cost of revenue.
Cost of revenue was $492 5 million, which includes direct part material shipping and handling.
Overhead personnel costs, including wages and stock based comp estimated warranty costs and inventory write down primarily related to reducing inventory to their net realizable value.
Similar to last quarter. This expected increase was primarily related to personnel and overhead costs as we ramp up production.
Offset by lower freight cost quarter over quarter due to our ability to shift the vast majority of our international shipments from air to Ocean freight.
Yes, we produced vehicles at low volumes on production line designed for higher volumes.
<unk> and will continue to experience negative gross profit related to labor and overhead costs.
Additionally, we recorded a lower of cost or net realizable value adjustment of $186 5 million in Q3. This amount contemplates the value we anticipate receiving upon vehicles fail after considering costs. That's the theory convert the inventory on hand into a finished product.
During this quarter, our LC and RV impairment increased primarily due to product mix and an increase in inventory levels, including firm commitment.
Moving to operating expenses.
We're still in the growth stages of our company and investing behind our strategic priority, but we're doing this in a prudent and methodical manner.
I said last quarter, we're instilling a culture of cost consciousness, and we're working across the company to identify and execute on cost efficiency opportunity.
R&D expense totaled approximately $213 8 million up 7% sequentially.
This sequential increase was related to the continued ramp up of the gravity and Sapphire program as well as head count growth to support further investment into our cutting edge tech and product <unk>.
Surely offset by lower stock based compensation expense.
SG&A expense was approximately $176 7 million up 8% sequentially SG&A, primarily a personnel related expenses allocated facility cost and other general corporate expenses.
Yes, we continue to grow with the company built out our sales force and commercialize the blues City Air and planned future generations of our electric vehicles, we expect that our SG&A costs will increase.
We ended the quarter with 29 studio in service centers flat from Q2.
We opened our first studio in Saudi Arabia at the end of October as well as our first textbook studio in Plano.
And we expect to strategically expand the number of studio in service centers with a number of new openings across North America, and Europe to the remainder of this year.
We increased our mobile suite by nearly 10% in Q3, which is an important element in ensuring high customer satisfaction.
We used to vehicles continues to grow.
Our mobile vans can perform over 80% of the services that can be done in a service center.
Yeah.
Stock based compensation in the quarter was $83 3 million approximately $10 8 million within cost of revenue.
$34 1 million in research and development and $38 4 million within SG&A.
Other income was favorably impacted by a noncash impact mark to market value of private warrant and the amount of $140 1 million.
Failure of the warrants can be influenced quarter to quarter by a number of factors, including boosted groups end of quarter share price.
Our overall performance in the quarter with a net loss of negative $531 million.
Moving to the balance sheet.
We ended the quarter with just over $3 885 billion in cash cash equivalents and investments with total liquidity of $4 2 billion when considering our global credit facilities.
To continue to drive our growth plan and capture significant market opportunity. We see we do want to maintain the flexibility to raise additional capital.
Our major shareholder the public investment fund is X.
Preston willingness to support us in our future capital raise on a pro rata basis.
We are incredibly grateful to have such a strong strategic investor.
<unk>.
We are putting in place.
$600 million aftermarket program, which will create flexibility for us to raise new third party equity capital.
Combined with our pro rata participation by the public investment fund this would allow us to raise up to approximately one 5 billion net of fees and other operating expenses.
The ATM program provides us with an attractive option to raise capital, but we have no obligation to execute on our program and we will continue to be opportunistic in our approach to financing. This.
This is consistent with our historical funding action, including raising funds last year with a green convertible bond in earlier this year, securing a $1 billion ABL facility.
Our strategy is to take a holistic approach towards funding the business.
We believe we have access to a variety of available options for debt and equity markets as well as access to low cost government program.
We will continue to be opportunistic in raising capital and this ATM program is one incremental tool and our broader funding strategy.
Turning to inventory.
Inventory in the quarter increased due to a combination of our protection volume ramp in vehicles in transit to customers. However, we reduced work in progress inventory by more than half relative to last quarter.
<unk> made progress on completing production of in process vehicles from Q2.
In Q3, we secured approximately 495 acres of land situated underneath our amp one factory and we also entered into an option to purchase additional land around your existing facility further securing our future needs.
Capital expenditures were $290 1 million in Q3.
Year to date, Capex was close to $785 million.
Our phase two expansion at Amp, one is progressing and we expect to begin moving air production into the South building in the first half of next year construction.
Construction is ongoing but we didn't started installing some equipment and as we discussed last quarter. We are using a portion of our expanded footprint for logistics.
Now moving to our international expansion efforts, just recently, Peter and I and some of the loop. The team are in the Kingdom of Saudi Arabia meeting with government and banking partners in conjunction with the opening of our studio in Riyadh, we're already starting to realize the benefits of the KSA relationship and a $3 4 billion.
And economic support.
We were happy to announce the signing of a memorandum of understanding with the human resources development fund for HRD up in Saudi Arabia, as well as the receipt of the first grant from the Ministry of investment Saudi Arabia also known as MISO.
<unk>, which is part of the National Development Fund will contribute 75% of the training costs and salary support for more than 1000 employees, resulting in an estimated contribution of more than $50 million over a five year period.
This collaboration and investment from HRD up well allow me to provide essential and meaningful training opportunities for Saudi national many of whom have not worked in the EV space previously and will be instrumental in making sure. We have well trained professionals as we launched boosted first internal.
Manufacturing International manufacturing locations, we're thankful for the strong support and collaboration of the region and glad to see it all coming to fruition.
Turning to the outlook for.
We're reiterating our 2022 production guidance of 6000 to 7000, we had strong production in Q3, and we believe we're on track to achieving this outlook. We ended the quarter with a little over $3 85 billion in cash and investments, which we continue to believe is sufficient liquidity at least into the fourth quarter of 2000.
23.
As soon as we are investing fully in accordance with our forward plan, which includes the phase two expansion of Amp one in Arizona.
Engineering and prototyping of gravity. The continued Buildout of studios in service centers in North America, Europe , and Middle East and some early spend associated with entering the Asia Pac and China market.
Moving to Capex.
We expect capital expenditures for 2022 to be around $1 2 billion.
The reduction in Capex guidance for 2022 was largely a function of timing and does not represent an overall reduction in the budget any dollars not spent in 2022 are anticipated to be spent in 2023 and a corresponding shift from the end of 2023 into 2024 is likely to occur in.
Clothing, we're excited about our progress and the many exciting coming milestones in our roadmap by the end of this year, we will introduce four of our lucid air vehicle variant.
Grand touring performance Grant Turing Turing pure.
And air Sapphire and gravity around the horizon. Our international expansion is also well underway and you can see that we're starting to realize the benefits of our strong partnership with the government of Saudi Arabia, we can't wait to share more about some of these great projects to pollute the team that's working on including our boosted launch event on November 15.
With that let me turn it back to me to get to your question Maynard. Thanks, Jerry will now start the Q&A portion of the call today's Q&A will features.
One is from some of our retail investors who are an important.
Important constituency of our shareholder base through.
Through the same technology platform will follow that by live analyst questions and close it out with a couple of quick question. If we have time.
Let's start with the first question.
What is the production targets for 2023.
So we won't be providing a detailed outlook for 2023 today, we will likely provide us information on our next earnings call, which will cover our Q4 and full year performance and expectations for 2023, if we said in our prepared remarks, we are intently focused on ramping production. We have line of sight into our next incremental ramp up.
And we're delivering as many vehicles for our customers as possible. So by next year, we expect to be producing our full line of air from our highest performing ear Sapphire term most affordable are pure.
And we plan to begin delivering some of these vehicle variance internationally. We're also planning on unveiling our gravity Suvs. So we're very excited about 2023.
Thanks, Sherry will move to the next day question.
When are you planning to start building and utilizing the railway transportation and the cost of growing factory to reduce transportation costs with suppliers in card is delivery.
Yeah. So as I mentioned, we're working across the company to identify and execute on cost efficiency opportunities generally if there is a number of opportunities we could pursue in which may make more sense to pursue as we ramp volume if it makes financial sense. We of course, we'll consider them, including the use of the railway transportation, which is.
Right in our backyard, yes.
I would want to add the Arizona and the city of Casa Grande have been incredible partners and we're always looking for additional opportunities to drive our business whilst at the same time, helping to spur jobs.
Economic growth in this region.
Thank you and let's move to the next a question it looks like there's about a thousand cars that have been produced but not delivered why is that and where are these car store Oh, yeah, well I mean this is a function of the cadence by which we ramped up we've made remarkable strides in ramping up.
And naturally there is going to be a phase lag between producing because I'm guessing them out so all of their customers so very much.
Our cadence this year.
A phase lag phenomenon, yeah as I said in my prepared remarks, I mean adhere to mirror in the near to medium term. We expect vehicles produced the pace at a higher volume in vehicle deliveries is we're accelerating production and we're also going to be initiating our international deliveries in the fourth quarter and that requires longer transit time.
Great. Next question is what is your current development progress of the current car play version is it still planned to be released by end of year and are you planning on partnering with Apple to add their upcoming fully integrated car play into next year, Oh, yes, or where most cognizance of the demand for lease with team is working on it all I can say right now we are pushing hard to get it to market.
As we possibly can.
Great we'll move to the next question the reported Q3 deliveries and confirmation of 2022 delivery targets was helpful going forward as lucid plan to provide more transparency to investors between earnings calls.
Yeah. So it is our intention to release, our production and delivery numbers each quarter ahead of earnings in the hope of providing greater transmission greater transparency.
And important to the retail any institutional shareholders and we really appreciate your feedback and I'm glad to have the confirmation of this information was helpful.
Okay.
Great I think we will move to questions on the phone and the interest of time and getting everyone's questions in.
Operator first wonder if we could take the first question. Please.
Thank you.
Our first questions. Please standby.
Okay.
Okay.
As a reminder, ladies and gentlemen to ask a question you will need to press star one one on your telephone.
Our first question comes from the line of John Murphy.
Mr. Murphy with Bank of America. Your line is open.
Good evening, everybody just a couple of quick ones.
Can you remind us of what you think the minimum cash level is you need to keep on the balance sheet, along with liquidity and how how do you think about the key drivers.
The improvement of cash flow through the end of next year, I mean, theres a lot going on here on product investment capacity expansion.
I mean, it would be understandable that cash burn would stay fairly high in this growth mode, but it seems like you're indicating that will improve.
Clearly as we go through the.
At the end of next year. So just curious on minimum cash and how we should think about cash burn improvement.
Yeah, So let's say, it's in the prepared remarks Jamie.
<unk> got cash.
385 billion already on the books and then when you look at the availability under the ABL I'm available borrowing that takes you up to $4 2 billion and that's even before you look at the fact that we have access to the outside the us.
Graham and the Saudi investment development Fund, which has $1 4 billion loan capacity, you've drawn down on non us out and so as we expand next year a lot of our capex is going to be kind of split between both Saudi and then also here in the United States and so all of those Saudi dollar three.
But to draw down against the.
<unk> loan as well so as we said were good well.
In Q4 of next year. So you can kind of complete the math here, you know kind of put yourself on minimum cash needs.
As for key drivers of it we're going to continue to keeping a watchful eye on manufacturing overhead and labor be looking at our Bom cost reductions keeping an eye on on things like raw market raw material inflation.
On inflation and then of course, you know a big part of this is our intentional growth right. We're deciding as a company to expand rapidly.
Quadrupling the size of our Casa Grande facility and then also the big build out of our first international facilities. So that that Capex spend is what's driving a lot of this spend for next year and again that gets at our decision.
Okay. That's helpful. And then just a second question around the product Peter.
Equally excited about the sapphire in the pure which are kind of two ends of the spec.
Spectrum for air.
Just curious as you think about mix and pricing next year do you as you balance the launch of those two products. One is at the high end ones.
The lower end or are still high.
At a high mix products.
How should how should we think about that Peter and if you will.
Look at Sapphire.
Volume limits on that or if the if the order book is.
Thousands and thousands.
Do you feel that is there a limit on where sapphire volume could be chat.
Well Amit quick since each one for different reasons I mean, the key message here is we are going to use it.
Technology.
Grind boom.
Post tomorrow.
Maintaining the electric car through efficiency and pure is a big step forward in that March is going to be an example of them may do more affordable part of more attainable price point in a fundamentally better call we're going to get.
The full six months of the chemicals that you see with the more expensive model with.
<unk>, but we're also going to have eventually receipts of economics, because we have a smaller battery pack we've been bleeding.
Bleeding ranged from this thing.
I think it's going to be an amazing product.
Terrific.
It's part of our relentless drive to make more affordable products.
And with closing remarks, I think it's really important because it's a halo product. It's a performance grew even focus brands.
That's helpful Lucid brand can grow, but it's really important as among could demonstrate to the rules the ship prowess could performance pres.
The drawing loosely.
Ah stay to be at high Ultra high voltage homegrown electric powertrain can deliver.
<unk> is the most satisfying driving machine driven I've had the luxury of reliving phenomenon caused throughout my entire career I think this is truly the pinnacle of drawing the machinery. So that you have a really moves bandwidth.
Right up to $250000 and it's a growing great points range two operated.
Yeah. So we're going to continue to see strong mix with the.
Mix of products and just a helpful indicator to you.
For informing AFP is the reservations book and so we've got the 34000 reservations that equates to greater than $3 2 billion and corresponding revenue and so that's a helpful. Indicator is yes, you are looking to build out your models.
That's helpful. Thank you very much guys.
Thank you next question please.
Please standby for our next question.
Our next question comes from the line of Andrew Shepherd with Cantor Fitzgerald. Your line is open.
Yeah.
Hi, Peter Hi, Sherri. Thank you for taking my question and congrats on another strong quarter.
Just wanted to better understand the capex. It looks like the 2022 guidance was lowered to $1 2 billion from 2 billion you mentioned on the call. This reduction is primarily due to timing. So I'm just wondering I know you haven't disclosed the capex for 2023, but should we assume.
An additional $800 million in Capex for 2023, or how should we think about that as we go into next year. Thank you.
Yeah no. Thank you for the question I'd be thinking more of it in terms of a shift in a way that we estimated capex for both 2022 and as we look at it in 2023, we took a really conservative estimate of all of the exposure that we would have but as you know the pain and scheduled to come in to work gets completed.
If I spend a little bit slower on the payment side. So that those dollars that are going to go into 2023, we see that a similar amount of dollars are going to exit 2023, and actually go into 2024. So we don't really see it as incremental per se, we see a little bit more of a shifting of dollars based on the way we did our comps.
Mutations for Capex that will be giving some more guidance on that in February when we do our Q4 performance and then also providing some guidance for 2023 then.
Got it. Thank you terrie that that's very helpful and maybe for my quick follow up is just in regards to the agreement with the government of Saudi Arabia for the up to 100000 vehicles I'm wondering if you could maybe give a bit more color there regarding the timing I think in the past you've said that the vehicle deliveries for the agreement are expected to begin.
No later than the second quarter of 2023 with initial orders in the range of between 1002 thousand vehicles annually is there any additional color. There that you could provide or just trying to get a sense of how to think about it going forward. Thank you.
I would think that that's exactly right.
Don't have any updates to that guidance, we were just over in Saudi a couple of weeks ago meeting.
With the Ministry of finance in a very initiatives. So we're firming up the details are starting to pick trims, we're working on schedules. So all that's coming together really nicely and.
That same number that we said, it's going to start a little bit slower than I. Remember. This is a 10 year agreement that they're making with us. So just a tremendous commitment from from KSA and that's going to extend across multiple of our vehicle variance. It is going to start with the air and then move to the gravity and and also.
Tuna type platform thereafter.
Think foot.
And your commitment just underscores what a great long term partnership that we've got.
Particularly with the public investments from this is this is a long term relationship with planning for a very successful long term future together.
Wonderful. Thank you so much and again congrats on the quarter I'll pass it on thank you.
Thank you.
Thank you please standby for our next question.
Okay.
Our next question comes from the line of Charles <unk> with Redburn. Your line is open.
Hi, Thanks for taking my questions.
The first one was on the order book So maybe it was it was a bit surprising to see decrease in land since.
First off I appreciate deliveries were higher in the past three months than in prior periods.
Yes that still implies the order intake slowed materially.
Why do you think that is.
Do you think that the order backlog will continue to decrease as you deliver more vehicles in Q4, perhaps you could comment on what you think is ideal order backlog is for lucid either in units or days of sales.
Yeah. So let me just add a little bit yeah, youre absolutely understood. It correctly. The reservation does net out all of the deliveries that we had in Q3 as well as up to now in Q4, we.
We did have some cancellations as well, but they've continued to be quite modest low single digit level of cancer at low single digit picture percentage amount of cancellations. What we did see just to give you a little bit more context, I know a lot of people are asking about this is in August after we announced the.
The bring down to the 6000 to 7000, we think some of the folks felt that they might be pushed out a little bit too far and we did see a bit of a spike in August the still low single digit in terms of cancellations, but now it will be a normalized to a much a much more normal rate.
We also think folks are getting excited for gravity and that's going to be coming here in early 2023, where it will be opening up the order book So frankly.
<unk> can speak to this as well, but I'm quite satisfied with where we are when you think about <unk>.
Hi, Charles.
It was a good number to hear we don't want people want you too long.
This is a perception here the more I think so I think there is a good number we've got great. Great Order book here I think that some folks we might have lost a few because Q.
Q2 production was.
<unk> I mean, perhaps in anticipation of the wage would be too long, but we're addressing that now with a dramatic increase in.
Production lines.
Also as a show you said I think the big one for US is going to be privately gravity is absolutely going to be awesome and many people say look I'm, just holding but we'll see.
Gravity is going to be because it's really the SUV.
I'm <unk>.
If that can deliver the same sort of space concept the range the efficiency the performance.
I'm waiting for the order book to open them up.
Yeah.
Yes.
Okay. Thank you.
The cancellations to we're finding as we do research on that a lot of it is from that people that order early June so with.
But Peter is talking about let's say, a wait time and the proper size. It really is important for us to manage.
Got it Thanks, and then my second question on the gross profit margin. So despite the increase in volume. So there wasn't much improvement in the gross margin versus Q2 could you maybe comment on that.
Sort of more big picture.
During the destock process, I think youll financial guidance at the time, indicating that the gross margin would be positive. Once you had delivering 20000 units a year. Obviously a lot has changed since then including the material costs.
But but.
Is 20000 units anywhere near the scale that you think you require to get gross margin breakeven.
Not yet how much harp.
Yeah. So first let me comment on the quarter. So youre right. The gross margin should go go.
A little bit more negative so I guess related to us ramping up the business increasing the inventory the way that lower of cost or net realizable value calculation works is you got to take your inventory you got to then assume that you put into that all of the additional dollars needed to make it scalable you look at what your mix.
And then you do that that analysis for the impairment the impairment.
Gone up which is a big kind of driver of that number we are seeing a lot of positive progress on the gross margin.
We go into next year I'm, not ready to comment on yet fully yet we're working through the budget, we might provide some guidance on that in February but.
But a lot of the things that we're looking at is we're looking at.
Our continued ability to bring our bom costs down, which we're continuing to see we're also seeing that really coming into effect with our gravity program as well as we're sourcing some of the components. So as we're moving into the future, we're seeing that as well.
And you're right. There are some things that are different than when we went out with the facts of raw material prices have been high we think they may have peaked in Q3 and we're starting to see what we believe is going to be some settling in Q4 and beyond but that's definitely hit us hard in and also freight cars.
Although we've been able to do within our control to take anything that was an error and transport it to sea freight costs are still high. So we're looking for that to continue to normalize which is going to really start to enable the types of numbers that we were thinking about previously so more to come on that.
<unk>. Our next next call. Thank you very much for the question.
Can I just sneak one last one the capex.
Production for this year what are the projects specifically that have been delayed into next year.
So it's more of the payments and most of the spend this year is based on our Amp one facility. So there's this whole quadrupling of the the facility that's happening here in Casa Grande, Arizona, that's for most of its happening.
Got it thank you.
Mhm. Thank you please standby for our next question.
Our next question comes from the lineup Adam Jonas with Morgan Stanley . Your line is open.
Thanks, everybody just a question on on cost cutting.
You added about 1000, new employees in the quarter I'm just wondering in addition to.
Some of the delayed capex into 'twenty, three 'twenty, four or whether there is an opportunity to maybe.
Hello.
Pace of hiring could we see some of the opex for the curvature.
It also maybe be flattened a bit sequentially or.
How should we think about that as you kind of plow forward with a quadrupling of the size of the facility.
Yeah, you know I think has some depth the keen observation Adam I'd say that we're keeping a really watchful eye on that because we want to make sure that we are scaling in the opex really commensurate with the progress in the business and if the business is progressing in a certain level, we want to make sure that rate.
So well.
We will continue to look at SG&A in particular, but you remember part of the SG&A is the sales component of NASA building out that footprint first studios in our service centers, which is a really important part of our customer service experience. So we don't want to cut ourselves short there, but certainly on other areas of the business we're keeping.
A very watchful eye on spend yes, John I think that's absolutely right.
I think we're balancing.
Our growth trajectory with prudent.
Youre going to continue to see as the revenue is going up and with the doubling of revenue that we had this quarter, obviously as a percentage the opex came down quite a bit as you would expect and we can continue to expect that type of you know.
The improvement to happen over time.
Okay. Thanks, Thanks, Jerry Thanks, Peter just a last quick one for me is I'm.
Thinking into <unk> B L.
LC and RV.
Impact you guided that you are still going to be having production over deliveries and I think implying that as you ramp youre still going to have that carrying.
Inventory in the channel, even if it's not working process inventory, but I'm wondering if the number you mentioned.
Was it a 180 some odd million in the third quarter. It was something that that could flatten the increase or b b a bogey, we could think about as an impact into the fourth quarter.
Well thanks, everybody.
Yeah.
Complicated calculation, but I would say, it's going to likely improve over time as we continue to grow into the full capacity of our facility in before we start to activate new depreciation expense associated with future.
Our expansion so given that wouldn't be activated probably in the end of the year youre going to probably see.
Quite a bit of improvement there also as you start to maybe normalize some of the inventory levels as well because remember a lot of this is kind of looking at inventory and taking a kind of a a reduction based on that as well.
Thanks Jerry.
Yeah. Thanks, Kevin Thanks, Okay.
And by far our next question.
Our next question comes from the Lama pick one battery with Needham.
Line is open.
Good evening, everyone. Thanks for taking my question I wanted to quickly touch on the order book in potential revenues as well as the potential revenues dropped $300 million from approximately $3 $5 billion into Q2 two.
$2 billion in <unk> third quarter revenues of $200 million do not explain the drop for Lee I was wondering if oh, what the gap of $100 million hit is am I reading too much in these approximate figures are oddly high priced orders were replaced by lower priced orders during the quarter or was there something.
It's like a impact of Forex.
What explains that hundred million dollars additional drop in potential revenues.
Yes.
But I'm not necessarily following them you know our deliveries increased by about double and our revenue increased a little bit more than double so we saw a really nice linear relationship between delivery and revenue.
Our reservation mix continues to be quite high right now because remember we've been largely producing the chi Chi which is one of our higher priced products higher performance products in it as we move forward, we're going to start seeing more of that touring and pure entering into the equation. So you will see the mix changing over time, but then we're all.
Also bringing the sapphire in some of the GTP and as well that does some counterbalancing. So I I didn't see any kind of.
Disconnect from my vantage point between the revenue number and the delivery number.
Okay.
Okay great.
And the second question was I wanted to ask about particularly in CF. This on the.
Pausing vehicle order from the from the Kingdom.
There's a lot of talk about kingdom looking to have their own EV brand how does it affect your relationship with the government is that increased urgency to deliver those vehicles quickly are there is there a sense of urgency to have some safeguards in place to protect that I'll go to in any other way how should we think about.
About that large order from the kingdom of Saudi Arabia.
What I think is testament to the long term relationships, we have and the support that we've enjoyed from Saudi Arabia.
Hum.
Typically.
Faced with fear the electric company and I think there are potentially some synergies with supply chain in the kingdom as well, but I think with our relationship.
<unk>, meaning ministries.
Within the kingdom, they commit to 250000 preorders.
<unk>.
With an option up to 100000 over long term.
Period of 10 years, so I'm very confident we can very comfortably.
Co exist and benefit actually mutually benefit from each other's existence and growth.
They really view us yeah.
Very vital to the growth of the auto ecosystem overall, and that's why we've had such a strong.
Relationship building across the page yeah, the HRD at the Ministry of Finance.
The MISO organization, and especially the public investments and Greg I think the other thing to recognize is we have different go to markets, which were luxury brands. So I think we got some sort of complementary strength here.
I just think that.
We can we can work together to reduce costs with the supply chain I'm looking at a synergistic opportunity.
Great and if I can sneak one more in a show you you mentioned that you will start international deliveries in fourth quarter. I was wondering if you can talk about what does it do to the margins, especially given that your cost of deliveries will go up and U S. Dollar is pretty strong so how should we think of.
Boat margins in fourth quarter, but you know hired Heidi I ever had calmed international deliveries and so forth.
Yeah.
Yeah. So we're just gonna be starting the international deliveries in Q4, and that's going to be going to Europe , and Saudi Arabia first.
So we haven't announced all of our pricing in those regions. Yet. So you know stay tuned for that and youll be able to see what we're going to be doing there.
It's a world of opportunity that's the way I look at it.
<unk>.
Great. Thank you.
I'm showing no further questions in the queue I would now like to turn the call back over to Peter for closing remarks.
Great actually before you go to the closing remarks, maybe we'll mix them together, let's go to one more state.
And the last question in orders that you guys plan to make cheap requires like Tesla in the future, but this reps and I think very nicely too.
Another question, which is what can shareholders expect within the next year to two years from lucid motor essentially I mean this is what it's all about our vision is to capitalize on.
Inspire and and accelerates the adoption of sustainable mobility sustainable energy and to do that we are developing a ultra high technology in house to create more efficient electric vehicles, because not only these are created equal.
Enables us to travel further.
With less slack because.
And because of the highest single Arlington, that's where we can grow only because of Evs Domino may seem a great paradox, because what now we're making spoken with the luxury product, but mid decade, we're going to bring up.
A mid sized platform and that's going to be an awesome products and much more affordable. So watch this space. That's what this is all about making evs more affordable true high technology in risk take rates.
To that point, what do you what do we expect to see well I mean, this year, we're going to see touring and pure pure.
Sheila flavors of mine.
The.
The elemental truly and we're going to share more of that on a lucid means you are going to move in the 15th of this year. So please tune into that.
Turing and fuel then we're going to have this monumental grinding machine standpoint, which im personally tends to be finding the performance truly satisfactory amendment, that's going to come out in the first half of next year and then the real big one on the near Horizon, which is looming is gravity and I think gravity is going to be.
Really transformative.
Hi Tech high efficiency.
Truly sporting SUV, spoofing, SUV and I'll just call them too.
Show that to everybody.
That's when we will soon be a 2024.
And we will have a sneak peak of that.
November 15th.
And we will move towards sort of latent decades.
Mid sized platform, which is what it's going to be a balance.
The real.
Generally all this technology to make a call which is truly much more affordable mid price range.
Great.
Thank you everyone. This concludes <unk> third quarter 2022 earnings conference call. Thank you all for joining US today and you may now disconnect.
Yeah.
Okay.
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