Q3 2022 Lucid Group Inc Earnings Call
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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 to ask the question. During the session you will need to press star one on your telephone.
I would now like to hand, the conference over to your speaker for today Maynard you may begin.
Thanks, Rhonda and welcome to <unk> group's third quarter 2022 earnings call. Joining me today are Peter <unk>, our CEO and CTO and Sherry House, our CFO before handing the call over to Peter Let me remind you that some of the statements on this call include forward looking statements under Federal Securities Law. These include without limitation statements regarding the future financial.
Performance of the company production and delivery volumes macroeconomic and industry trends company initiatives and other future events. These statements are based on our 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.
Our 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.
You may now and thank you everyone for joining us for our third quarter earnings call.
Now I'm delighted to say that we've made significant progress towards achieving our 2022 production targets of.
6000 to.
7000 vehicles.
In Q3, we achieved a record quarterly production of 2282 vehicles more than Cryptograms of Q2.
And deliveries of 1398, which is more than double that of Q2.
I want to extend a heartfelt thank you.
Every lease it to your collective efforts, which have been central to growing these meaningful increases as we scale and ramp production and deliveries.
<unk> continued to play a key.
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 wheat 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 and some systematic changes to the organizational structure.
And I think now the results are beginning to speak for themselves.
We are working very hard to control, what we can control, but the supply chain situation remains fluid.
Even now we're experiencing a challenge with one particular item that will lead to some very temporary time out for the line.
However, we believe we can still achieve our six to seven.
Production guidance for 2022, despite this particular issue.
During this time, we will implement a whole bunch of improvements that will further enable us to produce even more cars.
Turning to logistics, we believe we've made significant progress.
Our plan to bring our logistics operation in house.
To restructure our logistics and manufacturing organization.
We addressed some of the primary gating factors that impacted production in the second quarter Steve.
Steve and David and the new leaders, we put in place have been doing a very good job.
<unk> valuable leadership in executing this transition.
But we're also im 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.
Long side incredible team here in <unk>.
Arizona.
So in fact I'm joining today's earnings call. Once again from A&P one in areas that are right off the factory floor, where we've been very busy just last week, we commenced production of the listed at touring and.
And I'm looking forward to personally deliver the very first one to a customer next week.
620 horsepower dual mode. So all wheel drive version of the App with the zero to 60 of around three two seconds.
Yeah.
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 variance with up to 480 horsepower. We're on track to start production of pure soon 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.
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 grim sorry, albeit at a more affordable price point and Thats, an important incremental step to bringing ultra efficient in these more attainable.
And we will continue to push relentlessly to get closer to what is our aspirational target of closer to five miles per kilowatt hour for lucid.
No. This incredible efficiency is driven in large part by our in house developed attach rates.
Many of you heard me say this before this truly is a technology race.
A 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.
And so offer exceptional rear seats 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 from <unk> <unk>.
But we're not stopping there.
In Q3, we introduced the Sapphire brands.
Its new high performance driver focus brands.
Sophomore represents the pinnacle of electric performance finally, achieving satisfactory performance that I, so long searched for.
As Revpar will be the very first lucid products to bear.
My name 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 most of the powertrain the first from lucid.
<unk> a brand new twin mode. So we're drilling units.
And a single months.
<unk> drive units.
It was developed and manufactured enhanced by lucid.
And really no mistake that the.
Performance efficiency and competitiveness I believe these are truly state of the art.
Between rear drive units introduces new heat exchanger technology.
Heightened.
Flow rates.
In addition, the battery system is 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 sapphire now in fact, I'm currently personally test driving sapphire and im 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 soon we're planning events in early 2023, and we will begin taking reservations from that movement.
Head of the start of production in calendar year 2024.
So I'd go so far as 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 of the same.
<unk> space concept the range the efficiency technology design elements and performance.
Lots of crates.
I believe he 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 project gravity and the south 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.
<unk> for the luxury sedan market.
And I cannot wait to share more details in the not too distant future.
Stay tuned for a launch event next week, where we'll 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 made a very conscious decision to design lifted from.
From the beginning is truly software defined vehicle.
The synergistic integration of software and hardware engineering results 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 advancements improvements across the vehicles.
New features include instant one glass cockpits and pilot panel displays.
<unk> of highway assist for the Dream drive advanced driver assistance system improved on screen layouts and indeed, 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 easily update adult as well.
Our World Class software team led by Mike Bell will be releasing many more features in the very near future. In fact, just last week, we announced Sirius is X and radio audio entertainment experience will be a standard in dash feature across the school.
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 elusive group of companies, let me come to us not just cars, but energy ecosystem as well as a technology licensing and these are the three pillars. If you will.
So we recently launched a lucid vehicle accessories, 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 AUC 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 included 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 cell 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 think all 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.
Just a short amount of time, we brought our logistics operations in house, we restructured our 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 when we truly expect to dilute it.
That and 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.
We unveiled project gravity SUV early next year, and we will continue to focus on extending our unsurpassed technology leadership.
Lastly, and most importantly.
I'd 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 all I want to reiterate that I firmly believe.
To achieve our 6000 to 7000 vehicle production guidance for 2022 and with that let me turn it over to Sherry for an update on our financials.
Thank you Peter and thank you to those start taking the time to join US today before sharing our Q3 results I'd also like to extend my sincere gratitude to our customers as well as our entire team members our partner suppliers in Q3, we scaled across every corner of our business from manufacturing and engineering.
G&A sales and service we've made tremendous strides in our production ramp we launched our new SaaS Firebrand introduced additional product features and work to enhance our customer experience through our expanding sales and service network.
All of that strong progress with only possible due to the perseverance and collaboration of each and every one of you and I'm incredibly proud to work alongside you.
Now turning to our third quarter financial results.
Peter mentioned, we produced 2282 vehicles more than triple our Q2 production numbers until that for 1398 vehicles, which was more than double Q2, the variance between production and deliveries was 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, if we accelerate our production and we initiate international deliveries in the fourth quarter, the latter which requires longer 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 toward capacity any up 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 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> have been ongoing with the government and we're actively working on the scheduling of 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.
Spanish mine of accessories that serve as a stylish compliments to the entire listed here 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 vehicle sale. After considering cost that's the theory to 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 commitments.
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 the gravity and Sapphire program as well as head count growth to support further investment into our cutting edge tech and products.
Surely offset by lower costs stock based compensation expense.
SG&A expense was approximately $176 7 million up 8% sequentially SG&A consist primarily of personnel related expenses Alan.
<unk> facility cost and other general corporate expenses.
<unk> to grow with the company built out our sales force and commercialize the lucid 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.
We expect to strategically expand the number of studio in service centers with a number of new openings across North America and Europe through the remainder of this year.
We increased our mobile fleet by nearly 10% in Q3, which is an important element in ensuring high customer satisfaction.
<unk> continues to grow our mobile vans can perform over 80% of the services that can be done in a service center.
Stock based compensation in the quarter with $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.
We have 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 $530 1 million.
Moving to the balance sheet, we ended the quarter with just over 3.85 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 has expressed a willingness to support us in our future capital raised on a pro rata basis.
We are incredibly grateful to have such a strong strategic investor, Yes, our partner.
We are putting in place.
$600 million aftermarket program, which will create flexibility for us to raise new third party equity capital.
Bind with a pro rata participation by the public investment fund this would allow us to raise up to approximately $1 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 the program and we will continue to be opportunistic in our approach to financing.
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.
Well continue to be opportunistic in raising capital and this ATM program, it's 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. As we 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 constructions.
Construction is ongoing but we did 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 Loopnet 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 in a $3 4 billion.
And economic support.
We were happy to announce the signing of a memorandum of understanding with the human resources development fun 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 are 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 <unk>.
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 2012.
Three.
This assumes we're investing fully in accordance with our forward plan, which includes the phase two expansion of Amp, one in Arizona, The engineering and prototyping of gravity. The continued build out 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 is 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 2020.
Three and a corresponding shift from the end of 2023 into 2024 is likely to occur.
In closing, we're excited about our progress and the many exciting coming milestones in our roadmap by the end of this year. We will have introduced score of our lucid air vehicle variant.
<unk> performance Grand touring touring 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 that pollute the team that's working on including our boosted launch event in November .
With that let me turn it back to me to get to your question.
Thanks, Jerry will now start the Q&A portion of the call today's Q&A will feature some questions from some of our retail investors who are an important important constituency of our shareholder base.
The safe technology platform will follow that by live analysts' questions and close it out with a couple of quick questions.
We have time.
Let's start with the first question.
What is the production target 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, Yes, we said in our prepared remarks, we're intently focused on ramping production. We have line of sight into our next incremental ramp up.
And we're delivering as many vehicles 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.
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 question.
When are you planning to start building and utilizing the railway transportation and the cost of growing factory to reduce transportation cost for suppliers in Carter's delivery.
Yeah. So as I mentioned, we're working across the company to identify and execute on cost efficiency opportunities generally.
Theres 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 don't think I'd 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 region.
Thank you and let's move to the next a question it looks like there's about 1000 cars that have been produced but not delivered why is that and where are these cars stored oh, yeah, well I mean this is a function of the cadence by which we've ramped up we've made remarkable strides in ramping up.
Naturally there is going to be a phase lag between producing the cars and getting them out to all of their customers. So it's very much.
Our cadence this year.
A phase lag phenomenon, yeah as I said in my prepared remarks, I need to adhere to mirror in the near to medium term. We expect vehicles produced at pace at a higher volume in vehicle deliveries is we're accelerating production. 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 plant in the next year, Oh, yes, well when most cognizance of the demand <unk> seen 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 Friday greater transmission. The greater transparency. We know this has been important to the retail and the institutional shareholders and we really appreciate your feedback and I'm glad to have the confirmation of this information was helpful.
Yeah.
Great I think we'll move to questions on the phone and the interest of time and getting everyones question.
First I wonder if we could take the first question. Please.
Thank you.
Our first question please standby.
Yeah.
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 Sherry can you remind us of what you think the minimum cash level is you need to keep on the balance sheet, along with liquidity and how 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.
So I mean, it would be understandable the cash burn was fairly high in this growth mode, but it seems like you're indicating that will improve materially 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 I'd say, it's in the prepared remarks Jamie.
We've got cash.
$3 eight 5 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 nasty than before you look at the fact that we have access to the <unk> program.
Program.
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 dollars, we're able to draw down again.
See the loan as well so as we said were good well into Q4 of next year. So you can kind of complete the math here you know kind of put yourself on minimum cash need no ads for key drivers of it we're going to continue to keeping a watchful eye on manufacturing overhead and labor be looking at our bond.
Cost reductions keeping an eye on things like.
Raw market raw material inflation, and then of course, a big part of this is our intentional growth right. We're deciding as a company to expand rapidly.
Tripling 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, Nancy I can't sit our decision.
Okay. That's helpful. And then just a second question around the product Peter.
Tom equally excited about the sapphire, the pure which are kind of two ends of the.
The spectrum for air.
I'm 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 that the the.
The lower end or are still high.
A high mix products.
How should we think about that Peter and if you look at Sapphire.
Their volume limits on that or if the if the order book is.
Thousands and thousands will you feel that is there a limit on worst half our volume could be capped.
Well Amit.
Quick since each one for different reasons I mean, the key message here is we're going to use.
This technology to drive down the coast Tomorrow of May.
<unk> electric car through efficiency and pure is a big step forward.
In the more it's going to be an example.
Do more affordable power to more attainable price point in a fundamentally better call, we're going to get matched the full six months of the kilowatt hour that you see with the more expensive model with.
I'd been touring but we're also going to have eventually rooms suites 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 in it.
And 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 the sealant product. It's a performance grew even focus brands. It shows how for lucid brand can grow, but it's really important as a market.
<unk> Street to the rules the shield prowess the performance Pres.
The drawing loosely but 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 calls throughout my entire career I think this is truly the pinnacle of drawing the machinery. So that you have a really moves bandwidth.
<unk>, one up to $250000 and it's a growing great points range to operate in.
Yeah. So we're going to continue to see strong mix.
Mix of products and just a helpful indicator to you.
For informing AFP is the reservations book and so you'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.
Yes.
Our next question comes from the line of dangerous separate with Cantor Fitzgerald. Your line is open.
Okay.
Hi, Peter Hi, Sherri. Thank you for taking my question and congrats on another strong quarter.
I 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 shifting 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.
I spent 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 computation.
<unk> for Capex that will be giving some more guidance on that.
February when we do our Q4 performance and then also providing some guidance for 2023 band.
Got it. Thank you Sherry that's very helpful and maybe for my quick follow up is just in regards to the agreement with the government of Saudi Arabia for the up to 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.
Provider, just trying to get a sense of how to think about it going forward. Thank you.
Yes, I would say that that's exactly right.
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 trends. We're working on schedule. So all that's coming together really nicely and.
That same number that we said, it's going to start a little bit slower and remember this is a 10 year agreement that theyre, making with us. So just a tremendous commitment from from KSA and asking extend across multiple of our vehicle variant that's going to start with the air and then move to the gravity and it all fits in.
The <unk> platform thereafter.
The only thing foot 10.
10 year commitment of just under schools water, 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 very successful long term ctrip together.
Wonderful. Thank you so much and again congrats on the quarter I'll pass it on thank you.
Thank you.
Please standby for our next question.
Our next question comes from the line of chalk Caldecott with Redburn. Your line is open.
Hi, Thanks for taking my questions.
My first one was on the order book So maybe it was a it was a bit surprising to see decrease in labor cost.
I appreciate deliveries were higher in the past three months than in prior periods, but I guess that still implies the order intake slowed materially.
Why do you think that is.
And do you think that the order backlog will continue to decrease as you deliver more vehicles in Q4.
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, you're you're absolutely understood. It correctly. The reservation does net out all of the deliveries that we had in Q3 as well as up to now in Q4.
We did have some cancellations as well, but they've continued to be quite modest low single digit.
Level of cancer at low single digit 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 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 they are 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 would 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.
That's a good number to hear we don't want people want you too long.
There 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 some folks we might have lost a few because Q.
Q2 production was.
<unk> and <unk>.
Perhaps in anticipation of the wage would be too long, but we're addressing that now with a dramatic increase in <unk>.
Production rates and also.
Sure you said I think the big one for us is going to be rapidly gravity is absolutely going to be awesome.
Many people are saying look I'm just holding back.
C.
Gravity is going to be because it's really the SUV.
I'm <unk>.
And if that can deliver the same sort of space concept the range the efficiency the performance.
I'm waiting for the order book to open them up.
Yeah.
Okay understood. Thank you.
The cancellations to we're finding as we do research on that a lot of it so that people that ordered early June so with.
But Peter is talking about what that wait time and the proper size that really is important for us to manage.
Got it Thanks, and then my second question on the gross profit margin. So despite the increase in volumes there wasn't much improvement in the gross margin versus Q2 could you maybe comment on that.
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. Yeah. 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.
And if not how much harp.
Yeah. So first let me comment on the quarter. So you're right. The gross margin should go go.
A little bit more negative, but a lot of that's 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 it and assume that you put into that all the additional dollars needed to make it scalable you look at what your mix is.
And then you do that that analysis for the impairment the impairment had gone up which is a big kind of driver of that number we are seeing a lot of positive progress on the gross margin.
As we go into next year I'm, not ready to comment on yet well yet we're working through the budget you 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 for Q2.
<unk> ability to bring our Bom cost down, which we're continuing to see we're also seeing that really coming into effect with our gravity program as well as we're sourcing some of the components. So as we're moving into the future, we're seeing that as well.
And you're right. There are some things that are different than when we went out with the 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 cost.
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 reduction.
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.
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.
Yes.
Thanks, everybody just a question on on cost cutting.
You added about 1000, new employees in the quarter.
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.
That 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, we can get some depth the keen observation Adam I'd say that we're keeping a really watchful eye on that somebody would want to make sure that we are scaling in the opex really commensurate with the progress in the business and if the business is progressing at a certain level, we want to make sure that rate is.
So well.
We'll 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.
That's absolutely right I think we are 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 improvement.
The improvement to happen over time.
Okay. Thanks, Thanks, Jerry Thanks, Peter just a last quick one from me is.
Thinking into <unk>.
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.
Or is it a 180 some odd million in in.
In the third quarter, what 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, it's a.
A 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.
Your expansion so given that wouldn't be activated probably in the end of the year, you're 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 you know kind of looking at inventory and taking a kind of a a reduction.
Just on that as well.
Thanks Jerry.
Yes. Thank you thanks Jay.
Please standby for our next question.
Yeah.
Our next question comes from the line of pick one battery with Needham Your 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 Q T point $2 billion in <unk> third quarter revenues of $200 million do not explain the drop.
I was wondering if oh, what would the GAAP 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 else like a impact of Forex.
What explains that for them to get an additional drop in potential revenues.
But I'm not necessarily following.
Our deliveries increased by about double and our revenue increased a little bit more than doubled. 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 as we move forward, we're going to start seeing more of the touring and pure entering into the equation. So you will see the mix changing over time, but then we're also.
Bringing the sapphire in some of the GTP and as well that does some counterbalancing sorry, I didn't see any kind of disconnect from from my vantage point between the revenue number and the delivery number.
Okay.
Okay great.
The second question was.
Wanted to ask about particularly in CF.
Paulson vehicle order from the from the Kingdom.
Theres 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.
Our sense of urgency to have some safeguards in place to protect that or does it in any other way how should we think about about that large order from the kingdom of Saudi Arabia.
Willing I think is testament to the long term relationship that we have and the support that we've enjoyed from Saudi Arabia.
Consistently.
First with sphere.
The other electric power company and I think there are potentially some synergies with supply chain in the kingdom as well, but I think with our relationship.
Spongy close meaning ministries.
Within the kingdom like commit to 250000 preorders and.
With an option up to 100000 over loan to them.
Period of 10 years, so I'm very confident in Q2 very comfortably.
<unk> exist and benefit actually mutually benefit from each other's existence and growth.
I think that they really you are 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 assay Ministry of Finance.
The MISO organization, and especially the public investment I think the other thing to recognize is we have different pulp markets, which are luxury and so I think we got some sort of a complementary strength here.
I just think that we can.
We can work together to reduce costs with the supply chain I'm looking at the synergistic opportunities.
Great and if I can sneak one more in 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.
Cost of deliveries will go up and U S. Dollar is pretty strong. So how should we think about margins in fourth quarter, which you know hired Hyatt <unk> Hyatt had gone 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 then you'll be able to see what we're going to be doing there.
It's a world of opportunity that as well.
<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 I go to the closing remarks, maybe we will mix them together, let's go to one more.
Question and the last question in orders that you guys plan to make cheaper cars like Tesla in the future, but disruption 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 them in.
Inspire and and accelerates.
The adoption of sustainable mobility sustainable energy and to do that we've developed ultra high technology in house to create more efficient electric vehicles, because not only is created equal.
Enables us to travel book with Lyft slack, because wet crudes to the highest single item, that's where we can grind because of evs down that may seem a great paradox, because what now we're making spoken to luxury products, 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.
Hi, technology in risk pick rice and maintenance.
That won't be what do we expect to see well I mean, this year, we're going to see touring and pure pure.
Chela flavors of mine.
The.
The elemental truly and we're going to share more of that on a loose. It means you are going to move in the 15th of this year. So please tune into that and we're going to Turing until then we're going to have this monumental grinding machine standpoint, which I'm personally tends to be finding the performance truly satisfactory at the moment, but.
Going to come out in the first half of next year and then the real big one on the near Horizon, which is looming as 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.
To show that to everybody.
Planes will soon be a 2024.
And we will have a sneak peak of that on November 15th and then we will move towards sort of late in the decade.
Mid sized platform, which is what it's going to be a balance the the real.
Gelling of all the technology to make a call which is truly much more affordable mid price range.
Great.
Everyone. This concludes <unk> third quarter 2022 earnings conference call. Thank you all for joining US today and you may now disconnect.
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