Q1 2023 Lucid Group Inc Earnings Call

Okay.

Hello, and thank you for standing by and welcome to Lucid group's first quarter 'twenty three 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 a question. During this time you will need to press star one on your telephone.

You will then hear automated message advising your hand is raised.

To withdraw your question. Please press star one again.

I'd now like to hand, the conference over to Maynard you may begin.

Thank you and welcome to lucid group's first quarter 2023 earnings call.

Turning me today are Peter Robinson, our CEO , and CTO and Sherry House, our CFO before handing the call over to Peter Let me, let me remind you that some of the statements on this call include forward looking statements under Federal Securities Law. These include without limitation statements regarding the future financial performance of the company production and delivery volumes financial and operating.

The outlook and guidance.

Economic and industry trends company initiatives and other future events. These statements are based on predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our most recent filings with the SEC and the forward looking statements on page two of our investor deck.

Available on the Investor Relations section of our website at IR 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 Mike and thank you everyone for joining us for our first quarter earnings call.

In quarter, one we produced 2314 vehicles and delivered 1406.

Sheri will go into more detail on our financials, but I would like to thank.

All our employees, we have the best EV on the market and really I believe is the best car on the market and it would not have been possible without the collective efforts of.

Our entire team, which is a direct result of tremendous perseverance with thoughtfulness and teamwork.

I want to express my deep personal gratitude to everyone, who has contributed to and the teams that will help absorb mission going forward.

Im very excited about our future and the opportunities that lie ahead of US we have the best EV on the market and really unbelievable come on the market and it would not have been possible without the collective efforts of the entire team.

I would like to welcome three new members of the board shares from Iraq.

<unk> and <unk> wins.

Together, they bring significant global experience in the areas of marketing finance and operations across automotive technology and luxury consumer goods.

These additions are a reflection of the company's evolution as we mature to the growth and brand awareness stage of our lifecycle.

I'd also like to congratulate Turkey, otherwise on his appointment as chairman of the board and also thank Andrew Liveris for his guidance during his service as chairman.

And also <unk>.

Thank you.

Going board members, Nancy Gioia, Tony part of Us and Frank Lindenberg, with very significant contributions and dedication to <unk> mission.

Now last quarter I laid out key significant strategic priorities for the company number one growth and brand awareness and number two a laser focus upon cost.

We've taken immediate action on <unk>, we made the decision to adjust our workforce in Q1, given evolving business needs productivity improvements and broader economic uncertainty, which we like many others are not immune from.

Whilst we believe this positions us to be more agile and puts us in the best position for success moving forward. It was nonetheless, a difficult decision.

Jerry will speak to our coast Christy in greater depth. So let me provide an update on our growth and brand awareness progress.

Now we continue to make strides in growing our brand awareness and I'm proud to say that lucid.

<unk> was recently awarded a number of prestigious industry accolades, adding to our existing portfolio of rewards such as the 2022 motor trend car of the year.

At the 2023, New York International Auto show look today was crowned the 'twenty two 'twenty three world luxury car.

Lucid Air was also named the U S News and we will report 2023, best hybrid and electric cars lists for best luxury electric car.

Now these awards reinforce our belief that the lucid as not just the best TV in the world with the best available in the World today.

The lucid as a new industry benchmark range and two versions that were the first evs to achieve an EPA estimated range over 500 miles.

And we set these new standard thanks in part to a groundbreaking in has developed technology, which continues to garner significant industry attention.

In fact, <unk> recently received the 2023, Newsweek powertrain disruptor of the year Award.

I cannot underscore enough how advanced our technology is making it the best in the world of many metrics I believe we are years ahead of our next closest competitor who in turn we believe is several years ahead of their next closest competitor.

I believe that as more companies come to the realization that developing world class powertrain is not as easy as we make it look then we will continue to grow more interest and our patented hardware and software technology from other Oems.

And in fact, we continue to see interest from multiple parties as I've said in the past. While this is not an area, where we've put a tremendous amount of proactive attention I am pleased with the growing levels of interest and progress that we are receiving with these Oems.

Our technology and Knowhow is what enables us to have game changing range Super current levels of performance Super fast charging.

Heres, some spacious interior and exceptional aerodynamics.

But I also want to stress that the best technology does not mean, most complex nor most expensive and in fact, it's quite the opposite I believe.

Because it fundamentally easier to manufacture in many ways than our competitors unless it is done through brilliant.

<unk> engineering design for manufacture and very high degrees of innovation.

And we're not resting on our laurels, we're using advanced technology to drive down the cost for Evs, we're moving towards a more efficient Tvs in order to decrease the battery pack sizes, which will enable lower cost vehicles, and we have much more to come with an exceptional technology roadmap.

And further enhancements and innovations pushing the envelope on what.

<unk>, including for a mid sized platform.

Now looking more near term is on track for startup production later this summer in mid September .

The lucid and sat Fi will feature three motors carbon ceramic brakes, and Arizona package, new sports seats, and correct queuing suspension for the blind draw your focus boating experience.

It is expected to post <unk>.

Sub two seconds north of 60 miles an hour at a sub four seconds not to 100 miles an hour with the sub nine second quarter mile at a top speed exceeding 200 miles an hour I think test driving sapphire.

Very recently and on funding it extremely satisfactory in terms of its performance.

<unk> excited to announce the gravity SUV entered a new phase of development with road testing having started a couple of weeks ago, just as the lucid are redefined the sedan category I believe the gravity of CV is positioned to do exactly the same.

Its corresponding SUV category.

We're taking all the best elements of that and putting them into an SUV game changing range and efficient to see amazing interior space challenging performance and luxury.

Last week I was out in the gravity on a test drive and I'm delighted with the progress that's been made.

And make no mistake, the gravity SUV will be a true landmark.

And we can't wait future experienced the gravity SUV.

Unveil later this year at which time, you'll be able to place a reservation, we think youre going to absolutely love it.

Now in software, we continue to make big strides we have five over the air updates in Q1 with a number of features that customers have been requesting including car play and schedule charging and indeed, we are working on many more exciting updates.

We're listening intently to what our customers want.

Simultaneously provide a more in house design features to provide our customers with what as a best in class experience they prefer.

What's more important is to emphasize that we've designed our cost to be over the air updates are all from the very start.

And I believe that there are very few that have the over the air capability to the same degree.

It's a platform on which we can do so much more.

On our last earnings call in February I spoke about customer awareness of the lucid brand.

We see brand growth happening in stages, starting with the innovators than early adopters and moving to early majority and beyond.

We believe we are still early on in our customer growth stage of innovators and early adopters and as we achieve a tipping point in brand visibility once enough cars on the road. We will believe we will see a higher velocity of growth.

And we've continued to take serious action and holistic data driven approach to our marketing programs focused on qualified awareness digital conversion test drive experiences and conversion to orders and deliveries.

And we're seeing some early wins.

A number of test drives has nearly doubled in the first quarter from the fourth quarter of last year I believe it's seeing is believing and once you experienced the handling the quality the performance and the interior space of Lucid Airport yourself, you'll understand the award winning nature of our vehicles, we see test.

Drives as the key steppingstone for customers considering the purchase of a lucid.

We launched our agreement had lot tool last month, which is designed to showcase the lucid as game changing electric vehicle performance and technology consumers will have the opportunity to experience and drive three lucid our models the lucid a pure pellucid at touring and.

Grand touring and they will do that in 42 key cities right across the USA.

In fact, the Whitehouse promoted dream ahead, so as part of President of Spiking EV acceleration challenges challenge.

Highlighting actions to encourage EV deployment.

I'm also delighted to announce that in dress Ceriani recently joined <unk> as our new head of marketing.

<unk> brings over 25 years of experience in luxury brands and automotive having worked at companies such as Maserati Ferrari and tachycardia.

We certainly expect to lucid as sapphire and the gravity SUV.

Elevate awareness of Pellucid brand.

There are many more grassroots efforts underway capitalizing upon our incredibly passionate customers who are also our biggest advocates.

Now there is a misconception out there lucid add starting price is far higher than it actually is many people out there really believe that the lucid is a $200000 come.

When the fact is that the starting price for lucid and pure is $87400.

Which we believe is a truly compelling offering in the marketplace today and we're working on ways to achieve broader access.

We started deliveries of the lucid as with stealth appeared last month and will deliver more lucid and green and Grand touring this quarter two customers in the EU and in Saudi Arabia.

We've resolved some of the gating items and we will continue to focus on ramping up production of <unk> for parents and components for international shipments in the second quarter.

We expect the lucid a pure volumes in the back half to also ramp with the start of the lucid a pure Ria will drive in North America.

We're on track to produce over 10000 vehicles in 2023 with companywide initiatives ongoing that will enable higher volumes as market conditions allow and Shelly will go through guidance in greater detail.

So in closing we recognize that we have more work to do.

But we're making progress with our strategic priorities and the team is totally energized our mission and our optimism are unchanged. We are committed to a more innovative and environmentally sustainable future designing building and delivering the best EV on the market as we expand globally.

And develop more exceptional vehicles, such as the gravity SUV, which we plan to launch in 2024.

I am confident that we have the most advanced technology, we have the right operational infrastructure.

The know how to deliver and we have a track record of tenacity that will make us stronger.

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

Thank you Peter and thank you for taking the time to join US today I'd like to begin by calling out a few recent highlights.

Last month, we announced that with the joined the United Nations Global compact the world's largest corporate initiative advancing sustainable and socially responsible business practices sustainability is an integral part of what we do every day, it's our mission and we view this as a natural progression in our sustainability journey at the company.

Last month, we also signed the first annual agreement with the human resources development.

Our HRD yet.

Audio radio this agreement operationalized, the memorandum of understanding signed with the HRD assay in October 2022, and will facilitate boosted training program and will fund the skills development and salaries for Saudi Nationals, who work within our organization within Saudi Arabia.

The public investment fund is connected to many of the ministries throughout Saudi Arabia, and the <unk> agreement is another example of how those relationships and partnerships have resulted in significant economic and administrative support as we launch our international operations in the Middle East. The PAA has it been a committed investor and a strict.

T J partner for many years, and we're very grateful for their partnership and support.

I'd also.

On the SEC investigation that was previously disclosed in December six 2021.

On April 27, 2023 FC staff FCC staff informed me that the SEC concluded their investigation related to the business combination between Churchill Capital Corporation for which recent recall predecessor, and Akiva, Inc. In certain projections and statements.

Please inform you that they do not intend to recommend an enforcement action by the SEC against the company, which we view as a very positive outcome.

Consider this matter closed.

I wanted to talk about the form S. Three and form S. Eight that you may have seen filed today after market close we amended the existing S. Three with the filing of a new S. Three.

As you'll recall, we consummated a private placement of common stock for aggregate proceeds of $915 million in December 2022 in connection with this private placement we agreed to register the shares with the SEC.

Form S. Three as intended to register these shares by amending the existing form S. Three that we filed in August 2022.

This action was to fulfill our contractual obligation regarding registration rights.

Not a new issue.

We also filed a form S. Eight as a reminder, the form S. Eight is primarily to register the additional shares made available under the company's second amended and restated 2021 stock incentive plan, which was approved by the stockholders at the 2023 annual meeting on April 24.

Moving to the business.

Peter mentioned in Q1, we made the very difficult decision to streamline our workforce to better position. The company for the future. We took a $22 5 million restructuring charge, which was at the lower end of the $22 million to $28 million. We indicated in late March given that we were able to reallocate.

Certain employees to other critical positions within the company.

We anticipate the final part of this restructuring action approximately $2 million to occur in the second quarter.

Now turning to our 2023 first quarter financial results, we produced 2314 vehicles, 225% year over year and delivered 1400, six vehicles up approximately 291% year over year, making Q1 2023.

Second highest performing quarter in terms of production and delivery volume.

This performance was flat thank you for 2022.

As we guided last quarter, we expected Q1 to be down significantly versus Q4 2022, while we work to drive up qualified awareness of our world class products and also work to unlock production itself, the European and the Middle East area.

As Peter mentioned, we've now resolved some of the gating item and are focused on ramping these three areas further in Q2.

For Q1.

We recorded revenue of $149 4 million, which represented a year over year increase of 159%.

Cost of revenue was $500 5 million for the first quarter. Our gross margin was down on a quarter over quarter basis. This reduction was driven by lower volume, which we signaled would be down in our Q4 earnings call in February .

As part of that $505 million and cost of revenue, we recorded impairment charges of approximately $227 million in Q1 related to lower of cost or net realizable value, which we also refer to as LC and RV.

The lesson and losses from firm purchase commitments.

Now moving to operating expenses.

R&D expense totaled approximately $229 8 million up three 8% sequentially due in part to gravity testing and tooling Peter spoke about gravity and we're very excited that road testing has already begun.

This increase was partially offset by the execution of cost initiatives to reduce outside services as well as freight.

SG&A expense was approximately $168 8 million down one 2% sequentially. The sequential decrease was primarily due to lower base stock compensation expense.

Expenses.

While we are intently focused on optimizing optimizing costs.

Which I will talk about in a moment is equally important to note that we are continuing to invest behind our strategic and growth priorities, including sales and service customer care and the build out of international offices and infrastructure.

To that end in the first quarter. We're excited to have opened by these studios and service centers three our international sites with one each in Montreal, Toronto, and Oslo, Norway and <unk> in the U S with one in the Washington D C area and the second in the San Francisco Bay area. This brought our total at the end of the quarter.

<unk> to 40.

We will continue to be strategic and judicious with our site expansion in our user utilizing cost effective pop up studio with great effect to complement our studios for brand awareness.

On the service side, we ended Q1 with 38 mobile band in the fleet and 73 nationwide approved body shops to ensure high customer satisfaction. It's a fleet of lucid vehicles continues to grow.

Our stock based compensation in the quarter was $55 3 million.

We also recorded a noncash expense of $48 million related to the change in fair value of our common stock warrant liability.

As a reminder, the noncash impact can be influenced quarter to quarter by a number of factors with one of our larger factors being listed share price at the end of the quarter.

In Q1, we achieved an adjusted EBITDA loss of $643 9 million.

Now moving to the balance sheet, we ended the quarter with just over $3 4 billion in cash and.

Cash equivalents and investments with total liquidity of approximately $4 1 billion.

We're very proud of our ability to consistently sustain a strong balance sheet over time, we've been able to access a variety of funding option from the $2 billion Green convertible bond offering at the end of 2021 to the $1 5 billion ATM and private placement at the end of 2022 alongside government support.

In Saudi Arabia, and the large $1 billion ABL facility, we put in place with a world class banking Syndicate, we will continue to take a holistic and opportunistic approach towards funding the business and we continue to believe that we have access to various options and debt and equity market as well as access to low cost government programs.

Turning to inventory inventory increased sequentially due to the pace of our production volume ramp versus delivery in the quarter raw materials associated with new vehicle variant that we are now producing at a higher volume of in transit inventory as we moved the remainder of the component which are eligible for ocean.

Transport.

Over the balance of the year, we expect a significant reduction in raw material days of inventory on hand at supply chain pressures ease somewhat we obtained more predictability in that transportation channel and we refine our inventory management processes and systems.

Capital expenditures for $242 million in Q1.

Now moving to the outlook.

We are on track to produce over 10000 vehicles in 2023 with company wide initiatives ongoing that will enable lucid to pivot to higher volume as market conditions allow while we typically don't provide delivery guidance. We wanted to provide some directional color to help you with your modeling.

For Q2, we are targeting deliveries to be up sequentially. We now have <unk> in all U S. Showrooms for test drive and we have a broader set of buildable configurations available, though it is important to note that we are still scaling those program and we're continuing to work on our sales and qualified awareness initiatives.

We expect that Q3 production and delivery numbers will ultimately be determined by how fast we are able to ramp the <unk> configuration and asked for Q4, we are expecting that to be our largest quarter of the year.

But again caution that there are many controllable and uncontrollable variables.

That gross margin I wanted to provide some context on our expectation for the direction of gross margin this year.

In the second quarter, we expect improvement on higher sequential volume.

We also expect to realize improvements throughout the year as a result of our cost efficiency and cost optimization efforts spitz.

Specifically, our workforce restructuring in the first quarter is expected to result in annualized cost savings of approximately $91 million geared towards cost of revenue with the balance of the annual savings attributed to Opex.

You will start to see the full impact of the savings in Q2, plus the approximately $2 million restructuring charge that we mentioned above which will hit in Q2.

Second we've been working a number of bill of material cost reduction effort, we're expecting to see a cost savings by the end of the year not necessarily throughout the year with more reductions already identified for 2024.

Third we have restructured a number of our freight contracts and we believe that will continue to see improvement in this area over time.

Lastly, we're working diligently to reduce the days outstanding of our raw material inventory over the past 18 months, we have held additional inventory due to concerns on part availability and logistics slowdown and in some cases banking of part two to tooling capacity planning. However, this excess inventory has.

Significant storage costs.

It uses our ability to benefit from commodity price reductions that are now occurring and also increases risk for obsolescence is some parts expire or updated due to engineering changes. We believe that there is significant savings as we unwind some of this excess inventory and simultaneously refine our tracking and inventory systems. These actions will be.

Reduce our working capital and our cost of revenue.

Other gross margin tailwind is include the opportunity from the inflation reduction Act, which we think could contribute as much as a couple thousand dollars per vehicle in the regulatory environment is also getting more stringent and we see opportunity on the emission credit side around the world recall, we signed our first emission credit deal in Q4.

2022.

Regarding our liquidity position, we ended the quarter with approximately $4 $1 billion in total liquidity, which we believe provides sufficient capital at least into the second quarter of 2024.

Moving to Capex, we expect capital expenditures for 2023 to be between one four and $1 6 billion, reflecting some efficiencies which were identified over the last quarter and deferrals in our capital outlay.

Capex will support our continued growth objectives, as we strategically invest in manufacturing capacity and capabilities are retail studios and service center capabilities across the globe and development of different products and technology.

And other area of supporting growth of lucid business.

Phase two of the factory build out in Arizona is progressing and we believe will benefit from a number of cost efficiencies, including moving logistics more fully on site and later, bringing stamping in house. We're also looking at bringing phase two online in stages on a shop by shop basis, which we expect will allow us to defer some.

Capital expenditures and associated depreciation expense until 2024 without a delay and the estimated gravity timing.

With regard to our manufacturing progress and the Middle East. The first semi knockdown also referred to as FTE facility in Saudi Arabia with capacity of up to 5000 unit is nearly complete.

Equipment and installation will begin next month, we had a ribbon cutting for our SPD building in Casa Grande, Arizona trained staff that came over from the Middle East and we expect to be operational in Saudi Arabia. In Q3. This is very exciting and exactly where we want to be.

In closing I want to express my gratitude to the entire leadership team as well as our investors partners suppliers and customers with your support and commitment we are several steps closer to realizing an environmentally sustainable future with that let me turn it back to <unk> to get to your question Maynard.

Thanks, Jerry will now start the Q&A portion of the call, we'll start by taking Q&A from retail investors through the <unk> platform very important constituency of our shareholder base followed by life analyst questions. So our first retail question is Peter <unk> said I'd, just like to under promise over deliver you promised 20000 deliver.

In 2022% and 49000 in 2023, we've got 4022 and guidance is just 10% to 14 for 23 when will we see under promising and over delivering it has been the complete opposite so far thank you might note.

I'd, just like to say start by saying to everyone on our technology and facilities with the frustration.

Take this very seriously.

Under promising and over delivering isn't about setting low standards are being complacent.

And I'm being realistic.

Active.

And then going above and beyond.

To try to exceed expectations and we have a management team we take this very very seriously.

Back in 'twenty one.

And one could have foreseen.

The disruption to the logistics and supply chain that we saw in 2022 that affected the whole industry. It wasn't just lucid. It was a bunch of other companies very established names were affected the same way.

I was proud of the team that were 19 <unk> factory to resolve issues around 22.

As a huge team effort, we did that.

And now we are facing.

The challenges in the market and macroeconomic effects and high interest rates, which do impact.

We've seen the withdrawal of the.

These are federal tax incentives at the end.

2022.

The strength is which is very difficult to.

We predict when we don't we do so.

Honesty and integrity.

The very best that we are able to estimate and I truly empathize with shareholders, who are here with us through the loan book.

Nevertheless believe that this is a technology.

With the technology that we've developed is unique.

Hugely differentiating it will enable us to push the prudence of calms down because we've got more efficiency, which means we can go further with less pantry energy, which means we can go the same distance as anyone else with smaller crews and batteries at a high cost item, which gives us.

An advantage in terms of potential gross margin and I believe this will come to bear.

In the future and we've also got compelling products coming we've got <unk>, which is going to be a halo product halo product for the brand and help grow brand awareness.

<unk>.

As we noted that as a limiting factor right now and then we've got the big one for production coming next year and on track the gravity, which I think is going to be a seminal products. So.

Ill temper this was.

Optimism for the future.

Lucy.

Thanks, Peter the second question is would you consider launching the gravity with more price accessible trims first to attract more buyers considering the current.

Economy conditions.

Yes, Firstly I would say that from a principal perspective, and given where we are in the lifecycle of maturity of our company. We do think it's important that balance between volume and price and not to optimize one to the detriment of the other question is timely because we have been studying this capex looking at launch cadence the time between launches.

And the price elasticity curve and where the intersection of those and optimizing for the company.

Still a little bit early for us to comment on our intended approach, but what I can say is that we've already sourced about 80% of the components on the gravity, it's going really well and we've been able to stay within our cost targets, which will ultimately give us maximum flexibility to react to dynamic market conditions over time, we're also taking lessons.

Foreign from the air and looking how we shrink the amount of time between trim launches, hence getting all buildable configurations into all regions out to the public faster and finally, we know it's important that customers are aware of the full price spectrum for the vehicle. We found that a lot of people simply don't know that we offer in the case.

With an air of vehicle with a starting price of 87000 as Peter mentioned, a few moments ago and hence awareness is something that we continue to focus on so we will keep you posted as we can share more perhaps at the gravity unveil later this year and in 2024 as we approach startup production.

Thanks.

Can we turn it over to our phone questions. Please.

Sure, Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby for our first question.

Our first question comes from the line of Chris peers with Needham <unk> Company. Your line is open.

Hey, good afternoon, just a clarification did I hear you right that test drugs or up to <unk> 23 versus the fourth quarter of last year and if that is the case I was just curious what was driving that given the dream ahead to launched in the second quarter I believe.

That is correct, it's been a whole holistic series of activities that we've initiated sage, which collectively will form.

The the basis for our.

Forthcoming marketing strategy, it's not just been the degree and the hand tool, that's bringing garnering a losses transcribes, but we've been much more crime.

<unk> studio level through initiatives that we've undertaken from from headquarters here to get more people in Macau people blew way Budd spool seamless the growing ever engagements to refine the comforts advising elucidate people, who have never driven evs.

Before are attracted to this so it's all about getting people behind the wheel to experience very few people will actually buy a car.

Experiencing a test drive so I see this as a conduit.

Sort of a gateway to a future purchase and ownership experience.

Okay, and then just lastly for me with the cars available on the website right now of cars. We have in inventory is there something you're doing to kind of coincide with the test drives of the dream ahead kind of work through that inventory or is it just about whatever specifications or configuration of the customer wants you'll build that based on whatever they order it just kind of want to get.

No.

I know youre, not perfecting our price, but how youre kind of thinking about those two dynamics.

Well, we've got we are reconfiguring, the the website to make the customer experience.

More seamless more straightforward, we're sharing the tons that we have currently available.

That can.

Ken can be spent on that web sites and of course, we're building to order. We've recently introduced the <unk> selling Luke.

Lucid.

Yes.

We will continue very different audiences are very different design, a more youthful appearance to that call.

And.

It's a very handsome manifestation of the range. So we're doing all those things we've got.

Increasing volumes of touring out, but we've got a touring in the studio experience and test drawings are undergoing and of course, we're bringing more and more affordable versions of it.

Pure the pure coming out.

Later this year, we will be bringing the rear wheel drive variance of the pure I don't.

I remember a low that many people believe that elusive as a $200000.

It actually starts at $87400 and we need to.

Really disciplined manner.

Thank you.

Please standby for our next question.

Our next question comes from the line of John Murphy with Bank of America. Your line is open.

Hi, good afternoon guys.

Yes.

Peter in your in your comments.

It sounded like you were.

You alluded to potentially licensing or selling the powertrain technology and it sounded like that was actually.

Pretty far along potentially with some customers I'm just curious if you can comment on that or give us any other color as to what those comments meant.

John I'm not in a position to disclose anything tangible at this juncture.

As I said on the.

Earlier, but we continue to receive incoming interest amongst people I think there is a growing awareness that we have something very very special here in terms of performance and efficiency and if you can have something more efficient you can be less so.

So your burden with free weights and this makes the car really more agile and more school to more of a drawing the focused experience. So the technology. We have today is eminently suitable for higher performance vehicles with our drive units of 600 to 670 horsepower capability when we do.

Low power units more affordable units for mid size platform in a few years' time.

But that technology would be.

More appropriate for more mainstream manufacturers, we've more proactively.

Proactively going out to seek any engagement in this arena, but we have multiple Oems come speak to us and we are in dialogue with central link now.

And Thats, all I really can disclose at this juncture.

Okay, and then maybe just two quick financial questions for you the $411 million of finished finished goods inventory would indicate there is almost 4000.

Units.

In stock is that about writers or something else in that finished goods inventory that would.

We consider that wouldn't be a complete vehicle.

It is a little bit misleading. So I'm glad you asked the question John .

The finished goods inventory has the inventory that is available for sale, but it also includes our test fleet.

Vehicles loaner vehicles that we have in order to give optimal customer care experiences for the end customer showroom cars as well. These are vehicles that ultimately after a few thousand miles on them or path no miles on them in the case of showroom cars or media cars that we will ultimately sell but they're not available for sale today.

So it's important to differentiate between available for sale today and finished good inventory that is being used for other customer facing purposes.

Okay, and then just the other financial question.

A lot going on right now so I haven't had a chance to completely go through that is three but it sure looks like.

A mixed shelf I mean is there the availability for you to raise material amounts of capital under that shelf, that's been filed or I'm, sorry, once again I haven't gone through the details here, but it looks at first blush like Theres a lot of room for you to raise capital.

Well again this is not a new issuance.

Really just a contractual obligation that was associated with the subscription agreement that we did with the Pis back in December of 2022.

Okay.

Great. Thank you very much guys.

Okay. Thank you John .

Thank you.

Please standby for our next question.

Our next question comes from the line of Andrew Shepherd with Cantor Fitzgerald. Your line is open.

Hi, good afternoon, everyone. Congrats on the quarter and thanks for taking our questions.

Peter I wanted to perhaps follow up from the one of the last questions in terms of the licensing I realize you're not providing additional color on that and see if I can maybe I can ask the question.

Slightly differently given the slight reduction in the production guidance for this year in gross margins where they are.

I guess what is the reluctance to to introduce this is a new revenue stream you have the proof of concept with the Formula E series.

Continue to talk about the technology and how our superior it is relative to competitors.

Trying to understand why not introduce this sooner rather than later thank you.

There's no reluctance on our part we're very open and engaged.

We have a we have to prioritize here last year My laser focus was working crazy hours in the factory, that's what I was doing crazy hours.

To resolve logistics and supply chain issues.

And laser focus right now is amplifying for brand awareness and creating a cohesive strategy with Andrea to market. This brand and make many more people aware that we've got the best on the planet.

Tech roadmap I believe is extraordinary.

We will be launching progressively more affordable versions of our tech which would be approved.

For OA is a different cost structure of the markets.

So.

There is nothing tangible.

Announced right now we're in dialogue with.

Third policies.

Well.

I will make appropriate announcements should.

Bear fruit, but theres no reluctance on our part we're open and receptive, but I really have to focus on our products right now relevant proactively chasing licensing.

Got it okay understood. Thanks, Peter and maybe as a quick follow up.

Was wondering if you could perhaps just give us any color on the deliveries starting to to Saudi Arabia as part of the major agreements. There was a brief comment there from sharing the and sorry, if I missed it just wondering if maybe you can elaborate a bit further.

Sure.

Just in terms of how you see those progressing.

Yeah, So I think youre, referring to the Ministry of Finance agreement that we have.

Which they have committed up to 50000, maybe up to a total with the option for another 50000 up to a total of 100000 units over the next 10 years. We are progressing our conversations we are in active dialogues. We are in the process of building out.

For the first vehicles that they want to receive later this year. So that is actively ongoing.

Okay. Thanks, guys. Congrats again I'll pass it on thank you.

Thank you. Thank you.

Thank you please standby for our next question.

Okay.

Our next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Hi, good afternoon, two questions if I could first of all the change in guidance in terms of going from 10 to 14000.

10000, how.

How much of that would you say is related to just some concerns on the macro or your ability to build brand versus just factory production issues. Any details you can provide on that and then I had a follow up.

Yes, I think it's.

So as we take a very responsible perspective of this.

We match the comp that we build the production volumes.

The costs that we deliver.

And that's the balancing act.

Certainly we believe.

The macroeconomics are playing a pause in.

The deliveries right now we also believe that.

The interest rates play apart even for high end products, even in this part of the market interest rates too.

Provide.

A headwind, but we've got initiatives within the company consumed the sausage some to up to the end use shouldnt those are market conditions improve and we are ready to scale up pending that.

And also why we amplify brand awareness and also I come back to this misconception.

Seems to be the end of it.

Yes people believe it is a 200000 gold accounts.

Entry level price is $87400 it appropriately conceivable that people think of it as a 200000 telecom.

Amazing, but actually it's much more attainable and we need to spread that word as well.

Great. That's helpful. And then just in terms of you mentioned maybe.

Bringing phase III online in stages can you just talk to sort of the triggering point for that and whether I don't know whether they were if you focus on certain stages. Besides us.

Capex efficiencies that helps in any other ways.

In terms of how you how the vehicle production goes from a cost standpoint, and your ability to react to changes in demand. Thank you.

Yeah, Yeah, no I think it's an important question. So we're in the process of <unk>.

Adding significant I think $2 85 million additional square feet in Arizona, Casa Grande facility, if and it's a number of our shops are being either expanded or new building and what we're finding is that as we look at our production plan.

We have the ability to continue to eke out a bit more volume out of some of our existing machinery tooling equipment and the existing shop for a bit longer which would allow us to take certain of the shops.

Campaign, perhaps pain and potentially delay the.

Onboarding of Dow with hence you will delay the depreciation expense that accompanies that particular machinery tooling equipment and facility to a little bit longer. The other thing. We're doing is we are really carefully looking at all of the equipment that's going in each of these shops and to the extent that there is volume equipment.

That could potentially be delayed like the addition of additional.

Robots for instance, we're looking to put those in place and activate those as they're needed versus doing it all at one time. The other thing Thats really unique about what we're doing in the General Assembly Hall is that we're going to have the ability to dial up the jobs per hour between a few different job.

<unk> points, so it's not a unit step.

Increase in direct labor and bringing on the equipment, but instead will have the ability to dial that up gradually and Brooklyn of work to be really thoughtful about that so we can minimize depreciation expense and also the amount.

Just efficiency of the workforce as well.

Great. That's all very helpful. I appreciate the answers thank you.

Thank you please standby for our next question.

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

Thank you hi, Peter sharing team so looking at Asps there were about 106000 per vehicle this quarter.

These are implied some heavy discounting below MSRP or a lot of short term could you maybe speak a little more to that and then how we can think about that going forward.

So I think that when you think about the mix as it starts to defer from 2022 youre starting to have more dominance and trends other than Grand touring and Dream right. Now you start having more prevalence of Turing, we're starting to get curious in there, but as you go forward through the balance of this year.

Sure there is going to continue to be healthy mix because some of the higher trim levels are going to start going in or going to the middle East and Europe , and so youre going to start to see the exposure of those products with higher end products in those regions. While you simultaneously start to ramp here in the U S.

And then later said that overseas as you're exiting the year and into 2024, so you're going to continue to see the mix of trends. We did have a 7500 kind of continuation program.

Lapped in the first couple of months of the year couple of few months of the year and that also is reflected in the revenue numbers that you do see.

Okay, and it's safe to say that $7500 continuation program will come off going forward throughout 'twenty three.

It did come off yes.

Yes, Okay and then just one quick modeling question for you Sherry on the LC and RV cadence is there any sort of guide on how we might see those charges hit and the remainder of this year and the next just so that we can lay out cleanly in the model and understand how those might affect the bottom line.

Yeah, no. It's a great question.

The charges have been really kind of between $180 million 200 ish million to $20 million. The last three quarters that we've kind of seen it basically leveling off we do expect to see an improvement of that overtime because part of the charge is associated with the <unk>.

Inventory, we have on hand, given my comments that we're looking to reduce the days outstanding of inventory on hand, and not bringing fresh inventory and in terms of raw material, which and also work in process finished goods.

We would expect that to start to taper down so as youre looking forward. This year, we are expecting sub some reduction in that over time. The other thing that we have had in some impairments there.

You had mentioned some obsolescence we had mentioned some scrap I had mentioned the fact that we have some different activities ongoing to really address that in a more proactive way and thats, partly us improving our systems is partly if not having to hold as much inventory on a precautionary basis, because we're not.

<unk> sustained supply chain issues and the same COVID-19 issues that we had in the past so bringing down that inventory, making sure. It's more current inventory will also improve the situation throughout the year.

Understood. Thank you for the detail and detailed answer.

Of course, thank you.

Please standby for our next question.

Okay.

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

Hi, Thanks for taking my question.

If we exclude the noncash inventory write down charge your Cogs per unit only improved by about 8% versus the fourth quarter of 2022, which likely reflects the rotation towards lower content pure <unk>, but also some of it.

Discounts that you just mentioned are you able to provide some data points for analysts and investors on the work that's being done internally to remove the costs from the vehicle.

Yeah, absolutely I've mentioned, a few of them in my prepared remarks.

But let me provide some additional context.

So some of the work that's being done is on bill of material cost down now they have two different flavors. One part is commercial agreements that we have with our suppliers and in improving piece price cost some of that happens as you're negotiating additional volume with them on new pro.

Graham as they become more open to negotiating down piece price on current programs. So that part of the effect. The other effect is when we are doing engineering changes that have a corresponding cost increase as well. The bom cost is certainly something that we are expecting to see throughout the year, though you have to remember.

When you've got inventory on hand, and you are bringing new lower cost parts and you got to go through that inventory. One that's why I guided earlier that you're going to start to see the impact of that more towards the end of the year and also as you get into 2024, because some of these items, we know will actually take effect in 2020 for some of the other areas.

Where we've been seeing some really.

Good progress has been in freight and that will start to show up more in Q2 and Q3 as we renegotiated some of our contracts. There and also we are seeing improvements in manufacturing overhead as well and then as a result of the workforce.

Option there is improvement.

<unk> that youre going to start seeing more of it is going to be in cost of revenues than in opex and you're going to start seeing that in Q2. So these are different.

Cost down initiatives that will start flowing through the gross margin and then of course, we talked about greenhouse gas credits the inflation reduction act some of those things some of the trends that we have those will start hitting a little bit later in the year is our expectation.

Okay cool. Thank you I guess my second question is that.

The looser that began production roughly one year after beta prototyping test testing began.

Clearly COVID-19 impacted some at the start of production timeline.

But shouldnt analysts and investors use the same timelines conclude that the gravity SUV begins production in where feed nine to 12 months from now given your announcement that this nameplate has just begun the road testing.

Yeah.

All I can say is that.

We've got to get the prototypes to Iranians there is just.

Just question period between.

The data.

Production result.

So in a moment future issues here, we are on target to start production late 2004 through the grant between.

Okay.

Perhaps maybe you.

Outline exactly what needs to happen.

For the between now and the start of production, maybe so that we could trucking in real time.

When do you expect the vehicles.

<unk> et cetera et cetera.

Yes, well I mean home obligation comes relatively light because of that to be conducted to process and tooling.

Represented.

Levels of authenticity for that represent production so right now.

Road testing.

The base of vehicles for the core attributes.

<unk> C drive ability suspension tuning, we're starting on some of the developments.

The traction controlled antilock braking systems.

Core attributes of the vehicle.

Then we will move to a size of interior development.

A representative of interiors at this stage later this year will move basis with.

Representative into areas, where we can do all of that development than the lonely tooling items.

Are being kicked off.

Some of the parts take over a year to two and then we'll go through a preproduction run through.

Next spring.

Yes.

Culminating in production late 2024.

On track.

And I believe this will be a seasonal a seminal product.

Gravity is on track, it's the big one is going to be a landmark seven seats.

Three row Super practical Super High performance extraordinary range <unk> Xu extraordinary performance attributes.

Great. This has been super helpful. Thank you I'll pass the line.

Thank you.

Please standby for our next question.

Our next question comes from the line of Ron to cycle with Guggenheim. Your line is open.

Good evening.

Thanks for taking my questions.

Peter just wanted to get your thoughts on kind of competitive dynamics in the market right now from our vantage point it feels like.

You are pretty challenging market for for luxury electric vehicles, but.

I wanted to get your view on price cuts from.

Your one of your large domestic competitors.

Their luxury vehicles is having any impact on <unk>.

Demand for lucid vehicles.

Well I think what you're referring to is perhaps the different parts of the markets.

I believe.

There is a there is a challenge to the entire market right now because of macroeconomics and because of interest rates, which actually do affect this place for marketers.

No we are seeing.

<unk>.

Key competitors from Germany.

Discounting their products very heavily.

It's not just the.

The U S manufacturer that you may be.

May be referencing the Germans are heavily discounting their vehicles.

And I think there is challenges right across the marketplace I think what we need to do is just amplify awareness.

How compelling.

Product is we've got better range better into comfort, we've got more leg room with hopes to challenging we're more efficient through technology.

The main place superior growing user engagement experience I was taking some.

Potential customers trying just yesterday and they would just blown away by the <unk> rule, providing and riding experience and we just need to get more people behind the wheel. That's what this is about we don't have a 100 year head.

<unk> history, we didn't have an existing customer base, we need to win new and because new customers.

That's super helpful and it's good to hear you are out in the field kind of promoting the product.

Personally most weekends announce meeting customers.

And the grass roots evangelism is growing and this doesn't happen overnight. This will take some time, we are planting a combs for for us to come in the future.

No mistake.

It makes perfect sense I guess, just you gave the data point around test drives and the number of cities Youre going to for the Dream ahead tours. There is there anything you can commentary you can provide on kind.

Kind of the cadence for order trends.

Started or.

It's too early.

It's too early to do that.

<unk> is very dangerous.

But what I would say is.

That we've more than doubled the number of test runs in the last quarter and I believe that very few people, who would buy a car without test drive it and I see that as a key stepping stone a key conduit a very relevant metric and that is the process step towards <unk>.

Purchasing ownership and then what we see is.

The best salespeople with those are our customers.

Become advocates and some of them even evangelize for us.

So something very genuine about them.

These tests are it's also give us personal touch points in order to enter into dialogue with the customers better understanding their needs and then also I would say that as we've set up the lucid financial services business in the U S and in growing that overseas. That's another touch point, where we can gain intelligence on what the customer needs the <unk>.

<unk> that theyre looking for the interest rates that theyre looking for in all of these are going to be data points that we can use to refine offerings that are going to best meet meet the customer needs.

Streamlining the whole customer experience, making the website much more intelligible.

Q2 will user friendly screen line during the Athena streamlined new aluminum prices.

Online.

That's super helpful and just last quick question for me kind of gravity.

Any learnings from the early launch process over the last 12 to 18 months that will help inform.

The gravity launch call it 12 months from now.

Yes of course, I mean, we want to we want to continuously improve and there is a continuous improvement in learning process, which we take very seriously. The teams here Big engineering team and gravity works very closely with production theme resuming full process design for manufacture and.

This is a this is a really collaborative a team sport, which we take very seriously I really believe gravity is going to be a seminal product.

Adam is going to be anything else.

<unk>.

<unk> closed its taken.

All technology that we develop today and more that we're going to throw at this.

The problem with Suvs is getting range without Julie large battery, which become super heavy and then you lose payload capacity.

So this is this is a multi dimensional hugely.

Nickel challenge and it's only now I believe that were ready to really give it our best shot a gravity is going to be huge for us I'm very excited about it.

That's very helpful color.

Peter Sherry.

I'll hop back in the queue.

Thank you.

Ladies and gentlemen, due to the interest of time I would now like to turn the call back to <unk> for closing remarks.

This concludes <unk> first quarter 2023 earnings conference call. Thank you all for joining US today and you may now disconnect.

Okay.

[music].

Hmm.

Yes.

[music].

Okay.

Okay.

Okay.

[music].

Yes.

Hum.

Okay.

[music].

Sure.

[music].

Hello, and thank you for standing by and welcome to elusive groups first quarter 'twenty three 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 a question. During this time you would need to press star one on your telephone.

You will then hear automated message advising your hand is raised.

To withdraw your question. Please press star one again.

I'd now like to hand, the conference over to a minor you may begin.

Thank you and welcome to lucid group's first quarter 2023 earnings call. Joining me today are Peter Rawlinson, our CEO and CTO and Sherry House, our CFO before handing the call over to Peter Let me, let me remind you that some of the statements on this call include forward looking statements under Federal Securities Law. These include without limitation statements.

Regarding the future financial performance of the company production and delivery volumes financial and operating outlook and guidance.

Economic and industry trends company initiatives and other future events. These statements are based on predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our most recent filings with the SEC and the forward looking statements on page two of our investor deck.

Available on the Investor Relations section of our website at IR 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 Mike and thank you everyone for joining us for our first quarter earnings call.

In quarter, one we produced 2314 vehicles and delivered 1406.

Sheri will go into more detail on our financials, but I would like to thank.

All our employees, we have the best EV on the market and really I believe is the best car on the market and it would not have been possible without the collective efforts of our entire team, which is a direct result of tremendous perseverance with thoughtfulness and teamwork.

I want to express my deep personal gratitude to everyone, who has contributed to and the teams that will help advance our mission going forward.

I'm very excited about our future and the opportunities that lie ahead of US we have the best EV on the market and really unbelievable come on the market and it would not have been possible without the collective efforts of the entire team.

I would like to welcome three new members of the board sharing for.

Chevy Norrie and <unk> wins.

Together, they bring significant global experience in the areas of marketing finance and operations across automotive technology and luxury consumer goods.

These additions are.

Reflection of the company's evolution as we mature to the growth and brand awareness stage of our lifecycle.

Also like to congratulate <unk> on his appointment as chairman of the board and also thank Andrew Liveris for his guidance during his service as chairman.

And also a heartfelt thank you to.

Going board members, Nancy Gioia, Tony Puzzled us.

And Frank Lindenberg with vast significant contributions and dedication to loosen its mission.

Now last quarter I laid out key significant strategic priorities for the company number one growth and brand awareness and number two a laser focus upon cost.

We've taken immediate action on Bugs, we made the decision to adjust our workforce in Q1, given evolving business needs productivity improvements and broader economic uncertainty, which we like many others are not immune from.

Whilst we believe this positions us to be more agile and puts us in the best position for success moving forward. It was nonetheless, a difficult decision.

Jerry will speak to our cost focusing greater depth. So let me provide an update on our growth and brand awareness progress.

Now we continue to make strides in growing our brand awareness and I'm proud to say that lucid.

<unk> was recently awarded a number of prestigious industry accolades, adding to our existing portfolio of awards such as the 2022 motor trend car of the year.

At the 2023, New York International Auto show loose today was crowned the 'twenty two 'twenty three world luxury car.

Lucid Air was also named the BV U S News and we will report 2023, best hybrid and electric cars lists for best luxury electric car.

These awards reinforce our belief that the lucid is not just the best TV in the world, but the best available in the world today.

The lucid as a new industry benchmark for range and two versions that were the first evs to achieve an EPA estimated range over 500 miles.

And we set these new standard thanks in part to a groundbreaking enhanced development technology, which continues to garner significant industry attention.

In fact, lucid recently received the 2023, Newsweek powertrain disruptor of the year Award.

I cannot underscore enough how advanced our technology is making it the best in the world on many metrics I believe we are years ahead of our next closest competitor who in turn we believe is several years ahead of their next closest competitor.

I believe that as more companies come to the realization that developing world class powertrain is not as easy as we make it look then we will continue to grow more interest and our patented hardware and software technology from other Oems.

And in fact, we continue to see interest from multiple parties as I've said in the past whilst this is not an area, where we've put a tremendous amount of proactive attention I am pleased with the growing levels of interest and progress that we are receiving with these Oems.

So our technology and Knowhow is what enables us to have game changing range Super current levels of performance Super fast charging.

Heres, some spacious interior and exceptional aerodynamics.

But I also want to stress that the best technology does not mean, most complex nor most expensive in fact, it's quite the opposite I believe our vehicles are fundamentally easier to manufacture in many ways than our competitors unless it is done through brilliant.

<unk> engineering design for manufacture and very high degrees of innovation.

And we're not resting on our laurels, we're using advanced technology to drive down the cost for Evs, we're moving towards a more efficient Tvs in order to decrease the battery pack sizes, which will enable lower cost vehicles, and we have much more to come with an exceptional technology roadmap.

And further enhancements and innovations pushing the envelope on what.

<unk>, including for a mid sized platform.

Now looking more near term is on track for startup production later this summer in mid September .

The lucid and sat Fi will feature three motors carbon ceramic brakes, and Arizona package, new sports seats, and correct queuing suspension for the blind growing Eva focused boating experience.

It is expected to post <unk>.

Sub two seconds north of 60 miles an hour at a sub four seconds not to 100 miles an hour with the sub nine second quarter mile at a top speed exceeding 200 miles an hour I think test driving sapphire.

Very recently and on funding it extremely satisfactory in terms of its performance.

<unk> excited to announce the gravity SUV entered a new phase of development with road testing having started a couple of weeks ago, just as the lucid are redefined the sedan category I believe the gravity of CV is positioned to do exactly the same.

Its corresponding SUV category.

We're taking all the best elements of that and putting them into an SUV game changing range and efficient see amazing interior space challenging performance and luxury and just last week I was out in a gravity on a test drive and I'm delighted with the progress that's been made.

And make no mistake, the gravity SUV will be a true landmark.

And we can't wait future experienced the gravity SUV at and unveil later this year at which time, you'll be able to place a reservation, we think youre going to absolutely love it.

Now in software, we continue to make big strides we have five over the air updates in Q1 with a number of features that customers have been requesting including car play and schedule Chongqing and indeed, we are working on many more exciting updates.

We're listening intently to what our customers want while simultaneously providing more data.

<unk> design features to provide our customers with what as a best in class experience they prefer.

What's more important is to emphasize that we have designed our cost to be over the air update table from the very start and I believe that there are very few that have the over the air capability to the same degree.

It's a platform on which we can do so much more.

On our last earnings call in February I spoke about customer awareness of the lucid brand.

We see brand growth happening in stages, starting with the innovators than early adopters are moving too early majority and beyond.

We believe we are still early on in our customer growth stage of innovators and early adopters and as we achieve a tipping point in brand visibility once enough cars on the road. We will believe we will see a higher velocity of growth.

And we've continued to take serious action and holistic data driven approach to our marketing programs focused on qualified awareness digital conversion test drive experiences and conversion to orders and deliveries.

And we're seeing some early wins there.

A number of test drives has nearly doubled in the first quarter from the fourth quarter of last year I believe it's seeing is believing and once you experienced the handling the quality the performance and the interior space of lucid for yourself, you will understand the award winning nature of our vehicles, we see Tess.

Drives as the key steppingstone for customers considering the purchase of lucid.

We launched our agreement had lot tool last month, which is designed to showcase the lucid as game changing electric vehicle performance and technology consumers will have the opportunity to experience and drive three lucid our models the lucid a pure pellucid at touring and.

Grand touring and they will do that in 42 key cities right across the USA.

In fact, the Whitehouse promoted during the head so as part of President of Spiking EV acceleration challenges challenge.

Highlighting actions to encourage EV deployment.

I'm also delighted to announce that in bras Ceriani recently joined <unk> as our new head of marketing.

Andrea brings over 25 years of experience in luxury brands and automotive having worked at companies such as Maserati Ferrari and tax lawyer.

And we certainly expect diluted as sapphire and the gravity SUV to furloughs.

Elevate awareness of Pellucid brand.

There are many more grassroots efforts underway capitalizing upon our incredibly passionate customers who are also our biggest advocates.

Now there is a misconception out that lucid add starting price is far higher than it actually is many people out there really believe the lucid is a $200000 come.

When the fact is that the starting price for lucid and pure is the $87400.

Which we believe is a truly compelling offering in the marketplace today and we're working on ways to achieve broader access.

We started deliveries of the lucid as with self apparent last month and will deliver more lucid and green and Grand touring this quarter two customers in the EU and in Saudi Arabia.

We've resolved some of the gating items and we will continue to focus on ramping up production of <unk> for parents and components for international shipments in the second quarter.

We expect the lucid a pure volumes in the back half to also ramp with the start of the lucid a pure Ria will drive in North America.

We're on track to produce over 10000 vehicles in 2023 with companywide initiatives ongoing that will enable higher volumes as market conditions allow and Shelly will go through guidance in greater detail.

So in closing we recognize that we have more work to do.

But we're making progress with our strategic priorities and the team is totally energized our mission and our optimism are unchanged. We are committed to a more innovative and environmentally sustainable future designing building and delivering the best EV on the market as we expand globally.

And develop more exceptional vehicles, such as the gravity SUV, which we plan to launch in 2024.

I am confident that we have the most advanced technology, we have the right operational infrastructure.

The know how to deliver and we have a track record of tenacity that will make us stronger.

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

Thank you Peter and thank you for taking the time to join US today I'd like to begin by calling out a few recent highlights.

Last month, we announced that with the joined the United Nations Global compact the world's largest corporate initiative advancing sustainable and socially responsible business practices sustainability is an integral part of what we do every day, it's our mission and we view this as a natural progression in our sustainability journey at the company.

Last month, we also signed the first annual agreement with the human resources development time, or HRD and Saudi Arabia. This agreement operationalized.

Random up understanding timed with the HIV up in October 2022, and will facilitate boosted training program and we will find the skills development and salaries for Saudi Nationals, who work within our organization within Saudi Arabia.

The public investment scientists connected up to many of the ministries throughout Saudi Arabia, and this HRD up agreement is another example of how those relationships and partnerships have resulted in significant economic and administrative support.

Our international operations in the Middle East the Pis had been a committed investor in a strategic partner for many years and we're very grateful for their partnership and support.

I'd also.

On the second.

Ken that was previously disclosed in December six 2021.

On April 27, 2023 FC staff SEC staff informed me that the SEC concluded their investigation related to the business combination between Churchill Capital Corporation for which Lucent recalled predecessor, and Akiva, Inc. In certain projections and statements.

Please inform you that they do not intend to recommend any enforcement actions by the SEC against the company, which we view as a very positive outcome.

Consider this matter closed.

I wanted to talk about the form S. Three and form S. Eight that you may have seen filed today after market close we amended the existing S. Three with the filing of a new S. Three.

As you'll recall, we consummated a private placement of common stock for aggregate proceeds of $915 million in December 2022 in connection with this private placement we agreed to register the shares with the SEC.

Form S. Three as intended to register these shares by amending the existing form S. Three that we filed in August 2022.

This action was to fulfill our contractual obligation regarding registration right and it's not a new issue.

We also filed a form S. Eight as a reminder, the form S. Eight is primarily to register the additional shares made available under the company's second amended and restated 2021 stock incentive plan, which was approved by the stockholders at the 2023 annual meeting on April 24.

Moving to the business.

Peter mentioned in Q1, we made the very difficult decision to streamline our workforce to better position. The company for the future. We took a $22 5 million restructuring charge, which was at the lower end of the $22 million to $28 million. We indicated in late March given that we were able to reallocate.

Certain employees to other critical positions within the company.

We anticipate the final part of this restructuring action approximately $2 million to occur in the second quarter.

Now turning to our 2023 first quarter financial results, we produced 2314 vehicles, 225% year over year and delivered 1400, six vehicles up approximately 291% year over year, making Q1 2023 are.

Second highest performing quarter in terms of production and delivery volume.

This performance was less than Q4 2022.

As we guided last quarter, we expected Q1 to be down significantly versus Q4 2022, while we work to drive up qualified awareness of our world class products and also work to unlock production of cell the European and the Middle East area.

As Peter mentioned, we've now resolved some of those gating items and are focused on ramping these three areas further in Q2.

For Q1.

<unk> revenue of $149 4 million, which represented a year over year increase of 159%.

Cost of revenue was $500 5 million for the first quarter. Our gross margin was down on a quarter over quarter basis. This reduction was driven by lower volume, which we signaled would be down in our Q4 earnings call in February .

As part of that $505 million and cost of revenue, we recorded impairment charges of approximately $227 million in Q1 related to lower of cost or net realizable value, which we also refer to as LC and RV obsolescence and losses from firm purchase commitments.

Now moving to operating expenses.

R&D expense totaled approximately $229 8 million up three 8% sequentially due in part to gravity testing and tooling.

Peter spoke about gravity and we're very excited that road testing has already begun.

This increase was partially offset by the execution of cost initiatives to reduce outside services as well as freight.

SG&A expense was approximately $168 8 million down one 2% sequentially. The sequential decrease was primarily due to lower base stock compensation and <unk> expense.

Expenses.

While we are intently focused and estimating optimizing costs.

Which I will talk about in a moment is equally important to note that we are continuing to invest behind our strategic and growth priorities, including sales and service customer care and the build out of international offices and infrastructure.

To that end in the first quarter. We're excited to have opened five new studio and service centers three our international sites with one each in Montreal, Toronto in Oslo, Norway and tour in the U S with one in Washington D C area and the second in the San Francisco Bay area. This brought our total at the end of the quarter.

<unk> to 40.

We will continue to be strategic and judicious with our site expansion in our user utilizing cost effective pop up studios with great effect to complement our studios for brand awareness.

On the service side, we ended Q1 with 38 mobile vans in our fleet and 73 nationwide approved body shops to ensure high customer satisfaction. It's a fleet of lucid vehicles continues to grow.

Our stock based compensation in the quarter was $55 3 million.

We also recorded a non cash expense of $48 million related to the change in fair value of our common stock warrant liability.

As a reminder, this noncash impact can be influenced quarter to quarter by a number of factors with one of our larger factors being listed share price at the end of the quarter.

In Q1, we achieved an adjusted EBITDA loss of $643 9 million.

Now moving to the balance sheet, we ended the quarter with just over $3 4 billion in cash.

Cash equivalents and investments with total liquidity of approximately $4 1 billion.

We're very proud of our ability to consistently sustain a strong balance sheet over time, we've been able to access a variety of funding options from the $2 billion Green convertible bond offering at the end of 2021 to the $1 5 billion ATM and private placement at the end of 2022 alongside government <unk>.

<unk> in Saudi Arabia, and the large $1 billion ABL facility, we put in place with a world class banking Syndicate will continue to take a holistic and opportunistic approach towards funding the business and we continue to believe that we have access to various options and debt and equity markets as well as access to low cost government programs.

Turning to inventory inventory increased sequentially due to the pace of our production volume ramp versus delivery in the quarter raw materials associated with new vehicle variant that we are now producing and a higher volume of in transit inventory as we move to the remainder of the component which are eligible for <unk>.

<unk> transport.

Over the balance of the year, we expect a significant reduction in raw materials days of inventory on hand at supply chain pressures ease somewhat we obtain more predictability in the transportation channel and we refine our inventory management processes and systems.

Capital expenditures were $242 million in Q1.

Now moving to the outlook.

We are on track to produce over 10000 vehicles in 2023 with companywide initiatives ongoing.

Enabled with it to pivot to higher volume as market conditions allow.

We typically don't provide delivery guidance, we wanted to provide some directional color to help you with your modeling.

For Q2, we are targeting deliveries to be up sequentially. We now have <unk> in all U S. Showrooms for test drive and we have a broader set of buildable configurations available. So it is important to note that we are still scaling those program and we're continuing to work on our sales and qualified awareness initiatives.

We expect that Q3 production and delivery numbers will ultimately be determined by how fast we are able to ramp the pure buildable configurations and ask for Q4, we are expecting that to be our largest quarter of the year.

But again caution that there are many controllable and uncontrollable variables that can affect gross margin I wanted to provide some context on our expectation for the direction of gross margin this year.

In the second quarter, we expect improvement on higher sequential volume.

We also expect to realize improvements throughout the year as a result of our cost efficiency and cost optimization efforts spitz.

Specifically, our workforce restructuring in the first quarter is expected to result in annualized cost savings of approximately $91 million geared towards cost of revenue with the balance of the annual savings attributed to Opex.

You will start to see the full impact of the savings in Q2, plus the approximately $2 million restructuring charge that we mentioned above which will hit in Q2.

Second we've been working a number of bill of material cost reduction effort, we're expecting to see a cost savings by the end of the year not necessarily throughout the year with more reductions already identified for 2024.

Third we have restructured a number of our freight contracts and we believe that will continue to see improvement in this area over time.

Lastly, we're working diligently to reduce the days outstanding of our raw material inventory over the past 18 months, we have held additional inventory due to concerns on part availability and logistics slowdown and in some cases banking apart due to tooling capacity planning. However, this excess inventory has.

Significant storage costs.

It uses our ability to benefit from commodity price reductions that are now occurring and also increases risk for obsolescence is some parts expire or updated due to engineering changes. We believe that there is significant savings as we unwind some of this excess inventory to simultaneously refine our tracking and inventory systems. These actions will be.

Reduce our working capital and our cost of revenue.

Other gross margin tailwind is include the opportunity from the inflation reduction Act, which we think could contribute as much as a couple thousand dollars per vehicle in the regulatory environment is also getting more stringent and we see opportunity on the emission credit side around the world.

Call, we signed our first emission credit deal in Q4 of 2022.

Regarding our liquidity position, we ended the quarter with approximately $4 $1 billion in total liquidity, which we believe provides sufficient capital at least into the second quarter of 2024.

Moving to Capex, we expect capital expenditures for 2023 to be between one four and $1 6 billion, reflecting some efficiencies which were identified over the last quarter and deferrals in our capital outlay.

Capex will support our continued growth objectives, as we strategically invested manufacturing capacity and capabilities are retail studios and service center capabilities across the globe and development of different products and technology.

And other area of supporting growth of lucid business.

Phase two of the factory built on in Arizona is progressing and we believe will benefit from a number of cost efficiencies, including movie logistics more fully on site and later, bringing stamping in house. We're also looking at bringing phase two online in stages on a shop by shop basis, which we expect will allow us to defer some.

Capital expenditures and associated depreciation expense until 2024 without a delay and the estimated gravity timing.

With regard to our manufacturing progress and the Middle East. The first semi knockdown also referred to as FTE facility in Saudi Arabia with capacity of up to 5000 unit is nearly complete.

Equipment and installation will begin next month, we had a ribbon cutting for our SPD building in Casa Grande, Arizona trained staff that came over from the Middle East and we expect to be operational in Saudi Arabia. In Q3. This is very exciting and exactly where we want to be.

In closing I want to express my gratitude to the entire leadership team as well as our investors partners suppliers and customers with your support and commitment we are several steps closer to realizing an environmentally sustainable future with that let me turn it back to <unk> to get to your question.

Thanks, Jerry will now start the Q&A portion of the call, we'll start by taking Q&A from retail investors through the <unk> platform very important constituency of our shareholder base followed by life analyst questions. So our first retail question is Peter <unk> said I'd, just like to under promise over deliver you promised 20000 deliver.

In 2022% and 49000 in 2023, we've got 4022 and guidance is just 10 to 14 for 2003 when will we see under promising and over delivering it has been the complete opposite so far thank you.

I'd, just like to say start by saying to everyone on our technology and facilities with the frustration.

Take this very seriously.

Under promising and over delivering isn't about <unk> being complacent.

And I'm being realistic.

Proactive.

And then going above and beyond.

To try to exceed expectations and we have a management team we take this very very seriously.

Back in 'twenty one.

And one could have foreseen.

The disruption to the logistics and supply chain that we saw in 2022 that affected the whole industry. It wasn't just lucid there was.

Bumps have overcome companies very established names.

At the same way.

I was proud of the team that worked night and day in that factory to resolve issues around 22 and is a huge team effort we did that.

And now we are facing.

Our challenges in the market and macroeconomic effects and high interest rates, which do impact.

We've seen the withdrawal of the.

Nathan Federal tax incentives at the end.

2022, and these are Frank which was very difficult to predict when we joined we do so with absolute.

Honesty and integrity to the very best that we are able to estimate.

And I truly empathize with shareholders, who are here with us through the loan book.

Nevertheless belief that this is a technology.

So the technology that we've developed is unique it's hugely.

Differentiation it will enable us to push the prudence of comes down because we've got more efficiency, which means we can go further with less pantry energy, which means we can go the same distance as anyone else with small of an increase in batteries at the high cost which gives us.

An advantage in terms of potential gross margin and I believe this will come to bear.

In the future and we've also got compelling products coming with.

Sat Fi, which is going to be a CLO product halo product for the brand and help grow brand awareness.

As we noted that as a limiting factor right now and then we've got the big one for production coming next year and on track with gravity, which I think is going to be a seminal products. So.

<unk>.

Optimism for the future.

Felicia.

Thanks, Peter the second question is would you consider launching the gravity with a more price accessible trims first to attract more buyers considering the current.

Economy conditions.

Yes, Firstly I would say that from a principal perspective, and given where we are in our lifecycle maturity of our company. We do think it's important that balance between volume and price.

To optimize one to the detriment of the other your question is timely because we have been studying this capex looking at launch cadence the time between launches and the price elasticity curve and where the intersection of those and optimizing for the company.

Still a little bit early for us to comment on our intended approach, but what I can say is that we've already sourced about 80% of the components on the gravity, it's going really well and we've been able to stay within our cost targets, which will ultimately give us maximum flexibility to react to dynamic market conditions over time, we're also taking lessons.

Learn from the air and looking how we shrink the amount of time between trim launches, hence getting all buildable configurations into all regions out to the public faster and finally, we know it's important that customers are aware of the full price spectrum for the vehicle. We found that a lot of people simply don't know that we offer in the case.

And are a vehicle with a starting price of 87000 as Peter mentioned, a few moments ago and hence awareness is something that we continue to focus on so we will keep you posted as we can share more perhaps at the gravity unveil later this year and in 2024 as we approach the start of production.

Thanks.

And we turn it over to phone questions. Please.

Sure, Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby for your first question.

Our first question comes from the line of Chris <unk> with Needham and company. Your line is open.

Hey, good afternoon, just a clarification.

Our test drugs or up to <unk> 23 versus the fourth quarter of last year and if that is the case I was just curious what was driving that given the dreamer head toward launched in the second quarter I believe.

That is correct, it's been a whole holistic series of activities that we've initiated sage, which collectively will form.

The the basis for our.

Forthcoming marketing strategy, it's not just been the green the hand tool, that's bringing garnering a losses transcribes, but we've been much more active both in studio level through initiatives that we've undertaken from from headquarters to June .

More people in Macau people blown away by the spool seamless the growing ever engagements to refining the comfort declining elucidate people, who have never driven evs before are attracted to this so it's all about getting people behind the wheel to experience very few.

People will actually buy a car without.

<unk>.

And you described so I see this as a conduit.

I sort of gateway to a future purchase and ownership experience.

Yeah.

Okay, and then just lastly for me with the cars available on the website right now of cars. We have in inventory is there something you're doing to kind of coincide with the test drives or a dream.

Through that inventory or is it just about whatever specifications or configuration as a customer once you'll build that based on whatever they order. It just kind of want to get sense of.

I know you are not appropriate thing or price, but how youre kind of thinking about those two dynamics.

Well, we've got we're reconfiguring the website to make the customer experience.

More seamless more straightforward, we're sharing the costs that we have currently available.

That can.

Can can be spent on that web sites and of course, we are building to order. We've recently introduced the <unk> Luke.

Lucid.

Thats.

We will continue very different audiences are very different with volume and more youthful appearance to that call.

Yes.

It's a very handsome manifestation of the range. So we're doing all those things we've got.

Increasing volumes of Turing.

Turing in studio experience and test drawings are undergoing and of course, we're bringing more and more affordable versions of pure the pure coming out and.

Later this year, we will be bringing the rear wheel drive variance of the pure <unk> remember that's a low the many people believe that elusive as a $200000.

It actually starts at $87200, we need to.

Really dispel myths.

Thank you.

Please standby for our next question.

Our next question comes from the line of John Murphy with Bank of America. Your line is open.

Hi, good afternoon guys.

Peter in your in your comments.

It sounded like you were.

Youre alluding to potentially licensing or selling the powertrain technology and it sounded like that was actually.

Pretty far along potentially with some customers I'm just curious if you can comment on that or give us any.

Other color as to what those comments meant.

John I'm not in a position to disclose anything tangible at this juncture.

As I said on the.

Earlier, but we continue to receive incoming interest and I think I think theres a growing awareness that we have something very very special here in terms of performance and efficiency and if you can have something more efficient you can be less batteries.

So you're building with <unk>.

Free weights and this makes the car really more agile and more sports you more of a drawing the focused experience.

Technology, we have today.

Is eminently suitable for higher performance vehicles with our drive units of 600 to 670 horsepower capability. When we develop low power units more affordable units for mid sized platform in a few years' time.

Does that technology would be.

More appropriate for more mainstream manufacturers, we've new laws.

Actively going out to seek any engagement in this arena, but we've had multiple Oems come speak to us and we are in dialogue with central link now.

Thats all I really can disclose at this juncture.

Okay, and then maybe just two quick financial questions for you the $411 million of finished finished goods inventory would indicators almost 4000.

Units.

In stock is that about writers or something else in that finished goods inventory that would.

We consider that wouldn't be a complete vehicle.

It is a little bit misleading. So I'm glad you asked the question John .

The finished goods inventory has the inventory that is available for sale, but it also includes our test fleet.

Vehicles loaner vehicles that we have in order to give optimal customer care experiences for the end customer showroom cars as well. These are vehicles that ultimately after a few thousand miles on them or perhaps no miles on them in the case of showroom cars their media cars that we will ultimately sell but they're not available for sale today.

So it's important to differentiate between available for sale today and finished good inventory that is being used for other customer facing purposes.

And then just the other financial question I mean.

A lot going on right now so I haven't had a chance to completely go through that is three but it sure looks like.

A mixed shelf I mean is there the availability for you to raise material amounts of capital under that shelf thats been filed or I'm, sorry, once again I haven't gone through the details here, but it looks at first blush like Theres a lot of room for you to to raise capital.

Well again this is not a new issuance.

Really just.

<unk> obligation that was associated with the subscription agreement that we did with the Pis back in December of 2022.

Okay.

Great. Thank you very much guys.

Okay. Thank you John .

Thank you.

Please standby for our next question.

Our next question comes from the line of Andrew Shepherd with Cantor Fitzgerald. Your line is open.

Hi, good afternoon, everyone. Congrats on the quarter and thanks for taking our questions.

Peter I wanted to perhaps follow up from the one of the last questions in terms of the licensing I realize you're not providing additional color on that Steve maybe you can ask the question.

Slightly differently given the slight reduction in the production guidance for this year in gross margins where they are.

I guess what is the reluctance to to introduce this is a new revenue stream you have the proof of concept with the Formula E series.

Continue to talk about the technology.

Our superior it is relative to competitors. So I'm just trying to understand why not introduce this sooner rather than later thank you.

There's no reluctance on our part we're very open and engaged.

We have a we have to prioritize here last year my laser focus.

Was working crazy hours in the factory, that's what I was doing crazy hours to resolve logistics and supply chain issues.

<unk> laser focus right now is amplifying for brand awareness and creating a cohesive strategy with Andrea to market. This brand and make many more people are aware that we've got the best on the planet.

Our second roadmap I believe is extraordinary.

We will be launching progressively more affordable versions of our tech, which would be approved for different.

He has a different cost structure of the markets.

So.

There is nothing tangible to announce right now we are in dialogue with.

Third policies.

Well.

I will make an appropriate announcement should.

Bear fruit, but theres no reluctance on our part we're open and receptive, but I really have to focus on our products right now relevant proactively chasing licensing.

Got it okay understood. Thanks, Peter and maybe as a quick follow up.

Was wondering if you could perhaps just give us any color on the deliveries starting to to Saudi Arabia as part of the major agreements. There was a brief comment there from sharing the and sorry, if I missed it just wondering if maybe you can.

Hybrid a bit further.

Sure.

Just in terms of how you see those progressing yeah. Thanks, Yeah. So I think youre, referring to the Ministry of Finance agreement that we have.

In which they have committed up to 50000, maybe up to a total with the option for another 50000 up to a total of 100000 units over the next 10 years. We are progressing our conversations we are active dialogues we are in the process of building out.

For the first vehicles that they want to receive later this year. So that is actively ongoing.

Okay. Thanks, guys. Congrats again I'll pass it on thank you.

Thank you. Thank you.

Thank you please standby for our next question.

Okay.

Our next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Hi, good afternoon, two questions if I could.

Of all the change in guidance in terms of going from 10% to 14000.

10000, how.

How much of that would you say is related to just some concerns on the macro or your ability to build brand versus just factory production issues. Any details you can provide on that I know they had a follow up.

Yes, I think it's important as we take a very responsible perspectives of this that we match the cars that we build the production volumes.

The costs that we deliver.

And that's the balancing act.

Certainly we believe.

The macroeconomics are playing a pause in.

The deliveries right now we also believe that.

The interest rates play a part even for high end products, even in this part of the market interest rates too.

Provider.

Headwind.

We've got initiatives within the company consumed the sausage some to up to the end use shouldnt those are market conditions improve and we are ready to scale up pending that.

Also as we amplify brand awareness and also I come back to this misconception, which.

It seems to be some.

Yes people believe it is a $200000 account thanks to the entry level price is $87400. It appropriately conceivable that people think of it as a 200000 telecom because it is so amazing, but actually it's much more attainable and we need to spread that word is alone.

Great. That's helpful. And then just in terms of you mentioned maybe.

Bringing phase two online in stages can you just talk to sort of the triggering point for that and whether I don't know, whether if you focus on certain stages. Besides just the capex efficiencies that helps.

Any other ways.

In terms of how you how the vehicle production goes from a cost standpoint, and your ability to react to changes in demand. Thank you.

Yeah, Yeah, no I think it's an important question. So we're in the process of.

Adding significant I think $2 85 million additional square feet in Arizona, Casa Grande facility, if and it's a number of our shops are being either expanded or new building.

And what we're finding is that as we look at our production plan that we have the ability to continue to eke out a bit more volume out of some of our existing machinery tooling equipment and the existing shop for a bit longer which would allow us to take certain of the shops.

Campaign, perhaps pain and potentially delay the onboarding of those hence you will delay the depreciation expense that accompanies that particular machinery tooling equipment and facility to a little bit longer. The other thing. We're doing is we are really carefully looking at all of the equipment.

Going in each of these shops and to the extent that there is volume equipment that could potentially be delayed like the addition of additional <unk>.

Robots for instance, we're looking to put those in place and activate those as they're needed first is doing it all at one time. The other thing that's really unique about what we're doing in the General Assembly Hall is that we're going to have the ability to dial up the jobs per hour between a few different job.

Points, so it's not a unit step in.

The increase in direct labor and bringing on the equipment, but instead, we will have the ability to dial that up gradually and broker network to be really thoughtful about that so we can minimize depreciation expense and also the amount.

Just efficiency of the workforce as well.

Great. That's all very helpful. I appreciate the answers thank you.

Thank you please standby for our next question.

Our next.

And comes from the line of Doug <unk> with Evercore. Your line is open.

Thank you hi, Peter sharing team so looking at Asps. They were about 106000 per vehicle this quarter.

These are implied some heavy discounting below MSRP or a lot of the future trend could you maybe speak a little more to that and how we can think about that going forward.

So I think that when you think about the mix as it starts to defer from 2020, Q youre starting to have more dominance and trends other than Grand touring and Dream right. Now you start having more prevalence of Turing, we're starting to get curious in there, but as you go forward through the balance of this year.

Sure there is going to continue to be healthy mix because some of the higher trim levels are going to start going in or going to the middle East and Europe , and so youre going to start to see the.

Closure of those products with higher end products in those regions. While you simultaneously start to ramp here in the U S. And then later said that overseas as you're exiting the year and into 2024, so youre going to continue to see this mix of trends. We did have a 70 510.

<unk> program.

Laughter. The first couple of months of the year couple of few months of the year and that also is reflected in the revenue numbers that UGC.

Okay, and it's safe to say that $7500 continuation program will come off going forward throughout 'twenty three.

It did come off yes, yes.

Yes, Okay and then just one quick modeling question for you Sherry on the LC and RV cadence is there any sort of guide on how we might see those charges hit in the remainder of this year and the next just so that we can lay it out cleanly in the model and understand how those might affect the bottom line.

Yeah, no. It's a great question, the LC and RV charges have been really China and between $180 million 200 ish million to $20 million. The last three quarters that we've kind of seen it basically leveling off we do expect to see an improvement of that over.

Time, because part of the charge is associated with the inventory we have on hand, given my comments that we're looking to reduce the days outstanding and inventory on hand did not bringing fresh inventory in in terms of raw material, which and also work in process finished goods.

We would expect that to start to taper down so as youre looking forward. This year, we are expecting some reduction in that over time. The other thing that we have had in some impairments there.

We had mentioned some obsolescence we had mentioned some scrap I had mentioned the fact that we have some different activities ongoing to really address that in a more proactive way.

Partly us improving our systems is partly if not having to hold as much inventory on a precautionary basis, because we're not experiencing the same supply chain issues and the same COVID-19 issues that we had in the past so bringing down that inventory, making sure. It's more current inventory will also improve the situation throughout the year.

<unk>.

Understood. Thank you for the detail and detailed answer.

Of course, thank you.

Please standby for our next question.

Okay.

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

Hi, Thanks for taking my question.

If we exclude the noncash inventory write down charge your Cogs per unit only improved by about 8% versus the fourth quarter 2022, which likely reflects the rotation towards lower content pure and <unk>, but also some of it.

Discounts that you just mentioned are you able to provide some data points for analysts and investors on the work that's being done internally to remove costs from the vehicle.

Yeah, absolutely I've mentioned, a few of them in my prepared remarks.

Let me provide some additional context.

Some of the work that's being done is on bill of material cost down now they have two different flavors. One part is commercial agreements that we have with our suppliers and in improving piece price cost some of that happens.

You are negotiating additional.

Volume with them on new programs, they become more open to negotiating down piece price on current programs. So that part of the effect. The other factors. When we are doing engineering changes that have a corresponding cost increase as well. So bom cost is certainly something that we are expecting to see throughout the year.

Now you have to remember when you've got inventory on hand, and you are bringing new lower cost parts and you got to go through that inventory. One that's why I guided earlier that youre going to start to see the impact if that more towards the end of the year and also as you get into 2024, because some of these items, we now will actually take effect in 2024.

Some of the other areas, where we've been seeing some really good progress has been in freight and that will start to show up more in Q2 and Q3.

We've renegotiated some of our contracts there and also we're seeing improvements in manufacturing overhead as well and then as a result of the workforce reduction.

There is improvement that youre going to start seeing more of it is going to be in cost of revenues and an opex you're going to start seeing that in Q2. So these are different cost down initiatives that will start flowing through the gross margin and then of course, we talked about greenhouse gas credits the inflation reduction Act.

Some of those things and the <unk>.

<unk> that we have those will start hitting a little bit later in the year is our expectation.

Okay cool thank you.

My second question is that.

The looser that began production roughly one year after beta prototyping test.

<unk> began.

Clearly COVID-19 impacted some of it to start production timeline.

But shouldnt analysts and investors use the same timelines conclude that the gravity SUV begins production in nine to 12 months from now given your announcement. This nameplate has just begun road testing.

Okay.

I can say is that.

We've got to get the prototypes <unk> there is.

Gestation period between.

Sure.

Data.

Production.

In a moment future issues here, we are on target to start production late 2004 through the <unk>.

<unk>.

Okay.

Perhaps maybe you.

You outline exactly what needs to happen.

Between now and the start of production, maybe so that we could trucking in real time.

When you expect the vehicle.

Smaller gates, it et cetera, et cetera, yes, homely obligation comes relatively light because of that to be conducted to process and tooling represented.

Levels of authenticity for that represent production so right now.

On road testing.

Base vehicles for the core attributes structural.

Structural integrity C drive ability suspension tuning, we starting on some of the developments.

The traction controlled antilock braking systems.

Attributes.

Then we will move to a size of interior development.

Representative interiors at this stage later this year will move basis with.

Representative into areas, where we can do all of that development than the long lead tooling items.

Are being kicked off because some of the parts take over a year to two and then we will go through a preproduction run through.

Next spring.

Culminating in production late 2024.

On track.

And I believe it will be a seasonal a seminal product.

Gravity is on track, it's the big one is going to be a landmark seven seats.

Three row supercritical Super High performance extraordinary range <unk> Xu extraordinary performance attributes.

Great. This has been super helpful. Thank you I'll pass the line.

Thank you.

Please standby for our next question.

Our next question comes from the line of Ron two cycle with Guggenheim. Your line is open.

Sure.

Good evening.

Thanks for taking my questions.

Peter just wanted to get your thoughts on kind of competitive dynamics in the market right now from our vantage point it feels like.

While you are pretty challenging market for for luxury electric vehicles, but.

I wanted to get your view on the price cuts from.

Your one of your large domestic competitors.

Their luxury vehicles is having any impact on <unk>.

Demand for lucid vehicles.

Well I think what you're referring to is perhaps the different parts of the markets.

Please.

The reasonable through the challenge to the entire market right now because of macroeconomics and because of interest rates, which actually do affect this place for marketers.

We are seeing.

A key competitors from Germany.

Discounting their products very heavily.

It's not just the.

The U S manufacturer that you may be you may be referencing the Germans are heavily discounting their vehicles.

And I think there is challenges right across the marketplace I think what we need to do is just amplify awareness.

Yes.

Piling product is we've gotten better range better into their comfort we've got more legroom refers to challenging we're more efficient through high technology.

Fundamentally superior growing user engagement experience I was taking some.

Potential customers protest trying just yesterday and they were just blown away by the rule.

And riding experience and we just need to get more people behind the wheel. That's what this is about we don't have a 100 year heritage of history, we don't have an existing customer base, we need to win new and because new customers.

Yeah.

That's super helpful and it's good to hear Youre out in the field kind of promoting the product.

Firstly, most weekends announce meeting customers.

And the grass roots evangelism is growing and this doesn't happen overnight. This will take some time, we are planting a combs for for us to to come in the future.

Make no mistake.

It makes perfect sense I guess, you gave the data point around test drives and the number of cities you're going to for the Dream ahead tours. There is there anything you can commentary you can provide on.

Kind of the cadence for order trends.

Started or.

It's too early.

It's too early to do that and the assembly for instance disposal.

It's very dangerous, but what I would say is this that we've more than doubled the number of test runs in the last quarter and I believe that very few people, who would buy a car without test drawing, meaning I see that as a key stepping stone a key conduit is a very relevant metric and that is the process.

Spend towards.

Purchasing ownership and then what we see is that.

Salespeople with those are our customers.

Become advocates and some of them even evangelize for us.

There's something very genuine about that.

Yes. These test rates also gave us personal touch points in order to enter into dialogue with the customers better understanding their needs and then also I would say that as we've set up the lucid financial services business in the U S and in growing that overseas. That's another touch point, where we can gain intelligence on what the customer needs the <unk>.

Reising that theyre looking for the interest rates that theyre looking for in all of these are going to be data points that we can use to refine offerings that are going to best meet meet the customer needs.

Streamlining the whole customer experience, making the wind side much more intelligible more intuitive user friendly screen laundering streamlining the ordering process.

Online.

That's super helpful and just last quick question for me kind of gravity.

Any learnings from the.

The air launch process over the last 12 to 18 months that will help inform.

The gravity launch call it 12 months from now.

Yes of course, I mean, we want to we want to continuously improve and there is a continuous improvement in learning process, which we take very seriously. The teams here the engineering team and gravity works very closely with production theme resuming full process design for manufacture and.

This is a this is a really collaborative teams for which we take very seriously I really believe gravity is going to be a seminal product.

Adam is going to be anything else.

Even close is taken.

All technology that we develop today and more that we're going to throw this because the problem with Suvs is getting range without among Julie large battery, which become super heavy and then you lose payload capacity.

So this is this is a multi dimensional hugely.

Nickel challenge and it's only now I believe that were ready to really give it up is short gravity is going to be huge for us I'm very excited about it.

That's very helpful color.

Peter Sherry.

Ill hop back in the queue.

Thank you.

Ladies and gentlemen, due to the interest of time I would now like to turn the call back to <unk> for closing remarks.

This concludes <unk> first quarter 2023 earnings conference call. Thank you all for joining US today and you may now disconnect.