Lucid Group, Inc.

Hello, and thank you for standing by. Welcome to LUCIP's fourth quarter 2023 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, and instructions will follow then. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Maynard Um, Senior Director of Investor Relations. You may begin.

Thank you, and welcome to Lucid Group's fourth quarter 2023 earnings call. Joining me today are Peter Rawlinson, our CEO and CTO, and Gagan Dhingra, our interim CFO and principal accounting officer. Before handing the call over to Peter, let me remind you that some of the statements on this call include forward-looking statements under federal securities laws. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, financial and operating outlook and guidance, macroeconomic and industry trends, company initiatives, and other future events. These statements are based on predictions and expectations as of today, and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors 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.lucidmotors.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 our investor deck. With that, I'd like to turn the call over to Lucid's CEO and CTO, Peter Rawlinson. Peter, please go ahead. Thank you, Maynard.

And thank you, everyone, for joining us for our fourth quarter earnings call. During the first three years of production of Lucid Air, we garnered significant industry accolades, including Car and Driver 10 Best List for 2024, the 2023 World Luxury Car of the Year, and the 2022 Motor Trend Car of the Year. I can't think of any other company that has gotten this far this fast. Our superior technology, design, and performance has repeatedly been recognized. We proved our technology prowess with Lucid Air, and not only did we pioneer the concept of efficient range through our technology, we also grew our lead. With 4.74 miles of range per kilowatt hour for the air pure rear wheel drive, the technology gap between Lucid and others is growing, not shrinking. We also launched the Lucid Air Sapphire, the first super sport EV sedan as a halo product to showcase the potency of our technology. Not just the most powerful production sedan ever, It has also been recognized as a great all-round driving car with exceptional handling and driving dynamics. Its exceptional 427 miles of EPA estimated range and fast charging truly completes the package. And now we're embarking upon our next and most transformational phase of our development with expansion of our vehicle lineup. The expansion of Lucid's total addressable market starts right now with the air-pure rear-wheel drive, grows with Gravity, and broadens with the forthcoming midsize platform. We unveiled the Lucid Gravity at the LA Auto Show in November to tremendous early reviews. I'm confident that the Lucid Gravity will redefine the electric SUV segment with incredible range, superior efficiency, fast charging speed, and interior space that you have to see to believe. It will be unlike anything in its class, and it will be massive for Lucid. And for those who might be in Geneva, Switzerland next week, we welcome you to come and see us at the Geneva International Motor Show, where we will introduce the Gravity to the European market. Now, turning to sales and marketing. In 2023, we increased our brand awareness. And of greater significance, our awareness among EV purchasing tenders increased substantially from the beginning of the year. And this gives us confidence that our sales and marketing initiatives are making solid progress. And we'll continue to take a science-based, data-driven, analytical approach to our marketing. but are also adding new initiatives. For example, our recent SACS Fifth Avenue partnership will allow us to leverage SACS luxury brand and ecosystem to generate awareness, leads, and sales. Select locations will have test drive vehicles further expanding our reach in locations which are not currently present with a studio. Of particular significance, has been our recent Air Pure Stealth initiative, launched just last week. We have now realized the starting price point for the Lucid Air range of $69,900. Yes, that's right. The finest production EV in the world now starts at under $70,000. This effectively extends the scope of the Lucid Air range into a new total addressable market segment. In fact, we're already seeing extremely promising results from this. Moreover, this is commensurate with our long-term strategy to make progressively more affordable vehicles. This remarkable value proposition has in large part been made possible by our world-leading technology. Because our tech enables our cars to go further with less batteries, the air-pure rear-wheel drive is able to achieve an EPA-estimated range of 419 miles, itself further than the competition. But more significantly, it achieves this with a battery pack size of just 88 kilowatt hours. And since the cost of an EV is dominated by the cost of the battery pack, this technical advantage translates directly to a profound commercial advantage. Now, I believe it's important that the full impact of this is fully comprehended. The EPA testing procedure has recently been revised, and it's become more stringent. So air-pure rear-wheel drive is able to achieve a landmark 4.74 miles of range per kilowatt hour of battery capacity, and that's with the new EPA ratings. So whilst we're currently witnessing other EV brands registering reductions in their respective range ratings, Lucid is forging ahead, growing and building upon our technology advantage, and with it, I believe, our future commercial advantage. But I want to be clear, I'm also critically focused upon cost. It's not well understood that we designed and developed our technology for true mass manufacturability at scale. And we have more coming. We have significant advancements that I believe can drive costs down further. Technology is not only about creating incredible products. It's also about innovation to improve costs. And I've never been more pumped about what's coming. What's yet to come from our technology roadmap, we're resolutely focused upon cost while continuing to prudently invest for the future. Through 2023, we dramatically expanded our advanced manufacturing plant in Arizona, which we call AMP1. And that was in preparation for gravity. We built a state of the art general assembly line that is capable of assembling both gravity and air on the same line. And we'll continue to vertically integrate where it makes the most sense in areas of stamping, body and light for gravity, a paint shop expansion, and the new powertrain facility at AMP1. We built the first ever car manufacturing plant in Saudi Arabia for semi-knockdown kits, and more recently this year, We also broke ground for the manufacturing of the completely built up cars there. These are critical long term investments that are reflected in our cost of goods sold. Now the imagery in our earnings presentation I hope gives you some sense of the scope and scale of what we're doing. When you sit in person and walk the different shops in the factory, you truly start to understand how we're building a state-of-the-art factory for the future. In fact, in January of this year, we had more than 100 guests representing over 60 strategic suppliers for gravity, air, and for potentially mid-size come to our factory. The feedback and support from our suppliers was extraordinary. They highlighted our best-in-class and advanced technology and continued investment in our production facilities, which provide a material signal of our long-term commitment. My key message to them was one of growth, the critical need for obsessed partners focused upon excellence and the importance of driving this journey together. So I want to express my heartfelt gratitude to all of them. Now, on the R&D side, we continue to invest for future supremacy. And I'm incredibly excited about our roadmap, both from an innovation and from a cost perspective. Now, in 2023, we also raised $3 billion, including unparalleled support of $1.8 billion in equity funding from our largest shareholder, the PIF. Now, Gagan will talk about liquidity in further detail. We formed our technology licensing and access business through our first such deal with Aston Martin, and we're actively exploring additional and even broader technology and supply agreements. We also have sales to a rental car company And we're very pleased with early results. Lucy's range and efficiency are perfectly suited for fleets. And in fact, we saw new incremental orders from that rental car company due to demand. Of course, we haven't yet scaled this business. We're taking a methodical approach which is prudent, and we're pleased with what we're seeing thus far. This is yet another tool to help grow our brand awareness and allow potential customers experience the car. 2023 was also a year where we made significant progress with our in-house software capabilities. Software is more than just the user interface. We have some of the best software engineers in the world working on everything from user interface to new features, to power train, to infrastructure. In fact, we developed and have been transitioning to our own in-house over-the-air software infrastructure. This not only helps our OTA functionality, but it's also a source of cost savings. Now, building an OTA software-as-a-service platform is no small feat, one that I believe most other car companies would simply not be able to do. And it's another example of technology aiding cost. And of course, this is a platform that we could potentially monetize in the future. Now, I want to be transparent as well. We also had some challenges. Firstly, the macroeconomic and higher interest rate environment impacted many in this market. And in new markets to us, there's been some learning. For example, in Saudi Arabia, we learned that there are different market dynamics and intricacies unique to that market. And so we have to scale that business differently for growth. But we've addressed the pain points. We're scaling up and expect good growth in the region this year. Now, we've also faced some technical challenges with commencing production of the rear-wheel drive pure in the fourth quarter. This is normal when doing something so advanced and so efficient. As I said, a landmark achievement with a 4.74 miles of range per kilowatt hour. This is our most accessible car, and we had challenges ramping it up. But I'm delighted to say that we've now overcome these challenges and are now fully ramped in pure production. So as we start 2024, I'm very excited about the year ahead and beyond. we made focus improvements to further enhance our customer journey. For example, the Lucid Financial Services team has been working to enhance and to simplify the customer financing experience, significantly reducing the customer cycle time to finance vehicles. And we're also in the midst of implementing a new technology platform, Combined with a rollout of our accelerated delivery pilots, we were able to significantly improve the cycle times from order to delivery, improve customer satisfaction, and in some cases, increase orders. In one instance, we were able to get a customer through their purchase journey from the time they placed the order to the time they completed delivery walkouts in only just about three hours. Now, this new process has been live for select markets since Q4 and for new loans and is expected to go live for all lease and other loan markets by the end of Q1 of this year. You'll see us roll these out to more locations throughout 2024. So our total addressable market triples by doing what we always have intended to do, making the air progressively more affordable and now starting at under $70,000. A technical achievement in getting an 88-kilowatt-hour battery pack in the Pure allows us to cut out battery costs but still provide an EPA-estimated range of 419 miles, even based upon the new and more stringent EPA testing. And Gravity will further expand our total addressable market from 2023 by more than six times. The Gravity is scheduled for starter production late this year, and numerous prototypes are already driving around. In fact, we just built more than 40 prototypes to date. You just have to see to believe it. The interior space and the sheer practicality is what every family has been craving, made only possible by our technology and design. And I'm exceptionally encouraged by the early feedback and interest. We saw more than a four-fold increase in daily gravity interest sign-ups following the LA Auto Show unveil. And starter production for our more affordable, high-volume, mid-size car is scheduled for late 2026. will continue to push the boundaries of what's possible with the midsize platform and the next gen powertrain technology. And this will expand our market opportunity from 2023 to nearly 20 times. As I mentioned earlier, we'll continue to invest in our future with further vertical integration, with stamping, with body and light for gravity, with paint shop expansion and powertrain at AMP1, an important part of our longer-term cost and quality strategy. I want also to touch on the broader market landscape and what seems to be a shifting emphasis from EVs. We have the utmost confidence in the future growth of the EV market. Environmental sustainability, energy storage improvements, regulatory forces, and sheer performance superiority over internal combustion engine vehicles will drive the eventual march to an EV-dominated automotive market. Emission standards are getting more stringent, and you've heard me say this many times, this truly is a technology race. But Doing world-leading EV technology isn't easy, and not everyone can do it. And I believe that is becoming better understood now. As others are pulling back on EVs, we are here ready to help. We've talked about our willingness to work with other OEMs, and we've signed our first technology access deal with Aston Martin. And we continue to receive incremental interest from larger OEMs and others in the automotive space, as well as in adjacent markets for our advanced technology. In the automotive vertical, this is not only for electric vehicles, but we are also seeing interest in our technology for use in hybrid electric vehicles. There's nothing to announce yet today in terms of a deal, but we're really encouraged by the level of interest. And we're open to it because we think it's critically important for the planet. Sustainability is at the core of who we are. It's ingrained in our purpose and our products. And we are a technology innovation company. EVs are just the start. But we also believe in the importance of accountability and transparency, which is why I'm so proud to say that we published our very first sustainability report just last week. We have more to come in 2024 with the expansion of our total addressable market opportunity with AirPure and Gravity, further software enhancements and significant announcements, the opening of Gravity orders, the start of Gravity test drives, and of course, start of production of Gravity later this year. Now, we've come a long way and we're here to do much more. We are here to stay. We have a clear and determined strategy for growth while having a laser focus upon costs. So I'd like to close by saying thank you to our suppliers, to our partners, and to our most important asset, our employees. We've overcome significant challenges, and I can't think of any other people I would rather be with on this journey than the people here at Lucid. You are the core of our successes. And we are embarking upon our next transformational phase of the Lucid story, and so I've never been more excited about the future. And with that, I'd like to introduce Gagan Dhingra, who has stepped into the role of our interim CFO. Gagan, please provide an update on our financials.