Lucid Group, Inc.

Good day and welcome to Lucid Group's second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Nick Twork, Chief Communications Officer. Please go ahead.

Thank you and welcome. Joining me today are Silvio Napoli, our CEO, and Taoufiq Boussaid, our CFO. Before handing the call over to Silvio, 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, Vehicles and Products, Studios and Service Networks, Financial and Operating Outlook, Timeline and Guidance, Liquidity Position, Capital Expenditures, Macroeconomic, Geopolitical, Policy and Industry Trends, Tariffs and Trade Policy, Company Initiatives and Plans, Leadership Changes, and Other Future Events. These statements are based on various assumptions, why they are not identified in this communication, and on the predictions and expectations of our management as of today. Actual events or results are difficult or impossible to predict and may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our annual report on Form 10-K for the year ended December 31, 2025, subsequent quarterly reports on Form 10-Q, Current reports on Form 8K and other SEC filings and the forward-looking statements on page 2 of our quarterly earnings presentation available on the Investor Relations section of our website at ir.lucidmotors.com. We undertake no obligation to revise or update publicly any forward-looking statement for any reason except as required by law. In addition, management will make references to non-GAMP financial measures during this call. Thank you, Nick.

Good afternoon everyone and thank you for joining us from my first quarterly results as Lucid's CEO. As promised, today I'll share my initial assessment, our mid-term priorities, and the actions already underway. In my first two months as CEO with the company, I spend much of my time with the people who do the work, in our factories, studios, My approach is simple. Listen first, understand what is happening on the ground, and act with urgency. Over more than 30 years, I have led complex, technology-driven manufacturing and service businesses through many of the same fundamental challenges Lucid faces today. That experience is directly relevant to the work ahead and is one of the reasons I came to Lucid. And what I've seen so far gives me confidence in Lucid's inherent value and potential. We have leading technology, compelling award-winning products, and deeply committed people. But potential is not performance, and effort is not the same as results. Now, before discussing our priorities, I want to be very direct about our situation. I came to Lucid with a mandate from the board to do what is necessary to fix the business. My acceptance of this exciting challenge is based on the clear understanding that financial support is needed to provide the runway to make the company profitable and successful. Together with the Board, we are confident in our resolve, and that confidence is supported by the financial and operational measures that I will discuss today, which we expect will provide sufficient liquidity runway well into 2027. But let me be direct. The way we operate has to change. While there is no question that Lucid brought leading innovations and outstanding products to the market, We have disappointed on several fronts, and for far too long. We have not executed consistently, we missed commitments, launched products before they were ready, underinvested in service, responded too slowly to quality issues, and allowed complexity to slow decisions down. Accountability has too often been diffused rather than clearly owned, and we have not operated as one team. The concept went as clear. We have strained trust. Trust with our customers, trust with our employees, trust with our suppliers, and ultimately, trust with you, our investors. And I'm here because I'm convinced we can rebuild this trust. We will fix the business because the underlying causes are operational and largely within our control. But to get there, we must go back to basics. All our work must be focused on three fundamentals and four must-win deliverables. We define the three fundamentals as our three Cs, cash and cost, customer and quality, and culture and tea. The four must-win projects are, first, our plan to deliver 1.4 billion of cash flow improvement by year-end, Second, the Uberneuro Robotaxi project. Third, the completion of our AM2 factory in Saudi Arabia. And fourth, our mid-size platform. Let me first provide some color on the three Cs, starting with cash and cost. During my first month as CEO, we reduced our US forfeits by one fifth and eliminated the second shift at the Arizona factory. These two measures combined generated $158 million in projected annualized savings. The decision to separate ourselves from hard-working team members was not taken lightly. And in fact, I would like to take this opportunity to thank them again for their contribution to make Lucid what it is today. But that decision was necessary, and it was only the first step in our cost reduction effort. We need to be direct about the scale of the challenge. Lucid continues to consume a significant amount of cash each quarter as we invest simultaneously in a manufacturing footprint, vehicle production, and future programs. That level of cash burn is not sustainable and bringing it down is an immediate priority. We are therefore reviewing every major cost, each individual investment, and every single program across the company. Our objective is to reduce cash burn with urgency while protecting the initiatives that are most critical to Lucy's long-term value. We've already identified approximately 1.4 billion of cash for improvement in 2026 across operating costs, capital spending, and working capital. We deliberately reduced production by eliminating a second shift because building vehicles faster than we could deliver them was consuming cash and increasing inventory. Today, our priority is to convert inventory into deliveries and cash, aligning production with demand to improve working capital. We will continue to selectively use incentive programs, but we will not buy volume at the expense of cash or vehicle economics. Here, I also want to address the speculation surrounding our work with AlixPartners. Their engagement has been focused solely on supporting our cost savings plan and streamlining our operations. We will be wrapping up their assignment once that work is complete, which we expect at the end of this month. Moving on to the second C, customer and quality. Frankly, this is not optional, but a must for every business, including ours. Let's be honest, we have exceptional vehicles, but the ownership experience has to often come short of the promise of the product. That's why we created the Chief Customer Officer position and hired Billy Hayes, a highly respected automotive industry leader with a unique understanding of the customer experience in our sector. With them, we're assigning clear ownership to each major customer pain point and creating a closed loop from customer feedback to corrective action. We're making significant investments in service. By the end of the year, we plan to increase the number of technicians and dedicated staff supporting our customers by 35% and mobile service capacity by more than 20%. Together with improvements in parts availability, service operations, and capacity, we expect these actions to reduce wait times by more than 30%. Our objective is to make the full experience of buying and owning a Lucid match the strength of the vehicle. We will continue to invest in innovation and bring outstanding products to the market, but only after passing rigorous quality gates. We created a chief technology officer position and hired Raja Macha, a proven technology leader and accomplished scientist with extensive industrial experience, including the automotive sector, to take our innovation to the next level and enable the quality our customers expect. Even prior to Raja's joining, we knew that software was a common root cause for customer dissatisfaction. To address this pain point, we immediately deploy measures to strengthen our software rollout process. And we are already seeing progress. During the quarter, software quality improved across gravity and air, with work focused on infotainment stability, access control, and OTA reliability. We strengthened our validation and release processes, reduced software-related customer issues, and established more rigorous quality disciplines. At the same time, we continue to bring innovations to the market. Our latest software release, Gravity UX 3.6, added hand-free drive assist in combination with other customer features and stability improvements. And I'm excited to share that in a few days, at Monterey Car Week, we will unveil a new, sportier version of the Lucy Gravity. Coming to the third overseas, Culture and talent. Without the right team and the right culture, no plan can succeed. That's why culture and team must be one of our top priorities. Last July 2nd, in my second month on the job, we introduced a new simplified organizational structure which halved the number of direct CEO reports. To enforce accountability and foster transparency, we introduced a true C-suite to lead the company. To accelerate decision-making, we are greatly reducing the number of committees except for legally mandatory ones. In just a few weeks, we began a major transformation of Lucid as a company and as a team. To keep the momentum going, we created a Chief Transformation Officer role and appointed Hugo Martinho, a proven leader with deep expertise in driving organizational change across global businesses. We will establish the Lucid Business Process function led by Hugo to enforce process discipline across everything we do. Lucid needs leaders who are fully present and working side by side with their teams. That is why we asked a new leadership team to work in person from one of our main locations close to our customers and teams in manufacturing, supply chain, and engineering. My expectation is straightforward. Tough medicine first, clear ownership, fast action, and unity of effort. The people closest to the work will diagnose the problems and design solutions. Leadership sets priorities, removes obstacles, and holds individuals accountable, starting with me and our executive team. Alongside this fundamental reset, we identified four must-win deliverables that will shape Lucid's future. I've already addressed the first one, a spending reduction plan which delivers approximately $1.4 billion in cash for improvement in 2026. The second one is a Robotaxi project with Uber and Euro, a top priority and indeed a must-win project for Lucid. Lucid's capabilities are recognized not only through independent awards for our products, but also through partners choosing a platform for their own strategic platforms. The work between Uber, Nuro and Lucid is one example and demonstrates the potential of our technology beyond privately owned vehicles. Brand recognition and committed sales aside, this project applies our technology in a new, fast-growing sector. Independent estimates project that 2.5 million robotaxis will be operating globally in 2035. That is, less than 10 years from now. And the total addressable market for Robotaxi vehicles will grow to $600 billion by 2040. Given Lucid's differentiated technology, the Robotaxi ecosystem also creates opportunities beyond vehicle sales, including recurring software, services, and mobility revenue. Over time, Lucid has the potential to participate across a broader share of the Robotaxi value chain, which some industry estimates value at approximately $1 trillion. These exponential growth prospects are not the only feature that makes the Robotaxi market so attractive. Equally compelling, if not more so, is the profit potential. We project the margins vastly exceeding those of the traditional retail model. As a native software-defined vehicle company, Lucid is ideally positioned to capture a large share of this rapidly emerging market. Lucid's technology platform, combined with our vehicle space, efficiency, and lower operating costs, provides a clear advantage over legacy carmakers. The success of the UberNeuro project will demonstrate the value of our platform at scale. Our program is deep into the testing and validation phase with an active engineering fleet of nearly 100 vehicles across the San Francisco Bay Area and Houston. Last month, we began delivering to Uber and Neuro production validation vehicles assembled at a facility in Coolidge, Arizona. This will be followed by regular vehicle production in Q4, which in turn will be followed by a launch in late 2026. While we progress towards this milestone, the Robotaxi industry is at a pivotal juncture. And Lucid is resolved to fully capture this historic opportunity. That's why we're creating Lucid Technologies, a new business unit with its leader, Kai Stepper, reporting directly to me and driving our efforts in robotaxis and other high-potential technology opportunities. Lucid Technologies brings together AI, ADAS, and a broader digital functions under one single structure to improve resource and capital allocation. Kai previously led our ADAS and autonomy organization, and now serves as President of Lucid Technologies and Chief Digital Officer. With more than 25 years of experience spanning autonomous driving, advanced vehicle technologies, product development and strategic partnerships, CAI is ideally positioned to help Lucid capitalize on this emerging opportunity. Moving on to our third must-win project, AMP2. M2, our new factory in Saudi Arabia, is steadily transitioning from construction to industrialization. Last April, in my second week with Lucid, I traveled to Jeddah to see the factory firsthand and get a sense of construction progress and factory readiness. And I was impressed by the progress achieved despite the geopolitical situation. All buildings are functional and manufacturing systems installation and equipment testing is happening across stamping, body, paint and final assembly in preparation for production trials. These pictures also attest to the heroic effort by the Lucy team and our supportive Saudi government partners who continue to work to meet the project milestones. I am due to return to the Kingdom this month and I look forward to seeing the continued progress over there. It is important to clarify that there are two distinct components to a readiness plan. The first is the factory itself, which is within our control. Based on the work underway today, we expect AM2 to be ready for production in early 2027 and ready to run mid-size production in the second half of the year. The second component is the surrounding supplier base and supporting infrastructure required to enable a sustained production ramp. We are closely working with the Saudi authorities, suppliers and other partners to ensure that this ecosystem is ready to support a planned ramp. The Saudi authorities continue to be a strong partner helping to advance the road, water, electrical and telecom infrastructure. We are also evaluating supply localization timelines and identifying actions to mitigate potential delays. Importantly, this does not change our commitment to the Kingdom, to the local supply chain networks, and to our broader industrial strategy. We look forward to updating you as the work proceeds. Speaking of progress, I had the opportunity to drive our latest Cosmos prototype at our Arizona test track last week. And I have to say, I came away extremely impressed. This new model delivers everything you would expect from a Lucid. The acceleration is remarkable, the handling is precise, and it remains unmistakably true to the Lucid DNA. Really, I can't wait for you to experience it yourself. Commos will be the first vehicle produced at a new AMP2 factory, and the first model from our midsize platform. and this mid-size platform remains an essential element of Lucid's strategic plan. That's why it must be one of our must-wins. While the EV market is experiencing near-term demand uncertainty, we remain confident in the long-term transition to electric vehicles. EV adoption continues to expand globally and we believe the mid-size segment represents the largest opportunity for Lucid to bring our technology to a broader EV customer base. and then encouraged by the progress across the program. Atlas drive units and prototype vehicles are already in advanced stages of testing. We'd work underway across chassis, drive units, battery pack manufacturing and on-road and test track validation. We're also carrying out crash testing, aerodynamic refinement and durability testing with cold weather evaluation in New Zealand. The next major phases of the program include additional prototype and quality launch builds, completion of the regulatory and homologation activities, expanded manufacturing validation, and preparation for a start of production. To lead the process and coordinate actions across functions, we have promoted Christian Apple to VP of Program Management. Based at Ramp One Factory in Arizona, Kristen is responsible for the program while ensuring discipline and coordination across the company to deliver top quality. With a strengthened team and additional resources, he and his team are performing a comprehensive review of the program and will implement any changes needed to ensure a successful launch. Our objective is clear. Mid-size will launch Only when every process and quality requirement have been met. We will not repeat the mistakes of the past by bringing a product to market before it is ready. Once more, we remain confident in mid-size as a core enabler to scale, improve unit economics, and ultimately profitability. Finally, moving on to outlook. Today, I have provided an update on my ongoing assessment, our near-term priorities, and several of the actions already underway. As you will understand, we are not yet in the position to provide detailed guidance. We will set formal guidance once a leadership team has completed the strategic planning process. In the meantime, we want nonetheless to offer some directional context. In particular, I want to stress how current consensus estimates for production and deliveries are based on operating models that no longer reflect the figures we anticipate today. Consequently, based on our ongoing assessment, production and delivery figures are expected to come in below current consensus estimates. Specifically, production in Q3 and Q4 is expected to be below Q2 levels. reflecting AMP1 transition from two shifts to a single shift configuration through year end. On the other hand, given the availability of existing inventory, delivery should be above the deliberate reduction in production. Deliveries in the second half should benefit from recent product and service enhancements and reflect sequential growth broadly consistent with the typical seasonal increase from Q2 to Q3. We expect growth to be more moderate than in the prior year period, which at the time also benefited from a pull forward of demand and the ramp of the gravity model. When we are ready to provide formal guidance, it will be grounded in market-calibrated demand, lower inventory, and disciplined cash management. Above all, it will reflect commitments We are confident Lucid can deliver. For now, our business review remains underway, and Alexander Duboc, our incoming Chief Financial Officer, who joins us this week, will play a leading role in completing that work. So, what can you expect from us over the next two quarters in terms of further updates? In November, at our Q3 results, we will provide details on the progress of our 1.4 billion cash for improvement for 2026, including a liquidity update. We will also provide a progress update on the Nuro Uber Robotaxi project and on the latest advancements of our M2 factory readiness. Next, at our year-end results, we will provide Guidance for 2027, as well as mid-term plan and targets. To wrap up, the work ahead is substantial and rebuilding trust will take time. We have a clear understanding of the key issues. These issues are operational in nature and we are fixing them. A deep transformation is in motion at Lucid. We have a new team in place with clear priorities. The direction is clear. Focus on the fundamentals, execute the most in projects, act with discipline and demonstrate progress through results. Lucid as the technology, products and people to succeed. Our responsibility now is to build a discipline operating model that converts those strengths into consistent performance. We expect to be judged by the results. Before I turn over the call, I want to thank Taoufiq for his outstanding efforts and loyal service to the company. His contribution and partnership throughout this transition reflect his professionalism, commitment and integrity. So thank you, Taoufiq, and over to you.