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.

Thank you, Silvio. As Sylvia outlined, we are focused on improving capital efficiency, preserving liquidity, and positioning the business for the successful launch and ramp of our mid-size platform and commercialization of our autonomous offerings. While our review of the business remains ongoing, we have already begun implementing actions. My comments today will focus on our liquidity position, second quarter financial results, the actions already underway, and the priorities guiding our decision going forward. Turning to Q2 results, production was 4,774 vehicles down 13% from 5,500 in the first quarter, a deliberate reduction and up 24% year-over-year from 3,863. We lowered production during the quarter deliberately to better align production with near-term demand, reduce inventory levels over time, improve capital efficiency, and preserve liquidity as we prepare for the launch and ramp of our midsize platform and commercial Robotaxi program. As Silvio and I have discussed, our objective is to stabilize the business and accelerate the path towards profitability. Looking ahead, We believe certain external expectations regarding our production levels do not yet fully reflect the operating assumptions guiding our decisions today, including the reduction of our manufacturing workforce to preserve cash. Our near-term focus is on improving unit economics, reducing cash burn, and progressing towards breakeven. Our objective is to allocate capital efficiently while maintaining readiness for the next phase. As we optimize incentives, improve product mix, and convert inventory into customer deliveries, we expect these actions to support average selling price, working capital efficiency, and operating cash flow. Q2 deliveries were 3,953 vehicles, up 28% from 3,093 in the first quarter and up 19% from 3,309 in the quarter a year ago. Lucid Gravity continued to be the majority of deliveries. Deliveries in the Middle East improved during the quarter. As a reminder, under our existing agreement, the Government of Saudi Arabia has committed to purchase more than 4,000 vehicles during 2026 and annually through 2032, subject to the terms of the agreement. During the quarter, we continued working through the effects of the stop sales actions announced earlier this year. Deliveries improved as the quarter progressed, and we are focused on converting the remaining affected orders. As part of our back to basic priorities, we are determined to improve customer experience, product quality, and execution. Our focus remains on converting existing demand Thank you for your attention. Revenue was approximately $405 million, up 44% sequentially from $282 million in the first quarter, and up 56% year-over-year from $259 million in the quarter a year ago. The increase was driven primarily by higher deliveries and improved product mix, reflected in a 3.7% overall sequential increase in average sales price, which was further supported by higher regulatory credit sales revenue by $25 million. Besides pricing, we expect revenue growth ahead will be driven by improved sales execution and mix, an expanding service footprint, recurring software and subscription opportunities, and finally future vehicle programs. On top of traditional EV sales, revenue streams from robo-taxis are expected to be a new source of revenue growth. Q2 gross margin was negative 105% compared with negative 110% in the prior quarter and negative 105% year over year. Gross margin in the quarter reflects higher revenue sequentially, lower production volumes which resulted in lower fixed cost absorption and higher conversion cost per vehicle. Gross margin also reflects $300 million in impairment charges associated with inventory optimization actions, offset by a reduction in loss on firm purchases commitments as a result of lower volumes. This impairment has had a negative impact on gross margin of 74 percentage points in the current quarter. Gross margin also included $25 million of regulatory credit revenue. Adjusted EBITDA was negative $901 million in the second quarter compared to negative $781 million in the first quarter. The sequential change was primarily driven by higher gross loss as we continue to ramp gravity production through May, thereby increasing finished vehicle inventory. Operating expenses remain flat sequentially, reflecting reduced payroll from lower headcount and the absence of certain one-time costs recorded in the first quarter. These benefits were partially offset by increased prototype parts and tooling for our midsize platform, as well as sustained cost and investment related to the construction of our AMP2 factory. Our focus during the quarter was not simply reducing inventory balances, but improving inventory quality. As noted previously, the $300 million impairment in the current quarter reflects a reassessment of carrying values and expected demand. and we cut firm purchases commitments, proactively reducing future inventory obligations and cash requirements. Inventory conversion remains one of our most significant opportunities to improve working capital, free cash flow and capital efficiency. A large part of our inventory has already consumed cash. Converting it into deliveries unlocks working capital and reduces our cash requirements. The efforts initiated as of June have not yet been able to offset the created inventory increase during the first five months of the year, during which gravity production outpaced demand. Together with the impairments and lower purchase commitments, the inventory reduction improves the quality of our working capital position. Our objective is to accelerate the order-to-delivery-to-cash cycle and improve inventory turnover. As we convert finished inventory into deliveries, we expect stronger working capital efficiency, liquidity, and free cash flow. Free cash flow was negative $1.476 billion during the quarter. A meaningful part of this is working capital trapped on the balance sheet rather than permanent burn. As we convert that inventory to cash, our free cash flow is positively impacted. The actions underway today are specifically designed to improve cash generation and reduce capital requirements going forward. Free cash flow was primarily affected by working capital investment, including inventory built into finished gravity vehicles ahead of deliveries, lower accounts receivable collections, and accelerating the conversion cycle and increasing inventory turnover. More broadly, Our operating assumptions today prioritize liquidity preservation, cash generation, and disciplined capital allocation. Investors should expect measured operating approach as we improve unit cost economics and progress towards profitability. In June, we launched a comprehensive review of the business to identify opportunities to reduce cash burn and improve cash flows while preserving our most important strategic initiatives. To date, we have identified approximately $1.4 billion in cash flow improvements for 2026. Implementation is already underway on many of these and the review continues. These opportunities span inventory, capital expenditure, and operating expenses and together are intended to improve liquidity, reduce cash burn, and increase capital efficiency while preserving key growth programs including our mid-sized platform and autonomous commercialization initiatives. Turning to our liquidity position and financial flexibility, as of June 30th, we had $3 billion of total liquidity, including $800 million of cash and investment and $2.2 billion of available borrowing capacity through our credit facilities. Following the quarter, we drew an additional $800 million under our delayed draw term loan facility. This strengthens our cash position, increases financial flexibility, and supports execution of the actions on the way. This transaction reflects continued support from our stakeholders and provides additional flexibility as we complete the construction of our AMP2 factory and prepare for the launch and ramp of our midsize platform. It also supports our autonomous initiatives and Robotaxi programs where we continue to work alongside strategic partners towards commercialization. Our priority remains maintaining adequate liquidity while preserving investments that are strategically important to Lucid's future. We continue to expect liquidity to extend well into 2027, further supported by ongoing organic improvements including the announced $1.4 billion in cash savings in 2026. This gives us the flexibility to select the right timing to raise further additional funding while ensuring that we optimize the execution, pricing, and capital structure. Lucid will provide an updated liquidity outlook with its Q3 results. In closing, While our review remains ongoing, we have already moved from identifying areas for improvement to executing actions across the business. Manufacturing actions have been implemented, organizational changes have been announced and are being executed, cost reduction initiatives are on the way, and additional opportunities across inventory, CAPEX and OPEX continue to be identified and implemented. At the same time, we are preserving investments in the program and technologies that strengthen the foundation for our next phase. We are not providing quantitative financial guidance at this time. However, we believe external estimates do not yet fully reflect three things. The lower near-term anticipated production given the reduction in the manufacturing workforce, the improved cost structure and cash preservation from recent workforce reductions, and updated operating assumptions, and the upside to gross margin as we reduce inventories and release impairment provisions. We are confident in the direction of the company and will provide additional updates and guidance as we are able. Looking ahead, we remain on track for the launch of RoboTaxi service with our partners Uber and Nuro, and we continue to advance AMP2 and our midsize readiness plan. We anticipate multiple opportunities to extend Lucid's technology platform to new applications over time. In closing, I would like to thank my colleagues at Lucid, partners, investors, and analysts for their engagement and support. It has been a privilege to serve as Lucid's CFO during this important chapter in the company's journey. I remain deeply confident in the strength of Lucid's technology, products, and people and I look forward to watching the company continue to execute against the significant opportunities ahead. Thank you for your partnership and support. And with that, I turn it back to the operator.

Thank you. We will now begin the question and answer session by taking questions submitted through the Say Technologies platform first. Our first question comes from John R. Thanks for stepping in as a legit CEO, Mr. Napoli. How confident are you and your team today in bringing Lucid Motors to a stable company? What message would you deliver to people who love and are loyal to Lucid Motors?

Thank you, John, for your question, your support and your engagement reflected in the statement you make here. If I'm here, it's because I'm extremely confident in Lucid's future. The one thing that impressed me the most in joining Thank you very much. I am absolutely confident and that's why we launched these priorities and most of the projects. Delivering on those will set the platform for our success going forward and for a company that will always be stronger, closer with its customers with new products and also a much stronger service. So again, thank you for your question and I look forward to providing more products and more technology and more service to you.

Thank you. Our next question comes from Vikas A. Thank you, Vikas.

We address the financial aspect of the software and so I'd like to focus here about more the aspect of software. I also did mention in my statement how we are reviewing the whole aspect of software from conception to coding into the installation and into the service. I was at our factory last week and I witnessed firsthand as an example, how we are actually bringing software engineers and manufacturing line experts together in order to improve the process. And as an example, we totally changed the way we do over-the-air upload Thank you very much. Thank you. The next question comes from William I. Is Lucid ready to become more than just a car company by branching into ESS where it could see huge growth, especially if working with Saudi Arabia to achieve its 2030 goals? William, thank you for this question. I think you point to a very important opportunity, which I strongly believe in. That's why we created Lucid Technologies, which is meant to drive this opportunity, starting with the Robotaxi, which I addressed during my speech, which is an immediate big opportunity. There will be others, many more, thanks to our technology. At the same time, before we get there, we need to stabilize the business. This is our priority today. Our three Cs and our foremost win. Then we create the platform. We have to be disciplined in not going after other things today which may further strain our resources. ESS is definitely one of them. There are actually, in fact, many more, and I look forward to putting myself in the position to address all of them. But thank you for the confidence shown in your question. That, again, indeed shows a big opportunity for Lucy going forward. We are resolved to get there by first strengthening and stabilizing the business.

Thank you. Our last question comes from John R. I purchased the AT, and I love to drive every day. Kudos to the teams, but what is the plan to improve the quality of software issues slash bugs? Could we stop tarnishing the brand name unveiling with the bad quality of the vehicle?

John, thank you. This is another question that I really like because it's direct and specific and addresses clearly one of a major area of opportunity. I addressed it in my answer to Vikas a second ago, how we're improving software, so we'll not repeat it here. But again, your question reinforces a belief that having customer and quality as a central part of a strategy is absolutely essential to the future. In fact, Customer and quality are the best investment we can do in a brand. That's why we are investing in service and that's why we created a chief customer officer position because we want someone accountable to me but to the company and to the board in terms of driving forward with a single accountability point all these actions which address software as I mentioned before but many other aspects which I've I think the only a great opportunity for us to improve not only versus our past performance but also against the industry which generally I must say from what I see has a lot of room to improve in terms of customer service so again thank you for that re-establishing a brand and rewarding those of our customers is my absolute key priority

That concludes the questions from the Say Technologies platform. We will now take questions from the phone lines. As a reminder, if you would like to ask a question, please press star 1 1. And our first question will come from the line of Andres Shepherd with Cancer Fitzgerald. Your line is open.

Hey, everyone. Good afternoon. Congratulations on the quarter and thanks for taking our questions. First, I just wanted to quickly thank Taoufiq as well for all his contributions. It's been great working with you, and you will be missed. Regarding questions, you know, Silvio, I wanted to maybe touch on the AMP2 and midsize a bit further. I realize you talked about it in your prepared remarks, but I guess as we move closer to production of midsize starting in early 2027, Curious if you can maybe help us understand, you know, what are the milestones that are left regarding the completion of the Saudi plan? You know, what can investors be tracking there? And separately, you know, how should we think about those initial deliveries in the first half before ramping up in the second half of next year? Thank you.

Andres, thank you for your question. So it is about ARM2 and MISAI. So what are the key milestones? Let's start with M2. M2, as I tried to address in my remarks, there are 12 elements. There are the ones that are achievable to us under our control and the ones which are outside our direct control. In terms of what is our control, the only thing missing is the industrialization testing or the different Thank you very much. There are other parts which are outside our control and this may involve certain elements of local certification, but also it's access to power for example all the things that you know are in our control but have to be validated with the local authorities or agency which so far have been extremely supportive so I'm very positive. The third element which is not entirely controlled is the suppliers network which is due to be built around this new manufacturing area being built in the very same geographical location where a factory is. These ones are not only, it depends on the supplier corresponding which we have only limited control and so this is one thing that we need to keep close watch of. To be clear, we have backup plans. If they were late in their localization plans, we would be able nonetheless to proceed with production by importing the parts. This is all in flux, and again, not in our control, hence our caution into providing an exact date. In terms now of the mid-size, the mid-size we're going through all the certifications. I mentioned all the lists and parts as part of my remarks. So far, I tell you, also based on my personal experience last week with this prototype, it is all looking very, very well. But at the end, you know, in automotive, until you have not produced a car, you don't know until there are all those certifications, and not only external, but also internal, that want to make sure are done well. and you know to do it well takes time and in the past mistakes were done I want to make sure they're not repeated here so all in all that's why we are not being held to account to a date established top down my objective is to launch the car when it is ready with top quality and when that moment will come it's going to be in 27 when we are clear about the date I'll be communicating that to everyone

Excellent. Thank you, Silvio. I appreciate all that color. That's very helpful. And maybe just as a quick follow-up, so you highlighted a $1.4 billion cash flow improvement for the year, which is excellent. And now with $3 billion in total liquidity as of the quarter, just curious if you can maybe give us a sense of how you're thinking about capital needs going forward. Thank you.

Andres, thank you for the follow-up question. To be clear, capital needs going forward will be a function of the business planning we are just in the process of completing. Once done with the planning and clarity on the top and bottom line, this will be the time to assess how to then manage a balance sheet. Depending on the findings, we'll decide. We have many options. We're a very supportive board. And as soon as we will have an answer on how to do that, we have different alternatives. We'll be communicating that.

Wonderful. Thank you again. Congrats on the quarter. Looking forward to working together. We'll pass it on.

Same here. Thank you, Andres.

Thank you. One moment for our next question. That will come from the line of Alex Perry with Bank of America. Your line is open.

Hi, thanks for taking our questions here. I guess first, I just wanted to ask, what milestones should investors be monitoring to measure progress in RoboTaxi? Maybe talk through some of the key learnings from your testing and validation in San Francisco and Houston. Thanks.

Yeah, thank you. Alex, thank you for this question. So clearly, there are two elements. It's a three-part tied partnership. So I can comment on the learnings on the engineering EV supplier side. I will refrain from comment concerning the software and platform side which are with our partners. So clearly Houston and Bay Area. The idea is really we have a vehicle that is software defined so the The challenge of integrating that to the new firmware in the software is in fact facilitated by the way our vehicles are conceived. It is really essentially about how to make sure that all the checks and balances, all the redundancies, which are very much safety-related, function through operations. As you can imagine, you've probably read about this, Robotaxi certification. It's all about miles accumulated, and there are miles on the road, miles virtually, and how the whole system which is now three. So the software, the firmware, and the vehicle respond to that. So data is there a number, and I personally, by the way, every two weeks review the state of the projects with my counterpart and Neuro. And in parallel, there is a number also certifications that have been dealt with by Neuro It's passing all those certifications, making sure enough miles are accumulated that then paves the way for the final launch. This is what we're following. So far, there is honestly no red flag in terms of the engineering aspect. But again, there is new systems coming through. I was last week, as I mentioned, in Arizona, and I saw how the prototype vehicles are being assembled and shipped. to our partners, and I am very excited to see them on the road and how they perform will be the next stage of validation of the project.

That's really helpful. And then my follow-up question was just on inventory and how you're thinking about inventory. How much do you plan to underproduce relative to deliveries? What is the ultimate goal? And I think you actually produce more than deliveries in the second quarter, I guess. You know, it's the expectation that that sort of reverses as we move into the back half. And, you know, when should we expect the inventory rightsizing to be complete?

I'd like to pass this question to Taoufiq, please.

Hi, Alex. So, I mean, as we said, we are not providing a detailed guidance, but the baseline that we're starting from. So, I mean, we have published, obviously, our inventory. So, you saw the evolution since, I would say, Q4 of last year. So, what we want to do is that between now and here, and we come back to a normalized inventory level. So, that's the plan that we're building. So, that's also one of the key components of the $1.4 billion plan. and many more. Thank you. Production will slow down. When it comes to deliveries, we have the normal seasonality which would help. You know that, and we have commented on that during our prepared remarks, we're expecting a growth for the second half of the year when it comes to the deliveries. And this is really the key component of the plan which will allow us to burn down the inventories that we have currently built. and obviously the ultimate expectation is to release this trapped cash into real cash for the business.

If I may just respond on this question, Alex, for a second here. Going back to the earlier questions, inventory made me think about deliveries, right? So let's not forget this Uber Neuro project for now has 35,000 units including in delivery. Those will start ramping up as of January or as soon as the project goes live. I'd like to say this is for us, not only per se, but as I said in my speech, this is really a new industry, which I think needs to be taken into consideration in terms of our growth prospects, which will not only be in this traditional EV, but very much so in an industry that is at the start of an exponential growth, and therefore this project provides us a unique chance to position us for a and additional growth with higher volumes and higher margins, as I said, and I feel very strongly about that. Also, the investment and resources will be dedicated to that. So, sorry, just wanted to bring that point back.

Perfect. That is all incredibly helpful and best of luck going forward.

Thank you, Alex.

One moment for our next question. That will come from the line of Andrew Percoco with Morgan Stanley. Your line is open.

Great. Thanks for taking the question, Taoufiq. Great working with you and wishing you the best in your next endeavor. But I guess, you know, maybe to start just where we kind of left off with that last question on inventory and the inventory turn, can you provide any more, I guess, clarity or color around within, you know, the buckets of inventory you put in the deck, raw materials, whip, and finished goods? What's the proportion for split between gravity and air within that?

So, we can give you some indication. First of all, Andrew, and thank you very much for your very nice words. So, I mean, again, we are not breaking down the inventories by categories, but what we have said is that the majority of the production has been about gravity. So, you can take a reasonable assumption and consider that the big part of what we currently have on hand is gravity-related.

Okay, got it. That's helpful context. And then maybe just, you know, one question on manufacturing strategy. Obviously, you know, right now running AMP1 at a pretty low utilization rate, and you're still kind of ramping AMP2 here. So I'm just kind of curious what your philosophy or your strategy is in terms of potentially consolidating, you know, midsize production into AMP1 and maybe mothballing What are your thoughts in general about trying to be maybe a little bit more capital efficient and running a higher utilization rate to optimize that fixed cost structure while demand is relatively de minimis in the near term?

Andrew, thank you for the question. In essence, this is part of what we're looking at now as part of our strategic planning, but to be clear, I asked the same question coming in, but the fact is today the AMP1 factory is meant to design to produce air and especially gravity. The way the factory is designed, introducing a new line will create inefficiencies on the other models. That's why the decision was taken to put this factory with a new platform in Saudi Arabia with AMP2. So going forward, our job is to make sure we ramp it up with quality on both sides Let's not forget that now we have a new source of volume, which is the Robotaxi. So our plan is to optimize capacity utilization by also looking at these volumes and others that may come going forward, first of all by traditional business, but also by others that lucid technologies might generate. For now, that's all we can say, but I think it's a very understandable question and one that is We cannot answer now, but it's really key to our profitability going forward.

Okay, that's super helpful. Appreciate it. Thank you, Andrew.

Thank you. Our next question will come from the line of Steven Gingaro with Stifel. Your line is open.

Thanks, and thanks for taking the question. And thanks for all the details. Two things for me. The first is, and I know you're maybe not ready to give a whole lot of detail, but when you think about sort of the next couple of years, is the underlying business plan changing as far as, you know, the willingness to license the technology as one thing I'm thinking of, or just, and also just kind of the focus and importance of the midsize? Is there anything material changing in the underlying plan? Is it all sort of financial and cost-related?

Steven, thank you for the question. The line is not ideal, but I do think your question related to the idea of licensing. I think as we look at our business planning, licensing absolutely is an option. And Lucid Technologies indeed also one of the activities will be to license or sell our components into either automotive, EV, but possibly also to other industries. So that is very much something we're looking actively at. At the same time, allow me to come back. This will only be possible when we stabilize the business. So our priority now is really a three-season, a four-month twin, because then we're going to have the sustainable business model to take us forward. So all I think what I understood you mentioned is still very much possible and actively looked at, but we're also very conscious of our priorities, which are at the moment is to Stabilize and business as it is today.

Okay, great. Thank you.

Thank you. One moment for our next question. And that will come from the line of Itay McKaylee with TD Cowan. Your line is open.

Great. Thank you, everybody. It's been great working with you. Thank you for everything. All the best. Maybe just a first question. I'm curious kind of what the go forward kind of marketing and branding campaign might look like as you sort of curtail production and maybe hopefully can strengthen pricing. Just kind of curious how you're thinking about brand positioning, particularly ahead of the midsize launch.

I thank you for the very current question, something which in fact I realize I didn't speak much about this time, but I will probably elaborate more next time, is that we are, as we speak, carrying out, we just initiated actually this week in fact, a whole, I call it a brand audit, and then will allow us to reposition our brand in a way that is consistent with our product. Today our brand is very strong, but I think it is fair to say the approach, the understanding of the brand is not consistent across every sector, every market, and I'm going to say even internally within a company in the sense of how people see that. So I want to make sure that this is clear because this is a strength. So building on that asset is a clear platform to go forward. I look forward to sharing more about that, but I do – Thank you very much. and many more.

That's helpful. As a quick follow-up, I think it was mentioned a few times, sort of an effort to improve the unit economics. But typically, there is some relationship between volume and unit economics. And so I'm curious, sort of during this period where volume is a bit more in a kind of a low period, how you're able to improve unit economics and sort of maybe some targets there would be helpful. Thank you.

Thank you for the follow-up question. I'm not in a position, again, to provide targets. But what I can tell you is that our suppliers have been extremely supportive in the way we look at different volumes in combination with profitability and, say, unit economics. At the same time, there are things that are also in our control. For example, we have way too many options. So working on our configurator to make sure we focus on the trims that also support economics is a key element and you can imagine that is itself a great opportunity. So that's an example of exactly the type of non-stopping exercise to look into every aspect of the business to make sure we establish a solid way forward. So thank you for the question which allowed me to address that. I will look forward to coming with more detail as we continue our changing. Thank you. Thank you.

Thank you. As a reminder, if you have a question, please press star 1-1. Our next question will come from the line of Michael Ward with Citigroup. Your line is open.

Thank you. Good afternoon, everybody. When I look at page 23 and you talk about $1.4 billion in cash savings by the end of the year, are those annualized savings, cash savings, or a run rate? Because it's always going to occur in the second half.

Hi Mike, thanks for the question.

So the 1.4 billion is what we're expecting to save this year between now and year end. So that's a 2026 impact that will be reflected in our results. So now Part of it, obviously, as you can imagine, we will make it sustainable and part of it will be impacting as well the baseline for next year. So we're trying to do things from a structural standpoint, removing some of the cash, but they are also part of the savings and optimizations which are leveraging phasing and So some spent will be potentially pushed to next year. So when you read the 1.4, read it as an impact in 2026.

Perfect. And so then, so it sounds like some of the CapEx are deferred, so they're not eliminated. But it sounds like the inventory, it looks like to get back to the December 2025 level, It's like $300 million, so there's more there. And that sounds like more of a structural change. Is that the right way to read it? Getting more efficient with the energy there?

That's absolutely the right point. So, I mean, and we refer to it in the prepared remarks. It's really about how we accelerate the conversion cycle. So reducing the timing between the moment where we receive the raw materials for our products into converting them into whip and finish goods. That's something that we're working on from a structural standpoint. and it's really about carrying the lowest level of working capital and translating this working capital into revenues as soon as possible and this obviously touches receivables, payables, so it's really an end-to-end approach and structural change to your point that we're implementing currently.

And it leads to a lower inventory write-down, correct?

That's right.

Okay, and the second thing is on the Cosmos. Where are those prototypes being built? It sounds like you have some out there being tested and certified already. And where are those being put together? Amp1?

Amp1. Today, it's assembled in Coolidge. We have a factory next to Amp1, which is a and many others. technology transfer that we're going to do from Coolidge into Saudi Arabia. In fact, we have a whole line testing everything before we can be transferring it to Amtou in Saudi Arabia.

And when will the prototypes begin coming off Amtou?

As I said before, they will become a prototype that will be starting in the early 27 and the full Amtou production will be in the second part.

Okay, thank you very much. Really appreciate it.

Thank you, Mike.

I'm showing no further questions in the queue. I'd like to turn the call back over to Silvio for any closing remarks.

Thank you. So, as we come to a close here, I'd like to thank you all for joining us today, for your engagement, and for your questions. Our priorities are clear. Reduce cash burn. improve quality and the customer experience, build a high premium team and culture, simplify the company, and deliver our must-win projects. We know that rebuilding credibility will take time, and we intend to earn it through consistent results. Thanks again, and I look forward to seeing you again soon and continuing our conversation. Bye-bye.

This concludes today's program. Thank you all for participating. You may now disconnect.