Hello, and thank you for standing by. Welcome to the Lucid's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker for today, Maynard Um. You may begin.

Thanks, Towanda, and welcome to Lucid Group’s third quarter 2022 earnings call. Joining me today are Peter Rawlinson, our CEO and CTO; and Sherry House, our CFO. Before handing the call over to Peter, let me 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, 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 quarterly report on Form 10-Q for the quarter ended September 30, 2022, 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 the 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 all for joining us for our third quarter earnings call. I’m pleased to report that we have made significant strides towards reaching our 2022 production goals of 6,000 to 7,000 vehicles. In Q3, we set a record with 2,282 vehicles produced, which is over three times the output of Q2, and delivered 1,398 vehicles, more than double what we achieved in Q2. I want to sincerely thank everyone at Lucid for your dedication; your teamwork has been crucial in driving these impressive increases as we scale production and deliveries. You are essential to our production ramp and helping more customers get behind the wheel of their new Lucid Air. In Q2, we were unable to provide a figure for weekly production, but I’m excited to share that we have demonstrated our capacity to produce 300 cars a week. Even more significantly, we have a clear pathway to increase our production rate further. This achievement is a testament to teamwork across the company, and we’ve made some tough decisions and structural changes that are beginning to show positive results. Although we are focused on areas we can control, the supply chain situation is still unpredictable. Right now, we are facing a temporary setback with one particular component that will cause brief stops on the production line. Nonetheless, we are confident we can meet our production guidance of 6,000 to 7,000 vehicles for 2022 despite this challenge. During this period, we will also implement various improvements to enhance our production capabilities. Turning to logistics, we have made encouraging progress in bringing our logistics operations in-house and restructuring our logistics and manufacturing teams. We have tackled some of the main issues that hindered production in Q2. Steve, David, and the new leaders we’ve appointed are doing a commendable job in guiding this transition. While I’m satisfied with the progress made, there’s still plenty of work ahead, and I’m honored to keep leading this important effort alongside a remarkable team here in Arizona. I’m speaking to you today from AMP-1 in Arizona, right on the factory floor where we have been very active. Last week, we began production of the Lucid Air Touring, which I look forward to personally delivering to our first eager customer next week. The Touring model features around 620 horsepower and can accelerate from zero to 60 in about 3.2 seconds. Alongside the Touring, I’m equally excited about the upcoming Lucid Air Pure, our most affordable variant with up to 480 horsepower. We remain on schedule to start production of the Pure soon and anticipate deliveries before the year ends. Stay tuned for our Lucid Launch Event next week for more details. Here’s a sneak peek: we previously shared that the Grand Touring achieves an industry-leading efficiency of 4.6 miles per kilowatt hour. I’m happy to announce that the Touring will match this impressive figure while being more affordable, making ultra-efficient EVs more accessible. We will persistently strive to reach our aspirational goal of near five miles per kilowatt hour for the Lucid Air. This remarkable efficiency is largely due to our in-house developed powertrain technology. As I’ve mentioned before, this is a technology race, and not all EVs are created equal. Lucid enables more miles per kilowatt hour from its batteries, providing exceptional range with a smaller battery and incredible rear seat comfort in both the Touring and Pure models. Our technology progress has been acknowledged with accolades such as WardsAuto’s Top 10 Best Engine and Propulsion Systems. In Q3, we also unveiled the Sapphire brand, Lucid’s new high-performance, driver-centric line. Sapphire stands for the peak of electric performance and delivers the exceptional performance I’ve long sought. The Air Sapphire will be the first model under this brand, utilizing a three-motor powertrain, featuring a new twin-motor rear drive unit and a single motor front unit—all developed and made by Lucid. These components are state-of-the-art in terms of performance, efficiency, and compactness. The new rear drive unit includes advanced heat exchanger technology and improved coolant flow rates, while the battery system has been enhanced for greater power and precise thermal management. With over 1,200 horsepower, the Lucid Air Sapphire is not just the most powerful electric sedan in the world but the most powerful sedan overall. We are actively testing the Sapphire, and I’m personally test-driving it, pleased with the progress so far. We expect to start production in the first half of 2023. Additionally, we are excited to announce that the Project Gravity SUV will be revealed soon, with events planned for early 2023, and we will begin taking reservations ahead of its production launch in 2024. I believe the performance benchmarks of Gravity will be unmatched in its category, showcasing our technological excellence. We are preparing our factory at AMP-1 for Phase 2, expanding the body shop and assembly lines to accommodate both Air and Gravity. I believe Gravity could have an even larger impact on the SUV market than Air has had on the luxury sedan sector. I cannot wait to share more in the near future, so please stay tuned for our launch event next week where we will discuss the Lucid Air lineup and provide a sneak peek of the Gravity SUV. While I feel great about our vehicle plans, I am equally excited about our software advancements, particularly with the recent UX 2.0 release. We intentionally designed the Lucid Air as a truly software-defined vehicle. The integration of software and hardware engineering enables our vehicles to improve over time via over-the-air updates. In Q3, we released 14 over-the-air updates, more than one each week. Our latest software update is our most comprehensive, bringing significant enhancements across the vehicle, including a new Instant-on Glass Cockpit and Pilot Panel displays, the launch of highway assist for the DreamDrive advanced system, improved on-screen layouts, and many more features. It’s important to emphasize that Lucid Air has always boasted world-class software, even if it hasn’t been apparent. Our software manages the powertrain and batteries, as well as crucial vehicle components. Our advanced software is key to the impressive performance and efficiency of Lucid Air, enabling the EPA estimated 520 miles range in the Dream Edition. These components are also updatable over-the-air. Our exceptional software team, led by Mike Bell, is set to roll out many more features soon. Just last week, we announced that SiriusXM's radio and audio entertainment will be a standard feature in all Lucid vehicles, with a beta available at no cost, and a complete rollout expected in 2023. Lucid owners will receive a three-month complimentary subscription. My vision has always been to create a group of companies that encompass not just automobiles but also an energy ecosystem and technology licensing, forming three key pillars. We recently launched Lucid vehicle accessories, including the Lucid Connected Home Charging Station, which is our first step towards establishing our energy ecosystem. This Home Charging Solution supports up to 19.2 kilowatts, allowing up to 80 miles of charge per hour, matching Lucid Air's fast AC charging rate. It will effectively double the charging speed compared to the standard charging cable when installed at full power. The Charging Station is designed for future upgrades and is Wi-Fi enabled for over-the-air updates. Regarding our battery strategy, I’m pleased to announce that we validated battery cells with an additional global supplier. We believe this partnership, alongside our existing agreements with LG and Samsung, will ensure a robust cell supply for 2022 and 2023. We are also pursuing long-term supply agreements with other suppliers. I’d like to take a moment to thank all our suppliers who are working diligently with us during these challenging times. In conclusion, I am incredibly proud of the Lucid team and what we have accomplished, given the numerous challenges faced by us and the industry. In a short timeframe, we have brought our logistics operations in-house, restructured our logistics and manufacturing operations, brought in outstanding leadership, addressed production constraints from Q2, and delivered a software experience true to Lucid Air. I believe we are just getting started. We will offer a range of variants from performance to affordability with Sapphire, Touring, and Pure, begin global expansion with deliveries in Europe and Saudi Arabia by the year’s end, unveil Project Gravity SUV early next year, and maintain our focus on advancing our technological leadership. Lastly, I want to extend my gratitude to our customers for your trust in us. I’ve met many of you and your families, and your feedback and enthusiasm inspire me and the entire team to deliver the quality and experience you deserve. We are ramping up production to get more vehicles into our customers' hands. I affirm that we are on track to meet our production target of 6,000 to 7,000 vehicles for 2022. Now, I will hand it over to Sherry for an update on our financials.

Thank you, Peter, and thank you to those who are taking the time to join us today. Before sharing our Q3 results, I'd also like to extend my sincere gratitude to our customers as well as our entire Lucid team members, our partners, and our suppliers. In Q3, we scaled across every corner of our business, from manufacturing and engineering to G&A, sales, and service. We've made tremendous strides in our production ramp. We launched our new Sapphire brand, introduced additional product features, and worked to enhance our customer experience through our expanding sales and service network. All of this strong progress was only possible through the perseverance and collaboration of each and every one of you, and I'm incredibly proud to work alongside you. Now, turning to our third quarter financial results. As Peter mentioned, we produced 2,282 vehicles, more than triple our Q2 production numbers, and delivered 1,398 vehicles, which was more than double Q2. The variance between production and deliveries was primarily a function of vehicles distributed across three areas of the delivery process: vehicles in transit, vehicles awaiting pre-delivery inspection, and vehicles awaiting delivery to a customer. As we mature as a business, we'll continue to learn and refine our in-transit inspection and delivery processes. In the near to medium term, we expect vehicles produced to be placed at a higher volume than vehicle deliveries as we accelerate our production and initiate international deliveries in the fourth quarter, the latter which requires longer in-transit times. We continue to have strong demand with more than 34,000 reservations as of November 7. To put the reservation number in context, this equates to the amount of our current annual tool capacity in AMP-1. This compares to the over 37,000 reservations we had in Q2. The reservation calculation includes new reservations, nets out all deliveries that we accomplished in Q3 and Q4 to date, and also nets out cancellations. It's important to note that this number does not include up to 100,000 vehicles under the agreement with the government of Saudi Arabia. We expect deliveries to start next year. Meetings have been ongoing with the government, and we're actively working on scheduling the first deliveries. We also have not opened up reservations for Project Gravity SUV. We expect to start taking reservations in early 2023, opening up what we believe will be a very large and incremental addressable market for us. Our ultimate goal is to sustain a healthy reservation bank, balancing wait times and deliveries until our supply increases with our expanding factory footprint. Turning to our P&L, Q3 revenue was just over $195 million, which represented a quarter-over-quarter increase of 101%. We remain intently focused on scaling the business and expect to see significant growth in revenue as delivery volumes ramp. We're also excited about our recent launch of Lucid vehicle accessories, an expanding line of accessories that serve as stylish complements to the entire Lucid Air vehicle lineup. In addition to the Lucid connected home charging station that Peter mentioned, we also announced a number of other accessories, including a cargo capsule that many customers have been asking for. Turning to our cost of revenue, it was $492.5 million, which includes direct part, material, shipping, IT costs, overhead, personnel costs, including wages and stock-based compensation, estimated warranty cost, and inventory write-down, primarily related to reducing inventories to their net realizable value. Similar to last quarter, this expected increase was primarily related to personnel and overhead costs as we ramp up production, offset by lower freight costs quarter-over-quarter, due to our ability to shift the vast majority of our international shipments from air to ocean freight. As we produce vehicles at low volumes on a production line designed for higher volumes, we have and will continue to experience negative gross profit related to labor and overhead costs. Additionally, we recorded a lower of cost or net realizable value adjustment of $186.5 million in Q3. This amount contemplates the value we anticipate receiving upon vehicle sale after considering the cost necessary to convert the inventory on hand into a finished product. During this quarter, our LC NRB impairment increased primarily due to product mix and an increase in inventory levels, including firm commitments. Moving to operating expenses, we're still in the growth stages of our company and investing behind our strategic priorities, but we're doing this in a prudent and methodical manner. As I said last quarter, we're instilling a culture of cost consciousness and we're working across the company to identify and execute on cost efficiency opportunities. R&D expense totaled approximately $213.8 million, up 7% sequentially. The sequential increase was related to the continued ramp-up of the Gravity and Sapphire programs as well as headcount growth to support further investment into our cutting-edge tech and products, partially offset by lower stock-based compensation expense. SG&A expense was approximately $176.7 million, up 8% sequentially. SG&A consists primarily of personnel-related expenses, allocated facility costs, and other general corporate expenses. As we continue to grow as a company building out our sales force and commercializing the Lucid Air and planned future generations of our electric vehicles, we expect our SG&A costs to increase. We ended the quarter with 29 studios and service centers, flat from Q2. We opened our first studio in Saudi Arabia at the end of October and our first Texas studio in Plano. We expect to strategically expand the number of studios and service centers with a number of new openings across North America and Europe through the remainder of this year. We increased our mobile fleet by nearly 10% in Q3, which is an important element in ensuring high customer satisfaction as the fleet of Lucid vehicles continues to grow. Our mobile vans can perform over 80% of the services that can be done in a service center. Stock-based compensation in the quarter was $83.3 million, approximately $10.8 million within cost of revenue, $34.1 million in research and development, and $38.4 million within SG&A. Other income was favorably impacted by a non-cash impact, mark-to-market value of private warrants in the amount of $140.1 million. The value of the warrants can be influenced quarter-to-quarter by a number of factors, including Lucid's Group's end of quarter share price. Our overall performance in the quarter was a net loss of negative $530.1 million. Moving to the balance sheet, we ended the quarter with just over $3.85 billion in cash, cash equivalents, and investments, with total liquidity of $4.2 billion when considering our global credit facilities. To continue to drive our growth plan and capture the significant market opportunity we see, we do want to maintain the flexibility to raise additional capital. Our major shareholder, the public investment fund, has expressed a willingness to support us in a future capital raise on a pro rata basis. We are incredibly grateful to have such a strong strategic investor as our partner. We are putting in place a $600 million at-the-market program, which will create flexibility for us to raise new third-party equity capital. Combined with pro-rata participation by the Public Investment Fund, this would allow us to raise up to approximately $1.5 billion net of fees and other operating expenses. The ATM program provides us with an attractive option to raise capital, but we have no obligation to execute on the program, and we will continue to be opportunistic in our approach to financing. This is consistent with our historical funding actions, including raising funds last year with a green convertible bond and earlier this year securing a $1 billion ABL facility. Our strategy is to take a holistic approach towards funding the business. We believe we have access to a variety of available options in debt and equity markets as well as access to low-cost government programs. We'll continue to be opportunistic in raising capital, and this ATM program is one incremental tool in our broader funding strategy. Turning to inventory, it increased in the quarter due to a combination of our production volume ramp and vehicles in transit to customers. However, we reduced work-in-progress inventory by more than half relative to last quarter, as we made progress on completing production of in-process vehicles from Q2. In Q3, we secured approximately 495 acres of land, situated underneath our AMP-1 factory, and we also entered into an option to purchase additional land around our existing facility, further securing our future needs. Capital expenditures were $290.1 million in Q3. Year-to-date CapEx was close to $785 million. Our Phase 2 expansion at AMP-1 is progressing, and we expect to begin moving Air production to the south building in the first half of next year. Construction is ongoing, but we've started installing some equipment, and as we discussed last quarter, we're using a portion of our expanded footprint for logistics. Moving to our international expansion efforts. Just recently, Peter and I and some of the Lucid team went to the Kingdom of Saudi Arabia, meeting with government and banking partners in conjunction with the opening of our studio in Riyadh. We're already starting to realize the benefits of the KSA relationship in the $3.4 billion economic support. We were happy to announce the signing of a memorandum of understanding with the Human Resources Development Fund for HRDF in Saudi Arabia as well as the receipt of the first grant from the Ministry of Investment of Saudi Arabia, also known as MISA. HRDF, part of the National Development Fund, will contribute 75% of the training costs and salary support for more than 1,000 employees, resulting in an estimated contribution of more than US$ 50 million over a five-year period. This collaboration and investment from HRDF will allow Lucid to provide essential training opportunities for Saudi nationals, many of whom have not worked in the EV space previously, and will be instrumental in making sure we have well-trained professionals as we launch Lucid's first internal international manufacturing locations. We're thankful for the strong support and collaboration in the region and glad to see it all coming to fruition. Turning to the outlook, we're reiterating our 2022 production guidance of $6,000 to $7,000. We had strong production in Q3, and we believe we're on track to achieve this outlook. We ended the quarter with a little over $3.85 billion in cash and investments, which we continue to believe is sufficient liquidity at least into the fourth quarter of 2023. This assumes we are investing fully in accordance with our forward plan, which includes the Phase 2 expansion of AMP-1 in Arizona, the engineering and prototyping of Gravity, the continued build-out of studios and service centers in North America, Europe, and the Middle East, and some early spend associated with entering the Asia-Pac and China markets. Moving to CapEx, we expect capital expenditures for 2022 to be around $1.2 billion. The reduction in CapEx guidance for 2022 is largely a function of timing and does not represent an overall reduction in the budget. Any dollars not spent in 2022 are anticipated to be spent in 2023, and a corresponding shift from the end of 2023 into 2024 is likely to occur. In closing, we're excited about our progress and the many exciting milestones in our roadmap. By the end of this year, we will have introduced four of our Lucid Air vehicle variants: Grand Touring Performance, Grand Touring, Touring, Pure, and Air Sapphire, with Gravity on the horizon. Our international expansion is also well underway, and you can see that we're starting to realize the benefits of our strong partnership with the government of Saudi Arabia. We can't wait to share more about some of these great projects that Lucid's team is working on, including our Lucid Launch Event on November 15. With that, let me turn it back to Maynard to get your questions.

Thanks, Sherry. We'll now start the Q&A portion of the call. Today's Q&A will feature some questions from some of our retail investors who are an important constituency of our shareholder base. We'll follow that by live analyst questions and close it out with a couple of statements if we have time. So let's start with the first question. What is the production target for 2023?

We will be providing a detailed outlook for 2023 today. We will likely provide this information in our next earnings call, which will cover our Q4 and full year performance and expectations for 2023. As we said in our prepared remarks, we're intently focused on ramping production. We have line of sight into our next incremental ramp-up, and we're delivering as many vehicles to our customers as possible. So by next year, we expect to be producing our full line of Air from our highest performing Air Sapphire to our most affordable Air Pure. We plan to begin delivering some of these vehicle variants internationally. We're also planning on unveiling our Gravity SUV. So we're very excited about 2023.

Thanks, Sherry. We’ll move to the next question. When are you planning to start building and utilizing the railway transportation in the Casa Grande factory to reduce transportation costs for suppliers and car delivery?

Yes. So as I mentioned, we're working across the company to identify and execute on cost efficiency opportunities generally. There are a number of opportunities we could pursue that make more sense to pursue as we ramp volume. If it makes financial sense, we will, of course, consider them, including the use of the railway transportation, which is right in our backyard.

Yes. I think I would want to add that Arizona and the City of Casa Grande have been incredible partners, and we're always looking for additional opportunities to drive our business while at the same time helping to spur jobs and economic growth in this region.

Thank you. And let's move to the next question. It looks like there are about 1,000 cars that have been produced and not delivered. Why is that? And where are these cars stored?

Yes. Well, I mean this is a function of the cadence by which we've ramped up. We've made remarkable strides in ramping up. Naturally, there’s going to be a phase lag between producing the cars and getting them out to our dear customers. So it’s very much a cadence issue and a phase lag phenomenon.

Yes. As I said in my prepared remarks, in the near to medium term, we expect vehicles produced to pace at a higher volume than vehicle deliveries as we're accelerating production, and also going to be initiating our international deliveries in the fourth quarter, which requires longer in-transit time.

Great. Next question is, what is your current development progress of the current CarPlay version? Is it still planned to be released by the end of the year? And are you planning on partnering with Apple to add their upcoming fully integrated CarPlay in the next year?

Yes. Well, we're most cognizant of the demand for this and the team is working on it. All I can say right now is we are pushing hard to get it to market as soon as we possibly can.

Great. We'll move to the next question. The report of Q3 deliveries and confirmation of 2022 delivery targets was helpful. Going forward, does Lucid plan to provide more transparency to investors between earnings calls?

Yes. So it is our intention to release our production and delivery numbers each quarter ahead of earnings in the hope of providing greater transparency. We know this has been important to the retail and institutional shareholders. We really appreciate your feedback, and I'm glad to have the confirmation that this information was helpful.

Great. I think we'll move to questions on the phone in the interest of timing getting everyone's questions in. Operator, I just wonder if we could take the first question, please.

Thank you. Our first question, please stand by. Our first question comes from the line of John Murphy. Mr. Murphy with Bank of America, your line is open.

Good evening, everybody. Just a couple of quick ones. Sherry, can you remind us of what you think the minimum cash level is you need to keep on the balance sheet along with liquidity? And how do you think about the key drivers of the improvement of cash flow through the end of next year? I mean, there's a lot going on here on product investments, capacity expansion. It would be understandable that cash burn would stay fairly high in this growth mode, but it seems like you're indicating that it would improve materially as we go through the end of next year. So just curious on minimum cash and how we should think about cash burn improvement?

Yes. So as I said in the prepared remarks, John, we have $3.85 billion in cash already on the books. When you look at the availability under the ABL, the borrowing shifts to $4.2 billion. Even before you look at the fact that we've access to the SIDF program and that's the Saudi Investment Development Fund, which has a $1.4 billion loan capacity. We haven't drawn down on any of that. As we expand next year, a lot of our CapEx is going to be split between both Saudi and here in the United States. All those Saudi dollars were able to draw down against the loan as well. So, as we said, we're good well into Q4 of next year, so you can kind of complete the math there for yourself on minimum cash needs. For key drivers, we're going to continue to keep a watchful eye on manufacturing overhead and labor, looking at bond cost reductions, and keeping an eye on things like raw material inflation. A big part of this is our intentional growth; we're deciding to expand rapidly, quadrupling the size of our Casa Grande facility and the big build-out of our first international facility. That CapEx spend is what's driving a lot of this for next year, and again, that is our decision.

Okay. That's helpful. And then just a second question around the product, Peter. You sound equally excited about the Sapphire and the Pure, which are kind of two ends of the spectrum for Air. I'm just curious, as you think about mix and pricing next year, if you balance the launch of those two products, one at the high-end, one at the lower end of the Air, in this high-mix product, how should we think about that, Peter? And if you look at Sapphire, are there volume limits on that, or if the order book is thousands and thousands, will you feel that? Is there a limit on where Sapphire volume could be capped?

Well, any quick side, John, for different reasons. The key message here is we're going to use our in-house technology to drive down the cost per mile of making an electric car through efficiency. And Pure is a big step forward in advance in that march. It's going to be an example of us making a more affordable car at a more attainable price point and a fundamentally better car. We're going to match the 4.6 miles per kilowatt hour that you see with a more expensive model like Grand Touring, but we're also going to have better rear seat ergonomics because we have a smaller battery pack, we're going to have class-leading range from this thing. It's going to be an amazing product with a character of its own. It's part of our relentless drive to make more affordable products. I'll touch on that in my closing remarks. For Sapphire, it's important because it's a halo product. It's our performance driver-focused brand. It shows how far the Lucid brand can go. But it's really important as a market to demonstrate to the world the sheer prowess, the performance prowess, the driveability that a state-of-the-art, ultra-high-voltage, homegrown electric powertrain can deliver. Sapphire is the most satisfying driving machine. I've driven phenomenal cars throughout my entire career, and I think this is truly the pinnacle of driving machinery. You have a really nice bandwidth from right up to $250,000, and it's a great price range to operate in.

Yeah. We're going to continue to see a strong mix with the nice mix of products. A helpful indicator for informing ASP is the reservations book. We've got the 34,000 reservations, which equates to greater than $3.2 billion in corresponding revenue. That's a helpful indicator as you're looking to build out your models.

It's helpful. Thank you very much, guys.

Thank you.

Thank you.

Next question please.

Thank you. Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald. Your line is open.

Hi Peter. Hi, Sherry. Thank you for taking my question, and congrats on another strong quarter. I just wanted to better understand the CapEx. It looks like the 2022 guidance was lower to $1.2 billion from $2 billion. You mentioned on the call that this reduction is primarily due to timing. So I'm just wondering, I know you haven't disclosed the CapEx for 2023, but should we assume an additional $800 million in CapEx for 2023, or how should we think about that as we go into next year? Thank you.

Yeah. No, thank you for the question, I'd be thinking more of it in terms of a shifting in the way that we estimate for CapEx for both kind of 2022 and if we look at it in 2023. We took a really conservative estimate of all of the exposure that we would have. As payment schedules come in and the work is completed, it's been a little bit slower on the payment side. Those dollars going into 2023, we see that a similar amount of dollars are going to exit 2023 and actually go into 2024. So we don't see it as incremental per se. We see a little bit more as a shifting of dollars based on the way we did our computations for CapEx. We will be giving some more guidance on that in February when we do our Q4 performance and also provide guidance for 2023 then.

Got it. Thank you, Sherry. That's very helpful. For my quick follow-up is just in regards to the agreement with the government of Saudi Arabia for the up to 100,000 vehicles. I'm wondering if you can give a bit more color there regarding the timing. I think in the past you've said that the vehicle deliveries for the agreement are expected to begin no later than the second quarter of 2023 with initial orders in the range of between 1,000 and 2,000 vehicles annually. Is there any additional color you could provide, or just trying to get a sense of how to think about it going forward? Thank you.

Yes, I would say that that's exactly right. I don't have any updates to that guidance. We were just over in Saudi a couple of weeks ago meeting with the Ministry of Finance on the very initiatives. So we're firming up the details. They're starting to pick trends, and we're working on schedules so all of it is coming together really nicely. That same number we said is going to start a little bit slower. Remember, this is a 10-year agreement that they're now making with us. It's a tremendous commitment from KSA, and that's going to extend across multiple vehicle variants. It's going to start with the Air and then move to the Gravity and also to the Lucid platform thereafter.

Yes, indeed. I think that 10-year commitment just underscores what a great long-term partnership we have, particularly with the Public Investment Fund. This is a long-term relationship, and we're planning for a very successful long-term future together.

Wonderful. Thank you so much, and again congrats on the quarter. I will pass it on. Thank you.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Charles Coldicott with Redburn. Your line is open.

Hi. Thanks for taking my questions. My first one was on the order book. So maybe it was a bit surprising to see it decrease in length since Q2. I appreciate deliveries were higher in the past three months than in prior periods. But I guess that still implies that order intake has slowed materially. Why do you think that is? Do you think the order backlog will continue to decrease as you deliver more vehicles in Q4? Perhaps you could comment on what you think is an ideal order backlog for Lucid, either in units or days of sales?

Yes. You absolutely understood it correctly. The reservation does net out all of the deliveries that we had in Q3 as well as up to now in Q4. We did have some cancellations as well. So they've continued to be quite modest, low single-digit percentage amount of cancellations. Just to give you a little bit more context, in August, after we announced the bring down to the 6,000 to 7,000, we think some of the folks felt that they might be pushed out too far. We did see a bit of a spike in August, still low single-digit in terms of cancellations. Now that's normalized. We also think folks are getting excited for Gravity, and that's going to be coming here in early 2023. We're going to be opening up the order book. So, frankly, Peter can speak to this as well, but I'm quite satisfied with where we are.

Charles, yes. There's a good number to hear. We don't want people working too long. There's a perception here, more is better. I think there’s a good number. We've got a great order book here. Some folks we might have lost a few because our Q2 production was lacking, and people anticipated the wait would be too long. But we're addressing that with a dramatic increase in production rates. The big one for us is going to be Gravity. Gravity is absolutely going to be awesome, and many people are saying, 'Look, I'm just holding back now. I want to see what this Gravity is going to be like.' It’s really an SUV that I’m hankering after. If that can deliver the same sort of space concept, range, efficiency, and performance, I'm waiting for the order book to open on that one.

Okay. Understood. Thank you.

The cancellations, too, we're finding as we do research on that, a lot of them are from the people that ordered early. Managing the proper size is really important.

Got it. Thanks. My second question on the gross profit margin. So despite the increase in volumes, there wasn't much improvement in the gross margin versus Q2. Could you comment on that? More big picture, during the SPAC process, your financial guidance indicated that the gross margin would be positive once you were delivering 20,000 units a year. Is 20,000 units anywhere near the scale that you think you require to get to gross margin breakeven? If not, how much higher?

Yes. You're right, the gross margin went a little more negative. But a lot of that is related to us ramping up the business, increasing the inventory. The way that lower cost or net realizable value calculation works is you have to take your inventory and then assume you put into that all the additional dollars needed to scale. During Q3 we are seeing a lot of positive progress on the gross margin as we go into next year. I'm not ready to comment on that fully yet as we're working through the budget; we might provide some guidance on that in February. There are some things that are different than when we went out with SPAC. Raw material prices have been high, but we think they may have peaked in Q3, and we're starting to see some settling in Q4 and beyond. Freight costs remain high, but we've managed to take anything that was air and transport it to sea. We're looking for freight to continue to normalize, which is going to enable the types of numbers we're thinking about previously. More to come on that probably in our next call. Thank you very much for the question.

Can I just sneak one last one in? The CapEx reduction for this year, what are the projects specifically that have been delayed into next year?

Most of the spend this year is based on our AMP-1 facility. This quadrupling of the facility that's happening here in Casa Grande, Arizona, that's where most of it's happening.

Got it. Thank you.

Thank you. Our next question comes from the line of Adam Jonas with Morgan Stanley. Your line is open.

Thanks, everybody. Just a question on cost-cutting. You added about 1,000 new employees in the quarter. I'm just wondering, in addition to some of the delayed CapEx into 2023 and 2024, whether there is an opportunity to maybe slow that pace of hiring? Could we see some of the OpEx or the curvature of it also maybe be flattened a bit sequentially, or how should we think about that as you plow forward with the quadrupling of the size of the facility?

Yeah. I think that's a keen observation, Adam. We're keeping a really watchful eye on this. We want to make sure we scale in the OpEx that commensurate with the progress in the business. If the business is progressing at a certain level, we want to make sure that rate is scaling up. We'll continue to look at SG&A in particular. Remember, part of SG&A is the sales component, so building out that footprint for our studios and service centers is really important for our customer service experience. We don't want to cut ourselves short there. In other areas of the business, we're keeping a very watchful eye on spend.

That's absolutely right, Adam. We're balancing our growth trajectory with prudence.

You'll continue to see as revenues go up, and with the doubling of revenue this quarter, OpEx as a percentage will come down.

Okay. Thanks, Sherry, thanks, Peter. Just a last quick one for me. Thinking into Q4, the LCNRV impact, you guided that you're still going to have production over deliveries. I think implying that as you ramp, you're still going to have to carry inventory in the channel even if it's not work in process inventory. I'm wondering if the number you mentioned of, what was it, $180-some-odd million in the third quarter could flatten, increase, or be a bogey we could think about as an impact into the fourth quarter as well? Thanks, everybody.

It's a complicated calculation, but I would say it’s likely to improve over time as we continue to grow into the full capacity of our facility. Before we start to activate new depreciation expense associated with future expansion, you're probably going to see quite a bit of improvement there. As you start to normalize some inventory levels, remember, a lot of this is looking at inventory and taking a reduction based on that as well.

Thanks, Sherry.

Thank you, Adam.

Our next question comes from the line of Vikram Bagri with Needham. Your line is open.

Good evening, everyone. Thank you for my question. I wanted to quickly discuss the order book and potential revenue as well. The potential revenues decreased by $300 million from about $3.5 billion in Q2 to $3.2 billion in Q3. The third quarter revenues of $200 million do not fully account for the drop. I'm curious about the $100 million gap. Am I misinterpreting these figures? Were higher-priced orders replaced by lower-priced ones during the quarter, or was there another factor, such as Forex impacts? What accounts for the additional $100 million decline in potential revenues?

I'm not necessarily following it. Our deliveries increased by about double, and our revenue increased a little bit more than double. We saw a really nice linear relationship between deliveries and revenue. Our reservation mix continues to be high right now because we've largely been producing the GTs, one of our higher-priced products, higher performance products. As we move forward, we're going to start seeing the Touring and Pure entering into the equation, while also bringing in the Sapphire and some of the GTP. I didn't see any disconnect from my vantage point between the revenue number and the delivery number.

Okay, great. And the second question was I wanted to ask about the resiliency of the 10,000 vehicle order from the Kingdom. There is a lot of talk about the Kingdom looking to have their own EV brand. How does it affect your relationship with the government? Is there increased urgency to deliver those vehicles quickly? Are there safeguards in place to protect that order in any other way? How should we think about that large order from the Kingdom of Saudi Arabia?

I think that it's a testament to the long-term relationship that we have and the support that we've enjoyed from Saudi Arabia. I think we typically see this as the electric car company. There are potentially some synergies with supply chain in the Kingdom as well. Our relationship spans across many ministries within the Kingdom. They committed to 50,000 preorders with an option up to 100,000 over a long-term period of 10 years. I am very confident and think we can co-exist and mutually benefit from each other's existence and growth.

They really view us as vital to the growth of the auto ecosystem overall. That's why we have such a strong relationship building with numerous entities in Saudi Arabia.

Great. If I can sneak one more in. Sherry, you mentioned you will start international deliveries in the fourth quarter. I wondered if you can talk about what that does to the margins, especially since your cost of deliveries will go up and the U.S. dollar is pretty strong. How should we think about margins in the fourth quarter with higher rate, higher headcount, international deliveries, and so forth?

We're just going to be starting the international deliveries in Q4, and that’s going to be going to Europe and Saudi Arabia first. We haven't announced all of our pricing in those regions yet, so stay tuned for that, and you'll be able to see what we're going to be doing.

It's a lot of opportunities; that's the way I'm looking at.

Great. Thank you.

I'm showing no further questions in the queue. I would now like to turn the call back over to Peter for closing remarks.

Great. Before we move to the closing remarks, let's take one more question. The final question regarding orders is whether you plan to produce more affordable cars like Tesla in the future. This ties in nicely with another question: what can shareholders anticipate from Lucid Motors in the next one to two years?

Essentially, this is what it's all about. Our vision is to capitalize and inspire, and accelerate the adoption of sustainable mobility and sustainable energy. To do that, we're developing our own ultra-high technology in-house to create more efficient electric vehicles because not all EVs are created equal, and this enables us to travel further with less batteries, the highest single cost item. That’s where we can drive the cost of EVs down. It may seem a great paradox because right now, we're making starting the luxury product, but mid-decade, we're going to bring our midsized platform in. That's going to be an awesome product and much more affordable. So watch this space. Making EVs more affordable through high technology in this tech race? To that point, what do we expect to see? Well, this year, we're going to see Touring and Pure. Pure is a particular favorite of mine; it's elemental Air truly, and we're going to show more of that on our Lucid launch event on November 15. Please tune into that. We'll have Touring and Pure. Then we're going to have this monumental driving machine Sapphire, which I'm personally testing, and finding the performance truly satisfactory at the moment. It's going to come out in the first half of next year. The real big one looming is Gravity, which I believe will be transformative as a high-tech, high-efficiency, truly sporting SUV. It's a sporting SUV, and I can't wait to show that to everybody. That’s planned for calendar year 2024, and we’ll have a sneak peek of that on November 15. Then we will move towards the late mid-decade on midsized platform, which is going to be about the real gelling of all this technology to make a car that is truly much more affordable mid-price range.

Great. Well, thank you, everyone. This concludes Lucid's Third Quarter 2022 Earnings Conference Call. Thank you all for joining us today. You may now disconnect.