Earnings Call Transcript - LCID Q2 2025

Operator, Operator

Ladies and gentlemen, thank you for being here, and welcome to the Lucid Group Second Quarter 2025 Earnings Conference Call. Please note that this conference is being recorded. I would now like to hand the call over to your speaker for today, Nick Tork, Vice President of Communications. Please proceed.

Nick Tork, Vice President of Communications

Thank you, and welcome to Lucid Group's Second Quarter 2025 Earnings Call. Joining me today are Marc Winterhoff, our Interim CEO; and Taoufiq Boussaid, our CFO. Before handing the call over to Marc, let me remind you that some of the statements on this call include forward-looking statements under Federal's Securities law. 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 and guidance, macroeconomic policy and industry trends, tariffs and trade policy and other future events. These statements are based on various assumptions, whether or 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. 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, 2024, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other SEC filings and the forward-looking statements on Page 2 of our quarterly earnings presentation available online 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 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 financials is in our release issued earlier this afternoon as well as in the earnings presentation. With that, I'd like to turn the call over to Lucid's Interim CEO, Marc Winterhoff. Marc, please go ahead.

Marc Winterhoff, Interim CEO

Thank you, everyone, for joining us in our second quarter 2025 earnings call. I want to start by expressing my gratitude to our employees, customers, partners, and shareholders. Your ongoing support for our mission inspires us every day. In the second quarter of 2025, we made significant progress operationally and strategically. We delivered 3,309 vehicles, which is a 38% increase year-over-year, marking our sixth straight quarter of record deliveries. We produced 3,863 vehicles, up 83% year-over-year. As anticipated, our average selling price increased sequentially this quarter due to an improved mix. However, gross margin took a hit, and Taoufiq will provide further details on this. We have informed you that we are engaged in active discussions about partnerships beyond just selling or licensing our leading EV technology. On July 17, we took an important step in this direction when we announced our partnership with Uber and Nuro to develop a next-generation premium robotaxi specifically designed for Uber's ride-hailing service. This collaboration merges our advanced software-defined vehicle architecture with Nuro's Level 4 autonomy and Uber's extensive global network and fleet management, creating a fully integrated robotaxi experience focused on comfort, safety, and scalability. Our cutting-edge efficiency and technologies, such as our AV-capable sensors and robust safety systems, are vital for maximizing uptime and reducing operating costs—both crucial for a successful robotaxi program. The new security architecture positions it as an ideal platform for third-party autonomy integrations. Under the agreement, Uber will invest $300 million in Lucid, pending regulatory review. Uber aims to deploy at least 20,000 Lucid Gravity vehicles equipped with Nuro's driver technology over the next six years in various global markets, with the first launches expected late next year. This partnership marks a significant entry for Lucid into the massive robotaxi market, but it is just the beginning. While collaborating with external partners, we continue to enhance our internal Advanced Driver-Assistance Systems and Autonomous Driving capabilities, including our recently announced hands-free driving software update, with more developments to come. Additionally, we are utilizing our collaboration with the University of Science and Technology to improve our AI models for ADAS and AD and bring innovative solutions from research to the road. I have made it clear that we intend to monetize Lucid's technology through licensing agreements or strategic partnerships, and this announcement validates our potential in new markets. Uber's investment in Lucid further demonstrates third-party recognition of our advanced technical platform, and we continue to engage with other potential partners. Last week, we fulfilled our commitment to elevate awareness for our products and the Lucid brand by announcing Timothée Chalamet as our first global brand ambassador. Chalamet will appear in a new campaign promoting Lucid Gravity, representing a significant effort to increase brand visibility. This campaign is set to launch in early September and is designed to foster brand affinity and trust as we prepare to enter the mass market with our midsized vehicles. Let me take a moment to explain how these initiatives align with our mission to provide not just the best car in the world, but also the best company. Since taking on our roles, Taoufiq and I have focused on aligning our priorities. We are committed to three key near-term objectives: operational discipline, building a unique and scalable brand, and maintaining a sustainable edge through our technology. Operational discipline pertains to manufacturing, cost management, and various business elements. Our goal is to produce between 18,000 to 20,000 vehicles in 2025. In the second quarter, we produced just over 6,000 vehicles, and I am pleased to say that we are on target with Lucid Gravity production at this point in the year. Our team has worked diligently to resolve supply chain bottlenecks and enhance manufacturing efficiency. I am happy to announce that we have mostly overcome these challenges and are beginning to increase Lucid Gravity production, with significant ramp-up expected in the second half of the year. The challenges we faced were complex, primarily involving supplier capacity and the availability of magnets sourced from China, which is a common industry issue. We have been addressing these concerns by collaborating closely with suppliers and implementing initiatives aimed at improving accountability and data-driven decision-making. As a result, we are already seeing improvements in Lucid Gravity production. To tackle potential geopolitical supply chain challenges, we quickly adopted alternative magnets in our production. Thanks to our agile in-house vertical integration, this adjustment took only weeks instead of months. With software and manufacturing changes working in tandem, we have avoided halting production in the second quarter. I am confident that this issue is resolved, and we now have sufficient magnets for the remainder of the year. As previously noted, we remain committed to U.S.-based manufacturing, which enhances our resilience and mitigates risks from tariffs and other geopolitical factors. In this regard, I would like to highlight a couple of recent announcements that bolster our position. We announced a preliminary agreement with Graphite One to source natural and synthetic graphite domestically starting in 2028, supplementing our previous non-binding supply agreement with them from April 2024. Furthermore, we played a role in establishing a collaboration among U.S. critical minerals producers aimed at supporting domestic manufacturing and sourcing. We see these as crucial steps to protect our supply chain from global fluctuations. We also recently celebrated the opening of Panasonic's U.S. factory in Kansas, which will enhance our domestic supply chain starting in 2026 as they are one of our key suppliers. Amplifying demand through brand marketing and partnership initiatives is our next priority. Our team's recent efforts have been exemplified by announcements made in recent weeks. I am pleased with our progress in enhancing our brand, but this is only the start. In September, we plan to introduce a new Gravity campaign featuring Timothée Chalamet as part of our broader partnership. To deepen brand trust, we are expanding our initiatives beyond traditional advertising through partnerships with elite athletes, influential cultural figures, and globally recognized creators aligned with our vision. We are also forming strategic collaborations with leading brands and organizations in sports and culture to engage new communities and strengthen consumer emotional connections to our brand. In terms of our brand's scalability, many new customers are experiencing Lucid Gravity in our studios, and we are witnessing a significant increase in order conversion rates once they interact with the vehicle. Our daily order rate has nearly doubled since we widely delivered display and test drive vehicles to our studios. Our final priority is to sustain and enhance our competitive edge through technology. Engineering and technological excellence have always defined Lucid, and we remain focused on these principles as we grow. Recently, we rolled out a software update to our DreamDrive Pro Advanced Driver-Assistance System, enabling hands-free driving and lane changes. This feature is expected to be available for Lucid Gravity later this year. Additionally, we commenced production of the 2026 Lucid Air, which introduces a new battery pack for touring models that improves the EPA-rated range to 431 miles compared to 406 miles from the previous year. Notably, all 2026 Lucid Air models now use the same AC compressor as Lucid Gravity, marking the beginning of our efforts to standardize parts across our vehicle lines. The Lucid Air Grand Touring recently showcased its range leadership by setting a Guinness World Record for the longest distance traveled by an electric vehicle on a single charge. Moreover, Current Driver referred to the Lucid Sapphire as the quickest car they've ever tested, achieving 0 to 60 mph in 1.9 seconds and completing a quarter-mile in 9.1 seconds. The Lucid Gravity Dream edition, with dual motors, matched this performance with a quarter-mile time of 10.5 seconds. The Lucid Gravity Touring impressed with its acceleration beyond 60 mph, highlighting the exceptional passing power and highway merging confidence that characterize Lucid performance. The same Lucid Gravity Dream edition can reach 150 mph quicker than a Corvette Z06 according to Current Driver. Earlier, I discussed our partnership with Uber and Nuro, which validates that the advanced capabilities of Lucid Gravity serve as an optimal platform for integrating AD technology. Looking ahead, our midsized platform vehicles will be crucial in maintaining Lucid's technological competitive edge. These models are designed for leading product features while keeping costs low, positioning our company for substantial market growth. This approach aims to balance cost-effectiveness and high-volume production while preserving the premium quality our customers expect from Lucid. A key element of our strategy is our ADAS drive unit, which underpins our efficiency and cost management strategy. We are dedicated to maintaining our leadership in powertrain efficiency while achieving lower costs and exceptional performance. Lastly, as you may know, the Lucid Gravity was the first non-Tesla vehicle to offer a built-in next connector for Tesla Supercharger network access. We have also recently extended this access for Lucid Air owners. As of July 31, Lucid Air owners with an approved adapter in North America can charge at any of the 2,300-plus Tesla Supercharger locations nationwide, which is integrated into their Lucid app, in addition to more than 30,000 CCS chargers available for Lucid drivers in North America. In closing, we are not just making electric vehicles; we are redefining what EVs can accomplish. From the groundbreaking performance and efficiency of the Lucid Air to the transformative Lucid Gravity and our forthcoming midsized platform, our technology is continually pushing the boundaries of possibility. Our mission extends beyond creating outstanding EVs; it involves building a strong business around that goal. This means fostering innovation while scaling wisely, establishing a resilient supply chain, and making strategic decisions that secure our long-term success. We are entering a critical new phase where world-class engineering is paired with exceptional execution. With the talent, focus, and determination within our team, I genuinely believe we are only at the beginning. Thank you for your continued support of Lucid as we aim to shape the future of mobility and American manufacturing.

Taoufiq Boussaid, CFO

Thank you, Marc, and thank you to those who are joining us today. I'd like to build on Marc's comments by sharing more details about our operational and financial performance this quarter. I will also provide clarity on the strategic steps we're taking to position Lucid for long-term success. In the last few months, our focus has been on execution, turning strategic commitments into measurable progress across production, cost discipline, and financial resilience. We have also taken meaningful steps to strengthen our capital structure and accelerate monetization of our technology. One of our most significant recent developments was our agreement with Nuro, which represents far more than a commercial transaction. It is a strategic alignment with two leading players in mobility and autonomy, who chose Lucid Gravity as the core platform for the next-generation robotaxi. Uber's planned $300 million investment in Lucid, subject to regulatory approval, will directly support the development and integration of this program. It reflects external confidence in our underlying architecture and is a validation of the broader platform opportunity we see beyond direct-to-consumer sales. It also confirms our ability to create scalable enterprise value by deploying our technology in new verticals, including fleet, autonomy, and AI. In parallel, we announced our intention to implement a reverse stock split. This is not a cosmetic action; it is a deliberate and targeted measure to ensure Lucid's equity remains accessible to a broader universe of long-only institutional investors. It also aligns our share price with the strategic trajectory of the company as we move into the next chapter of scaling our operations and deepening our capital market engagement. The reverse split is expected to take effect in early September, subject to shareholder approval. Turning now to the numbers. We have delivered $259 million in revenue in Q2, marking a 29% increase year-over-year. We produced 3,863 vehicles, and deliveries reached 3,309 units, up 38% compared to the same quarter last year. This marks our sixth consecutive quarter of record deliveries. Despite the ongoing challenges facing the EV sector, particularly in supply chain, we maintained positive momentum and continued progressing toward our volume targets. Given the continuously shifting market environment, we have decided to provide our production guidance as a range. Gross margin for the quarter was negative 105%, and this reflected a $54 million impact from tariffs alone, which accounted for a 21 percentage point decrease in gross margin, offsetting the benefits from sequential improvements in ASP. While we anticipate this pressure, we're actively taking decisive actions to move margins back toward a positive trajectory. These actions include material cost optimization, improving production efficiency, and tighter inventory management. We also saw continued cost discipline across the organization while maintaining targeted investments in products and brands. R&D totaled $274 million for the quarter, reflecting higher spending on the midsized platform and Atlas powertrain. SG&A was $257 million, a sequential increase as it normalized following the one-time reversal of previously recognized stock-based compensation expense in the first quarter. Importantly, we are continuing to make deliberate trade-offs across the business, investing where it matters and streamlining where appropriate. Adjusted EBITDA was negative $632 million, down 12%, driven mainly by gross margin pressure. We ended the quarter with $3.6 billion in cash and investments and total liquidity of $4.86 billion. Our financial position remains strong, providing us the runway to fund operations and execute our long-term plans. CapEx totaled $183 million, consistent with our guidance and inventory rose to $730 million, reflecting Lucid Gravity production builds and preparations for ramp-up. Looking forward, we are navigating an environment that remains volatile and uneven. We flagged earlier this year the potential impact of tariff-related margin headwinds in the range of 8% to 15%. Based on what we know today and the mitigations we have already activated, including localized sourcing, engineering substitutions, and vertical integration, we now believe the actual impact will fall at the lower end of that range. We are also continuing to manage exposure to magnet supply risk through a combination of supplier diversification and in-house reengineering. The lessons learned during the Lucid Gravity ramp are informing our decisions as we prepare for the start of midsized production in late 2026. On the policy front, most of you are aware of the elimination of the $7,500 lease credit beginning in Q4 of this year. We have defined countermeasures that will be implemented in Q3 to address this change. This next phase of our strategy will require us to scale with precision. The midsize platform represents a critical opportunity to expand Lucid's addressable market, enhance manufacturing leverage, and offer a broader value proposition to customers without compromising on performance and efficiency. We are applying everything we've learned from the Lucid Gravity to ensure this program comes to market with greater agility, lower unit costs, and shorter lead times. Lastly, we are updating our annual production guidance to a range of 18,000 to 20,000 vehicles. Going forward, we will provide production guidance as a range to reflect the potential impact of continuously changing market environment and external factors. We are refining our 2025 CapEx guidance to a range of $1.1 billion to $1.2 billion. This adjustment reflects a more focused investment approach, prioritizing critical programs with the highest near-term returns and long-term strategic value and deprioritizing lower return investments. We remain committed to funding future growth, and all other operational and strategic targets remain unchanged. Let me close with this: as you've seen, we are committed to building a great company, not just a great product. That means scaling responsibly, investing wisely, and staying laser-focused on the fundamentals: quality, cost, and capital discipline. We are operating in one of the most dynamic and competitive industries of our time. What will distinguish the winners from the rest is not ambition alone but execution, and execution is what we do.

Operator, Operator

Thanks, Taoufiq. We'll now start the Q&A portion of the call. Before we take questions from those on the phone, I want to pose questions that our retail investors send in through the technology platform. The first question comes from Sean D. How many current Gravity orders are there?

Unidentified Company Representative, Unidentified Company Representative

We don't disclose the specific number of orders we've received. However, as I referenced in my prepared remarks, customers are now experiencing Lucid Gravity in our studios, and we are seeing a high conversion rate once people see the vehicle for themselves. We are happy with what we're seeing, and we remain supply constrained and not demand constrained. We expect the situation will normalize soon.

Operator, Operator

Our second question comes from Paul C. Is the midsize platform still on target for production in late 2026? Are deliveries expected to start in 2026 or 2027, and does the acquisition of the facilities impact the midsize timeline at all?

Unidentified Company Representative, Unidentified Company Representative

The midsize is still scheduled for start of production in late 2026 and we are planning to unveil the vehicle next year. Given that production starts in late 2026, we expect deliveries to ramp up throughout 2027. Regarding the facilities we acquired, while they added capabilities, they will not impact the timeline of our midsized vehicles.

Operator, Operator

It comes from Adrian B. How will the partnership with Uber aid in company growth? And how big of an impact do you expect it to have?

Unidentified Company Representative, Unidentified Company Representative

The strategic partnership with Uber and Nuro is our entry into a large and very attractive market. As far as impact, partnering with companies like Uber and Nuro validates Lucid's highly scalable platform and signals our right to win in new markets as we continue to pursue additional partnerships. This is the start of our path to extend our innovation and technology leadership into this multitrillion-dollar market.

Unidentified Analyst, Analyst

Now we'd like to take questions from the phone lines. Operator?

Operator, Operator

Our first question will come from the line of Andres Sheppard with Cantor Fitzgerald.

Andres Juan Sheppard-Slinger, Analyst

Congratulations on the quarter. Just a quick question on ASPs, just given the macro environment, should we be expecting any changes to the midsized initial ASPs as they ramp up?

Unidentified Company Representative, Unidentified Company Representative

Midsize ASPs ramp up. I think that is still some time out. Are you referring to Gravity?

Andres Juan Sheppard-Slinger, Analyst

So just on the mid-size, I know we're not there yet, but just curious if you're expecting any changes to initial ASPs once it's available.

Unidentified Company Representative, Unidentified Company Representative

No. No. I mean, there's no plan and no expectation that the ASP of the midsize will be impacted. As a matter of fact, we see the current situation as a temporary phase where we had a significant hype around EVs a couple of years ago. Now there's a slowdown, but we are fully convinced that EVs are the way forward, and this will normalize over the next years.

Andres Juan Sheppard-Slinger, Analyst

Got it. That's very helpful. And just as a follow-up, maybe for Taoufiq, can you remind us of the plans regarding the 2026 convertible that's coming up? Like remind us how you're planning on addressing, I think, the remaining $900 million that's left.

Taoufiq Boussaid, CFO

Yes, Andres. So the plan is still– I think we touched quickly on it the last time we spoke. The plan is still to go to the market in the next coming quarters. So I mean there is no change to that. So obviously, we're carefully monitoring the market situation in order to take advantage of the best conditions. But it's something that, for the moment, we're planning for towards the end of 2025, early 2026.

Operator, Operator

And that will come from the line of Stephen Gengaro with Stifel.

Stephen David Gengaro, Analyst

Okay. Sorry about that. I hit mute by mistake. What I would like to start with, if you don't mind, is can you talk about the current approach and if it changed to licensing agreements and what you see the potential there for over the next couple of years?

Unidentified Company Representative, Unidentified Company Representative

Yes. I mean actually, the comment on that one would not change compared to what I said three months ago because we have still ongoing discussions on that topic. Most of the other OEMs we are talking to have other problems right now. They are still very much focused on grappling with the tariff effect and those kinds of things. And so those discussions are still happening; they are just progressing slower. We still see the potential in those deals. But as I said last time, we are also having discussions and partnerships beyond this topic. The Nuro and Uber deal is one example of that, and we are expecting more to come to fruition in the future as well.

Stephen David Gengaro, Analyst

Great. And I apologize for that background noise. The other question, just an update on how the new Atlas Powertrain is coming and sort of your confidence in the development of that and the efficiency of that product versus– because you're just so well known for how efficient the motor systems are. So I'm just curious where things stand there.

Unidentified Company Representative, Unidentified Company Representative

Yes, it's on track. To put it simply, this is our next-generation powertrain that we are targeting to achieve the same efficiency or even better at a much lower cost. So we are fully on track with that at this point. Yes, looking very much forward to deploying this in the midsized platform as the first vehicle.

Operator, Operator

And that will come from the line of James Picarelli with BNP Paribas.

Thomas Jacob Scholl, Analyst

This is Jake on for James. I was wondering if you could just quantify Gravity deliveries in the second quarter? And based on third-party data, which is admittedly unreliable for Lucid, there were no deliveries in July. So is there a hang-up, like a quality issue with the Gravity delivery ramp? When should we expect to see material volumes?

Unidentified Company Representative, Unidentified Company Representative

Yes. Well, let me address July first. That number is incorrect. And that's all I want to say about that; it's totally inaccurate. When it comes to numbers for the second half, we are not disclosing this, but we're definitely in the process of ramping up Gravity in the second half of this year, and Gravities will actually be the majority of our deliveries. But yes, going back to the July number, we saw that as well. But yes, it's unfortunate that something like this is published.

Thomas Jacob Scholl, Analyst

And then CapEx is an area where I think you guys have done a good job controlling your costs, keeping under expectations. But even the revised guide, it looks like you're implying spending will more than double in the second half. So could you just talk through some of the puts and takes there?

Unidentified Company Representative, Unidentified Company Representative

Well, as you can imagine, CapEx spend is not a linear exercise. Between the moment you place your purchase orders, you finalize all the blueprints and so forth, there’s a lag of time. This is why CapEx spend is backloaded. Most of the spend will be related to our API facility. So again, it's not a linear spend. What we have tried to do is critically evaluate all the CapEx spend proposals and make sure that we only spend where it deserves to be spent, with the highest product return and the highest level of return. Hence the revised guidance that we have provided. But yes, most of the spending will happen in the second half of the year.

Operator, Operator

Our next question will come from the line of Tobias Beith.

Unidentified Analyst, Analyst

I have three questions, if that's okay. Two for Marc and one for Taoufiq, and I'll ask them separately. Marc, in your prepared remarks, you cited issues in production, but output in the second quarter is at an all-time high and above demand. I also understand that Gravity and the Air use the same amount of magnets, so I'm slightly confused. Could you provide further details on that topic or clarify what I may have missed?

Marc Winterhoff, Interim CEO

Yes. First of all, that problem is behind us. We solved that issue in Q2. In the second half of the year, we have secured enough magnets, so we have no problem with that anymore. When it comes to your second part, the Gravity and the Air using the same magnet is not exactly true. Because what happens is that over each model year and from each model, we have minor changes in the chemical setup of the magnets and those kinds of things. So that is not really accurate. We had a shortfall for a certain trend, and we were able to overcome this with some creativity from our engineering teams. This enabled us to maintain production during Q2. That helped us overcome that challenge.

Unidentified Analyst, Analyst

Okay. I think that clarifies things. The second question for Marc is: About two years ago, I asked your predecessor to detail the timeline and the required milestones from the beginning of Gravity production to help me judge progress from the outside. I was wondering if you could please do the same for the Atlas Powertrain and the first model based on the midsized platform.

Marc Winterhoff, Interim CEO

Yes. Right now, one key thing that we're doing is sourcing. What I'm saying right now applies to the Atlas Powertrain and also to the midsized platform. There's not really a difference because both of them will come at the same time. Sourcing is important because we are sourcing for the so-called validation builds. All of the engineering work will be quickly finalized. From there, we go into a validation phase with various tests, including winter testing later in the year and then homologation. Those are the steps that are following. I guess the background of your question is the start of production of the midsize is still planned for the end of 2026, and that plan has not changed.

Unidentified Analyst, Analyst

Taoufiq, final question from me: How much of the step-up in the write-downs on inventories and losses from purchase commitments is attributable to tariffs versus building raw inventory for the ramp-up of the Gravity?

Taoufiq Boussaid, CFO

Yes. So first of all, yes, there is an impact on inventory adjustment for the next six months' commitment of purchases. It is, as we see it, an event that primarily impacted Q2 because for the subsequent quarters, we will need to do a reversal that will offset the new provision that we will book, provided that we maintain roughly an equivalent volume of procurement. Knowing that we acquired and did increase our inventory in Q2, we should expect the volumes to remain stable in Q3 and Q4. Therefore, it will not necessitate any incremental impairment that we might have to book. We stated that the tariffs' impact in Q2 was around $55 million. This is a net figure which includes the actual tariff impact, which is about $55 million. There’s also the impairment we booked only in Q2 and a netting effect coming from the reimbursement that we are getting. Hence, all this leads to a net $55 million for the quarter.

Unidentified Analyst, Analyst

Okay, to be crystal clear, right, the 21 points of tariff impact were realized, but not all of it was realized in the second quarter? You're still expecting some reimbursements to come later in the year. So the actual impact on the second quarter was more than 21%?

Taoufiq Boussaid, CFO

No, no. I mean we will have reimbursement and that will continue. It's a flat percentage function of the localization of the procurement activity and the volumes. So this will continue until the end of the year. The only difference is that booking the impairment of the inventory will not happen for the balance of the year, as it will be netted off between the reversal and provision that we book. That's why when you look at our financial guidance, we are stating that the tariff impact on a full-year basis will be on the lower end of what we provided, 8% to 15%. We had 21% in Q2 largely because we had to book the first impairment on inventories that will not happen in subsequent quarters.

Operator, Operator

I'm showing no further questions in the queue at this time. This concludes Lucid's Second Quarter of 2025 Earnings Conference Call. Thank you all for joining us today, and you may now disconnect.