Lucid Group, Inc. — Q1 2023 Form 10-Q
Business context and period. This unaudited filing covers the three months ended March 31, 2023, with comparisons to Q1 2022. Lucid designs, manufactures and sells luxury electric vehicles and related technology; its commercial vehicle at the time was the Lucid Air.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $149.4 million | $57.7 million |
| Cost of revenue | $500.5 million | $246.0 million |
| Gross loss / gross margin | $351.1 million / approximately (235%) | $188.3 million / approximately (326%) |
| Operating loss | $772.2 million | $597.5 million |
| Net loss | $779.5 million | $81.3 million |
| Net loss per share, diluted | $0.43 | $0.36 |
| Operating cash flow | $(801.3) million | $(494.6) million |
| Capital expenditures | $241.8 million | $185.1 million |
Revenue increased 159%, primarily due to higher Lucid Air deliveries. Cost of revenue rose 103%; production remained below manufacturing capacity, leaving significant facility and overhead costs relative to sales. Inventory and firm-purchase-commitment write-downs were $227.0 million, versus $96.4 million a year earlier. Q1 2023 included a $40.8 million loss from revaluing warrants, while Q1 2022 included a $523.3 million gain; this non-cash volatility substantially affects the year-over-year net-loss comparison. Q1 2023 also included $40.0 million of interest income.
At March 31, 2023, cash and cash equivalents were $900.0 million and investments were $2.520 billion, totaling approximately $3.42 billion. Total current assets were $4.12 billion and current liabilities $1.01 billion. Long-term debt was $1.993 billion, principally the 1.25% convertible notes due 2026; short-term GIB borrowings were $9.6 million. Operating and finance lease liabilities totaled approximately $344.4 million. Cash, cash equivalents and restricted cash fell by $835.7 million during the quarter.
Changes, outlook and commentary
- Research and development expense rose 23% to $229.8 million, largely due to prototype, engineering, design and testing costs. Selling, general and administrative expense fell 24% to $168.8 million, mainly because stock-based compensation was lower than in Q1 2022.
- Lucid announced a workforce-reduction restructuring plan on March 28, 2023. It recorded $22.5 million of charges in Q1 and expected total charges of approximately $24 million, with substantial completion targeted by the end of Q2 2023.
- Management said existing liquidity, together with projected operating cash flows, was expected to provide adequate liquidity for at least the next 12 months. It forecast fiscal 2023 capital expenditures of $1.4–$1.6 billion. This outlook is subject to substantial execution and financing risks.
- Management expected Lucid Gravity SUV production to begin in 2024. The filing also describes continued AMP-1 expansion and construction of Saudi Arabia’s AMP-2.
- Long-term purchase commitments were approximately $5.1 billion, primarily for battery cells; plant and equipment commitments were $534 million. The company cautioned that production ramp, demand, costs, and access to financing remain uncertain.
Risks, contingencies and unusual items
- Lucid reported recurring operating losses, negative operating cash flow, and an accumulated deficit of $8.1 billion. It expects substantial losses and spending to continue; additional capital may be needed.
- Key risks include production ramp and capacity utilization, cancellable customer reservations and orders, reliance on a single vehicle model, luxury-market demand, competition and pricing pressure, supply-chain constraints and single-source suppliers, and cost inflation.
- The company disclosed construction deficiencies at part of its Casa Grande facility requiring remediation to support future production, and inspection findings at facilities for which it was working with local authorities. Remediation could be costly; authorities could require operational pauses if issues are not addressed.
- Pending shareholder securities and derivative lawsuits include allegations concerning past projections and statements. Lucid said it considered pending matters not material to its business, while noting outcomes were uncertain. Separately, SEC staff informed Lucid on April 27, 2023 that its business-combination investigation was concluded and that staff did not intend to recommend enforcement action.
- Lucid reported effective disclosure controls and procedures as of March 31, 2023 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent vehicle deliveries, production volumes, demand, cancellations and progress toward efficient production at AMP-1.
- Cash burn, liquidity runway, actual 2023 capital spending, and whether additional financing will be required.
- Progress and costs of restructuring and facility remediation, and whether these actions deliver expected savings without disrupting operations.
- Inventory valuation, future write-downs, purchase commitments and the timing and conditions for Saudi financing and AMP-2 support.
- Developments in pending litigation, product recalls or warranty costs, and the timing of Lucid Gravity production.