Lucid Group, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Lucid designs, manufactures and sells luxury electric vehicles and related technology, primarily the Lucid Air. The filing was signed May 6, 2024.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $172.7 million | $149.4 million; up 16% |
| Cost of revenue | $404.8 million | $500.5 million; down 19% |
| Gross loss / gross margin | $232.1 million / approximately -134% | $351.1 million / approximately -235% |
| Research and development | $284.6 million | $229.8 million; up 24% |
| Selling, general and administrative | $213.2 million | $168.8 million; up 26% |
| Operating loss | $729.9 million | $772.2 million |
| Net loss | $680.9 million; $0.30 per share | $779.5 million; $0.43 per share |
| Operating cash flow | $(516.7) million | $(801.3) million |
| Cash, cash equivalents and investments | $4.62 billion at March 31, 2024 | $4.32 billion at December 31, 2023 |
Revenue growth reflected higher Lucid Air deliveries and a $5.4 million increase in regulatory-credit sales, partly offset by lower average vehicle selling prices. The gross loss narrowed as inventory and firm-purchase-commitment write-downs fell, but remained substantial. Such write-downs totaled $137.8 million, compared with $227.0 million in Q1 2023. Operating expenses rose 18% in total, despite no restructuring charge in Q1 2024; the prior-year period included $22.5 million of restructuring charges.
Cash provided by investing activities was $317.5 million, principally reflecting investment maturities exceeding purchases. Financing activities provided $997.2 million, primarily from the $1.0 billion preferred-stock placement with Ayar. Capital expenditures were $198.2 million in Q1. At quarter-end, current assets were $4.83 billion and current liabilities $1.04 billion. The company reported an accumulated deficit of $10.9 billion.
Debt and liquidity: Long-term debt was $2.00 billion, representing the carrying value of $2.01 billion principal amount of 1.25% convertible notes due 2026. Lucid also had approximately $72.5 million outstanding under its GIB facility, recorded in current liabilities. The $1.0 billion ABL facility had no borrowings; reported availability was $360.6 million, subject to borrowing-base limits and covenants. No SIDF loan balance was outstanding. Management stated that existing liquidity and projected operating cash flows were expected to provide adequate liquidity for at least the next 12 months, while also describing the business as capital-intensive and dependent on future funding.
Material changes and notable items
- Revenue from the Saudi government vehicle purchase agreement was $51.4 million in Q1 2024, versus none in Q1 2023. Saudi government-related receivables were $84.9 million, or 66.9% of total accounts receivable, at quarter-end.
- On March 29, 2024, Lucid issued Ayar $1.0 billion of Series A redeemable convertible preferred stock. It carries cumulative 9% annual dividends, initially converts at $3.5952 per common share subject to terms and adjustments, and has an initial conversion threshold tied to a $5.50 common-stock price. The filing reported a $497.1 million embedded derivative liability and $504.5 million carrying value for the preferred stock at quarter-end. Conversion, redemption and other settlement provisions may dilute common holders or require cash under specified circumstances.
- The preferred stock was initially convertible into approximately 278 million common shares. The filing lists approximately 467 million shares reserved for potential issuance across preferred stock, notes, warrants, options, RSUs and equity plans.
- Other income included a $27.1 million noncash gain from revaluing warrants, partly offset by a $19.9 million noncash loss on Aston Martin shares. Interest income was $50.6 million.
- Inventory declined to $565.7 million from $696.2 million at year-end 2023. Property, plant and equipment, net, increased to $3.0 billion; construction in progress was $1.33 billion.
Outlook, management commentary and risks
- Management expects approximately $1.5 billion of capital expenditures in fiscal 2024. It expects Gravity SUV production to start in late 2024 and the Midsize platform to start production in late 2026. Lucid said near-term production would remain materially below manufacturing capacity and expects operating expenses to increase as the business grows.
- Management cautioned that inventory write-downs could continue to affect vehicle costs as production ramps. The company remains loss-making, has negative operating cash flow and says it expects substantial losses and additional financing needs.
- Significant commitments include approximately $4.9 billion of minimum inventory-component purchase commitments, including battery-cell commitments, and $330.2 million of AMP-1 and AMP-2 plant and equipment commitments at March 31, 2024. These commitments may be burdensome if production or demand falls short.
- Key risks include demand and pricing pressure in the premium EV market; reliance on the Lucid Air and a limited number of models; manufacturing scale-up and facility remediation costs; single-source suppliers and supply-chain disruption; execution and funding risks for Saudi Arabia manufacturing expansion; and the possibility that customers defer purchases or cancel orders.
- Additional risks include potential dilution and Ayar’s voting and governance influence; conditions attached to financing facilities and Saudi support; vehicle warranty, recall, and product-liability exposure; and pending securities, derivative and direct-sales litigation. Management stated that pending legal matters were not considered likely to have a material adverse effect, but outcomes remain uncertain. The SEC informed Lucid in April 2023 that it had concluded its investigation of the business combination without intending to recommend enforcement action.
- Management reported disclosure controls and procedures were effective as of March 31, 2024 and no material change in internal control over financial reporting occurred during the quarter.
Important facts for investors to verify
- Whether vehicle deliveries, pricing and production volumes can improve gross economics and reduce the continuing cash burn.
- Whether the $4.62 billion of cash and investments, available credit and expected cash flows are sufficient against the stated capital plan, purchase commitments and ongoing losses.
- The preferred stock’s dividend accrual, conversion and settlement mechanics, potential dilution, cash-settlement exposure and Ayar’s related voting and consent rights.
- Progress and costs for Gravity production, AMP-1 remediation and AMP-2 construction, including milestones tied to Saudi support.
- Collection timing for Saudi government receivables and the actual purchasing pace under the vehicle agreement, whose minimum quantity may be reduced under specified terms.
- Future inventory and purchase-commitment charges, warranty costs, supplier continuity, and developments in the pending litigation and Gravity trademark challenge.