Lucid Group, Inc. Common Stock 2026 Q2 Earnings Call

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, 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 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 8-K and other SEC filings, and the forward-looking statements on page two 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-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 earnings presentation. Please note that today's agenda is longer than usual.

We plan to reserve 20 minutes for questions at the end of the call, and we'll take them in the order received. With that, I'd like to turn the call over to Lucid CEO, Silvio Napoli. Silvio, please go ahead. 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 midterm priorities, and the actions already underway. In my first two months as CEO with the company, I spent much of my time with the people who do the work in our factories, studios, service centers, engineering labs, and technology centers. My approach is simple. Listen first, understand what is happening on the ground, and act with urgency. Over more than 30 years, I've 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. 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. 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. 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, under-invested 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 consequence is clear. We have strained trust. Trust with our customers, trust with our employees, trust with our suppliers, and ultimately, trust with you, our investors. 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. 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 our three fundamentals as our three Cs: cash and cost, customer and quality, and culture and team. The four must-win projects are, first, our plan to deliver $1.4 billion of cash flow improvement by year-end. Second, the Uber Nuro Robotaxi project. Third, the completion of our AMP-2 factory in Saudi Arabia, and fourth, our midsize 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 U.S. workforce by one-fifth and eliminated the second shift at our Arizona factory. These two measures combined generated $115 million in projected annualized savings. The decision to separate ourselves from hardworking team members was not taken lightly.

I would like to take this opportunity to thank them again for their contribution to make Lucid what it is today. That decision was necessary, and it was only the first step in our cost reduction efforts. 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 Lucid's long-term value. We've already identified approximately $1.4 billion of cash flow 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 too 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 him, we're assigning clear ownership to each major customer pain point and creating a closed loop from customer feedback to corrective action. We are 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 deployed measures to strengthen our software rollout process, and we're 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, Lucid UX 3.6, added hands-free drive assist in combination with other customer features and stability improvements. I'm excited to share that in a few days, at Monterey Car Week, we will unveil a new, sportier version of the Lucid Gravity. Coming to the third of our Cs, 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 2, 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're 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.