What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-08 · 134 added, 185 removed, 147 unchanged (68% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 , filed with the SEC on February 28, 2022.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

This discussion may contain forward-looking statements based upon Lucid’s current expectation, estimates and projections that involve risks and uncertainties.

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We are a technology and automotive company with a mission to inspire the adoption of sustainable energy by creating advanced technologies and the most captivating luxury electric vehicles, centered around the human experience.

Our focus on in-house technological innovation, vertical integration, and a “clean sheet” approach to engineering and design have led to the development of our groundbreaking electric vehicle, the Lucid Air.

We sell vehicles directly to consumers through our retail sales network and through direct online sales.

We believe that owning our sales network provides an opportunity to closely manage the customer experience, gather direct customer feedback, and ensure that customer interactions are on-brand and tailored to our customers’ need.

We also operate an in-house vehicle service network, with brick-and-mortar service centers in various geographies and a mobile service fleet.

In addition to our in-house service capabilities, we established and continue to grow an approved list of specially trained collision repair shops which also serve as a repair hub for our mobile service offerings in some cases.

Our focus on in-house technology innovation, vertical integration, and a “clean sheet” approach to engineering and design have led to the development of the award-winning Lucid Air.

We sell vehicles directly to consumers through our retail sales network and through direct online sales including through Lucid Financial Services.

We own and operate a vehicle service network comprised of service centers in major metropolitan areas and a fleet of mobile service vehicles.

In addition to our in-house service capabilities, we established and continue to grow an approved list of specially trained collision repair shops which also serve as repair hubs for our mobile service offerings in some cases.

We began delivering the Lucid Air to customers in October 2021.

We expect to launch additional vehicles over the coming decade.

We have already commenced design and engineering work for Project Gravity, a luxury SUV that is expected to leverage and expand the technological advancements from the Lucid Air.

We expect to begin production of Project Gravity in 2024.

After the Lucid Air and Project Gravity, we plan to leverage and expand our technological and manufacturing advancements to develop and manufacture progressively more affordable vehicles in higher volumes.

We further believe that our battery systems expertise positions us to produce compelling stationary energy storage system (“ESS”) products.

ESS is a technologically adjacent opportunity which can leverage the modular design of our battery packs and our extensive experience with battery pack and battery management systems.

Recent Developments

At-the-Market Offering

On November 8, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with BofA Securities, Inc., Barclays Capital Inc.

and Citigroup Global Markets Inc.

(collectively, the “Managers”), under which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price up to $600 million.

Subject to the terms and conditions of the Equity Distribution Agreement, the Managers may sell the shares by any method permitted by law including, without limitation, in ordinary brokers’ transactions, to or through a market maker, in privately negotiated transactions, in block trades, in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act or through a combination of any such methods of sale.

The Equity Distribution Agreement will terminate on the earlier of September 1, 2025, its termination by the parties pursuant to the terms of the Equity Distribution Agreement, or the issuance and sale of all of the shares through any Manager pursuant to the terms under the Equity Distribution Agreement.

Subscription Agreement

In addition, on November 8, 2022, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with Ayar, pursuant to which Ayar has agreed to purchase from the Company, subject to certain conditions, up to $915 million (the “Maximum Investment Amount”) of shares of its common stock in one or more private placements through March 31, 2023 (the “Ayar Investment”).

The number of shares that Ayar will purchase from the Company in the Ayar Investment will be equal to the number of shares of its common stock that the Company actually sells pursuant to the Equity Distribution Agreement, multiplied by a ratio, the numerator of which is approximately 60.4%, which is the number of shares of its common stock owned by Ayar as a percentage of the total number of shares of its common stock outstanding as of September 30, 2022, and the denominator of which is approximately 39.6%, rounded down to the nearest whole share.

The Company will settle the Ayar Investment on the last trading day of each calendar quarter based on the number of shares that are actually sold pursuant to the Equity Distribution Agreement during such calendar quarter, at a price per share equal to the weighted average price to the public of the shares that are actually sold pursuant to the Equity Distribution Agreement during such calendar quarter.

In addition, Ayar will have the right, but not the obligation, to enter into a subscription agreement substantially on the terms and subject to the conditions set forth in the Subscription Agreement in respect of any increase to the maximum offering amount under the Equity Distribution Agreement and/or any new at-the-market

offering of the Company’s common stock made or commenced, respectively, during the term of the Subscription Agreement.

The Subscription Agreement will terminate automatically upon the earlier of March 31, 2023, the date upon which the Company has sold to Ayar shares for an aggregate purchase price equal to the Maximum Investment Amount, or its termination by the parties pursuant to the terms of the Subscription Agreement.

We have already commenced design and engineering work for the Lucid Gravity, a luxury sports utility vehicle (“SUV”) that is expected to leverage and expand the technological advancements from the Lucid Air.

We expect to begin production of the Lucid Gravity SUV in 2024.

After the Lucid Air and the Lucid Gravity SUV, we plan to leverage and expand our technological and manufacturing advancements to develop and manufacture progressively higher-volume vehicle segments.

Potential Impact of an Economic Downturn on our Business

A global economic recession or other downturn, whether due to inflation, ongoing conflict in Ukraine or other geopolitical events, COVID-19 or other public health crises, interest rate increases or other policy actions by major central banks, or other factors, may have an adverse impact on our business, prospects, financial condition and results of operations.

Adverse economic conditions as well as uncertainty about the current and future global economic conditions may cause our customers to defer purchases or cancel their reservations and orders in response to tighter credit, decreased cash availability, fluctuations in foreign currency exchange rates, and weakened consumer confidence.

A global economic recession or other downturn, whether due to inflation, ongoing conflict in Ukraine or other geopolitical events, COVID-19 or other public health crises, interest rate increases or other policy actions by major central banks, government closures of banks and liquidity concerns at other financial institutions, or other factors, may have an adverse impact on our business, prospects, financial condition and results of operations.

Adverse economic conditions as well as uncertainty about the current and future global economic conditions may cause our customers to defer purchases or cancel their reservations and orders in response to higher interest rates, availability of consumer credit, decreased cash availability, fluctuations in foreign currency exchange rates, and weakened consumer confidence.

Reduced demand for our products may result in significant decreases in our product sales, which in turn would have a material adverse impact on our business, prospects, financial condition and results of operations.

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In addition, the deterioration of conditions in global credit markets may limit our ability to obtain external financing to fund our operations and capital expenditures on terms favorable to us, if at all.

See “Risk Factors” in Part II, Item 1A of this Quarterly Report for additional information regarding risks associated with a global economic recession, including under the caption “A global economic recession or other downturn may have a material adverse impact on our business, prospects, results of operations and financial condition.”

See “Risk Factors” in Part II, Item 1A of this Quarterly Report for more information regarding risks associated with a global economic recession, including under the caption “A global economic recession, government closures of banks and liquidity concerns at other financial institutions, or other downturn may have a material adverse impact on our business, prospects, results of operations and financial condition.”

Impact of the COVID-19 Pandemic on our Business

The COVID-19 pandemic continues to impact the global economy and cause significant macroeconomic uncertainty.

The COVID-19 pandemic has impacted the global economy and caused significant macroeconomic uncertainty.

Infection rates vary across the jurisdictions in which we operate.

Governmental authorities have continued to implement numerous and constantly evolving measures to attempt to contain the virus, such as travel bans and restrictions, masking recommendations and mandates, vaccine recommendations and mandates, limits on gatherings, quarantines, shelter-in-place orders and business shutdowns.

We have taken proactive action to protect the health and safety of our employees, customers, partners and suppliers, consistent with the latest and evolving governmental guidelines.

We expect to continue to implement appropriate measures until the adequate containment of the COVID-19 pandemic.

We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations and requirements or as we otherwise see fit to protect the health and safety of our employees, customers, partners and suppliers.

While certain of our and our suppliers’ operations have from time-to-time been temporarily affected by government-mandated restrictions, we were able to commence deliveries of the Lucid Air to customers and to proceed with the construction of our Advanced Manufacturing Plant 1 in Casa Grande, Arizona (“AMP-1”).

Broader impacts of the pandemic have included inflationary pressure as well as ongoing, industry-wide challenges in logistics and supply chains, such as increased port congestion, intermittent supplier delays and a shortfall of semiconductor supply.

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While we continue to focus on mitigating risks to our operations and supply chain in the current industry environment, we expect that these industry-wide trends will continue to impact our cost structure as well as our ability and the ability of our suppliers to obtain parts, components and manufacturing equipment on a timely basis for the foreseeable future.

In the current circumstances, given the dynamic nature of the situation, any impact on our financial condition, results of operations or cash flows in the future continues to be difficult to estimate and predict, as it depends on future events that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, the duration and continued spread of the outbreak, its severity, potential additional waves of infection, the emergence of more virulent or more dangerous strains of the virus, the actions taken to mitigate the virus or its impact, the development, distribution, efficacy and acceptance of vaccines worldwide, how quickly and to what extent normal economic and operating conditions can resume, the broader impact that the pandemic is having on the economy and our industry and specific implications the pandemic may have on our suppliers and on global logistics.

See “Risk Factors” in Part II, Item 1A of this Quarterly Report for additional information regarding risks associated with the COVID-19 pandemic, including under the caption “ The ongoing COVID-19 pandemic has adversely affected, and we cannot predict its ultimate impact on, our business, prospects, results of operations and financial condition.

In the current circumstances, any impact on our financial condition, results of operations or cash flows in the future continues to be difficult to estimate and predict, as it depends on future events that are highly uncertain and cannot be predicted with accuracy.

See “Risk Factors” in Part II, Item 1A of this Quarterly Report for more information regarding risks associated with the COVID-19 pandemic, including under the caption “ The COVID-19 pandemic has adversely affected, and we cannot predict its ultimate impact on, our business, prospects, results of operations and financial condition.

Key Factors Affecting Our Performance

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We believe that we are positioned to be a leader in the electric vehicle market by unlocking the potential for advanced, high-performance, and long-range electric vehicles to co-exist.

The Lucid Air is designed with race-proven battery pack technologies and robust performance together with a sleek exterior design and expansive interior space given our miniaturized key drivetrain components.

The Lucid Air is designed with race-proven battery and powertrain technologies and robust performance together with a sleek exterior design and expansive interior space given our miniaturized key drivetrain components.

We anticipate consumer demand for the Lucid Air based on its luxurious design, high-performance technology and sustainability leadership, and the growing acceptance of and demand for electric vehicles as a substitute for gasoline-fueled vehicles.

We have received significant interest in the Lucid Air from potential customers.

As of November 7, 2022, we had refundable reservations and non-refundable orders of cars yet to be delivered that reflect potential sales of over $3.2 billion.

Direct-to-Consumer Model

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We expect to continue to incur significant expenses in our sales and marketing operations for sale of the Lucid Air, including to open studios, hire a sales force, invest in marketing and brand awareness, and stand up a service center operation.

As of September 30, 2022, we have opened twenty-nine studios and service centers, one in Germany, two in Canada, twenty-six in the United States (one in each of Colorado, Massachusetts, Michigan, New Jersey, Texas, and Virginia, and two in each of Arizona, Illinois, New York, and Washington, three in Florida, as well as nine in California).

We also intend to hire additional sales, customer service, and service center personnel.

As of March 31, 2023, we have opened forty studios and service centers that are customer-facing, thirty-one in the United States (ten in California, three in each of Florida and New York, two in each of Arizona, Illinois, Massachusetts, Texas, Virginia and Washington, and one in each of Colorado, Michigan and New Jersey), four in Canada, one in Germany, one in Netherlands, one in Norway, one in Switzerland, and one in Saudi Arabia.

We also expect to hire additional sales, customer service, and service center personnel.

We believe that investing in our direct-to-consumer sales and service model will be critical to deliver and service the Lucid electric vehicles we plan to manufacture and sell.

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Achieving commercialization and growth for each generation of electric vehicles requires us to make significant capital expenditures to scale our production capacity and improve our supply chain processes in the United States and internationally.

We expect our capital expenditures to increase as we continue our expansion of AMP-1 and construction of planned Advanced Manufacturing Plant 2 in the Kingdom of Saudi Arabia (“AMP-2”).

We expect our capital expenditures to increase as we continue our expansion of AMP-1 and construction of planned Advanced Manufacturing Plant 2 in Saudi Arabia (“AMP-2”).

The amount and timing of our future manufacturing capacity requirements, and resulting capital expenditures, will depend on many factors, including the pace and results of our research and development efforts to meet technological development milestones, our ability to develop and launch new electric vehicles, our ability to achieve sales and experience customer demand for our vehicles at the levels we anticipate, our ability to utilize planned capacity in our existing facilities and our ability to enter new markets.

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The electric vehicle market is highly competitive and includes both established automotive manufacturers and new entrants.

To establish market share and attract customers from competitors, we plan to continue to make substantial investments in research and development for the commercialization and continued enhancements of the Lucid Air, the development of Project Gravity, and future generations of our electric vehicles and other products.

To establish market share and attract customers from competitors, we plan to continue to make substantial investments in research and development for the commercialization and continued enhancements of the Lucid Air, the development of the Lucid Gravity SUV, and future generations of our electric vehicles and other products.

Inflationary Pressure

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Our cost to manufacture a vehicle is heavily influenced by the cost of the key components and materials used in the vehicle, cost of labor, as well as cost of equipment used in our manufacturing facilities.

As we continue our phased construction of our AMP-1 facility, increases in steel prices and cost of construction labor have led to higher capital expenditures.

We expect that the inflationary pressure will persist for the foreseeable future.

As we continue our phased construction of our AMP-1 facility, increases in material and infrastructure equipment prices and cost of construction labor have led to higher capital expenditures.

Results of Operations

The following table presents our revenue for the periods presented (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

Revenue $ 195,457 $ 232 $ 195,225 *nm $ 350,468 $ 719 $ 349,749 *nm

*nm - not meaningful

We began generating sales from the deliveries of vehicles in the fourth quarter of 2021.

Three Months Ended March 31,

2023 2022 $ Change % Change

Revenue $ 149,432 $ 57,675 $ 91,757 159 %

We recognize vehicle sales when the customer obtains control of the vehicle, which is upon delivery.

We also generate revenue from the sale of powertrain kits, battery pack systems, supplies and related services for vehicles to a single customer.

Revenue increased by $195.2 million and $349.7 million, respectively, for the three and nine months ended September 30, 2022, as compared to the same periods in the prior year, primarily driven by customer deliveries of Lucid Air vehicles.

We also generate revenue from non-warranty after-sales vehicle services and parts, sales of battery pack system, powertrain kits and retail merchandise.

Revenue increased by $91.8 million for the three months ended March 31, 2023, as compared to the same period in the prior year, primarily driven by an increase in deliveries of the Lucid Air vehicles.

Cost of Revenue

The following table presents our cost of revenue for the periods presented (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

Cost of revenue $ 492,483 $ 3,320 $ 489,163 *nm $ 1,030,795 $ 3,424 $ 1,027,371 *nm

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Cost of revenue related to vehicle sales primarily include direct parts, materials, shipping and handling costs, allocable overhead costs such as depreciation of manufacturing related equipment and facilities, information technology costs, personnel costs including wages and stock-based compensation, estimated warranty costs and charges to reduce inventories to their net realizable value or charges for inventory obsolescence.

Cost of revenue related to powertrain kits, battery pack systems, supplies and related services for electric vehicles primarily consists of direct parts and materials, shipping and handling costs, personnel costs including wages and stock-based compensation, and estimated warranty costs related to battery pack systems.

Cost of battery pack systems also includes allocated overhead costs such as depreciation of manufacturing related equipment and facilities, and information technology costs.

Cost of revenue increased by $489.2 million and $1,027.4 million, respectively, for the three and nine months ended September 30, 2022 as compared to the same periods in the prior year, primarily due to the manufacture and sale of Lucid Air vehicles in 2022.

We incurred significant personnel and overhead costs to operate our large-scale manufacturing facilities while ramping up production, with production activity for a limited quantity of vehicles in the three and nine months ended September 30, 2022.

Three Months Ended March 31,

2023 2022 $ Change % Change

Cost of revenue $ 500,524 $ 245,970 $ 254,554 103 %

Cost of vehicle sales includes direct parts, materials, shipping and handling costs, allocable overhead costs such as depreciation of manufacturing related equipment and facilities, information technology costs, personnel costs, including wages and stock-based compensation, estimated warranty costs, charges to reduce inventories to their net realizable value, charges for any excess or obsolete inventories, and losses from firm purchase commitments.

Cost of other revenue includes direct parts, material and labor costs, manufacturing overhead, including amortized tooling costs, shipping and logistic costs.

Cost of other revenue also includes costs associated with providing non-warranty after-sales services and costs for retail merchandise.

Cost of revenue increased by $254.6 million for the three months ended March 31, 2023, as compared to the same period in the prior year, primarily due to the increase in the manufacture and sale of the Lucid Air vehicles in 2023.

We incurred significant personnel and overhead costs to operate our large-scale manufacturing facilities while ramping up production.

In the near term, we expect our production volume of vehicles to continue to be significantly less than our manufacturing capacity.

Additionally, we recorded write downs of $186.5 million and $364.6 million, respectively, in the three and nine months ended September 30, 2022 to reduce our inventories to their net realizable values, for any excess or obsolete inventories, and losses from firm purchase commitments.

Additionally, we recorded write-downs of $227.0 million and $96.4 million in the three months ended March 31, 2023 and 2022, respectively, to reduce our inventories to their net realizable values, for any excess or obsolete inventories, and losses from firm purchase commitments.

We expect inventory write-downs could negatively affect our costs of vehicle sales in upcoming periods in the near term as we ramp production volumes up toward our manufacturing capacity.

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The following table presents our operating expenses for the periods presented (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

Three Months Ended March 31,

2023 2022 $ Change % Change

Research and development $ 229,803 $ 186,076 $ 43,727 23 %

Selling, general and administrative 168,770 223,159 (54,389) (24) %

Restructuring charges 22,496 — 22,496 *nm

Total operating expenses $ 421,069 $ 409,235 $ 11,834 3 %

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Research and Development

Our research and development efforts have primarily focused on the development of our battery and powertrain technology, the Lucid Air, Project Gravity, and future generations of our electric vehicles.

Our research and development efforts have primarily focused on the development of our battery and powertrain technology, the Lucid Air, the Lucid Gravity SUV, and future generations of our electric vehicles.

Research and development expenses consist primarily of materials, supplies and personnel-related expenses for employees involved in the engineering, designing, and testing of electric vehicles.

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Research and development expenses also include prototype material, engineering, design and testing services, and allocated facilities costs, such as office and rent expense and depreciation expense, and other engineering, designing, and testing expenses.

Research and development expense decreased by $28.6 million, or 12%, for the three months ended September 30, 2022 as compared to the same period in the prior year.

The decrease was primarily attributable to lower personnel-related expenses of $31.7 million due to lower stock-based compensation expense of $25.1 million, and a decrease of $18.5 million in allocated facilities cost, partially offset by an increase of $26.0 million for prototype material, engineering, design and testing services.

The stock-based compensation expense was lower primarily due to the initial recognition of the cumulative expense recognized for the three months ended September 30, 2021 related to the restricted stock units (“RSUs”) upon the closing of the merger of a merger subsidiary of Churchill and Atieva, Inc., with Atieva, Inc.

surviving such merger as a wholly owned subsidiary of Churchill (the “ Merger”) .

Research and development expense increased by $13.6 million, or 2%, for the nine months ended September 30, 2022 as compared to the same period in the prior year.

The increase was primarily attributable to higher personnel-related expenses of $41.0 million due to higher stock-based compensation expense of $37.2 million and an increase of $22.7 million for prototype material, engineering, design and testing services, partially offset by decreases of $33.7 million in allocated facilities costs and $18.9 million from lower utilization of contractors and professional fees.

The stock-based compensation expense for the nine months ended September 30, 2021 included expenses recognized related to the RSUs upon the closing of the Merger, and the fourth closing of the Legacy Lucid Series E preferred stock issuance.

Research and development expense increased by $43.7 million, or 23% for the three months ended March 31, 2023, as compared to the same period in the prior year.

The increase was primarily attributable to an increase of $43.6 million for prototype material, engineering, design and testing services, partially offset by lower personnel-related expenses of $3.6 million ($20.8 million lower stock-based compensation expenses, offset by $17.2 million increase due to our growth in headcount).

Selling, General, and Administrative

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We are incurring additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations, and professional services.

Selling, general, and administrative expense decreased by $74.8 million, or 30%, for the three months ended September 30, 2022 as compared to the same period in the prior year.

The decrease was primarily attributable to lower personnel-related expenses of $116.4 million (decrease in stock-based compensation expense of $139.3 million, offset by $22.9 million increase due to our growth in headcount), partially offset by higher utilization of contractors and professional fees of $19.4 million, and increases in other general corporate expenses of $10.1 million, allocated facilities costs of $6.2 million, and sales and marketing expenses of $4.3 million.

The stock-based compensation expense was lower primarily due to initial recognition of the cumulative expense recognized for the three months ended September 30, 2021 related to the RSUs upon the closing of the Merger.

Selling, general, and administrative expense increased by $108.2 million, or 24%, for the nine months ended September 30, 2022 as compared to the same period in the prior year.

The increase was primarily attributable to higher utilization of contractors and professional fees of $37.5

million, and increases in allocated facilities costs of $23.5 million, other general corporate expenses of $18.5 million, and sales and marketing expenses of $14.5 million.

The increase was also attributable to higher personnel related expenses of $9.7 million ($90.6 million increase due to our growth in headcount, partially offset by lower stock-based compensation expense of $80.9 million).

Selling, general, and administrative expense decreased by $54.4 million, or 24% for the three months ended March 31, 2023, as compared to the same period in the prior year.

The decrease was primarily attributable to lower personnel related expenses of $74.7 million ($89.5 million lower stock-based compensation expense mainly driven by the vesting of the four tranches of CEO performance-based awards during the three months ended March 31, 2022, offset by $14.8 million increase due to our growth in headcount), partially offset by increases in allocated facilities costs of $10.9 million, other general corporate expenses of $4.5 million, and higher utilization of contractors and professional fees of $4.4 million.

Restructuring Charges

On March 28, 2023, we announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating expenses in response to evolving business needs and productivity improvement through a reduction in workforce.

We expect to substantially complete the Restructuring Plan by the end of the second quarter of 2023, subject to local law and consultation requirements.

As a result of the Restructuring Plan, we expect to record total restructuring charges of approximately $24 million, primarily related to severance payments, employee benefits, employee transition and stock-based compensation.

Restructuring charges of $22.5 million for the three months ended March 31, 2023 primarily related to severance payments, employee benefits and stock-based compensation, net of a reversal of previously recognized stock-based compensation expense.

Other Income (Expense), net

The following table presents our other income and expense, net for the periods presented (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

The following table presents our other income (expense), net for the periods presented (in thousands):

Three Months Ended March 31,

2023 2022 $ Change % Change

Other income (expense), net:

Change in fair value of forward contracts $ — $ — $ — *nm $ — $ (454,546) $ 454,546 (100) %

Change in fair value of convertible preferred stock warrant liability — — — *nm — (6,976) 6,976 (100) %

Change in fair value of common stock warrant liability 140,146 (24,787) 164,933 *nm 998,319 (24,787) 1,023,106 *nm

Transaction costs expensed — (2,717) 2,717 (100) % — (2,717) 2,717 (100) %

Interest income 24,373 — 24,373 *nm 27,284 — 27,284 *nm

Interest expense (7,613) (76) (7,537) *nm (22,521) (111) (22,410) *nm

Other income (expense), net 665 249 416 167 % 9,898 (151) 10,049 *nm

Total other income (expense), net $ 157,571 $ (27,331) $ 184,902 *nm $ 1,012,980 $ (489,288) $ 1,502,268 *nm

Change in fair value of common stock warrant liability $ (40,802) $ 523,330 $ (564,132) (108) %

Interest income 40,005 — 40,005 *nm

Interest expense (7,108) (7,719) 611 (8) %

Other income, net 667 956 (289) (30) %

Total other income (expense), net $ (7,238) $ 516,567 $ (523,805) (101) %

*nm - not meaningful

Change in Fair Value of Contingent Forward Contracts

Our contingent forward contracts provided the holder the right to purchase Legacy Lucid Series D preferred stock and Legacy Lucid Series E preferred stock in future periods and were subject to remeasurement to fair value at each balance sheet date.

Changes in the fair value of our contingent forward contracts were recognized in the condensed consolidated statements of operations and comprehensive loss.

Change in contingent forward contracts liability decreased by $454.5 million, for the nine months ended September 30, 2022, as compared to the same period in the prior year.

The Legacy Lucid Series E contingent forward contracts were settled during the six months ended June 30, 2021, and there are no future earnings adjustments pertaining to the contingent forward contracts.

Change in Fair Value of Convertible Preferred Stock Warrant Liability

Our convertible preferred stock warrant liability related to the warrants to purchase shares of Legacy Lucid Series D preferred stock was subject to remeasurement to fair value at each balance sheet date.

Changes in the fair value of our convertible preferred stock warrant liability were recognized in the condensed consolidated statements of operations and comprehensive loss.

All issued and outstanding shares of Legacy Lucid Series D preferred stock were settled in February 2021 and there will no longer be future earnings adjustments pertaining to the convertible preferred share warrant liability related to Legacy Lucid Series D preferred stock.

We recorded a loss of $7.0 million for the nine months ended September 30, 2021 due to the changes in fair value of the convertible preferred stock warrant liability related to Legacy Lucid Series D preferred stock upon the exercise and settlement of all outstanding warrants to purchase Legacy Lucid Series D preferred stock.

Change in Fair Value of Common Stock Warrant Liability

Our common stock warrant liability relates to the Private Placement Warrants to purchase shares of Lucid Group common stock that were effectively issued upon the Closing in connection with the reverse recapitalization treatment of the Merger.

Our common stock warrant liability relates to the privately placed common stock warrants (the “Private Placement Warrants”) to purchase shares of Lucid Group common stock that were effectively issued upon the Closing in connection with the reverse recapitalization treatment of the Merger.

Our common stock warrant liability is subject to remeasurement to fair value at each balance sheet date.

Changes in the fair value of our common stock warrant liability were recognized in the condensed consolidated statements of operations and comprehensive loss.

The Private Placement Warrants remained unexercised as of September 30, 2022.

The liability was remeasured to fair value, resulting in gains of $140.1 million and $998.3 million, respectively, for the three and nine months ended September 30, 2022, and was classified within change in fair value of common stock warrant liability in the condensed consolidated statements of operations and comprehensive loss.

The Private Placement Warrants remained unexercised as of March 31, 2023.

The liability was remeasured to fair value, resulting in a loss of $40.8 million and a gain of $523.3 million for the three months ended March 31, 2023 and 2022, respectively, and was classified within change in fair value of common stock warrant liability in the condensed consolidated statements of operations and comprehensive loss .

See Note 7 “Common Stock Warrant Liability” to our condensed consolidated financial statements included elsewhere in this Quarterly Report for more information.

Transaction Costs Expensed

In connection with the Merger, the Company incurred $38.9 million in one-time direct and incremental transaction costs, consisting of banking, legal, and other professional fees.

Transaction costs incurred by Lucid were allocated on a relative fair value basis between equity and liability-classified instruments deemed to be issued for financial reporting purposes at the Closing by Lucid.

The Company’s $36.2 million transaction costs allocable to equity-classified instruments, including the common stock and public warrants, were charged as a direct reduction to Lucid’s additional paid-in capital of the gross proceeds remitted to Lucid from Churchill.

The Company’s $2.7 million transaction costs allocable to liability-classified instruments measured at fair value, including the private warrants, were charged to the condensed consolidated statements of operations and comprehensive loss upon the Closing for the three and nine months ended September 30, 2021.

Interest Income

Interest income of $24.4 million and $27.3 million, respectively, for the three and nine months ended September 30, 2022, primarily consisted of interest, as well as amortization and accretion of purchase premiums and discounts on our investments of available-for-sale securities.

Interest income of $40.0 million for the three months ended March 31, 2023 primarily consisted of interest, as well as amortization and accretion of purchase premiums and discounts on our investments of available-for-sale securities.

Interest Expense

Interest expense consists primarily of contractual interest and amortization of debt discounts and debt issuance costs incurred related to the 2026 Notes issued in December 2021, interest and commitment fee as well as amortization of issuance costs incurred associated with ABL Credit Facility and GIB Credit Agreement, and interest on our finance leases.

Interest expense increased by $7.5 million and $22.4 million, respectively, for the three and nine months ended September 30, 2022 as compared to the same periods in the prior year, primarily related to the 2026 Notes issued in December 2021.

Interest expense decreased by $0.6 million for the three months ended March 31, 2023, as compared to the same period in the prior year, primarily due to an increase in interest capitalized on construction in progress related to significant capital asset construction, partially offset by an increase in commitment fees from the five-year senior secured asset-based revolving credit facility (“ABL Credit Facility”).

Other Income (Expense), net

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We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

Other income (expense), net increased by $0.4 million and $10.0 million, respectively, during the three and nine months ended September 30, 2022 as compared to the same periods in the prior year, primarily due to changes in foreign currency exchange rates and dividend income from our investments.

Other income (expense), net did not significantly fluctuate during the three months ended March 31, 2023 as compared to the same period in the prior year.

Provision for Income Taxes

Three Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands)

2022 2021 $ Change % Change 2022 2021 $ Change % Change

Provision for income taxes 149 22 127 *nm 540 31 509 *nm

*nm - not meaningful

Our provision for income taxes consist primarily of U.S.

2023 2022 $ Change % Change

Provision for income taxes $ 129 $ 323 $ (194) (60) %

Our provision for income taxes consists primarily of U.S.

state and foreign income taxes in jurisdictions in which we operate.

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and state net deferred tax assets because we believe it is more likely than not that the recoverability of these deferred tax assets will not be realized.

The provision for income taxes increased by $0.1 million and $0.5 million, respectively, for the three and nine months ended September 30, 2022 as compared to the same periods in the prior year, primarily due to changes in taxable income of our foreign operations.

The provision for income taxes decreased by $0.2 million for the three months ended March 31, 2023, as compared to the same period in the prior year, primarily due to changes in the mix of jurisdictional earnings.

Liquidity and Capital Resources

Sources of Liquidity

As of September 30, 2022, Lucid had approximately $3.85 billion of cash, cash equivalents and investments.

Our sources of cash are predominantly from proceeds from Lucid’s de-SPAC transaction with Churchill (plus PIPE), and the issuance of convertible debt.

We expect that our current sources of liquidity together with our projection of cash flows from operating activities will provide us with adequate liquidity over at least the next 12 months, including investment in funding (i) ongoing operations, (ii) research and development projects for new products/ technologies, (iii) production and manufacturing ramps at existing manufacturing facilities in Casa Grande, Arizona, (iv) Phase 2 of construction at AMP-1 in Casa Grande, Arizona, (v) the construction of AMP-2, (vi) expansion of retail studios and service centers, and (vii) other initiatives related to the sale of vehicles and/ or technology.

We anticipate our cumulative spending on capital expenditures to be approximately $1.2 billion for the fiscal year 2022 to support our continued commercialization and growth objectives as we strategically invest in manufacturing capacity and capabilities, our retail studios and service center capabilities throughout North America and across the globe, development of different products and technologies, and other areas supporting the growth of Lucid’s business.

As of March 31, 2023, Lucid had approximately $3.4 billion of cash, cash equivalents and investments.

Our sources of cash are predominantly from proceeds received upon the completion of the Merger, the issuance of convertible debt and proceeds from equity offerings.

We expect that our current sources of liquidity together with our projection of cash flows from operating activities will provide us with adequate liquidity for at least the next 12 months, including investment in funding (i) ongoing operations, (ii) research and development projects for new products/ technologies, (iii) expanding production and manufacturing at existing manufacturing facilities in Casa Grande, Arizona, (iv) Phase 2 of construction at AMP-1 in Casa Grande, Arizona, (v) construction of AMP-2, (vi) expansion of retail studios and service centers, and (vii) other initiatives related to the sale of vehicles and/ or technology.

We anticipate our cumulative spending on capital expenditures to be in the range of $1.4 billion to $1.6 billion for the fiscal year 2023 to support our continued commercialization and growth objectives as we strategically invest in manufacturing capacity and capabilities, our retail studios and service center capabilities throughout North America and across the globe, development of different products and technologies, and other areas supporting the growth of Lucid’s business.

Our future capital expenditures may vary and will depend on many factors including the timing and extent of spending and other growth initiatives.

We expect our operating expenses to increase in order to grow and support the operations of a global automotive company targeting volumes in line with Lucid’s aspirations.

As of September 30, 2022, our total minimum lease payments are $486.3 million, of which $7.3 million is due in the current fiscal year.

We also have non-cancellable long-term commitments of $291.2 million, primarily relating to certain inventory component purchases.

For details regarding these obligations, refer to Note 14 “Leases” and Note 15 “Commitments and Contingencies”.

In December 2021, Lucid entered into a purchase agreement pursuant to which we issued $2,012.5 million of the 2026 Notes.

In addition, we expect our operating expenses to increase in order to grow and support the operations of a global automotive company targeting volumes in line with Lucid’s aspirations.

As of March 31, 2023, our total minimum lease payments are $486.5 million, of which $35.1 million is due in 2023.

We also have non-cancellable long-term commitments of $5.1 billion, primarily relating to certain inventory component purchases.

For details regarding these obligations, refer to Note 10 “Leases” and Note 11 “Commitments and Contingencies” to the condensed consolidated financial statements included elsewhere in this Quarterly Report for more information.

In December 2021, Lucid issued $2,012.5 million of the 2026 Notes.

The 2026 Notes accrue interest at a rate of 1.25% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022.

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From and after September 15, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

The initial conversion rate is 18.2548 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $54.78 per share of common stock.

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In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

As of September 30, 2022, we were in compliance with applicable covenants under the indenture governing the 2026 Notes.

As of March 31, 2023 and December 31, 2022, we were in compliance with applicable covenants under the indenture governing the 2026 Notes.

International Manufacturing Expansion

On February 27, 2022, the Company announced that it has selected King Abdullah Economic City (“KAEC”) in the Kingdom of Saudi Arabia as the location of its first international manufacturing plant and signed related agreements with the Ministry of Investment of Saudi Arabia, the Saudi Industrial Development Fund, and the Economic City at KAEC.

The agreements are estimated to provide financing and support of up to $3.4 billion in aggregate over the next 15 years to build and operate a manufacturing facility in the Kingdom.

The operations at the new plant would initially consist of re-assembly of Lucid Air vehicle “kits” pre-manufactured in the U.S.

On February 27, 2022, we announced that we had selected King Abdullah Economic City (“KAEC”) in Saudi Arabia as the location of our first international manufacturing plant and signed related agreements with the Ministry of Investment of Saudi Arabia, the Saudi Industrial Development Fund, and the Economic City at KAEC.

The operations at the new plant would initially consist of re-assembly of the Lucid Air vehicle “kits” pre-manufactured in the U.S.

and, over time, production of complete vehicles.

Saudi Industrial Development Fund (“SIDF”) Loan Agreement

On February 27, 2022, Lucid, LLC, a limited liability company established in the Kingdom of Saudi Arabia and a subsidiary of the Company (“Lucid LLC”) entered into a loan agreement (as subsequently amended, the “SIDF Loan Agreement”) with SIDF, a related party of Public Investment Fund (“PIF”), which is an affiliate of Ayar Third Investment Company, the controlling stockholder of the Company (“Ayar”).

On February 27, 2022, Lucid, LLC, a limited liability company established in Saudi Arabia and a subsidiary of the Company (“Lucid LLC”) entered into a loan agreement (as subsequently amended, the “SIDF Loan Agreement”) with SIDF, a related party of Public Investment Fund (“PIF”), which is an affiliate of Ayar.

Under the SIDF Loan Agreement, SIDF has committed to provide loans (the “SIDF Loans”) to Lucid LLC in an aggregate principal amount of up to SAR 5.19 billion (approximately $1.4 billion);

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The SIDF Loan Agreement also defines customary events of default, including abandonment of or failure to commence operations at the plant in KAEC, and drawdowns under the SIDF Loan Agreement are subject to certain conditions precedent.

As of September 30, 2022, no amounts were outstanding under the SIDF Loan Agreement.

As of March 31, 2023 and December 31, 2022, no amount was outstanding under the SIDF Loan Agreement.

Ministry of Investment of Saudi Arabia (“ MISA”) Agreements

In February 2022, Lucid LLC entered into agreements with MISA, a related party of PIF, which is an affiliate of Ayar, pursuant to which MISA has agreed to provide economic support for certain capital expenditures in connection with Lucid LLC’s on-going design and construction of AMP-2.

The support by MISA are subject to Lucid LLC’s completion of certain milestones related to the construction and operation of AMP-2.

The support by MISA is subject to Lucid LLC’s completion of certain milestones related to the construction and operation of AMP-2.

Following the commencement of construction, if operations at the plant do not commence within 30 months, or if the agreed scope of operations is not attained within 55 months, MISA may suspend availability of subsequent support.

Pursuant to the agreement, MISA has the right to require Lucid LLC to transfer the ownership of AMP-2 to MISA, at the fair market value thereof, minus an amortized value of the support provided in the event of customary events of default including abandonment or material and chronic low utilization of AMP-2.

Pursuant to the agreements, MISA has the right to require Lucid LLC to transfer the ownership of AMP-2 to MISA, at the fair market value thereof, minus an amortized value of the support provided in the event of customary events of default including abandonment or material and chronically low utilization of AMP-2.

Alternatively, Lucid LLC is entitled to avoid the transfer of the ownership of AMP-2 by electing to pay such amortized value.

The agreements will terminate on the fifteenth anniversary of the commencement of completely-built-up (“CBU”) operations at AMP-2 at the latest.

During the three and nine months ended September 30, 2022, the Company received support of SAR 366 million (approximately $97.3 million) in cash, of which $70.7 million was recorded as deferred liability within other long-term liabilities and $26.6 million was recorded as a deduction in calculating the carrying amount of the related assets on the condensed consolidated balance sheet.

There are no unfulfilled conditions and contingencies attached to the payments received.

In 2022, we received support of SAR 366 million (approximately $97.3 million) in cash.

We recorded $46.5 million and $64.0 million as deferred liability within other long-term liabilities on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.

We also recorded $50.8 million and $33.3 million as a deduction in calculating the carrying amount of the related assets on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.

There were no unfulfilled conditions and contingencies attached to the payments received.

Gulf International Bank (“GIB”) Facility Agreement

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GIB is a related party of PIF, which is an affiliate of Ayar.

The GIB Facility Agreement provides for two committed revolving credit facilities in an aggregate principal amount of SAR 1 billion (approximately $266.2 million).

SAR $650 million (approximately $173.0 million) under the GIB Facility Agreement is available as bridge financing (the “Bridge Facility”) of Lucid LLC’s capital expenditures in connection with AMP-2.

The remaining SAR 350 million (approximately $93.2 million) may be used for general corporate purposes (the “Working Capital Facility”).

Loans under the Bridge Facility and the Working Capital Facility will have a maturity of no more than 12 months.

The Bridge Facility will bear interest at a rate of 1.25% per annum over 3-month SAIBOR and the Working Capital Facility will bear interest at a rate of 1.70% per annum over 3-month SAIBOR and associated fees.

The Company is required to pay a quarterly commitment fee of 0.15% per annum based on the unutilized portion of the GIB Credit Facility.

Commitments under the GIB Facility Agreement will terminate, and all amounts then outstanding thereunder will become payable, on the maturity date of the GIB Facility Agreement.

The GIB Facility Agreement contains certain conditions precedent to drawdowns, representations and warranties and covenants of Lucid LLC and events of default.

As of September 30, 2022 , the Company had outstanding borrowing s of SAR 51 million (approximately $13.6 million) from the Working Capital Facility, which was recorded within other current liabilities on the condensed consolidated balance sheets.

As of September 30, 2022, available borrowings are SAR 650 million (approximately $173.0 million) and SAR 299 million (approximately $79.6 million) under the Bridge Facility and Working Capital Facility, respectively.

As of September 30, 2022, we were in compliance with applicable covenants under the GIB Facility Agreement.

The GIB Facility Agreement provided for two committed revolving credit facilities in an aggregate principal amount of SAR 1 billion (approximately $266.1 million).

SAR 650 million (approximately $173.0 million) under the GIB Facility Agreement was available as bridge financing (the “Bridge Facility”) of Lucid LLC’s capital expenditures in connection with AMP-2.

The remaining SAR 350 million (approximately $93.1 million) might be used for general corporate purposes (the “Working Capital Facility”).

Loans under the Bridge Facility and the Working Capital Facility had a maturity of no more than 12 months.

The Bridge Facility beared interest at a rate of 1.25% per annum over 3-month SAIBOR and the Working Capital Facility beared interest at a rate of 1.70% per annum over 1~3-month SAIBOR and associated fees.

On March 12, 2023, Lucid LLC entered into an amendment of the GIB Facility Agreement (together with the GIB Facility Agreement, the “Amended GIB Facility Agreement”) to combine the Bridge Facility and the Working Capital Facility into a committed SAR 1 billion (approximately $266.4 million) revolving credit facility (the “GIB Credit Facility”) which may be used for general corporate purposes.

Loans under the Amended GIB Credit Facility Agreement have a maturity of no more than 12 months and bear interest at a rate of 1.40% per annum over SAIBOR (based on the term of borrowing) and associated fees.

We are required to pay a quarterly commitment fee of 0.15% per annum based on the unutilized portion of the GIB Credit Facility.

Commitments under the Amended GIB Facility Agreement will terminate, and all amounts then outstanding thereunder would become payable, on the maturity date of the Amended GIB Facility Agreement.

The Amended GIB Facility Agreement contains certain conditions precedent to drawdowns, representations and warranties and covenants of Lucid LLC and events of default.

As of March 31, 2023, we had outstanding borrowings of SAR 36 million (approximately $9.6 million) with interest rate of 7.20%.

As of March 31, 2023, availability under the GIB Credit Facility was SAR 963 million (approximately $256.7 million), after giving effect to the outstanding letters of credit.

As of December 31, 2022, we had outstanding borrowings of SAR 36 million (approximately $9.6 million) with interest rate of 6.40% from the Working Capital Facility.

As of December 31, 2022, available borrowings were SAR 650 million (approximately $173.0 million) and SAR 314 million (approximately $83.5 million) under the Bridge Facility and Working Capital Facility, respectively.

The outstanding borrowings were recorded within other current liabilities on the condensed consolidated balance sheets.

As of March 31, 2023 and December 31, 2022, we were in compliance with applicable covenants under the Amended GIB Facility Agreement.

ABL Credit Facility

In June 2022, the Company entered into a new five-year senior secured asset-based revolving credit facility (“ABL Credit Facility”) with a syndicate of banks that may be used for working capital and general corporate purposes.

In June 2022, we entered into the ABL Credit Facility with a syndicate of banks that may be used for working capital and general corporate purposes.

The ABL Credit Facility provides for an initial aggregate principal commitment amount of up to $1.0 billion (including a $350.0 million letter of credit subfacility and a $100.0 million swingline loan subfacility) and has a stated maturity date of June 9, 2027.

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Availability under the ABL Credit Facility is subject to the value of eligible assets in the borrowing base and is reduced by outstanding loan borrowings and issuances of letters of credit which bear customary letter of credit fees.

Subject to certain terms and conditions, the Company may request one or more increases in the amount of credit commitments under the ABL Credit Facility in an aggregate amount up to the sum of $500.0 million plus certain other amounts.

The Company is required to pay a quarterly commitment fee of 0.25% per annum based on the unutilized portion of the ABL Credit Facility.

Subject to certain terms and conditions, we may request one or more increases in the amount of credit commitments under the ABL Credit Facility in an aggregate amount up to the sum of $500.0 million plus certain other amounts.

We are required to pay a quarterly commitment fee of 0.25% per annum based on the unutilized portion of the ABL Credit Facility.

The ABL Credit Facility contains customary covenants that limit the ability of the Company and its restricted subsidiaries to, among other activities, pay dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, dispose of certain assets, consummate acquisitions or other investments, prepay certain debt, engage in transactions with affiliates, engage in sale and leaseback transactions or consummate mergers and other fundamental changes.

The ABL Credit Facility also includes a minimum liquidity covenant which, at the Company’s option following satisfaction of certain pre-conditions, may be replaced with a springing, minimum fixed charge coverage ratio (“FCCR”) financial covenant, in each case on terms set forth in the credit agreement governing the ABL Credit Facility.

As of September 30, 2022, we were in compliance with applicable covenants under the ABL Credit Facility.

As of September 30, 2022, we had no outstanding borrowings and $36.8 million outstanding letters of credit under the ABL Credit Facility.

Availability under the ABL Credit Facility was $303.7 million as of September 30, 2022, after giving effect to the borrowing base and the outstanding letters of credit.

We have generated significant losses from our operations as reflected in our accumulated deficit of $6.9 billion and $6.1 billion as of September 30, 2022 and December 31, 2021, respectively.

The ABL Credit Facility also includes a minimum liquidity covenant which, at our option following satisfaction of certain pre-conditions, may be replaced with a springing, minimum fixed charge coverage ratio (“FCCR”) financial covenant, in each case on terms set forth in the credit agreement governing the ABL Credit Facility.

As of March 31, 2023 and December 31, 2022, we were in compliance with applicable covenants under the ABL Credit Facility.

As of March 31, 2023 and December 31, 2022, we had no outstanding borrowings under the ABL Credit Facility.

Outstanding letters of credit under the ABL Credit Facility were $37.9 million and $37.4 million as of March 31, 2023 and December 31, 2022, respectively.

Availability under the ABL Credit Facility was $483.8 million (including $39.7 million cash and cash equivalents) and $441.4 million (including $37.3 million cash and cash equivalents) as of March 31, 2023 and December 31, 2022, respectively, after giving effect to the borrowing base and the outstanding letters of credit.

At-the-Market Offering and Subscription Agreement

In December 2022, we completed our at-the-market offering program (the “At-the-Market Offering”) pursuant to the equity distribution agreement for net proceeds of $594.3 million after deducting commissions and other issuance costs and also consummated a private placement of shares to Ayar (“the Subscription Agreement”) pursuant to the Subscription Agreement for $915.0 million.

See Note 8 “Stockholders’ Equity” to the condensed consolidated financial statements included elsewhere in this Quarterly Report, for more information.

We have generated significant losses from our operations as reflected in our accumulated deficit of $8.1 billion and $7.4 billion as of March 31, 2023 and December 31, 2022, respectively.

Additionally, we have generated significant negative cash flows from operations and investing activities as we continue to support the growth of our business.

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The following table summarizes our cash flows for the periods presented (in thousands):

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash used in operating activities $ (801,264) $ (494,649)

Cash used in investing activities (28,716) (185,082)

Cash (used in) provided by financing activities (165,566) 5,236,843

Net (decrease) increase in cash, cash equivalents, and restricted cash $ (5,032,330) $ 4,192,148

Cash used in financing activities (5,745) (187,301)

Net decrease in cash, cash equivalents, and restricted cash $ (835,725) $ (867,032)

Cash Used in Operating Activities

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As we continue to ramp up hiring after starting commercial operations, we expect our cash used in operating activities to increase significantly before it starts to generate any material cash flows from our business.

Net cash used in operating activities increased by $832.3 million to $1,577.7 million during the nine months ended September 30, 2022, compared to the same period in the prior year.

Net cash used in operating activities increased by $306.6 million to $801.3 million during the three months ended March 31, 2023 compared to the same period in the prior year.

The increase was primarily due to the increase in net loss excluding non-cash expenses and gains of $128.4 million and an overall increase in net operating assets and liabilities of $178.2 million.

The change in net operating assets and liabilities was mainly attributable to an increase in inventory driven by planned production ramp-up, and other current liabilities related to operating activities.

The change in net operating assets and liabilities was mainly attributable to decreases in other current liabilities and accounts payable due to timing of payments, partially offset by an increase in other current assets.

Cash Used in Investing Activities

We continue to experience negative cash flows from investing activities as we expand our business and continue to build our infrastructure.

Cash flows from investing activities primarily relate to purchases of investments and capital expenditures to support our growth.

Net cash used in investing activities increased by $2,989.7 million to $3,289.0 million during the nine months ended September 30, 2022, compared to the same period in the prior year, primarily attributable to purchases of investments of $2,726.7 million during the nine months ended September 30, 2022 and an increase in capital expenditures of $485.7 million, partially offset by proceeds from maturities of investments of $125.4 million and capital expenditure support received from MISA of $97.3 million during the nine months ended September 30, 2022.

Cash (Used in) Provided by Financing Activities

Since inception, we have financed our operations primarily from the issuances of equity securities, including convertible preferred stock, the proceeds of the Merger, and the 2026 Notes.

Net cash used in financing activities were $165.6 million during the nine months ended September 30, 2022, compared to $5,236.8 million of net cash provided by financing activities for the same period in the prior year.

The change was primarily attributable to gross proceeds of approximately $4,439.2 million from the Merger, proceeds from the issuance of Legacy Lucid Series E preferred stock of $600.0 million, proceeds from the exercises of public warrants of $173.3 million, and proceeds from short-term insurance financing note of $41.9 million during the nine months ended September 30, 2021, and remittance for tax withholding obligations in connection with vesting of the CEO time-based and performance-based RSUs through net settlement of $196.4 million during the nine months ended September 30, 2022.

We continue to experience negative cash flows from investing activities as we expand our business and continue to build our infrastructure.

Net cash used in investing activities decreased by $156.4 million to $28.7 million during the three months ended March 31, 2023 compared to the same period in the prior year.

The decrease was primarily attributable to proceeds from maturities of investments of $1,041.2 million, partially offset by purchases of investments of $842.5 million, and an increase in capital expenditures of $56.7 million during the three months ended March 31, 2023 compared to the same period in the prior year.

Cash Used in Financing Activities

Since inception, we have financed our operations primarily from the issuances of equity securities, including the At-the-Market Offering, the private placement to Ayar, convertible preferred stock, the proceeds of the Merger, and the 2026 Notes.

Net cash used in financing activities decreased by $181.6 million to $5.7 million during the three months ended March 31, 2023 compared to the same period in the prior year.

The decrease was primarily attributable to $180.6 million of remittance for tax withholding obligations in connection with vesting of the CEO time-based and performance-based RSUs through net settlement during the three months ended March 31, 2022, and a decrease in proceeds from the exercises of stock options of $6.9 million during the three months ended March 31, 2023 compared to the same period in the prior year.

Critical Accounting Policies and Estimates

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Actual results may differ from these estimates under different assumptions or conditions due to the inherent uncertainty involved in making those estimates and any such differences may be material.

For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2021 and Note 2 “Summary of Significant Accounting Policies” to our

condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report.

For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2022 and Note 2 “Summary of Significant Accounting Policies” to our condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report.

There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2022.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet activities or have any arrangements or relationships with unconsolidated entities, such as variable interest, special purpose, and structured finance entities.

Qualitative and Quantitative Disclosures about Market Risk.

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Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Our market risk exposure is primarily the result of fluctuations in interest rates and due to inflationary pressure.

Our market risk exposure is primarily the result of fluctuations in interest rates and inflationary pressure.

Interest Rate Risk

We are exposed to market risk for changes in interest rates applicable to our Cash and cash equivalents, restricted cash, and investments.

We had cash, cash equivalents, restricted cash, and investments totaling approximately $3.85 billion as of September 30, 2022.

We had cash, cash equivalents, restricted cash, and investments totaling approximately $3.4 billion as of March 31, 2023.

Our investment policy is focused on the preservation of capital and supporting our liquidity needs.

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We utilize external investment managers who adhere to the guidelines of our investment policy.

Based on investment positions as of September 30, 2022, a hypothetical 100 basis point increase in interest rates would result in approximately $12.0 million incremental decline in the fair market value of our portfolio.

Based on investment positions as of March 31, 2023, a hypothetical 100 basis point increase in interest rates would result in approximately $12.3 million incremental decline in the fair market value of our portfolio.

Inflationary Pressure

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We expect that the inflationary pressure will persist for the foreseeable future.

We are dependent on its suppliers, the majority of which are single-source suppliers, and the inability of these suppliers to deliver necessary components of its products according to the schedule and at prices, quality levels and volumes acceptable to us, or its inability to efficiently manage these components, could have a material adverse effect on our results of operations and financial condition.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis