Lucid Group (LCID 0.83%), a luxury electric vehicle (EV) maker, has struggled since it went public through a special purpose acquisition company (SPAC) merger in 2021, as most other SPACs and EV stocks have. Its first-quarter earnings report, out Monday, showed why the company still faces a steep uphill climb as it tries to build a viable business.
Revenue in the quarter jumped 159% to $149.4 million, which was well below the consensus at $209.9 million. On the bottom line, the company lost $1.04 billion in free cash flow and had a loss per share under generally accepted accounting principles (GAAP) of $0.43, down from a loss of $0.36 in the quarter a year ago and worse than the consensus at $0.41. As you can see from the chart below, there was a whole lot of red ink in the report as Lucid reported a net loss of $779 million.
As Tesla has moved downmarket, Lucid has grabbed the opportunity to establish itself as the leading luxury EV maker, and it's won several awards, burnishing its reputation.
Its Lucid Air was named 2023 World Luxury Car, Best Luxury Electric Car, Powertrain of the Year, and MotorTrend Car of the Year. Lucid is also tops in range in the EV industry with its premium Grand Touring getting a range of up to 516 miles on a single charge.
A financial hole
The company is aiming to produce 10,000 cars this year, but that's well below its guidance from 2021 when the company said it would produce 49,000 vehicles this year.
Management blamed supply chain challenges for the shortfall in production, but CEO Peter Rawlinson also made several comments on the earnings call about needing to build the brand, a sign that there may not be enough demand to support 50,000 annual vehicle sales right now, especially at an average price point around $100,000.
With vehicle production and sales slower than expected, the company is feeling pressure from its cash burn. Not only did it burn more than $1 billion in cash in the first quarter, but CFO Sherry House noted that the company has sufficient liquidity to last at least through the second quarter of next year, or just a year from now. Layoffs in the first quarter should help relieve some of the cash burn.
Lucid won't be profitable by then so that indicates that the company will need to raise considerably more capital, but that's likely to come at a cost as interest rates have risen and its market cap has fallen to $13 billion, meaning diluting shareholders with a secondary offering isn't going to raise as much capital as it would have earlier in its history. Diluting shareholders by 10% would only give the business enough cash to operate for just four months.
Interest expense in the first quarter was minimal at $7.1 million and its share count increased by about 9% from the year before, which is reasonable for a company growing this fast. Lucid finished the quarter with $3 billion in cash and equivalents and $2 billion in debt.
What's next for Lucid
The company expects to ramp up volumes of the Lucid Air Pure in the second half of 2023 and will begin production on the Lucid Air Sapphire this summer. Additionally, it will introduce its new model, the Gravity SUV, this year and begin selling it to the public.
Rawlinson talked up the Gravity on the earnings call, saying: "Just as Lucid Air redefined the sedan category, I believe that the Gravity SUV is positioned to do exactly the same for its corresponding SUV category. Indeed, we're taking all the best elements there and putting them into an SUV...game-changing range ...amazing interior space, fast-charging performance, and luxury."
Lucid may have proven it can make top-notch electric vehicles, but scaling the business and competing in an increasingly crowded EV market are different challenges.
Not surprisingly, the stock fell on the report, down 6% on Tuesday. Investors are right to be skeptical of Lucid's prospects given its financial challenges and the tightening EV market.
