Yahoo Finance Lucid Group, Inc. (NASDAQ:LCID) Q4 2023 Earnings Call Transcript
Lucid Group, Inc. (NASDAQ:LCID) Q4 2023 Earnings Call Transcript February 21, 2024
Lucid Group, Inc. misses on earnings expectations. Reported EPS is $-0.3 EPS, expectations were $-0.28. Lucid Group, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and thank you for standing by. Welcome to Lucid's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Maynard Um, Senior Director of Investor Relations. You may begin.
Maynard Um: Thank you, and welcome to Lucid Group's Fourth Quarter 2023 Earnings Call. Joining me today are Peter Rawlinson, our CEO and CTO; and Gagan Dhingra, our Interim CFO and Principal Accounting Officer. Before handing the call over to Peter, 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, financial and operating outlook and guidance, macroeconomic and industry trends, company initiatives and other future events. These statements are based on predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties.
We refer you to the cautionary language and the risk factors in our most recent filings with the SEC and the forward-looking statements on Page 2 of our investor deck available on the Investor Relations section of our website at ir.lucidmotors.com. In addition, management will make reference 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 our investor deck. With that, I'd like to turn the call over to Lucid's CEO and CTO, Peter Rawlinson. Peter, please go ahead.
Peter Rawlinson: Thank you, Maynard, and thank you, everyone, for joining us for our fourth quarter earnings call. During the first 3 years of production of Lucid Air, we've garnered significant industry accolades, including Car and Driver 10 Best List for 2024, The 2023 World Luxury Car of the Year and the 2022 Motor Trend Car of the Year. I can't think of any other company that has gotten this far this fast. Our superior technology, design and performance has repeatedly been recognized. We've proved our technology prowess with Lucid Air. And not only did we pioneer the concept of efficient range through our technology, we also grew our lead with 4.74 miles of range per kilowatt hour for the Air Pure real wheel drive. The technology gap between Lucid and others is growing, not shrinking.
We also launched the Lucid Air Sapphire, the first supersport EV Sudan as a halo product to showcase the potency of our technology. Not just the most powerful production Sudan ever, it has also been recognized as a great all-around driving car with exceptional handling and driving dynamics. Its exceptional 427 miles of EPA estimated range and fast charging truly completes the package. And now we're embarking upon our next and most transformational phase of our development with the expansion of our vehicle lineup. The expansion of Lucid's total addressable market starts right now with the Air Pure rear wheel drive grows with Gravity and broadens with the forthcoming midsized platform. We unveiled the Lucid Gravity at the LA Auto Show in November to tremendous early reviews.
I am confident that the Lucid Gravity will redefine the electric SUV segment with incredible range, superior efficiency, fast charging speed and interior space that you have to see to believe. It will be unlike anything in its class, and it will be massive for Lucid. And for those who might be in Geneva, Switzerland next week, we welcome you to come and see us at the Geneva International Motor Show, where we will introduce the Gravity to the European market. Now turning to sales and marketing. In 2023, we increased our brand awareness. And of greater significance our awareness among EV purchasing tenders increased substantially from the beginning of the year. And this gives us confidence that our sales and marketing initiatives are making solid progress.
And we'll continue to take a science-based, data-driven analytical approach to our marketing but are also adding new initiatives. For example, our recent Saks Fifth Avenue partnership will allow us to leverage Saks luxury brand and ecosystem to generate awareness, leads and sales. Select locations will have test drive vehicles, further expanding our reach in locations which are not currently present with the studio. Of particular significance has been our recent Air Pure Stealth initiative launched just last week. We have now realized a starting price point for the Lucid Air range of $69,900. Yes, that's right. The finest production EV in the world now starts at under $70,000. This effectively extends the scope of the Lucid Air range into a new total addressable market segment.
In fact, we're already seeing extremely promising results from this. Moreover, this is commensurate with our long-term strategy to make progressively more affordable vehicles. This remarkable value proposition has in large part been made possible by our world-leading technology. Because [indiscernible] enables our cars to go further with less batteries, the Air Pure rear wheel drive is able to achieve an EPA estimated range of 419 miles [indiscernible] further than the competition. But more significantly, it achieves this with a battery pack size of just 88-kilowatt hours. And since the cost of an EV is dominated by the cost of the battery pack, this technical advantage translates directly to profound commercial advantage. Now I believe it's important that the full impact of this is fully comprehended.
The EPA testing procedure has recently been revised, and it's become more stringent. So Air Pure rear wheel drive is able to achieve a landmark miles of range per kilowatt hour of battery capacity, and that's with new EPA ratings. So whilst we are currently witnessing other EV brands registering reductions in their respective range ratings, Lucid is forging ahead, growing and building upon our technology advantage, and with it, I believe our future commercial advantage. But I want to be clear, I'm also critically focused upon cost. It's not well understood that we designed and developed our technology for true mass manufacturability at scale. And we have more coming. We have significant advancements that I believe can drive costs down further.
Technology is not only about creating incredible products. It's also about innovation to improve costs. And I've never been more pumped about what's coming, what's yet to come from our technology roadmap. We are resolutely focused upon cost whilst continuing to prudently invest for the future. Through 2023, we dramatically expanded our advanced manufacturing plant in Arizona, which we call AMP 1, and that was in preparation for Gravity. We built a state-of-the-art a general assembly line that is capable of assembling both Gravity and Air on the same line. And we'll continue to vertically integrate where it makes the most sense in areas of stamping, , our paint shop expansion and the new powertrain facility at AMP 1. We built the first ever car manufacturing plant in Saudi Arabia for semi knockdown kits.
This year we also broke ground for the manufacturing of the completely built-up cars there. These are critical long-term investments that are reflected in our cost of goods sold. Now the imagery in our earnings presentation, I hope gives you some sense of the scope and scale of what we're doing. When you see it in person and not the different shots in the factory, you truly start to understand how we're building a state-of-the-art factory for the future. In fact, in January of this year, we have more than 100 guests representing over 60 strategic suppliers for Gravity, Air and for potentially midsize come to our factory. The feedback and support from our suppliers was extraordinary. They highlighted our best-in-class and advanced technology and continued investment in our production facilities, which provide a material signal of our long-term commitment.
My key message to them was one of growth, the critical need for obsessed partners, focused upon excellence and the importance of driving this journey together. So I want to express my heartfelt gratitude to all of them. Now on the R&D side, we continue to invest for future supremacy, and I'm incredibly excited about our road map, both from an innovation and from a cost perspective. In 2023, we also raised $3 billion, including unparalleled support of $1.8 billion in equity funding from our largest shareholder, the PIF. Now Gagan will talk about liquidity in further detail. We formed our technology licensing and access business through our first such deal with Aston Martin, and we're actively exploring additional and even broader technology and supply agreements.
We also have sales to a rental car company, and we're very pleased with early results. Lucid's range and efficiency are perfectly suited for fleets. And in fact, we saw new incremental orders from that rental car company due to demand. Of course, we haven't yet scaled this business. We're taking a methodical approach, which is prudent, and we're pleased with what we're seeing thus far. This is yet another tool to help grow our brand awareness and allow potential customers experience the car. 2023 was also a year where we made significant progress with our in-house software capabilities. Software is more than just the user interface. We have some of the best software engineers in the world, working on everything from user interface to new features, to powertrain to infrastructure.
In fact, we developed and have been transitioning to our own in-house over-the-air software infrastructure. This not only helps our OTA functionality but it's also a source of cost savings. Now building an OTA software as a service platform is no small feat. One that I believe most other car companies would simply not be able to do. And it's another example of technology aiding costs. And of course, this is a platform that we could potentially monetize in the future. Now I want to be transparent as well. We also had some challenges. Firstly, the macroeconomic and higher interest rate environment impacted mainly in this market. And in the new markets to us, there's been some learning. For example, in Saudi Arabia, we learned that there are different market dynamics and intricacy is unique to that market.
And so we have to scale that business differently for growth. But we've addressed the pain points. We're scaling up and expect good growth in the region this year. Now we've also faced some technical challenges with commencing production of the rear wheel drive Pure in the fourth quarter. This is normal when doing something so advanced and so efficient. As I said, a landmark achievement with a 4.74 miles of range per kilowatt hour. This is our most accessible car, and we had challenges ramping it up. But I'm delighted to say that we've now overcome these challenges and are now fully ramped in pure production. So as we start 2024, I'm very excited about the year ahead and beyond. We made focused improvements to further enhance our customer journey.
For example, the Lucid financial services team has been working to enhance and to simplify the customer financing experience, significantly reducing the customer cycle time to finance vehicles. And we are also in the midst of implementing a new technology platform. Combined with the rollout of our accelerated delivery pilots, we were able to significantly improve the cycle times from order to delivery, improve customer satisfaction and, in some cases, increase orders. In one instance, we were able to get a customer through their purchase journey from the time they place the order to the time they completed delivery walk out in only just about 3 hours. Now this new process has been live for select markets since Q4 and for new loans and is expected to go live for all lease and other loan markets by the end of Q1 of this year.
You'll see us roll these out to more locations throughout 2024. So our total addressable market triples by doing what we always intended to do, making the Air progressively more affordable and now starting at under $70,000. A technical achievement in getting an 88-kilowatt hour battery pack in the Pure allows us to cut out battery costs but still provide an EPA estimated range of 419 miles even based upon the new and more stringent EPA testing. And Gravity will further expand our total addressable market from 2023 by more than 6x. The Gravity is scheduled for start of production late this year and numerous prototypes are already driving around. In fact, we just built more than 40 prototypes to date. You just have to see to believe it, the interior space and the sheer practicality is what every family has been craving, made only possible by our technology and design.
And I'm exceptionally encouraged by the early feedback and interest. We saw more than fourfold increase in daily gravity interest sign-ups following the L.A. Auto Show unveil. And the start of production for more affordable, high-volume midsized car is scheduled for late 2026. We'll continue to push the boundaries of what's possible with the midsized platform and the next-gen powertrain technology. And this will expand our market opportunity from 2023 to nearly 20x. As I mentioned earlier, we'll continue to invest in our future with further vertical integration with stamping, with for Gravity with paint shop expansion and powertrain at AMP 1, an important part of our longer-term cost and quality strategy. I want also to touch on the broader market landscape and what seems to be a shift in emphasis from EVs. We have the utmost confidence in the future growth of the EV market.
Environmental sustainability, energy storage improvements, regulatory forces and sheer performance superiority over internal combustion engine vehicles will drive the eventual march to an EV dominated automotive market. Emission standards are getting more stringent, and you've heard me say this many times. This truly is a technology race. But doing world-leading EV technology isn't easy and not everyone can do it. And I believe that is becoming better understood now. As others are pulling back on EVs, we are here ready to help. We've talked about our willingness to work with other OEMs, and we've signed our first technology access deal with Aston Martin. And we continue to receive incremental interest from larger OEMs and others in the automotive space as well as in adjacent markets for our advanced technology.
In the automotive vertical, this is not only for electric vehicles, but we are also seeing interest in our technology for use in hybrid electric vehicles. There's nothing to announce yet today in terms of the deal, but we're really encouraged by the level of interest. And we're open to it because we think it's critically important for the planet. Sustainability is at the core of who we are. It's ingrained in our purpose and our products, and we are a technology innovation company. EVs are just the start, but we also believe in the importance of accountability and transparency, which is why I'm so proud to say that we published our very first sustainability report just last week. We have more to come in 2024 with the expansion of our total addressable market opportunity with Air Pure and Gravity, further software enhancements and significant announcements, the opening of Gravity orders, the start of Gravity test drives and, of course, start of production of Gravity later this year.
Now we've come a long way, and we're here to do much more. We are here to stay. We have a clear and determined strategy for growth while having a laser focus upon costs. So I'd like to close by saying thank you to our suppliers, to our partners, and to our most important asset, our employees. We've overcome significant challenges and I can't think of any other people I would rather be with on this journey than the people here at Lucid. You are the core of our successes. And we are embarking upon our next transformational phase of the Lucid story, and so I've never been more excited about the future. And with that, I'd like to introduce Gagan Dhingra, who has stepped into the role of our interim CFO, Gagan, please provide an update on our financials.
Gagan Dhingra: Thank you, Peter, and thank you to those who are taking the time to join us today. Before I get to my prepared remarks, I would also like to start by thanking the entire Lucid team. Over the past few months, I have spent even more time working closely with all the different parts of the organization. I am incredibly impressed by your perseverance, resourcefulness and teamwork. The successes we have been able to achieve is in no small part due to all of you. Turning to the business. In 2023, we made headway with our cost optimization programs, the key strategic priority for the company. We found success in areas, including freight, logistics, overhead and bill of materials. For example, we activated logistics as a part of the Phase II build-out of our Arizona factory, AMP 1, allowing us to bring the vast majority of vehicle components under the same roof as general assembly.
This enabled us to realize savings from the reduction in overhead, transportation and complexity as well as better efficiency. From an inventory perspective, we drew down raw material inventory levels by high teens percent from the start of Q4 through material planning and inventory management improvements. Improvements in focus accuracy, in particular, allowed us to reduce inventory resulted in savings related to logistics and material handling labor, equipment rentals and storage cost. We also experienced a significant reduction in freight from more efficient transportation and storage planning. For vehicle direct costs, we implemented a number of initiatives that resulted in certain bill of materials cost savings, some of which is directly related to our commitment to reduce our carbon footprint.
We have identified additional opportunities in cost of goods sold as well as operating expenses that we will look to operationalize over the course of 2024. Turning to our 2023 and fourth quarter financial results. We produced 8,428 vehicles in 2023, up 17% year-over-year and at the higher end of the 8,000 to 8,500 guidance we provided on our third quarter earnings call. During the fourth quarter, we produced 2,390 vehicles, up 54% sequentially. In 2023, we delivered 6,001 vehicles up 37% year-over-year and in the fourth quarter, delivered 1,734 vehicles, up 19% sequentially. We expected to deliver more vehicles in Saudi Arabia in the fourth quarter. As we mentioned last quarter, the ramp-up was taking longer than we expected. However, we believe we now have the right infrastructure and processes built out.
Turning to the P&L. For Q4, revenue was $157.2 million, up 14% sequentially, driven primarily by higher deliveries. Cost of revenue in Q4 was $410 million. I want to make sure this is well understood. You cannot take this line item and divide it by the number of cars delivered to get the initial cost of making each vehicle. This is because our lower of cost or net eligible value, or LCNRV, also takes into account losses on raw materials and from purchase commitments. We have LCNRV adjustments, which write down certain inventory value to the amount we anticipate receiving upon vehicle sale after considering the future cost necessary to get the inventory ready for the ultimate sale. And we also record losses on firm purchase commitments. In addition, as we ramp up production, we expect the overhead per vehicle to improve.
Our gross margin improved on a quarter-over-quarter basis primarily due to lower impairment charges in Q4 related to LCNRV. This amount was approximately $174.1 million, a 24.6% reduction from Q3. Although there are many controllable and uncontrollable variables that can affect gross margin, so we don't typically provide specific gross margin guidance, I wanted to provide some directional color to aid in your modeling. Looking forward to the first quarter of 2024, we anticipate improvements to gross margin despite the price adjustments in the quarter for Pure and Tooling. The improvements are expected to be driven primarily by projected reductions in impairments. As we move into the back half of the year, we expect to build inventory of Gravity components ahead of start of production, and so expect an increase in LCNRV impairments from an accounting standpoint that will affect gross margin.
As I noted earlier, we have identified additional opportunities in cost of goods sold and we'll continue to focus on implementation and further areas for cost out. Now moving to operating expenses. R&D expense in Q4 totaled approximately $243 million up 5.3% sequentially due largely to higher personnel-related expenses. We believe our R&D investment into technology garners a strong return as the technology is not only used in our own vehicles but can also be leveraged as an additional revenue stream through strategic technology deals such as the one with Aston Martin. SG&A expense in Q4 was approximately $241 million, up from $189.7 million in Q3. The sequential increase was primarily related to an increase in sales and marketing spend, which is consistent with what we talked about in prior quarters related to putting more energy behind our science-based data-driven sales and marketing initiatives, professional services and personnel-related expenses related to largely geographic expansion.
We ended the fourth quarter with 45 studio and service centers, excluding our temporary and satellite service centers flat from Q3. On the service side, we ended Q4 with 47 mobile vans in the fleet and 79 nationwide shops. We plan to continue to strategically expand our studio and service center footprint as well as satellite service centers, which will cost effectively provide additional locations for Lucid customers. Although we don't provide specific guidance on operating expenses, I did want to provide some broader directional color. Looking into 2024 we expect operating expenses to be up year-over-year on an absolute basis, but expect it to decrease as a percentage of revenue. Our stock-based compensation in the quarter was $63.9 million.
Total other income was $83.1 million, down from $122.3 million in Q3. The decrease was largely attributable to a lower noncash benefit of $25.3 million related to the change in fair value of our common stock warrant liability down from $60.3 million in Q3. As a reminder, this noncash impact can be influenced quarter-to-quarter by a number of factors with one of the larger factors being Lucid shared price at the end of the quarter. We also recognized $6 million in unrealized gains related to the Aston Martin stock we received in Q4 as a part of our strategic technology management. In Q4, we achieved an adjusted EBITDA loss of $604.6 million, a slight improvement from $624.1 million in Q3. Moving to the balance sheet. We ended the quarter with approximately $4.3 billion in cash, cash equivalents and investments, with total liquidity of approximately $4.78 billion.
Note, this excludes the $81.5 million in value of the Aston Martin shares as of December 31. We have been able to consistently sustain a strong balance sheet over time. And as we have done for the last couple of years, we will continue to be opportunistic in exploring and diversifying access to financing sources. Accounts receivable increased to $51.8 million in the fourth quarter, up sequentially from $23.4 million in the third quarter. The increase was primarily due to vehicle sales related to EV purchase agreements with the government of Saudi Arabia, and you can expect that this mix could result in fluctuations on a quarter-to-quarter basis. Turning to inventory. Total inventory decreased 12.9% sequentially primarily due to raw material drawdown.
We continue to see a box to a significant reduction in raw material days of inventory on hand as we work towards greater predictability in the transportation channel and refine our inventory management processes and systems. Capital expenditures for 2023 was $910.6 million, slightly below the $1 billion to $1.1 billion range we guided to on our third quarter earnings conference call. The lower CapEx was primarily related to developed projects into 2024. CapEx in the fourth quarter was $272.6 million, up from $192.5 million in Q3. Moving to the outlook for 2024. We forecast production of approximately 9,000 vehicles in 2024, and we'll continue to prudently manage and adjust our production to meet our sales and delivery needs. Although we don't typically provide quarterly forecasts, I would remind you that the North American market is typically down sequentially in the first quarter.
However, we expect to deliver vehicles in Saudi Arabia that we were not able to deliver in fourth quarter of 2023. With regard to our liquidity position, we ended the quarter with total liquidity of approximately $4.78 billion. We expect this will give us runway through the start of production of Gravity and at least into 2025. Moving to CapEx. Our focus is increasing investments in our future growth initiatives, and we expect capital expenditures for 2024 to be approximately $1.5 billion, reflecting certain defers in our capital outlay, M2 expansion for completely built up unit which we broke out last month. The completion of the AMP 1 Phase II expansion for stamping, paint shop, powertrain on-premise and Gravity body in . From a product perspective, we have scheduled for Gravity starter production in late 2024, and start of production of our high-volume midsized platform is scheduled for late 2026.
In closing, I would like to echo Peter's excitement as we enter the next transformation phase of the Lucid. We gained market share in 2023 and outpaced our overall addressable market despite the challenging macro environment, and I'm excited about the significant expansion of our total addressable market opportunity with the Pure, Gravity and the upcoming midsized platform. We are confident in the growth of the EV market and that we have the right technology, people and product lineup to succeed. With that, let me turn it back to Maynard to get to your questions, Maynard.
A - Maynard Um: Thanks, Gagan. We'll now start the Q&A portion of the call. As we typically do, we'll start with the saved retail questions. The first question is from Ed. Where are you at on production and delivery of Saudi orders?
Peter Rawlinson: Well, last year, we made history in Saudi Arabia with the opening of the country's first ever manufacturing facility. In its first phase, the factory has a capacity to assemble just 5,000 Lucid vehicles a year, and operations have been well underway. Last month, actually, we broke ground on the factory for completely built up or CBU cars and these are critical investments into our future. And we're grateful for all the support from the government and from our partners.
Gagan Dhingra: With regard to deliveries, we started deliveries to the Ministry of Finance last year. Under the terms of the agreement, the government has committed to purchase 50,000 vehicles with an option to purchase additional 50,000 over a 10-year time frame. This includes the Lucid Air as well as future models such as the Gravity and midsized platform. As I said in the opening remarks, the ramp was taking longer. We now have the infrastructure built out and have the right processes, we are scaling and expect good growth in 2024.
Maynard Um: Our next question is from Paul. Do you plan to reduce time to market for new products? Gravity has delayed 1 year. Third model is now mooted as mid- to late decade to the 2025. And as shareholders were losing value due to failures and delays, what happened to the all-star team and proven track record?
Peter Rawlinson: Yes. That's a good point actually. I mean what we saw unprecedented external forces that impacted us with COVID and the global supply chain disruption. And that impacted many in the industry, not just Lucid. But I would say this. Tesla is the benchmark for engineering speed. If you look at the time taken between the start of production of Tesla Model S and X, it was just a bit over 3 years. If you look at where -- I mean we're scheduled for production for Gravity late this year, that's going to be a very similar time period between production of Air and Gravity. And that's despite it not being a derivative product there, a whole new platform. So I think that is a world-leading pace of engineering. And for a small team to get Gravity, a landmark product, a completely differentiated product in just over 3 years.
Now midsize what we've done is define a schedule for it, we're scheduling for late '26. Very similar in time scale. It's right there. I think this is world-class execution, frankly.
Maynard Um: Thanks, Peter. We'll go to question 3. Are there any updates regarding future partnerships with Apple?
Peter Rawlinson: Well, as a general corporate policy, we don't talk about any particular companies, particularly as it relates to the future. But as I said in my prepared remarks, we have what I believe is the best tech history. We've seen increased interest from others, and we're very open to it because we think it's critically important for the planet. As I said before, it's super hard to do a good EV. It's relatively easy to make a bad EV and this growing realization just how hard it is to do a world-class EV.
Maynard Um: Next question is from Landon. When will Gravity reservations open? Is there a target date for first deliveries? We know what -- the target date for first deliveries.
Peter Rawlinson: Oh, yes, I'm hoping we'll deliver some Gravity vehicles later this year. But naturally, you should expect the bigger volume to be around 2025. But we know the excitement around gravity is palpable.
Maynard Um: Okay. And we'll take our last saved question from Daniel. Do you plan to take a salary cut to reduce losses or plan to buy back shares to improve stock health?
Peter Rawlinson: Well, many may not be aware of my founding role in this company as we know it today. I joined the company around 11 years ago, with a clear goal of making the very best electric vehicle and to drive a revolution towards sustainable transportation, which is going to benefit everyone in the planet. Around that, we would call [indiscernible]. And I guess we had around 19 employees. So in 2021, I received a onetime CEO stock grant, and this was solely determined and approved by the Board of Directors. And a significant portion of that vested due to the company achieving certain market capitalization milestones as we publicly disclosed in 2023. So I think there's a huge misperception that this onetime grant was received as a salary and somehow we replicate it as my salary in the future.
In fact, in 2023, at my request, I did not receive a bonus for 2022, nor did I receive any further equity grants in '22 or '23. And I just want to assure you, my mission and my dedication is still unwavering. I have not sold a single share of stock in all this time, over 10 years, except what was absolutely necessary for tax purposes. And the company stock I received from the grant remains in the form of company stock. And so I am also directly tied, personally tied, directly and hugely to the company's performance as a key shareholder. And so I'm incentivized that way. My promise is to continue to work tirelessly, day and night, to drive brand awareness, to deliver more cars, to sign up more technology licensing and access agreements, to drive down costs and to bring the Gravity and midsized platform to market.
We have an incredible team. We're driving forward, and I'm incredibly excited about our products and moreover, our future.
Gagan Dhingra: Regarding the second part of the question, we are investing in our future, but we are a growth company. We are also a technology company. and I believe our investments into areas such as our research and development is an advantage and give us the opportunity for higher returns than any other automotive company because we are monetizing the intellectual property through agreements such as the one with Aston Martin. When we feel we can't increase value from reinvesting back into the business, we would consider returning the cash to shareholders via a repurchase program. But we don't believe this would happen for quite some time.
Maynard Um: Okay, thanks. Towanda, can we turn it over to go to questions on the call, please?
Operator: [Operator Instructions]. Our first question comes from the line of John Murphy with Bank of America.
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