Faraday Future Intelligent Electric Inc. (FFIE) Transcript of Q2 2024 Earnings Call

Start time: 20:00 January 1 0000 20:13 ET

Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE)
Q2 2024 Earnings Conference Call
August 14, 2024, 8:00 PM ET

Company participants

Matthias Aydt – Global CEO
Jonathan Maroko – Interim CFO

Conference participants

Operator

Greetings. Welcome to Faraday Future Intelligent Electric Inc. Second Quarter 2024 Earnings Call. All participants are in a listen-only mode at this time. A question and answer session will follow the official presentation. (Operator Instructions). Please note that this conference is being recorded.

I will now turn the conference over to Jonathan Maroko, CFO. Thank you. You might start.

Jonathan Maroko

Welcome, everyone, to Faraday Future’s Q2 2024 earnings call. My name is Jonathan Maroko and I am the acting CFO of Faraday Future. Joining me on the call today is our Global Global Director, Matthias Aydt. We will share details from today’s press release reporting second quarter 2024 results. This press release can be found in the Investor Relations section of our website. A replay of this call will be posted there later today.

Please note that on this call we will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today, should not be considered representative of our views as of any future date, and we undertake no obligation to revise or publicly release the results of any revision of these forward-looking statements. in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion of the material risks and other important factors that could affect our financial results, please see our filings with the SEC.

With that, I will turn the call over to Faraday Future CEO Matthias Aydt.

Matthias Aydt

Thanks, Jonathan, and thanks to everyone for joining our earnings call. I am pleased to share an update on our progress at Faraday Future, highlighting the key milestones we achieved in the second quarter of 2024 and strategic initiatives to keep moving forward. The beginning of 2024 marked a period of transformation for the company.

Our new China-US Automotive Bridge strategy positions us to leverage our cutting-edge AI and software technology across multiple market segments, potentially accelerating our entry into the mass market while maintaining our ultra-luxury offering. As we move forward, we remain focused on executing our global strategy and bringing our unique vision of smart electric mobility to a wider audience.

In addition, we recently held our first Investor Community Day to highlight our technology, our team and developments that underscore our commitment to innovation, sustainable growth and demonstrate our commitment to shareholder value. The Investor Community Day provided an opportunity to experience FF 91 firsthand. FF executives spent the day presenting the company’s core values ​​and market advantages. The event highlighted FF’s unique product strength, transformative technology, brand strength and innovative user ecosystem.

FF unveiled its innovative China-US Automotive Bridge Strategy, marking a return to a two-brand approach. As part of its dual market strategy, FF expects to leverage its unique bridging value to integrate the strengths of the US auto industry with those of Chinese auto companies and their respective supply chains. This strategy aims to establish a second brand focused on the mass market by working with OEMs and parts suppliers in China, focusing the 20,000 to 80,000 price segment under the FF brand. FF intends to enhance the profit components with its own AI technology and vehicle software, with the contribution of the mechanical platform and supply chain, cooperation with the Chinese auto industry, creative and compelling value proposition for the AI ​​EV mass market.

Our FF ieFactory enables full production capabilities, a solid foundation for future collaboration with other OEMs by adjusting certain product lines, additional products could be integrated into the FF ieFactory in Hanford. The company continues to seek strategic financing. If the strategic investments are secured, this could allow increased production and additional deliveries of the FF 91.

In addition, additional funding could support the development of the China-US Auto Bridge Strategy and advance our entry into the Middle East. FF also continues to work to optimize operations to support sustainability. This includes ongoing assessments of current cost reductions and cost efficiencies, including daily operations and FF 91 material cost.

Upon filing Form 10-Q for the period ending June 30, 2024, the company continues to comply with Nasdaq’s timely reporting requirements. Therefore, the only compliance requirement to be listed on Nasdaq is the minimum offer price before August 31, 2024. Through negotiations with existing investors on August 2, 2024, the company successfully refined the terms of the previously signed share purchase agreement related to the convertible notes . financing.

Initially, the company could have been required to repay the principal and interest in cash when the note matured. As a result of the adjustments to the agreement, most of the cash repayment obligations have been changed to share issuance obligations, and cash interest expense will be significantly reduced. This agreement will help ease cash pressure and should lead to further funding efforts.

Also, FF operational initiatives in 2024 continue to progress. The main focus is the production and delivery of vehicles and we are delighted to have delivered two more FF 91 2.0 EVs since June with plans to deliver more in the rest of this year. This marks the resumption of the early phase of the second delivery, SOD2, which began last year. Till date we have delivered 13 vehicles to our valued users.

Product is king. We must continuously improve the product and technology strengths of FF 91 2.0 to maintain the production and technology strengths of FF, focusing on applied research and development of AI technology, including the vertical application of generative AI in the field of mobility. Starting in Q2, we started manufacturing the vehicle and some interior components, leading to significant cost reductions in these areas. Specifically, the cost of interior parts has been cut by more than half, despite substantial financial challenges this year. Our supply chain successfully resumed SOD2 in June. Our production and quality control systems are also constantly maturing.

At the beginning of the second quarter, we established a Middle East sales entity in Dubai, which marks an important milestone in the company’s expansion plans. With the entry into the Middle East, FF may look to implement a third pole geographic strategy. This includes the US and Chinese markets, which are known for their strong appetite for high-end products. The stage is based on the FF strategy for the Middle East. This was revealed with the introduction of the FF brand in the region in 2023. In addition to FF’s establishment activities in the UAE, the company continues to engage with potential partners in the Middle East to explore opportunities including strategic financing, business development and sales and marketing. .

Jonathan will now give us an overview of the financial situation. He will also cover our fundraising efforts and detail the measures we have implemented to reduce costs and strengthen Faraday Future’s financial position. Now, without further ado, I would like to turn the call over to Jonathan.

Jonathan Maroko

Thank you Matthias. I will first summarize our financial results for the second quarter of 2024, then discuss our financing activities during this period and conclude with an overview of the company’s current financial position.

The company continued its efforts to control costs and reduce operating expenses. Operating expenses improved significantly to $29.9 million compared to $49.4 million in the year-ago quarter. Losses from operations also improved to $50.6 million, compared to a loss of $56.0 million in the year-ago quarter. For the six months ended June 30, 2024, cash from operating activities improved significantly to an outflow of $29.1 million, compared to an outflow of $160.7 million for the six months ended June 30, 2023.

The company had assets of $457.9 million, liabilities of $309.2 million and a book value of $148.7 million at the end of the quarter June 30, 2024. These results represent major cost reductions and cost discipline, and we expect reductions continued costs compared to last year. periods of the year until the remainder of 2024. The next step is to increase our vehicle production and delivery levels. With respect to Q2 2024 financing activities, we have successfully raised approximately $15.5 million in gross convertible debt financing.

Throughout our challenging cash flow period, the company has demonstrated the ability to reduce costs and manage cash flow. The cost cuts implemented across the board were painful but necessary. We have right-sized our operational footprint and workforce based on current operational requirements and funding situation. We continue to believe that the biggest barrier to vehicle sales and profitability is the capital required to produce vehicles at scale. Given our low cost structure, every new dollar invested in Faraday Future can be used very efficiently.

With that, I’ll give it back to Matthias.

Matthias Aydt

Thank you Jonathan. Let me give you a look ahead. Our primary focus remains on stabilizing and consolidating our operations. The key is to achieve profitability and independence in the shortest time possible. To be able to achieve greater market penetration in the future, we are exploring several avenues. For FF, the US-China auto industry bridge is designed to be a lightweight, fast-paced, high-value model. FF could provide most of the major technology systems and technology platforms that serve as intelligence sold to the machine’s neural network.

Looking ahead, I am excited for the path ahead. We remain steadfast in our pursuit of growth through efficiency and dedicated to increasing shareholder value. The journey ahead promises significant opportunities. And with our talented team at the helm, I am confident in our ability to meet and exceed our goals. We continue to believe that the FF 91 is unlike anything on the road today. We look forward to the potential for continued production in 2024 to help the rest of the world achieve the same.

FF appreciates the trust shown by investors and would like to thank them for their loyal and continued support. Thank you for your time and interest in Faraday Future, and I look forward to providing you with further updates as significant events unfold.

Question and answer session

Operator

Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.