Bank of America Q3 2024 Earnings Call Transcript

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November 6, 2024

There are 5 speakers on the call.

Operator

As a reminder, this conference is being recorded.

Operator

It is now my pleasure to introduce John Schilling, Global Director of Communications and Public Relations. Thank you. You may begin.

Speaker 1

Welcome everyone to Faraday Future's Q3 2024 Earnings Call. My name is John Schilling, Faraday Future's Global Director of Communications and Public Relations, and I am joined by Faraday Future's recently appointed CFO, Cody Mecha our Global Chief Executive Officer, Matthias Eit and Max Ma, Head of Product and Mobility Ecosystem and Head of Corporate Strategy here at FF. Today, we will be sharing details from our Q3 2024 results. The press release as well as today's presentation will be available on the Investor Relations section of our website at investors.ff.com. A replay of this call will also be posted there later this evening.

Speaker 1

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 relied upon as representative of views as of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revision to 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 further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC. With that, I'll turn the call over to Faraday Future's Global CEO, Matteo Seidt.

Speaker 2

Thank you, John, and thank you, everyone, for joining our earnings call. Let me outline the key areas I'll cover in today's discussion. First, I'll review our organizational transformation and recent leadership appointments. 2nd, I'll discuss our corporate initiatives and operational progress, including our FS912.0 deliveries. 3rd, I'll provide details on the launch of our recently announced FX brand and market strategy, which plays into our FF Dual brand strategy.

Speaker 2

Finally, I'll update you on our international expansion, particularly our progress in the Middle East. During the Q3, we continued our transformation from a project driven organization to an operation driven organization with heavy emphasis on cost optimization, quality improvements and operational efficiency. Notably, we made significant progress in our strategic road map while achieving a significant reduction in operating expenses. We believe this cost discipline, combined with our strategic shift, positions us well for our next phase of development. To help support this next phase of growth, we have strengthened our leadership team with several key appointments.

Speaker 2

Todie Mecha recently was promoted to Chief Financial Officer, replacing Jonathan Morocco, who remains on us as a consultant. Aaron Ma was elevated to acting Head of EV R and D and Tim Mok was appointed Head of FF UAE, where he is leading our business development and strategic financing efforts in the region. Now let me share some key developments from the quarter. In terms of corporate progress, we successfully completed several important initiatives. First, on the financing front, we secured $30,000,000 in new financing commitments from investors across the Middle East, United States and Asia.

Speaker 2

This included US7.5 million dollars in previously funded amounts and US22.5 million dollars in new investments. Notably, this financing included participation from Master Investment Group led by Sheikh Abdullah Al Qasimi of Rashekhemah. The net proceeds we received were approximately US28.5 million dollars Of this amount, US20 million dollars was received in Q3 and US8.5 million dollars was received after September 30 prior to today. In addition, I'm pleased to report that we regained full NASDAQ listing compliance, completed our previously announced reverse stock split and increased our authorized share count to support potential future growth opportunities. We also successfully worked with our existing noteholders to restructure certain convertible notes with the goal of reducing future cash obligations.

Speaker 2

On the operational front, we delivered 2 FF912.0 vehicles during the Q3, including Weng2 Wei Gao, our Head of Global Communication and Community Sales. Our other delivery was to Born Leaders Entertainment, expand our B2B initiatives and develop co creation of our program. This brings our total deliveries to 14 vehicles to date. We have implemented several manufacturing improvements, including bringing certain vehicle body and interior component production in house, which has reduced interior costs by half. Our FFIE factory, California continues to demonstrate its potential as a cornerstone of our manufacturing strategy.

Speaker 2

We continue to enhance our product quality. A manufacturing related warranty improvement process was put in place. There's a comprehensive synergy between factory quality and PDI resulting in a comprehensive CCA audit. Our 1st inspection customer Craftsmanship Audit Score has seen improvement of 25%. We have made continued efforts to improve the FF9-1 software, AI and human machine interaction with recent multiple software improvements that include expanded voice controls, improved route guidance and improved display interface updates to name a few, all created in the effort to make the lives of our users more connected, more engaging and more effortless.

Speaker 2

A significant milestone this quarter was the announcement of our 2nd brand, Faraday X or FX, which took place at our Global Automotive Industry Bridge Launch event on September 19. This initiative represents our planned return to a dual brand strategy with FX being developed to target mass market segments. We envision 2 initial models, the FX5, which we are planning to position in the $20,000 to $30,000 range and the FX6, which we expect to offer between $30,000 $50,000 Subject to securing necessary funding and approvals, we intend to offer both range extended AI EV and battery electric AI EV powertrain options. We believe the market opportunity for range extended AI EVs is particularly compelling in the United States where charging infrastructure continues to develop. Based on our analysis of market data, while the U.

Speaker 2

S. EV penetration rate remains below 20%, we have observed that range extended AI EVs have shown strong adoption in other markets, particularly in addressing range anxiety concerns. We believe this represents a potential opportunity for our planned FX product lineup. Our global automotive industry bridge strategy aims to leverage existing technologies and potential manufacturing synergies between our premium and mass market segments. Thus far, we have entered into preliminary agreements with 4 OEMs, including 2 strategic framework agreements and 2 MOUs.

Speaker 2

Though these discussions remain subject to final documentation and various conditions. Turning to our Middle East expansion. We have made great progress in establishing our presence in the region. We recently announced a co investment agreement with Master Investment Group led by Sheikh Abdullah Al Khasimi to establish our future regional headquarters in Rasaghema. Through our Rasagheimer based entity, 30 Future Middle East Free Zone LLC, we have signed agreements with the Rasagheimer Economic Zone, Rakesh, for both current operations and a nearly completed 108,000 square foot facility.

Speaker 2

Earlier this year, we established a sales entity in Dubai, marking a key milestone in our expansion. This entry into the Middle East supports our 3rd total strategy, complementing our dual home markets of the U. S. And China. Looking ahead, we are focused on 3 key areas: strengthening our core operations, advancing our dual brand strategy and pursuing strategic partnerships that support our growth objectives.

Speaker 2

We believe our engineering capabilities, combined with our planned dual brand approach and the potential international partnerships, position us to address both the premium and mass market segments of the evolving AI EV market. I now want to turn it over to Max Maher for an important update on our FX strategy.

Speaker 3

Hello and thank you for joining us today. I'm Max Mah, Head of Product and Mobility Ecosystem and Head of Corporate Strategy. I just returned from China after completing this business trip for the FX strategy to China and I can't wait to share it with everyone. We achieved all the set objectives for this trip, kicked off the internal next step meeting on Monday and we'll provide further updates as we reach our new milestone in the near future. Sheikh Abdullah Al Qasimi, our Middle East investor also held in-depth discussions with FX partners in China.

Speaker 3

We have already initiated the activities to achieve first milestones according to our production program for the first vehicle model, which targets to roll off the line by the end of 2025, subject to securing the necessary funding. The products are currently in the first phase of vehicle development with related work underway to achieve the 1st phase milestones. FF has begun hiring for key positions for the second brand, FereDx. Job openings for FX include Production Planning Director, Quality Planning Director, Head of FX Vehicle Engineering and Head of FX EV R and D. I'll now turn it over to Cody Mecha for a review of our financial results.

Speaker 4

Thank you, Max. Great to hear things are progressing steadily on our FX brand and strategy, and hello to everyone on the call. I'll start with our Q3 financial performance, discuss our balance sheet and close with comments on our capital raising efforts. As Matthias noted, I am pleased to report that Faraday has been successful in its efforts to reduce costs. During the Q3 of 2024, our operating expenses declined 92.6 percent to $3,800,000 compared to $50,900,000 in the prior year's quarter.

Speaker 4

This reduction reflects our ongoing cost control initiatives as well as a nonrecurring gain of $14,900,000 from the settlement of previously accrued research and development costs. However, even adjusting for that gain, operating expenses would have still declined 63.2% from the prior year period. 3rd quarter loss from operations improved to $25,200,000 compared to a loss of $66,400,000 in the prior year quarter. Our loss before income taxes was $77,700,000 compared to $78,000,000 in the prior year quarter. Turning to the balance sheet.

Speaker 4

As of September 30, 2024, our preliminary financial position included total assets of $449,000,000 total liabilities of $292,300,000 and book value of $156,700,000 We ended the quarter with $7,300,000 in cash. During the 1st 9 months of 2024, our financing activities provided net proceeds of $55,700,000 Looking ahead, we will continue to look for opportunities to improve operational efficiencies and reduce costs while maintaining disciplined investment in our strategic growth initiatives. We continue to explore various financing alternatives, including non dilutive options to support our operational needs and growth initiatives. While access to capital continues to be a key consideration for our production plants, we believe our streamlined cost structure positions us to utilize any new capital more efficiently. With that, I will hand it back to Matthias.

Speaker 2

Thank you, Cody. Let me provide you with a look ahead for the company. Our main focus remains on stabilizing and strengthening our operation, continuing to attract strategic investors, maintain and grow FS912.0 production and develop the FX brand and products moving into 2025. Our main goal is to achieve profitability and become self funding in the shortest possible time. To be able to achieve a higher market penetration in the future, we are exploring multiple avenues and scenarios.

Speaker 2

Our dual brand strategy is allowing us to leverage our high value traditional FF brand with 4 Chinese OEMs providing the potential to gain economies of scale. We have already entered into 2 strategic framework agreements and 2 memorandum of understanding and we are working toward finalizing definitive agreements with each. Importantly, FF has submitted FX trademark registrations in both China and U. S. Since our 9/19 event, we have had over 200,000 views on live streaming, received over 70 questions in our Q and A section and garnered over 2,000,000 impressions across our social media platforms.

Speaker 2

After the 9/19 launch event, Max Mah, our Head of Global Strategy and Product, along with investor, Sheikh Abdullah Al Qasimi, engaged in-depth discussions with potential FX partners in China achieving positive progress. FX has already launched a vehicle development project for the target models with the first vehicle potentially rolling off the line by the end of 2025, subject to our securing the necessary funding. The project is currently in the first phase of the vehicle development with related work set to begin to complete the first phase milestones of this vehicle project. Additionally, we would like to address questions regarding last week's S-one filing. This filing primarily corresponds to our $30,000,000 convertible notes financing round in September 2024.

Speaker 2

Of the total 29,700,000 shares registered in the S-one, the 25,300,000 shares registered in the S-one covering shares issuable upon conversion of the notes is based on conversion floor price of $1.048 per share. The number of shares actually issued is independent of the number of shares being registered. The actual conversion price is variable and linked to the market price. For example, if the conversion price were $2 per share and the full $30,000,000 in convertible debt were converted at this price, approximately 15,000,000 shares would be issued. These shares would then be added to our total shares outstanding.

Speaker 2

For more information, please check our recent S-one disclosure. FS appreciates the trust shown by investors and would like to thank them for their loyal and ongoing 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. Thank you, everyone.

Operator

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

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