Rivian Automotive, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited U.S. GAAP results. Rivian designs, manufactures, and sells electric vehicles, including R1T and R1S consumer vehicles and Electric Delivery Vans (EDVs).
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1.337 billion | $536 million | $3.119 billion | $995 million |
| Gross loss | $477 million | $917 million | $1.424 billion | $2.123 billion |
| Gross margin | Approximately -35.7% | Approximately -171.1% | Approximately -45.7% | Approximately -213.4% |
| Operating loss | $1.440 billion | $1.774 billion | $4.158 billion | $5.061 billion |
| Net loss | $1.367 billion | $1.724 billion | $3.911 billion | $5.029 billion |
| Net loss per share | $1.44 | $1.88 | $4.15 | $5.53 |
- Q3 revenue rose 149% year over year, alongside deliveries up 136% to 15,564 vehicles. For the first nine months, revenue increased 213% and deliveries increased 194% to 36,150. Production was 16,304 vehicles in Q3 and 39,691 year to date.
- Gross losses narrowed as production ramped, per-vehicle materials and conversion costs declined, and average selling prices increased. Management cautioned that gross profit remained negative while production volumes were below capacity.
- For the nine months, operating expenses fell to $2.734 billion from $2.938 billion. R&D decreased 5% and SG&A decreased 9%, largely reflecting lower stock-based compensation and, for R&D, lower payroll costs. Q3 expenses were higher year over year in both categories.
- Cash used in operating activities was $3.759 billion for the nine months, versus $3.606 billion a year earlier. Investing used $1.908 billion, including $1.405 billion for short-term investments; capital expenditures were $728 million. Financing provided $1.509 billion, primarily from convertible notes.
- At September 30, cash and cash equivalents were $7.941 billion and short-term investments were $1.192 billion. Total liquidity, including $1.120 billion of ABL availability, was $10.253 billion, down from $11.911 billion at year-end 2022. Inventory increased to $2.530 billion from $1.348 billion.
- Long-term debt carrying value was $2.720 billion; principal debt was $2.750 billion, comprising $1.250 billion of 2026 Notes and $1.500 billion of 2029 Green Convertible Notes. The ABL Facility had no borrowings and $380 million of letters of credit outstanding.
Material changes and notable items
- Rivian recorded $34 million of regulatory-credit revenue in the first nine months of 2023. Inventory valuation and firm-purchase-commitment charges were $114 million for the nine months, compared with $696 million in the prior-year period.
- Amazon-related revenue was $401 million in Q3 and $715 million for the nine months, primarily from EDVs. Amazon is a significant near-term customer and an affiliate of a principal stockholder.
- In October 2023, after quarter-end, Rivian issued $1.725 billion principal amount of 2030 Green Convertible Notes and paid $108 million for capped calls. The filing reports $1.602 billion net proceeds after the debt discount and capped-call premium; these proceeds were not included in September 30 liquidity.
- On November 7, 2023, Rivian amended its Amazon EDV agreement to permit certain commercial-van sales to third parties, subject to distribution fees, customer and volume limits, and approval requirements for specified customer categories. Rivian also agreed to certain vehicle-improvement investments through 2026.
- Warranty reserves increased to $223 million at September 30 from $100 million at December 31, 2022. The filing reports contract liabilities of $186 million at quarter-end.
Outlook, risks, and controls
- Management stated that cash, short-term investments, and available ABL borrowing capacity should cover operating expenses, working capital, and capital expenditures for at least the next 12 months. It also expects substantial continuing investment and anticipates future financing may be needed; no specific forward production or revenue guidance is provided in the supplied filing text.
- Management expects per-vehicle gross losses to improve with higher production, cost reductions, technology updates, and higher average selling prices, but does not expect near-term profitability. It expects near-term interest expense to rise following the 2030 Notes issuance and amid elevated rates.
- Key exposures include production ramp and supply constraints, reliance on single- or limited-source suppliers, cost and demand pressures, higher vehicle-financing rates, and dependence on Amazon for a meaningful portion of near-term revenue. The Amazon EDV agreement has no minimum purchase requirement and may be terminated under its terms.
- Rivian’s disclosure controls were deemed ineffective as of September 30 because previously reported material weaknesses in IT general controls, user access, and segregation of duties remained unremediated. Management said additional procedures supported the fairness of the financial statements and that the deficiencies had not caused identified misstatements.
- Legal matters include Tesla trade-secret litigation, IPO-related stockholder litigation, and proceedings concerning the planned Georgia factory. The company said it did not believe pending matters were likely to have a material adverse effect, while noting litigation outcomes are uncertain. The Georgia factory’s timing and construction could be affected by related proceedings.
Most important facts for investors to verify
- Whether delivery growth and cost reductions continue to narrow negative gross margin, and how production compares with deliveries and factory capacity.
- Cash burn, capital spending, inventory growth, and the timing and use of post-quarter 2030 Notes proceeds; confirm liquidity remains adequate as planned investments continue.
- Amazon’s actual EDV purchases and the financial and commercial impact of the amended agreement, including distribution fees and third-party sales restrictions.
- Progress in remediating material weaknesses in internal controls and any subsequent change in control effectiveness.
- Developments in supplier constraints, warranty costs, Georgia factory proceedings, and other disclosed litigation and contingencies.