Rivian Automotive, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited results; amounts below are in U.S. dollars unless noted. Rivian was transitioning from development and pre-production to vehicle sales, with R1T production and initial deliveries beginning in September.
Financial performance and position
| Metric | Q3 2021 | Nine months 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $1 million | $1 million | $0 reported |
| Cost of revenue | $83 million | $83 million | $0 reported |
| Gross loss | $82 million | $82 million | $0 reported |
| Research and development | $441 million | $1.124 billion | $220 million; $511 million |
| Selling, general and administrative | $253 million | $560 million | $68 million; $157 million |
| Net loss | $1.233 billion | $2.227 billion | $288 million; $665 million |
| Basic and diluted loss per share | $12.21 | $22.05 | $2.88; $6.65 |
Gross margin was deeply negative at this very early production stage; the filing reports an $82 million gross loss on $1 million of revenue. The company attributed this largely to factory labor and overhead against very low production volumes, plus a $31 million inventory write-down.
- Cash and cash equivalents: $5.156 billion at September 30, 2021, versus $2.979 billion at December 31, 2020. Restricted cash was an additional $49 million at September 30; cash, cash equivalents and restricted cash totaled $5.205 billion in the cash-flow statement.
- Cash flows, nine months: $1.536 billion used in operating activities; $1.338 billion used in investing activities, primarily factory capital spending; and $5.068 billion provided by financing activities.
- Capital investment: Property, plant and equipment, net, was $2.856 billion at September 30, up from $1.445 billion at year-end. Capital expenditures were $1.335 billion in the first nine months.
- Debt and liquidity: The $2.5 billion convertible notes were carried at fair value of $2.958 billion at September 30. The company had no ABL borrowings, with $550 million of availability after letters of credit and borrowing-base limits. It had repaid its prior term facility in February.
- Accumulated deficit: $3.913 billion at September 30, compared with $1.686 billion at December 31, 2020.
Material changes versus prior comparable periods
- Revenue began with 11 R1T customer deliveries in Q3; production and deliveries were not material in the 2020 comparison periods.
- Q3 net loss increased to $1.233 billion from $288 million; nine-month net loss increased to $2.227 billion from $665 million. Higher R&D and SG&A reflected vehicle programs and expansion of sales, service, facilities and corporate operations.
- The company recognized a $458 million net loss related to issuing and remeasuring the 2021 convertible notes under fair-value accounting. This was a non-cash valuation-related charge, not the notes’ $2.5 billion principal.
- Operating cash use rose to $1.536 billion from $580 million, while investing cash use rose to $1.338 billion from $604 million, reflecting increased spending to develop the business and build the Normal Factory.
Outlook, risks and unusual items
- Management outlook: Rivian expected continued operating losses, rising operating expenses and substantial capital investment as it ramped production and expanded manufacturing, service and charging infrastructure. It said cash, ABL availability and IPO proceeds were expected to cover operating, working-capital and capital needs for at least 12 months. No quantified production or financial guidance for future periods is provided in the filing text.
- Production and demand: As of September 30, Rivian had produced 12 R1Ts and delivered 11. As of December 15, it reported 652 R1 vehicles produced, 386 delivered and approximately 71,000 R1 preorders in the U.S. and Canada. Preorders were cancellable and fully refundable.
- Amazon exposure: Amazon had an initial order for 100,000 electric delivery vans, but the agreement has no minimum purchase requirement; Amazon may modify quantities or timing. Rivian also disclosed exclusivity and right-of-first-refusal provisions relating to certain commercial vehicles.
- Operational and supply risks: Management cited semiconductor and other component shortages, reliance on single- or limited-source suppliers, COVID-related disruption, production-ramp delays, and costs from adapting designs and processes. Low utilization of the Normal Factory was expected to pressure near-term gross profit.
- Subsequent financing and IPO: After quarter-end, Rivian issued $1.25 billion of secured floating-rate notes in October and completed its November IPO at $78 per share, receiving $13.539 billion in net proceeds. The convertible notes converted into 37.7 million Class A shares at $66.30 per share at the IPO.
- Expected post-IPO charges: The filing expected approximately $370 million of stock-based compensation expense in Q4 2021 as IPO performance conditions were met, and approximately $643 million of one-time non-cash expense for shares donated to Forever by Rivian.
- Contingencies and litigation: A supplier-contract termination liability of $19 million was accrued at September 30. Rivian described Tesla trade-secret litigation and an Illinois dealer-association lawsuit challenging direct vehicle sales; management said it intended to defend both and did not believe pending matters would materially affect the company, while noting litigation outcomes remain uncertain.
- Controls: Disclosure controls were found ineffective at September 30 because of previously reported material weaknesses in segregation of duties and IT general controls. The filing said remediation was underway and that the weaknesses had not caused a financial-statement misstatement.
Important facts for investors to verify
- Actual production, deliveries, cancellations and conversion of refundable preorders into completed purchases.
- Whether factory utilization improves enough to reduce per-vehicle overhead and inventory write-downs, and how vehicle gross margins develop.
- Amazon’s actual delivery-van purchase volumes and timing under an agreement without minimum purchase commitments.
- Cash burn, capital spending, liquidity and debt terms after the IPO, including covenants and the use of secured financing.
- The realized impact and timing of IPO-related stock compensation and the $643 million donation expense.
- Progress in remediating material weaknesses in internal controls, and developments in the disclosed litigation and supplier contingencies.