Rivian Automotive, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited U.S. GAAP results. Comparisons are with the corresponding 2022 periods.
Business context and key results
Rivian designs, manufactures and sells electric vehicles, accessories and related services. Its vehicle lineup includes the R1T, R1S and Electric Delivery Van (EDV). In the first half of 2023, Rivian produced 23,387 vehicles and delivered 20,586. Amazon is its first commercial customer and has placed an initial EDV order of 100,000, subject to modification.
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $1.121bn | $364m | $1.782bn | $459m |
| Gross loss | $412m | $704m | $947m | $1.206bn |
| Gross margin | (36.8%) | (193.4%) | (53.1%) | (262.7%) |
| Operating loss | $1.285bn | $1.708bn | $2.718bn | $3.287bn |
| Net loss | $1.195bn | $1.712bn | $2.544bn | $3.305bn |
| Basic and diluted loss per share | $1.27 | $1.89 | $2.72 | $3.66 |
Q2 revenue rose 208% year over year; first-half revenue rose 288%. Management attributed the increases primarily to higher vehicle deliveries. Losses narrowed, but Rivian remained substantially gross-margin negative and unprofitable.
Cash flow, debt and liquidity
- First-half cash flow: Operating cash used was $2.882bn, versus $2.238bn used in 2022. Investing cash used was $1.476bn, including $938m used to purchase short-term investments; capital expenditures were $538m, versus $777m in 2022. Financing provided $1.517bn, primarily from convertible-note proceeds.
- Cash and investments: At June 30, cash and cash equivalents were $9.260bn and short-term investments were $942m, totaling $10.202bn. Total liquidity, including $1.115bn available under the ABL Facility, was $11.317bn, compared with $11.911bn at December 31, 2022.
- Debt: Outstanding principal was $2.750bn: $1.250bn of 2026 secured floating-rate notes and $1.500bn of 2029 green convertible notes. The balance-sheet carrying value was $2.718bn. The notes issued in 2023 bear 4.625% annual interest and have an initial conversion price of approximately $20.13 per share.
- Revolving facility: The amended ABL commitment is $1.5bn, with no borrowings and $385m of letters of credit outstanding at quarter-end. Rivian reported compliance with its covenants.
- Balance sheet: Inventory increased to $2.161bn from $1.348bn at year-end; total liabilities were $5.513bn and stockholders’ equity was $11.714bn. Accumulated deficit was $15.670bn.
Material changes and management commentary
- Gross loss improved year over year, which management attributed primarily to lower materials and conversion costs per vehicle and higher average selling prices. Management expects negative gross profit to continue improving per vehicle as production rises and cost reductions are achieved; it nevertheless expects negative gross profit during the production ramp.
- Operating expenses declined: first-half R&D fell 14% and SG&A fell 16%, principally reflecting lower payroll and stock-based compensation. Rivian plans continued investment in future platforms, technology, facilities and operations.
- First-half operating cash use increased, primarily due to inventory buildup. Management stated that cash, short-term investments and ABL availability should cover operating expenses, working capital and capital expenditures for at least the next 12 months. It also expects continued losses and significant investment, and anticipates future financing may be required; no specific production or profitability target is provided in the supplied filing text.
- Rivian issued $1.5bn principal amount of 2029 green convertible notes in March and amended its ABL Facility in April, increasing the commitment and releasing related restricted cash.
- Financial reporting controls: Management concluded disclosure controls were not effective at June 30 because previously reported material weaknesses in IT general controls, user access and segregation of duties remained unremediated. Management said additional procedures supported the fair presentation of the financial statements and that the deficiencies had not caused a misstatement.
- Concentration and execution risks: Amazon generated $242m of Q2 revenue and $314m in the first half; $219m was receivable at June 30. Amazon may purchase fewer vans or delay purchases, and the EDV agreement has no minimum purchase requirement. Rivian also cites supplier concentration, manufacturing scale-up, cost and supply volatility, competition, customer demand, charging and service infrastructure, and financing needs as risks.
- Legal matters: Disclosed matters include Tesla trade-secret litigation, securities litigation, and proceedings concerning the planned Georgia factory. The filing says outcomes are uncertain and that Georgia-related cases could affect the plant’s timing or construction; management did not expect pending matters, based on its current knowledge, to have a material adverse effect.
Important facts for investors to verify
- Whether improving per-vehicle costs and production efficiency can narrow gross losses without weakening pricing or demand.
- Cash burn, inventory levels, capital spending and the assumptions behind management’s statement that liquidity covers at least 12 months.
- Actual Amazon EDV order volume, delivery timing, receivables and the effects of customer concentration and contract terms.
- Debt-service, covenant and potential dilution implications of the 2029 convertible notes and the ABL Facility.
- Progress remediating the material weaknesses in internal controls and any subsequent developments in the Georgia factory and other litigation.