Rivian Automotive, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited consolidated financial statements prepared under U.S. GAAP. Amounts below are in U.S. dollars unless noted.
Business context and operating performance
Rivian designs, manufactures, and sells electric vehicles and related services. Its vehicle lines include the R1T pickup, R1S SUV, and commercial Electric Delivery Van (EDV). In Q1 2023, Rivian produced 9,395 vehicles and delivered 7,946.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $661 million | $95 million |
| Gross profit (loss) | ($535) million | ($502) million |
| Gross margin | Approximately (81%) | Approximately (528%) |
| Operating expenses | $898 million | $1.077 billion |
| Operating loss | ($1.433) billion | ($1.579) billion |
| Net loss | ($1.349) billion | ($1.593) billion |
| Net loss per share, basic and diluted | ($1.45) | ($1.77) |
| Cash used in operating activities | $1.521 billion | $1.034 billion |
| Capital expenditures | $283 million | $418 million |
At March 31, 2023, cash and cash equivalents were $11.244 billion; total assets were $18.191 billion; and stockholders’ equity was $12.742 billion. Inventory was $1.823 billion, up from $1.348 billion at year-end 2022. The quarter-end accumulated deficit was $14.475 billion.
Principal debt outstanding was $2.750 billion: $1.250 billion of 2026 secured floating-rate notes and $1.500 billion of 2029 green convertible notes. The company had no ABL borrowings and $367 million of ABL availability at quarter-end, after $383 million of letters of credit. Reported quarter-end liquidity was approximately $11.6 billion.
Material changes versus the prior comparable period
- Revenue rose $566 million, or 596%, primarily as vehicle deliveries increased by 6,719 year over year.
- Gross loss widened by $33 million despite higher revenue. Management cited higher volume-related costs, increased depreciation, and $229 million of inventory and firm-purchase-commitment valuation charges; these charges were $188 million in Q1 2022.
- Operating loss narrowed by $146 million, with research and development and selling, general, and administrative expenses declining. The company attributed much of the reductions to lower stock-based compensation, including the absence of accelerated expense recognition on certain pre-IPO awards.
- Operating cash use increased by $487 million, principally due to inventory build to support rising production. Investing cash use fell by $135 million, while financing provided $1.485 billion, primarily from the 2029 notes issuance.
- Cash and cash equivalents declined by $324 million from December 31, 2022. Long-term debt, net of discount and issuance costs, increased from $1.231 billion to $2.716 billion.
Outlook, risks, contingencies, and unusual items
- Liquidity and investment: Management said cash and available ABL capacity should fund operating expenses, working capital, and capital expenditures for at least 12 months. It expects significant ongoing investment and losses, and says future investments may require additional debt or equity financing. The filing text provides no clear quantified annual production or financial guidance.
- Post-quarter financing update: In April 2023, Rivian amended its ABL Facility, doubling the commitment to $1.5 billion and increasing availability to $753 million after letters of credit. The amendment enabled release of $536 million of restricted cash; management reported total liquidity of $12.5 billion after these changes.
- Margins and supply: Management expects near-term gross-margin pressure from low production volumes, with per-vehicle improvement dependent on ramping production, technology changes, higher average selling prices, and material-cost savings. It said near-term production at the Normal Factory is likely to be limited by supply-chain factors. Single- and limited-source suppliers, including semiconductor suppliers, remain a material risk.
- Customer concentration: Amazon accounted for $72 million of Q1 2023 revenue. Rivian notes that the EDV agreement has no minimum purchase requirement, permits purchase timing and volumes to vary, and may be terminated subject to its terms. Amazon’s initial order of 100,000 EDVs is subject to modification.
- Debt and dilution: The 2029 notes bear 4.625% interest and have an initial conversion price of approximately $20.13 per share. Conversion, cash repurchase obligations after certain fundamental changes, interest expense, and future financing needs could affect liquidity or dilute shareholders. Management expected interest expense to rise in the near term.
- Inventory and warranty: Inventory carried $561 million of lower-of-cost-or-net-realizable-value write-downs at March 31, and accrued liabilities included $261 million of related losses on firm purchase commitments. Warranty reserves increased from $100 million at year-end to $137 million.
- Controls and legal matters: Disclosure controls were deemed ineffective due to continuing material weaknesses in IT general controls, user access, and segregation of duties. Management said the weaknesses had not caused a financial-statement misstatement and remediation continued. Disclosed proceedings include Tesla trade-secret litigation, IPO-related shareholder suits, and disputes and litigation concerning the planned Georgia manufacturing site. Management did not believe pending matters were likely to have a material adverse effect, while noting litigation uncertainty.
Important facts for investors to verify
- Whether production and deliveries continue to grow, and whether inventory build converts into customer deliveries and revenue.
- Whether gross loss per vehicle improves as planned, including the level and recurrence of inventory valuation and purchase-commitment charges.
- Updated cash burn, capital spending, liquidity, and borrowing availability after the April ABL amendment and restricted-cash release.
- Amazon’s actual EDV purchases and the pace of diversification in commercial-customer revenue.
- Progress remediating internal-control material weaknesses and the status and potential effects of the Georgia and other legal proceedings.