RIVIAN AUTOMOTIVE, INC. 
The following discussion and analysis of our financial condition and results of operations should be read together with the condensed consolidated financial statements and related notes included in Part I, Item 1 "Financial Statements" of this Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Form 10-K for the year endedDecember 31, 2021 . This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in this Form 10-Q, particularly those identified under Part I I, Item 1A
"Risk Factors" . Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
Rivian exists to create products and services that help our planet transition to carbon neutral energy and transportation. Rivian designs, develops, and manufactures category-defining EVs and accessories and sells them directly to customers in the consumer and commercial markets. Rivian complements its vehicles with a full suite of proprietary, value-added services that address the entire lifecycle of the vehicle and deepen our customer relationships.
Starting with a clean sheet, we built a vertically integrated ecosystem comprised of our vehicle technology platform, cloud architecture, product development and operations, products, and services. Interconnected by our data and analytics backbone, our ecosystem is designed to deliver fast-paced innovation cycles, structural cost advantages, and exceptional customer experiences.
In the consumer market, we launched the R1 platform with our first generation of
consumer vehicles: the R1T, a two-row five-passenger pickup truck, and the R1S,
a three-row seven-passenger sport utility vehicle ("SUV").
In the commercial market, we launched with the Rivian Commercial Vehicle ("RCV")
platform. Our first vehicle on this platform is our Electric Delivery Van
("EDV"), designed and engineered by Rivian in collaboration with Amazon, our
first commercial customer. We are producing EDVs to fulfill Amazon's initial
order of 100,000 EDVs, subject to modification as described under Part III, Item
13 "Certain Relationships and Related Transactions, and Director Independence"
in the Form 10-K.
During the six months ended
Factors Affecting Our Performance
The growth and future success of our business depends on many factors. While these factors present significant opportunities for our business, they also pose risks and challenges, including those discussed below and in Part II, Item 1A "Risk Factors," that we must successfully address to achieve growth, improve our results of operations, and generate profits. •Ability to Develop and Launch New Offerings. The R1T, R1S, and EDV, our initial launch products, appear to resonate with customers based on positive responses to vehicles delivered and preorder data. The term "preorder" refers to all configured preorders prior toMay 25, 2022 and all reservations made on and followingMay 25, 2022 , net of delivered vehicles and cancelled orders. We believe the Rivian brand is becoming established in the most attractive consumer and commercial vehicle market segments. However, our ability to grow revenue and expand margins will also depend on our ability to develop and launch new vehicle platforms and programs. Our future financial performance will also depend on our ability to offer services that deliver an intuitive, seamless, and compelling customer experience. •Ability to Attract New Customers. Our growth will depend in large part on our ability to attract new consumer and commercial customers. We have invested heavily in developing our ecosystem and plan to continue to do so. We are in the very early stages of growth in our existing markets, and we expect to substantially raise brand awareness by connecting directly with our community through engaging content, rich digital experiences, and immersive events. We anticipate that these activities will lead to additional preorders and deliveries, and, as a result, increase our base of Rivian customers. An inability to attract new customers would substantially impact our ability to grow revenue or improve our financial results.
•Ability to Scale our Ecosystem and Brand Experience. Our go-to-market strategy requires us to scale our ecosystem quickly and effectively, including our technology platform and product development and operational infrastructure.
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Our future success will also depend on our ability to further develop and
leverage our proprietary technology platform. Our ability to enhance our product
design, engineering, and manufacturing capabilities and expand our delivery and
service operations, Rivian Adventure Network ("RAN"), charging network, and
customer service will be critical for supporting growth. We believe our
long-term ability to achieve our financial targets will depend on our ability to
cost-effectively scale these elements, while also delivering a unified customer
and brand experience consistent with our adventurous brand commitment.
•Ability to Convert our Customers to Subscribers of our Services. Services are a
key part of our growth strategy, driven by initial attach rate, retention, and
the subsequent adoption of future service offerings. We offer a variety of
services, including financing and insurance, vehicle maintenance and repair,
charging, and FleetOS solutions that we believe will grow our revenue outside of
vehicle sales. As we increase our base of Rivian customers and expand our
services portfolio, we expect our customers to expand their usage of our service
offerings over the full lifecycle of their vehicle ownership. We believe the
services portion of our business will have the benefit of creating a
higher-margin, recurring revenue stream for each vehicle, therefore improving
our margin profile. Our ability to grow revenue and our long-term financial
performance will depend in part on our ability to drive adoption of these
offerings.
•Ability to Invest in our Production and Capabilities. We believe that customer
acquisition and retention is contingent on our ability to produce innovative
offerings, including vehicles that deliver the broadest combination of
performance, utility, and capability, as well as services that enhance the
ownership journey through new features, functions, and a best-in-class customer
experience. To this end, we intend to continue making investments to drive
growth as we scale vehicle production and deliveries, expand our offerings, and
strengthen our core capabilities. As we invest in our business for long-term
growth, leading to increases in operating expenses as well as capital
expenditures, we expect to experience additional losses, which could delay our
ability to achieve profitability and positive operating cash flow. Furthermore,
we anticipate that these future investments will require significant external
debt and/or equity financing.
•Ability to Develop and Manage a Resilient Supply Chain. Our ability to
manufacture vehicles and develop future solutions is dependent on the continued
supply of input materials (e.g., lithium and nickel) and components (e.g.,
semiconductors). Any inability or unwillingness of our suppliers to deliver
necessary input materials or components at timing, prices, quality, and volumes
that are acceptable to us could have a material impact on our business,
prospects, financial condition, results of operations, and cash flows.
Fluctuations in the cost of input materials or components and supply
interruptions or shortages could materially impact our business. We have
experienced and may continue to experience cost fluctuations and disruptions in
supply of input materials and components that could impact our financial
performance. For example, the recent global semiconductor supply shortage has
had, and is continuing to have, wide-ranging effects across the automotive
industry, and has impacted our operations and financial performance, along with
those of many automotive suppliers and manufacturers that incorporate
semiconductors into their products. In addition, there have been sizable
increases in recent months in the cost of key metals, including lithium, nickel,
aluminum, and cobalt, with volatility in pricing expected to persist for the
foreseeable future. We also have experienced a need for expedited freight
services associated with supply chain challenges, resulting in higher logistics
costs. Given the current supply chain environment, we believe our production
ramp and rate in our Normal Factory will be limited by supply chain factors in
the near-future. We also must manage the risk of field actions, including
product recalls, with respect to components from suppliers. For example, on May
10, 2022 , we voluntarily initiated a product recall approved by the National
Highway Traffic Safety Administration ("NHTSA") of approximately 500 R1T
vehicles, after we determined that the calibration of the occupant
classification systems for the front passenger seat might not meet current
production specifications due to a defect during supplier manufacturing of the
seat. This defect could potentially result in the passenger air bag not being
deactivated as required in certain circumstances when a car seat or child is in
the front passenger seat. We intend to replace the front passenger seat in the
affected vehicles free of charge. We do not expect this product recall to result
in a material expense or adversely affect our business. We continue to work
diligently and collaboratively with suppliers to identify and proactively
address problems or constraints as quickly as possible.
•Ability to Grow in New Geographies. We plan to invest in international
operations and grow our business outside of our existing operations in the
United States , Canada , the United Kingdom , and the European Union . We believe we
are well-positioned for international expansion in light of a healthy global
demand for EVs and for the vehicle segments in which we currently operate or
expect to operate. Other factors that we believe will aid our successful
international growth include: the highly flexible, modular nature of our
platforms, which we anticipate will provide us the ability to introduce new
vehicle programs and configurations; our digital-first approach, which we
anticipate will allow us to expand quickly and without a significant physical
retail footprint; and our product development
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--------------------------------------------------------------------------------expertise, which we anticipate will enable us to offer significant customization for diverse international markets and demographics.
Our international expansion has significant associated investment requirements, such as capital spending related to infrastructure, including additional manufacturing capacity, delivery, and service operations, charging networks, and personnel. International expansion is also subject to a variety of risks, including local competition, multilingual customer support and servicing, delivery logistics, and compliance with foreign laws and regulations, including those related to vehicle sales, data privacy, financing, taxes, labor and employment, and foreign exchange. •Ability to Maintain Our Culture, Attract and Retain Talent, and Scale Our Team. We believe our culture has been a key contributor to the positive response from our customers, and our mission promotes a sense of greater purpose and fulfillment in our employees. We have invested in building a strong culture and believe it is one of our most important and sustainable sources of competitive advantage. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively pursue our objectives. If we are unable to retain or hire key personnel, our business and competitive position may be harmed resulting in an adverse impact to our prospects, financial condition, results of operations, and cash flows. •Seasonality. Historically, the automotive industry has experienced higher revenue in the spring and summer months. Additionally, we expect volumes of commercial vehicle sales to be less in the winter months, as customers shift their focus to making last mile deliveries during holidays, rather than incorporating more vehicles into their fleet. We do not expect such seasonality in demand to significantly impact our operations in the near-term as we scale our business due to our backlog of preorders; however, we may experience seasonal variations in demand in the long-term. •Impact of the COVID-19 pandemic. Since 2020, public health and governmental authorities have taken extraordinary steps to contain and combat the outbreak and spread of COVID-19, including associated variants, throughout the world. Consistent with these actions and in combination with recommendations by public health officials, since lateMarch 2020 a significant percentage of Rivian personnel have been working remotely; however, in recent months a number of employees have been able to work on-site at our facilities, including ourNormal Factory , subject to operating restrictions intended to protect public health and the health and safety of our employees. Additionally, the effects of the COVID-19 pandemic have caused disruptions to and delays in our operations, including shortages, delays, and price increases in the supply of input materials (e.g., lithium and nickel) and components (e.g., semiconductors). In response, we have adapted various internal designs and processes to proactively address any impacts of such disruptions and delays on our production timeline, which has resulted in higher costs. In addition, the recent lock-downs inChina could cause additional disruptions in the supply chain. The full extent of the future impact from the COVID-19 pandemic on our operational and financial performance is currently uncertain and will depend on future developments outside of our control, including the duration, extent and intensity of the COVID-19 pandemic, the effectiveness and availability of vaccines and boosters, and actions taken by public health organizations and governmental authorities. We will continue to monitor these conditions and remain flexible, evolving our business and processes as appropriate. •Inflation.The United States economy has experienced various disruptions, including supply chain shortages. These disruptions, as well as the ongoing military conflict betweenRussia and theUkraine , have contributed to increased inflation. The cost of input materials (e.g., lithium and nickel) and components (e.g., semiconductors) required to produce our vehicles has risen considerably. We expect inflation to be higher than recent years for the foreseeable future. If we are unable to fully offset higher costs through price increases or other measures, especially in the near-term as we continue to work through the backlog of preorders, we could experience an adverse impact to our business, prospects, financial condition, results of operations, and cash flows. 17 --------------------------------------------------------------------------------
Results of Operations
The following tables set forth our consolidated results of operations for the
periods presented (in millions). The period-to-period comparisons of our
historical results are not necessarily indicative of the results that may be
expected in the future.
Three Months Ended June 30 ,
Six Months Ended
2021 2022 2021 2022
(in millions)
Revenues $ - $ 364 $ - $ 459
Cost of revenues - 1,068 - 1,665
Gross profit - (704) - (1,206)
Operating expenses
Research and development 394 543 683 1,090
Selling, general, and administrative 186 461 307 991
Total operating expenses 580 1,004 990 2,081
Loss from operations (580) (1,708) (990) (3,287)
Interest income - 22 1 25
Interest expense (1) (24) (6) (46)
Other income, net 1 1 1 6
Loss before income taxes (580) (1,709) (994) (3,302)
Provision for income taxes - (3) - (3)
Net loss $ (580) $ (1,712) $ (994) $ (3,305) Comparison of the three and six months ended
Revenues
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2022 $ Change % Change 2021 2022 $ Change % Change
Revenues $ - $ 364 $ 364 nm $ - $ 459 $ 459 nm
*nm-not meaningful
Revenues increased for the three and six months ended June 30, 2022 , compared to
the three and six months ended June 30, 2021 primarily due to customer
deliveries of 4,467 and 5,694 vehicles during the three and six months ended
June 30, 2022 , respectively.
Cost of revenues and gross profit
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2022 $ Change % Change 2021 2022 $ Change % Change
Cost of revenues $ - $ 1,068 $ 1,068 nm $ - $ 1,665 $ 1,665 nm
Gross profit $ - $ (704) $ (704) nm $ - $ (1,206) $ (1,206) nm
*nm-not meaningful
Cost of revenues increased for the three and six months ended June 30, 2022 ,
compared to the three and six months ended June 30, 2021 , as a result of the
production of 4,401 and 6,954 vehicles and the delivery of 4,467 and 5,694
vehicles in the three and six months ended June 30, 2022 , respectively.
Additionally, we recorded $127 million and $207 million of depreciation and
amortization expense and $13 million and $23 million of stock-based compensation
expense for the three and six months ended June 30, 2022 , respectively.
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Negative gross profit increased for the three and six months ended June 30,
2022 , compared to the three and six months ended June 30, 2021 . As we produce
vehicles at low volumes on production lines designed for higher volumes, we have
and will continue to experience negative gross profit related to significant
labor and overhead costs. The pressure on gross profit from limited volumes will
continue in the near-term, but we expect it will improve on a per-vehicle basis
as production volumes ramp up faster than future labor and overhead cost
increases. Additionally, gross profit for the three and six months ended June
30, 2022 was negatively impacted by a $301 million charge to reflect the LCNRV
of inventory and losses on firm purchase commitments as of June 30, 2022 ,
recorded in "Cost of revenues" in our Condensed Consolidated Statements of
Operations . LCNRV reflects the amount we anticipate receiving upon vehicle
sale (after considering future costs necessary to ready the inventory for sale).
We expect these items to continue to negatively impact operating results in
near-term periods.
There have been recent sizable increases in the cost of various inputs to
manufacture our products, due to inflationary pressures and supply chain
disruptions, impacting items such as the cost of input materials (e.g., lithium
and nickel) and components (e.g., semiconductors). We expect volatility in
pricing to persist for the foreseeable future. We have also incurred higher
indirect costs, such as elevated levels of expedited freight, to compensate for
certain supply chain challenges.
Research and development
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2022 $ Change % Change 2021 2022 $ Change % Change
Research and development $ 394 $ 543 $ 149 38 % $ 683 $ 1,090 $ 407 60 %
For the three months ended June 30, 2022 , we incurred R&D expenses of $543
million , including $15 million of depreciation and amortization expense. R&D
expenses increased by $149 million , or 38% compared to the three months ended
June 30, 2021 . This increase was primarily due to $115 million of stock-based
compensation expense, a $109 million increase in payroll and related expenses,
and other miscellaneous operating expenses, partially offset by a $122 million
decrease in engineering, design, and development costs.
For the six months ended June 30, 2022 , we incurred R&D expenses of $1,090
million , including $35 million of depreciation and amortization expense. R&D
expenses increased by $407 million , or 60% compared to the six months ended June
30, 2021 . This increase was primarily due to $253 million of stock-based
compensation expense and a $226 million increase in payroll and related
expenses, partially offset by a $154 million decrease in engineering, design,
and development costs.
The primary drivers for these higher expenses were stock-based compensation
expense not recognized prior to our November 2021 IPO and higher headcount and
personnel costs related to investing in our R1 and RCV programs as well as
investments related to other advanced product development activities, including
early development of our R2 platform, future propulsion platforms, and our
updated vehicle network architecture. The decrease in engineering, design, and
development costs was related to higher product development activities in the
lead up to our start of production for the R1 and RCV platforms in the prior
periods. We plan to continue investing in future vehicle platforms, furthering
vertical integration of manufacturing, as well as enhancing current
technologies, including in-vehicle and Rivian Cloud .
Selling, general, and administrative
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2021 2022 $ Change % Change 2021 2022 $ Change % Change
Selling, general, and
administrative $ 186 $ 461 $ 275 148 % $ 307 $ 991 $ 684 223 %
For the three months ended June 30, 2022 , we incurred SG&A expenses of $461
million , including $19 million of depreciation and amortization expense. SG&A
expenses increased by $275 million , or 148% compared to the three months ended
June 30, 2021 . The increase was primarily due to $114 million of stock-based
compensation expense, an increase of $85 million in payroll and related
expenses, and a $26 million increase in facilities and other occupancy costs.
For the six months ended June 30, 2022 , we incurred SG&A expenses of $991
million , including $37 million of depreciation and amortization expense. SG&A
expense increased by $684 million , or 223% compared to the six months ended June
30, 2021 . The increase was primarily due to $283 million of stock-based
compensation expense, a $187 million increase in payroll
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and related expenses, a
The primary drivers for these higher expenses were scaling our sales operations, including customer-facing facilities and corporate functions to support our future business growth, including higher headcount and increased personnel costs, as well as stock-based compensation expense not recognized prior to ourNovember 2021 IPO. We also plan to make corresponding investments in our facilities, service network, commercial operations, and technology for our future operations. Other (expense) income Three Months Ended June 30, Six Months Ended June 30, (in millions) 2021 2022 $ Change % Change 2021 2022 $ Change % Change Interest income $ -$ 22 $ 22 nm$ 1 $ 25 $ 24 2,400 % Interest expense$ (1) $ (24) $ (23) 2,300 %$ (6) $ (46) $ (40) 667 % Other income, net$ 1 $ 1 $ - - %$ 1 $ 6 $ 5 500 % *nm-not meaningful Interest income increased by$22 million for the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 . Interest income increased by$24 million for the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . The primary drivers of this higher interest income were higher interest rates and higher average balances of cash and cash equivalents. Interest expense increased by$23 million for the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 . Interest expense increased by$40 million for the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . The primary drivers of this higher interest expense were higher average debt balances and interest rates resulting from the 2026 Notes. See Note 4 "Debt" to our condensed consolidated financial statements included in this Form 10-Q for more information on the 2026 Notes. We expect interest expense to increase in the near term, reflecting changes in the interest rate environment. Provision for income taxes As ofJune 30, 2021 and 2022, the majority of our deferred tax assets were comprised of net operating losses generated primarily inthe United States and tax credit carryforwards, and for both periods, these assets were fully offset by a valuation allowance.
Liquidity and Capital Resources
Our operations have been financed primarily through net proceeds from the sale of securities, including in our IPO, and from borrowings. The following table summarizes our liquidity as ofDecember 31, 2021 andJune 30, 2022 (in billions): December 31, 2021 June 30, 2022 Cash and cash equivalents $ 18.1 $ 14.9 Availability under ABL Facility 0.3 0.5 Total liquidity $ 18.4 $ 15.4 InNovember 2021 , we completed our underwritten IPO of approximately 176 million shares of Class A common stock at a public offering price of$78.00 per share. The net proceeds to us from the IPO were$13.5 billion . See Note 10 "Stockholders' Equity and Net Loss Per Share" to our condensed consolidated financial statements included in this Form 10-Q for more information regarding the IPO. We have generated significant losses from operations, as reflected in our accumulated deficit of$6.4 billion and$9.7 billion as ofDecember 31, 2021 andJune 30, 2022 , respectively. Additionally, we have generated negative cash flows from operations and investing activities as we continue to support the growth of our business. We anticipate continuing to make significant capital investments over the next several years to focus on ramping up production as we strategically expand infrastructure, including additional manufacturing capacity at theNormal Factory and initiating work on our second domestic 20 -------------------------------------------------------------------------------- manufacturing facility inGeorgia . We also anticipate continuing to make significant investments in future growth objectives, including vehicle and other technology and software, tooling for current vehicle platforms, future vehicle manufacturing lines, battery technology and supply, our service network, charging infrastructure, and digital offerings.
As of
Note 4 "Debt" to our condensed consolidated financial statements included in
this Form 10-Q, do not include any commitments related to these ongoing
investments as we do not have any related material commitments that we cannot
cancel without a significant penalty. In addition to our capital expenditures,
we expect our operating expenses to increase as we ramp vehicle production and
continue to invest in R&D activities and our commercial infrastructure in
support of our growing customer base.
We believe our existing balance of cash and cash equivalents, in addition to
amounts available for borrowing under the ABL Facility, will be sufficient to
meet our operating expenses, working capital, and capital expenditure needs for
at least the next 12 months.
Our future operating losses and capital requirements may vary materially from
those currently planned and will depend on many factors, including our rate of
revenue growth, the timing and extent of spending on R&D efforts and other
growth initiatives, the expansion of manufacturing activities, the timing of new
products and services, market acceptance of our offerings, and overall economic
conditions. Furthermore, we anticipate that future investments will require
significant debt and/or equity financing. The sale of additional equity would
result in dilution to our stockholders. The incurrence of additional debt would
result in debt service obligations, and the instruments governing such debt
could provide for operational and/or financial covenants that restrict our
operations. There can be no assurances that we will be able to raise additional
capital on favorable terms or at all. The inability to raise capital would
adversely affect our ability to achieve our business objectives.
Cash Flows
Six Months Ended June 30,
(in millions) 2021 2022
Net cash used in operating activities $ (851) $ (2,238)
Net cash used in investing activities$ (871) $
(777)
Net cash provided by financing activities$ 2,568 $ 56 Operating Activities Cash used in operating activities increased by$1,387 million during the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . This increase was primarily driven by higher cash outlays to support overall growth of the business, especially the manufacture and sale of our products from ourNormal Factory , various selling, general, and administrative activities related to scaling our corporate and commercial operations (such as payroll), and R&D related to progressing our vehicle programs (such as prototype expenses). We also used cash to build up inventory levels to support our increasing production levels, partially offset by an increase in payables and accrued expenses related to operating activities. Investing Activities Cash used in investing activities during the six months endedJune 30, 2022 decreased by$94 million compared to the six months endedJune 30, 2021 , as we continued to invest in the growth of our business, including in the manufacturing capabilities at ourNormal Factory and our facilities footprint including service centers. Financing Activities Cash provided by financing activities during the six months endedJune 30, 2021 of$2.6 billion was primarily driven by proceeds from the issuance of shares of Series F contingently redeemable convertible preferred stock. We had no material financing activities during the six months endedJune 30, 2022 . 21 --------------------------------------------------------------------------------
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP. In preparing the condensed consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders' deficit or equity, revenue, and expenses, and related disclosures. We re-evaluate our estimates on an ongoing basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions, and such differences may be material. The critical accounting policies that reflect the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements include those described in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K. During the six months endedJune 30, 2022 , there were no material changes to our critical accounting policies and estimates from those discussed in the Form 10-K.
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