Rivian Automotive Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Emmanuel Rosner - Wolfe Research - Analyst : Thank you so much. My first question is around the improvement in the gross profit and implications for the unit economics on R1. Obviously, you expect a fairly meaningful amount of reg credits in the [fourth] quarter, and then it's a modest gross profit. So I would assume without it, it's still somewhat unprofitable. But can you maybe comment on where you are in the past of improvement in unit economics? How should we think about it in terms of how much does a fourth quarter mean for how do we think about it for 2025 and which other levers you have to keep improving in place?

Question: Emmanuel Rosner - Wolfe Research - Analyst : Okay, that's a lot of great, Claire. Just maybe my follow-up would be then, based on all these factors, would you expect 2025 gross profit to also be positive? And can you give us some sort of indication of how do you think about reg credits for 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, RIVN.OQ - Q3 2024 Rivian Automotive Inc Earnings Call

Question: Emmanuel Rosner - Wolfe Research - Analyst : Thank you.

Question: Adam Jonas - Morgan Stanley. - Analyst : Thanks everybody. So you highlighted a challenging consumer environment. Just wanted to drill on that. Can you remind us what percentage of your volume in the quarter is pre-ordered versus sold out of dealer inventory? And how is that changing? And I'd also be curious, given events of this week if you could remind us what portion of your sales are the customers who realize a full $7,500 tax credit? And also what percentage of your sales are leased? And can you confirm how Rivian is not taking any direct residual value exposure related to those leases. Thanks.

Question: Adam Jonas - Morgan Stanley. - Analyst : Thanks, Claire.

Question: Dan Levy - Barclays - Analyst : Hi, good evening. Thank you for taking the question. I want to start and just follow up maybe a bit on Emmanuel's question. And just to decompose the third quarter COGS per unit, it was roughly $127,000 if you backed out the cost of revenue initiatives. But recognizing that there's -- there were inefficiencies on the volume on the supplier side. Maybe what is a more clean way to look at your current COGS per unit? And then into 2025, if you could maybe just decompose some of the pieces on the COGS per unit that get better and specifically the cadence of material cost benefits, how that layers in.

Question: Dan Levy - Barclays - Analyst : Great. That's helpful. Just if you could remind us on the benefits actually from stronger operations in '25, how much runway there is to drive the COGS per unit down.

Question: Dan Levy - Barclays - Analyst : Thank you. If I could just squeeze in one more. On Volkswagen, we've seen the Scout announcement, and it's using the joint electric architecture. Maybe you could just -- I know we're waiting for the JV to be closed, but remind us of sort of where the collaboration currently stands?

Question: Mark Delaney - Goldman Sachs - Analyst : Yes, good afternoon, thanks very much for taking my question. I think 2024 production guidance implies that production in the fourth quarter will be a little over 11,000 units or roughly 865 vehicles per week. Maybe you can help us better understand where Rivian currently stands. And I ask to better contextualize where you stand with the supply constraint with the Enduro motor? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, RIVN.OQ - Q3 2024 Rivian Automotive Inc Earnings Call

Question: Mark Delaney - Goldman Sachs - Analyst : Thank you for that color. My second question was around the regulatory credits. Clearly, you said you now expect $300 million for this year. I had thought it was closer to $200 million as an outlook for 2024. Maybe help us better understand what's leading to the upside relative to the prior view? Thank you.

Question: Joseph Spak - UBS - Analyst : Thank you very much. Claire, just in talking about 2025 a little bit, a couple of times on this call, and you mentioned still that gross profit positive target. You again just sort of mentioned some downtime later in the year. So just to be clear, when you say gross profit positive, is that for the full year at some point of the year? Is it like on the R1 vehicle, like X something for R2? And I guess just related to the regulatory kind of question, like how do we think about the cadence of that? Like do you have any recourse and when do you recognize that revenue?

Question: Joseph Spak - UBS - Analyst : But just at a high level, excluding maybe some of the agency stuff like you recognize revenue when like, someone buys it from you. Like you can't recognize it on an agreement to buy it from you?

Question: Joseph Spak - UBS - Analyst : Okay. The second question, just -- and I apologize, I joined a little late right as you were saying this, but I thought I heard you say van production will be up in the fourth quarter. Is that deliveries too? Or are you building some inventory, maybe in advance of some actions in next year? Because I thought in the past, you had mentioned that Amazon doesn't really like to take a lot of vans in the fourth quarter. So something changed with the cadence there.

Question: George Gianarikas - Canaccord Genuity - Analyst : Hi, good afternoon, and thank you for taking my questions. I just want to piggyback on a previous question around the relationship with Volkswagen and the Scout vehicle. From what we understood about the relationship, it had to do with electrical and software, but the car looks a lot like R1. And so to what extent can we expect there to be sort of a similar lineup from Volkswagen with regard to Rivian? And how closely will you be cooperating on aesthetics as well as engineering. Thank you.

Question: George Gianarikas - Canaccord Genuity - Analyst : Thank you. And maybe as a follow-up, just any update on commercial vehicle traction in the marketplace and when we could expect additional customers to ramp volumes? Thank you very much.

Question: Tom Norian - RBC Capital - Analyst : All right. Thanks for taking the question. Sorry, one more on the regulatory credit. So if I look at the Q3 gross profit is a negative $392 million, I believe the $300 million of that, I think, $275 million hits in Q4 alone, I think you did $25 million year-to-date. Is that would imply like $117 million benefit in Q4. Volumes were depressed in Q3. So they're coming back in Q4, that should be a benefit -- a piece of think of that $117 million. It just feels like the sequential bridge between Q3 to Q4 on cost improvement sequentially might not be as significant, just be helpful clear to just see what the cost improvement piece of that bridge is? If you could quantify that, that would be really helpful. Thanks.

Question: Tom Norian - RBC Capital - Analyst : Got it. And my follow-up, RJ, on the R2, I believe the $45,000 price variety is the one that's not the 300-mile range, when it might be below. Just wondering how competitive that would be a $45,000 under 300-mile range vehicle with the -- in 2026, the competitive environment seems to be -- we have GM with Equinox at sub-$30,000 with 300-plus miles of range. How does that compete? Is it a different demographic, perhaps that makes it different features beyond just battery range. Just love to hear how the competitive environment shakes out with that product at that range, at that price. Thanks.

Question: Alex Potter - Piper Sandler - Analyst : Perfect. Thanks. So I had a question on the Volkswagen relationship. There's obviously been, I don't know, a fair amount of intrigue in the media regarding headcount reductions, the restructuring and plant closures and things going on at Volkswagen. And I just wanted to, I guess, get some clarity on whether any of the teams that you've been working with may or may not be impacted. I don't know, obviously, you maybe can't put words in their mouth. But has this impacted you in any way? Or are there ways that it could potentially impact you looking ahead?

Question: Alex Potter - Piper Sandler - Analyst : Okay. Very good. And then maybe lastly, there was a fair amount of verbiage in the shareholder letter on Connect+. Streaming apps and things of this nature. I mean it sounds sort of compelling. It sounds like the take rates are pretty high amongst people who have been trying it. Is this something that is modelable, something that investors should be including in their own forecasting? Or is it not quite material enough to call that out. Thanks.

Question: Mike Shlisky - D.A. Davidson - Analyst : Yes, hi. Thanks for taking my question. I guess, given some of the challenges you mentioned, the consumer challenges you had mentioned earlier just with some of the demand impact that's on having. I've heard about these kind of new variants that might have higher prices, better -- higher price assumptions in the fourth quarter. But I'm curious if you're seeing on a like-for-like basis, when people are making orders, are they trying to look at cheaper options or maybe fewer features. Has that been trended at all?