Rivian Automotive Inc ($RIVN) Q2 2025 Earnings Call

Welcome to today's Q2 earnings results hosted by Rivian. At this time, all participants are in a listen-only mode. After the speaker's presentation, we will conduct a question and answer session. I'll now turn the call over to Derek Mulvy, vice president of finance.

Good afternoon and thank you for joining us for Rivian's second quarter 2025 earnings call. Today I am joined by R.J. Scaringe, our CEO and founder, Claire McDonough, our chief financial officer, and Javier Varela, our chief operations officer. Before we begin, matters discussed in this call, including comments and responses to questions, reflect management's views as of today. We will also be making statements related to our business operations and financial performance that may be considered forward-looking statements under federal securities law. Such statements involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC filings and the shareholder letter we filed with the SEC. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of historical non-GAAP to GAAP financial measures is provided in our shareholder letter. Just before the earnings call, we published and filed our shareholder letter, which includes an overview of our progress over the recent months. I encourage you to read it for additional details around some of the items we will cover in today's call. With that, I'll turn the call over to R.J., who will begin with a few opening remarks.

Thanks, R.J. I want to echo our excitement for the upcoming launch of R2 and our autonomy and AI advancements. It is great to see our vertically integrated technologies go into our design validation builds for R2. This is a key driver of the structural cost advantages we expect to achieve on R2 while also delivering fantastic performance and utility. During the second quarter, we produced 5,979 and delivered 10,661 vehicles from our manufacturing facility, which was the primary driver of the $927 million of automotive revenue. We saw a significant decrease in production volume compared to the first quarter as a result of a variety of supply chain related complexities partially driven by shifts in trade policy. We believe we now have visibility into these components for the remainder of the year. Automotive gross profit in the second quarter was negatively impacted by lower production volumes which resulted in approximately $137 million of fixed cost included in cost of revenues as compared to more normalized volumes. Automotive gross profit losses were $335 million. Our software and services segment reported another strong quarter with $376 million of revenue and $129 million of gross profit. About half of the revenue within software and services was a result of the software and electrical hardware joint venture we created with Volkswagen Group. We also experienced strong growth and gross profit contribution from remarketing, service, accessories, and charging. Our consolidated revenue was $1.3 billion and gross profit losses were $26 million. Included in this was $185 million of depreciation and $37 million of stock-based compensation expense. Adjusted EBITDA losses for the quarter were $667 million. We saw a slight increase in overall operating expenses in the second quarter as compared to the first quarter driven by the ongoing investments we're making to develop our R2 and our key technologies as well as the continued growth of our sales and service infrastructure and organization. We expect to see increasing operating expenses in the second half of the year as we advance our R2 towards production and continue the buildout of our sales and service infrastructure to support R2's volumes. During the second quarter, we also strengthened our balance sheet. On June 30th, we received a $1 billion equity investment from Volkswagen Group at an effective price per share of $19.42, which represents a 33% premium to the $14.56 30 trading day volume weighted average stock price. During the second quarter, we also refinanced our senior secured notes due October 2026 by issuing $1.25 billion of green secured notes at a rate of 10% maturing January 2031. In addition to the $7.5 billion of cash and cash equivalents and short-term investments reflected on our balance sheet, we expect to receive up to an additional $2.5 billion of incremental capital associated with our joint venture transaction as well as an up to $6.6 billion loan from the Department of Energy associated with the buildout of our Georgia facility. Turning to our 2025 guidance, we are maintaining our delivery guidance of 40 to 46,000 vehicles and our capex guidance of $1.8 to $1.9 billion. As a reminder, we plan to shut down our Normal facility for approximately 3 weeks starting in September of this year to prepare for the planned launch of R2 in the first half of 2026. We anticipate the third quarter to be our peak delivery quarter of the year across both consumer and commercial vehicles. As R.J. mentioned, while we believe our long-term opportunity to drive meaningful growth and profitability remains strong, some of the recent policy actions will have an impact on our results and cash flow of our business. This includes increased tariffs which had a minimal impact during the second quarter but are expected to have a net impact of a couple thousand dollars per unit for the remainder of 2025. In addition, due to changes in certain regulatory credit programs, we do not expect to earn revenue from these programs for the remainder of 2025. We expect total 2025 regulatory credit sales to be approximately $160 million as compared to our prior outlook of $300 million. As a result of the changes in our regulatory credit outlook, in addition to our second quarter results, we expect our gross profit for the full year 2025 to be roughly break even. We are also increasing our guidance for our adjusted EBITDA loss to $2 to $2.25 billion as a result of the modifications to our gross profit outlook. Our focus remains on cost optimization and efficiently scaling the business. We are actively studying tariff mitigation strategies to best position the company, especially as we look ahead to the Section 232 automotive tariff offset which ends in April 2027. We remain steadfast in our belief that R2 and our technology development will be truly transformative for our growth and profitability. I'd like to turn the call back over to the operator to open the line for Q&A.

For the Q&A section of today's session, we'll be utilizing the raise hand feature. If you'd like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted, please unmute yourself and begin with your question. As a reminder for today's call, we will allow one question and one relevant follow-up. We will now pause a moment to assemble the queue. Our first question will come from Dan Levy with Barclays. Your line is open. Please ask your question.

Hi. Good evening. Thanks for taking the questions. I want to start with a question I think that's probably on everyone's mind, which is just bridging from R1 to R2. And I think the obvious key here is the cost reduction. You're saying you can cut the cost by more than half, but maybe you can just remind us again about what are the things in R1 that won't recur? And on the flip side, you're talking about things like sourcing and contracts that can help on R2. What is the conviction that you can get the required cost reduction from these items to get appropriate economics on R2?

If I may add, R.J., today we have the R2 100% sourced. So it's a fact. We know the prices of our components and we can confirm this 50% reduction.

Okay, great. Thank you. As a follow-up, I think related, a year ago at your investor day, you outlined a path to EBITDA break even in 2027. We've obviously seen a number of changes since then with lower regulatory credit environment as you're talking about, tariffs, the loss of the EV tax credit. So the question is, what are the areas in which you need to pivot the business now to still see that path to eventually reaching positive EBITDA, and how much more does this make licensing deals or other partnerships with automakers on the tech side more of a necessity to ultimately get to where you need to be on the EBITDA margin side?

Thanks, Dan. As you know, our objective is to drive to positive EBITDA as a result of the full year R2 production and strong software and services performance that we anticipate as we look ahead to 2027. As you look at the relative contributing factors there, while there certainly have been meaningful headwinds as we look at some of the policy implications that are in play today relative to the conversation that we had about a year ago as part of our investor day, we're working across a number of cost efficiency initiatives in the business to drive and scale the business as efficiently as possible. And maybe I'll invite R.J. to talk to some of the opportunities as we think about the continued growth and development of our software and services and future opportunities with other potential OEMs as well.

Great. Thank you.

Our next question will come from Adam Jonas with Morgan Stanley. Your line is open.

Hi, thanks everybody. My first question is on the $6.6 billion loan with the Department of Energy that's associated with the buildout of Georgia. Can you confirm has any of that loan been drawn? And is there a scenario where you would decide not to draw on that loan? Because from the readings of the shareholder letter, I don't see much of an update on capex going into that buildout at this point, but just maybe kind of where are we on that? What's your thinking on that loan? And then I have a follow-up.

Sure. Thanks, Adam. As it pertains to the Department of Energy loan, it's more of a construction finance, project finance-based loan. And so it does require Rivian to be deploying capital on site in Georgia. We've not yet started construction of the site, and so that precludes us from having the opportunity to draw on that loan as we sit here today. As we look at the future roadmap, the attractive cost of capital that the Department of Energy loan provides is something that's quite attractive to us. So we do intend to draw on that loan as we look to expand our manufacturing base in Georgia.

Okay. Thanks, Claire. Just as a follow-up, you spun off Also Inc. in March of this year, your micromobility unit. You seem to have attracted some pretty serious talent to that unit as well, and I think there's probably more announcements to come there I would assume. Aside from the minority stake held by Rivian, and maybe you can confirm how big that is, is there any other relationship between Rivian and Also Inc., and how much time, R.J., are you spending on this entity with your current role as chairman? Thanks.

Our next question will come from Mark Delaney with Goldman Sachs. Your line is open.

Yes, good afternoon. Thank you very much for taking the questions. I think Rivian's COGS per vehicle went up about $22,000 sequentially. Can you elaborate more on what drove that and to what extent these are temporal relative to sustained costs? And then you spoke about taking costs down by more than 50% with R2 compared to the R1. So I'm hoping to better understand if there are some sustained higher cost levels you're seeing with the R1. Does that change the absolute cost that you expect R2 to come in at?

Sure. As you think about the drivers of the cost of goods sold per unit from Q1 to Q2, the largest driver as we mentioned in our prepared remarks was driven by the lower production volume and therefore the lack of fixed cost leverage that we had absorbing those costs into inventory, so to speak. So that represented about $14,000 a unit of impact. We also had higher levels of LCNRV in this period as well as some warranty and other related costs that constituted the other increases in COGS per unit for the automotive segment for Q2 relative to Q1. So as we take a step back and look at the Q1 baseline, we do see that as a helpful starting point of demonstrating the opportunity set that we have with R1 with higher levels of production volumes. However, that Q1 COGS per unit doesn't include the impact from tariff related costs which we mentioned are roughly about a couple thousand dollars a unit that we'll begin to see more so in the second half of this year as well. As we look at the R2 cost structure, we do have similar impacts as we think about the tariff impacts on R2 on a go forward basis. However, one of the core benefits that we have in R2 and hopefully in the future R1 will benefit from as well is some of the joint venture shared sourcing opportunity as we think about the low voltage electronics that will be shared between Rivian vehicles and our two vehicles in the future, which we are in market sourcing currently and that can produce incremental upside as we think about the COGS roadmap for our vehicles.

Very helpful. Thanks for that. My other question was around the ASPs and hoping to better understand how Rivian is expecting ASPs per vehicle to trend. You launched the quad motor and talked about the positive pricing benefits of that product line, but with the IRA credits set to go away in the fourth quarter, I'm wondering if you think Rivian is going to need to adjust its pricing strategy and perhaps that may be a headwind. So any more color around how to think about pricing and puts and takes. Thank you.

One other item I'd just add on is we do anticipate there being higher levels of commercial van deliveries in the second half of the year relative to the first half of the year. So as you look at the overall Rivian blended ASP, you'll see the commercial vans reducing that figure, although we do anticipate there being strong ASPs on the R1 program as R.J. noted.

Our next question will come from Daniel Rosa. Your line is open. Please ask your question.

Hey, thanks for taking my questions. I'd like to double click a little bit on Dan's first question on the EBITDA break even in '27 because it does seem that there are quite a few meaningful headwinds especially in the near term, and some of the items you talked about seem like there are more long-term opportunities. So I'm just, maybe you could go back and comment a bit on '27 because we're losing the EV credits, the loss of the IRA purchase incentive could be almost 10 to 15% of an R2 purchase price. The Volkswagen partnership, if I recall correctly, doesn't have financial upside other than the disclosed amounts that are kind of baked into the guidance, and even more partnerships are highly unlikely to materialize by '27 if you need to integrate a full electrical architecture into a new car. So I'm wondering here with those headwinds, shouldn't we expect the EBITDA break even to move into later years given the plan we discussed last year?

This is what Claire talked to. We're pushing extremely hard to get there, recognizing that we have time to react to some of these changes. The other key driver is, as we look at the broader software and services opportunity, this is an area where we do anticipate significant growth over the next two years, especially as we recognize greater levels of revenue from some of the background IP consideration associated with the progress occurring within the joint venture and getting Volkswagen vehicles out on the road. That is one of the key contributing factors as we think about the relative contribution of both the automotive business from a gross profit standpoint, which is driven by R2 and the continued scaling of the Normal plant, as well as the software and services opportunity from the joint venture, coupled with the broader opportunities that we have as we continue to scale and grow the car park and achieve additional gross profit and ultimately contribution to our EBITDA target from things like our remarketing program, the sale of used Rivians, our charging network, the growth of our service infrastructure, financing, insurance, and in a future state, autonomy is another driver of that roadmap as well.

Great, that's very helpful. Thanks. And maybe, R.J., you referenced it a bit when you talked about the competitive environment for the R2. I mean, do you think that even without the IRA credits, it can still be a gross profit break-even car, just the car itself, or do you need software, services, and other elements to make that EBITDA work for the car itself?

Our next question will come from Joseph Spak with UBS. Your line is open. Please ask your question.

Thanks. Good afternoon. Maybe just two quick clarifications and then a bigger picture question. You previously on these earnings calls have said you were baking in several hundred million in policy impacts, which I know was vague but I think was interpreted and suggested as tariffs and some regulatory credits. So you just lowered regulatory credit, you're basically not assuming anything in the back half. That seems like it's maybe half the EBITDA reduction. But what exactly got worse on tariffs, and now you see it a couple thousand dollars per vehicle higher? And then just the other clarification on the 2027 EBITDA target, which I know came up a couple times. Since the regulatory credit is the one thing you're willing to concede has changed, how much was actually baked into 2027 for that number?

Just wanted to clarify on your first question, Joe. The couple thousand dollars a unit on tariffs is consistent with the commentary that we provided last quarter. So there's no change overall in terms of the outlook from a tariff impact on the business as we look at the 2025 impact. The incremental impact, as we mentioned, is real from a policy standpoint, driven by changes in the regulatory credit outlook where we no longer anticipate we'll be earning revenue from the sale of regulatory credits in the second half of this year, given changes to certain regulatory credit programs that have occurred of late. As we look at the broader guidance, the other impact is, as we talked a little bit about in our prepared remarks, driven by the Q2 overall performance and some of the supply chain related complexities that limited our production volume this quarter in particular. As we look at 2027 EBITDA, we're not going to get into specifics in terms of what was in and is now in the overall outlook from a regulatory credit standpoint. We fully acknowledge that the bar has risen given some of the policy related headwinds that we're now working through as a business, but our objective is to continue to drive towards positive EBITDA through a number of ongoing initiatives to drive cost efficiency into the business and to ensure that we have an efficient ramp of R2.

Thanks for that. The second question, I want to touch back on something Adam brought up earlier, which is the Normal plant. So you're taking three weeks of downtime here in September to get Normal capacity to 15,000. You're currently producing at, I don't know, probably below 20% of that utilization right now. So, and I realize it's not fair because you have much higher volume for R2, but at what level of utilization do we need to see Normal before you really start thinking about commissioning in Georgia?

Our next question will come from Ron with Guggenheim Securities. Your line is open. Please ask your question.

Yeah, good afternoon and thank you for taking my questions. A bit of a follow-up on some of the policy changes, but has any of the impact of these policy changes, whether it's emissions or consumer credits, changed how you view the R2 or R3 with respect to whether it's pricing, costs, or how much capacity is needed? And I know that there's some sensitivity around the pre-order number for the R2, but if you'd be willing to share an update, it probably would go a long way in assuaging concerns around the needed capacity with Georgia.

Yeah, no, I appreciate that. And then on the technical aspects of your approach to autonomy, excited to see what you have in store for us later this year. But some of your competitors are opting for camera only, as you're well aware. Some are opting for more hardware heavy approaches with LiDAR or even beyond that in terms of the hardware required. What gives your team confidence that your early sensor fusion approach to autonomy is the correct one?

Our next question will come from Emanuel Rosner with Wolfe Research. Your line is open. Please ask your question.

Great. Thank you so much. So when I look at your software and services revenues excluding the JV, they were up very sharply versus last year. How should we think about the growth there going forward, the trajectory, your profitability profile for it, and to what extent, how much of this was embedded in your expectation for positive EBITDA by year end 2027?

Sure, Manuel. As we think about some of the key contributors to the growth and profitability that we saw in Q2 from software and services, one of the drivers of this is the growth of Rivian's remarketing program. So this is both trade-in vehicles for consumers getting into a Rivian for the first time, but also one of the key contributors is the sale of used Rivians. As we think about being able to open the aperture, attract more consumers that can afford an R1 at a variety of different price points, this is a very compelling business for us over the long term and one that's important to Rivian maintaining strong residual values as well. Beyond that, we've continued to see the growth and expansion of our service infrastructure. That's also contributing to the growth in some of our maintenance expenses and revenues in the business. And then beyond that, we're in the process right now of opening up our charging network to additional vehicles and going through the integration of NACS as well, which will allow more and more customers to charge on the Rivian Adventure Network, which will again be another contributing factor for us over the longer term. So as we look at the underlying tailwind of software and services, we saw significant quarter-over-quarter growth in terms of the non-joint venture contributions to the gross profitability of this business segment. And as I mentioned, as we look ahead to 2027, we'll see the joint venture contributing more significantly given increasing increases in background IP related revenue streams, the growth of the JV as they continue to hire and grow to expand the team and organization, as well as the ongoing growth of many of these key internal services that will be servicing a larger car park as a whole. So we see this as a meaningful contributor to the business on a go-forward basis, especially as we think about the contributions in 2027 as well.

Understood. And then coming back to the earlier question of the R2 economics. So R.J., you were mentioning how the BOM would be about half of R1, but then there's also operational and manufacturing efficiency. How should we think about the gross break-even point for that vehicle? You're putting in 155,000 units of capacity into Normal. You'll be leveraging a lot of the fixed cost space already within that facility. How many R2s do you need to sell to get a combination of both these costs to get you to break even?

So as we look at the overall outlook for the R2 unit economics, we see a much faster path to positive gross profit on the vehicle itself. And that's primarily driven by the fact that the vehicle has a much lower underlying material cost structure associated with it that R.J. walked through. But beyond that, R2 is also benefiting from the volumes that are already existing within the Normal plant as well. That allows us to efficiently get to positive gross profit on the R2 program. We think as we exit 2026, it can be at that level, and then we'll be looking to expand that as we add a third shift of operation into the plant and continue to reduce the cost structure over time. One of the big strategic reasons we made the decision to launch R2 out of our Normal facility is the shared fixed cost absorption that we'll now have between R1, EDV, and R2. And as Claire said, out of the gate on day one of production of saleable units of R2, we'll already have the benefit of all the fixed cost absorption that R1 and the commercial vans are picking up. So it just has a fundamentally different path to profitability than what we saw with R1. Above and beyond that, some of those assets that R2 is going to be utilizing, like our stamping operation, have already been in use for a while and much of that has been depreciated. So there's just inherent overall fixed cost advantages to being in Normal.

Our next question will come from Andres Shepard with Cantor Fitzgerald. Your line is open. Please ask your question.

Hi everyone. Can you hear me? Okay.

Wonderful. Well, thank you so much for taking our questions. Good afternoon and congratulations on the quarter. By the way, I think this is our first time making it to the Q&A, so bucket list for us. I think a lot of our questions have been asked, but R.J., I was hoping to come back to ASPs. Just given the macro environment, tariffs, removal of tax credit, do you expect any changes to ASPs, particularly off the R2 line? Should we still be targeting around $45,000 to $50,000? Any color there would be helpful. Thanks.

Got it. That's super helpful. I really appreciate all that color. Maybe just as a quick follow-up, I know we touched on autonomy and the different technologies and use cases. I'm just wondering if you can maybe give us your vision in terms of the initial ramp up of that, any granularity that you might be able to provide, and then also, are you considering autonomy for the EDVs potentially? Just curious if you're considering commercial self-driving as well. Thank you.

Our last question will come from George Gianarikas with Canaccord Genuity. Your line is open. Please ask your question.

Hi everyone. Thank you for taking my questions. You sort of alluded to this in a previous answer, but I'm curious, with the impressive specs of the R2 and the compelling price, you are admittedly launching it into a challenging market for EVs. Could you just sort of illuminate us as to maybe broad marketing strategies or anything you plan to do to boost the market appeal of the product? Thank you.

Thank you. And maybe as a brief follow-up, any news to share on commercial vehicle momentum? Any additional wins or raw traction there? Thank you.

This concludes the Q&A section of the call. I would now like to turn the call back to R.J. Scaringe for closing remarks.