What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-03-31 · 130 added, 193 removed, 147 unchanged (69% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (“Form 10-K”).

This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.

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Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

The discussion of our financial condition and results of operations for the year ended December 31, 2020 is included in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Rivian exists to create products and services that help our planet transition to carbon neutral energy and transportation.

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the R1T, a two-row, five-passenger pickup truck, and the R1S, a three-row, seven-passenger SUV.

We made our first deliveries of the R1T and R1S in September and December 2021, respectively.

As of December 31, 2021, we produced 1,009 and delivered 917 R1Ts, and produced and delivered two R1Ss.

As of March 8, 2022, we had approximately 83,000 R1 preorders in the United States of America (“United States") and Canada from customers who each paid a cancellable and fully refundable deposit of $1,000.

In the commercial market, we launched the RCV platform.

Our first vehicle on this platform is our EDV, designed and engineered by Rivian in collaboration with Amazon, our first commercial customer.

Amazon has placed an initial order of 100,000 EDVs, subject to modification as described under Part III, Item 13.

"Certain Relationships and Related Transactions, and Director Independen ce" in this Form 10-K.

Initial Public Offering

In November 2021, we completed our underwritten IPO of 175,950,000 shares of Class A common stock at a public offering price of $78.00 per share, which included the exercise in full by the underwriters of their option to purchase from us an additional 22,950,000 shares of Class A common stock.

The net proceeds to us from the IPO were $13.5 billion.

Amazon has placed an initial order of 100,000 EDVs, subject to modification.

During the year ended December 31, 2022, we produced 24,337 vehicles and delivered 20,332 vehicles.

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 I, Item 1A “Risk Factors,” that we must successfully address to achieve growth, improve our results of operations, and generate profits.

While these factors present significant opportunities for our business, they also pose risks and challenges, including those discussed below and in Part I, 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.

Based on current preorders, our initial launch products - the R1T, R1S, and EDV - appear to resonate with customers and, we believe, have established the Rivian brand in the most attractive consumer and commercial vehicle market segments.

The R1T, R1S, and EDV appear to resonate with customers based on positive responses to vehicles delivered and preorder data.

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.

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• 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, to deliver a seamless customer experience.

Our future success will also depend on our ability to further develop and

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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.

Our go-to-market strategy requires us to scale our ecosystem quickly and effectively, including our technology platform and product development and operational infrastructure.

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 production capacity, delivery and service operations, Rivian Adventure Network, 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.

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• Ability to Convert our Customers to Subscribers of our Services.

Services are a key part of our growth strategy, driven by initial attach rate, member retention, and the subsequent adoption of future service offerings.

We intend to offer a variety of services, including financing and insurance, vehicle maintenance and repair, membership, software, charging solutions, and FleetOS solutions that we believe will grow our revenue outside of vehicle sales.

Services are a key part of our growth strategy.

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.

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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 to make investments to drive growth as we scale vehicle production and deliveries, expand our offerings, and strengthen our core capabilities.

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.

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• 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, including metals, battery cells, and semiconductors.

Any inability or unwillingness of our suppliers to deliver necessary product components, including semiconductors, 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 materials, supply interruptions, or material shortages could materially impact our business.

We have experienced and may continue to experience cost fluctuations or disruptions in supply of input materials that could impact our financial performance.

For example, the recent global semiconductor supply shortage is having 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 very 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.

Furthermore, during the year ended December 31, 2021, we experienced increased logistics cost due to expedited freight associated with supply chain challenges.

Given the current supply chain environment, we believe our production ramp and rate in our Normal Factory will be limited by the supply chain in the near-future.

We continue to work diligently and collaboratively with suppliers to identify and head off problems or constraints as quickly as possible.

Our ability to manufacture vehicles and develop future solutions is dependent on the continued supply of input materials (e.g., lithium and nickel) and product components (e.g., semiconductors).

Any inability or unwillingness of our suppliers to deliver necessary input materials or product 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 product 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 product components that could impact our financial performance.

For example, the 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, over the prior year there have been sizable increases in the cost of key metals, including lithium, nickel, aluminum, and cobalt.

These prices have declined from peak levels but are expected to remain volatile for the foreseeable future.

We have also experienced a need for expedited freight 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 service actions, including product recalls, with respect to components from suppliers.

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 (“U.K.”), and the European Union (“EU”).

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, and expect to, operate.

We plan to invest in international operations and grow our business outside of our existing operations.

We believe we are well-positioned for international expansion in light of healthy global demand for EVs and for the vehicle segments in which we currently or expect to operate.

Other factors that we believe will aid our successful international growth include:

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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

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customer support and servicing, delivery logistics, and compliance with foreign laws and regulations related to vehicle sales, data privacy, financing, taxes, labor and employment, and foreign exchange.

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 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 our success to date and our mission promotes a sense of greater purpose and fulfillment in our employees.

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 business, prospects, financial condition, results of operations, and cash flows.

Any failure to preserve our culture could negatively

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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.

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however, we may experience seasonal variations in our business in the long-term.

• Impact of the COVID-19 pandemic.

Beginning in 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, in combination with recommendations by public health officials, since late March 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 our Normal Factory, subject to operating restrictions intended to protect public health and the health and safety of our employees.

Additionally, COVID-19, including associated variants, as well as the more recent conflict in the Ukraine have caused disruptions to and delays in our operations, including shortages and delays in the supply of certain parts, as well as higher prices for certain parts, including semiconductors, materials, and equipment necessary to produce our vehicles.

In response, we have adapted various internal designs and processes to remedy or mitigate impacts of such disruptions and delays on our production timeline, which has resulted in higher costs.

The full extent of the future impact from the 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 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.

The United States economy has experienced various disruptions, including supply chain shortages which have contributed to increased inflation.

The cost of input materials ( e.g.

, sheet metal), components ( e.g., semiconductors), and systems ( e.g.

, seats) required to produce our vehicles has risen considerably.

We expect higher than recent years’ levels of inflation to persist for the foreseeable future.

The United States economy has experienced various disruptions, including supply chain shortages.

These disruptions, as well as the ongoing military conflict between Russia and the Ukraine, have contributed to increased inflation.

The cost of input materials (e.g., lithium and nickel) and product components (e.g., semiconductors) required to produce our vehicles has risen considerably over the past year.

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.

Components of Operating Results

We expect to incur significant operating costs and expenses that will impact our future profitability, including research and development (“R&D”) expenses as we develop and introduce new vehicles and services and improve our existing vehicles and services, capital expenditures in the expansion of our manufacturing footprint and operations, additional operating costs and expenses for production ramp-up, raw material procurement costs, general and administrative expenses as we scale our operations, and selling and distribution expenses as we market our vehicles and services.

In addition, we may incur significant costs in connection with our services once we deliver our vehicles, including servicing and warranty costs.

We expect to incur significant operating costs and expenses that will impact our future profitability, including research and development (“R&D”) expenses as we develop and introduce new vehicles and services and improve our existing vehicles and services, capital expenditures in the expansion of our manufacturing footprint and operations, additional operating costs and expenses for production ramp-up, raw material procurement costs, servicing, and warranty costs as we expand our deliveries, general and administrative expenses as we scale our operations, and selling and distribution expenses as we market our vehicles and services.

Our ability to become profitable in the future will depend on our ability not only to successfully market and sell our vehicles and services at prices we establish, but also to appropriately control costs and realize economies of scale.

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Revenues and Cost of revenues

We are a development stage company and have only recently started to generate notable revenues.

Vehicle production and deliveries began in September 2021.

As we expand production and commercialization of vehicles, we expect the majority of our revenue will be initially derived from sales of consumer and commercial vehicles, accessories, and regulatory credits.

We expect the majority of our costs of revenues will initially be driven by labor, overhead, logistics, and direct material expenses related to the production of consumer and commercial vehicles and accessories, as well as costs incurred in excess of the net realizable value (“NRV”) of certain inventory.

The majority of our revenues is derived from sales of consumer and commercial vehicles.

The majority of our costs of revenues is driven by direct parts, material and labor costs, manufacturing overhead (e.g., depreciation of machinery and tooling), shipping and logistics costs, and reserves including for estimated warranty costs related to the production of consumer and commercial vehicles, adjustments to write down the carrying value of inventory when it exceeds its estimated net realizable value (“NRV”), losses on firm purchase commitments, and to adjust for excess and obsolete inventory based upon expectations of forecasted demand.

Additionally, we started recognizing recurring non-cash stock compensation charges in the quarter ended December 31, 2021 in connection with the performance-based vesting condition of RSUs and stock options being met upon the IPO.

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• consulting and contractor expenses;

• amortized equipment expenses;

• depreciation expenses;

• allocation of indirect expenses.

We expense R&D costs as incurred.

We expect our R&D expenses to increase in the foreseeable future as we continue to develop vehicle platforms, next generation EVs and components, and other technologies.

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Selling, general, and administrative

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SG&A expenses also include allocated facilities expenses such as rent and depreciation, and other general corporate expenses such as travel and recruiting expenses.

We expect our SG&A expenses to increase for the foreseeable future as we continue to scale as a company, build out our service and sales operations, and produce our planned future vehicle platforms and programs.

We also expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with rules and regulations of the SEC and of applicable national securities exchanges, as well as legal, audit, investor relations, insurance, and other administrative and professional services expenses.

Other expenses

Other expenses consist of charitable contributions to Forever by Rivian.

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Other (expense) income, net

Other (expense) income, net consists primarily of non-operating expenses and income such as interest expense, amortization of debt discounts and issuance costs, and other gains or losses associated with our debt financing arrangements, as well as interest income earned on investments.

Other income (expense), net

Other income (expense), net consists primarily of non-operating expenses and income such as interest expense, amortization of debt discounts and issuance costs, and other gains or losses associated with our debt financing arrangements, as well as interest income earned on investments.

Provision for income taxes

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The following tables set forth our consolidated results of operations for the periods presented (in millions).

The year-to-year comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

Years Ended December 31,

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Loss on convertible notes, net — (441) —

Other (expense) income, net (1) 1 (1)

Other income (expense), net 1 (1) 18

Loss before income taxes (1,018) (4,688) (6,748)

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Net loss $ (1,018) $ (4,688) $ (6,752)

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Comparison of the years ended December 31, 2021 and 2022

Years ended December 31, 2019 vs 2020 Change 2020 vs 2021 Change

Years Ended December 31, 2021 vs 2022 Change

(in millions) 2021 2022 $ %

Revenues $ — $ — $ 55 $ — nm $ 55 nm

Revenues $ 55 $ 1,658 $ 1,603 nm

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Revenues increased by approximately $55 million for the year ended December 31, 2021, compared to the year ended December 31, 2020.

This increase was achieved primarily through our first customer deliveries of 917 R1Ts.

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Revenues increased for the year ended December 31, 2022, compared to the year ended December 31, 2021 primarily due to increased deliveries of 19,412 vehicles.

Cost of revenues and Gross profit

Years ended December 31, 2019 vs 2020 Change 2020 vs 2021 Change

Years Ended December 31, 2021 vs 2022 Change

(in millions) 2021 2022 $ %

Cost of revenues $ — $ — $ 520 $ — nm $ 520 nm

Gross profit $ — $ — $ (465) $ — nm $ (465) nm

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Cost of revenues increased by $520 million for the year ended December 31, 2021, compared to the year ended December 31, 2020, as a result of the manufacture and sale of our first production vehicles.

Negative gross profit increased by $465 million for the year ended December 31, 2021, compared to the year ended December 31, 2020.

As we produce vehicles at low volumes on production lines designed for higher volume, 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, we recorded a lower of cost or net realizable value (“LCNRV”) adjustment of $95 million for the year ended December 31, 2021 to write-down the value of certain inventory to the amount we anticipate receiving upon vehicle sale (after considering future costs necessary to ready the inventory for sale).

We expect LCNRV charges to negatively impact upcoming periods in the near term.

We also experienced increased logistics costs due to expedited freight associated with supply chain challenges, which we expect to continue in the near future.

Cost of revenues $ 520 $ 4,781 $ 4,261 819 %

Gross profit $ (465) $ (3,123) $ (2,658) (572) %

For the year ended December 31, 2022, we incurred cost of revenues of $4,781 million, including $475 million of depreciation and amortization expense.

Cost of revenues increased compared to the year ended December 31, 2021 as a result of the increased production and delivery of 23,322 and 19,412 vehicles, respectively.

Additionally, we had a $920 million charge to reflect the lower of cost or net realizable value (“LCNRV”) of inventory and losses on firm purchase commitments as of December 31, 2022 compared to a $95 million as of December 31, 2021 for an increase of $825 million, increased depreciation and amortization expense by $371 million, and increased stock-based compensation expense by $44 million.

We expect to continue to incur LCNRV charges and losses on firm purchase commitments in the near-term but anticipate that the total charge associated with our Normal Factory will decline over the course of 2023 and 2024 as we lower material, production, logistics, and other costs and increase production volumes.

The increase in LCNRV charges and losses on firm purchase commitments compared to the previous period is primarily due to an increase in overall inventory and firm purchase commitment values as production ramps, which were adjusted to reflect the amount we anticipate receiving upon vehicle sale (after considering future costs necessary to ready the inventory for sale).

There have been sizable increases in the cost of various inputs to manufacture our products over the past year, 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 have also incurred higher indirect costs, such as elevated levels of expedited freight and short-term premiums on materials, to compensate for certain supply chain challenges which we expect will continue in the near-term.

In addition, our total cost of goods sold was negatively impacted by the ramping of our second manufacturing shift.

Negative gross profit increased for the year ended December 31, 2022, compared to the year ended December 31, 2021 primarily due to the items noted above.

As we produce vehicles at low volumes on production lines designed for higher volumes, we have experienced, and will continue to experience, negative gross profit driven by labor, depreciation, 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 we implement new in-vehicle technologies, achieve commercial cost savings on material costs, and ramp our overall production levels.

Research and development

Years ended December 31, 2019 vs 2020 Change 2020 vs 2021 Change

Years Ended December 31, 2021 vs 2022 Change

(in millions) 2021 2022 $ %

Research and development $ 1,850 $ 1,944 $ 94 5 %

2020 compared to 2019

R&D expenses increased by $465 million, or 154%, for the year ended December 31, 2020, compared to the year ended December 31, 2019.

This increase was primarily due to a $212 million increase in engineering, design, and development costs and a $182 million increase in payroll and subcontracting expenses.

The primary drivers for these higher expenses were our increased efforts related to our R1 and EDV programs and other advanced product development activities.

During this period, we started our pre-production vehicle builds, which required significant investment to manufacture and test vehicles, and had higher personnel costs to support these activities.

2021 compared to 2020

R&D expenses increased by $1,084 million, or 142%, for the year ended December 31, 2021, compared to the year ended December 31, 2020.

This increase was primarily due to a $344 million increase in the cost of prototype materials and supplier R&D, a $293 million increase in payroll and related expenses, and $277 million of stock-based compensation expense.

The primary drivers for these higher expenses were our increased efforts related to our R1 and EDV programs, important investments related to other advanced product development activities, and higher headcount and personnel costs.

We plan to continue to invest in future vehicle platforms and vertical integration, as well as current technologies, including in-vehicle and Rivian Cloud.

For the year ended December 31, 2022, we incurred R&D expenses of $1,944 million, including $95 million of depreciation and amortization expense.

R&D expenses increased compared to the year ended December 31, 2021 primarily due to a $228

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million increase in payroll and related expenses, a $160 million increase in stock-based compensation expense, a $43 million increase in depreciation and amortization, and a $33 million increase in software expenses partially offset by a $362 million decrease in engineering, design, and development costs.

The primary drivers for these higher expenses were 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 were related to higher product development activities in the lead up to our start of production for the R1 and RCV platforms in the prior period.

We plan to continue investing in future vehicle platforms and new in-vehicle technologies as well as furthering vertical integration of manufacturing.

Selling, general, and administrative

Years ended December 31, 2019 vs 2020 Change 2020 vs 2021 Change

Years Ended December 31, 2021 vs 2022 Change

(in millions) 2021 2022 $ %

Selling, general, and administrative $ 1,242 $ 1,789 $ 547 44 %

2020 compared to 2019

SG&A expenses increased by $147 million, or 136%, for the year ended December 31, 2020, compared to the year ended December 31, 2019.

This increase was primarily due to an $89 million increase in payroll and related expenses and a $25 million increase in facilities and other occupancy costs, driven by higher headcount and office location expansions.

2021 compared to 2020

SG&A expenses increased by $987 million, or 387%, for the year ended December 31, 2021, compared to the year ended December 31, 2020.

This increase was primarily due to a $258 million increase in payroll and related expenses, $277 million of stock-based compensation expense (which was not recognized in prior periods, given our IPO occurred during the year ended December 31, 2021), a $103 million increase in facilities and other occupancy costs, a $66 million increase in subcontractor and other professional fees, and an increase in other miscellaneous operating expenses, including fees for contract cancellations, certain logistics costs, promotional costs, expenses for information technology, and travel, meal, and entertainment costs.

The primary drivers for these higher expenses were our efforts to further scale our sales and service operations, office locations, customer-facing facilities, and other corporate functions to support our future business growth, including higher headcount and increased personnel costs.

We also plan to make corresponding investments in our facilities, service network, commercial operations, and technology for our future operations.

For the year ended December 31, 2022, we incurred SG&A expenses of $1,789 million, including $82 million of depreciation and amortization expense.

SG&A expenses increased compared to the year ended December 31, 2021 primarily due to a $213 million increase in stock-based compensation expense and a $208 million increase in payroll and related expenses.

The primary drivers for these higher expenses were scaling our corporate functions and commercial operations, including customer-facing facilities to support our current and future business growth.

These expenses include higher headcount and personnel costs.

We also plan to make corresponding investments in our facilities, commercial operations, and technology for our future operations.

Other expenses

Years ended December 31, 2019 vs 2020 Change 2020 vs 2021 Change

Years Ended December 31, 2021 vs 2022 Change

(in millions) 2021 2022 $ %

Other expenses $ — $ — $ 663 $ — nm $ 663 nm

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2021 compared to 2020

Other expenses increased by $663 million for the year ended December 31, 2021, compared to the year ended December 31, 2020, as a result of the Company’s donation of approximately 8 million shares of Class A common stock and $20 million in cash to Forever by Rivian, Inc., a 501(c)(4) social welfare organization (“Forever by Rivian”).

With this sizable initial funding, we have no short-term plans to provide additional direct funding to Forever by Rivian in the future.

Other (expense) income, net

Years ended December 31, 2019 vs 2020 Change 2020 vs 2021 Change

Other expenses $ 663 $ — $ (663) (100) %

Other expenses decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021 as a result of the Company’s donation of approximately 8 million shares of Class A common stock and $20 million in cash to Forever by Rivian in 2021.

With this sizable initial funding, we have no near-term plans to provide additional direct funding to Forever by Rivian in the future.

Other income (expense), net

Years Ended December 31, 2021 vs 2022 Change

(in millions) 2021 2022 $ %

Interest income $ 18 $ 10 $ 3 $ (8) (44) % $ (7) (70) %

Interest income $ 3 $ 193 $ 190 nm

Interest expense $ (29) $ (103) $ (74) (255) %

Loss on convertible notes, net $ — $ — $ (441) $ — nm $ 441 nm

Other (expense) income, net $ (1) $ 1 $ (1) $ 2 nm $ (2) nm

Loss on convertible notes, net $ (441) $ — $ 441 100 %

Other (expense) income, net $ (1) $ 18 $ 19 nm

*nm-not meaningful

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2020 compared to 2019

Interest income decreased by $8 million, or 44%, for the year ended December 31, 2020, compared to the year ended December 31, 2019.

This decrease was primarily due to lower market rates, partially offset by a higher average balance of cash and cash equivalents.

Interest expense decreased by $26 million, or 76%, for the year ended December 31, 2020, compared to the year ended December 31, 2019.

This decrease was primarily due to the amortization of debt discount upon the conversion of convertible debt during 2019, as well as lower market interest rates in 2020 associated with the Term Facility (as defined in Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K).

2021 compared to 2020

Interest income decreased by $7 million, or 70%, for the year ended December 31, 2021, compared to the year ended December 31, 2020.

This decrease was primarily due to lower market rates, partially offset by a higher average balance of cash and cash equivalents.

Interest expense increased by $21 million, or 263% for the year ended December 31, 2021, compared to year ended December 31, 2020.

This increase was primarily due to higher average debt balances and interest rates with the issuance of the 2026 Notes.

See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information on the 2026 Notes.

We expect interest expense to increase in the near term, according to changes in the interest rate environment.

Loss on convertible notes, net for the year ended December 31, 2021 resulted from the conversion of the 2021 Convertible Notes.

See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information on the 2021 Convertible Notes.

Interest income increased for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher interest rates and higher average balances of cash and cash equivalents.

Interest expense increased for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher average debt balances and interest rates resulting from the 2026 Notes.

See Note 7 “Debt” to our consolidated financial statements included in this Form 10-K for more information on the 2026 Notes.

We expect interest expense to increase in the near term, reflecting changes in the interest rate environment.

Loss on convertible notes, net decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021 as a result of the issuance and subsequent mark-to-market valuation of the unsecured senior convertible promissory notes due July 2026 (“2021 Convertible Notes”) in 2021.

See Note 7 “Debt” to our consolidated financial statements included in this Form 10-K for more information on the 2021 Convertible Notes.

Provision for income taxes

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Our operations have been financed primarily through net proceeds from the sale of securities, including in our IPO, and from borrowings.

As of December 31, 2020 and 2021, we had cash and cash equivalents of $3 billion and $18 billion, respectively, and availability under the ABL Facility was $306 million at December 31, 2021.

In January 2021, we issued 71,913,170 shares of Series F contingently redeemable convertible preferred stock to a group of investors at a price of $36.85 per share for total gross proceeds of $2.7 billion.

Upon the closing of our IPO, all outstanding shares of contingently redeemable convertible preferred stock converted into an aggregate 575,864,510 shares of Class A common stock.

In February 2021, we paid all outstanding amounts under the variable rate Term Facility Agreement (“Term Facility”).

The following table summarizes our liquidity (in billions):

December 31, 2021 December 31, 2022

Cash and cash equivalents $ 18.1 $ 11.6

Availability under ABL Facility 0.3 0.3

Total liquidity $ 18.4 $ 11.9

In May 2021, we entered into the ABL Facility, which will mature on May 20, 2025.

As of December 31, 2021, we had $306 million of unused committed amounts under the ABL Facility.

The ABL Facility contains certain affirmative and negative covenants and conditions to borrowing or taking other actions that restrict certain of our subsidiaries’ ability to, among other things, incur debt, grant liens, make investments, enter into certain transactions with affiliates, pay dividends, and prepay junior or unsecured indebtedness, subject to certain exceptions.

As of December 31, 2022, we had $0.3 billion of unused committed amounts under the ABL Facility.

The ABL Facility contains certain affirmative and negative covenants, including a minimum liquidity covenant requiring us to maintain no less than $1.0 billion of liquidity, which will fall away upon meeting a fixed charge coverage ratio of greater than 1.0 for two consecutive quarters, and conditions to borrowing or taking other actions that restrict certain of our subsidiaries’ ability to, among other things, incur debt, grant liens, make investments, enter into certain transactions with affiliates, pay dividends, and prepay junior or unsecured indebtedness, subject to certain exceptions.

As of December 31, 2022, we were in compliance with the covenants and conditions of the ABL Facility.

See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information regarding the ABL Facility.

In July 2021, we issued the unsecured senior convertible promissory notes due July 2026 (“2021 Convertible Notes”) at $2.5 billion aggregate principal amount.

The 2021 Convertible Notes would have matured on July 23, 2026 and accrued interest quarterly at a rate of (i) zero percent (0%) from the date of issuance to, and including, June 30, 2022 and (ii) five percent (5%)

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after June 30, 2022.

Upon the closing of our IPO, the 2021 Convertible Notes automatically converted into shares of our Class A common stock at a conversion price equal to $66.30 per share.

See Note 7 “Debt” to our consolidated financial statements included in this Form 10-K for more information regarding the ABL Facility.

In October 2021, we issued $1.25 billion aggregate principal amount of 2026 Notes.

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The 2026 Notes require certain of our subsidiaries to comply with a number of customary covenants (including restrictions on incurrence of indebtedness, liens, the making of restricted payments, and dispositions), in each case substantially similar to the corresponding covenants under the ABL Facility as described above.

In addition, the 2026 Notes contain a minimum liquidity covenant (but no other financial covenants) requiring us to maintain no less than $1.0 billion of liquidity, which will fall away upon meeting a fixed charge coverage ratio of greater than 1.0 for two consecutive quarters.

See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information regarding the 2026 Notes.

In addition, the 2026 Notes contain the same minimum liquidity covenant (but no other financial covenants) as the ABL Facility described above.

See Note 7 “Debt” to our consolidated financial statements included in this Form 10-K for more information regarding the 2026 Notes.

In November 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, which included the exercise in full by the underwriters of their option to purchase from approximately 23 million additional shares of Class A common stock.

The net proceeds to us from the IPO were $13.5 billion.

See Note 12 “Stockholders' Equity” to our consolidated financial statements included in this Form 10-K for more information regarding the IPO.

We have generated significant losses from operations, as reflected in our accumulated deficit of $6.4 billion and $13.1 billion as of December 31, 2021 and 2022, respectively.

Additionally, we have generated significant negative cash flows from operations and investing activities as we continue to support the growth of our business.

We anticipate continuing to make significant investments in capital over the next several years to focus on ramping up production as we strategically expand infrastructure, including additional manufacturing capacity at the Normal Factory and initiating work on our second domestic manufacturing facility in Georgia.

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 December 31, 2020 and 2021, our non-cancellable commitments as disclosed in Note 5 "Leases" , Note 6 “Debt” , and Note 12 "Commitments and Contingencies" to our consolidated financial statements included elsewhere in this Form 10-K, 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 roll out our commercial infrastructure in support of our growing customer base.

We believe our existing balance of cash and cash equivalents, including the net proceeds from our IPO and 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.

We anticipate continuing to make

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significant capital investments over the next several years to focus on ramping up production as we strategically expand infrastructure, including additional manufacturing capacity both domestically and internationally.

As of December 31, 2021 and 2022, our non-cancellable commitments as disclosed in Note 6 "Leases" , Note 7 “Debt” , and Note 13 "Commitments and Contingencies" to our consolidated financial statements included in this Form 10-K, 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 timing, nature, and rate of 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.

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Net cash provided by financing activities 2,500 19,828 99

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Operating Activities

Net cash used in operating activities increased by $0.5 billion during the year ended December 31, 2020 compared to the year ended December 31, 2019.

This increase was primarily driven by higher cash outlays to support overall growth of the business, especially in R&D related to the progress of our vehicle programs (such as prototype expenses) and various SG&A activities related to scaling our operations (such as payroll).

Net cash used in operating activities increased by $1.8 billion during the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase was primarily driven by higher cash outlays to support overall growth of the business, especially in R&D related to the progress of our vehicle programs (such as prototype expenses), various SG&A activities related to scaling our corporate and commercial operations (such as payroll), and the manufacturing and sale of our first products from our Normal Factory.

The overall growth of the business also resulted in increases in net operating assets (especially inventory for the start of production) and offsetting increases in operating liabilities (including payables and accrued expenses).

Net cash used in operating activities increased during the year ended December 31, 2022 compared to the year ended December 31, 2021.

This increase was primarily driven by higher cash outlays to support overall growth of the business, especially the manufacturing and sale of our products from our Normal Factory and building up inventory to support our increasing production levels.

Investing Activities

Net cash used in investing activities increased by $0.7 billion during the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by increased capital expenditures related to the build-out of our Normal Factory.

Net cash used in investing activities increased by $0.9 billion during the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the build-out of our Normal Factory, and to a lesser extent by investments in corporate workplaces, lab facilities, service operations, and experience spaces.

Net cash used in investing activities decreased during the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to higher capital expenditures related to the build-out of our manufacturing capabilities at our Normal Factory in the prior year.

We continued to invest in the growth of our business at our Normal Factory, our next generation vehicle platforms and technologies, along with our service centers in the current year.

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2019 of $2.8 billion was primarily driven by proceeds from the issuance of shares of Series A, B, C and D contingently redeemable convertible preferred stock.

Net cash provided by financing activities during the year ended December 31, 2020 of $2.5 billion was primarily driven by proceeds from the issuance of shares of Series E contingently redeemable convertible preferred stock.

Net cash provided by financing activities during the year ended December 31, 2021 of $19.8 billion was primarily driven by $13.5 billion in net proceeds from our IPO, $2.7 billion in proceeds from the issuance of shares of Series F contingently redeemable convertible preferred stock, $2.5 billion in proceeds from the issuance of the 2021 Convertible Notes, and $1.2 billion in net proceeds from the issuance of the 2026 Notes.

Net cash provided by financing activities during the year ended December 31, 2021 was primarily driven by $13.5 billion in net proceeds from our IPO, $2.7 billion in proceeds from the issuance of shares of Series F contingently redeemable convertible preferred stock, $2.5 billion in proceeds from the issuance of the 2021 Convertible Notes, and $1.2 billion in net

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proceeds from the issuance of the 2026 Notes.

We had no material financing activities during the year ended December 31, 2022.

Critical Accounting Policies and Estimates

The preparation of our financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“U.S.

The preparation of our financial statements and related disclosures in conformity with U.S.

GAAP and the discussion and analysis of our financial condition and operating results require us to make judgments, assumptions, and estimates that affect the amounts reported.

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We consider the following policies and estimates critical because they are important to the portrayal of our financial condition and operating results, and they require us to make judgments and estimates about inherently uncertain matters.

For further information on all of our significant accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Form 10-K.

For further information on all of our significant accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this Form 10-K.

Inventory Valuation

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When our expectations indicate that the carrying value of inventory may exceed its NRV, we perform an exercise to calculate the approximate amount by which carrying value is greater than NRV and record additional cost of revenue for the difference.

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Once a write-off occurs, a new, lower cost basis is established.

We also regularly monitor inventory quantities on hand and on order and record write-downs for excess and obsolete inventories based on our estimates of the future demand for our products and market and economic conditions and for damaged or otherwise impaired goods.

Should our estimates used in these calculations change in the future, such as estimated selling prices or production costs, additional write-downs may occur.

A hypothetical 10% change in estimated selling prices or production costs would have resulted in approximately a $20 million change in the inventory write-down for the year ended December 31, 2021.

Stock-Based Compensation

We measure our stock-based awards at their grant date at the fair value of the award and expense that value over the vesting period, net of actual forfeitures, when we consider any performance targets probable of being achieved.

Generally, the Company’s outstanding stock-based awards vest in quarterly or annual installments based on a requisite service period of one to four years of continuous service and may contain performance or market conditions related to production, stock price, and other targets.

We have two types of stock-based awards granted and outstanding under the 2015 Stock Plan and 2021 Stock Plan:

stock options and restricted stock units (“RSUs”).

We calculate the fair value of most stock options using a Black-Scholes option pricing model.

The Black-Scholes option pricing model requires certain subjective inputs and assumptions, including the expected stock price volatility, term of the award, risk-free interest rates, and dividend yield of our Class A common stock.

Expected volatility is based on historical volatility rates of peer companies.

The dividend yield is estimated based on the rate at which the Company expects to provide dividends.

The risk-free rate is based on the United States Treasury yield curve for zero-coupon Treasury notes with maturities approximating the respective expected term of the stock option.

The expected term represents the average time the Company’s stock options are expected to be outstanding and requires us to develop an expectation of when the award will vest.

Additionally, we have granted stock option awards with service-based vesting conditions and market-based conditions that are incorporated into the estimation of the grant-date fair value of the awards.

We determined the fair value of these awards by utilizing a Monte Carlo simulation model that incorporates the possibility that the market-based conditions may not be satisfied.

The Monte Carlo simulation also requires certain subjective inputs and assumptions, including expected stock price volatility, term, and risk-free interest rates, which are estimated as described above, except for the expected term.

We estimate the expected term of the award based on various stock price and exercise scenarios.

The fair value of our common stock is also an input to the estimated fair value of our stock options and is equivalent to the fair value of our RSUs.

Prior to our IPO, the method for estimating the fair value of our common stock required complex and subjective judgments regarding our projected financial results.

We utilized an independent appraisal of the fair market value of our common stock, which relied on a market approach with an adjustment for lack of marketability given that the shares underlying the awards were not publicly traded.

The market approach incorporated a backsolve method to the most recent equity funding round and a probability-weighted expected return method (“PWERM”) that estimated equity value in an IPO scenario.

We arrived at the estimated fair value of our common stock by weighting the backsolve and PWERM valuation methods based on our anticipated probability of an IPO as of each valuation date.

In light of initial information received in estimating our IPO price range, we changed the method for estimating the fair value of our common stock.

From July 20, 2021 to our IPO, the method used was a straight-line interpolation from the July 20, 2021 fair value estimated by the independent appraisal to the midpoint of the initial IPO price range.

As we continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis, those assumptions may change.

As we continue to accumulate additional data related to our common stock, we may revise our methods for estimating volatility, which could materially impact the valuation of our stock-based awards and the stock-based compensation expense that we recognize in future periods.

A hypothetical 10% change in our estimated stock price, volatility, and expected term during the year ended December 31, 2021 would have resulted in approximately a 16%, 7%, and 4% change, respectively, in the weighted-average grant date fair value of stock options valued using the Black-Scholes option pricing model.

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We also regularly monitor inventory quantities on orders for which we have a firm purchase commitment, consistent with our method for valuing inventory.

Should our estimates used in these calculations change in the future, such as estimated selling prices or remaining costs, additional write-downs may occur.

The increase in inventory write-downs for the year ended December 31, 2022 compared December 31, 2021 is primarily due to an increase in overall inventory and firm purchase commitment values as production ramps, which were adjusted to reflect the amount we anticipate receiving upon vehicle sale (after considering future costs necessary to ready the inventory for sale).

A hypothetical 10% change in estimated selling prices or remaining costs would have resulted in the following approximate changes in the inventory write-down for the year ended December 31, 2022.

Decrease in Inventory Write-Down Increase in Inventory Write-Down

Change in estimated selling prices $ 115 $ (115)

Change in estimated remaining costs $ 144 $ (128)

Recent Accounting Pronouncements

See Note 3 "New Accounting Standards" to our consolidated financial statements included elsewhere in this Form 10-K for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

See Note 3 "New Accounting Standards" to our consolidated financial statements included in this Form 10-K for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act (the “JOBS Act”) allows emerging growth companies to use the extended transition period for complying with new or revised accounting standards.

As a result of our election to use the extended transition period, our consolidated financial statements and related notes for the years ended December 31, 2019 and 2020 included in this Form 10-K may not be comparable to companies that comply with public company effective dates.

We ceased to be an “emerging growth company,” as defined in the JOBS Act, as of October 8, 2021 due to our issuance, in a three-year period, of more than $1.0 billion in non-convertible debt securities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis