Rivian Automotive, Inc.

Good day. Thank you for standing by. Welcome to Rivian's fourth quarter and full year 2024 earnings conference call. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Tim Bay, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us for Rivian's fourth quarter and full year 2024 earnings call. Today, I'm joined by RJ Scaringe, our CEO and founder, Claire McDonough, our chief finance officer, and Javier Varela, our chief operations officer. Before we begin, matters discussed on 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 laws. Such statements involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC filings in today's shareholder letter. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in our shareholder letter. Just before the call, we published 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'll cover on today's call. Beginning with the fourth quarter of 2024, there was a change in the composition of our reportable segments, and we now analyze the results of the business through the automotive segment and the software and services segment. Our Q4 2024 results are presented on this basis.

with that i'll turn the call over to rj who will begin with a few opening remarks thanks for joining us and thanks to the team for the tremendous effort in 2024. i'm pleased to be able to speak to our positive gross margin in q4 this is a result of outstanding effort from the team driving a focus on cost driving a focus on continuing to build a demand generation capabilities and of course looking at opportunities to improve efficiency across the business With that, we removed $31,000 in COGS per vehicle in Q4 of 24 relative to Q4 of 2023. This is a really important milestone for us as a company and something Claire and myself have spoken to a lot over the course of the last year. And there's a number of drivers of this. Of course, the cost reduction I just spoke to is a major driver. But we also had an increase in revenue, an increase in revenue on a per unit basis as the mix that we're producing. So we see translate to higher average selling prices. We've also seen increase in regulatory credit revenue, which Clara will speak to in a moment. And then, of course, the revenue associated with our joint venture with Volkswagen Group. Now, on the mixed side, Along with the Gen 2 launch, we introduced the tri-motor. And internally, we often say this is the Goldilocks of powertrain configurations. It's one motor in the front, two in the back. And it represents a really unique product market fit where it delivers outstanding performance in 0 to 60 in 2.9 seconds. It's dynamically incredible. It's not quite as extreme as our quad motor, but it does represent a meaningful step up relative to our dual motor, which is also very high performance, but the Tri really is connected with consumers, and we're seeing a higher take rate on our Tri motor than what we expected. With that, we are launching a special version of our Tri motor, which we just announced, which is our Dune Edition, and we're really excited about that. You know, linked to that, the product, you know, creating a clear vision around the product and the types of products we launch is the brand that we're building. And the first products we launched, the R1T, the R1S, their purpose was to really act as a handshake with the world to establish who we are as a brand. And what we see today is a brand that has customers that are really excited for what we're building. And there's a range of different third-party analyses that look at brand strength and customer happiness and customer satisfaction. For the second year in a row, we've come out as the highest rated brand in terms of customer satisfaction and likelihood of repurchase on one of the leading customer satisfaction and brand surveys that's done every year. And there's lots of reasons our customers love our products, but one of the most important to us is safety. And it's something we put at the very core of the vehicle development process. We make decisions around tradeoffs for content, for structure, for even the design of the vehicle to make sure that these are the safest vehicles in their respective segments. And speaking to that, the Insurance Institute for Highway Safety tests our vehicles and their highest safety rating, which is top safety pick plus, has been awarded to both our SUV, R1S, and to our truck. And in the case of the R1T, we're the only electric pickup to achieve this top safety pick plus rating. And in the case of the R1S, we're the only large SUV across both internal combustion and electric to achieve this rating. And so we're really pleased with that result. And we see it manifest in how consumers are starting to see our brand. Of course, we're exciting. Of course, we have a lot of fun embedded in the products. But these are also incredibly safe products. Now, the work that we've done in R1 in terms of continuing to progress our technology stack, that's our software architecture, our topology of computers and ECUs across the vehicle, the sensor set that's in the vehicle, the associated compute platform that's used for our self-driving features, that's continued to progress with R1, of course, with the launch of Gen 2. But it's really laid the foundation for us and what we're launching with R2, and also served as a big part of the foundation for what we established with Volkswagen with our joint venture. Now with regards to R2, we couldn't be more excited about this program. In terms of the product and the attributes and the features that go into it, it's really the result of so many learnings that have happened with R1, where we've simplified the product from a design point of view, We've been able to optimize around cost in a way that we weren't able to in R1. And we're able to deliver a feature set that really speaks to our brand and to our values in terms of product attributes that's just remarkable. And we're on track for launching this vehicle in the first half of 2026. The development work associated with that is well underway. Of course, lots of parts are being tooled, lots of equipment's being built. We're in the process of building the expansion in normal. well in excess of a million square foot expansion, where the foundations are in, the walls are going up. And over the course of the next several months, we're going to see the completion of that building expansion and the beginning of the installation of equipment, which will all lead into, through the end of the year, launching our manufacturing validation builds in that expanded portion of the facility. Now, of course, the things we see in terms of development of our product, and the build-out of the expansion to our plant, those are very visible to someone driving by normal or to see our test vehicles out on the road. But we've also sourced 95% of the bill of materials, and the bill of materials in R2 is expected to be roughly half of what we have in R1. And the other non-bill of material cogs targets are significantly less than what we have in R1, actually significantly less than half of what we have in our R1. And so the overall cost structure that we're planning for in R2 is a night and day improvement relative to what we launched with and what we have today on our R1. Now, with all that said, one of the things that has all of us very excited is just the response to the R2 product. We have inbound, you know, many, many inbound requests on a daily basis asking us if we can accelerate it or if customers can take delivery sooner. And we love that. We love the anticipation of the product and what's to launch. Now, I want to talk a little bit about our technology, and I'll focus first on autonomy. With the Gen 2 platform on R1, we used that as really a reset to how we've approached our autonomy platform, what we call the Rivian autonomy platform. And that's 55 megapixels of cameras around the vehicle. We have cameras. four corner radars and a front imaging radar. So for total five radars, those feed into a much higher compute platform, about 10x the compute levels of what we had in Gen 1. In that architecture, is designed fully contemplating the ability to use AI to help train our self-driving capabilities. And we're using an end-to-end approach where the Rivian-owned camera feeds and perception stack feed into our vehicle, where we identify unique events, train our model, our self-driving foundation model offline, and use a distilled version on the onboard vehicle in the inference platform to really drive, you'll see a growing set of features. And the headroom that we have for the feature set on our R1 vehicles, and because of that with our R2 vehicles as well, is phenomenal. So we're very bullish on that, and I've talked a bit about this in the past already, but we have a hands-off highway feature that we're going to be launching here very soon within the next – several weeks, we have an eyes off feature that we're going to be launching for a highway functionality in 2026. And the number of roads and types of conditions will allow our hands off eyes off features to operate will continue to expand beyond that. Once we get that highway eyes off feature launched. Now, beyond autonomy, we're also making progress on the mechanical aspects of our vehicle and mechanical aspects of our technology. With R2, we're using large high-pressure die castings to eliminate a lot of parts. If you were to compare the R2 body structure with that of R1, we've taken out approximately 65 parts. We've reduced the number of joints in the body by about 1,500. And we're doing that through part consolidation and part elimination. And that extends, that focus on part consolidation, part elimination, simplicity of assembly extends into every aspect of what you see in the R2 vehicle. So the way the electrical compute platforms go into the vehicle, the way those attach to the harness, the connectors in the harness, the attachment points for the harness to the body, the interior trim components going in, how they're loaded, how they're fastened. All of that's been optimized in a really meaningful way to achieve, as I talked about it before, the significant reduction in cost on our bill of materials, which I said again is about half of where we are on R1, and a significant more than half reduction on our non-bill of material cost of goods sold. Now, of course, there's a lot of discussion right now around the overall regulatory environment that we're operating in. And I first want to say we're very aligned with the administration in the importance of creating U.S. jobs and driving technology innovation here in the United States and in an area that we think is critically important for our country in the long term around looking at technology, around electrification, software, electronics. These core areas that we're going to see be vital to the long-term health of our transportation industry are areas we've really focused on. And they've enabled us to create products that are both highly compelling, and they've enabled us to create parts of our business where we can leverage that technology, as evidenced by our joint venture with the Volkswagen Group. We're also working towards our new Georgia facility, which will build both the R2 and the R3 product lines. And along with our facility in Normal, Normal, Illinois, will really form a core foundation for building the R1 product line, the R2 and the R3 products here in the United States. With all that, I'd like to thank our employees, our customers, our partners and suppliers, communities and of course our shareholders for the support and the excitement for what we're building you know we internal to rivian were uh couldn't be more excited about what's to come with r2 it is um it is a focal point for us as a business and it represents so many learnings that we've had across the r1 product line and our commercial van product line that are being fed into the launch and the development of that product with this i'll pass the call to claire