Q1 2022 Rivian Automotive Inc Earnings Call

May 11, 2022

Did you ANZ for standby welcome to the <unk> first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.

Speaking expressed mutation there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Any further assistance. Please press star Zero as a reminder, this conference call is being recorded.

Ill turn the call over to Mr. Kimzey, Vice President Investor Relations. Please go ahead Sir.

Good afternoon, and thank you for joining us for <unk> first quarter 2022 earnings call joining us on today's call. We have RJ <unk>, our founder Chairman and Chief Executive Officer, and Claire Mcdonough, Our Chief Financial Officer, a copy of today's shareholder letter is available on our Investor Relations website.

Before we begin I would like to remind you that during the course of this conference call our comments and responses to your questions reflect management's views as of today and we will include statements related to our business that are forward looking statements under federal securities laws, including without limitation statements regarding our market opportunity industry.

Trends business operations strategy and goals, our second domestic manufacturing facility, our future products, including our <unk> and our expectations regarding vehicle deliveries actual results may differ materially from those contained in or implied by these forward looking statements due to risks and uncertainties associated with our business.

Except as may be required by law <unk> does not have any obligation to update or revise such statements. If circumstances change for a discussion of the material risks and other important factors that could impact actual results. Please refer to the cautionary statements and risk factors contained in our SEC filings and today's.

Shareholder letter, which can be found on our website at <unk> dot com forward slash investors. 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 today's shareholder letter with that I'll turn the call over to RJ, who will begin with a few opening remarks.

<unk>.

We're happy to be here with everyone today and look forward to discussing the progress we've been making 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.

As of May nine we've produced approximately 5000 vehicles since the start of production, we are now producing and delivering the <unk> and <unk> 700, with a slightly narrower and shorter Edp 500 going through final production trials now.

And we've done all this in one of the most challenging operating environments in decades, we have $17 billion of cash and believe we have a clear path to launch our two in Georgia in 2025 with our current cash on hand.

Our goal is to build and scale a large business that addresses both the consumer and commercial markets.

Our launch of the <unk> that need to be products positions us to grow rapidly as we fully ramp the 150000 units of installed capacity and our normal Illinois manufacturing facility.

We have a lot of work ahead, but the passion and endorsement we have seen from customers and third parties such as being named motor trends 2022 truck of the year demonstrates the impact our team can drive as we remain laser focused on ramping production and getting more vehicles on the road.

With regard to our production we are encouraged by the acceleration of our demonstrated production rate. Our plants are now achieving cycle times three times higher than the start of the year.

These demonstrated production rates, which we expect to continue to increase coupled with our current supply chain outlook give us confidence in our ability to hit our targets for 2022.

Equally important demand continues to accelerate and as of May nine we had over 90000 preorders for our wind products in the U S and Canada all of our orders have been attracted by organic growth and brand awareness and without any paid marketing or media.

It is worth noting that since our March one price increase we received over 10000 <unk> <unk> for the U S and Canadian market with an average price of over $93000.

These orders are in addition to the 100000 commercial van order from Amazon.

As we ramp production and deliveries of Etv's, we're excited about the impact that our close partnership with Amazon will have in the commercial vehicle space.

As we have begun ramping deliveries the feedback has been tremendous one of my favorite parts of the leak because when I sync with our customer engagement team and hear the feedback they are receiving around the vehicle process and the interactions with our team we love seeing photos of our vehicles in the wild enabling customers debentures are core focus as an organization for 2022 is to get more are ones.

<unk> on the road the majority of our time is focused on ensuring our teams are driving towards ramping production and deliveries to customers.

<unk> is addressing the supply constraints that we have dealt with thus far and I am very confident saying the relationships and associated commitments, we have built with our suppliers as we demonstrate our production ramp our suppliers are leaning in to help ensure we can achieve our targets.

Before handing off to Claire I want to comment on our <unk> program, which is being developed and planned for our Georgia facility.

We are leveraging the many learnings from our <unk> and <unk> platforms.

And we're working to ensure the <unk> sets a high bar in terms of affordability unit economics performance and efficiency.

This global platform is critical for our long term growth.

With a lower price point to further expand our addressable market.

Our two will also leverage many of the cross platform technologies that will be incorporated into our <unk> and <unk> platforms, including our single Motor Drive unit, which we call Enduro and our next generation network architecture and associated family. These views.

I couldnt be more excited about the ramp of the <unk> and EV vehicles as well as the products services and technologies, we have in the pipeline with that I'll hand, it over to Claire.

Thanks, RJ I'll start with a review of our first quarter 2022 results. In Q1, we produced 2553 vehicles and delivered 1227 vehicles, which was the primary driver of the $95 million of revenue generated in the quarter as.

As we've discussed in the past the volume being produced on our manufacturing lines are a small fraction of our current 150000 units of annual capacity.

We generated negative gross profit of $502 million in the quarter as we ramp production, we expect high fixed costs associated with running our large scale highly vertically integrated facility will continue to impact our total gross profit.

Our negative gross margin was impacted by inflation and the production of low quantities of vehicles on large scale production lines. As we ramp. This includes the costs associated with expedited shipping expense labor and depreciation as well as some accounting adjustments such as lower of cost or net realizable value.

And RV.

As discussed on prior calls the LC and RV adjustment writes 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.

As we ramp production, we expect to leverage our labor and other fixed costs to drive improved gross margin per vehicle.

While our operations teams worked diligently to ramp production of the <unk> and <unk> 700, our customer engagement service and delivery teams are also accelerating efforts to enhance customer experience across the country.

Additionally, our engineering and design team continued to progress on our next generation in vehicle technology. Our vertically integrated approach is designed to drive long term structural cost advantages as we expand our production and product roadmap.

Our adjusted EBITDA for the first quarter was negative $1 1 billion.

We continue to strategically invest in our plants and normal annoy lab facilities and service operation we.

We also expect to begin investing additional capital into our Georgia facility later this year.

Capital expenditures for the first quarter were $418 million.

We ended the quarter with $17 billion of cash while we operate a capital intensive business, we have a high level of flexibility regarding the cadence of our growth investments as already mentioned our current priority is ramping the 150000 units of <unk> and EV capacity.

To meet the tremendous demand we have for these products.

We have optimized our product roadmap and associated operating expenses and believe we have a clear path to launch <unk> in Georgia in 2025 with our current cash on hand.

We are also reaffirming our 2022 full year guidance of 25000 total vehicles produce.

We anticipate a significant acceleration of production throughout the second half of the year as our demonstrated capacity improves and we accelerate the ramp up of key shops and.

In addition, we're reaffirming our 2022 adjusted EBITDA guidance of negative $4 $75 billion and capital expenditure guidance of $2 6 billion.

Our outlook does not assume a material change in the overall operating environment.

Going forward, we plan to provide production and delivery results shortly after the quarter end.

We'll no longer be providing intra quarter production and preorder figures.

Closing I want to thank our team community customers and suppliers for another successful quarter.

Thanks to our truly differentiated vehicle and technology platform, we're seeing such tremendous feedback and enthusiasm.

We have a steep climb ahead of us, but I couldn't be more confident with the plan that we have and the path that we're on.

With that let me turn the call back to the operator to open the line for Q&A.

Sure Ma'am as a reminder, if you have a question at this time. Please press star one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue press the pound key will possibly just a moment to compile the Kenyan Q&A roster.

Your first question comes from the line of John Murphy with Bank of America. Your line is now open.

Good evening, everybody just a first question around production versus deliveries in the quarter.

I mean production is essentially almost two extra deliveries I'm just curious why there was such a gap between the two this quarter I was just a question of timing of vehicles in transit or.

What's going on there because traditionally because of the lack of the dealer network, we kind of assume they're going to be a lot closer.

Thanks, John as you said in the question there is a gap between production and deliveries.

And it was just that the timing effect of vehicles being built in.

Being in transit and essentially prep for delivery.

<unk> said given that we have a direct model, where we sell vehicles directly to consumers.

Aligning up those customers, ensuring the delivery, creating a great customer experience.

There's always going to be some separation between the total production number and the number of deliveries.

Okay, but there was nothing other than simply just processing RJ.

Not like this vehicle is being held for any kind of quality or potent postproduction inspection or anything like that.

No in fact, when we talk about production numbers, we're referring to as vehicles are factory gated. So these have gone through the full quality inspection process. This doesn't production numbers do not include.

Any partially partially complete vehicles these are fully ready to deliver to customer vehicles.

Super helpful.

One point that I would just add on to that question is that because of the rate at which we're ramping production because we're continually continuously scaling week over week over week and there always will be that lag effect in regards to the vehicles that are ultimately in transit is something that will continue but will likely to be the same.

The percentage of of ratio of produced vehicles relative to delivery.

Got it.

Then just a second question on the run rate of production.

It seems like there was about 800 units that were produced from April one to May nine roughly do some dumb guy's math and just double it that gets you to 3600, but that doesn't even give you the benefit for the.

The full quarter and the acceleration so it seems like you're on pace to.

Hit at least in at least in our model 4000 units plus in the second quarter is that kind of reasoning about correct and I mean, just given that you are getting a good acceleration production here. It seems like you might be even.

Ahead of that.

How should we think about it that way and is there any tempering of parts specifically.

Gate your ability to get there.

That's about the right way to look at it I would want to point out a couple of things.

We've seen the overall production rate continue to increase in fact, our cycle time.

Three times, 300% or three <unk> improvement since the start of the year.

Through the course of Q1, and we continue to continue to see that production rate improvement.

As we go through quarter two here.

So you alluded to it but we are in midst of S curve. So.

The end of the quarter, we will be producing at a faster rate than the start of the quarter.

If you look at this quarter thus far.

<unk> been able to our produce our supply chain and what gives us a lot of confidence as we look at the time ahead.

Is that clear line of sight, we have around the ramp up of our supply chain and the close relationships, we have with those key suppliers.

Okay, and then just the last question on pricing and the price increases I mean, obviously the result of input cost increases but is there a margin.

Goes along with these price increases more specifically maybe are you raising.

Your prices exactly to what your cost is or is it is it above that so theres actually some.

Youll sort of parallel margin, that's going along with it.

On a unit basis.

Alright, so the way I would think about the margin opportunity that we have and you'll really see that kick in from an inflection point as you think about the 2020 for margin opportunity that we have.

Which brings together the combination of us really ramping and accelerating the production volumes.

Within within the plant combined with.

The move from.

From our pre March 1st Preorder cohorts you are post March burst.

Cohort.

Embedded in that post March 1st cohort there is.

A true step change that youll see in regard to the overall aggregate gross margin that youll see within the business and so the growth from a gross profit margin rate over time, it's not linear it truly is a step change function as you think about moving to this post March 1st cohort.

And as we talked about a bit in our shareholder letter as well. We're also now moving towards a reservation system versus the historical preorder system that we've had which allows us to have the customer can do.

Configure their vehicle closer to the delivery date, which enables us to understand the dynamics within the inflationary market at that time, but also importantly ensure that that customer has all of the core vehicle capabilities that we're introducing in that configuration.

As well.

We think that the combination of those two factors will really help us from an ongoing margin perspective, and allow us to really be nimble and dynamic as we evaluate this inflationary backdrop.

That's very helpful. Thank you very much.

Thank you. Your next question comes from the line of Adam Jonas with Morgan Stanley . Your line is now open.

Hi, clear I just wanted to follow up you mentioned if I quote.

High level of flexibility and the cadence of your growth investment so on the topic of cost control. Your enterprise value is currently just above zero dollars.

And it is sending the message the market's sending the message that if you don't get your supply chain costs.

Under control that you might have to significantly dilute shareholders. That's what happens when you see a zero.

Zero.

Apprise value.

Now you reiterated the 25000 unit delivery target in the 7 billion plus kind of cash burn your EBITDA and Capex. So my question is if you had to control <unk>.

Cash consumption of the business to the due to force majeure events outside of your control and you alluded to flexibility and cadence, but could you elaborate what levers could you pull to slow the burn and give you more runway to execute and restore confidence and review on the capital markets. Thanks.

Thanks for that question Adam is as you mentioned right. We're clearly in the driver's seat with $17 billion.

Cash on hand, and it's important to also note that we've made foundational investments.

Have allowed us to rapidly scale the business in both the consumer as well as the commercial market.

150000 units of capacity for our one in our CD platforms and as we've talked about as well demand remains incredibly strong with over 90000 or one preorders and an initial order of 100000 units from Amazon.

And as we just talked a little bit about with John previous question right, We do see a significant.

<unk> forward as we're ramping production and able to ultimately have that step change, where we're now harvesting right. The profitability of all of those foundational investments that we've made and the production capacity Thats online and the launch vehicles that we've come to market with and.

And so this ultimately gives us that flexibility to decide how we're deploying our capital on a go forward basis and as you mentioned with regard to what those key levers are we have the ability to live within our means.

As we think about the profitability that normal itself can deliver for radian.

Will allow us to really outpace the ongoing growth of the business.

Ultimately allows us to have that flexibility on when and how we would raise additional capital on a go forward basis.

And as you can talk a little bit about it okay.

We do believe we have the cash on hand to once I understand I understand clear let me let me just do one follow up and I will shut up.

For you at RJ since your IPO. The World has changed dramatically investors just don't want to fund negative EBITDA growth.

EBITDA companies in this environment and the supply chain issues have gotten to your point significantly worse.

Both quantity and input cost so has anything changed in your team's strategy to adapt to the changes in the environment.

Since the IPO.

Yes, Adam this has been something we as a leadership team has spent a tremendous amount of time on of course from a scenario planning point of view, but also just.

Just looking at the product roadmap and how we plan to invest and deploy capital over the coming years and as Claire said one of the really important things for us to recognize here is we have $17 billion in cash we have 150000 units of capacity with.

With Capex, that's installed and.

And it positions us well to now harvest.

And use that to.

Average.

Made a significant amount of growth, while we focus investment and focus our dollars on development and preparation for launch of our two.

So what we've what we've really done is and what we've been working hard on is to channel and focus our capital on.

A really important program from us and to trust in terms of scaling which is the <unk> program, but of course, maintaining laser focus on ramping up the existing capacity that we have.

Such that we can fully.

Fully fully is of course at harvest.

The revenue associated with it.

Thanks RJ.

Thank you. Your next question comes from the line of Joseph Spak with RBC capital. Please go ahead.

Hi, Thanks, good afternoon.

RJ you alluded to.

Some some better visibility with your suppliers I was wondering if could provide a little more color and detail on some of those conversations.

With those suppliers that you mentioned had some bottlenecks last quarter that gives you that level of confidence.

Sure. So we've previously talked.

In our last call around some of the challenges we've had inclusive of semiconductors as well as some other components.

Where we stand today a lot of those other challenges have been resolved we've worked with those suppliers to ramp their production.

We have clear line of sight to them being able to keep up with our continued ramp in our facility.

As we noted in our opening statements just the importance of us shifting to or moving to a two shift operation mid this year and of course, the suppliers seem to be capable of supporting that.

With that said, we also have very tight relationships with the semiconductor suppliers.

We've seen some we believe we've seen really the worst of it or sort of the valley. If you will of these supply constraints and the suppliers are leaned in and we have very high levels of visibility into what the allocations will be on a go forward basis and that gives us the confidence and what the ramp will look like is it.

We look out through the remainder of this year.

Okay.

And then just maybe to follow up on Adam's point about.

In our scenario planning and changing strategy your answer made it seem like.

You are being prudent about how you spend for next generation platforms I guess, what I'm wondering is your plan involved doing a lot of things on your own.

Or in sourced and then throughout really the entire value chain.

Has this experience.

And the change in capital markets led you to reevaluate whether you might rely on other partners or any sort of about face in terms of what you want to do versus you.

You might let others do for you is you want to as you go into sort of execute upon your longer term plan.

There's a few things to think about here Joseph first is.

Our original plan had a number of additional variance both of the <unk> product as well as.

Even propulsion platforms that were planned for the future pipeline.

And what we've done is we.

We've really looked at the incredible level of demand that we have for the <unk> products as they are.

And recognize that there are some big technology development efforts.

To further.

A further advance those products, but we've aligned to those very nicely with the <unk> program. So are or will be called enduro. This single motor drive unit that's used in the <unk> platform.

Drive application and the <unk> platform in a dual motor all wheel drive application.

Our next generation network architecture and associated families to use.

And of course, our LSP battery pack, which is going to be launching it at <unk>. Later this year all those technologies, we are able to share those not only across the <unk> and RSV platforms, but a number of them really lines up nicely with the <unk> program.

So what we've been focused on is simplifying the product plan and the product portfolio as much as possible, but we haven't in any way at all shifted our focus the.

The need to vertically integrate our software stack vertical integrate around our electronics and acute topology and.

And of course vertically integrate around our propulsion stock.

So we do believe those are really important from both the structural cost point of view, but also from a product attribute feature point of view, but we have simplified the overall product set and we've done that in a way that as you've heard us talk about here. It puts us in the driver seat so to speak in terms of controlling our need for additional capital and ensure.

Or is that we're able to launch our two with the capital that we have.

Thank you.

Thank you. Your next question comes from the line of Emmanuel Rosner with Deutsche Bank. Your line is now open.

Thank you very much first one super quick point of clarification.

You mentioned your reservation having.

Well, having received 10000 reservations since.

Price changes, but then as we see the latest hub that 90000 is only seven plasma so versus the last update so what are you exactly netting out of this is at the cancellation or the deliveries that you've already done.

So the net is both both of those things so.

When we report.

Net preorders every delivered vehicle that would be half comes out of that basin preorders.

<unk> is the netting effect of the delivered vehicle.

That we've had throughout.

Both great last quarter as well as the quarter to date period.

As well as any embedded churn within the preorder base.

Okay. That's very helpful. Then.

Youll targets, who launched <unk> in 2025 with current cash on hand is obviously there.

We are encouraging.

How do you plan on accomplishing this are you modifying the capex trajectory.

Have you identified areas, where you'll need to spend less capital do you anticipate lower operational cash burn than previously anticipated.

Will you do that.

Yes.

Sure as we mentioned one of the core catalysts that enable this.

Path forward to launch our two in Georgia with our cash on hand.

As both the profitability that we're going to begin to deliver.

To deliver with the installed 150000 units of installed capacity that we have in normal.

Also important to note as we think about Georgia, We're building, Georgia in a modular fashion so.

The first phase of Georgia will be <unk> line with 200000 units in that first 200000 units will be what.

Comes online in 2025, and so instead of building the full 400000 units at once that is certainly embedded capex savings within the plan and forecast that we're thinking about and additionally, as you heard from RJ <unk>.

<unk> of the strategic decisions, we've made to really.

Guests and prioritize our product development roadmap also come with embedded capex savings as well as as we think about that.

The capex forecast over the next handful of years.

Understood.

Finally, how is the ramp up of the Amazon and delivery is growing and out of the 25000 target for the full year.

How many of those would be on the commercial vehicle side.

We're excited to be producing and delivering the etv's.

As I said earlier.

Launched the <unk> 700 in terms of what's being delivered to Amazon and so this is the roughly 700 cubic foot version of the van.

We're in the production trials stage of the <unk> 500, but with regards to the <unk> 700.

Now this involved as we talked about in previous call heavy amount of iteration and refinement with Amazon in terms of how it fits into their digital ecosystem.

And getting a tremendous amount of driver feedback through a series of trials in a series of of of feedback loops with drivers.

So we're excited to have been through that have made a whole host of improvements over the course of really the last year.

Such that the deliveries that are now happening, we're going to start to ramp up and youre going to start to see a lot more of them hopefully coming into all of our neighborhoods delivering packages, but with that said, we haven't provided guidance on the exact split between the <unk> and the <unk> product line.

But broadly speaking, we would look to say <unk>.

Well over a majority will be in the <unk>.

With <unk>, making up.

On the order of a third of total production.

Great. Thank you so much.

Thank you. Your next question comes from the line of Alex.

<unk> with Piper Sandler. Please go ahead.

Okay great.

I had a follow up question on vertical integration and software.

Your strategy, obviously it is very clear.

Differentiated I mean, youre trying to layer in your own in house software on top of your own in House electronics.

Including some of the sort of quote unquote boring.

Firmware middleware and other things that customers may be never get a chance to see and obviously, there's another school of thought that suggests that it's redundant for auto brands to go so deeply.

Some of that behind the scene software that everybody should standardized around kind of a base level of third party.

System, and then only differentiate at the customer facing into the software stack.

My question for you.

Of all of it.

I want to make sure I'm articulating all that correctly, but then secondly.

Why do you think your strategy is right and the other ones are wrong.

Yes, Thanks, Alex it's a great question.

When you look at our.

Our product is complex as a vehicle in particular vehicle that's connected with the host of.

Sensors between cameras radar ultrasonics with.

With a whole bunch of actuators. So this is suspension braking.

Motors.

The traditional model is to buy as you said a number of compute platforms.

Use from different tier one suppliers and to put all of those different it's used together.

And then the OEM essentially does some part of or at least prescribes how it should be done at the application layer.

From our perspective to create a really.

Unique customer experience integrate the experience in which we can fully leverage all the sensors, all the hardware and the vehicle and continually improve the vehicle over time truly improve it more than just putting a new color on the screen, but actually going deep into the performance of the vehicle.

Whether that's referring to self driving whether that's referring to.

<unk> attributes or whether that's digital characteristics for digital capabilities of the vehicle.

Feel really strongly that it is important.

To both develop and control the full stack, so that's designing and developing.

The compute platforms across the vehicles. So that's all the electronics of course by doing that being able to design.

Very efficient network architecture, and then of course within that building all the layers of sulfur from the low level operating systems, all the way up to the applications layer.

And what's exciting to see is the beginnings of from a customer facing point of view of why that matters and so we've done a number of otas over the air updates already with customers and these are just an early sampling of what's to come so adding features.

Mike.

A garage door opener to the vehicle, adding enhanced self driving features adding additional drive modes.

Adding additional diagnostics platforms. So there's a host of things we can go very deep into the vehicle across platforms.

Does all of those platforms are controlled internally.

This is important not just on the consumer side. This is also we feel really important on the commercial side.

It really underpins a lot of the core.

Core capabilities, we embed in our fleet are less product.

Where we can predictably analyzed the need for maintenance, we can predictably manage.

The health of the lifecycle of the vehicle. So theres a number of characteristics that are useful as well on the commercial side.

Okay, great. Thanks, very much and then the second question I guess on Georgia and Dr. <unk> <unk>.

Both are you to finalizing I guess, maybe the exact bill of materials for the <unk> the exact design and the layout for GA. It sounds like Youre working on a modular plan I guess any.

Anything in that regard, especially related to things like single piece castings are any of the sort of new manufacturing techniques that we're hearing about how closer you are to finalizing all of that in Georgia.

Georges.

<unk> is a really interesting and exciting opportunity because it's going to leverage the learnings we have from going through ramping all of our production operations and normal.

In a normal you can really think of it as two plants housed in one site. So we have the <unk> production line.

And then that was sort of our Gen. One line. If you will and then we have our RCV platform within commercial van platform.

And with that.

Separate body shop separate General Assembly and.

So a number of learnings we're already embedded into that.

Into the second set of lines, we built a normal.

And as we now look at Georgia, the opportunities to learn from a production line layout point of view as well as the product itself and pull all those together to create.

Really.

World Class.

Product in terms of affordability World class product in terms of Capex efficiency. That's been a that is the major focus from a development point of view for the product teams and for the plant design teams.

And so what's also important to note is that that product.

Coming to market in 2025.

We will have the time to even further encapsulate more learnings as we continue to go through ramp and is the vast majority of our organization continues to be focused on ramping up and our normal facility between the <unk>. The <unk> the <unk> 700, and the Edp 500.

But those learnings are certainly flowing into how we think about our <unk>.

Part simplification part consolidation like you just like you mentioned with with usage of castings, we certainly used castings in the <unk> in RCD programs, but.

The opportunity to consolidate even more parts is something we're excited about <unk>.

Driving those manufacturing and cost efficiencies into that product is going to be critical.

Great. Thanks, guys.

Thank you. Your next question comes from the line of George <unk> with Baird. Please go ahead.

Hey, good afternoon, everyone. Thanks for taking my question.

RJ recently rang the alarm bell.

Are you around EDI materials and several of your competitors are saying direct deals with minors lithium.

And other minerals.

You can articulate your strategy now.

Deep relationships go that you're that you're developing in that field.

Thanks George.

In a recent interview.

Discussing some of the longer term strategic challenges, we're going to face as an industry.

As we go from.

Less than 10 million units being produced a year electric vehicles being produced year to every vehicle being produced globally, becoming electric.

As we think about that we do believe there's going to be material constraints.

As we get to the sort of near the end of this decade I want to be clear, though that as we look out over the next five years, we do not see any.

Battery cell supply constraints or material risks and the way we've approached.

Our battery cell strategy as well as our far upstream raw material precursor materials strategy is to make sure that we have a diversified approach.

So what we've launched with between the <unk> products in the RSV based platform products.

It's been a high nickel sell it's a cylindrical form factor.

But later this year as I mentioned, we introduced an LLP chemistry, lithium lithium iron phosphate chemistry.

Which which of course is a hedge on nickel pricing also just inherently a lower cost chemistry.

Fits beautifully as a base model configuration, and certainly for our commercial vehicle fits really really nicely.

As we look at diversification is not just looking at high nickel ore iron based chemistries, but also making sure that we have the right.

Selection of cell supplier partners, and we're very happy with the relationships that we have and continue.

Continue to grow those relationships.

To your question, though to be very specific around raw material and I think specifically here.

<unk> carbonate in the case of lithium iron phosphate battery cells in lithium hydroxide in the case of high nickel cells.

These are really key areas I believe for anyone serious about achieving significant scale multimillion vehicle per year scale.

To have secured supply chains around.

And we're working very hard to build those relationships and put together the right types of deals to secure these really critical precursor materials I think everybody on this line can appreciate.

The risks around the cost we have seen the price of lithium hydroxide go up quite considerably over the last several months.

And thats affected everyone.

So making sure that we have.

Confidence of supply as we look out in the latter latter part of this decade.

We see risk of scarcity for those key precursor materials, that's something we're very focused on it.

Future time, we will be able to make some announcements around that.

Thanks, and if I may take it to the complete other side of the spectrum and ask you about your autonomous offering and any update there any new learnings and how that offering is driving future product approvals.

Thanks.

Sure so in our launch products we have.

Recall driver plus.

And sort.

The core of that feature is a highway highway feature where essentially the vehicles capable of driving itself.

But today, that's geofence really to highways and we've developed that platform in house.

Look out overtime that that capability is going to continue to grow. So we will do that with over the air updates where for the existing vehicles that are already delivered to customers as well as future vehicles.

That feature.

We will extend into more roads.

And along with that development, which is software base. We're also upgrading and improving the hardware side. So are we call. It will be talked about in terms of our next generation network architecture. This also includes with it additional compute as well as updated cameras as well as a few other sensors on the vehicle to support continued progress above and beyond.

The level two feature set that we have today.

And Claire talked about this in the context of <unk>.

We'll be taking orders and moving to a reservation based process one of the one of the reasons for that is that their demand backlog being so large.

The products will be building in two years will be different than the products. We're building today when I say different I should say these products will be improved flow of different hardware. That's part of some of these.

<unk>, we're going to be making from a compute point of view from a perception stock point of view.

And of course, along with that the improved network architecture that will be going into these future state products.

Thanks, guys.

Thank you. Your next question comes from the line of Charles <unk> of Redburn. Please go ahead.

Hi, guys. Thanks for taking my questions.

Firstly on production the shareholder letter mentions but one reason why the weekday rates of production slowed.

To about 250 units I believe per week in the last five weeks from 350.

In March or at the end of March was that you lost 25% of your planned production due to additional stoppages can you just clarify what was it the full for longer periods of stoppage of stoppage then.

Dissipates in April .

Is that now and it may as production right now back to what it was in March or even above that.

Thanks Charles.

Want to clarify something.

<unk>.

Thank you.

Okay.

Mark.

Actual production lines themselves both in terms of their stability as well as the production rate has continued to improve.

The challenge is as those lines have continued to improve.

We've had supply constraints that havent allowed us to actually fully utilize them.

As we said of the single shift operation that we're on today, we lost.

Little more than 25% of the time.

So the number of vehicles, we produced to date this quarter is almost exactly equal to the number of.

Semiconductors, we have to support all the all the components that go into the vehicle.

So what's encouraging for us looking forward here as those areas. We've had shortages around we've been working very closely with the suppliers. We've demonstrated to those semi suppliers continued progress week over week in terms of rate and Theyre very leaned in on making sure that the.

The constraints in line down situations, we've dealt with over the last several weeks.

We're going to put those behind us as we look at ramping into the remainder of this quarter and of course through the rest of the year.

And it doesn't a day doesn't go by where I'm not talking to.

Our senior team of one of those key constraint suppliers and I can I can say with confidence that if certainly if they are listening and we appreciate their support but I can say here with confidence that there there is leaned in.

Hope for and I would say, it's a materially different situation than we had at the start of the year, where the suppliers, we're still trying to figure out whether or not we as a company, we're capable of producing and ramping.

Made it very clear through our performance that the plant is capable of running.

And as I said, we hope to be running the plant on two shifts starting mid year.

And with that of course building line of sight around component allocation.

Okay.

Okay. Thank you and then on the 10000 orders you've received since the price change in March.

At an ASP of $93000 that seems a very rich mix I guess it means that the vast majority.

Quad moat Max.

<unk> is a large pack onex's given that price point, what are you surprised by that does it match the mix of the rest of the order book, albeit virtually at the older lower prices and do you expect to sustain that type of mix.

For future orders.

We see just to clarify.

Definitely.

The higher Asps.

Indicate a preference for the dual motor as you as you called out but also.

Right.

Im sorry, a preference for the <unk>, but also just to clarify the large pack our middle sized pack.

It makes up a vast majority of the configurations. So.

What we see is customers have a very high willingness to spend and theres a lot of pricing power that these vehicles have in what we've built and the brand has.

And that gives us a lot of confidence as we go into the next six to 12 months understanding the inflation environment that we're in that there is significant pricing capability on these vehicles.

Thanks.

Thank you. Your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is now open.

Yes, good afternoon, and thank you very much for taking the questions.

He is working on several new vehicle technologies, you spoke about the batteries. The enduro motor also the new network architecture and you commented on how it's important part of your long term profitability objectives can you elaborate a bit more on how the development is going for some of these key technologies and do you expect them to still happen on time.

Sure as I mentioned before Mark we have on our LSP pack.

His first goes into our commercial vans later this year.

Along with that the enduro more motor firsthand first application is.

As in the vans as well later this year both of those are well underway in the case of the Enduro drive unit.

We're.

Putting that plan to outline it as we speak so there's.

The lines being built the plants being the additions going into our facility.

And it is on track, we're pushing very hard we're very excited to get that into our vehicles are late this year and then following introduction in the commercial van.

Both the <unk> as well as our Enduro drive unit as I said with enduro.

Being used in a dual motor set up one in the front one of the back.

It also makes its way into the <unk> product line.

That's helpful. My second question I'm, hoping to better understand the opportunity in software and services and it's an important part of your long term opportunity and I think a really interesting.

Is this opportunity for the industry can you speak more on how thats progressing with some of the early are one owners and what kind of adoption you've seen some of your offerings such as your insurance product. Thank you.

We haven't seen that strong peak rate, especially around our offering from a financing as well as insurance perspective.

And those are as we know we've had some questions as well around level of vertical integration. Those are two great. Examples of opportunities, where we have partnered with strong third party.

In the case of chasing on the financing side and then nationwide on the insurance side that allows us to build a very robust data driven insights into the business and importantly through some of their data driven insight allows us to continue to evolve.

<unk> chip that we have with our customer.

And beyond.

Financing and insurance are really excited to also offer.

<unk> hosted software enabled services.

The <unk> solution that we have with Amazon.

<unk> is a great benchmark as we think about the capabilities that we're bringing to bear.

Help them manage that end to end athlete solution and.

In the cases of fleet of last we're also able to ultimately leverage at a number of the core digital commerce.

<unk> that we've made as a company.

From the commercial side of the house and use those.

To think about greater our consumer experience as truly how do you manage a fleet of one and.

And so we're really leveraging digital infrastructure and digital backbone within the business across both the consumer as well as the commercial side of the house.

And as we've talked about in the past.

65% long term gross margin opportunity that our software and services.

The business deliveries allows us to ultimately drive an increased margin rapidly over time, if we think about that.

The compounding effects.

That can deliver from our growing car park.

And your next question comes from the line of Fine Brinkmann with Jpmorgan. Your line is now open.

Hi, Thanks for taking my question realm.

Relative to the 17% to 21% vehicle price increases implemented on March one I am curious how much of the higher pricing was meant to offset higher obviously higher battery metals costs are higher general inflation beyond your control versus maybe higher are there more company specific costs such as product.

<unk> expense et cetera, and what has been the trend in cost both within and outside your control since the time that you revised pricing just prior to the last earnings call and you discussed flexibility in your spending plans and I. Appreciate you are plentiful cash position two but have there been any examples yet of rain.

Den budget increases or anything like that.

Sure.

To address the first question as we thought about.

The decision to increase prices, we built across the.

The broader inflationary backdrop that we're seeing across our raw material costs.

Raw material costs, just looking at how inflation was playing whether that was the cost of freight that we're seeing across the broader market and industry backdrop as well as other increases that youre seeing more broadly from an inflationary perspective.

In addition to looking at each of those factors the wholesale importantly, benchmark the value proposition that we're bringing to market and the core capabilities.

Our vehicles represented to ensure we were truly bringing a compelling value proposition even at the higher at prices that we are charging in and I think the momentum and acceleration of preorders that we've seen.

<unk> that March versus.

Mark asked certainly emphasizes.

That that that equation is certainly still intact.

And it's been amazing to see a lot of the network effects that we've seen we're in.

In markets, where we've been delivering more vehicle.

Also continued to see an acceleration of our preorders because truly our customers our best salespeople out there in the market.

Giving their own test drive and in some cases actually reaching out to our customer experience center to ask them for.

How best to address their own friends question Ajay.

Educating and really.

Empowering educating others about.

The <unk> brand is in and importantly, what that driving experience feels like within the market.

So those are key enablers for us.

Importantly, we are also not standing still as we think about the priorities that we had in regard to our own cost attack initiatives as we think about our own cost of goods sold and the commercial opportunities that we have as an organization as well as a number of the engineering development.

That again will ultimately be at reducing the overall bom costs and as already mentioned create.

Lot of those foundational system that will power, our two which as you know with our more affordably priced.

Midsize SUV will be coming out as well and will also benefit for all of these horizontal technology investments that will be coming to market with over the next.

Two years.

Very helpful. Thank you.

Thank you. Your next question comes from the line of Vijay Rakesh with Mizuho. Please go ahead.

Yes, hi.

Glad I saw.

You maintain the full year guide on production so.

Looks like you hit that you're probably out of double production doubled or tripled production run rates from here.

Based on the fact that it looks like you'd be adding a second shift media does that imply that.

Assuming all of the supply constraints should get resolved by media.

June as you add the second shift there.

Yes.

Our production lines are capable of producing at.

Significantly higher rate than what our supply chain is able to support today as you said.

But the guidance we provided.

Fully encapsulates, our expectations and confidence around the supply chain.

I said this in our last call and I want to make sure I say it again here, we are pushing our suppliers as hard as possible to do more than that.

We would.

We would really like to unlock the full production capability of our plant.

Such that we can get more cars and more or I should say more vehicles to our customers.

Given the significant demand backlog and given the excitement we have on both the consumer and the commercial side.

Thanks, and on the Amazon <unk>.

Again on the consumer side, you are able to adjust pricing based on the cost.

And if cost inflation there.

Do you have the flexibility on the Evs as well in terms of.

Some flexibility with respect to commercially repricing that's.

Thats it thanks.

Sure.

Think about the Amazon contract, it's a cost plus agreement.

And so that Imbeds right.

Overall inflationary metrics.

In within that contract.

Also important to note that as we think about the introduction of our LSP pack as well as the introduction of our enduring.

Motors in the commercial van those those are key enablers for significance.

Drop down opportunities for Amazon and so that gives us a lot of confidence in regard to the ongoing margin that we can earn from from that contract.

And it's important to note that while as Claire said, while it is.

Cost plus contract. We do also have it structured such that we keep a portion of all the savings that we accomplish with things like our LLP pack as well as the Enduro drive unit.

Got it thank you.

And that concludes our question and answer session for today I will now turn the call back over to Mr. <unk> for closing remarks.

Alright, well, thank you everyone for joining the call.

Enjoyed the discussion here and I appreciate it.

The questions from everyone that came in.

Just in ending I want to repeat a few things that came out through.

Through the course of the discussion.

We couldnt be more confident in the path that lies ahead and we as a leadership team are very focused on making sure. We take the $17 billion in cash that we have the 150000 units of installed capacity and the incredible demand we have from from consumers both on the on the consumer customers both on the consumer side as well as well.

With our partner Amazon.

Taking all of those core elements and ensuring we're positioning ourselves for significant growth over the coming years, but also focusing our capital deployment on ensuring that we launch our two and 2025.

Can do that with the cash that we have on hand, so as Claire said and as I said. So we are in the driver's seat in terms of our in terms of our future growth.

With that we look forward to future discussions here and reporting continued progress as we work towards those goals and thank you again, everyone for joining.

And this concludes today's conference call. Thank you all for participating you may now disconnect.

Yes.

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Okay.

[music].

Okay.

Yes.

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Good day and thank you for standby welcome to the Vivian first acquire its 2022 earnings conference call. At this time all participants are in a loss in <unk>. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one telephone if you require any further assistance.

Please press Star Zero as a reminder, this conference call is being recorded.

To turn the call over to Mr. Tuesday, Vice President Investor Relations. Please go ahead Sir.

Good afternoon, and thank you for joining us for radians first quarter 2022 earnings call joining us on today's call. We have RJ Sky Ranch, our founder Chairman and Chief Executive Officer, and Claire Mcdonald, Our Chief Financial Officer, a copy of today's shareholder letter is available on our Investor Relations website.

Before we begin I would like to remind you that during the course of this conference call our comments and responses to your questions reflect management's views as of today and will include statements related to our business that are forward looking statements under federal securities laws, including without limitation statements regarding our market opportunity industries.

<unk> business operations strategy and goals, our second domestic manufacturing facility, our future products, including our <unk> and our expectations regarding vehicle deliveries actual results may differ materially from those contained in or implied by these forward looking statements due to risks and uncertainties associated with our business.

Except as may be required by law revenue and does not have any obligation to update or revise such statements. If circumstances change for a discussion of the material risks and other important factors that could impact actual results. Please refer to the cautionary statements and risk factors contained in our SEC filings and today's shareholder.

Your letter, which can be found on our website at <unk> Dot com forward slash investors. 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 today's shareholder letter with that I'll turn the call over to RJ, who will begin with a few opening remarks.

We're happy to be here with everyone today and look forward to discussing the progress we've been making just before the call republished 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 on today's call.

As of May nine we've produced approximately 5000 vehicles since it started production.

Producing and delivering the <unk> are one S and EW 700, with a slightly narrower and shorter Edp 500 going through final production trials now.

Our goal is to build and scale a large business that addresses both the consumer and commercial markets.

Our launch of the <unk> that need to be products positions us to grow rapidly as we fully ramp the 150000 units of installed capacity and our normal Illinois manufacturing facility.

With regard to our production we are encouraged by the acceleration of our demonstrated production rate plans is now achieving cycle times three times higher than the start of the year.

These demonstrated production rates, which we expect to continue to increase coupled with our current supply chain outlook give us confidence in our ability to hit our targets for 2022.

Equally important demand continues to accelerate and as of May nine we had over 90000 pre orders for our <unk> products in the U S and Canada all of our orders have been attracted by organic growth and brand awareness and without any paid marketing or media.

It's worth noting that since our March one price increase we received over 10000 <unk> <unk> for the U S and Canadian market with an average price of over $93000.

These orders are in addition to the 100000 commercial van order from Amazon as.

As we ramp production and deliveries of Evs. We are excited about the impact that our close partnership with Amazon will have in the commercial vehicle space.

As we have begun ramping deliveries the feedback has been tremendous one of my favorite parts of the week, because when I think with our customer engagement team and hear the feedback they are receiving around the vehicle process and the interactions with our team we love seeing photos of our vehicles in the wild enabling customers debentures are core focus as an organization for 2022 is to get more are ones.

And Evs on the road the.

City of our time is focused on ensuring our teams are driving towards ramping production and deliveries to customers.

Core to this is addressing the supply constraints that we have dealt with thus far and I'm very confident today in the relationships and associated commitment we have built with our suppliers as we demonstrate our production ramp our suppliers are leaning in to help ensure we can achieve our targets.

Before handing off to Claire I want to comment on our <unk> program, which is being developed and planned for our Georgia facility. We.

We are leveraging the many learnings from our one in RCV platforms.

And we are working to ensure the <unk> sets a high bar in terms of affordability unit economics performance and efficiency.

This global platform is critical for our long term growth.

With a lower price point to further expand our addressable market.

<unk> will also leverage many of the cross platform technologies that will be incorporated into <unk> and <unk> platforms, including our single Motor Drive unit, which we call Enduro and our next generation network architecture and associated family. These views.

I couldnt be more excited about the ramp of the <unk> and EV vehicles as well as the products services and technologies, we have in the pipeline with that I'll hand, it over to Claire.

As we've discussed in the past the volumes being produced on our manufacturing lines are a small fraction of our current 150000 units of annual capacity.

<unk>.

As we ramp production, we expect to leverage our labor and other fixed cost to drive improved gross margin per vehicle.

While our operations teams worked diligently to ramp production of the <unk> 700, our customer engagement service and delivery teams are also accelerating efforts to enhance customer experience across the country.

Additionally, our engineering and design teams continue to progress on our next generation in vehicle technology. Our vertically integrated approach is designed to drive long term structural cost advantages as we expand our production and product roadmap.

Our adjusted EBITDA for the first quarter was negative $1 1 billion.

We continue to strategically invest in our plants and normal annoy lab facilities and service operation.

We also expect to begin investing additional capital into our Georgia facility later this year.

Our capital expenditures for the first quarter were $418 million.

To meet the tremendous demand we have for these products.

We have optimized our product roadmap and associated operating expenses and believe we have a clear path to launch <unk> in Georgia in 2025 with our current cash on hand.

We are also reaffirming our 2022 full year guidance of 25000 total vehicles produce.

We anticipate a significant acceleration of production throughout the second half of the year as our demonstrated capacity improves and we accelerate the ramp up of key shops in.

In addition, we are reaffirming our 2022 adjusted EBITDA guidance of negative $4 $75 billion and capital expenditure guidance of $2 6 billion.

Our outlook does not assume a material change in the overall operating environment.

Going forward, we plan to provide production and delivery results shortly after the quarter end.

We'll no longer be providing intra quarter production and preorder figures in closing I want to thank our team community customers and suppliers for another successful quarter.

Thanks to our truly differentiated vehicle and technology platform, we're seeing such tremendous feedback and enthusiasm.

We have a steep climb ahead of us, but I couldn't be more confident with the plan that we have and the path that we're on.

With that let me turn the call back to the operator to open the line for Q&A.

Q&A roster.

Your first question comes from the line of John Murphy with Bank of America. Your line is now open.

Hi, Good evening, everybody just a first question around production versus deliveries in the quarter.

Production is essentially almost two extra deliveries I'm just curious why there was such a gap between the two.

This quarter. It was just a question of timing of vehicles in transit or whats going on there because I traditionally because of the lack of the dealer network, we kind of assume they're going to be a lot closer.

Thanks, John Yeah. As you said in the question there is a gap between production and deliveries in and it was just that the timing effect of vehicles being built and.

Being in transit and essentially prep for delivery.

As you said given that we have a direct model, where we sell vehicles directly to consumers.

Aligning up those customers, ensuring the delivery, creating a great customer experience.

There is always going to be some separation between the total production number and the number of deliveries.

Okay, but there was nothing other than simply just just processing RJ.

Its not like Theres vehicles being held for any kind of quality or potent postproduction inspection or anything like that.

Any partially partially complete vehicles these are fully ready to deliver to customer vehicles.

Super helpful.

One point that I would just add on to that question is that because of the rate at which we're ramping production because we're continuing we continuously scaling week over week over week and there always will be that lag effect in regard to the vehicles that are ultimately in transit. So it is something that will continue.

Well likely to be the same sort of percentage of a ratio of produced vehicles relative to delivery.

Got it and then just a second question on the run rate of production I mean, it seems like there was about 800 units that were produced from April one to may 9th roughly and if do some dumb Guy's math and just double it that gets you to 3600, but that doesn't even give you.

The benefit for the.

The full quarter and the acceleration so it seems like you're on pace to.

Ahead of that.

How should we think about it that way and is there any tempering of parts specifically.

Gate your ability to get there.

That's about the right way to look at it I would want to point out a couple of things.

We've seen the overall production rate continue to increase in fact, our cycle time.

Let's see the three times, 300% or three <unk> improvement since the start of the year.

Through the course of Q1, and we continue to continue to see that production rate improvement as we go through quarter two here.

So you alluded to it but we are in midst of S curve. So.

The end of the quarter will be producing at a faster rate than the start of the quarter.

If you look at this quarter, thus far we've we've the plan has been able to our produce our supply chain and what gives us a lot of confidence as we look at the time ahead.

Is that clear line of sight, we have around the ramp up of our supply chain and the close relationships, we have with those key suppliers.

Okay, and then just the last question on pricing and the price increases I mean, obviously the result of input cost.

Increases, but is there a margin.

Goes along with these price increases more specifically maybe are you raising.

Your prices exactly to what your cost is or is it is it above that so theres actually some.

Youll sort of parallel margin thats going along with it.

On a unit basis.

<unk>, which brings together the combination of us really ramping and accelerating the production volumes.

And then within the plant combined with.

The move from.

From our sort of pre March 1st Preorder cohorts you are post March burst.

Cohort.

Embedded in that post March 1st cohort there is.

A true step change that you will be in regard to the overall aggregate gross margins that youll see within the business and so the growth from a gross profit margin rate over time, it's not linear it truly is a step change function as you think about us moving to this post March 1st cohort.

They configure their vehicle closer to the delivery date, which enables us to understand that.

Dynamics within the inflationary market at that time, but also importantly ensure that that customer has all of the core vehicle capabilities that we're introducing in that configuration as well.

We think that the combination of those two factors will really help us from an ongoing margin perspective.

Allow us to really be nimble and dynamic as we evaluate this inflationary backdrop.

That's very helpful. Thank you very much.

Thank you. Your next question comes from the line of Adam Jonas with Morgan Stanley . Your line is now open.

Hi, Claire I just wanted to follow up you mentioned, if I quote you a high level of flexibility and the cadence of your growth investment. So on the topic of cost control. Your enterprise value is currently just above zero dollars.

And it is sending the message the market's sending the message that if you don't get your supply chain costs.

Under control that you might have to significantly dilute shareholders. That's what happens when you see at zero.

Zero.

Enterprise value.

Now you reiterated the 25000 unit delivery target in the $7 billion plus kind of cash burn your EBITDA and Capex. So my question is if you had to control.

Cash consumption of the business to the due to forced measure events outside of your control and you alluded to flexibility and cadence, but could you elaborate what levers could you pull to slow the burn and give you more runway to execute and restore confidence and review on the capital markets. Thanks.

Thanks for that question Adam is as you mentioned right. We're clearly in the driver's seat with $17 billion.

Cash on hand, and it's important to also note that we've made foundational investments.

That'll have allowed us to rapidly scale the business in both the consumer as well as the commercial market we have.

150000 units of capacity for our one in RCD platforms and is.

As we've talked about as well, but demand remains incredibly strong with over 90000 or one preorders and an initial order of 100000 units from Amazon.

And as we just talked a little bit about with John previous question right, we do see significant.

So where it is we're ramping production and able to ultimately have that step change, where we're now harvesting right. The profitability of all of those foundational investments that we've made and the production capacity Thats online and the launch vehicles that we've come to market with and.

And so this ultimately gives us that flexibility to decide how we're deploying our capital on a go forward basis and as you mentioned with with regard to what those key levers are we have the ability to live within our means.

As we think about the profitability that normal itself can deliver for Arabian that will allow us to really outpace the ongoing growth of the business.

Ultimately allows us to have that flexibility on when and how we would raise additional capital on a go forward basis.

And as.

A little bit about okay. We do believe we have the cash on hand.

I understand I understand clear, let me let me just do one follow up and I will shut up.

For you and RJ since your IPO. The World has changed dramatically investors just don't want to fund negative EBITDA growth.

EBITDA companies in this environment and the supply chain issues have gotten to your point significantly worse.

Both quantity and input cost so has anything changed in your team's strategy to adapt to the changes in the environment.

Since the IPO.

Yes, Adam this has been something we as a leadership team has spent a tremendous amount of time on of course from a scenario planning point of view, but also just.

With Capex, that's installed and.

And it positions us well to now harvest.

We use that.

Average.

A significant amount of growth, while we focus investment and focus our dollars on development and preparation for launch of our two.

So what we've what we've really done is and what we've been working hard on is to channel and focus our capital on.

A really important program from us and trust in terms of scaling which is the <unk> program, but of course, maintaining laser focus on ramping up the existing capacity that we have.

Such that we can fully.

Fully fully discourse at harvest.

The revenue associated with it.

Thanks RJ.

Thank you. Your next question concerns the line of Joseph Spak with RBC capital. Please go ahead.

Hi, Thanks, good afternoon.

RJ you alluded to.

Some some better visibility with your suppliers I was wondering if could provide a little more color and detail on on some of those conversations.

With those suppliers that you mentioned had some bottlenecks last quarter that gives you that level of confidence.

Sure. So we've previously talked.

In our last call around some of the challenges we've had inclusive of semiconductors as well as some other components.

Where we stand today a lot of those other challenges have been resolved we've worked with our suppliers to ramp their production.

We have clear line of sight to them being able to keep up with our continued ramp in our facility.

As we noted in our opening statements just the importance of us shifting to are moving to a two shift operation mid this year and of course, the suppliers seem to be capable of supporting that.

With that said, we also have very tight relationships with the semiconductor suppliers.

We've seen some we believe we've seen really the worst of it or sort of the valley. If you will of these supply constraints and the suppliers are leaned in we have very high levels of visibility into what the allocations will be on a go forward basis and that gives us the confidence of what the ramp will look like as we.

Look out through the remainder of this year.

Okay.

And then just maybe to follow up on <unk>.

Adams point about.

In our scenario planning and changing the strategy Youre answer made it seem like.

You're being prudent about how you spend for next generation platforms I guess, what I'm wondering is.

Your plan involved doing a lot of things.

On your own.

Or in sourced and then throughout really the entire value chain.

Has this experience.

And the change in capital markets led you to reevaluate whether you might rely on other partners or any sort of about face in terms of what you want to do versus you.

You might let others do for you is you want to as you go into sort of execute upon your longer term plan.

There's a few things to think about here Joseph first is.

Our original plan had.

Number of additional variance both of the <unk> product as well as.

Even propulsion platforms that were planned for the future pipeline.

And what we've done is we.

We've really looked at the incredible level of demand that we have for the <unk> products as they are.

And a recognized is that there's some big technology development efforts.

To further.

Further advance those products, but we've aligned to those very nicely with the <unk> program, so are or will be call. It zero. The single Motor drive unit that's used in the EV platform.

Drive application and the <unk> platform in a dual motor all wheel drive application.

Our next generation network architecture and associated families use.

And of course, our <unk> battery pack, which is going to be launching in the Edp. Later this year all of those technologies, we're able to share those not only across the <unk> and RSV platforms, but a number of them really line up nicely with the <unk> program.

And so what we've been focused on is simplifying the product plan and the product portfolio as much as possible, but we haven't in any way at all shifted our focus on the need to vertically integrate our software stack vertical integrate around our electronics and acute topology.

And of course vertically integrate around our propulsion stack so.

Is that we're able to launch our two with the capital that we have.

Thank you.

Thank you. Your next question comes from the line of Emmanuel Rosner with Deutsche Bank. Your line is now open.

Thank you very much first one super quick point of clarification.

Mentioned your reservation having.

Well, having received 10000 reservations since the.

The price changes, but then I would say.

Sub debt is 90000 was only up seven plasma slow versus the last update so what are you exactly netting out of this is at the cancellation or the deliveries that you've already done.

So the net is both both of those things so.

When we report.

Net preorders every delivered vehicles at the half comes out of that basin preorders and so it is the netting effect of the delivered vehicle.

That we've had throughout both great last quarter as well as the quarter to date period as.

As well as any embedded churn within the preorder base.

Okay. That's very helpful. Then.

Youll targets relaunch <unk> in 2025 with our current cash on hand is obviously.

They are encouraging.

How do you plan on accomplishing this are you modifying the capex trajectory.

Are you have you identified areas, where you'll need to spend less capital do you anticipate lower operational cash burn than previously anticipated I guess, how will you do that.

As we mentioned one of the core catalysts that enable this.

Path forward to launch <unk> in Georgia with our cash on hand is both the profitability that we're going to begin to.

Deliver with the installed 150000 units of installed capacity that we have in normal. It's also important to note as we think about Georgia, We're building, Georgia in a modular fashion. So the first phase of Georgia will be on <unk> line with 200000 units.

That first 200000 units will be what comes online in 2025, and so instead of building. The full 400000 units at once that is certainly.

Bedded capex savings within the plan and forecast that we're thinking about and additionally, as you heard from RJ a number of the strategic decisions we've made to really.

Focus and prioritize our product development roadmap.

Also come with embedded Capex savings as well as as we think about that.

The capex forecast over the next handful of years.

Understood.

Finally, how is the ramp up of the Amazon Prime delivery is growing and out of the 25000 target for the full year.

How many of those would be on the commercial vehicle side.

Yes, we're excited to be producing and delivering the etv's.

As I said earlier.

Launched Edd 700 in terms of what's being delivered to Amazon and so this is the roughly 700 cubic foot version of the van.

We're in the production trials stage of the <unk> 500, but with regards to the <unk> 700.

Now this involved as we talked about in previous call heavy amount of iteration and refinement with Amazon in terms of how it fits into their digital ecosystem.

And getting a tremendous amount of driver feedback through a series of trials and a series of of of feedback loops with drivers.

So we're excited to have been through that have made a whole host of improvements over the course of really the last year.

Such that the deliveries that are now happening, we're going to start to ramp up and youre going to start to see a lot more of them.

Coming into all of our neighborhoods delivering packages, but with that said, we haven't provided guidance on the exact split between the <unk> and the <unk> product line.

But broadly speaking.

Would look to say.

Well over a majority will be in the <unk>.

With <unk>, making up.

On the order of a third of total production.

Great. Thank you so much.

Thank you. Your next question comes from the line of Alex Potter.

Potter with Piper Sandler. Please go ahead.

Okay great.

I had a follow up question on vertical integration and software.

Your strategy, obviously it is very clear.

Differentiated I mean, youre trying to layer in your own in house software on top of your own in house electronics, including some of the sort of quote unquote boring.

Some of that behind the scene software and that everybody should standardized around kind of a base level of third party.

System, and then only differentiate at the customer facing into the software stack.

My question for you.

Of all of it.

I want to make sure I'm articulating all that correctly, but then secondly.

Why do you think your strategy is right and the other ones are wrong.

Yes, Thanks, Alex it's a great question.

When you look at our product as compared.

Complexities of vehicle in particular vehicle, that's connected with the host of the.

Sensors between cameras radar ultrasonics.

With a whole bunch of actuators. So this is suspension braking.

<unk>.

The traditional model is to buy as you said a number of compute platforms you see us from different tier one suppliers and to put all of those different is used together and then the OEM essentially does some part of or at least prescribes how it should be done at the application layer.

From our perspective to create a really.

Attributes or whether that's digital characteristics for digital capabilities of the vehicle.

We feel really strongly that it is important to us.

Both develop and control the full stack, so that's designing and developing.

Compute platforms across the vehicles. So that's all the electronics of course by doing that being able to design.

A very efficient network architecture, and then of course within that building all the layers of software from the low level operating systems, all the way up to the applications layer.

And what's exciting to see is the beginnings of from a customer facing point of view of why that matters and so we've done a number of otas over the air updates already.

With customers and these are just an early sampling of what's to come so adding features like of <unk>.

Raj door opener to the vehicle, adding enhanced self driving features adding additional drive modes.

Adding additional diagnostics platforms. So there's a host of things we can go very deep into the vehicle and cross platforms. Because all of those platforms are controls internally and this is important not just on the consumer side. This is also we feel really important on the commercial side.

It really underpins a lot of the core.

Core capabilities, we embed in our fleet are less product.

Where we can predictably analyzed the need for maintenance, we can predictably manage.

Health of the lifecycle of a vehicle so theres a number of characteristics that are useful as well on the commercial side.

Okay, great. Thanks, very much and then the second question I guess on Georgia and Dr to how close are you to finalizing I guess, maybe the exact bill of materials for the or two of the exact design and layout for GA. It sounds like Youre working on a modular plan I guess any.

Anything in that regard, especially related to things like single piece castings are any of those sort of new manufacturing techniques that we're hearing about how closer you to finalizing all of that in Georgia.

Georges.

<unk> is a really interesting and exciting opportunity because it's going to leverage the learnings we have from going through ramping all of our production operations and normal and.

In a normal you can really think of it as two plants housed in one site. So we have the <unk> production line.

And then that was sort of our Gen. One line if you will.

And then we have our RCV platform between commercial and platform.

And with that.

Separate body shop separate General Assembly and.

So a number of learnings we're already embedded into that.

Into the second set of lines, we built to normal and as we now look at Georgia the opportunities to learn from a production line layout point of view as well as the product itself and pull all those together to create.

Really.

A world class.

So what's also important to note is that that product coming to market in 2025.

But those learnings are certainly flowing into how we think about our two in.

Parts simplification part consolidation like you just like you mentioned with with usage of castings, we certainly used castings in the <unk> and RSV programs, but.

The opportunity to consolidate even more parts is something we're excited about in <unk>.

Driving those manufacturing and cost efficiencies into that product is going to be critical.

Great. Thanks, guys.

Thank you. Your next question comes from the line of George <unk> with Baird. Please go ahead.

Hey, good afternoon, everyone and thanks for taking my question.

RJ recently rang the alarm bell.

You around easy materials and several of your competitors are saying direct deals of miners lithium.

And other minerals.

You can articulate your strategy.

Deep relationships go that youre that youre developing in that field.

Thanks George.

In a recent interview.

Discussing some of the longer term strategic challenges, we're going to face as an industry.

As we go from.

Less than 10 million units being produced a year electric vehicles being produced year to every vehicle being produced globally, becoming electric.

As we think about that we do believe there's going to be material constraints.

As we get to the sort of near the end of this decade I want to be clear, though that as we look out over the next five years, we do not see any.

Battery cell supply constraints or material risks and the way we've approached our battery cell strategy as well as our far upstream raw material precursor materials strategy is to make sure that we have a diversified approach.

So what we've launched with between the <unk> products in the RSV based platform products.

It's been a high nickel sell it's a cylindrical form factor.

But later this year as I mentioned, we introduced an LLP chemistry, lithium lithium iron phosphate chemistry.

Which which of course is a hedge on nickel pricing also just inherently a lower cost chemistry.

Fits beautifully as a base model configuration, and certainly for our commercial vehicle fits really really nicely.

As we look at diversification is not just looking at high nickel ore iron based chemistries, but also making sure that we have the right.

Selection of cell supplier partners, and we're very happy with the relationships that we have.

To grow those relationships.

Now to your question, though to be very specific around raw material and I think specifically here lithium carbonate in the case of lithium iron phosphate battery cells in lithium hydroxide in the case of high nickel cells.

These are really key areas I believe for anyone serious about achieving significant scale multimillion vehicle per year scale.

To have secured supply chains around.

And we're working very hard to build those relationships and put together the right types of deals to secure these really critical precursor materials I think everybody on this line can appreciate.

The risks around the cost we've seen the price of lithium hydroxide go up quite considerably over the last several months.

And that's affected everyone.

So making sure that we have.

Confidence is supply as we look out in the.

Latter part of this decade.

We see risk of scarcity for those key precursor materials, that's something we're very focused on.

At a future time, we will be able to make some announcements around that.

Thanks, and if I may take it to the other side of the spectrum and ask you about your autonomous offering.

Update there any new learnings and how that offering is driving future product approvals.

Thanks.

Sure so in our launch products we have.

Peter we called <unk> plus.

And.

The core of that feature is a highway highway feature where essentially the vehicles capable of driving itself.

But today, that's geofence really to highways and we've developed that platform in house.

And as you look out over time that that capability is going to continue to grow. So we'll do that with over the air updates where for the existing vehicles that are already delivered to customers as well as future vehicles.

That feature.

We'll extend into more roads.

And along with that development, which is software based we're also upgrading and improving the hardware set so we call. It will be talked about in terms of our next generation network architecture. This also includes with it additional compute as well as updated cameras as well as a few other sensors on the vehicle to support continued progress above and beyond.

The level two feature set that we have today.

And Claire talked about this in the context of <unk>.

We'll be taking orders and moving to a reservation based process one of the one of the reasons for that is that their demand backlog being so large the <unk>.

Products will be building in two years will be different than the products. We're building today when I say different I should say these products will be improved flow of different hardware. That's part of some of these improvements we're going to be making from a compute point of view from a perception stock point of view.

And of course, along with that the improved network architecture that will be going into these future state products.

Thanks, guys.

Thank you. Your next question comes from the line of Charles <unk> with Redburn. Please go ahead.

Hi, guys. Thanks for taking my questions.

Firstly on production the shareholder letter mentions but one reason why the weekly rates of production slowed.

So about 250 units I believe per week in the last five weeks from 350.

March or at the end of March was that you lost 25% of your planned production due to additional stoppages can you just clarify what was it that forced the longer periods of stoppages of stoppage than you had anticipated in April .

Now over.

At <unk> production right now back to what it was in March or even above that.

Thanks Charles.

Clarify something.

Bobby.

Thank you.

For the year.

Okay.

No doubt.

Sure.

Actual production lines themselves both in terms of their stability as well as the production rate has continued to improve.

The challenge is as those lines have continued to improve.

We've had supply constraints that havent allowed us to actually fully utilize them. So as we said.

The single shift operation that we're on today, we lost.

Little more than 25% of the time.

The number of vehicles, we produced to date this quarter is almost exactly equal to the number of.

Semiconductors, we have to support all the all the components that go into the vehicle.

The constraints in line down situations, we've dealt with over the last several weeks.

We're going to put those behind us as we look at ramping into the remainder of this quarter and of course through the rest of the year.

And it doesn't a day doesn't go by where I'm not talking to the <unk>.

Our senior team of one of those key constraint suppliers and I can I can say with confidence and certainly if theyre listening and we appreciate their support but I can say here with confidence that there there is leaned in.

Hoped for.

And I would say, it's a materially different situation than we had at the start of the year, where the suppliers, we're still trying to figure out whether or not we as a company we're capable of producing and ramping we've made it very clear through our performance that the plant is capable of running.

And as I said, we hope to be running the plant on two shifts starting mid year.

And with that of course building line of sight around component allocation.

Okay.

Okay. Thank you and then on the 10000 orders you've received since the price change in March.

And ASP.

$3000.

A very rich mix I guess that means that the vast majority.

As quad mode.

<unk> Pak <unk> large pack onex's given that price points, what are you surprised by that does it match.

Mix of the rest of the order book, albeit virtually at the older lower prices and do you expect to sustain that type of mix for future orders.

We see just to clarify.

Definitely.

The higher Asps <unk>.

Indicate a preference for the dual motor as you as you called out but also.

Im sorry, a preference for the cloth odor, but also just to clarify the large pack our middle sized pack.

It makes up a vast majority of the configurations. So.

What we see is customers have a very high willingness to spend and theres a lot of pricing power that these vehicles have in what we've built is a brand has.

And that gives us a lot of confidence.

As we go into the next six to 12 months understanding the inflationary environment that we're in that there is significant pricing capability on these vehicles.

Thanks.

Thank you. Your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is now open.

Yes, good afternoon, and thank you very much for taking the questions. The company is working on several new vehicle technologies you spoke about your batteries. The enduro motor also the new network architecture and you commented on how it's important part of your long term profitability objectives can you elaborate a bit more on how the development is going for some of these key technologies in <unk>.

Do you expect them to still happen on time.

Sure as I mentioned before Mark.

On our LSP pack.

This first goes into our commercial vans later this year.

Along with that the enduro more motor first and first application is.

As in the vans as well later this year both of those are well underway in the case of the Enduro drive unit.

We're putting that plan to outline it as we speak so there's.

The lines being built the plants being the additions going into our facility.

And it is on track, we're pushing very hard we're very excited to get that into our vehicles are late this year and then following introduction in the commercial van.

Both the <unk> as well as our Enduro drive unit as I said with enduro.

Being used in a dual motor set up one in the front one of the back.

It also makes its way into the <unk> product line.

That's helpful. My second question I'm, hoping to better understand the opportunity in software and services and it's an important part of your long term opportunity and I think a really interesting.

We haven't seen that strong take rate, especially around to our offering from a financing as well as insurance App perspective.

And those are as we know we've had some questions as well around level of vertical integration. Those are two great. Examples of opportunities, where we have partnered with strong third party.

In the case of chasing on the financing side and then nationwide on the insurance side that allows us to build a very robust data driven insight into the business and importantly through some of those data driven insight allows us to continue to evolve.

<unk> chip that we have with our customer.

And beyond.

Financing and insurance are really excited to also offer.

All host of software enabled services.

The <unk> solution that we have with Amazon.

<unk> is a great benchmark as we think about the capabilities that we're bringing to bear.

Help them manage that end to end suite solution.

In the cases of fleet of last we're also able to ultimately leverage at a number of the core digital commerce.

I think that we've made as a company.

From the commercial side of the house and use those.

To think about radar our consumer experience as truly how do you manage a fleet of one and so we're really leveraging digital infrastructure and digital backbone within the business across both the consumer as well as the commercial side of the house.

And as we've talked about in the past.

The 65% long term gross margin opportunity that our software and services.

Side of the business delivers allows us to ultimately drive and increase margins rapidly over time, as we think about the compounding effects.

That can deliver from our growing car park.

And your next question comes from the line of fire and Brinkmann with Jpmorgan. Your line is now open.

Hi, Thanks for taking my question relative.

Den budget increases or anything like that.

Sure.

To address the first question as we thought about.

The decision to increase prices we built.

<unk>.

The broader inflationary backdrop that we're seeing across our raw material costs beyond raw material cost just looking at.

How inflation was playing whether that was the key.

Cost of freight that we're seeing across the broader market.

And industry backdrop, as well as other increases that youre seeing more broadly from an inflationary perspective.

In addition to looking at each of those factors. We also importantly benchmark.

Proposition that we're bringing to market.

Core capability that that that are vehicles represented to ensure we were truly bringing a compelling value proposition even at the higher prices that we're charging in and I think the momentum and acceleration of preorders that we've seen post that March versus.

Mark asked certainly emphasizes that.

That that equation is certainly yes.

Still intact.

And it's been amazing to see a lot of the network effects that we've seen we're.

In markets, where we have been delivering more vehicles. We've also continued to see an acceleration of our preorders.

Truly our customers our best salespeople out there in the market.

Given their own test drive and in some cases actually reaching out to our customer experience center to ask them for how best to address their own friends question as they're educating and really.

Empowering educating others about.

The Arabian brand is in and importantly, what that driving experience feels like within the market.

So those are key enablers for us.

Importantly, we're also not standing still as we think about the priorities that we had in regard to our own cost attack initiatives as we think about our own cost of goods sold and those the commercial opportunities that we have as an organization as well as a number of the engineering development.

That again will ultimately be at reducing the overall bom costs and as already mentioned create.

A lot of those foundational.

Systems that will power <unk>, which is as you know with our more affordably priced mid sized SUV will be coming out as well and will also benefit for all of these horizontal technology investments that will be coming to market with over the next.

Two years.

Very helpful. Thank you.

Thank you. Your next question comes from the line of Vijay Rakesh with Mizuho. Please go ahead.

Yes, hi.

Glad I saw.

You maintain the full year guide on production. So it looks like you hit that you're probably out of double production double or triple your production run rates from here.

Based on the fact that it looks like you'd be adding a second shift maybe does that imply that you're.

Assuming all of the supply constraints should get resolved by media.

By June .

And the second shift there.

Our production lines are capable of producing it.

Significantly higher rate than what our supply chain is able to support today as you said.

But the guidance we provided.

Fully encapsulates, our expectations and confidence around the supply chain.

I said this in our last call and I want to make sure I say it again here, we are pushing our suppliers as hard as possible to do more than that.

We would we would really like to unlock the full production capability of our plant.

Such that we can get more cars and more or I should say more vehicles to our customers.

Given the significant demand backlog and given the excitement we have on both the consumer and the commercial side.

Thanks, and then the Amazon <unk>.

Again on the consumer side, you are able to adjust pricing based on the cost.

And if cost inflation there.

Do you have the flexibility on the Evs as well in terms of.

Some flexibility with respect to commercial EV pricing et cetera.

Thats it thanks.

Sure. So as you think about the Amazon contract, it's a cost plus agreement.

And so that imbeds some of those overall inflationary metrics embedded in within that contract.

Also important to note that as we think about the introduction of our LLP pack as well as the introduction of our enduring.

Motors in the commercial van those bills are key enablers for significance.

Cost down opportunities for Amazon and so that gives us a lot of confidence in regard to the ongoing margin that we can earn from from that contract.

And it is important to note that while as Claire said wallets.

Cost plus contract. We do also have it structured such that we keep a portion of all the savings that will be accomplished with things like our LLP pack as well as the Enduro drive unit.

Got it thank you.

And that concludes our question and answer session for today I will now turn the call back over to Mr. <unk> for closing remarks.

Alright, well, thank you everyone for joining the call.

Enjoyed the discussion here and I appreciate it.

The questions from from everyone that came in.

Just in ending I want to repeat a few things that came out through.

Through the course of the discussion.

With our partner Amazon.

Can do that with the cash that we have on hand, so as Claire said and as I said. So we are in the driver's seat in terms of our in terms of our future growth.

With that we look forward to future discussions here and reporting continued progress as we work towards those goals. Thank you again, everyone for joining.

And this concludes today's conference call. Thank you all for participating you may now disconnect.

Q1 2022 Rivian Automotive Inc Earnings Call

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