Rivian shares fall, but electric vehicle (EV) maker remains on track to post gross profit in Q4

Shares Rivian Motors (Balanced -3.82%) fell 7% in after-hours trading on Tuesday after the electric vehicle maker released its second-quarter 2024 earnings report.

There was no clear, Rivian-specific catalyst for the decline. The company’s revenue and earnings beat analyst estimates, and the company reaffirmed its full-year production guidance and expectations for a modest gross profit in the fourth quarter.

The stock’s decline is likely due to recent market volatility. Through Aug. 6 S&P500 the index is down almost 8% from its all-time high close on July 16, and the company, which is dominated by technology stocks, Nasdaq Composite is 12% lower than its all-time high close set on July 10. That volatility has likely dampened investor appetite for higher-risk stocks like Rivian, which is not profitable.

As a background, Rivian produces two all-electric consumer vehicles: the R1T (pickup) and the R1S (SUV). It also produces an electric delivery vehicle, currently available only Amazonwhich owns a 16% stake in Rivian.

Below is an overview of Rivian’s Q2 2024 results and forecasts based on eight key metrics.

1. Revenues increased by 3% year-on-year

Rivian reported Q2 revenue of $1.158 billion, driven primarily by vehicles delivered during the quarter. That beat Wall Street estimates of $1.13 billion. Revenue was up 3% from the same period last year and down 4% from the prior quarter.

2. 9,612 vehicles produced, down 31% from the first quarter

In the second quarter, Rivian produced a total of 9,612 vehicles, down 31% from the first quarter. It delivered 13,790 vehicles, up 2% from the first quarter.

A large sequential decline in production volume and only a small increase in deliveries are not cause for concern. These effects were predictable. Rivian production was affected by plant downtime related to equipment upgrades at the Illinois plant and the launch of the second-generation R1 vehicles.

3. Continued rollout of 100,000 Amazon delivery vans

Rivian is still fulfilling Amazon’s initial order for 100,000 specially designed electric delivery vans (EDVs). The company does not disclose quarterly production and delivery numbers for the vehicles.

4. Operating loss increased by 7% year-on-year

The operating loss amounted to $1.38 billion, which is 7% higher than the operating loss in the same period last year.

5. Adjusted loss per share decreased by 7% year-over-year

Rivian’s net loss was $1.46 billion, or $1.46 per share, up 15% from the same quarter a year earlier.

After one-time items, net loss was $1.12 billion, or $1.13 per share, a 7% improvement from the same period last year. That result beat Wall Street’s forecast of a loss of $1.21 per share.

6. Cash used in operating activities increased by 45% year-on-year

Rivian used $754 million of cash to run its operations in the second quarter, a 45% improvement over the same period last year.

Free cash flow was negative $1.04 billion. This outflow represents a 36% improvement from the year-ago period.

7. USD 7.87 billion in cash and cash equivalents at the end of Q2

Rivian ended the second quarter with $7.87 billion in cash, cash equivalents and liquid investments and $4.43 billion of long-term debt on its balance sheet.

The total cash consideration includes $1 billion in unsecured convertible notes issued by Rivian to Volkswagen with the June announcement of a planned 50%-50% joint venture (JV) between the two companies to create next-generation electrical architecture and software technologies. As part of the agreement, VW, Rivian will license its existing intellectual property rights to the JV.

Given Rivian’s current cash burn rate of $1.04 billion per quarter, that would provide just over seven and a half quarters of cash, or nearly two years.

However, investors should note that Rivian has the potential to receive up to $4 billion in cash from its JV with VW, subject to certain milestones and regulatory approvals. The deal is expected to close in the fourth quarter of this year.

8. Confirmed production guidelines of 57,000 vehicles for 2024

Rivian reaffirmed its previously issued full-year guidance:

• Total production of 57,000 vehicles. This would be in line with the 2023 production level of 57,232 vehicles.
• Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was minus $2.7 billion. For comparison, in 2023 the figure was minus $3.98 billion.

The company also reiterated that it expects to achieve a modest gross profit in the fourth quarter.

Rivian Is Still a Risky Stock, But VW Partnership Lowers Its Risk Level

I will close with a statement from Rivian’s letter to shareholders that I agree with:

We believe the introduction of the second-generation R1 and the expected partnership with Volkswagen Group will fundamentally improve Rivian’s long-term earnings trajectory and growth profile.

To be clear, Rivian is still a risky stock, because it’s really hard for a startup car company, whether it’s electric or gas-powered, to succeed because of the high fixed costs of the auto industry. But the VW partnership, assuming it closes and goes according to plan, makes Rivian stock a little less risky.

The launch of the R2 platform (mid-size vehicles), scheduled for the first half of 2026, should further reduce the stock’s risk as vehicle production volumes should increase significantly, allowing for better utilization of the company’s fixed costs.