Our experts break down what to expect from Rivian earnings after the bell.
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00:00Hello and welcome to the Street Pro subscribers who have joined us here today.
00:06I want to thank you all for joining us.
00:08You may wonder why am I sitting in a car in my driveway?
00:11And the answer is today we're going to be talking about Rivian.
00:15Rivian's earnings are on February 20th.
00:19That's tomorrow.
00:20We're recording this on Wednesday, February 19th right now.
00:24And what I wanted to do is bring in one of our contributors, Brad Janessen,
00:29to talk with me a little bit about Rivian and what we can expect as we go into earnings tomorrow.
00:38Rivian has also been kind enough to lend me this car for a week.
00:42And so we're going to be doing a couple of additional articles.
00:45We'll do one as a follow-up after Rivian announces earnings.
00:49And then so that'll probably happen next week.
00:51And then also following that, I'm going to do a bit of a car review slash talk about Rivian's products.
00:58And so that will come in the next week or so as well.
01:02So with that, let's get right into it.
01:05Brad, do you want to tell people a little bit about yourself?
01:09Sure. Hey, Jason. Looking nice in that fancy-looking Rivian.
01:14It's very luxurious, I have to say.
01:16That's nice.
01:17So I started writing for The Street in November 2021.
01:25And coincidentally, the first column I wrote was about Rivian right before their IPO.
01:32And I coincidentally, well, I kind of panned it back then and cautioned investors.
01:42So I've been following it for a long time.
01:46I do manage a hedge fund, which I've been doing since 2000.
01:50And coming to you from the Hudson Valley, New York.
01:56And that's it.
01:59All right. And one thing I should say, Brad, is you mentioned that you cautioned investors on the eve of Rivian's IPO.
02:06And you were right, correct?
02:08The stock's trading somewhere in the mid-teens right now.
02:11And where did it IPO?
02:13I think it was maybe an $85 deal, $80 deal.
02:17And it obviously was very hyped up and it gapped up quite a lot that day.
02:22And what I was cautious about was that at that moment in time, the whole EV sector was really hyped up.
02:29That IPO was hyped up since Amazon owned a big stake and Ford owned a stake.
02:35And I just thought investors are paying up and getting a really bad deal because of the hype.
02:40So that's what I was most worried about.
02:43You know, I really appreciate what Rivian's doing as a company, trying to move, you know, the sector toward EVs.
02:51But it's just and that was before they even had sold one car.
02:56So it was like way ahead of itself.
02:59Right. People were assuming it was going to become the next Tesla.
03:03And well, I think we're seeing Tesla become the next Tesla right now.
03:08Okay, so let's because the goal of this video is to keep it pretty short, pretty concise.
03:14So I want to talk about a few things.
03:16So first of all, the earnings that we're expecting tomorrow are for the full year.
03:19It's Q4 earnings, full year earnings.
03:21So that'll be really telling on Rivian's.
03:24Well, obviously how they did for the full year, but perhaps as well, what's going to be happening in the future down the road.
03:32Brad, can you tell us really quickly, what are some of the expectations?
03:35Do you know what some of the numbers that we should be looking at for tomorrow?
03:39Well, they already sort of pre-announced how many vehicles they sold and how many they produced and delivered.
03:51Some of the things we're looking for are whether they they and they guided to gross profit gap, gross profit positive.
04:04So so you're likely to see that there are a couple of factors involved that may make a splashy headline that they finally hit some form of profitability, even though it's gross profit.
04:15But the factors in there are really going to make much of a difference in the street is not going to be that surprised about it.
04:22And then going forward, there's some expectation that they'll give some 20, 25 guidance.
04:28And you're you're likely to see some vehicle production.
04:32Some analysts are expecting in the fifty five to sixty thousand vehicle production for next year.
04:40And that would be in line.
04:42I mean, keep in mind, this is way, way down from what expectations were a few years ago.
04:49By twenty five, people were expecting over one hundred thousand.
04:53So, you know, these are still pretty depressed levels.
04:56And and this is not really much of the story.
05:00How many they're producing next year?
05:02It's really our two guidance.
05:05People want to make sure that the company is still on track for the R2 to be delivered in the first half of twenty, twenty six.
05:13So so any incremental guidance on that would be helpful for the street.
05:19Still looking for an EBITDA loss next year.
05:21Maybe it might be a billion and a half.
05:26And.
05:29Let's see, I think, you know, they've had some demand challenges last quarter.
05:38They blamed the macro a little bit.
05:41Some they've had some supply challenges and streets can be should see if they get that back on track.
05:48And so I think those are the primary things to keep in mind for for when the earnings come out right now.
05:57The car that I'm sitting in is the second generation car.
06:00And one of the things you mentioned, the the supply challenges, I think.
06:06This car and also the EDV, the electronic delivery van.
06:11I think I have that correct.
06:12That one, I think they both had some supply challenges where I think it was the wiring loom.
06:17They didn't have enough enough wire for the looms, even though they were much shorter or less, less resource intensive to create those than the ones that were in the R1 or the first generation cars.
06:34Great. So.
06:36OK, so let's talk about we talked about the expectations.
06:41Right. So so you mentioned that they're expecting gross profitability, which will be a good first start and gross profits again, just for the people who may be more technical analysis oriented.
06:53We you have your revenues minus your expenses in producing the product, and that gives you your gross.
06:59So your cost of goods sold, things like that.
07:01Yeah, you're still going to see a net loss expected, you know, somewhere around maybe 70 cents net loss in that.
07:08And that, you know, I think this people still want to see, like, incremental improvement in cost efficient in cost inefficiencies.
07:16And and that's really what this this company's been striving to to achieve.
07:21But since the unit growth is kind of slow, maybe 10 percent next year, it's really hard for them to get that that margin improvement right now.
07:30Can you talk a little bit about the product mix?
07:33I know. So right now, the R1, both the truck, which I'm in right now, the pickup truck and the and the SUV are pretty much their only product.
07:44But there is one other big product that we I see running around my neighborhood.
07:49One might make an appearance behind me at any time.
07:52The the electronic delivery van.
07:54Can you talk a little bit about about that market?
07:57And I read today that that product is actually profitable already on a gross basis.
08:04Well, about 25 percent of their sales have been in that delivery van, primarily to Amazon right now.
08:13And I think they've had a pilot with with AT&T and they've opened this up for for the for anybody now to to order where they were had been exclusively for Amazon.
08:27Yeah. You know, it's it's like all their their vehicles.
08:31I think it's it's been a it's been a slower ramp than people have hoped.
08:37But, you know, with the new plan, they're still looking for probably about 60, like with their capacity, 65000 units in their new plan, 65000 in their in their plan.
08:52Currently currently in normal Illinois.
08:56And, you know, it's it's I feel like it's it's a solid base for them to work off of where, you know, it diversifies the business.
09:07And, you know, it's it's important for them.
09:10I feel like people thought that it was a little more important.
09:13It would have been a much more solid base for them, base of units.
09:18And considering they're only selling 50000 vehicles a year, it's been a little slower uptake even in for Amazon.
09:29So, you know, we'll see that that that, you know, continue to ramp up.
09:34Great. Yeah.
09:35I want to go back to expectations again briefly.
09:40So you mentioned that Wall Street has been positive.
09:43They pre Riven is pre announced.
09:47But one thing I read, too, is that Riven has a history of disappointing the analysts.
09:53I think it was the last three quarters.
09:55They've actually underperformed estimates.
09:57So what do you think of that?
09:58And what what can we expect if they if they beat versus if they underperform?
10:03Does that mean that that the results will be a little bit tempered, right?
10:06If they come in a little bit below expectations?
10:08Does that mean that they'll have less of a bad reaction or or would that still be a pretty negative thing?
10:15I think, you know, as much as like it's important every quarter for a company to be able to do a good job,
10:23I think, you know, as much as like it's important every quarter for a company like this
10:28and they want to reduce their cash burn rate and the street watches it very closely.
10:35They you know, I just I think that they're just biding time.
10:41And I mean, you you cannot expect any sort of sustained rally, even if they beat up by a little bit here and there.
10:49You're not going to see any sustained rally.
10:50And it's already rallied about 10, 15 percent coming into these earnings tomorrow.
10:56I mean, I'm certainly not that optimistic just in the short run, like earnings reaction.
11:03And so very concerned about that just as for investors, because the continued cash burn is just, you know, weighing on the shares.
11:15And until we really get into the R2 production in 2026, you know, you're just not going to see any sort of significant improvement.
11:26Looking for a three billion dollar cash burn next year.
11:30So, you know, it's it's going to be a tough slog.
11:34You know, these earnings, you know, every quarter people want to see, you know, a little bit of improvement.
11:40But since they've had supply issues and they've even already blamed economic issues for some demand problems.
11:47So, you know, it's not likely to be, you know, an optimistic report.
11:54Sure. OK, why don't we why don't we wrap it up?
11:57Let's just you've given us a lot to think about.
12:01And I think you've already probably covered these, but I think it might be nice to have these as a summary.
12:06Or maybe there are some additional items you'll have.
12:08What would you say are the three most important metrics or things really for people to pay attention to with Rivian's report tomorrow?
12:17Hmm. Three most important.
12:20I would say, you know, people people want is the cash burn guidance for next year.
12:28The the the unit sold, I think the unit production for next year.
12:35I think I think the unit production guidance for next year, you know, in that 55 to 60 people, I think, want to see just demand continue to be, you know, strong enough to keep this to keep the factories, you know, going along.
12:54And, you know, so just to limit the the the the production snafus and the the, you know, the cash burn until they could really is really like a gap year until they get to to 2026, where they could start ramping up R2.
13:13So, you know, I'm not going to say it's not a critical report and guidance isn't going to be that, you know, isn't going to make much of a difference because 2025 is just overall going to be a tough year for the company until they get, you know, get to 26.
13:32So, you know, people also look for regulatory credits, you know, that that's really going to help their their gross gross margin profitability for the fourth quarter.
13:45And, you know, more about Volkswagen, how how that joint venture is progressing.
13:56So those are the incremental things I think just if there are any surprises in there, it's, it's going to be just commentary about their Georgia plant, how that's progressing.
14:07And there's still a lot of concern about the $6 billion in the DOE loan that that's going to entail. And we'll see if there's any commentary about the progress of that.
14:21Great.
14:22All right.
14:23Well, that is a ton for us to think about.
14:26And I think it seems like this is this company is at an inflection point.
14:33And it sounds like we're when we look at what other companies are doing, we might think more about, well, you know, how was the profitability and what were the margins like, but in this case, because this company doesn't have profits yet, at least not on a net basis.
14:47It really is more about those forward looking statements, right?
14:50It's more about the strategy and their ability to execute on their strategy.
14:54And so things like the MDNA and other other qualitative data will be more important than the quantitative data.
15:03Yeah.
15:04If there's this one thing, at least for shareholders, that the expectations are pretty low because the industry has been struggling.
15:11Tesla has struggled a lot with with with units.
15:15The units were down year over year and margins have been down.
15:19Ford had a really tough time in their EV unit.
15:22I think they're going to lose about five billion dollars.
15:24General Motors is still looking to lose two to four billion dollars in 2025 in their EV unit.
15:31So expectations have been brought down in the in for the sector, how the sector is doing, which which which helps.
15:39But since the stock is rallied a little bit here, it's it's it's definitely tricky going into these earnings, trying to to to to see the upside.
15:50Sure. Absolutely.
15:53All right. Well, thank you, Brad.
15:55That was really great.
15:56And we look forward to what the earnings are going to look like tomorrow.
16:01OK. And how are you enjoying the Rivian so far?
16:05You know, I took it to grab some lunch so far today.
16:08And it is it's a great ride.
16:11I'll have more to report on it, but I'm really enjoying this thing so far.
16:16And I look forward to really getting into it and trying to understand more about the pluses, minuses, what it does.
16:22We have a Tesla driven other Rivians before.
16:26No stranger to electric cars.
16:28And I like the flexibility as well as the luxury of this this thing.
16:34It's it seems really well built.
16:37It seems like it is incredibly well engineered.
16:40So I'm really excited to learn more about it and reporting to everybody.
16:45So. So with that, I'm going to end this video right now.
16:48And I want to thank everyone for joining us today.
16:51And we'll be sharing more after Rivian earnings.
16:56OK. See you.