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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (“Form 10-K”). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A. “Risk Factors” or in other parts of this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

Rivian exists to create products and services that help our planet transition to carbon neutral energy and transportation. Rivian designs, develops, and manufactures category-defining EVs and accessories and sells them directly to customers in the consumer and commercial markets. Rivian complements its vehicles with a full suite of proprietary, value-added services that address the entire lifecycle of the vehicle and deepen its customer relationships.

In the consumer market, we launched the R1 platform with our first generation of consumer vehicles: the R1T, a two-row, five-passenger pickup truck, and the R1S, a three-row, seven-passenger SUV. We made our first deliveries of the R1T and R1S in September and December 2021, respectively. As of December 31, 2021, we produced 1,009 and delivered 917 R1Ts, and produced and delivered two R1Ss. As of March 8, 2022, we had approximately 83,000 R1 preorders in the United States of America (“United States") and Canada from customers who each paid a cancellable and fully refundable deposit of $1,000.

In the commercial market, we launched the RCV platform. Our first vehicle on this platform is our EDV, designed and engineered by Rivian in collaboration with Amazon, our first commercial customer. Amazon has placed an initial order of 100,000 EDVs, subject to modification as described under Part III, Item 13. "Certain Relationships and Related Transactions, and Director Independence" in this Form 10-K.

Initial Public Offering

In November 2021, we completed our underwritten IPO of 175,950,000 shares of Class A common stock at a public offering price of $78.00 per share, which included the exercise in full by the underwriters of their option to purchase from us an additional 22,950,000 shares of Class A common stock. The net proceeds to us from the IPO were $13.5 billion.

Factors Affecting Our Performance

The growth and future success of our business depends on many factors. While these factors present significant opportunities for our business, they also pose risks and challenges, including those discussed below and in Part I, Item 1A “Risk Factors,” that we must successfully address to achieve growth, improve our results of operations, and generate profits.

•Ability to Develop and Launch New Offerings. Based on current preorders, our initial launch products - the R1T, R1S, and EDV - appear to resonate with customers and, we believe, have established the Rivian brand in the most attractive consumer and commercial vehicle market segments. However, our ability to grow revenue and expand margins will also depend on our ability to develop and launch new vehicle platforms and programs. Our future financial performance will also depend on our ability to offer services that deliver an intuitive, seamless, and compelling customer experience.

•Ability to Attract New Customers. Our growth will depend in large part on our ability to attract new consumer and commercial customers. We have invested heavily in developing our ecosystem and plan to continue to do so. We are in the very early stages of growth in our existing markets, and we expect to substantially raise brand awareness by connecting directly with our community through engaging content, rich digital experiences, and immersive events. We anticipate that these activities will lead to additional preorders and deliveries, and, as a result, increase our base of Rivian customers. An inability to attract new customers would substantially impact our ability to grow revenue or improve our financial results.

•Ability to Scale our Ecosystem and Brand Experience. Our go-to-market strategy requires us to scale our ecosystem quickly and effectively, including our technology platform and product development and operational infrastructure, to deliver a seamless customer experience. Our future success will also depend on our ability to further develop and

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leverage our proprietary technology platform. Our ability to enhance our product design, engineering, and manufacturing capabilities and expand our delivery and service operations, Rivian Adventure Network (“RAN”), charging network, and customer service will be critical for supporting growth. We believe our long-term ability to achieve our financial targets will depend on our ability to cost effectively scale these elements, while also delivering a unified customer and brand experience consistent with our adventurous brand commitment.

•Ability to Convert our Customers to Subscribers of our Services. Services are a key part of our growth strategy, driven by initial attach rate, member retention, and the subsequent adoption of future service offerings. We intend to offer a variety of services, including financing and insurance, vehicle maintenance and repair, membership, software, charging solutions, and FleetOS solutions that we believe will grow our revenue outside of vehicle sales. As we increase our base of Rivian customers and expand our services portfolio, we expect our customers to expand their usage of our service offerings over the full lifecycle of their vehicle ownership. We believe the services portion of our business will have the benefit of creating a higher-margin, recurring revenue stream for each vehicle, therefore improving our margin profile. Our ability to grow revenue and our long-term financial performance will depend in part on our ability to drive adoption of these offerings.

•Ability to Invest in our Production and Capabilities. We believe that customer acquisition and retention is contingent on our ability to produce innovative offerings, including vehicles that deliver the broadest combination of performance, utility, and capability, as well as services that enhance the ownership journey through new features, functions, and a best-in-class customer experience. To this end, we intend to continue to make investments to drive growth as we scale vehicle production and deliveries, expand our offerings, and strengthen our core capabilities. As we invest in our business for long-term growth, leading to increases in operating expenses as well as capital expenditures, we expect to experience additional losses, which could delay our ability to achieve profitability and positive operating cash flow. Furthermore, we anticipate that these future investments will require significant external debt and/or equity financing.

•Ability to Develop and Manage a Resilient Supply Chain. Our ability to manufacture vehicles and develop future solutions is dependent on the continued supply of input materials, including metals, battery cells, and semiconductors. Any inability or unwillingness of our suppliers to deliver necessary product components, including semiconductors, at timing, prices, quality, and volumes that are acceptable to us could have a material impact on our business, prospects, financial condition, results of operations, and cash flows. Fluctuations in the cost of materials, supply interruptions, or material shortages could materially impact our business. We have experienced and may continue to experience cost fluctuations or disruptions in supply of input materials that could impact our financial performance. For example, the recent global semiconductor supply shortage is having wide-ranging effects across the automotive industry, and has impacted our operations and financial performance, along with those of many automotive suppliers and manufacturers that incorporate semiconductors into their products. In addition, there have been very sizable increases in recent months in the cost of key metals, including lithium, nickel, aluminum, and cobalt with volatility in pricing expected to persist for the foreseeable future. Furthermore, during the year ended December 31, 2021, we experienced increased logistics cost due to expedited freight associated with supply chain challenges. Given the current supply chain environment, we believe our production ramp and rate in our Normal Factory will be limited by the supply chain in the near-future. We continue to work diligently and collaboratively with suppliers to identify and head off problems or constraints as quickly as possible.

•Ability to Grow in New Geographies. We plan to invest in international operations and grow our business outside of our existing operations in the United States, Canada, the United Kingdom (“U.K.”), and the European Union (“EU”). We believe we are well-positioned for international expansion in light of a healthy global demand for EVs and for the vehicle segments in which we currently, and expect to, operate. Other factors that we believe will aid our successful international growth include: the highly flexible, modular nature of our platforms, which we anticipate will provide us the ability to introduce new vehicle programs and configurations; our digital-first approach, which we anticipate will allow us to expand quickly and without a significant physical retail footprint; and our product development expertise, which we anticipate will enable us to offer significant customization for diverse international markets and demographics.

Our international expansion has significant associated investment requirements, such as capital spending related to infrastructure, including additional manufacturing capacity, delivery, and service operations, charging networks, and personnel. International expansion is also subject to a variety of risks, including local competition, multilingual

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

•Ability to Maintain Our Culture, Attract and Retain Talent, and Scale Our Team. We believe our culture has been a key contributor to our success to date and our mission promotes a sense of greater purpose and fulfillment in our employees. We have invested in building a strong culture and believe it is one of our most important and sustainable sources of competitive advantage. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively pursue our objectives. If we are unable to retain or hire key personnel, our business and competitive position may be harmed resulting in an adverse impact to our business, prospects, financial condition, results of operations, and cash flows.

•Seasonality. Historically, the automotive industry has experienced higher revenue in the spring and summer months. Additionally, we expect volumes of commercial vehicle sales to be less in the winter months, as customers shift their focus to making last mile deliveries during holidays, rather than incorporating more vehicles into their fleet. We do not expect such seasonality in demand to significantly impact our operations in the near-term as we scale our business due to our backlog of preorders; however, we may experience seasonal variations in our business in the long-term.

•Impact of the COVID-19 pandemic. Beginning in 2020, public health and governmental authorities have taken extraordinary steps to contain and combat the outbreak and spread of COVID-19, including associated variants, throughout the world. Consistent with these actions, in combination with recommendations by public health officials, since late March 2020 a significant percentage of Rivian personnel have been working remotely; however, in recent months a number of employees have been able to work on-site at our facilities, including our Normal Factory, subject to operating restrictions intended to protect public health and the health and safety of our employees.

Additionally, COVID-19, including associated variants, as well as the more recent conflict in the Ukraine have caused disruptions to and delays in our operations, including shortages and delays in the supply of certain parts, as well as higher prices for certain parts, including semiconductors, materials, and equipment necessary to produce our vehicles. In response, we have adapted various internal designs and processes to remedy or mitigate impacts of such disruptions and delays on our production timeline, which has resulted in higher costs.

The full extent of the future impact from the pandemic on our operational and financial performance is currently uncertain and will depend on future developments outside of our control, including the duration, extent and intensity of the pandemic, the effectiveness and availability of vaccines and boosters, and actions taken by public health organizations and governmental authorities. We will continue to monitor these conditions and remain flexible, evolving our business and processes as appropriate.

•Inflation. The United States economy has experienced various disruptions, including supply chain shortages which have contributed to increased inflation. The cost of input materials (e.g., sheet metal), components (e.g., semiconductors), and systems (e.g., seats) required to produce our vehicles has risen considerably. We expect higher than recent years’ levels of inflation to persist for the foreseeable future. If we are unable to fully offset higher costs through price increases or other measures, especially in the near-term as we continue to work through the backlog of preorders, we could experience an adverse impact to our business, prospects, financial condition, results of operations, and cash flows.

Components of Operating Results

We expect to incur significant operating costs and expenses that will impact our future profitability, including research and development (“R&D”) expenses as we develop and introduce new vehicles and services and improve our existing vehicles and services, capital expenditures in the expansion of our manufacturing footprint and operations, additional operating costs and expenses for production ramp-up, raw material procurement costs, general and administrative expenses as we scale our operations, and selling and distribution expenses as we market our vehicles and services. In addition, we may incur significant costs in connection with our services once we deliver our vehicles, including servicing and warranty costs. Our ability to become profitable in the future will depend on our ability not only to successfully market and sell our vehicles and services at prices we establish, but also to appropriately control costs and realize economies of scale.

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Revenues and Cost of revenues

We are a development stage company and have only recently started to generate notable revenues. Vehicle production and deliveries began in September 2021. As we expand production and commercialization of vehicles, we expect the majority of our revenue will be initially derived from sales of consumer and commercial vehicles, accessories, and regulatory credits. We expect the majority of our costs of revenues will initially be driven by labor, overhead, logistics, and direct material expenses related to the production of consumer and commercial vehicles and accessories, as well as costs incurred in excess of the net realizable value (“NRV”) of certain inventory. Additionally, we started recognizing recurring non-cash stock compensation charges in the quarter ended December 31, 2021 in connection with the performance-based vesting condition of RSUs and stock options being met upon the IPO.

Operating expenses

Research and development

Our R&D cost consists primarily of expenses incurred for the development of our vehicles and related technologies. These expenses include:

• personnel expenses for teams in engineering and research;

• prototyping expenses;

• consulting and contractor expenses;

• amortized equipment expenses; and

• allocation of indirect expenses.

Additionally, we started recognizing recurring non-cash stock compensation charges in the quarter ended December 31, 2021 in connection with the performance-based vesting condition of RSUs and stock options being met upon the IPO. We expense R&D costs as incurred. We expect our R&D expenses to increase in the foreseeable future as we continue to develop vehicle platforms, next generation EVs and components, and other technologies.

Selling, general, and administrative

Selling, general, and administrative (“SG&A”) expenses consist primarily of personnel costs for employees in our sales, service, facilities, corporate, executive, finance, and other administrative functions, as well as outside professional services, including legal, accounting, and audit services. Personnel costs consist of salaries and wages, benefits, and employment taxes. Additionally, we started recognizing recurring non-cash stock compensation charges in the quarter ended December 31, 2021 in connection with the performance-based vesting condition of RSUs and stock options being met upon the IPO. SG&A expenses also include allocated facilities expenses such as rent and depreciation, and other general corporate expenses such as travel and recruiting expenses.

We expect our SG&A expenses to increase for the foreseeable future as we continue to scale as a company, build out our service and sales operations, and produce our planned future vehicle platforms and programs. We also expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with rules and regulations of the SEC and of applicable national securities exchanges, as well as legal, audit, investor relations, insurance, and other administrative and professional services expenses.

Other expenses

Other expenses consist of charitable contributions to Forever by Rivian.

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Other (expense) income, net

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

Provision for income taxes

Our provision for income taxes consists primarily of income taxes related to foreign jurisdictions in which we do business. We maintain a full valuation allowance on our United States federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized.

Results of Operations

The following tables set forth our consolidated results of operations for the periods presented (in millions). The year-to-year comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

Years Ended December 31,

Revenues $ — $ — $ 55

Cost of revenues — — 520

Gross profit — — (465)

Operating expenses

Other expenses — — 663

Interest expense (34) (8) (29)

Loss on convertible notes, net — — (441)

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

Provision for income taxes — — —

Comparison of the years ended December 31, 2019, 2020 and 2021

Revenues

Revenues $ — $ — $ 55 $ — nm $ 55 nm

*nm-not meaningful

Revenues increased by approximately $55 million for the year ended December 31, 2021, compared to the year ended December 31, 2020. This increase was achieved primarily through our first customer deliveries of 917 R1Ts.

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Cost of revenues and Gross profit

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

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

*nm-not meaningful

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

Negative gross profit increased by $465 million for the year ended December 31, 2021, compared to the year ended December 31, 2020. As we produce vehicles at low volumes on production lines designed for higher volume, we have and will continue to experience negative gross profit related to significant labor and overhead costs. The pressure on gross profit from limited volumes will continue in the near term, but we expect it will improve on a per-vehicle basis as production volumes ramp up faster than future labor and overhead cost increases. Additionally, we recorded a lower of cost or net realizable value (“LCNRV”) adjustment of $95 million for the year ended December 31, 2021 to write-down the value of certain inventory to the amount we anticipate receiving upon vehicle sale (after considering future costs necessary to ready the inventory for sale). We expect LCNRV charges to negatively impact upcoming periods in the near term. We also experienced increased logistics costs due to expedited freight associated with supply chain challenges, which we expect to continue in the near future.

Research and development

2020 compared to 2019

R&D expenses increased by $465 million, or 154%, for the year ended December 31, 2020, compared to the year ended December 31, 2019. This increase was primarily due to a $212 million increase in engineering, design, and development costs and a $182 million increase in payroll and subcontracting expenses.

The primary drivers for these higher expenses were our increased efforts related to our R1 and EDV programs and other advanced product development activities. During this period, we started our pre-production vehicle builds, which required significant investment to manufacture and test vehicles, and had higher personnel costs to support these activities.

2021 compared to 2020

R&D expenses increased by $1,084 million, or 142%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. This increase was primarily due to a $344 million increase in the cost of prototype materials and supplier R&D, a $293 million increase in payroll and related expenses, and $277 million of stock-based compensation expense.

The primary drivers for these higher expenses were our increased efforts related to our R1 and EDV programs, important investments related to other advanced product development activities, and higher headcount and personnel costs. We plan to continue to invest in future vehicle platforms and vertical integration, as well as current technologies, including in-vehicle and Rivian Cloud.

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Selling, general, and administrative

2020 compared to 2019

SG&A expenses increased by $147 million, or 136%, for the year ended December 31, 2020, compared to the year ended December 31, 2019. This increase was primarily due to an $89 million increase in payroll and related expenses and a $25 million increase in facilities and other occupancy costs, driven by higher headcount and office location expansions.

2021 compared to 2020

SG&A expenses increased by $987 million, or 387%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. This increase was primarily due to a $258 million increase in payroll and related expenses, $277 million of stock-based compensation expense (which was not recognized in prior periods, given our IPO occurred during the year ended December 31, 2021), a $103 million increase in facilities and other occupancy costs, a $66 million increase in subcontractor and other professional fees, and an increase in other miscellaneous operating expenses, including fees for contract cancellations, certain logistics costs, promotional costs, expenses for information technology, and travel, meal, and entertainment costs.

The primary drivers for these higher expenses were our efforts to further scale our sales and service operations, office locations, customer-facing facilities, and other corporate functions to support our future business growth, including higher headcount and increased personnel costs. We also plan to make corresponding investments in our facilities, service network, commercial operations, and technology for our future operations.

Other expenses

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

*nm-not meaningful

2021 compared to 2020

Other expenses increased by $663 million for the year ended December 31, 2021, compared to the year ended December 31, 2020, as a result of the Company’s donation of approximately 8 million shares of Class A common stock and $20 million in cash to Forever by Rivian, Inc., a 501(c)(4) social welfare organization (“Forever by Rivian”). With this sizable initial funding, we have no short-term plans to provide additional direct funding to Forever by Rivian in the future.

Other (expense) income, net

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

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

*nm-not meaningful

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2020 compared to 2019

Interest income decreased by $8 million, or 44%, for the year ended December 31, 2020, compared to the year ended December 31, 2019. This decrease was primarily due to lower market rates, partially offset by a higher average balance of cash and cash equivalents.

Interest expense decreased by $26 million, or 76%, for the year ended December 31, 2020, compared to the year ended December 31, 2019. This decrease was primarily due to the amortization of debt discount upon the conversion of convertible debt during 2019, as well as lower market interest rates in 2020 associated with the Term Facility (as defined in Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K).

2021 compared to 2020

Interest income decreased by $7 million, or 70%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. This decrease was primarily due to lower market rates, partially offset by a higher average balance of cash and cash equivalents.

Interest expense increased by $21 million, or 263% for the year ended December 31, 2021, compared to year ended December 31, 2020. This increase was primarily due to higher average debt balances and interest rates with the issuance of the 2026 Notes. See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information on the 2026 Notes. We expect interest expense to increase in the near term, according to changes in the interest rate environment.

Loss on convertible notes, net for the year ended December 31, 2021 resulted from the conversion of the 2021 Convertible Notes. See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information on the 2021 Convertible Notes.

Provision for income taxes

As of December 31, 2019, 2020 and 2021, the majority of our deferred tax assets were comprised of net operating losses generated primarily in the United States and tax credit carryforwards, and for all periods, these assets were fully offset by a valuation allowance.

Liquidity and Capital Resources

Our operations have been financed primarily through net proceeds from the sale of securities, including in our IPO, and from borrowings. As of December 31, 2020 and 2021, we had cash and cash equivalents of $3 billion and $18 billion, respectively, and availability under the ABL Facility was $306 million at December 31, 2021.

In January 2021, we issued 71,913,170 shares of Series F contingently redeemable convertible preferred stock to a group of investors at a price of $36.85 per share for total gross proceeds of $2.7 billion. Upon the closing of our IPO, all outstanding shares of contingently redeemable convertible preferred stock converted into an aggregate 575,864,510 shares of Class A common stock.

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

In May 2021,we entered into the ABL Facility, which will mature on May 20, 2025. As of December 31, 2021, we had $306 million of unused committed amounts under the ABL Facility. The ABL Facility contains certain affirmative and negative covenants and conditions to borrowing or taking other actions that restrict certain of our subsidiaries’ ability to, among other things, incur debt, grant liens, make investments, enter into certain transactions with affiliates, pay dividends, and prepay junior or unsecured indebtedness, subject to certain exceptions. As of December 31, 2021, we were in compliance with the covenants and conditions of the ABL Facility. See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information regarding the ABL Facility.

In July 2021, we issued the unsecured senior convertible promissory notes due July 2026 (“2021 Convertible Notes”) at $2.5 billion aggregate principal amount. The 2021 Convertible Notes would have matured on July 23, 2026 and accrued interest quarterly at a rate of (i) zero percent (0%) from the date of issuance to, and including, June 30, 2022 and (ii) five percent (5%)

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after June 30, 2022. Upon the closing of our IPO, the 2021 Convertible Notes automatically converted into shares of our Class A common stock at a conversion price equal to $66.30 per share.

In October 2021,we issued $1.25 billion aggregate principal amount of 2026 Notes. The 2026 Notes have a maturity of five years from the date of their original issuance. The 2026 Notes require certain of our subsidiaries to comply with a number of customary covenants (including restrictions on incurrence of indebtedness, liens, the making of restricted payments, and dispositions), in each case substantially similar to the corresponding covenants under the ABL Facility as described above. In addition, the 2026 Notes contain a minimum liquidity covenant (but no other financial covenants) requiring us to maintain no less than $1.0 billion of liquidity, which will fall away upon meeting a fixed charge coverage ratio of greater than 1.0 for two consecutive quarters. See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Form 10-K for more information regarding the 2026 Notes.

We have generated significant losses from operations, as reflected in our accumulated deficit of $1.7 billion and $6.4 billion as of December 31, 2020 and 2021, respectively. Additionally, we have generated significant negative cash flows from operations and investing activities as we continue to support the growth of our business. We anticipate continuing to make significant investments in capital over the next several years to focus on ramping up production as we strategically expand infrastructure, including additional manufacturing capacity at the Normal Factory and initiating work on our second domestic manufacturing facility in Georgia. We also anticipate continuing to make significant investments in future growth objectives, including vehicle and other technology and software, tooling for current vehicle platforms, future vehicle manufacturing lines, battery technology and supply, our service network, charging infrastructure, and digital offerings.

As of December 31, 2020 and 2021, our non-cancellable commitments as disclosed in Note 5 "Leases", Note 6 “Debt”, and Note 12 "Commitments and Contingencies" to our consolidated financial statements included elsewhere in this Form 10-K, do not include any commitments related to these ongoing investments as we do not have any related material commitments that we cannot cancel without a significant penalty. In addition to our capital expenditures, we expect our operating expenses to increase as we ramp vehicle production and continue to invest in R&D activities and roll out our commercial infrastructure in support of our growing customer base.

We believe our existing balance of cash and cash equivalents, including the net proceeds from our IPO and in addition to amounts available for borrowing under the ABL Facility, will be sufficient to meet our operating expenses, working capital, and capital expenditure needs for at least the next 12 months.

Our future operating losses and capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on R&D efforts and other growth initiatives, the expansion of manufacturing activities, the timing of new products and services, market acceptance of our offerings, and overall economic conditions. Furthermore, we anticipate that future investments will require significant debt and/or equity financing. The sale of additional equity would result in dilution to our stockholders. The incurrence of additional debt would result in debt service obligations, and the instruments governing such debt could provide for operational and financial covenants that restrict our operations. There can be no assurances that we will be able to raise additional capital on favorable terms or at all. The inability to raise capital would adversely affect our ability to achieve our business objectives.

Cash Flows

Years Ended December 31,

Net cash used in operating activities (353) (848) (2,622)

Net cash used in investing activities (199) (914) (1,794)

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Operating Activities

Net cash used in operating activities increased by $0.5 billion during the year ended December 31, 2020 compared to the year ended December 31, 2019. This increase was primarily driven by higher cash outlays to support overall growth of the business, especially in R&D related to the progress of our vehicle programs (such as prototype expenses) and various SG&A activities related to scaling our operations (such as payroll).

Net cash used in operating activities increased by $1.8 billion during the year ended December 31, 2021 compared to the year ended December 31, 2020. This increase was primarily driven by higher cash outlays to support overall growth of the business, especially in R&D related to the progress of our vehicle programs (such as prototype expenses), various SG&A activities related to scaling our corporate and commercial operations (such as payroll), and the manufacturing and sale of our first products from our Normal Factory. The overall growth of the business also resulted in increases in net operating assets (especially inventory for the start of production) and offsetting increases in operating liabilities (including payables and accrued expenses).

Investing Activities

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

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

Financing Activities

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

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

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

Critical Accounting Policies and Estimates

The preparation of our financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and the discussion and analysis of our financial condition and operating results require us to make judgments, assumptions, and estimates that affect the amounts reported. We base these estimates on historical experience and on various other assumptions we believe are appropriate and reasonable under the circumstances and apply judgement to possible outcomes as the basis for amounts reported. Because of the inherent uncertainties involved in making such estimates, actual results may differ, and such differences may be material.

We consider the following policies and estimates critical because they are important to the portrayal of our financial condition and operating results, and they require us to make judgments and estimates about inherently uncertain matters. For further information on all of our significant accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Form 10-K.

Inventory Valuation

We review our inventory to ensure that its carrying value does not exceed its NRV, with NRV based on the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal and transportation. When our expectations indicate that the carrying value of inventory may exceed its NRV, we perform an exercise to calculate the approximate amount by which carrying value is greater than NRV and record additional cost of revenue for the difference.

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Once a write-off occurs, a new, lower cost basis is established. We also regularly monitor inventory quantities on hand and on order and record write-downs for excess and obsolete inventories based on our estimates of the future demand for our products and market and economic conditions and for damaged or otherwise impaired goods.

Should our estimates used in these calculations change in the future, such as estimated selling prices or production costs, additional write-downs may occur. A hypothetical 10% change in estimated selling prices or production costs would have resulted in approximately a $20 million change in the inventory write-down for the year ended December 31, 2021.

Stock-Based Compensation

We measure our stock-based awards at their grant date at the fair value of the award and expense that value over the vesting period, net of actual forfeitures, when we consider any performance targets probable of being achieved. Generally, the Company’s outstanding stock-based awards vest in quarterly or annual installments based on a requisite service period of one to four years of continuous service and may contain performance or market conditions related to production, stock price, and other targets. We have two types of stock-based awards granted and outstanding under the 2015 Stock Plan and 2021 Stock Plan: stock options and restricted stock units (“RSUs”).

We calculate the fair value of most stock options using a Black-Scholes option pricing model. The Black-Scholes option pricing model requires certain subjective inputs and assumptions, including the expected stock price volatility, term of the award, risk-free interest rates, and dividend yield of our Class A common stock. Expected volatility is based on historical volatility rates of peer companies. The dividend yield is estimated based on the rate at which the Company expects to provide dividends. The risk-free rate is based on the United States Treasury yield curve for zero-coupon Treasury notes with maturities approximating the respective expected term of the stock option. The expected term represents the average time the Company’s stock options are expected to be outstanding and requires us to develop an expectation of when the award will vest.

Additionally, we have granted stock option awards with service-based vesting conditions and market-based conditions that are incorporated into the estimation of the grant-date fair value of the awards. We determined the fair value of these awards by utilizing a Monte Carlo simulation model that incorporates the possibility that the market-based conditions may not be satisfied. The Monte Carlo simulation also requires certain subjective inputs and assumptions, including expected stock price volatility, term, and risk-free interest rates, which are estimated as described above, except for the expected term. We estimate the expected term of the award based on various stock price and exercise scenarios.

The fair value of our common stock is also an input to the estimated fair value of our stock options and is equivalent to the fair value of our RSUs. Prior to our IPO, the method for estimating the fair value of our common stock required complex and subjective judgments regarding our projected financial results. We utilized an independent appraisal of the fair market value of our common stock, which relied on a market approach with an adjustment for lack of marketability given that the shares underlying the awards were not publicly traded. The market approach incorporated a backsolve method to the most recent equity funding round and a probability-weighted expected return method (“PWERM”) that estimated equity value in an IPO scenario. We arrived at the estimated fair value of our common stock by weighting the backsolve and PWERM valuation methods based on our anticipated probability of an IPO as of each valuation date.

In light of initial information received in estimating our IPO price range, we changed the method for estimating the fair value of our common stock. From July 20, 2021 to our IPO, the method used was a straight-line interpolation from the July 20, 2021 fair value estimated by the independent appraisal to the midpoint of the initial IPO price range.

As we continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis, those assumptions may change. As we continue to accumulate additional data related to our common stock, we may revise our methods for estimating volatility, which could materially impact the valuation of our stock-based awards and the stock-based compensation expense that we recognize in future periods. A hypothetical 10% change in our estimated stock price, volatility, and expected term during the year ended December 31, 2021 would have resulted in approximately a 16%, 7%, and 4% change, respectively, in the weighted-average grant date fair value of stock options valued using the Black-Scholes option pricing model.

RIVIAN AUTOMOTIVE, INC.

Recent Accounting Pronouncements

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

Emerging Growth Company Status

The Jumpstart Our Business Startups Act (the “JOBS Act”) allows emerging growth companies to use the extended transition period for complying with new or revised accounting standards. As a result of our election to use the extended transition period, our consolidated financial statements and related notes for the years ended December 31, 2019 and 2020 included in this Form 10-K may not be comparable to companies that comply with public company effective dates. We ceased to be an “emerging growth company,” as defined in the JOBS Act, as of October 8, 2021 due to our issuance, in a three-year period, of more than $1.0 billion in non-convertible debt securities. As a result, we have not applied the extended transition period for new or revised accounting standards beginning with our consolidated financial statements and related notes for the year ended December 31, 2021.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Supply Risk

We are subject to risks related to our dependence on suppliers, the majority of which are single source providers of parts or components for our products. Any inability or unwillingness of our suppliers to deliver necessary product components, including semiconductors, at timing, prices, quality, and volumes that are acceptable to us could have a material impact on our business, growth prospects, and financial and operating results. Fluctuations in the cost of materials, supply interruptions, or material shortages could materially impact our business.

We have experienced and may continue to experience cost fluctuations or disruptions in supply of input materials that could impact our financial performance. For example, the recent global semiconductor supply shortage is having wide-ranging effects across the automotive industry, and has impacted our operations and financial performance, along with those of many automotive suppliers and manufacturers that incorporate semiconductors into their products. In addition, there have been very sizable increases in recent months in the cost of key metals, including lithium, nickel, aluminum, and cobalt with volatility in pricing expected to persist for the foreseeable future. Furthermore, during the year ended December 31, 2021, we experienced increased logistics cost due to expedited freight associated with supply chain challenges. Given the current supply chain environment, we believe our production ramp and rate in our Normal Factory will be limited by the supply chain in the near-future. We continue to work diligently and collaboratively with suppliers to identify and head off problems or constraints as quickly as possible.

Inflation Risk

The United States economy has experienced various disruptions, including supply chain shortages which have contributed to increased inflation. The cost of input materials (e.g., sheet metal), components (e.g., semiconductors), and systems (e.g., seats) required to produce our vehicles has risen considerably. We expect higher than recent years’ levels of inflation to persist for the foreseeable future. If we are unable to fully offset higher costs through price increases or other measures, we could experience an adverse impact to our financial condition, results of operations, and cash flows.

Interest Rate Risk

Our cash, cash equivalents, and marketable securities primarily consist of cash on hand and highly liquid investments in money market instruments and United States government securities. We do not enter into investments for trading or speculative purposes. However, our investments are exposed to market risk due to fluctuations in interest rates. This may affect our interest income and the fair market value of our investments. However, due to the short-term nature of our investment portfolio, we do not believe a hypothetical 100 basis point increase or decrease in interest rates would have a material effect on the fair market value of our portfolio.

We are exposed to interest rate risk on our borrowings that bear interest at floating rates. A rising interest rate environment would increase the amount of interest paid on these borrowings. A hypothetical 100 basis point increase in interest rates on

our floating rate debt would have increased our interest expense for the year ended December 31, 2021 by an amount that is not material.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Page

Consolidated Financial Statements

Consolidated Balance Sheets 76

Consolidated Statements of Operations 77

Consolidated Statements of Comprehensive Loss 77

Consolidated Statements of Cash Flows 79

Notes to Consolidated Financial Statements 80

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Rivian Automotive, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Rivian Automotive, Inc. and subsidiaries (the Company) as of December 31, 2021 and December 31, 2020, the related consolidated statements of operations, comprehensive loss, changes in contingently redeemable convertible preferred stock and stockholders’ (deficit) equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and December 31, 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2020 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair value of common stock

As discussed in Note 9 to the consolidated financial statements, the Company has granted restricted stock units (RSUs). The grant-date fair values of RSUs, as well as the modification-date fair value of RSUs that were modified and remeasured in June 2021, were estimated based on the fair value of the Company’s common stock on the date of grant or modification. Through July 2021, the fair value of the Company’s common stock underlying the RSUs was based on an independent appraisal. The appraisal incorporated weighting of a backsolve method and a probability-weighted expected return method based on the anticipated probability of an initial public offering (IPO) as of each valuation date. The Company recorded stock-based compensation expense of $570 million for the year ended December 31, 2021, which included expense associated with the RSUs remeasured in June 2021 and certain other RSUs granted through July 2021.

We identified the evaluation of the estimated fair value of common stock used to remeasure the modified RSUs in June 2021 and measure certain other RSUs granted through July 2021 as a critical audit matter. Complex and subjective

auditor judgment was required to evaluate (1) the selection and weighting of valuation methods used to estimate the fair value of common stock, and (2) the estimated equity value in a potential IPO.

The following are the primary procedures we performed to address this critical audit matter. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the selection of the valuation methods used by the Company by considering the Company’s equity structure, proximity to a recent financing round, and possible exit scenarios. We evaluated the weighting of valuation methods based on the anticipated probability of an IPO as of the valuation date by:

•observing the Company’s actions taken to prepare for an IPO

•inspecting the Company’s written plans and other relevant documentation, such as minutes and presentations

•assessing the Company’s ability to carry out particular courses of action, including the timeline to a liquidity event (including an IPO) and whether the Company had the financial resources, personnel, and other means to achieve a liquidity event.

We evaluated the Company’s estimate of equity value in an IPO scenario, by assessing:

•the effect of the Company’s operations and organizational changes on the value of its common stock since its latest funding round, including changes in peer company market capitalizations over a similar time frame

•the Company’s valuation using forecasted revenue multiples by comparing them to those of relevant peer companies

•information provided by underwriters as part of initial discussions in anticipation of an IPO

•the sensitivity of changes in estimated equity value in an IPO scenario on the fair value of common stock used to remeasure the modified RSUs in June 2021 and measure certain other RSUs granted through July 2021.

/s/ KPMG LLP

We have served as the Company’s auditor since 2021.

Detroit, Michigan

March 31, 2022

RIVIAN AUTOMOTIVE, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

ASSETS

Current assets:

Cash and cash equivalents (Note 2) $ 2,979 $ 18,133

Accounts receivable, net (Note 2) 6 26

Inventory (Note 2) — 274

Other current assets 31 126

Property, plant, and equipment, net (Note 4) 1,445 3,183

Operating lease assets, net (Note 5) 80 228

Other non-current assets 61 324

Current liabilities:

Accounts payable $ 90 $ 483

Accrued liabilities (Note 7) 443 667

Customer deposits 28 74

Current portion of long-term debt (Note 6) 28 —

Current portion of lease liabilities and other current liabilities 22 89

Non-current portion of long-term debt (Note 6) 47 1,226

Non-current lease liabilities (Note 5) 83 218

Other non-current liabilities 1 23

Commitments and contingencies (Note 12)

Stockholders' (deficit) equity:

Total stockholders' (deficit) equity (1,384) 19,514

See accompanying notes to these consolidated financial statements.

RIVIAN AUTOMOTIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

Years ended December 31,

Revenues (Note 2) $ — $ — $ 55

Cost of revenues (Note 2) — — 520

Gross profit — — (465)

Operating expenses

Selling, general, and administrative (Note 2) 108 255 1,242

Other expenses (Note 2) — — 663

Interest expense (Note 6) (34) (8) (29)

Loss on convertible notes, net (Note 6) — — (441)

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

Provision for income taxes — — —

Weighted-average common shares outstanding, basic and diluted 98 101 204

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

Years ended December 31,

Other comprehensive (loss) income — — —

See accompanying notes to these consolidated financial statements.

RIVIAN AUTOMOTIVE, INC.

(in millions)

Contingently Stockholders' (Deficit) Equity

Redeemable

Convertible Additional

Preferred Stock Common Stock Paid-In Accumulated

Shares Amount Shares Amount Capital Deficit Total

Capital stock issuance 343 2,750 — — — — —

Warrants issuance — — — — 13 — 13

Conversion of convertible notes — — 25 — 126 — 126

Warrants issuance — — — — 3 — 3

Share repurchase and retirement — (6) — — — — —

Conversion of convertible notes — — 38 — 2,941 — 2,941

Stock-based compensation — — — — 570 — 570

See accompanying notes to these consolidated financial statements.

RIVIAN AUTOMOTIVE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Year Ended December 31,

Cash flows from operating activities:

Depreciation and amortization 7 29 197

Stock-based compensation — — 570

Other expenses (Note 2) — — 643

Loss on convertible notes, net — — 441

Write-down of inventory — — 95

Other non-cash activities 37 41 36

Changes in operating assets and liabilities:

Accounts receivable (16) 11 (20)

Inventory — — (369)

Other current assets (8) (34) (81)

Other non-current assets (5) (8) (8)

Accounts payable and accrued liabilities 43 121 461

Other current liabilities 15 1 37

Other non-current liabilities (14) (1) 18

Net cash used in operating activities (353) (848) (2,622)

Cash flows from investing activities:

Net cash used in investing activities (199) (914) (1,794)

Cash flows from financing activities:

Proceeds from issuance of convertible notes — — 2,500

Principal payments and other financing activities — (6) (86)

Cash, cash equivalents, and restricted cash—Beginning of period 14 2,273 3,011

Supplemental disclosure of cash flow information:

Cash paid for interest $ 5 $ 4 $ 2

Supplemental disclosure of non-cash investing and financing activities:

Capital expenditures included in liabilities $ 98 $ 325 $ 479

Conversion of convertible notes $ 100 $ — $ 2,941

Conversion of convertible preferred stock $ — $ — $ 7,894

Warrants issuance $ 13 $ 3 $ —

See accompanying notes to these consolidated financial statements.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. PRESENTATION AND NATURE OF OPERATIONS

Description and Organization

Rivian Automotive, Inc. (together with its consolidated subsidiaries, “Rivian” or the “Company”), was incorporated as a Delaware corporation on March 26, 2015. Rivian was formed for the purpose of designing, developing, manufacturing, and selling category-defining electric vehicles (”EVs”), accessories, and related services directly to customers in the consumer and commercial markets. The nature of the Company’s operations during the years ended December 31, 2019, 2020 and 2021 was primarily research and development activities related to vehicle development and its related technologies, and pre-production activities related to manufacturing and sales. However, the Company began making deliveries of the R1T, R1S, and EDVin the United States in 2021.

Segment Information

The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker (“CODM”). As the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance, the Company has determined that it operates in one operating segment and one reportable segment.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and, in the opinion of management, reflect all normal recurring adjustments necessary to fairly present the financial position, results of operations, cash flows, and change in equity for the periods presented. Results for the periods presented are not necessarily indicative of the results that may be expected for any subsequent period.

Basis of Consolidation

The Company consolidates entities in which it has a controlling financial interest. Intercompany balances and transactions have been eliminated in consolidation.

Initial Public Offering

In November 2021, the Company completed its underwritten IPO of approximately 176 million shares of Class A common stock at a public offering price of $78.00 per share, which included the exercise in full by the underwriters of their option to purchase approximately 23 million additional shares of Class A common stock. The net proceeds to the Company from the IPO were $13.5 billion. See Note 11“Contingently Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity” for more information regarding the IPO.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For each accounting topic that is addressed in a separate footnote, the description of the accounting policy can be found in the related footnote. Other significant accounting policies are described below.

Use of Estimates

Accounting estimates are an integral part of the consolidated financial statements. These estimates require the use of judgments and assumptions that may affect the reported amounts of assets, liabilities, and expenses in the periods presented. Estimates are used for, but not limited to, inventory valuation, property, plant, and equipment, leases, income taxes, stock-based compensation, and commitments and contingencies. The Company believes that the accounting estimates and related assumptions employed by the Company are appropriate and the resulting balances are reasonable under the circumstances. However, due to the inherent uncertainties involved in making estimates, the actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks, payments due from financial institutions for the settlement of credit card and debit card transactions, and money market funds with maturities of three months or less. All short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates also are classified as cash equivalents.

Accounts Receivable, Net

Receivables are reported at the invoiced amount, less an allowance for any potential uncollectible amounts. The Company had no allowance for uncollectible amounts as of December 31, 2020 and 2021.

Restricted Cash

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are classified as restricted cash and are primarily recorded in “Other non-current assets” on the Company’s Consolidated Balance Sheets. Restricted cash primarily consists of the balance of an account under the dominion and control of the administrative agent under the ABL Facility, which will be used to repay outstanding borrowings under the ABL Facility if certain specified events of default occur, and cash held in reserve accounts related to contractual obligations. See Note 6 “Debt” for more information on the ABL Facility. Total restricted cash was $32 million and $290 million as of December 31, 2020 and 2021, respectively. Subsequent to December 31, 2021, the balance of restricted cash increased by $250 million due to requirements under the ABL Facility.

Inventory

Inventories are stated at the lower of cost or net realizable value (“LCNRV”) and consist of raw materials, work-in-progress, finished goods, and service parts. The Company primarily calculates inventory value using standard cost, which approximates actual cost on the first-in, first-out (“FIFO”) basis. Net realizable value (“NRV”) is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation. The Company assesses the valuation of inventory and periodically adjusts its value for estimated excess and obsolete inventory based upon expectations of future demand and market conditions, as well as damaged or otherwise impaired goods. During the year ended December 31, 2021, the Company recorded a $95 million charge to reduce the carrying value of inventory to net realizable value, with the charge reflected in “Cost of revenues” in the Company’s Consolidated Statement of Operations. As of December 31, 2020 the Company’s inventory was not material. As of December 31, 2021, the $274 million carrying value of inventory consisted primarily of raw materials.

Impairment of Long-Lived Assets (Held-and-Used Long-Lived Assets)

We review property, plant and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset may not be fully recoverable. Events that trigger a test for recoverability include material adverse changes in projected revenues and expenses, present cash flow losses combined with a history of cash flow losses and a forecast that demonstrates significant continuing losses, significant negative industry or economic trends, a current expectation that a long-lived asset group will be disposed of significantly before the end of its useful life, a significant adverse change in the manner in which an asset group is used or in its physical condition, or when there is a change in the asset grouping. We initially assess the risk of impairment based on an estimate of the undiscounted cash flows at the lowest level for which identifiable cash flows exist against the carrying value of the asset group. Impairment is indicated when the carrying value of the asset group exceeds the estimated future undiscounted cash flows generated by those assets. When impairment is indicated, the Company records an impairment charge for the difference between the carrying value of the asset group and its estimated fair market value. Depending on the asset, estimated fair market value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues

The Company primarily recognizes revenue from the sale of EVs to consumers. Revenue from the sale of EVs is recognized upon delivery, when control of the EV transfers to the customer. Payment for EV sales is due prior to or upon delivery, and an insignificant amount of revenue is recognized after delivery for performance obligations satisfied over time. Sales are subject to a right of return and involve variable consideration for certain sales to employees.

The expected value of variable consideration is used to estimate the transaction price. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal of revenue recognized will not occur. The transaction price is allocated based on the estimated relative standalone selling price of each performance obligation. The Company utilizes directly observable standalone selling prices when possible. If not available, the standalone selling prices are estimated using appropriate methods, such as the “adjusted market assessment” approach, “expected cost plus a margin” approach, and others.

Contract Liabilities

The Company recognizes contract liabilities when payments are received or due before the related performance obligation is satisfied. The Company’s contract liabilities exclude fully-refundable customer deposits. The Company’s contract liabilities were not material during the year ended December 31, 2021 and were recorded in Current portion of lease liabilities and other current liabilities” on the Consolidated Balance Sheets. The increase in contract liabilities resulted from sales to customers with payment due prior to delivery of the EV.

Because the Company’s contracts generally have an original expected duration of one year or less, the Company has not disclosed the aggregate amount of the transaction price in contracts with customers that is related to unsatisfied or partially unsatisfied performance obligations as of December 31, 2021.

Cost of Revenues

Cost of revenues primarily relates to the cost of EVs and includes direct parts, material and labor costs, manufacturing overhead (e.g., depreciation of machinery and tooling), inbound shipping and logistics costs, and reserves for estimated warranty costs. Cost of revenues also includes adjustments to write down the carrying value of inventory when it exceeds its estimated NRV and to provide for on-hand inventory that is either obsolete or in excess of forecasted demand. Costs to develop software that is integral to the Company’s EVs are recognized as expenses as they are incurred.

Fair Value Measurements

A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. These two types of inputs create the following fair value hierarchy:

•Level 1 – Quoted prices for identical instruments in active markets

•Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose significant inputs are observable

•Level 3 – Instruments with model-derived valuations whose significant inputs are unobservable

The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets. As of December 31, 2020 and 2021, money market funds totaled $2,782 million and $13,048 million, respectively. The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses approximated their fair values at December 31, 2020 and 2021, due to the short period of time to maturity or repayment.

The Company’s debt instruments are classified within Level 2 of the fair value hierarchy because they are valued using quoted prices for inactive markets or have significant inputs that are observable. As of December 31, 2020 and 2021 the fair value of debt approximated their carrying value. See Note 6 “Debt” for more information.

During the year ended December 31, 2021, there were no transfers between the levels of the fair value hierarchy.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Benefit Plan

The Company provides a defined contribution plan for substantially all employees in the United States in which the Company provides discretionary matching contributions. The Company made matching contributions to the defined contribution plan for the years ended December 31, 2019, 2020 and 2021 which were not material.

Research and Development Costs

Research and development (“R&D”) costs consist primarily of personnel costs for teams in engineering and research, prototyping expenses, contract and professional services, amortized equipment costs, and allocation of indirect costs. R&D costs are expensed as incurred.

Selling, General, and Administrative

Advertising costs are recorded in “Selling, general, and administrative” in the Consolidated Statement of Operations as they are incurred. The advertising costs recognized during the years ended December 31, 2019, 2020 and 2021 were not material.

Other Expenses

Upon the IPO, the Company donated approximately 8 million shares of Class A common stock and $20 million cash to Forever by Rivian. As a result, $663 million was recorded in “Other expenses” in the Consolidated Statement of Operations during the year ended December 31, 2021.

Concentration of Risk

Counterparty Credit Risk

Financial instruments that potentially subject the Company to concentration of counterparty credit risk consist of cash and cash equivalents, restricted cash, deposits, and loans. We are exposed to credit risk to the extent that our cash balance with a financial institution is in excess of Federal Deposit Insurance Company insurance limits. The degree of counterparty credit risk will vary based on many factors including the duration of the transaction and the contractual terms of the agreement. Management evaluates and approves credit standards and oversees the credit risk management function related to investments. As of December 31, 2020 and 2021, all of the Company’s cash and cash equivalents were placed at financial institutions that management believes are of high credit quality. These amounts are typically in excess of insured limits.

Supply Risk

The Company is subject to risks related to its dependence on its suppliers, the majority of which are single-source providers of parts or components for the Company’s products. Any inability of the Company’s suppliers to deliver necessary product components, including semiconductors, at timing, prices, quality, and volumes that are acceptable to the Company could have a material and adverse impact on Rivian’s business, growth prospects, and financial and operating results.

The Company’s manufacturing facility in Normal, Illinois (the “Normal Factory”) is operational, and Rivian is continuing to invest in the Normal Factory. The Company’s ability to sustain production depends, among other things, on the readiness and solvency of suppliers and vendors through all macroeconomic factors, including factors resulting from the COVID-19 pandemic.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. NEW ACCOUNTING STANDARDS

Recently Adopted Accounting Standards

The Financial Accounting Standards Board’s Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) requires the recognition of assets and liabilities for leases that are not short-term. The Company adopted the provisions of the ASU, along with the provisions of all other issued ASUs containing related amendments, on January 1, 2020. The Company elected to use hindsight to determine whether lease terms included periods covered by options to extend or terminate a lease, did not reassess existing or expired land easements that were not previously accounted for as leases, and did not elect to apply the “package of three” practical expedients available upon adoption. Amounts in the consolidated financial statements and accompanying notes prior to January 1, 2020 have not been restated and continue to be reported in accordance with the legacy accounting requirements in Accounting Standards Codification (“ASC”) Topic 840, Leases. The adoption of the ASU did not have a material impact on the Company’s consolidated financial statements.

ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity simplifies (i) the accounting for convertible financing instruments issued, including preferred stock, (ii) the derivatives scope exception for contracts in an entity’s own equity, and (iii) the calculation of earnings per share. Early adoption is permissible, and the Company elected to early adopt the provisions of the ASU on January 1, 2021. The adoption of the ASU did not have a material impact on the Company’s consolidated financial statements.

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments amends the measurement of (i) assets measured at amortized cost by including an entity’s current estimate of all expected credit losses and broadening the information that an entity must consider in developing its expected credit loss estimate and (ii) available-for-sale debt securities by requiring estimated credit losses to be presented as an allowance rather than a write-down. The Company adopted the provisions of the ASU, along with the provisions of all other issued ASUs containing related amendments, on January 1, 2021. The adoption of these ASUs did not have a material impact on the Company’s consolidated financial statements.

Upcoming Accounting Standards Not Yet Adopted

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting provides optional expedients and exceptions to the accounting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate “LIBOR” or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided do not apply to contract modifications made and most hedging relationships entered into or evaluated after December 31, 2022. The Company expects to adopt the provisions of the ASU as of the beginning of any interim period in which LIBOR is discontinued from the Company’s transactions that reference LIBOR. The Company is currently evaluating the potential impact of the ASU on the consolidated financial statements.

4. PROPERTY, PLANT, AND EQUIPMENT, NET

Property, plant, and equipment are recorded at cost, net of accumulated depreciation and impairments. Costs of routine maintenance and repair are expensed when incurred.

The Company capitalizes certain qualified costs incurred in connection with the development of software used internally. Costs incurred during the application development stage are evaluated to determine whether the costs meet the criteria for capitalization. Costs related to preliminary project activities and post implementation activities, including maintenance, are expensed as incurred.

Property, plant, and equipment are primarily depreciated using the straight-line method over the estimated useful life of the asset. Leasehold improvements are amortized over the period of lease or the life of the asset, whichever is shorter, using the straight-line method. Capitalized costs related to software used internally are amortized using the straight-line method over the estimated useful life of the asset. Land is not depreciated.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the components of “Property, plant, and equipment, net” (in millions):

Land, buildings, and building improvements 10 to 30 years $ 88 $ 429

Leasehold improvements Shorter of 10 years or lease term 51 191

Machinery, equipment, vehicles, and office furniture 5 to 15 years 88 1,856

Computer equipment, hardware, and software 3 to 10 years 51 180

Total property, plant, and equipment 1,483 3,416

Accumulated depreciation and amortization (38) (233)

Total property, plant, and equipment, net $ 1,445 $ 3,183

Depreciation and amortization expense was $7 million, $29 million, and $197 million for the years ended December 31, 2019, 2020 and 2021, respectively.

5. LEASES

The Company leases real estate, machinery, equipment and vehicles under agreements with contractual periods ranging from one month to 12 years. Leases generally contain extension or renewal options, and some leases contain termination options. After considering all relevant economic and financial factors, the Company includes periods covered by renewal or extension options that are reasonably certain to be exercised in the lease term and excludes periods covered by termination options that are reasonably certain to be exercised from the lease term. The Company determines whether a contractual arrangement is or contains a lease at inception.

The Company has lease agreements with lease and non-lease components and has elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, with the exception of leases of real estate which is comprised of land and buildings. For leases of land and buildings, the Company accounts for each component separately based on the relative estimated standalone price of each component. At lease commencement, the Company measures the lease liability at the present value of lease payments not yet paid. All variable payments that are not based on a market rate or an index (e.g., the Consumer Price Index) are excluded from the measurement of the lease liability and instead are recognized as expense when paid. Because the discount rate implicit in the lease is not determinable for most leases, the Company determines the appropriate discount rate using the estimated incremental borrowing rate for the lease based on the information available at lease commencement. Right-of-use assets are measured at the amount of the lease liability, adjusted for prepaid or accrued lease payments, lease incentives, and initial direct costs incurred, as applicable.

Leases that are economically similar to the purchase of an asset are classified as finance leases. The Company’s carrying value of finance leases is not material for all periods reported.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company does not recognize right-of-use assets and lease liabilities for short-term leases with an original lease term of 12 months or less. Instead, expense representing the rent payments is recognized on a straight-line basis over the lease term within “Selling, general, and administrative” in the Consolidated Statement of Operations.

Operating lease assets are recorded net of accumulated amortization. The following table presents the carrying value of operating lease right-of-use assets and lease liabilities recorded within the corresponding line items on the Company’s Consolidated Balance Sheets at December 31, 2020 and 2021 (in millions):

Operating lease assets, net $ 80 $ 228

Current portion of lease liabilities and other current liabilities $ 18 $ 46

Long-term lease liabilities 83 218

Total lease liabilities $ 101 $ 264

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the contractual maturities of operating lease liabilities as of December 31, 2021 (in millions):

Operating Leases

Thereafter 65

Total undiscounted liabilities 302

Less: Present value discount (38)

Total lease liabilities $ 264

The future minimum lease payments for leases that have not yet commenced are not material at December 31, 2021. The leases will commence in 2022 and 2023, with lease terms ranging from 1 year to 10 years.

Total lease cost for the year ended December 31, 2020 was not material. Total least cost of $43 million for the year ended December 31, 2021 was comprised primarily of operating lease cost and recorded in “Selling, general, and administrative” in the Consolidated Statements of Operations.

The weighted average remaining lease term and weighted average discount rate for operating leases at December 31, 2020 and 2021 were as follows:

Weighted average remaining operating lease term (in years) 5.8 6.1

Weighted average operating lease discount rate 3.8 % 4.0 %

Supplemental cash flow information related to operating leases for the year ended December 31, 2020 and 2021 is as follows (in millions):

Operating lease expense for the year ended December 31, 2019 was not material.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. DEBT

The following table summarizes the Company’s outstanding debt:

Less unamortized discount and debt issuance costs (4) (24)

Notes payable, less unamortized discount and debt issuance costs 75 1,226

Less: Current portion (28) —

Total note payable, less current portion $ 47 $ 1,226

Term Facility

In April 2018, the Company entered into a variable rate Term Facility Agreement for a committed facility to be used towards the Company’s and its subsidiaries’ operating expenses and capital expenditures (“Term Facility”). As of December 31, 2020, the amount drawn on the Term Facility was $79 million. In February 2021, the Company paid all outstanding amounts related to the Term Facility.

The Term Facility was scheduled to mature in May 2022, the fourth anniversary of the first borrowing under the loan. Maturity payments were scheduled to begin in 2021. Rivian’s obligations under the Term Facility Agreement were backed by guarantees from two of its subsidiaries, as well as an affiliate of a stockholder of the Company.

Interest on the Term Facility was paid based on the LIBOR plus 4.3%. As of December 31, 2020, the stated interest rate for borrowings under the Term Facility Agreement was 4.5%. As the Term Facility was variable rate debt, the carrying value of the Term Facility approximated fair value.

In connection with the Term Facility Agreement, the Company issued common stock warrants to the affiliate of the stockholder on the date thereof (“Initial Common Stock Warrant”) and on each anniversary thereafter (“Anniversary Common Stock Warrants”) until the Term Facility Agreement was terminated. The Initial Common Stock Warrant was classified as a debt issuance cost and recorded as an increase to Additional paid-in capital on the Consolidated Balance Sheets. The debt issuance cost was subsequently amortized over the periods the Term Facility was outstanding. The Anniversary Common Stock Warrants were classified as prepaid expenses and recorded as an increase to Additional paid-in capital on the Consolidated Balance Sheets. The prepaid expenses were subsequently amortized over the respective annual period following the grant of each Anniversary Common Stock Warrant. Refer to Note 11 "Contingently Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity" for further details regarding stock warrants.

2021 Convertible Notes

In July 2021, the Company issued $2,500 million aggregate principal amount of unsecured senior convertible promissory notes due July 2026 in a private offering (“2021 Convertible Notes”) and made an irrevocable election to account for the 2021 Convertible Notes under the Fair Value Option in accordance with ASC Topic 825, Financial Instruments. As a result, the 2021 Convertible Notes were initially recognized as a liability measured at issue-date estimated fair value and subsequently re-measured to estimated fair value as of September 30, 2021. The 2021 Convertible Notes accrued interest quarterly at a rate of (i) zero percent (0%) from the date of issuance to, and including, June 30, 2022 and (ii) five percent (5%) after June 30, 2022. The Company made no cash interest payments on the 2021 Convertible Notes during the year ended December 31, 2021.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Upon the Company’s IPO, the 2021 Convertible Notes converted into 38 million shares of Class A common stock at a conversion price equal to $66.30 per share. During the year ended December 31, 2021, the loss on the 2021 Convertible Notes is recognized in “Loss on convertible notes, net” in the Consolidated Statement of Operations and is calculated as follows (in millions):

ABL Facility

In May 2021, the Company, through various of its subsidiaries, entered into a senior secured asset-based revolving credit facility (“ABL Facility”) with a syndicate of banks that may be used for general corporate purposes. The ABL Facility is secured by certain current assets of the Company. The ABL Facility provides for a $750 million committed secured revolving credit facility with an annual interest rate between 1.25% and 1.75% plus LIBOR that matures on May 20, 2025. Availability under the ABL Facility is based on the lesser of the borrowing base and the committed $750 million cap and is reduced by borrowings and the issuance of letters of credit which bear a fronting fee of 0.125% plus interest per annum. Interest on LIBOR borrowings under the ABL Facility is due at maturity of each LIBOR period, and interest on non-LIBOR borrowings under the ABL Facility is due on a quarterly basis. The Company is required to pay a quarterly commitment fee of 0.25% per annum based on the unused portion of the ABL Facility. The ABL Facility contains certain affirmative and negative covenants and conditions to borrowing or taking other actions that restrict certain of the Company’s subsidiaries’ ability to, among other things, incur debt, grant liens, make investments, enter into certain transactions with affiliates, pay dividends, and prepay junior or unsecured indebtedness, subject to certain exceptions. The covenants include a minimum liquidity requirement and fixed charge coverage ratio calculated quarterly. As of December 31, 2021, the Company was in compliance with all covenants required by the ABL Facility.

As of December 31, 2021, the Company had no borrowings under the ABL Facility and $103 million of letters of credit outstanding, resulting in availability under the ABL Facility of $306 million after giving effect to the borrowing base and the outstanding letters of credit.

2026 Notes

In October 2021, the Company issued $1,250 million aggregate principal amount of senior secured floating rate notes due October 2026 (the “2026 Notes”) to new and existing investors of the Company. Proceeds received, net of a $25 million original issue discount (“OID”), may be used for general corporate purposes. The 2026 Notes bear interest at (x) six-month LIBOR, subject to a 1.00% floor, plus (y) 6.00% per annum, subject to downward adjustment upon certain events, including an IPO. Upon the Company’s IPO, the interest rate on the 2026 Notes was adjusted downward and as of December 31, 2021, the interest rate on the notes was 6.63%. Interest on the 2026 Notes is paid in cash semi-annually in arrears on April 15 and October 15 of each year. The Company has the option to redeem the notes at any time at 100% of the principal amount of the 2026 Notes, plus any applicable premium. The 2026 Notes are secured by a second priority security interest in the same assets in which the ABL Facility has a first priority security interest and are guaranteed by certain subsidiaries of the Company. The 2026 Notes contain a number of customary covenants similar to the covenants under the ABL Facility, including a minimum liquidity covenant. As of December 31, 2021, the Company was in compliance with all covenants required by the 2026 Notes.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest Expense

The components of “Interest expense” recorded in the Consolidated Statements of Operations are as follows (in millions):

Years Ended December 31,

Amortization of discount and debt issuance costs $ 22 $ 3 $ 7

Contractual interest expense 12 5 22

Total interest expense $ 34 $ 8 $ 29

7. ACCRUED LIABILITIES

The carrying value of “Accrued liabilities” on the Consolidated Balance Sheets includes the following components that were not yet paid by the Company as of December 31, 2020 and 2021 (in millions):

Capital and other expenditures $ 384 $ 490

Total accrued liabilities $ 443 $ 667

8. INCOME TAXES

Components of Income Taxes

The Company’s tax rate is generally a function of the tax rates in the jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction, and the relative amount of losses or income for which no tax benefit or expense is recognized due to a valuation allowance.

The components of ”Loss before income taxes” in the Consolidated Statements of Operations for the years ended December 31, 2019, 2020 and 2021 are as follows (in millions):

Years Ended December 31,

Loss before income taxes

Total loss before income taxes $ (426) $ (1,018) $ (4,688)

Based on United States tax regulations applicable to Rivian, the Company does not anticipate foreign earnings would be subject to a 21% corporate income tax rate upon repatriation. Accordingly, no provision for United States tax on undistributed earnings of foreign subsidiaries has been made. Distributions of unremitted foreign earnings would be subject to foreign withholding taxes. The Company maintains that foreign earnings will be indefinitely reinvested unless expressly stated to the contrary.

Provisions are made for estimated United States and foreign income taxes which may be incurred on the reversal of the basis differences in investments in foreign subsidiaries and corporate joint ventures not deemed to be indefinitely reinvested. Provisions have not been made on basis differences in investments that primarily result from earnings in foreign subsidiaries which are deemed indefinitely reinvested. If recorded the deferred tax liability associated with indefinitely reinvested basis differences would be immaterial to the financial statements.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to (i) temporary differences that exist between the carrying value of assets and liabilities and their respective tax bases and (ii) operating loss and tax credit carryforwards on a taxing jurisdiction basis. The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid.

The Company’s accounting for deferred tax consequences adheres to the requirements of U.S. GAAP to reduce the measurement of deferred tax assets not expected to be realized. The Company considers all available evidence, both positive and negative, to determine whether a valuation allowance is needed. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded.

As of December 31, 2021, the Company recorded valuation allowances of $1,458 million for the portion of deferred tax assets that is not expected to be realized. The valuation allowance on net deferred tax assets increased by $105 million, $293 million, and $988 million during the years ended December 31, 2019, 2020 and 2021, respectively. The changes in the valuation allowance are primarily due to additional United States deferred tax assets and liabilities recognized in the respective years. The Company had no releases of valuation allowances for the years ended December 31, 2020 and 2021. The Company continues to monitor the realizability of the United States deferred tax assets taking into account multiple factors, including results of operations. The Company shall continue maintaining a full valuation allowance on United States deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of all, or a portion, of the valuation allowances would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

A reconciliation of the provision for income taxes to its components at the United States statutory rate for the years ended December 31, 2019, 2020 and 2021 is shown below (in millions):

Years Ended December 31,

Federal income tax at statutory rate $ (90) $ (214) $ (984)

Permanent items 1 4 8

Nondeductible charitable contributions — — 172

Nondeductible loss on convertible debt — — 118

Nondeductible interest 8 — —

Other — — (3)

Tax credit limitation 7 — —

Provision for income taxes $ — $ — $ —

The Company’s effective tax rate was 0% for the years ended December 31, 2019, 2020 and 2021. Foreign income taxes were not material during the years ended December 31, 2019, 2020 and 2021.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities as of December 31, 2020 and 2021 are as follows (in millions):

Deferred tax assets:

Net operating loss and tax credit carryforwards $ 453 $ 1,218

Lease liabilities 26 71

Stock-based compensation — 118

Less: valuation allowances (470) (1,458)

Total net deferred tax assets 27 141

Deferred tax liabilities:

Property, plant, and equipment (6) (78)

Operating lease assets (21) (62)

Total deferred tax liabilities (27) (140)

Net deferred tax assets $ — $ 1

The majority of the Company's gross loss carryforwards are generated in the United States. Federal net operating losses (“NOLs”) generated by the Company through December 31, 2017 totaling $81 million may be carried forward for 20 years and begin to expire in 2035. These NOLs may fully offset taxable income in the year utilized. Under the Tax Cuts and Jobs Act, federal losses generated in tax years beginning after December 31, 2017, totaling $4,234 million, may be carried forward indefinitely; but their deduction is limited to 80% of annual taxable income. In addition, the Company has federal and state tax credit carryforwards of $100 million that can be carried forward for 20 years and begin to expire in 2039. The NOLs and tax credits are fully offset by a valuation allowance. Additionally, the Company has $3,375 million of carryforwards for state NOLs.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as R&Dtax credits) to offset its post-change income may be limited. If the Company experiences a greater than 50 percentage point aggregate change in ownership of certain significant stockholders over a three-year period, a Section 382 ownership change could be deemed to have occurred. If a Section 382 change occurs, the Company’s future utilization of the NOLs and credits as of the ownership change will be subject to an annual limitation under Section 382 of the Code and similar state provisions. Such an annual limitation may result in the expiration of NOLs before utilization. Due to previous ownership changes experienced by the Company, tax credits are limited in their utilization and the amounts above reflect such adjustment. NOLs are not expected to be limited.

The Company records uncertain tax positions using a two-step process. First; by determining whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and second; for those tax positions that meet the more-likely-than-not recognition threshold, by recognizing the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company includes interest and penalties related to income tax matters within the provision for income taxes. As of December 31, 2020 and 2021, the Company has not recorded any amounts related to uncertain tax positions.

The Company is subject to taxation and files income tax returns in the United States federal jurisdiction, plus state and foreign jurisdictions. Tax years after 2017 remain open in our major jurisdictions and are subject to examination by the taxing authorities.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. STOCK-BASED COMPENSATION

Stock Plans

The Company's 2015 Long-Term Incentive Plan ("2015 Stock Plan") and 2021 Incentive Award Plan (“2021 Stock Plan” and, together, “Stock Plans”) permit the grant of stock options, RSUs, and other stock-based awards to employees, non-employee directors, and consultants. The 2021 Stock Plan became effective when the registration statement filed in connection with the Company’s IPO became effective. The Company’s stock options have seven- or ten-year contractual terms and unvested stock options and RSUs generally are forfeited upon the termination of a grantee’s service. The Company has elected to recognize forfeitures as an adjustment to compensation expense for options and RSUs in the same period as the forfeitures occur. As of December 31, 2021, 101 million and 99 million shares were reserved for issuance under the 2015 Stock Plan and 2021 Stock Plan, respectively.

Generally, the Company’s stock options vest in annual installments based on a requisite service period of four years of continuous service and may contain performance conditions related to production and other targets. Stock options granted under the 2015 Stock Plan may be exercised only upon the occurrence of a Change in Control (as defined under the 2015 Stock Plan, which includes an IPO), which is a performance condition. RSUs generally vest in quarterly installments based on a requisite service period of four years of continuous service, upon the later of the quarterly vest date and six months after the occurrence of an IPO (as defined under the Stock Plans), which is a performance condition. Achievement of the Change in Control- and IPO-based performance conditions of stock options and RSUs granted under the 2015 Stock Plan is not deemed to be probable until such events occur. Therefore, no awards granted under the 2015 Stock Plan vested, were expected to vest, or were exercisable prior to the Company’s November 2021 IPO. Accordingly, the Company recognized no stock-based compensation expense prior to the IPO.

In January 2021, the Company granted a stock option covering 27 million shares valued at $241 million to its CEO. A portion of the stock option contains only a service condition, which vests over a requisite service period of six years following a Qualified IPO (as defined within the award). The other portion of the stock option contains both a service and a market condition, which vests in installments based on the achievement of share price goals following a Qualified IPO , measured over a specified period ending on the tenth anniversary of the award.

During June 2021, the Company modified the service-based vesting terms of approximately 17 million RSUs. As achievement of the performance condition of the RSUs was not considered probable both before and after the modification, the fair value of the RSUs was remeasured on the date of modification, which resulted in an increase in unrecognized stock-based compensation cost of approximately $322 million. During October 2021, the Company modified the service-based vesting terms of approximately 5 million stock options. As achievement of the performance condition of the stock options was not considered probable both before and after the modification, the fair value of the stock options was remeasured on the date of modification, which resulted in an increase in unrecognized stock-based compensation cost of approximately $275 million.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company’s stock option and restricted stock unit activity during the year ended December 31, 2021:

Stock Options RSUs

Weighted

Average Weighted

Number of Weighted Remaining Aggregate Number of Average

Shares Average Contractual Intrinsic Value Shares Grant Date

(in millions) Exercise Price Life (years) (in millions) (in millions) Fair Value

Exercised / Vested (1) 3.29 — —

The weighted-average fair value of stock options granted during the years ended December 31, 2019, 2020 and 2021 was $1.26, $2.28, and $10.03, respectively. There were no stock options exercised during the years ended December 31, 2019 and 2020. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2021 was $127 million. There were no RSUs granted during the year ended December 31, 2019, and the weighted-average fair value of RSUs granted during the year ended December 31, 2020 was $7.23.

During the years ended December 31, 2019 and 2020, the Company recognized no stock-based compensation expense for the Stock Plans and ESPP. The following table summarizes Company’s stock-based compensation expense for the Stock Plans and ESPP recognized for the year ended December 31, 2021 by line item in the Consolidated Statements of Operations (in millions):

Cost of revenues $ 16

Research and development 277

Selling, general, and administrative 277

Total stock-based compensation expense for the Stock Plans and ESPP $ 570

The stock-based compensation expense for the Stock Plans recognized for the year ended December 31, 2021 reflects the fair value of stock options and RSUs that are vested as of December 31, 2021. As of December 31, 2021, the Company’s unrecognized stock-based compensation expense for awards outstanding under the Stock Plans was approximately $1,491 million, which is expected to be recognized over a weighted-average period of 3.8 years.

Fair Value Assumptions

The fair value of the stock options granted to the CEO in January 2021 was estimated using a Monte Carlo simulation capturing scenarios of the Company's projected stock price over the ten-year time horizon, with the resulting intrinsic value at maturity of the stock options in each scenario discounted to present value.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The assumptions used in the Monte Carlo simulation are as follows:

Volatility 50.0 %

Dividend yield — %

Risk-free rate 1.1 %

Maturity (in years) 10.0

Initial stock price $21.72

The exercise price of all stock options granted during the years ended December 31, 2019, 2020 and 2021 was equal to or greater than the fair market value of Rivian's stock at the date of grant. The Company generally estimates the fair value of stock options using a Black-Scholes option pricing model. Expected volatility is based on historical volatility rates of peer companies. The dividend yield is estimated based on the rate at which the Company expects to provide dividends. The risk-free rate is based on the United States Treasury yield curve for zero-coupon Treasury notes with maturities approximating the respective expected term of the stock option. The expected term represents the average time the Company’s stock options are expected to be outstanding. As the stock options were not exercisable prior to the IPO, the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. As a result, for stock options, the expected term is estimated based on the weighted-average midpoint of expected vest date and expiration date.

The weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted during the years ended December 31, 2019, 2020 and 2021 are as follows:

Years Ended December 31,

Dividend yield — % — % — %

Risk-free rate 1.8 % 0.3 % 1.1 %

Expected term (in years) 6.9 5.3 5.6

Prior to the Company’s IPO, the stock price input to the estimated fair value of stock options and the fair value of RSUs was measured on the grant date (or modification date, if appropriate) based on an independent appraisal of the fair market value of the Company’s common stock. The independent appraisal used a market approach with an adjustment for lack of marketability given that the shares underlying the awards were not publicly traded. This assessment required complex and subjective judgments regarding the Company’s projected financial results. The appraisal incorporated a backsolve method to the Company’s most recent equity issuance and a PWERM that estimated equity value in an IPO scenario. The fair value of a share of the Company’s common stock was estimated by weighting the backsolve and PWERM valuation methods based on the anticipated probability of an IPO as of each valuation date.

In light of initial information received in estimation of the Company’s IPO price range and the proximity of stock-based awards granted from July 20, 2021 to the IPO, the Company established the fair value of a share of the Company’s common stock applicable to stock options and RSUs granted from July 20, 2021 onward using a straight-line interpolation from the July 20, 2021 fair value estimated using an independent appraisal to the midpoint of the initial price range in order to calculate unrecognized stock-based compensation expense.

The grant-date fair value of stock options granted after the IPO is measured using the Black-Scholes option pricing model described above. The grant-date fair value of RSUs granted after the IPO is equal to the closing trading price of the Company‘s common stock on the grant date.

Employee Stock Purchase Plan

In November 2021, the Company adopted the 2021 Employee Stock Purchase Plan (“ESPP”). The ESPP is designed to allow eligible employees to purchase shares of Class A common stock at a 15% discount, generally at intervals of approximately six months, with their accumulated payroll deductions. The number of shares of Class A common stock authorized for sale under

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the ESPP is equal to the sum of (i) 22 million shares of Class A common stock and (ii) an annual increase on the first day of each year beginning on January 1, 2022 and ending on January 1, 2031, equal to the lesser of (A) 1% of the aggregate number of shares of all classes of common stock outstanding on the last day of the immediately preceding year and (B) such smaller number of shares of Class A common stock as determined by the board of directors; provided, however, that no more than 185 million shares of Class A common stock may be issued under the ESPP. As of December 31, 2021, 22 million shares were reserved for issuance under the ESPP. As of December 31, 2021, the Company’s unrecognized stock-based compensation expense for the first offering period of the ESPP was approximately $46 million.

10. RELATED PARTY TRANSACTIONS

Stock Warrants

During the year ended December 31, 2019, the Company entered into an agreement with Amazon (Amazon.com, Inc. and its affiliates referred to as “Amazon”) to develop, manufacture, and supply customized EVs. In connection with this agreement, the Company provided a share-based sales incentive to Amazon in the form of warrants to purchase preferred stock. In November 2021, upon the close of the IPO, the outstanding warrants for the purchase of preferred stock converted to warrants to purchase an equivalent number of shares of Class A common stock. The grant-date fair value of the warrants is not material and will be amortized as an offset against revenues in future periods; the offset against revenues for the year ended December 31, 2021 was not material.

2021 Convertible Notes

In July 2021, the Company issued the 2021 Convertible Notes to existing investors of the Company, including the following principal owners: Amazon with $490 million principal amount, Ford Motor Company (“Ford”) with $415 million principal amount, and certain funds and accounts advised by T. Rowe Price Associates, Inc. (“T. Rowe Price”) with an aggregate $400 million principal amount. Upon the Company’s IPO, the 2021 Convertible Notes converted into 38 million shares of Class A common stock at a conversion price equal to $66.30 per share (refer to Note 6 "Debt" for more information about the 2021 Convertible Notes).

2026 Notes

In October 2021, the Company issued the 2026 Notes to new and existing investors of the Company, including T. Rowe Price with an aggregate $285 million principal amount (refer to Note 6 "Debt" for more information about the 2026 Notes).

Operating Expenses

The Company obtains prototyping, engineering, and other R&D services from Troy Design and Manufacturing Co., a wholly-owned subsidiary of Ford. The Company recognized $8 million, $66 million and $71 million of expense for these services during the years ended December 31, 2019, 2020 and 2021, within “Research and development” in the Consolidated Statements of Operations. As of December 31, 2020 and 2021, respectively, unpaid amounts of $27 million and $16 million related to these services are reported within “Accrued liabilities” on the Consolidated Balance Sheets.

The Company obtains hosting services from Amazon. During the years ended December 31, 2019, 2020 and 2021, expenses related to these services of $0, $6 million, and $30 million, respectively, were recorded in “Research and development” and “Selling, general, and administrative” in the Consolidated Statements of Operations. As of December 31, 2020 and 2021, the unpaid amounts related to these services are not material.

11. CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

During the year ended December 31, 2019, the Company authorized a fifty-for-one stock split by issuing fifty shares for each one share held. All share information within the consolidated financial statements has been retroactively adjusted to reflect the stock split.

RIVIAN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Initial Public Offering

In November 2021, the Company completed its IPO of approximately 176 million shares of Class A common stock at a public offering price of $78.00 per share, which included the exercise in full by the underwriters of their option to purchase from the Company an additional 23 million shares of the Company’s Class A common stock. The net proceeds to the Company from the IPO, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, were $13,530 million. Upon the close of the IPO, (i) 102 million shares of common stock outstanding converted into an equal number of shares of Class A common stock, (ii) 8 million shares of Class A common stock held by an affiliate of the Company’s CEO were exchanged for an equivalent number of shares of Class B common stock, (iii) all outstanding shares of contingently redeemable convertible preferred stock converted into an aggregate 576 million shares of Class A common stock, (iv) a warrant outstanding for the purchase of 4 million shares of Series C preferred stock, with an exercise price of $9.09 per share, converted to a warrant to purchase an equivalent number of shares of Class A common stock, (v) outstanding warrants to purchase fewer than 1 million shares of Class A common stock, with a weighted-average exercise price of $5.66 per share, terminated unexercised, and (vi) the 2021 Convertible Notes converted into 38 million shares of Class A common stock at a conversion price equal to $66.30 per share. The Company also amended and restated its certificate of incorporation to (i) authorize the issuance of 3,500 million shares of Class A common stock and 8 million shares of Class B common stock and (ii) authorize the issuance of 10 million shares of preferred stock.

Common Stock

The Company has two classes of common stock: Class A common stock and Class B common stock. Shares of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. As of December 31, 2021, 892 million shares of Class A common stock and 8 million shares of Class B common stock were issued and outstanding. As of December 31, 2021, 3,500 million shares of Class A common stock and 8 million shares of Class B common stock were authorized.

Each share of Class A common stock entitles the holder to one vote, and each share of Class B common stock entitles the holder to ten votes. Holders of Class A common stock and Class B common stock have the right to receive any dividend declared by the Company, subject to the payment of dividends on shares of preferred stock (as described below). After the payment in full of all liquidation amounts required to be paid to the holders preferred stock, holders of common stock also have the right to receive the remaining property of the Company upon the liquidation, dissolution, or winding up of the Company on a pari passu basis among all holders of common stock.

At the option of the holder, shares of Class B common stock are convertible anytime into an equal number of shares of Class A common stock. Each outstanding share of Class B common stock will automatically convert into one share of Class A common stock upon the earliest to occur of (a) the five-year anniversary the Company’s IPO, (b) the date fixed by the Board of Directors within six months of the death or disability of the Company’s CEO, and (c) the date fixed by the Board of Directors within six months of the date that the number of outstanding shares of Class B common stock held by the Company’s CEO represents less than 30% of the shares of Class B common stock outstanding. Any shares of Class B common stock that are no longer owned by the Company’s CEO or their affiliates will automatically convert into an equal of shares of Class A common stock upon transfer of ownership.

Contingently Redeemable Convertible Preferred Stock

Each share of preferred stock outstanding prior to the IPO entitled the holder to the number of votes equal to the number of whole shares of common stock into which the share of preferred stock was convertible. Except as provided by law or by the other provisions of the Company’s Certificate of Incorporation, the holders of preferred stock voted together with the holders of common stock as a single class and on an “as-converted to common stock” basis. The holders of preferred stock also had voting rights separate and apart from the holders of common stock, on a single-class and single-series basis, as set forth in the Company’s Certificate of Incorporation. Each holder of preferred stock had the right to receive dividends on a single-series basis, in addition to the right to receive dividends on a pari passu basis with holders of common stock, according to the number of shares of common stock held on an “as-converted to common stock” basis. Dividends were non-cumulative and were payable at a per-annum rate of eight percent of the Original Issue Price (as defined in the Company’s Certificate of Incorporation). As of December 31, 2021, no dividends had been declared or distributed.

RIVIAN AUTOMOTIVE, INC.

RIVN US Equity

RIVN · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

RIVN US Equity☆

RIVN · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

RIVN US Equity