Good day and thank you for standing by. Welcome to the Rivian Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tim Bei, Vice President of Investor Relations. Good afternoon and thank you for joining us for Rivian's Fourth Quarter and Full Year 2023 Earnings Call. Before we begin, matters discussed on this call, including comments and responses to questions, reflect management's views as of today. We will also be making statements related to our business, operations, and financial performance that may be considered forward-looking statements under federal securities laws. Such statements involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC filings and today's shareholder letter. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in our shareholder letter. Just before the call, we published our shareholder letter, which includes an overview of our progress over the recent months. I encourage you to read it for additional details around some of the items we'll cover on today's call. With that, I'll turn the call over to RJ, who will begin with a few opening remarks. Thanks, Tim. Hello everyone, and thanks for joining us today. During our call, I'll highlight key developments during the fourth quarter, provide an update on the progress we're making against our value drivers, and discuss steps Rivian is taking to adapt to evolving market conditions in our industry. Before I dive in, as part of our ongoing focus on driving cost efficiency, we announced internally today the difficult decision to reduce the number of salaried employees by approximately 10%. These difficult decisions, among other initiatives I plan to discuss, enable us to maximize the amount of impact we can have as a company. We hold a deep conviction that the entire automotive industry will electrify over the long term. This means, as an industry, replacing roughly 1.5 billion internal combustion passenger cars across the planet over the next couple of decades. Rivian's mission is to accelerate this transition. A major goal with the launch of R1 was to build a brand that deeply resonates with customers. Beyond our active owner groups and the R1S being the top-selling EV in the U.S. priced over $70,000, an owner satisfaction survey conducted by Consumer Reports showed Rivian as the number one automotive brand with the highest likelihood for customers to purchase again. We intend to harness this brand strength as we launch R2, which we'll be unveiling on March 7th. R2 represents the essence of our brand while targeting the significant midsize SUV segment, a massive market with limited compelling EV options beyond Tesla. R2 has been developed with vertically integrated propulsion platforms, electronics, and software to create an incredible user experience. Our team is laser-focused on the factors within our control that will drive Rivian's long-term value. These include driving cost efficiency, optimizing our production and deliveries, investing in differentiating technologies, enhancing the Rivian customer experience, and maintaining a strong balance sheet. The progress we've made ramping production and driving greater cost efficiency was significant in 2023. During the full year, we more than doubled production and deliveries and exceeded our initial production guidance by more than 7,000 vehicles. The team achieved this while also successfully managing complex integration of new engineering design changes, including our in-house drive units for both the EDV and R1 platforms, LFP battery packs for EDV, and new vehicle variants such as our MaxPack. Ramping production and introducing new technologies across multiple vehicle platforms has presented challenges, but importantly, our team has gained significant learnings in a compressed time frame. This experience will be foundational as we execute against our 2024 plan. We took significant steps towards driving greater efficiency in 2023. Gross profit per vehicle improved by approximately $81,000 when comparing the fourth quarter of 2023 to the fourth quarter of 2022. As we start 2024, I want to emphasize our team's continued sense of urgency and ownership mindset in driving further efficiency throughout the organization. During our second quarter shutdown, we plan to incorporate additional material cost downs with the integration of new design engineering changes in the R1 platform, deliver further supplier cost reductions, capture the flow-through of commodity price improvements, and further optimize our manufacturing expenses. We believe these steps position us to achieve modest gross profit in the fourth quarter of 2024. As we start 2024, I want to address the broader industry context, which I referred to during our third quarter call. Our business is not immune to existing economic and geopolitical uncertainties, most notably the impact of historically high interest rates, which has negatively impacted demand. In this fluid environment, we appreciate the expressed interest in demand visibility from the investment community. The conversion of orders to sales can be impacted by several factors, including delivery timing, location of order, monthly payments, and customer readiness. Our order bank has notably reduced over time as deliveries have more than doubled in 2023 versus 2022, along with the impact of cancellations due to both the macro environment and the customer factors I just referenced. For 2024, we expect our total deliveries to be derived from our existing backlog as well as new orders generated during the year. Our key focus is on increasing demand to achieve our 2024 delivery targets. Our go-to-market strategy is built on growing brand awareness, enabling our direct-to-consumer experience, and importantly, providing more opportunities for consumers to experience our award-winning R1T and R1S vehicles firsthand. We are scaling our Rivian Spaces program, which is our equivalent of retail locations, and today we have 11 sites open across North America, most of which have opened in the last six months. These sites have garnered over 130,000 visitors so far in 2024. Complementing our Spaces footprint, our more than 50 service centers serve as another location for current and potential customers to experience our vehicles. We provided over 13,000 demo drives already in the first quarter and consider this to be one of our key demand-building strategies. We've also expanded the lineup of our vehicles and recently introduced our standard range variant, which provides an accessible price point for more potential Rivian customers. We're encouraged by the early results. The steps we're taking in 2024 will be foundational in positioning Rivian as a leader in the transition to electrification. The opportunity ahead is significant. We are taking deliberate action to drive additional cost efficiency as we continue building our go-to-market capabilities and develop our R2 platform. I would like to thank all those who continue to support our vision, including employees, customers, partners, suppliers, communities, and shareholders. With that, I'll pass the call to Claire. Thanks, RJ. I'd like to reiterate our excitement for the long-term success of Rivian. Over the course of 2023, we made significant progress in all four key value drivers: driving greater cost efficiency, continuing to optimize production and deliveries, investing in differentiated technologies, and continuing to enhance the Rivian customer experience. During the fourth quarter, we produced 17,541 vehicles and delivered 13,972 vehicles, which was the primary driver of the $1.3 billion of revenue we generated. Total revenue for the quarter included $39 million of proceeds from the sale of regulatory credits. We expect the sale of regulatory credits to increase over time but to vary quarter to quarter. For the full year 2023, we produced 57,232 vehicles, which was significantly above our initial guidance of 50,000 vehicles and more than double 2022 production. Total gross profit for the quarter was $606 million. Gross profit per vehicle delivered was approximately $43,000. During the fourth quarter, costs of goods sold were negatively impacted by $70 million of costs primarily associated with our planned 2024 shutdown, or approximately $5,000 per vehicle delivered. These costs include supplier-related expenses, accelerated depreciation, and other expenses related to the new technology and cost-saving design changes going into the R1 platform. While we could incur additional costs associated with the planned shutdown and technology and design changes in the near term, we do not anticipate these costs to be part of our normal course of business in the longer term. During the fourth quarter, we also delivered a higher proportion of consumer vehicles due to Amazon's expected seasonality. For context, the proportion of our total revenue attributed to Amazon was 8% in the fourth quarter of 2023 versus 30% in the third quarter of 2023. Given our commercial vans have lower material costs due to the technology changes made in 2023, the lower deliveries during the quarter negatively impacted our gross margin. In addition, due to this dynamic, the vast majority of the increase in finished goods inventory in the fourth quarter of 2023 was related to commercial vans. Changes in LCNRV and losses on firm purchase commitments benefited our fourth quarter results by $7 million as compared to $106 million in the third quarter of 2023, a difference of approximately $6,300 per delivered unit on a quarter-sequential basis. Next, I want to help provide more clarity on how we bridge from our fourth quarter 2023 results to where we expect to reach modest gross profit in the fourth quarter of 2024. The largest driver, which represents approximately 50% of the bridge, is our plan to reduce our variable cost per unit. The majority of this will be accomplished through material cost reductions planned as part of our Q2 2024 shutdown. As a reminder, this is through engineering cost reductions such as our ECU and wire harness simplification, through our commercially negotiated cost downs, and contribution from lower raw material costs. The second driver, representing approximately 35% of the bridge, is through our focus on driving greater efficiency through our production facility. As part of our planned shutdown, we are increasing the R1 line rate by approximately 30% to more efficiently produce vehicles. We also expect to see a benefit from declining LC&RV and firm purchase commitment balances in 2024. The final piece of the bridge, which represents approximately 15%, is the scaling of our non-vehicle revenue. With over 70,000 Rivians on the road, we have the opportunity for increased revenue areas such as regulatory credits, accessories, service, remarketing, and software-enabled services. These drivers are core to our long-term margin targets, and we expect to continue to drive recurring revenues in these areas as the car park grows and we expand our offerings. Our adjusted operating expenses for the fourth quarter were $706 million. For the full year, our adjusted operating expenses of $2.7 billion represented 2.5% growth versus 2022, despite our production and delivery volumes more than doubling over the same period. As RJ mentioned earlier, we're in the process of optimizing our operating expenditures by reducing our salaried employees by approximately 10%, along with a limited number of non-manufacturing hourly employees. Our adjusted EBITDA for the quarter was -$1.1 billion. For the full year, our EBITDA was just under our guidance of -$4 billion. Turning to our business outlook for 2024, we remain focused on driving greater cost efficiency across the company. We are guiding to 57,000 total vehicles produced for the year. Compared to 2023, we anticipate consumer and commercial vehicle deliveries to grow by low single digits. As we discussed on last quarter's earnings call, we expect to shut down both the consumer and commercial lines in our Normal plant for several weeks during the second quarter to introduce cost savings in vehicle technologies to the R1 platform. We believe these changes will meaningfully reduce our material costs and position Rivian to exit 2024 with a much-improved margin profile. While the direct downtime will be over a portion of Q2, we anticipate this to impact all four quarters of output as we prepare the facility for the work and then individually ramp each vehicle variant as well as our supply chain following the shutdown. As for the first quarter of 2024, due to managing changes in our supply chain associated with the introduction of new materials, we expect to factory gate approximately 13,500 units for the quarter. We expect that there will be a few thousand more vehicles, which are built but not factory gated as they wait an updated part we expect to receive in April. We anticipate the first quarter total deliveries to be approximately 10%-15% below the fourth quarter 2023 deliveries. While the incorporation of new design changes impacts near-term production, we are confident it better positions Rivian to be more profitable and competitive over the long term. We expect 2024 EBITDA to be -$2.7 billion as we focus on continuing our go-to-market infrastructure buildout and the development of R2, while also optimizing our costs driven by the integration of key new engineering technology and design changes, negotiated supplier cost downs, and a more efficient operating expense structure. Recently, we have taken measures to rationalize our capital expenditures due to a greater focus on our core business. Capital expenditures in 2024 are expected to be $1.75 billion driven by additional investments in our production facilities, next-generation technologies, and the continued buildout of our go-to-market operations. We remain confident that our cash, cash equivalents, and short-term investments can fund our operations through 2025. We aim to maintain a strong balance sheet position by continuing to drive cost efficiencies and improve our vehicle unit economics while opportunistically evaluating a variety of capital markets available to Rivian ranging across the capital structure. Over the long term, we continue to see a clear path to our approximately 25% gross margin target, high teens Adjusted EBITDA margin target, and approximately 10% free cash flow margin target. With that, let me turn the call back over to the operator to open the line for Q&A. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and one follow-up. One moment for questions. Our first question comes from John Murphy with Bank of America. You may proceed. Good afternoon, guys. Just a question on the downtime relative to the R1 versus the launch of the R2. And RJ, I'm just curious, is it maybe better to focus on pulling forward the launch of the R2 and committing capital, both human and dollars, to pulling that forward and getting that high-volume program up and running as opposed to tinkering with the line on the R1 and maybe circling back to that R1 line later? Is that possible, or is there kind of constraints, or am I just kind of misguided and these things can both happen at the same time and you can't pull the R2 forward at all? Yeah, thanks, John. We're certainly working very hard to make sure we deliver our R2 on time and to the extent possible, pull any time we can out of the program. I think what has us so excited about R2 is if we look at the success of R1 in terms of how the market's responded to the brand and to the product, it's the top-selling EV with a price point of over $70,000. Our hope, of course, is to translate the brand strength that we've demonstrated for Rivian with R1 into the R2 product and into a much lower price segment, which has a very large adjusted market. I think the key thing, though, to coming back to your question on R1 is just recognizing how much of the content that's going into the shutdown in Q2 actually translates to R2. So there's a massive consolidation of our ECUs in the vehicle. So that's all the computers in the vehicle, which we design and engineer in-house. But we've consolidated them. We reduced the number of computers by about 65%. And that network architecture and associated ECU topology is very closely related to what's in R2. And so it not only de-risks R2, but it's part of the development process and development sequence associated with the launch of that product. Along with that, these changes that we're making to R1 with regards to just the overall changing out of hundreds of components and associated suppliers with those components also corresponds to a number of supplier engagements that we have that link to R2. And the volume that R2 brings allows us to be more aggressive in pricing with a number of those suppliers that are on the R1 program. The two are very much interlinked. With that said, as we think about our focus as a business, the shutdown and the updates associated with it in our Bill of Materials and along with the line really is sort of part one to the major focus for us as a business, which is the successful launch and rapid ramp-up of the R2 production. That's very helpful. One follow-up. If you think about product cadence and spacing of product, do you feel like the tack that Tesla's taken of a product launch that's relatively sparse but constant improvement is more appropriate in the direction you're heading, or do you think something closer to sort of a typical sort of 4- to 5-year product lifecycle with many products interspersed is the way you're ultimately going to land as we kind of look 5- to 10 years in the future? Yeah. When we think about it from a customer point of view, one of the things we see as most valued is making sure that the platform, the vehicle platform and architecture, allows for a continuous stream of updates. And so in the R1 product, the customer satisfaction is extremely high. The brand strength is high. Consumer Reports rate us as having the highest level of brand equity, if you will, where the likelihood of repurchase is the highest for our brand. And a lot of that's born out of the continued updates we're making through over-the-air software improvements. And so we think that's a really dramatic shift in just how we think about products and sort of overall vehicle lifecycle. That will translate, of course, into R2. As we look at the launch of R2, learning from what we went through in launching R1 with R1T, R1S, and also the commercial vans all in parallel, we've really simplified the product portfolio cadence with R2 where there's a single vehicle that we're launching. The number of build combinations and trim combinations is very limited, with an emphasis on managing rapid ramp-up of the supply chain and driving operational efficiency into the R2 plant. Okay. Thank you very much. Thank you. One moment for questions. Our next question comes from Adam Jonas with Morgan Stanley. You may proceed. My first question is, how much of the volume that you forecast for this year is pre-ordered versus what you expect to be sold out of inventory? That's a follow-up. Thanks, Adam. Our backlog is something that we know there's been questions around just what does that look like? What's the topology of it? One of the things we need to recognize is a lot of the customers that are on our backlog have been there for a number of years. And as a result, it's not as if the moment someone gets to the front of the line, so to speak, and we're ready to make a delivery to them, that they can take delivery at that moment. Life situation in terms of when they're ready to take on a new vehicle, the coordination of that around what their financing expectations are, all of those factors play in. And so the way to think about our backlog is to recognize that this will continue to exist through the remainder of this year. But in parallel to delivering vehicles from our backlog, we'll also be delivering vehicles from newer orders, orders that are happening over the course of this year. And so that, for us, is a transition as a business where we go from purely delivering from backlog to having folks that are coming in, new demand, and having those deliveries happen much quicker. And to help facilitate that transition, we've created a few customer-facing structures that make that a little easier. We've created something we call the R1 shop, which allows some of the more common build combinations to be put in there to allow customers to get access to those vehicles more quickly. Still to this day, one of the most common questions we get from customers is, "How quickly can I get my vehicle?" So managing that dynamic of customers wanting to have the immediate gratification of they buy a vehicle, they get it within a week or two, along with customers that have been waiting for, in some cases, two or three years, that balance has been something we're learning to navigate. We do expect to continue to have to manage that balance over the course of the year. Okay. And just as a follow-up, the EV world has changed so much, RJ, since the 2021 IPO and in a lot of ways in a more moderated demand and competitiveness and pretty uncertain economic environment to boot. So I'm just wondering, has the board and the management team, are you still fully committed to that vertically integrated, go to Georgia, 400,000-unit, $5 billion on your own strategy, or has the board considered any alternative to the greenfield option in Georgia or at least some adjustments in terms of the size or whether you're going with a partner? Or is it pretty much the strategy from 2021 that you're kind of going ahead with right now into 2024? Thanks. Yeah, thanks, Adam. Yeah, the way we've approached our Georgia facilities is to build out the plant across two phases. So it's not a single 400,000-unit block, but rather two 200,000-unit blocks. I think the broader point that you raised, just around overall demand for electric vehicles, how fast the market transitions to electric vehicles, we do think we're in a very interesting moment in time where there is a lack of choice of highly compelling EV products in that $45,000-$55,000 price range, recognizing the average price of a new vehicle transaction in the United States last year was around $48,000. And so when we look at the competition that exists, we often get immediately drawn into competing, what's the competition look like directly with Tesla? But we need to recognize only 7% of the market has electrified, meaning really we're talking about how do we get the 93% of the market that's not buying an EV to get excited about the product? And R2, the layout of the vehicle, the package, the configuration, the technology content, we think creates a really interesting and very unique configuration that we're very bullish in the demand for that product. And of course, recognizing what we've seen in R1 and how strong Rivian has resonated with consumers there, we remain very bullish on the R2 segment and the R2 product itself. And so the way that we've engaged with our suppliers to ensure that we can ramp effectively, as well as laying out the production roadmap, albeit measured, as I described, across two phases, has been very much thoughtful of the scale of the opportunity and the scale of this transition that we see happening over the course of this decade. Okay. Thanks, RJ. Thank you. One moment for questions. Our next question comes from Joseph Spak with UBS. You may proceed. Thanks. Good afternoon. Just on the workforce reduction, sort of obviously some tough decisions. I know Claire and RJ have sort of been really focused on the gross profitability. But maybe if we could just sort of focus a little bit on OpEx because I understand you're cutting the workforce by 10% here, but how do you get comfortable that even that is sort of the right level? Because X stock comp in 2023, it's just under $3 billion. I know it's a different world, but if I look at where Tesla was at a sort of similar level of sales back in 2015, you're still 80% above that. So maybe you could just go to give us a little bit more color on sort of OpEx and the plans there going forward. Yeah, thanks, Joe. Yeah, when we think about OpEx, there's a number of components here. So just to break apart the big category of it all, if we look first at R&D, if we look at it between R&D and SG&A, on the R&D side, we have to recognize comparing to Tesla in 2015, while useful and certainly we look at these types of metrics internally as well, we're not competing against Tesla in 2015. We're competing against Tesla and others in 2024. And so we're driving incredible focus on efficiency and how we develop our products. We talk internally about being the most efficient at turning capital into amazing products. But it does also require us to be spending appropriately in the core areas. And for us, there's a few areas that we've made the decision to develop vertically in-house to create what we believe to be significant structural long-term advantages. That's really around the electronic stack in the vehicle, so the ECU and computer topology throughout the vehicle, the software, of course, that's running on those computers across the vehicle, and then our high-voltage architecture. That's our high-voltage battery system all the way through the rest of the driveline, so through the drive unit out to the wheels. It's in those areas that we see both technical differentiation that creates really a consumer experience that's markedly different and better than what we believe a sourced third-party strategy would deliver. It also provides meaningful cost advantages. In the compute stack and ECU topology front, the biggest opportunity here is ECU consolidation and the ability to have a much smaller number of computers that run the vehicle. Of course, because we control and design those computers, it allows us much more seamlessly to do that. That's first on the R&D front. A big focus, as I said, has been on driving efficiency into that. Now, we think of R&D as entirely spending within our employee base, but a big portion of this is also with suppliers. It has to do with the supplier development costs associated with, let's say, a seat program for the R2 or headlights for the R2. So a lot of the negotiations that are being driven, I referenced this earlier, around R1 supply also link to much more strategic long-term relationships with our suppliers that'll feed into R2, where we're asking those suppliers to treat us much more like partners, where instead of having to pay the suppliers so much upfront, which is a lot of what we've dealt with historically, to those suppliers recognizing and clearly seeing the market strength that we have. I mean, these suppliers are providing all of our competitors, and they see our volumes relative to our competitors, especially with R1, seeing it's really dominant position from a market share point of view. That's helped a lot in completely changing the nature of those discussions with suppliers, which, of course, we think about it. We talk about it a lot in the context of COGS, but it really does impact us on the OpEx side through the pre-launch development costs. Now, with that said, I do want to just spend a moment here on SG&A because it's the other big driver of our OpEx, of course. On this front, we're at a point where we're building out a service network. We're building out a sales and distribution network. And a number of these areas today are recognized as OpEx. In particular, on the service side, almost all of this is OpEx. But over time, of course, our service costs become part of our COGS structure. And in fact, service will ultimately be a profitable part of the business. And so Claire references, and we can certainly speak to it more here, we're very focused on not minimizing the growth of our SG&A spend as we continue to scale the business. So while the business is scaling and the number of vehicles we're supporting in the field grows dramatically over the next couple of years, we're working very hard to really maintain a lean SG&A side of the organization. And that has the tailwind of a lot of those costs that are embedded in SG&A today, as I said, becoming COGS and actually becoming profitable. Okay. Thanks for that. Then maybe just on CapEx, I think last quarter, you sort of talked about a 2023, 2024 average below $2 billion. I guess that's technically true, but it's pretty significantly below $2 billion now with the $175 guidance. So is there sort of a further shift in capital spending? And if so, what does that relate to? Sure. So as we think about the broader context, first and foremost, as you heard RJ talk about, we're focused on driving efficiency across the entire company as a whole. And so as we look at what we've been able to achieve, given these efforts across the company, it's allowed us or enabled us to not just shift out CapEx, but dramatically reduce the required CapEx within the business as a whole. And so that's by pressurizing the areas of investment, whether it's how efficient we're able to invest in some of the re-rate activities in Normal and taking CapEx out there, whether it's, as RJ mentioned, engaging with suppliers around product tooling investments, whether it's continuing to tweak around the efficiency of all of our go-to-market operations investments between sales and service locations, as well as all of our enterprise tech and logistics infrastructure as well. And so I think what you're seeing from us is it's really just continuing to drive that mentality of efficiency and culture of efficiency across not just CapEx, but really our operating expenses, how we're managing our cost of goods sold, and equally as we're thinking through the way in which we'll manage our inventory balances as well, which are our four key focuses across the business. Thank you. Thank you. One moment for questions. Our next question comes from Rod Lache with Wolfe Research. You may proceed. Hi, everybody. There's a comment in your release about the 2024 forecast requiring an improvement in the order rate. You said it's going to be driven by planned go-to-market strategies. I wanted to ask about that. Is it reasonable to assume that the Q1 deliveries that you're projecting here is kind of reflective of the current order run rates around 12,000 or 135 a day? What is the impact that you're seeing from some of the strategies you've unveiled, like the standard variants and leasing? Can you talk a little bit about how you're going to get the word out or advertise what you're offering at this point? Sure. Well, thanks, Rod. Yeah, you referenced it, but it's important to note here, we've just recently launched our Standard Pack variant, which we've long talked about, but ultimately, it's now available to customers. And we're really encouraged by the reaction to that and some of the early read-through on just what that does in terms of demand generation. It's also worth noting and implicit in your question is a key element here, which is the Standard Pack is not only driven demand for our more price-sensitive customers, but it's actually increased. We've seen an increase in demand for our quad Large Pack as well. And that really links to the continued growth and awareness for what we're building. When we think about how strong our customers like the product and how the brand excitement for customers has been so high, with the likelihood of repurchase being, by a significant degree, the highest across the entire auto industry, it's really a key element for us in terms of driving knowledge of the brands, knowledge of the products, and driving awareness up. So with that said, a lot of the investment that I was referring to in the letter and in my opening comments has to do with building out more of our go-to-market infrastructure. Today, we have 11 spaces. We have just over 50 service locations. We're now offering test drives through our service locations along with some of those spaces. But getting customers in our vehicles is by far and away the most effective way to not only drive brand awareness, but to convert that brand or that experience into actual vehicle orders and vehicle sales. And so a lot of activity is going to be playing out over the course of the next few months to continue building up those functional capabilities within the business and also the infrastructure associated with supporting physical interaction with the products. Great. Just given what you're seeing right now, can you discuss the rationale behind expanding the capacity by 30% at the end of this year and any update on EDV demand outside of Amazon? Yeah. And within the plant, the shutdown we have coming in second quarter of next quarter, I think a lot of the thinking around that tends to drive towards what's happening in the plant. And I said it before, but just to repeat here for clarity, one of the most important parts of the shutdown is actually what's happening within our supply chain. So we're making a number of supplier changes, a number of component changes along with supplier changes that lead to significant reductions in our material cost. And the scale and amount of change in our supply chain and through our Bill of Materials means that the coordination of the restart of the plant and winding down of the existing inventory, bringing up of new inventory, requires that multi-week shutdown. And with that multi-week shutdown, we are making improvements to the line as well. I do want to make that very clear. The improvements are really focused on line rate and the ability to run the line at a higher speed and therefore in a more efficient manner. That increased line rate will ultimately translate to lower conversion costs, reduced hours per unit within the plant as we look at operating post-shutdown through the rest of this year. And the EDV demand? Yeah, this is something we've talked about in the past. We're really excited to have new customers running pilot programs. We have more of these pilot programs coming online. There's more and more images of our commercial vans being spotted with different logos on the side. But as we've said in the past, for these large fleets and the complexities associated with transitioning to an electric vehicle fleet, we expect these to start as pilots and then over the course of this year transition into larger-scale orders. And we don't anticipate and we've been careful to guide to say that really the significant step up in demand associated with non-Amazon customers, we'll see that next year in the 2025 timeframe. Great. Thank you. Thank you. One moment for questions. Our next question comes from George Gianarikas with Canaccord Genuity. You may proceed. Thank you for taking my questions. I'd like to just go back to one of the previous questions. Just to understand the Q1 delivery cadence of down, like you said, down 10%-15% sequentially, can you just kind of help us understand the reasons behind that? Is there anything to do with just the supply, or was it informed by the comments you made around demand? Thank you. Thanks, George. Claire references in her opening remarks, during this quarter, some of the supplier changeovers that we're working on, we're going to start to feel the impact of them. And we saw it in some of the one-time charges that we accumulated already in Q4. We're going to feel more of that in Q1. And along with that, we're going to be building several thousand vehicles that won't be deliverable to consumers. So we won't be factory gating those vehicles in Q1. And so that's the reason you see the production guide lower in Q1 than what it was and what we achieved in Q4. And so while the plant won't be shut down in Q1, we are going to start to feel the impacts of the scale of the supplier changeover that we're making. And that ultimately is going to translate into our deliveries as well. So with that said, we're going to be doing everything we can once the parts are available to get those vehicles built and then make those deliveries as quickly as we can in the second quarter. Thank you. Maybe as a follow-up, just to understand, you have, I think, over 70,000 cars on the road today. I'm sure you've learned a lot from them being on the road, a lot of data collection. What has that data collection informed you about product performance and maybe what you're going to put into the R2? Thank you. Yeah. Oh, there's a lot. One of the things that's been most surprising to us is just watching how customers are interacting with the overall digital experience and digital ecosystem of the vehicle. We track really closely how the experience of interacting in the vehicle translates into the mobile app and the use of the mobile app within the vehicle or I should say to access and work with the vehicle. So as we look at some of the features that are coming even in this year, it's to enhance the digital experience in the vehicle around dynamics, around usability, around activities that you can do in the vehicle, so some of the entertainment functions, and continuing to make those interactions easier and more seamless. The way we build our software roadmap, there's a strategic, call it, long-form element that looks at how everything puzzles together in terms of partnerships, in terms of some of the capability that goes in. Then there's also a very active dialogue with customers where we're not only active on forums, but we have user groups that send us feedback points, and we address those. I get a lot of joy out of our release notes that go out every 3-4 weeks with every over-the-air update that we drop and then the feedback and the excitement that comes with that. With all that said, a lot of the learnings of what's gone into R1 beyond software around drivability, around how the vehicles are being used, around the importance placed on safety have played into really helping to shape how we're prioritizing cost of goods sold, spending, if you will, on R2. We're very excited to show the R2 product. We think it really captures the most important sort of elements or the essence of Rivian as a brand and as a product, but in a smaller form factor package and, of course, at a lower price point. It's still very much a Rivian. We've had lots and lots of debates over the last 24 months around what the content needs to be in the vehicle to deliver on that Rivian-ness, if you will, while at the same time recognizing that certain trade-offs need to be made to achieve the lower price point. Thanks. Thank you. One moment for questions. Our next question comes from Dan Levy with Barclays. You may proceed. Hi. Good evening. Thank you for taking the questions. Wanted to just start with a question on your bridge to gross margin breakeven. I wanted to just contrast that versus the prior commentary you gave, which is that half of the improvement would come from volume, just cost absorption, a quarter from cost improvements, and a quarter from price. I recognize the starting points are different. But given a seemingly weaker volume environment and I think maybe some questions on the pricing, what are the incremental offsets that you're seeing that still enable you to get to this gross margin breakeven? Is it just further improvements or breakthroughs on price than what you previously anticipated? And maybe if you could just comment for a second if you reached variable margin breakeven in the fourth quarter on R1, which was something that I believe you previously targeted. Thank you. Thanks, Dan. As you heard in my prepared remarks, the largest piece of the bridge left from Q4 2023 to Q4 2024, in which we expect to be modestly positive in gross profit, is variable cost. And so that is enabled by, as you heard RJ speak about, the continued opportunity we have to renegotiate prices with suppliers. We now have the carrot of R2, which is coming next, which has been an enabler for us to get to lower material costs across the board from a commercial context. We also have, which is largely unchanged, the planned engineering design changes that drive ample cost efficiency that will go into the product as part of the Q2 shutdown. The areas where we've seen incremental opportunity is really what we've seen across the board from a commodities context, where lithium prices have continued to soften across the board and have been more of a tailwind today in this bridge relative to the last bridge that we provided a year ago on our Q4 2022 earnings call as well. As we look at the other elements, as you rightfully noted, the lever of fixed cost absorption is a smaller bucket for us today as we think about the continuation of driving more operational efficiency as the lever versus a massive step change in the underlying volumes associated with our 2024 guidance. The last element on AFP, you've seen us take an incremental $12,000 of revenue per delivered vehicle Q4-over-Q4 from 2022- 2023. We've already made very significant progress against a lot of the AFP side of the equation. What we indicated in our prepared remarks was really more directed on some of the non-vehicle-related services revenue opportunity. That's continuation of sales of regulatory credits. RJ spoke about the service opportunity just now as we build the car park. More of what today is sitting in SG&A starts to become COGS or warranty expense. That's another key enabler for us as well, as will the opportunity for Rivian to continue to offer additional software-related revenue streams in the future that will add to that broader AFP driver within the business as a whole. Onto your second question around the contribution margin of the vehicles, we were very close in achieving positive contribution for current-priced vehicles in Q4 and see direct line of sight, as is evidenced by our continuation of committing to our Q4 positive gross profit as we look to the future and the impact that the material cost reductions will have driven by our shutdown in Q2. Great. Thank you. And then maybe if we could just have a follow-up on the demand side and specifically, how do you think about elasticity of demand here? And I get it that most of the incremental volume you're looking at beyond the order book is coming from the go-to-market strategy. But beyond that, if that doesn't materialize as planned, how do you think about the pricing? Are you looking to hold firm on the price and maybe limit some of the volume upside, or do you think that there would be potential for pricing actions? Thank you. Yeah. Thanks, George. We're constantly monitoring and looking at the pricing environment and understanding really what the overall macro environment is looking like and how to manage that. To date, we've just recently launched our lowest-price variant of R1 with the Standard Pack. And as I indicated, we've seen very encouraging reaction to that. So there is demand elasticity as a function of price, for sure. But at this point, we feel comfortable with that pricing on the Standard Pack. But again, this is something in this environment we have to go an eyes wide open and recognize how the rest of the market's reacting and how the rest of the market's behaving. Thank you. Thank you. One moment for questions. Our next question comes from Mark Delaney with Goldman Sachs. You may proceed. Yes. Good afternoon. Thanks for taking the question. I think first, just hoping to better understand your drivers around the software and services part of the business. I think about 15% of the gross profit improvement by the fourth quarter of this year is coming from software and services. You've got a number of offerings there that you've spoken about, things like insurance, charging, regulatory credit sales. Maybe you can rank order for us what you see some of the largest drivers are in terms of getting to that 15% coming from software and services this year. Sure. The biggest driver there is driven by the increases that we saw in regulatory credits in aggregate. So for us, we had $73 million for the entire year in sales of regulatory credits, and Q4 alone had $39 million. That was the largest driver. But beyond that, we'd continue to see growth across the maintenance and repairs from a service standpoint, our continued efforts in remarketing, and over the longer term, the opportunity to sell Rivian in the resale market as well, which we think is an important value driver for the business overall. We've also been encouraged by the financing revenue streams, as evidenced by both the ongoing straight financing of our vehicles in addition to the introduction of leasing, which we launched in November of this year, which has been a key enabler for us to drive a greater share of our financing penetration across all Rivian sold as well. And equally, as we think about the insurance business, that's an annuity-type business as we've seen very strong renewal rates for existing customers that are now entering their second year, while we're also able to capture a significant portion of new customers as well. And so we're continuing to see strong tailwinds from each of the key drivers across the board and are excited to have a broader roadmap of more of these software-enabled services in the future. That's helpful, Claire. My second question was trying to understand how fixed the input cost environment might be for 2024 at this point. I mean, you spoke about some changes in things like lithium and battery pricing. I mean, that can move around a little bit throughout the year. I mean, have you already gotten firm commitments on some of these materials? And similarly with suppliers, oftentimes, there's a volume requirement in order to get a certain price. You spoke about a partnership approach that some of the suppliers are taking and wanting to be involved with the R2 and some of the longer-term opportunities with Rivian. But to the extent your volumes end up less than the 57,000 production target, is there some risk as well around what the input costs you'll be paying are? Thanks. Yeah, Mark, you referenced already, but I mean, the raw material costs within the battery supply chain have changed dramatically in the last year. Specifically, lithium hydroxide is down by about 4X from north of $80 a kilogram to just over $20 a kilogram today. So that has a very significant impact on our overall cost structure. But getting into just thinking about the overall supply chain sort of health for us and overall material cost, we're just seeing a dramatically different environment for sourcing than what we had previously. When we think about when we sourced R1 and a lot of the bill of materials that we've been operating off of and the contracts we've been operating off of to date, those are contracts that went in place in 2019, 2020, where Rivian was in a very different negotiating position with those suppliers and where the industry was in a very different position to be making commitments to us. Fast forward to today, those same suppliers are highly engaged, very enthusiastic about the product. And they've experienced very much firsthand some of the challenges of supplying other products. And some of the products from large established OEMs have not done nearly as well as what they thought they would or what those other manufacturers thought they would. And on a relative basis, looking at those and comparing it to us, they now see us as a large customer. They see what's coming with R2, and that gives us really meaningful negotiating leverage. In many cases, we've been able to negotiate with our existing suppliers meaningful cost reductions that remove any of the price premium that we would have been paying before associated with us being a new company. In cases where we haven't been able to do that, we've been very active on resourcing suppliers and ending supplier relationships and bringing on new suppliers. We have a relentless focus on driving our cost of goods sold down through those activities. Now, in cases where we're either changing the part design or changing out a supplier, it's not as if we can press a button and it happens immediately. There's both the tooling time, there's the bring-up of the supplier, and then there's the coordination of the transition. The shutdown, as I said, this will be the single largest consolidated set of supply chain changes that we've had by far since we started production. We had a similar set of changes we made on EDV early part of 2023 when we shut the line down. Out of that, we achieved a material cost reduction of 35%. But the scale of the changes we're making on R1 is meaningfully bigger in terms of number of suppliers and number of components with the shutdown that we're planning here in the second quarter of this year. Thank you. Thank you. One moment for questions. Our next question comes from Emmanuel Rosner with Deutsche Bank. You may proceed. Thank you very much. I was hoping you can help me understand better how the introduction of the Standard Packs helps with your targets and strategy. I think the previous plan, I think you may have shared with us, was perhaps to introduce it once you've actually had a chance to incorporate some of the cost savings and potentially lower battery packs and efficiencies, etc. But I guess by doing it now, the price point is probably like $9,000 below the Large Pack, but the battery pack is not that much smaller, like 14 kilowatts or smaller. So it feels like it's a large price cost without much of a cost to bill of materials of it. And so I'm curious, does it help you with volume scale in terms of getting to that break-even gross margin? Where does it fit in the equation? Yeah, Emmanuel, as you said, Standard Pack has long been part of the strategy to have the three different battery pack sizes. And ultimately, it helps us access the most price-sensitive customers. We pulled it into this quarter really with the intent of answering what we were seeing as a real customer request and a lot of our customers looking forward to that configuration. But we also are able to use this as a chance to really better understand the overall demand curve. And when we look at the different configurations that we offer, up until recently, we really had our Large Pack with Quad-Motor and then our Max Pack. So we built out the high-price side of our portfolio, but we hadn't brought in the more affordable variants of R1. And so what we're really encouraged by is not only the excitement around that for, as I said, our most price-sensitive customers, but the fact that it's driving awareness, which somewhat may be not immediately obvious, but what it is driving is more demand for our Quad-motor Large Pack as well. So we've seen a step up in new orders for the Quad Large, which is supported by folks that are becoming aware of the vehicle or becoming aware of the brand, getting drawn in by Standard Pack, but then recognizing that they'd actually be willing to pay for the upgrade in range or the upgrade in performance that comes with either the Large Pack or the Quad-motor. Understood. Then, as a follow-up, staying on the topic of pricing, if I'm looking at your gross margin walk towards break-even in the fourth quarter, obviously, the only piece about pricing there is sort of this adjacent revenue, and it's a positive one. Is there any risk of downside risk from pricing on existing vehicles? I mean, I'm thinking about specifically the introduction of the Standard Pack. This is obviously cheaper than the vehicles you were selling before. And so to a certain extent, all else equal, that would put some pressure on pricing. So any reason why that would not be part of the walk? Emmanuel, as we think about the AFP lever throughout the course of the year, we'll see fluctuations that will mirror our production ramp. So we'll start following our shutdown in Q2 with production of our standard pack vehicles across the board. So while you see higher AFPs in Q4 driven by a higher concentration of Max packs that were available in that period, you'll see some fluctuations throughout the course of the year. But by the time we get to Q4 of next year, we'll have that full suite of offerings as a whole that allows us to drive more equal levels of AFP on the R1 portfolio as a whole, which is embedded within that Q4 2024 bridge. And then as I spoke about, the increase from there is really driven by many of the non-vehicle revenue streams, which will be additive in aggregate as we're servicing a larger car park within the market. Understood. Thank you. Thank you. I would now like to turn the call back over to RJ for any closing remarks. Well, thanks, everyone, for spending the time with us today and the thoughtful questions and discussion we were able to have. We're incredibly excited about the strength of customer excitement for our brand and for what we're building as a company. And with that, looking forward to continuing to make progress on our drive towards profitability as a business. And an important component of that is, of course, the unveiling and showing of our R2 product line, which we'll be showing on March 7th. And that will embody a lot of the learnings we've talked about in the context of launching and ramping R1 in a product that we think really fits the market and really fits the largest segment of demand that's available today. So with that, thank you, everyone, for the time, and look forward to our next call. Thank you for your participation. You may now disconnect.