Rivian Automotive, Inc. (RIVN) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us for Rivian's Second Quarter 2026 Earnings Call. Today, I'm joined by RJ Scaringe, our CEO and Founder; Claire McDonough, our Chief Financial Officer; and Javier Varela, our Chief Operations Officer. Before we begin, matters discussed on this call, including comments and responses to questions, reflects 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 law. 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 the earnings presentation we filed with the SEC today. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of historical non-GAAP to GAAP financial measures is provided in our earnings presentation and press release. Just before the earnings call, we posted our earnings presentation, which includes an overview of our progress over the recent months. I encourage you to read it for additional details around some of the items we will cover on today's call. Following our prepared remarks, we will be taking questions from sell-side analysts. In the interest of keeping the call to 1 hour, we would ask these analysts to limit any follow-on questions to one. With that, I'll turn the call over to RJ.

Thanks, Chip, and good afternoon, everyone. Thanks for joining us for today's call. In the second quarter, we began deliveries of our 2 vehicles to external customers. We expect R2 to be a game changer for our customers and a driver of Rivian's long-term growth and profitability. Importantly, in the U.S. automotive marketplace start for high-quality EV choice, I strongly believe R2 is an attractively priced option for everyday ventures that will resonate with a broad set of consumers. Media reviews of R2 are outstanding. One journal wrote, "R2 is one of the best new cars I've driven in years." Another praise R2 as among the finest vehicle designs in the world. Early customer feedback of R2 is positive, and I have to say, I love it as my daily driver. Strong R2 reviews and increasing brand awareness are directly translating into accelerating customer touch points with our products. In the second quarter, we hosted over 57,000 demo drives, a Rivian record. While it's early in our ramp, we are pleased with the reservation conversion we've seen to date for launch addition R2. Turning to our manufacturing footprint. Our team in normal is focused on the production ramp of R2. As a reminder, R2 production started with a single shift, and we expect to scale to 2 shifts by the end of the third quarter. We are seeing good progress in new team member training and process improvements for the ramp of the first R2 shift. Additionally, members of our supply chain team are spending time on site with suppliers as we look towards supporting the ramp in the back half of the year and into next year. In Georgia, construction of our next manufacturing site is progressing well. The combination of our normal and Georgia facilities provides Rivian the path to scale to 515,000 units of annual capacity with plenty of room for future expansion. As an update on our Amazon partnership, Amazon now has over 40,000 Rivian electric delivery vans active in its fleet, delivering packages across thousands of cities in North America. In addition to the EDV standard pack variant already on the road, we're developing new variants with a larger battery pack and all-wheel drive to support Amazon's needs. In the second quarter, we surpassed 1 billion miles driven on the Rivian commercial van platform. Turning to our technology road map, Autonomy remains one of the most important areas of investment at Rivian. In the not-too-distant future, we believe advanced assisted driving capabilities will be a key differentiator for our customers and a substantial driver of market share. Our autonomy development is on track, and we expect to begin rolling out point-to-point capabilities by the end of this year. We believe our rapidly expanding car park with R2 will accelerate our data flywheel to enable delivering hands-off, eyes off capabilities in 2027 and ultimately, Level 4 capabilities in consumer and robotaxi variants of R2. Since we began monetizing Autonomy us in April, take rates are trending positively for the service, and we believe further future releases will drive continued increased uptake of Autonomy Plus. Later this year, we will host another autonomy and AI Day where we'll provide more updates around our exciting autonomy and AI progress. At the end of 2026, we are targeting the launch of our third-generation autonomy hardware -- this includes RAP1, our first in-house design silicon and the addition of LiDAR. The development of our RAP1 chip is on track, and we've begun final testing phases of production silicon. Finally, in May, we rolled out our Rivian assistant on all R1 vehicles and plan to launch the feature on R2 with an over-the-year update later this year. Rivian Assistant is our new AI-powered voice assistant that is built to be a digital co-pilot with integration into the vehicle ecosystem and other external apps. Customers love this new future and its intuitive functionality across applications like Spotify and Google. In closing, I want to thank our team for their continued execution this quarter. We are laying the foundations for a future that we believe will be fully electric, autonomous and AI defined. The reviews for R2 affirm that our category-defining brand and vertically integrated and extensible technology resonates deeply with customers. I couldn't be more excited about the upturn ahead. With that, I'll pass the call over to Claire to discuss our financial results.

Thank you, RJ, and good afternoon, everyone. As RJ shared, we started external customer deliveries of R2 in June. My family took a road trip in R2 earlier this summer, and we put the storage capacity to the test by piling in 4 large suitcases, backpacks, golf clubs, tennis rackets and groceries. Road tripping with universal hands-free is outstanding, making long car rides relaxing. I'm still looking forward to the launch of point-to-point capabilities later this year. As I discussed previously, delivering a strong 2026 exit rate for R2 production and deliveries is a key focus for our team as we believe it will directly translate into positive automotive gross profit for the business. Turning to the results for the second quarter. Our consolidated revenue was $1.66 billion, a 27% increase over the same quarter last year. Consolidated gross profit was $179 million, and our gross margin was 11%. Gross profit included $138 million of depreciation and amortization and $31 million of stock-based compensation expense. Adjusted EBITDA losses for the quarter were $379 million, driven by our $179 million of gross profit and increased adjusted operating expenses as we prepare to scale R2 and invest in our autonomy road map. In the second quarter, we produced 12,613 vehicles at our plant in Normal, Illinois, and delivered 12,194 vehicles. Delivery results topped our 9,000 to 11,000 vehicle expectations due to robust growth quarter-over-quarter in EDV and R1, coupled with the introduction of R2 deliveries. Our $1.14 billion of automotive revenue, a 23% increase over the same quarter last year were primarily driven by a 14% increase in vehicle deliveries and $103 million increase in revenues related to automotive regulatory credits, partially offset by a decline in average selling prices from a higher mix of commercial land and R2 deliveries. Automotive gross profit loss was $36 million compared to a gross profit loss of $335 million for the same quarter last year, a $299 million improvement, primarily due to increases in delivery and production volumes and increase in revenues related to automotive regulatory credits and an IEEPA tariff refund receivable, partially offset by the ramp of R2 production. In the quarter, we recognized approximately $100 million in incremental cost of revenue due to the ramp of R2 production as compared to the production at more normalized levels. While current macro and geopolitical factors are creating added complexity, cost and uncertainty, our team continues to work hard to manage supply chain risks and increasing commodity and memory costs. Our Software & Services segment reported another strong quarter. During the second quarter, the segment generated $515 million of revenue, a 37% year-over-year increase, primarily due to an increase in vehicle electrical architecture and software development services by the joint venture, repairs and maintenance and Autonomy Plus, offset by lower remarketing sales. $8 million or 60% of software and services revenue was attributable to our joint venture with Volkswagen Group. Software & Services gross profit was $215 million, a 42% margin due to higher vehicle electrical architecture and software development services by the joint venture. Looking at our balance sheet, we ended the quarter with approximately $5.3 billion of cash, cash equivalents and short-term investments. In July, we sold 86.25 million Class A shares in a follow-on equity offering to raise approximately $1.3 billion for general corporate purposes, including the funding of equity commitments and reserves for our $4.5 billion Department of Energy loan associated with the construction of our Georgia plant. Additionally, later this year, we expect to receive $1 billion in nonrecourse debt from Volkswagen Group and an additional $250 million equity investment from Uber, both subject to the completion of certain conditions. Our total available liquidity and targeted future capital is over $14 billion to support Rivian's investments in growth initiatives. This includes current liquidity, the Department of Energy loan and additional targeted equity investments from Uber and Volkswagen Group, which are all subject to certain conditions. Finally, for our 2026 guidance, in early July, we announced we expect to deliver 65,000 to 70,000 total vehicles across R1, R2 and our commercial van, a 3,000 unit increase as compared to our prior guidance. This implies approximately 42,400 to 47,400 deliveries in the second half of the year. We expect deliveries will be weighted towards the fourth quarter as we ramp R2. While we continue to believe our gross profit will increase year-over-year, we expect the complexity of a new vehicle launch will negatively impact our automotive gross profit in the third quarter as it did in the second quarter before becoming a benefit for our overall operations in the fourth quarter as we ramp production and deliveries. As a reminder, we believe this is a transition year for the automotive segments path towards long-term profitability as we scale R2. For 2026, we expect an adjusted EBITDA loss of between $2 billion to $1.8 billion, a $50 million improvement at the midpoint due to better-than-expected revenue related to regulatory credits in the second quarter and increased delivery volumes, which were partially offset by raw material, memory and logistic cost increases. While economic and geopolitical conditions, including international conflicts pose risks, we remain steadfast in our plans to invest behind key growth drivers. We continue to progress our autonomy road map and the expansion of our sales and service footprint as we scale with R2. We believe these strategic investments will deliver long-term value to our shareholders and customers. Finally, for 2026, we are reducing our capital expenditure guidance by $250 million at the midpoint to $1.7 billion to $1.8 billion, benefiting from project efficiencies and timing of spend. Our CapEx spend is primarily related to finalizing construction and tooling for R2 in Normal, the continued build-out of our sales, service and charging infrastructure and construction for our greenfield plant in Georgia. In closing, I'd like to congratulate our team again for the start of external R2 sales in June and the continued strong execution in the second quarter. We continue to believe that R2 and our technology road map will be truly transformative for the growth and profitability of our business. I'd like to turn the call back over to the operator to open the line for Q&A.

[Operator Instructions] Our first question comes from Mark Delaney with Goldman Sachs.

Congratulations on the R2 launch. Very exciting to see. I was hoping to start there on R2, can you share more on how the production ramp is progressing? And any examples or metrics maybe you can share on that front to illustrate how the ramp is going? And then as you think about R2 over the next year, think the pace of deliveries is going to be gated more by a supply or demand?

Well, thanks, Mark, for the question. We're also very excited about R2. Well, I guess, first on the production ramp. Of course, ramping production of a vehicle, especially where it's a first-time launch of a new vehicle is complex. It's an orchestration of ramping hundreds of suppliers, the suppliers all need to ramp at the same rate. Of course, our overall production output is throttled by our gated by the slowest moving supplier. And so the coordination to make sure everything is ramping consistently and in an organized fashion across all the different suppliers is really key focus for us. And it's the reason we start on a single shift and get everything moving efficiently and effectively before bringing on a second shift. So saying that, this is a complex effort. There's lots of moving parts, and we went into it fully recognizing the complexity and having been through this with R1 and iterations in R1 with a lot of learnings and knowledge of a business that we certainly didn't have to this level with the launch of R1. And so where it sense today is we're -- we are ramping. We're continuing to make progress week over week. We've -- as you saw, we've updated our guidance to reflect the progress we're making. And the biggest category of focus for us has been supply base and making sure that all of our suppliers are ready to continue ramping to much higher levels as we look at the back half of the year. And in particular, as we start to plan for running -- fully utilizing the plant and running across 2 shifts. Now on the demand side, there's an enormous excitement around the product. And we've been really encouraged by the conversion of reservations to orders on our launch addition. We, of course, had our own internal projections as to what that would be, recognizing that we're launching with the launch addition, which is a $58,000 version of the vehicle, and most expensive version of R2. And that conversion rate from reservation to orders has been meaningfully higher than what we expected, which is a great signal. Now of course, with that said, we are looking forward to introducing the other trims our mid-spec and our base or standard spec as we look at the early part of 2027. But the excitement even for the launch addition and the higher price finance addition has been very, very high.

Appreciate all those details. My other question was trying to understand what the R2 ramp might mean for the financials and putting that into context with some of the other comments around the input cost environment. So as you look out through the end of the year and start ramping R2, does Rivian still expect to reach a positive gross margin exiting 2026?

Thanks, Mark. As I mentioned in my prepared remarks, we continue to expect that R2 will achieve a positive gross profit as part of our exit rate for 2026. And that's enabled, as RJ mentioned, by the ongoing efficiencies of being able to produce R2 at much higher volumes and the fixed cost leverage that, that will enable within the business.

Your next question will come from George Gianarikas with Canaccord Genuity.

I wonder to focus a little bit on the EV. Can you provide an update maybe on commercial adoption beyond Amazon? And as you expand pilot programs for non-Amazon fleets, what's the current primary governor on deployment pace? Is it TCO parity, upfront capital outlay, charging density, anything you could share there?

Thanks, George. I think the first point to just call out is the ramp-up that we're seeing within Amazon. And so you're seeing this already in the numbers for the first 2 quarters of this year that Amazon is purchasing more vans. We're ramping up meaningfully from where we were in previous years. And that's absolutely a reflection of the TCO advantages that our EDV platform represents and enables. And we think that those cost benefits that are being so clearly realized by Amazon and so clearly evidenced by the ramping up of volume, we think that's going to translate to other commercial operators ultimately seeing those cost benefits and recognizing both to remain competitive, but also to address their own cost structures that they're going to be pursuing opportunities with EDV. Now that has taken longer than we had would have expected or we would have hoped for in terms of other fleets adopting a strategy towards electrification and a strategy of adopting not just electric vehicle, but a highly connected intelligent vehicle. But the signal that's being sent through Amazon's significant ramping of this is really outstanding in terms of a billboard for the capability and a billboard for what the EDV is possible delivering from a business point of view.

And maybe more of a long-term question. As you continue to benchmark other global EV platforms, particularly from Chinese OEMs, what structural or operational lessons can you apply to the R3 and other future vehicles as you spec those out and try to build them?

Of course, the auto industry is a business where every manufacturer is very aware of what our other manufacturers are doing. So Rivian are purchased by probably every car comp of the world and taken apart. And similarly, the Chinese vehicles are purchased by many different -- both OEMs, but also benchmarking companies. And so as a result, there's not really -- there's not like a magic difference in terms of how a Chinese vehicle is built relative to a vehicle built in the West in terms of the manufacturing approaches, the joining technologies, the use of high-pressure die castings, consolidation of stampings. Those methods are being deployed across all, call it, best-in-class vehicles from a manufacturability point of view and a vehicle architecture point of view. We see that, of course, evidenced in how we're building the R2, use of high-pressure die casting is an extreme focus on part consolidation and part elimination. I think the big difference that exists between U.S. cost structure and Chinese cost structure is the input cost. So you have a much, much lower labor cost in China. Much, much, much lower capital cost structure where, in many cases, the capital cost is zero, meaning it's being provided by the local government. And that compounds across the supply chain and all the way up through the OEM, and it results in a materially lower cost than what it would take to produce in the Western world. And so that naturally opens the question around trade policy. And importantly, it opens very complex questions around supply chain strategy. And we're navigating a lot of those complexities around sourcing our components and our -- not just our Tier 1, but even down to the raw materials, where there are coming from recognizing the frameworks that have been established around trade. And in a world of completely open trade, it would look -- our supply chains would look very different because we'd be optimizing purely around cost, which would be, of course, optimizing around countries that have the lowest input cost structure, be it labor cost, lowest energy cost, lowest land cost, lowest cost of capital. And of course, that's not the world we work in. We work in a world where there's very intentional industrial policies that exist that changed the way we might be able to look at this. And in many cases, there's implications around certain components where we believe it's very helpful to make sure those are sourced from the United States.

Your next question comes from Shreyas Patil with Wolfe Research.

I was curious if you could maybe unpack the $50 million increase in adjusted EBITDA for the year. How much of that is tied to the better regulatory credit sales? And then how should we think about input cost inflation?

Sure, Shreyas. As you look at the evolution of our EBITDA guidance, so we were able to improve the bottom end of the range by $100 million that moves the midpoint $50 million, as you stated. We had higher-than-anticipated regulatory credits in the first half of this year. And then as we look ahead, we have the added benefit of the incremental delivery volumes with the increase of 3,000 units in our outlook. But offsetting that, we have headwinds associated with increases in raw material costs, increases in memory costs as well as increases in logistics costs that had us arrive at this specific EBITDA range and outcome. And so as we look at the second half performance relative to the first half, what you can anticipate seeing is on the gross profit side, as I mentioned in my prepared remarks, we'll continue to see some of the inefficiencies and complexities associated with the R2 ramp impact Q3 automotive gross profit, and then we'll start to see some of the tailwinds of the scale and volumes kick in, in the fourth quarter. And then beyond that, we'll see just the ongoing investments that we're continuing to make across R&D and specifically the growth in our autonomy spend and then the continued fixed cost leverage that we'll see as we're growing our sales and service footprint, but certainly growing sales much more rapidly as well.

Okay. And then maybe just on the Autonomy Plus. So you're going to be launching the point-to-point solution later this year. I'm curious where things stand today with Autonomy Plus. Just if there's a way you can give us a sense of take rates or kind of adoption trends. And then how do you see point-to-point driving both demand, but then also those take rates? So ultimately, the subscription revenue opportunity.

We've been really encouraged by the take rates on Autonomy Plus to date. And I think, in particular, what's really encouraging is to see the status that we're at there in terms of customer engagement, customer usage of the future and then, of course, related to that, the take rate around paying for Autonomy Plus. But we have very clear line of sight and visibility into what's coming. And so as encouraged as we are with the take rates today, we're quite confident that, that will expand meaningfully as we add in additional capabilities and features. And there's going to be a whole -- think of it as like a staircase of features that ultimately leads us to very high levels of autonomy, but a really important step that's happening in the very near future is the capability of point-to-point. And just to restate what that entails, that means you can get into the car, type the address into the vehicle and the vehicle completely drive itself to that address. And initially, that will be a feature in which it's like Level 2++ where your hands are off the wheel, but your eyes are still primarily on the road, meaning you can look away for short extended moments of time, but you're not in a position to officially be reading a book or be responding to e-mails. Now this step in 2027 is going further where we go, not only hands off, but also eyes off, and that's really important because then not only is the vehicle fully driving itself and navigating to the address, but importantly, you're able to truly get your time back without the vehicle dinging it, you say, to keep your eyes on the road, but actually be able to read a book, be on an iPad. And so that's really into the like true as per the definition, Level 3 capability. And then, of course, into 2028, that's when we bring on Level 4. And that's where the vehicles capable of operating as a robotaxi, meaning there's no one even needed to be in the driver seat for any operation of the vehicle, and you can put occupants in the back. You can use that capability for robotaxi applications. But you can also have that, which is one of the things we've been very excited about, have that as a really nice feature on an owned vehicle. And so we think of this as personal Level 4, where your own personal vehicle can drop you at the airport, it can pick your kids up from school. It can go to the grocery store and grab things for you. And that road map is something we're not only very excited about, but we think will fundamentally drive increasing levels of adoption on Autonomy Plus and its future variances we've just described. Now with all that said, we also think we're at an inflection point from a consumer behavior and consumer mindset, where historically, autonomous features were not the primary purchase criteria for most customers. Of course, there's technology early adopters for which this has been top of mind for them for some time. But for the vast majority of customers, this wasn't the driving purchase criteria. We think this starts to emerge to be much more of a primary purchase criteria. And it's one of the reasons we've made the decision to invest so heavily here. We think ultimately, market share is going to be driven by the capability of the vehicle to drive itself. And of course, linked to that the vehicle being software and AI defined. And those are 2 very like critical pillars of our technology road map and technology strategy.

Our next question will come from Rajat Gupta with JPMorgan.

I had a question on the R2 customer profile. Any early reads on what that customer is proving to be existing electric vehicle owners, first-time electric wafer buyers, best lacrosse shoppers? Just curious if you have a read on the customer profile of the early R2 orders, and I have a quick follow-up.

Thanks, Rajat. The goal in developing and designing R2 is to have a very diverse set of customer profiles, meaning customers that were coming out of a wide variety of form factors coming out of a wide range of brands and from a broad spectrum of demographics. And that was the intent, that was the target. We now have the benefit of being able to see the data to see who is actually buying R2s. And the great news here is that it is exactly that. We have a very diverse customer set coming out of a broad range of vehicles, which I guess perhaps isn't -- shouldn't be too big or a surprise, the midsize SUV segment, the 2x5 passenger segment is the largest segment by far in the U.S. market. It's generally the largest segment globally as well. But the way that we've been able to really thoughtfully execute this vehicle in terms of packaging, storage capacity, performance, range, efficiency driving dynamics, both on-road and off-road has created a very wide net for attracting this very diverse set of buyers. And maybe one of the most exciting metrics here is we have a significant number of first-time EV owners, and that's really powerful. So for someone to have their first time owning an EV be Rivian. And for that bond with the brand, so to speak, to be created through that first-time ownership is powerful. But it also illustrates the strength of what we've created in terms of the product and the product market fit that this is mobilizing demand for EVs that's been latent, that's been sitting on the sideline because the product that sort of would motivate someone to move from an ICE to EV hasn't existed until R2. And so this is a great metric. Now of course, there's -- there are EV buyers that are in the mix. You have folks coming in a Tesla or folks going out of Rivian R1s, but the most important metric here is the very significant number of folks that have not owned EVs before.

That's great color. And just a follow-up for Claire, maybe. I noticed in the second quarter gross profit commentary, you mentioned on IEEPA tariff refund benefit. I'm curious how much that was because it didn't see it in the full year outlook. And then just relatedly, it looks like the guidance implies a steeper EBITDA loss in the second half versus first half despite the positive gross margin exit rate commentary. Just trying to bridge those 2 aspects.

Sure. On the IEEPA tariff refund piece, as we mentioned in our earnings call last quarter, we size the IEEPA tariffs in the tens of millions of dollars. The receivable that we booked this quarter is roughly half of the total. And so the receivable is related to the refund of the amount of anticipated proceeds that are not subject to the existing DOJ appeal. And then as you think about the second question on the EBITDA loss being steeper in the second half of the year. One of the big differences there is we did have $164 million of regulatory credits that benefited our gross profit outlook in the first half. And so as we look at the second half of the year, we'll see, again, some of the complexity associated with the R2 ramp impacting automotive gross profit in the third quarter before showing progress in the fourth quarter. But the bigger driver is really the absence of regulatory credits in second half versus first half and then the ongoing investments in R&D and SG&A.

Your next question comes from Itay Michaeli from TD Cowen.

Great. Just first, a couple of questions on the R2. RJ, 57,000 demo drives. It's a big jump sequentially Hoping you could talk a little bit about what you're seeing in terms of conversion of those drives into orders? How many people are actually experiencing autonomy plus? And then secondly, just curious whether you do expect to deliver a material amount of the premium trends this year or R2 sales just predominantly be the performance trend this year?

Yes. I mean we're really excited, as I said in my opening remarks, the 57,000 drives this past quarter is a record for Rivian. And so just the delivery of that, just enabling that number of drivers you said roughly doubling where we've been in the past. The team has had to really come together and we do a lot of prep knowing that the amount of excitement on R2 is going to drive a significant increase in both exposure to the brand, touchpoints of the brand, but of course, that's manifested through these test drives. And so with that, we're not providing specifics around conversion, but that's really an important metric we look at internally. And that actually links pretty heavily to the availability of the other variants. And so to start, as you said, we have our performance brand the most expensive variant of R2 that we've launched with. We'll be introducing the premium and then our standard trims as we look at early 2027. But we are witnessing a higher level of conversion than we expected, meaningfully higher than we expected into the launch edition package, which was great. It's super encouraging. I think reflects just the amount of excitement around the product. but saying that we fully recognize and are excited to also be launching the other trims and know that those will be coming, as I said, at the early part of 2027.

That's great to hear. And then Claire, maybe just a quick follow-up. R&D, I think, was flat up sequentially. I know you're making a lot of investments in autonomy. Just curious how we could think about R&D kind of trending in the second half of the year.

Sure. As we look at the second half of the year, we do anticipate seeing a step up and that's predominantly related to sourcing GPU for our autonomy training that will continue to ratchet up over the course of the second half of the year. In the second quarter, there, we saw some level of production as we're now in production. So there was a decrease in our engineering design and development spend, but we did underneath the R&D spend still see significant increase in terms of our overall autonomy spend.

Your next question will come from Joseph Spak with UBS.

Just maybe the comment about the $100 million of incremental cost of revenues of ramp of R2 compared to normalized levels. Just maybe some context, like what are you classifying as normalized? Is that 1 shift, 2 shifts? And are you also assuming a more normalized mix in that analysis?

Joe, the way to think about it is the $100 million reflects a combination of ramp-related inefficiencies such as expedited freight costs out of the gates or short-term premiums with suppliers that we anticipate coming off as we increase our production volumes over the course of the next couple of quarters. And then it's also cost that we expensed in period that would have naturally been absorbed into inventory, for example, if we were at more of a Q4 run rate of production volume. So that's a little bit of the way to think about how we've sized the $100 million of estimated ramp costs.

Okay. So yes, that's what I -- I mean, a good portion of that is just like you don't have the scale and leverage over the assets. So if you're saying second shift comes on at some point, later in the year and you're exiting gross profit positive, then that's sort of the -- that could help us sort of triangulate sort of like the units do you think you need to sort of be close to breakeven. But that's a fair way to think about it.

That's generally a fair way to think about it. And so as we talked about it being really at sort of Q4 normalized levels, that's not the full extent of R2 fully ramped up. But is, in the near term, a more normalized production environment that we can compare our standard cost too.