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Electric vehicle and storage company Tesla reported better than expected earnings Wednesday with a surprise profit, two weeks earlier than markets expected. $TSLA achieved profitability and announced it's Model 3 was the best selling car in the US in terms of revenue.


Tesla Model 3 Tesla Model 3

Tesla Inc. (NASDAQ: $TSLA) Reported Earnings After Close Wednesday

$2.90 Beat $(0.15) EPS and $6.82 billion Beat $6.32 billion forecast in revenue 

Earnings

Tesla Inc. ($TSLA) reported total revenues of $6.82 billion for the third quarter of 2018 compared to $2.98 billion in the same period last year. The report crushed average analyst expectations of losses of 15 cents per share on revenue of $6.32 billion.

The company achieved profitability with net income attributable to shareholders of $312 million or $1.75 per share compared to a net loss of $619 million or $3.70 per share in the prior-year quarter. Adjusted earnings totaled $516 million or $2.90 per share.  

Tesla Inc NASDAQ: TSLA Market Reaction > After hours Pre-market 299.72 −9.05 (2.93%)

Tesla Inc. (NASDAQ: $TSLA) Reported Earnings After Close Wednesday

$2.90 Beat $(0.15) EPS and $6.82 billion Beat $6.32 billion forecast in revenue 

Earnings

Tesla Inc. ($TSLA) reported total revenues of $6.82 billion for the third quarter of 2018 compared to $2.98 billion in the same period last year. The report crushed average analyst expectations of losses of 15 cents per share on revenue of $6.32 billion.

The company achieved profitability with net income attributable to shareholders of $312 million or $1.75 per share compared to a net loss of $619 million or $3.70 per share in the prior-year quarter. Adjusted earnings totaled $516 million or $2.90 per share.  

Tesla Inc NASDAQ: TSLA Market Reaction > After hours $321.00 +$32.50 (+11.27%

Q3 2018 was a truly historic quarter for Tesla. Model 3 was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume. With average weekly Model 3 production through the quarter (excluding planned shutdowns) of roughly 4,300 units per week, we achieved GAAP net income of $312 million. - Tesla Statement

Highlights

  • Tesla Inc. saw automotive revenues grow 158% year-over-year, driven by increased Model 3 deliveries.
  • Tesla expects to achieve positive GAAP net income in the fourth quarter of 2018.
  • Free cash flow came in at $881 million, buoyed by operating cash flow of $1.4 billion.
  • Average expectations were for free cash flows of $280 million for the quarter, according to analysts polled by Bloomberg.
  • "In order to significantly increase the affordability of Model 3, we have decided to accelerate our manufacturing timeline in China,” the company said i
  • “We are aiming to bring portions of Model 3 production to China during 2019 and to progressively increase the level of localization through local sourcing and manufacturing. Production in China will be designated only for local customers.”
  • ” For the Models 3, S and X, additional tariffs will impact gross profit negatively “by roughly $50 million,”.

Tesla Deliveries Q3 18

As we have transformed from a 100,000 per year unit carmaker into a ~340,000 unit per year carmaker, our earnings profile has flipped dramatically. Sufficient Model 3 profitability was critical to make our business sustainable – something many argued would be impossible to achieve. Due to the ingenuity and incredible hard work of our team combined with an innovative vehicle design and manufacturing strategy, we have achieved total auto gross margin of ~25%. We can’t thank you enough for your support. We would not have achieved this historic quarter without it. Tesla Statement

 

US Passenger Cars Sales Q3 2018

Tesla Inc. (NASDAQ: $TSLA) Q2 Earnings Recap

($3.06) Missed $(2.91) EPS BUT $4.00 billion Beat $3.97 billion forecast in revenue 

Earnings

Tesla reported a net loss of $520.20 million or $3.06 per share for the June-quarter worse than an expected loss of $2.91 per share. This compares to a loss of $220.36 million or $1.33 per share in the prior-year quarter. The loss, on an unadjusted basis, was $4.22 per share, compared to a loss of $2.04 per share last year. $TSLA showed a 43% growth in revenues to $4 billion beating analyst estimates for $3.97 billion.  

Tesla Inc NASDAQ: TSLA

Market Reaction > After hours 315.00 +14.16 (+4.71%)

Auto Production Targets, Orders and Deliveries

  • TSLA said total vehicle production rose 55% sequentially to 53,339 units in the second quarter
  • Shipments jumped 80% to 40,740 units.
  • During the month of July, Tesla said it maintained weekly production rate of approximately 5,000 Model 3 cars "multiple times" while also producing 2,000 Model S and X vehicles per week.
  • TSLA  plans to increase production to 6,000 Model 3 vehicles per week by late August. "We aim to increase production to 10,000 Model 3s per week as fast as we can,"
  • CEO Elon Musk said in his letter to shareholders. "We believe that the majority of Tesla's production lines will be ready to produce at this rate by end of this year."

In the conference call investors will also be closely watching to see if Musk sticks to the script during the earnings call or if he puts on another bizarre show as these numbers have been rubbery at best in the past. Musk said back in Q4 that  2018 will be “a transformative year” and that Tesla is “on the cusp of a step change in the world’s transition to sustainability.” What concerns the market is the companies sustainablity. 

While it is true that Tesla is not a one trick pony anymore since it acquired another Musk stablemate in Solar City it is the electric car that all the hype, promises and branding is built around.

Tesla has persistantly pushed back production targets and had been expecting to reach production of 5,000 Model 3 vehicles per week by late in the first quarter of 2018. Previously Musk indicated that he expected 5000 by fourth quarter of 2017. Musk had 'finally' stopped short of giving brazen targets and refers to diffuclties in production targets and bottlenecks, but 10,000 a week by year end falls back in that line.

TSLA Earnings Q2 18 

Gigafactory

  • At the end of July, Gigafactory 1 battery production reached an annualized run rate of roughly 20 GWh, making it the highest-volume battery plant in the world by a significant margin.
  • In July TSLA announced our plan to build a wholly Tesla-owned Gigafactory 3 in Shanghai – our first Gigafactory outside the US. We are excited about this opportunity, as China is by far the largest EV market in the world and Chinese support for electric vehicles has been exceptionally strong.
  • Initial capacity is expected to be roughly 250,000 vehicles and battery packs per year, and will grow to 500,000, with the first cars expected to roll off the production line in about three years.
  • Vehicles produced at Gigafactory 3 will augment our existing capacity in order to meet growing local needs, which means our US manufacturing operations will not be affected.
  • Construction is expected to start within the next few quarters, though our initial investment will not start in any significant way until 2019, with much of it expected to be funded through local debt. We will share more information about Gigafactory 3 in upcoming quarters.
  • In May 2018, TSLA energy storage business reached a significant milestone when we finished deploying 1 GWh of energy storage worldwide since the inception of there business.
  • "Having reached that milestone after less than 5 years, we are now aiming to repeat it with another GWh of energy storage deployed in just the next 9 to 12 months"

Solar

  • TSLA deployed 84 MW of solar energy generation systems in Q2, an 11% increase over Q1’18.
  • Cash and loan system sales made up 68% of residential deployments in the quarter, up from 37% in Q2 2017. 
  •  In the short run, our solar volumes should remain relatively stable, but we expect to rapidly grow our retrofit solar sales with our expanding customer base of Tesla vehicle owners.
  • In spite of relatively low solar volumes expected in 2018, cash flow from this business should remain neutral. 

Tesla Services

  • Services and Other revenue in Q2 increased by 25% compared to Q2 2017 primarily due to higher used car sales, but remained relatively stable sequentially. 
  • Services and Other gross loss in Q2 was in line with our expectations, and decreased slightly compared to Q1 to $116 million

Tesla Self Driving

Musk said in 2017, “Our goal is, and I feel pretty good about this goal, that we’ll be able to do a demonstration drive of full autonomy all the way from LA to New York, from home in LA to let’s say dropping you off in Time Square in New York, and then having the car go park itself, by the end of next year. Without the need for a single touch, including the charger.”

Now in 2018 Tesla said last it “will showcase a major leap forward for our self-driving technology” . Musk said in a changing environment requires “passive optical” rather than “active optical/ Lidar (Light Detection and Ranging)” to achieve autonomous driving goals. Tesla’s neural net is to expand as the company’s customer fleet grows, which enables more high-quality data collection and analysis than previously. Part of that overall goal will be a series of new Autopilot features in 2018 and beyond. Musk added Tesla’s upcoming shared autonomy fleet will be a little like Uber and a little like Airbnb and will be a “pretty significant opportunity.”

He went on to say “As we see people upgrading to full self-driving capability,” Musk said level 2 autonomy will also be able to offer easy swap-out of the computer system, which will meet regulatory standards so cars can “better than humans,”  Autopilot will require upgrades, and this full self-driving capacity will cost an extra $3,000 to $5,000.

Cash Balance

TSLA Cash Baalnce Q2 18

With Tesla the big question for bears is cash flow and burn rates. $TSLA said it ended the quarter with cash and cash equivalents of $2.2 billion which was etter than expected. However we see the cash balance shrinking and we are still very much in nagative cash flow. The concern is what of more production hick ups or cost overruns.

 TSLA Cash flow Q2 18

With the tech crashes of $NFLX, $FB and $TWTR after earnings and the vulnerability of the NASDAQ and Musk projections and burn rates will be more tightly scrutinised. Not many doubt Musk's vision but many doubt Tesla affordability and longevity.

Outlook

  • TSLA expect to produce 50,000 to 55,000 Model 3 vehicles in Q3, which will represent an increase of 75% to 92% from the prior quarter.
  • Deliveries should outpace production in Q3 as our delivery system stabilizes.
  • Model 3 gross margin should grow significantly to approximately 15% in Q3 and to approximately 20% in Q4.
  • Model S and Model X deliveries should accelerate in the second half of this year 
  • Our target of delivering 100,000 Model S and Model X vehicles this year remains unchanged.
  • Used car sales in particular are growing rapidly and are becoming more profitable.
  • Solar deployments should remain stable in the second half of this year as we solely focus on our own retail channel.
  • For the rest of this year, total non-GAAP operating expenses should remain relatively stable at Q2 levels excluding restructuring costs, as a result of our overall drive towards operating efficiencies.
  • The higher import duties on Chinese components and unfavorable currency movements are likely to cause negative pressures. That said, we still expect to achieve GAAP profitability in Q3 and Q4.

CapEx

  • "Significantly cut back on our capex projections as a result of our revised strategy to grow capacity with our existing Model 3 lines rather than adding all new lines. Our total 2018 capex is expected to be slightly below $2.5 billion, which is significantly below the total 2017 level of $3.4 billion. "
  • "Ultimately, our capital expenditure guidance will develop in line with Model 3 production and profitability. We will be able to adjust our capital expenditures depending on our operating cash generation. Interest expenses in Q3 should be roughly $170 million (with approximately half being non-cash) and losses attributable to noncontrolling interest should remain in line with the last quarter."

 

Source: Tesla. AlphaStreet

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