Tesla Reports Adjusted Profit $26 Million In Q2, Surprises Street – Shares Up

4 years ago by Jay Cole 39

New NASDAQ 100 Member Tesla Reported Q2 Financial Results Wednesday, August 7th After The Bell

New NASDAQ 100 Member Tesla Reported Q2 Financial Results Wednesday, August 7th After The Bell

After just delivering their first Model S sedan today in Europe (specifically in Oslo Norway), Tesla surprised Wall Street by reporting a second-quarter adjusted profit of $26 million dollars.

First Tesla Model S Has Now Been Delivered In Europe!

First Tesla Model S Has Now Been Delivered In Europe!

That worked out to 20 cents per share, besting analyst’s expectations for a loss of around 19 cents.

The non-adjusted result  (ex-one time items and the such)was a second-quarter net loss of $30.5 million.

“While profits were still modest in absolute terms and not our primary mission, net income increased by 70% from last quarter, driven by record Model S deliveries and a significant improvement in automotive gross margin,” said CEO ElonMusk in a statement on earnings.

So far this year, Tesla shares have increased by more than 300%, and the after hours trade has been positive to say the least.  Share were up about 13% immediately following the news. (real-time quote here)

Revenue for the quarter also came in higher than expected at $405 million, the street estimate ranged between 385 and 403 million.  Gross margins stood at 22% for the quarter and Tesla still expects to see that number rise to 25% by year’s end.

Overall, Tesla said they delivered 5,150 Model S sedans in the quarter which was higher than their earlier guidance.  (We’d also like to note that our own InsideEV’s estimate was that 4,950 Model S sedans were sold during the quarter…so we were pretty close)

“During Q2, we improved our production rate by 25% from 400 to almost 500 vehicles per week. 5,150 cars were delivered during the quarter, significantly surpassing our expectation of 4,500 deliveries.”

New Tesla Financing Programs Received Well

New Tesla Financing Programs Received Well

Financing Program Received Well

Tesla says their new financing program with the resale value guarantee has been successful, noting that “over 30% of
vehicles delivered in Q2 took advantage of our financing program.”   Tesla further expects “the penetration rate to
increase with the expansion of our financing programs in additional states in the United States and in international markets.”

Europe And Future Growth

As mentioned earlier, a launch party in Oslo, Norway today celebrated the first deliveries into Europe this week.  Tesla notes that the first countries to receive their Model S sedans will be Norway, Switzerland and the
Netherlands.

“In Norway alone, we expect to deliver almost 800 vehicles this year based on current orders. Orders from Europe have grown every month since February. If demonstrated demand in North America and Europe is matched by similar demand in Asia, annualized sales for Model S could exceed 40,000 units per year by late 2014”

The above statement while seeming positive, is a little bit of a ‘tricky wicket’ as it could open up interpretation that Tesla needs sales in Asia to be as strong as North America and Europe combined to hit future forecasts.  No guidance on US sale acquisition rates were also offered; something the market is desperate to ascertain.

41 Tesla "Dealer" Store Now Operation...Future Expansion To Slow In 2nd Half

41 Tesla “Dealer” Store Now Operation…Future Expansion To Slow In 2nd Half

Boutique Stores And Service Footprint

Tesla notes there is now 41 company-owned dealer stores worldwide, and 47 service centers.   Going forward for the balance of 2013, Tesla says it will focus more on expanding the service stations over the retail outlets.

“In the near term, we will slightly curtail the rate of stores openings in favor of more service centers, as it appears that simply increasing our service center coverage is sufficient to drive substantial Model S sales in any region that has a critical mass of Model S customers.”

“We only opened 6 service centers in Q2, for a total of 47 globally, but will accelerate this dramatically in coming quarters and relentlessly focus on providing a level of service that is as close to flawless as humanly possible. As a result, service expenditures in the short term will rise, but we believe that this is the right thing to do for the long-term value of the company.”

Random Notes Of Interest

  • Tesla Recognized Over $4 Million In Revenue From Upcoming Mercedes B-Class Project

    Tesla Recognized Over $4 Million In Revenue From Upcoming Mercedes B-Class Project

    Vehicle average selling prices declined slightly during the quarter because of sales of 60 kWh cars that were range limited, due to honoring 40 kWh cars commitments (the 40 kWh version of the Model S was discontinued).  This 40 kWh 60 kWh cars were sold at a $10,000 lower starting price point

  • Tesla continued to supply full electric powertrains to Toyota for the RAV4 EV
  • Tesla  completed “various deliverables” under the Mercedes Benz B-Class EV program, which the company says contributed to development services revenue of almost $4 million
  • Thanks to tapping their equity position, Tesla’s cash balance increased to $747 million at quarter end from $231 million at the end of Q1
  • cash outflows from operations was a net draw of $38 million

Model X

Not much news, but it continues to make its way into production.   Tesla notes that “R&D expenses are expected to increase significantly in Q3 as we accelerate product development efforts on Model X”

Tesla’s Outlook For Q3 And FY 2013

“While we expect production to increase from Q2, a considerable number of vehicles produced during the quarter will be in transit to European markets at the end of Q3. As a result, we plan to deliver slightly over 5,000 Model S vehicles in Q3, and remain on plan to deliver 21,000 vehicles worldwide for 2013.”

ZEV/GHG Revenue And The Bottom Line

A Model S Sold In The US Means ZEV Revenue,  A Model S In Europe?  Not So Much

A Model S Sold In The US Means ZEV Revenue, A Model S In Europe? Not So Much

Last quarter, an unexpectedly high $68 million dollars in ZEV credit revenue (+$17.1 million in other credits) was responsible for Tesla’s first ever profit of $15 million dollars.

At the time, Tesla told shareholders not to expect the same revenue stream in the future, saying:

“We expect (ZEV revenue) to decline significantly in future quarters, as ZEV credits will only apply to about 1/6 of worldwide deliveries, versus roughly half of US deliveries, and the price per credit has declined.”

It appears as though the same story is still playing out in Q2, as another $51 million (+$18 million in other GHG credits) was realized this quarter.  A number that will be decimated in Q3 as far fewer Model S sedans will be sold in the United States as production is redirected to Europe.

Still, it is easy to see how a $26 million profit from $51 million in ZEV (+$18 million in other credits) shows improvement over a $15 million dollar profit in Q1 from $68 million (+$17.1 million in other credits) in emissions revenue.

In other words, Tesla is still moving in the right direction…and that is good to hear.

(You can check out all the number in their unaudited glory here)

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39 responses to "Tesla Reports Adjusted Profit $26 Million In Q2, Surprises Street – Shares Up"

  1. kdawg says:

    Good news. This $ should keep the supercharger rollout on schedule. And hopefully the Blue Star for me 🙂

  2. Assaf says:

    Whoo-Hoo!

    Funny how all the rats came out of their analyst holes today, falling over each other telling people to short Tesla. Just in time to be smacked in the face yet again. Some people never learn…

  3. GeorgeS says:

    So what was the one time item that got them in the black??
    If they had a loss excluding this one time item, why did they have a loss.?
    One would think that they’d be showing a profit now after shipping this many cars.

    1. Josh says:

      They are using lease accounting for all of the cars sold (~30%) using the finance program they started offering. So it defers the profit over the 3 years.

      1. GeorgeS says:

        That would decrease profits.
        What one time accounting gimmick allowed them to show a profit?

        1. Tom A says:

          The one-time deal in Q1 was the way that the gov’t warrants are accounted for. Since Tesla paid off the loan early, there was about $11M in warrants that counted for Tesla, rather than against. That was the difference that put Q1 into the profit category.

          I do not know what the one-time things are for Q2.

          1. kdawg says:

            I thought it was the ZEV credits that made the difference in the first quarter.

            1. Tom A says:

              those, too, but they are not a one-time deal…they are recurring for as long as there is a market for them.

        2. Josh says:

          Tesla showed a loss on GAAP, the profit was based on non-GAAP (pre lease accounting and one timers).

          1. TeriJ says:

            Yes, Tesla lost $30.5 million this quarter.

          2. Taser54 says:

            Wait, so the numbers presented were snake oil? Will this create a backlash with the SEC?

            1. Tom A says:

              No. though I do not understand, and have not taken the time to understand, there are two ways of reporting corporate earnings: GAAP and non-GAAP. Both are reported. I’m sure Wikipedia can clear it up better than I can.

  4. scott moore says:

    The good news: They are going to go after Nissan.

    The bad news: They are going to go after Nissan.

  5. Tom A says:

    I’m not surprised. Blog threads tracking customer-reported VIN numbers, as well as reports from customers who got factory tours after picking up their Model S in Fremont, all made it pretty clear that Tesla was producing over 500 Model S vehicles per week by the end of Q2.

    I do not know why Tesla continues to state 21,000 deliveries for all of 2013. Unless you have some zombie analysts, it’s perfectly clear that, at over 500 Model S per week, they will meet that goal around Halloween!

    1. Jay Cole says:

      Tesla has to state those lower numbers because their ability to access easy cash is through their market cap (such as the most recent billion dollars). They have a vested interest in “beating” projections.

      Tesla pegged Q2 at 4,500 deliveries, but it was obvious to us (and anyone following plug-ins) that Tesla was going to smoke this number…it was just a question of by how much. For ourselves, and our monthly reports, we put the expected number at just a hair under 5,000…which turned out to be fairly accurate in the end.

      With a international order book still remaining to work through, the only way Tesla will fail to hit a number is due to an unexpected and/or catastrophic failure. In Q4 the order book will be completely depleted, then we get to see how Tesla is operating without the training wheels attached.

      1. Bonaire says:

        Can you update your monthly scorecard now with Q2 equal to 5150?

        Sounded like they may have sold some Q1-built demo cars in Q2 as well.

        You know what bothers me is the plant tours during Teslive in late July. The attendees got to see the Build Number for Q2 on a screen congratulating employees. Q2 had ended weeks before. Isn’t this offering inside information from end of July? The stock traded up since Teslive didn’t it? This gift to those attending, to me, is worth a call to the SEC for sharing non-public information. It’s like “Attend Teslive and we will give you a solid hint on earnings and you can trade it for a week”.

        1. Jay Cole says:

          Hehe, that was like the first thing we did at like 5pm when the earnings were out.

          http://insideevs.com/monthly-plug-in-sales-scorecard/

          Couldn’t have it off by those 200 cars (thought we did pretty good tracking the sales and pegging it at 5,000ish sales level though)

          1. kdawg says:

            The total for the quarter is 5150, but is there any rhyme or reason how the months break down?

    2. miimura says:

      You are correct. They will have produced all the cars they will deliver to Europe in 2013 by Halloween. For now, there’s a big difference between cars produced and cars delivered. They started producing the European cars in June and just delivered the first one today. There will be a lot of cars in transit from here on out as the cars travel to Europe and Asia. They will build that “buffer” during this year as they start up each region, then it will be transparent until they significantly increase production rate.

  6. Spec says:

    Well done Tesla. They continue to confound their critics. But I can’t help but be a bit skeptical . . . I wonder if they’ll continue to be able to find new customers for their great car after the get through the back-log of orders. I hope they can.

    1. Tom A says:

      It appears that they already have in the US, and there is still a 1 to 2 month wait from finalized order to delivery in the US. They say that 25% of test drives result in sales, and that every delivered Model S results in 2 to 3 new orders.

    2. GeorgeS says:

      and it’s a harder sell in Europe I would think in Germany the taxes would favor the Beemer or the Merc…..but I don’t know for sure.

    3. Bonaire says:

      Not really confounding. Q1 = 4900 sold. Q2 = 5150. That’s kind of flat, isn’t it? This is the hump in a three month graph of growth. I guess we wait it out to see how the rest of the year plays out to see if Tesla becomes a growth company or a temporary shining star (ala super-nova).

      1. Bonaire says:

        Been looking at the 10-K and the quarter wasn’t that great and they are highlighting all sorts of interesting non-GAAP stuff. The profit of Q2 can’t be repeated in the next two quarters. This really was a manufactured non-GAAP moment.

  7. IDK says:

    I like the Q&A session he mentions Gen 3 car for ~$35k without tax credit.

    1. Anthony says:

      Yeah, $35K (or really by then it’ll be 40K due to inflation), but for 200 miles, access to the mature Supercharger network (even if paid), and $10K in gas savings the first five years (which lowers the net price to 30K), 100K units per year initially doesn’t sound too far off.

  8. TeriJ says:

    If anyone is interested in the full story, Tesla actually lost $30.5 million this quarter using standard GAAP accounting.

    Revenue included $69 million in ZEV and regulatory credits, figures which the company expects to decline.

  9. Dan Frederiksen says:

    So much fanboying.
    The real result is 30.5m$ loss which you can see in the SEC filing. only further down is there a non gaap report which comes up with the 26m$ profit.
    Yet everyone cherry picks the fictitious profit and ignores the real result.

    1. Rick Danger says:

      Dan. FFS, they had to install all the equipment to build the Model S, they are still building out their service and supercharger networks, they are designing the Model X and it’s manufacture, then they will have to build out more of the factory to be able to design and build the Gen-III sedan, then design and build the Gen-III Roadster, CUV, etc etc etc etc etc etc etc.

      It’s not like they can just take the profits from selling the Model S and put it in their pockets.

      How is it that you cannot understand that?

      1. robster1979 says:

        @Rick: Bravo!

      2. Dan Frederiksen says:

        Rick, that’s complete fanboying. You haven’t even looked at the earnings report, have you? So you make up an excuse.

        1. Tom A says:

          What he is saying is, as long as Tesla keeps growing at such a fast pace, they will most likely not have a GAAP profit. The capex keeps outstripping revenue with such a steep growth curve.

          What is important is the growth. Once growth slows, and if the GAAP results are still negative, then the proverbial jig will be up.

          1. Rick Danger says:

            Well said Tom, TY.

    2. Steve T says:

      Dan, all I care about is that I saw my TSLA investment spike in after market trading. Apparently, the market sees the positives in today’s report. Obviously, you are not a stockholder, huh Dan….?

  10. David Murray says:

    I see some people saying it was really a 30.5$ million loss. The real question is not what they lost or gained this particular quarter, but rather if the long-term business model is sound and if sales will continue.

    1. Dan Frederiksen says:

      You can’t just ignore current results because it speaks to their long term viability.

      1. Tom A says:

        You cannot construe long-term viability when their growth is so steep that capex out-paces revenue. The critical point is growth. Once the growth slows down (which will not happen in the foreseeable future due to GenIII development), then there had better be a GAAP profit.

  11. TeriJ says:

    From Wired.com

    “Tesla included its lease accounting into this quarter’s results, something that’s not approved by GAAP.” ” Essentially, Tesla got all the cash for the expensive Model S sedans it sold and rolled that into this quarter’s income. That’s not allowed under GAAP, hence the discrepancy.”

  12. martinwinlow says:

    Isn’t there an EU equivalent of ZEV credits? MW