Tesla Fiscal Results: Delivers On Production Expectations For Future, But Loses $110.8 Million In Q3
On Monday morning, Tesla announced mostly encouraging news, although earnings per share losses were a higher than analysts had expected.
While the bottom line is ultimately the main focus on any company (Tesla lost $110.8 million this quarter), for an electric automaker looking to find its feet, short term succes is measured by their production ramp-up. And for one of the first times in its history, Tesla seems to be holding the line:
“Given Tesla’s rate of progress over the past few months, we are confident of being able to deliver 2,500 to 3,000 Model S vehicles in Q4 and over 20,000 in 2013.”
For the quarter ending, Tesla said it had achieved revenues of $50 million, which was up 16 percent from a year earlier, and 88 percent from Q2. Analysts had expected $48.3 million. As for earning per share, the company lost 92 cents excluding one-time items, which was a few cents worse than analysts expected.
During the quarter Tesla says it completed 350 Model S electric vehicles and delivered over 250. (253 Model S sedans to be exact)
“As our supply chain and internal manufacturing processes improved, production has continued to ramp into Q4, with over 200 cars produced this past week. Absent short term cost inefficiencies, such as expediting parts delivery and the learning curve of new employees, we are now at a production rate capable of generating positive operating cash flow. Given Tesla’s rate of progress over the past few months, we are confident of being able to deliver 2,500 to 3,000 Model S vehicles in Q4 and over 20,000 in 2013.”
Tesla states that in “a month from now” the company expects to be at the “400 per week” level needed to be able to produce 20,000 cars in 2013 if necessary.
Other quarterly highlights from the company:
- We delivered 253 Model S and 68 Roadsters in the quarter. Limited development services revenue was recognized in the quarter; however, progress on the full electric powertrain for the Mercedes Benz EV continues on schedule.
- Gross margin for Q3 was negative 17%, in line with previous guidance, primarily because the cost of automotive sales reflects the full burden of operating our Tesla factory allocated over a limited number of vehicles produced, along with launch-related variable cost inefficiencies.
- Research and development (R&D) expenses were $55 million on a non-GAAP basis and $62 million on a GAAP basis. The 19% sequential decrease in non-GAAP R&D expenses was primarily due to the shift of manufacturing expenses from R&D into cost of revenues as the Tesla Factory became fully operational.
- Capital expenditures were about $69 million in Q3, as we continued to build out the Tesla Factory and made final tooling payments to suppliers of Model S components. Most of the remaining tooling payments are expected to be made in Q4 based on our supplier terms.
We concluded the quarter with total cash of $109 million. This includes short term restricted cash, primarily to prefund the first DoE loan payment due in December 2012. Just after quarter end, we raised $222 million in net proceeds in a follow-on offering. This brought total available cash to $330 million heading into Q4.
- We completed our draw down of the $465 million DoE loan facility in Q3. In October, we pre-funded our second loan payment, related to principal and interest due in March of next year. We continue to maintain a strong relationship with the DoE.
Updated 2012 Financial Guidance
“We are maintaining our 2012 revenue guidance of $400 – $440 million, including our expectation of approximately 2,500 – 3,000 Model S deliveries to customers in Q4. Towards the end of the quarter, we expect to achieve positive free cash flow (cash flow from operations, inclusive of capital expenditures) in spite of short term cost inefficiencies.
Automotive sales gross margin is expected to improve significantly in Q4 due to higher volumes and planned cost reductions. We are also reaffirming our gross margin target of 25% in 2013 upon achieving the manufacturing efficiencies and planned cost reductions associated with our objective of 20,000 deliveries in 2013.
We expect that R&D spending will be flat in Q4, as we continue with further vehicle development, including introduction of smaller battery packs, and homologation for EU and Asian markets. Selling, general and administrative expenses should rise moderately on a quarterly basis as we continue to increase our vehicle selling and servicing capabilities. We remain on plan for about $240 million of capital expenditures for the year.”
Overall, this was a fairly ‘good news’ quarter for Tesla. While the 9-figure loss was high, it was still mostly expected. What was most unknown was whether or not Tesla could achieve a production level to allow them to be profitable eventually…that question now appears to be answered.
All that is left to find out now is if there is enough orders, of high enough quality, to make them profitable in 2013. We hope so.
Update: Tesla shares were up 9% @ $31.50 (+2.58) at the close of trading on Monday on the news. (Real time quote can be found here)