Tesla (TSLA) Posts Q4 adj.-Loss of 13c/Share; Deliveries at 9,834 Units

February 11, 2015 5:17 PM EST

Tesla (NASDAQ: TSLA) reported Q4 EPS of ($0.13), $0.44 worse than the analyst estimate of $0.31. Revenue for the quarter came in at $957 billion versus the consensus estimate of $1.23 billion.

  • Record quarterly production of 11,627 vehicles
  • Delivered 9,834 vehicles, as P85D production delays pushed some to Q1

Tesla commented:

In 2014, we also increased our number of stores and service centers by over 40%, expanded our Supercharger network by 400%, started construction of the Gigafactory and introduced numerous advances on Model S. As a result of this progress, we entered 2015 with over 10,000 orders for Model S and almost 20,000 reservations for Model X.

Model X development remains on plan for initial customer deliveries starting in Q3. Over 30 Beta Model X vehicles have been built and are undergoing extensive testing. The results of initial Beta phase crash testing have given us confidence that Model X will live up to the very high safety standard set by Model S. In March, we will start building and testing a small fleet of Release Candidate Model X vehicles that will be very close to the final production-intent design. Finally, since Model S and Model X will share the same dual motor powertrain, the introduction of All-Wheel Drive Dual Motor Model S helps reduce some of the risk that would otherwise have been associated with the launch and production ramp of Model X.

We built 11,627 vehicles in Q4, thus achieving our production target of 35,000 Model S vehicles in 2014. This required a herculean effort, because we held back release of our Performance All-Wheel Drive Dual Motor car (P85D) to ensure it would be a truly great experience for owners. While we were able to recover the lost production by end of the quarter, delivering those cars was physically impossible due to a combination of customers being on vacation, severe winter weather and shipping problems (with actual ships). As a result, about 1,400 vehicles slipped December and were delivered in Q1.

2015 Outlook

In 2015, we expect to deliver about 55,000 Model S and X vehicles, representing more than a 70% increase over 2014 deliveries. About 40% of these deliveries are planned for the first half of the year. First quarter production is expected to be about 10,000 vehicles due to it being a shorter quarter than in Q4 and approximately a week of factory downtime to allow the workforce to rest and tooling upgrades. Cars in transit to Europe and Asia must grow to support those markets, so we plan to deliver approximately 9,500 vehicles in Q1, an increase of over 47% from Q1 last year. In Q1, we expect to directly lease about the same percentage of cars that we did in Q4.

We expect that Q1 non-GAAP automotive gross margin should be about 26%, assuming no further strengthening of the US dollar in the latter half of Q1. Given that the euro has weakened another 7% since the beginning of the year, this impacts our gross margin by about 2 percentage points. We also expect GHG/CAFE credits to contribute one less percentage point to our non-GAAP automotive gross margin in 2015, than in Q4. Hence, our gross margin expectation of 26% in Q1 represents a significant improvement resulting from our efforts to increase manufacturing efficiency and deliver a richer mix of products. In markets where the local currency has declined significantly versus the US dollar, we recently increased prices by only about half that decline. The benefit of this price increase generally begins in Q2 as it applies only to new orders and is not retroactive to the existing book of orders.

Our goal is to continue to improve Model S profitability and we believe we can achieve a 30% gross margin on Model S for Q4 of 2015, even with foreign currency rates at current levels. We expect these gross margin improvements will be partially offset during the introduction of Model X, as Model X gross margin will be suppressed for a few quarters from supply chain and production inefficiencies that are typical of a new product introduction. Eventually we should be able to grow Model X gross margin to a similar level as Model S.

Edinburgh Airport Gets Its First Supercharger

As we continue to invest in the long term growth of Tesla, 2015 capital spending and operating expenses will increase, but at a more moderate pace than last year. Capital expenditures are expected to be about $1.5 billion as we expand production capacity, complete Model X development, and invest in the Gigafactory, our stores and service centers. We also plan to grow our Supercharger network by over 50% this year as well as continue other product development programs, including Model 3.

Operating expenses are expected to grow roughly 12% to 15% sequentially in Q1, driven mainly by increased engineering and design efforts. Growth of sales, general and administrative expenses in Q1 will be more modest as we will be particularly focused on increasing operational efficiency. In total, our operating expense growth should slow significantly. We expect 2015 operating expenses to grow 45% to 50% annually, as compared to doubling in 2014. Overall we expect to achieve a significantly higher level of non-GAAP profitability this year than the prior year, despite a significant increase in Tesla direct leasing, which reduces both our non-GAAP and GAAP profitability.

Starting in 2015, we plan to reorganize the revenue and cost of revenue subsections of our income statement so that automotive revenue and gross margin reflect only new car sales activities, including regulatory credits. Revenues and gross margin for all of our other businesses such as powertrain sales, services, trade-in sales and stationary storage will be captured in the “Services and Other” section of the income statement. This should provide clearer disclosure of our core business of new car production and deliveries.

In total, our customers have now driven their Tesla vehicles over 750 million miles. We are looking forward to achieving significant milestones in 2015, in addition to seeing our customers reach the billion miles driven mark.

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