Tesla (TSLA) Tops Q2 EPS by 12c; Deliveries Were 11,532 Units

August 5, 2015 4:28 PM EDT

(Updated - August 5, 2015 4:29 PM EDT)

Tesla (NASDAQ: TSLA) reported Q2 EPS of ($0.48), $0.12 better than the analyst estimate of ($0.60). Revenue was $954.98 million, versus the consensus of $1.17 billion.

Deliveries were 11,532 units in the quarter. (The company previously announced 11,507 Model S deliveries for Q2 2015.)

In Q3, we expect to produce just over 12,000 vehicles, representing a more than 60% increase from a year ago, and deliver approximately the same number of vehicles as in Q2, despite having one week of planned shutdown in Q3. This includes a small number of Model X deliveries.

We are now targeting deliveries of between 50,000 and 55,000 Model S and Model X cars in 2015. (Tesla previously expected to deliver approximately 55,000 Model S and X cars in 2015.) While our equipment installation and final testing of Model X is going well, there are many dependencies that could influence our Q4 production and deliveries. We are still testing the ability of many suppliers to deliver high quality production parts in quantities sufficient to meet our planned production ramp. Since production ramps rapidly late in Q4, a one-week push out of this ramp due to an issue at even a single supplier could reduce Model X production by approximately 800 units for the quarter. Furthermore, since Model S and Model X are produced on the same general assembly line, Model X production challenges could slow Model S production. Simply put, in a choice between a great product or hitting quarterly numbers, we will take the former. To build longterm value, our first priority always has been, and still is, to deliver great cars.

In addition, the timing of the Model X production ramp and high total deliveries in Q4 create operational challenges for our delivery organization towards the end of the year. This adds complexity in predicting our delivery rate with precision. Looking ahead to next year, we are highly confident of a steady state production and demand of 1,600 to 1,800 vehicles per week combined for Model S and Model X.

In Q3, we expect to directly lease about the same percentage of cars that we did in Q2. As always, we will use lease accounting for these cars even in our non-GAAP financial results, as such treatment is consistent with the cash collected on these transactions. We expect to sell about $45 million of regulatory credits in Q3, including $30 million from ZEV credit sales.

We expect the Model S average selling price to decline by more than 100 basis points in Q3 as the dollar has continued to strengthen against currencies in our key markets and our delivery mix shifts towards our lower priced 70 and 70D models. We plan to partially offset this pressure with lower production costs, and as a result we expect non-GAAP automotive gross margin, excluding ZEV credits, to be just slightly below the Q2 level.

We are on track to start production of Tesla Energy products this quarter at our Fremont factory, with a plan to ramp up production in Q4. As a result, we expect Q3 services and other revenue to grow modestly and gross margin to be comparable to Q2. We expect to further expand Tesla Energy battery module and pack production at the Gigafactory in Q1 2016 on a more automated line, where construction remains on plan.

Our operating leverage is expected to improve, with revenue and gross profit both growing at a faster rate than operating expenses during the next several quarters. Operating expenses should grow roughly 5-10% sequentially in Q3, and 45-50% for the full year as we invest in product development, including Model 3, and expand our sales capability.

We still plan to invest about $1.5 billion in capital expenditures this year as we expand production capacity, purchase Model X tooling, construct the Gigafactory, and expand our stores, service centers and Supercharger network.

In the coming months we are growing from a single product to a multi-product company. This is a milestone in the maturation of Tesla. We invite everyone to join us in getting to Tesla’s next billion miles and making Tesla Energy a part of our daily lives.

For earnings history and earnings-related data on Tesla (TSLA) click here.

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