Tesla Motors, Inc. (TSLA) Tops Q2 EPS by $0.40

August 7, 2013 4:03 PM EDT
(Updated - August 7, 2013 4:08 PM EDT)

Tesla Motors, Inc. (NASDAQ: TSLA) reported Q2 EPS of $0.20, $0.40 better than the analyst estimate of ($0.20). Revenue was $405 million vs the estimate of $383.40.

Net income (non-GAAP) increased 70% from Q1 to $26M

Record sales of 5,150 Model S vehicles in North America

Gross margin of 22% (non-GAAP), despite significant reduction in ZEV credits

On track to achieve Q4 gross margin of 25%, excluding ZEV credits

Strong balance sheet with almost $750 million in cash and no government debt

Primary focus is on expanding production to meet worldwide demand.

"Dear Fellow Shareholders:

While profits were still modest in absolute terms and not our primary mission, income increased by 70% from last quarter, driven by record Model S deliveries and a significant improvement in automotive gross margin. Non-GAAP net income in Q2 was $26 million or $0.20 per share, excluding one-time & non-cash items, and the effect of lease accounting. This compares to $15 million or $0.12 per share of non-GAAP net income last quarter. Since consensus estimates reflect non-GAAP results with lease accounting, our comparable Q2 non-GAAP net income was $7 million or $0.05 per share.

In this letter and going forward, we will report our results on a GAAP basis as well as on a non-GAAP basis, excluding lease accounting. We believe these non-GAAP financials are useful as they align with the underlying cash flow activity and timing of vehicle deliveries, and because we use such information internally for operational management and financial planning purposes.

Over 13,000 Model S customer vehicles are now on North American roads and have logged nearly 60 million miles. This week we started our international expansion by delivering the first Model S vehicles to customers in Europe. As demand for Model S grows, we are continuing to expand our manufacturing capacity as well as our global footprint of service center, retail and Supercharger networks.

With our recent $1 billion capital raise and subsequent repayment of the $440 million outstanding loan from the Department of Energy, our cash balance grew to almost $750 million during the quarter. Our financial position and balance sheet have never been stronger.

Outlook
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. We expect that Q3 ASPs will rebound from the Q2 level as we deliver European Signature Series cars and demand for 85 kWh cars remains strong.

We expect Q3 non-GAAP gross margin will remain in the low 20% range, with continuing improvements in Model S vehicle margin, offset by significantly lower ZEV credit revenue. As previously mentioned, we expect our non-GAAP automotive gross margin will continue to rise in the second half of the year to our target of 25%, assuming no contribution from ZEV credits.

R&D expenses are expected to increase significantly in Q3 as we accelerate product development efforts on Model X, Model S right hand drive, and localization of Model S for international markets. SG&A expenses will also rise, driven by the growth in our retail locations, service centers and Supercharger facilities.
Going forward, we expect to be non-GAAP profitable and generate positive cash flow from operations every quarter this year excluding any benefit from ZEV credits.

We expect to spend about $150 million in the second half of this year on capital expenditures, including the recent purchase of 31 acres of land adjacent to our factory for future expansion. The growing demand for Model S gives us the confidence to invest in additional production capacity. There are still some bottle necks in our supply chain that need to be resolved. While we are dealing with these bottlenecks, there remains some uncertainty in our ability to increase production as rapidly as we would like. We are also continuing to invest in our sales and service infrastructure. All these investments, funded in part by our profitable operations, position us for further expansion of our product portfolio and growth globally.

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


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