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Tesla reports Q2 loss of $93M, revenues of $27M; revenue guidance remains $500-$600M for year

26 July 2012

In its letter to shareholders, Tesla Motor reported a non-GAAP net loss for the second quarter (Q2) of $93 million, or $(0.89) per share and GAAP net loss of $106 million, or $(1.00) per share, based on 105.2 million weighted common shares outstanding.

The company reported Q2 revenue of $27 million, with automotive sales of $22 million—including powertrain work for Toyota and Daimler. This marked a 15% increase from the prior quarter, which reflects continued sales of the remaining Roadsters internationally, start of Model S deliveries in the United States and ramp up of powertrain component sales to Toyota for the RAV4 EV. Model S reservations at quarter end were over 11,500, and are now at about 12,200.

Tesla sold 89 Roadsters in the quarter, bringing the total Roadsters sold to more than 2,350. The company said it anticipates selling out of Roadsters by the end of this year.

Tesla said that it made “good progress” developing the full electric powertrain for the Mercedes Benz EV, resulting in the first recognition of development services revenue on this program. Development services revenue in Q2 was $5 million, significantly lower than the prior quarter due to completion of the Toyota RAV4 EV program in the prior quarter and the start of the Daimler program in Q2.

Tesla reported overall gross margin for Q2 of 18%, driven by strong development services margin. Automotive gross margin was lower at 9%, mainly due to planned ramp up costs associated with production of Model S and Toyota RAV4 EV components and the impact of the weak euro on Roadster revenues.

Initial Model S deliveries have a lower gross margin than Tesla planned, although the company says it expects gross margin will improve “significantly” as it moves into full production mode and absorbs more of the fixed overheads.

Research and development (R&D) expenses in the second quarter were $68 million on a non-GAAP basis and $75 million on a GAAP basis. This 8% sequential increase in non-GAAP R&D expenses was primarily due to continuing investments in Model S pre-production activities.

The company ended the second quarter with $266 million in cash resources. This reflects $233 million in total cash on hand, including its Department of Energy (DoE) dedicated accounts, and the additional $33 million left to draw on our loan facility with the DoE. Tesla drew down $71 million from its DoE loan facility in Q2.

Tesla is maintaining its revenue guidance of $560 - $600 million and Model S volume projection of 5,000 units for 2012. It expects to deliver approximately 500 vehicles to customers in Q3 with the balance delivered in Q4. Tesla reaffirmed its 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.

Tesla said it anticipated automotive sales gross margin will become positive just before the end of Q3 of this year; in Q4, it expects automotive sales gross margin to improve significantly mainly due to higher volume, as well as cost efficiencies and planned cost reductions.

R&D spending should decline sequentially in Q3 by about 20% as Model S manufacturing expenses will be reflected in cost of goods sold rather than in R&D and as one-time Model S development expenses decline.

Tesla said it remains on plan for capital expenditures of about $210 million for the rest of 2012, covering final payments on Model S related tooling and equipment, Model X development, and increases in stores, galleries, service centers and overall operational capabilities to handle high volume sales. It currently expects to be close to free cash flow breakeven in Q4 of this year.

July 26, 2012 in Electric (Battery), Vehicle Manufacturers | Permalink | Comments (4) | TrackBack (0)

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Comments

I will be amazed if here are still in business in 5 years especially if they remain an independently run company. This a really difficult business to make a go of.

@sd: I agree. You need a bottomless well of cash, a dynamite plan and mistake-free execution--for years. I expect they will be acquired by one of the incumbent players. In the meantime, I wish them well

@Nick,

I'm not so sure. What you mention is true if Tesla were making run-off-the-mill ICE cars. But they're not. They're in a niche they created themselves.

Mistake-free execution does not exist. Good enough execution is all that it takes and I can see them pulling that off. The coming months will show whether Tesla can execute good enough. The first time is the hardest. Starting Model X production will be a relatively uneventful routine. So if they succeed in ramping to full production over the next months, the future looks rosy.

The reviews of the Model S have been very positive without exception. They have a killer product. That's something that is easily forgotten amidst all the analyses that focus on the car industry, the financials, the economic crisis, etc. The most important question for any company is: do they have a compelling product? The answer for Tesla is a resounding "yes". Even if they have to delay for a few months, that will not sink the company because customers will wait. They have a waiting list of about 12,000 customers, and it is still increasing.

They bought their current plant and equipment at a bargain basement price, so that bottomless well doesn't need to be so deep after all.

One underestimated, never mentioned factor is that of "Tesla the talent magnet". Really talented people go where their heart leads them, not their wallet. Tesla has a halo as 'the place to be' in the auto industry. That's where the cutting edge technology is being done. The talent will come in, even without Tesla paying them top salaries. It is a self-reinforcing effect.

I think they are "dressing the windows" until China buys them.

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