Tesla reports Q2 non-GAAP net of $16M, GAAP net loss of $62M
1 August 2014
For the second quarter for 2014, Tesla Motors reported non-GAAP net income of $16 million and a GAAP net loss of $62 million. Tesla includes both GAAP and non-GAAP financial information because it plans and manages its business using non-GAAP information. Non-GAAP financials exclude stock-based compensation and non-cash interest expense, while adding back the deferred revenue and related costs for cars sold with a residual value guarantee or similar buy-back terms.
Non-GAAP revenue was $858 million for the quarter, up 55% from a year ago, while GAAP revenue was $769 million. Automotive revenue for Q2 included $23 million of powertrain sales to Daimler and Toyota, reflecting the start of production deliveries to Daimler for the Mercedes-Benz B Class Electric Drive and the wind down of sales to Toyota for the RAV4 EV.
In the quarterly letter to shareholders, Chairman and CEO Elon Musk and Deepak Ahuja, Chief Financial Officer, said that the company achieved a non-GAAP automotive gross margin of 26.8%, and 26.9% on a GAAP basis. These results represent a 140 basis point improvement in non-GAAP automotive gross margin sequentially, excluding ZEV credits.
In the second quarter of 2014, Tesla delivered 7,579 Model S vehicles—slightly ahead of guidance and up by more than 17% sequentially. However, average global delivery wait times increased because production growth was unable to keep pace with increased demand.
This year, we are doubling our total global addressable market by entering China and right hand drive (RHD) markets. Model S is off to a very encouraging start in China, especially considering that we are delivering cars only in the areas around Beijing, Shanghai, Shenzhen and recently Hangzhou where we can assure customers of service coverage. We are planning to launch service and deliveries in many additional cities in the upcoming months, including Chengdu and Guangzhou. China has almost 10 times as many cities with more than 1 million people compared to the United States, so we believe the opportunity is substantial.
Tesla set a new record for vehicles produced this quarter at its Fremont factory in tandem with efforts to increase the factory’s capacity. Factory production reached 8,763 Model S vehicles during the quarter, up 16% from Q1. Panasonic’s increased cell production capacity in Japan has begun to reduce this critical constraint on vehicle production.
Tesla is building a new final assembly line and adding more automation to its body shop. The new assembly line has the capacity to produce more than 1,000 vehicles per week and the flexibility to build both Model S and Model X. Tesla said that is efforts remain on track for production of Model X in the spring of 2015 and that its foresees average Q4 production of slightly more than 1,000 cars per week—enabling it to meet 2014 delivery guidance of more than 35,000 vehicles.
Gigafactory. Prior to the release of the Q2 report, Panasonic and Tesla announced their formal agreement to partner on the Gigafactory. (Earlier post.) Panasonic will invest in production equipment that it will use to manufacture and supply Tesla with battery cells. Tesla will prepare and provide the land, buildings and utilities for the Gigafactory, invest in production equipment for battery module and pack production, and be responsible for the overall management of the Gigafactory.
Tesla has already borken ground just outside Reno, Nevada on a site that could potentially be the location for the Gigafactory. However, the company continues to evaluate other locations in Arizona, California, New Mexico and Texas. The final site for the first Gigafactory will be determined in the next few months, once the company has full visibility and agreement on the relevant incentives and processes for enabling the Gigafactory to be fully operational to meet the timing for Tesla’s critical Model 3.
In the letter to shareholders, Musk and Ahuja said:
We see these concurrent efforts as prudent. This vehicle will be our third-generation product and will substantially broaden the addressable market for Tesla, helping to accelerate the transition towards sustainable transportation. Any potentially duplicative investments are minor compared to the revenue that could be lost if the launch of Model 3 were affected by any delays at our primary Gigafactory site.
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