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Tesla Motors posts first quarterly profit

Tesla reached profitability in the first quarter of 2013 for the first time in its ten year history. According to the shareholder letter, the company exceeded its targets for deliveries; significantly expanded gross margin; and improved execution throughout the company.

Excluding non-cash warrant and stock option items, the company generated a profit of $15 million. Including those factors, its GAAP profit was $11 million. The company said it achieved profitability despite the benefit of a one-time accounting gain related to the US Department of Energy (DOE) warrant.

Total revenues for Q1 rose 83% from Q4 to $562 million, a new record for Tesla. In addition to record Model S deliveries in Q1, it continued to supply full electric powertrains and battery packs to Toyota for the RAV4 EV program. It also completed various deliverables under the Mercedes Benz B-Class EV program which contributed to total development services revenue of almost $7 million.

From Q4 to Q1, total gross margin rose from 8% to 17%, as a result of a higher Model S production rate, manufacturing efficiencies, part cost reductions and regulatory credit sales. Zero emission vehicle (ZEV) credits sold to other automakers amounted to approximately $68 million or 12% of revenues. Tesla said it expected this to decline significantly in future quarters, as ZEV credits will only apply to about 1/6 of worldwide deliveries, versus roughly half of US deliveries, and the price per credit has declined.

Tesla reaffirmed its prior guidance of a gross margin of 25% in Q4 2013, assuming zero ZEV credit revenue.

Research and development (R&D) expenses were $47 million on a non-GAAP basis and $55 million on a GAAP basis. R&D spending declined by 23% from Q4 on a non-GAAP basis, as very high expenses associated with the Model S launch declined substantially.

Selling, general and administrative (SG&A) expenses were $41 million on a non-GAAP basis and $47 million on a GAAP basis, up slightly from Q4. The increase was driven primarily by additional selling expenses related to the expansion of the store network and service infrastructure, and by increased information technology costs.

Total cash was $231 million at quarter end, an increase of $10 million from last quarter, despite making the second quarterly principal repayment of almost $13 million on our DoE loan. Total cash includes short term restricted cash set aside primarily for the next DOE loan payment due in June 2013, and excludes noncurrent restricted cash.

During Q1, Tesla consistently produced 400 or more Model S vehicles per week, for a total of more than 5,000 during the quarter. 4,900 vehicles were recognized as revenue, exceeding initial Q1 guidance of 4,500.

Tesla said it is currently receiving orders at a rate greater than 20,000 per year worldwide. Orders in a particular region increase proportionate to the number of deliveries—i.e., customers are selling other customers on the car. Given that it has not yet delivered any customer cars outside of North America, there would appear to be significant upside potential in Europe and Asia, the company said.

Outlook. Tesla said that it expected to build about 5,000 Model S vehicles in Q2, with some cars to be in transit to Europe for start of deliveries in Q3. As a result, it expects to deliver slightly more than 4,500 vehicles during Q2, all in North America. For the full year of 2013 it raised its guidance to about 21,000 deliveries.

The company expects to achieve gross margin in the high teens in Q2. This expectation includes the impact from lower ZEV credit sales, a lower average selling price due to a higher mix of 60 kWh cars, as well as limited sales of the now discontinued 40 kWh cars, which will have a range-limited 60 kWh battery pack.

The lease accounting treatment for cars sold through the new financing plan (earlier post) will have no impact on cash flows. The company expects to be roughly breakeven on cash flow from operations in Q2, despite launch costs in Europe and an increase in service centers, stores and Supercharger stations.

Deferred revenue recognition required by GAAP for lease accounting will lead to a net loss on paper in Q2.

Tesla expects operating expenses to increase moderately in Q2. R&D expenses are expected to increase slightly from Q1 as the pace of product development starts to pick up. SG&A expenses will continue to rise moderately, primarily due to the growth in our stores and service centers.

Comments

HarveyD

Good going Tesla. Hope that the next generation (Model-X) will also have worldwide success.

sd

It took a little digging to figure out what their profit was. From their statement:

On a fully diluted basis, non-GAAP EPS was $0.12. GAAP diluted EPS was $0.00, as net income has been adjusted to exclude the one-time non-cash gain of $10.7 million from the elimination of our Department of Energy (DoE) warrant liability as required under GAAP.

Where GAAP is Generally Accepted Accounting Practices and EPS is earnings per share. From looking at Schwab, the full year loss per share was $-2.72 and the previous 3 quarterly losses totaled $-2.84 so that corresponds to a reported gain of 0.12 for this quarter.
From the NY Times, the expected earnings for next quarter was 0.00 and 0.04 for the following quarter.

Bob Wallace

A brand new company bringing a very innovative product to market breaking even this soon in its history?

Celebrate.

Think past the current quarter. Elon seems to know where he's going.

The Edsel lost a couple billion for Ford....

kelly

Why should selling an order backlog plus additional cars/leases "lead to a net loss on paper in Q2."?

With SpaceX profitable since 2007 and now Tesla, Musk may feel a bit relieved.

Roger Pham

Tesla has excellent technology and esthetical design which is also very ergonomic. Adding an option of PHEV for existing Model S, having a much smaller battery pack of 20 kWh, a 500cc-60-hp ICE (Kawasaki Ninja 500cc)as a built-in range extender in the front axle that is incorporated with a front wheel drive serial-parallel hybrid power train, and Tesla will be greatly appealing to the bulk of luxury sedan market that will fetch high profitability and name recognition.

Dropping battery size from 60kWh to 20kWh due to having a range extender will greatly reduce the weight and cost of the vehicle, yet still allow conservatively ~60-80 mile range all electric. Nearly all local driving will be on electric mode, while the ICE will only fire up for out-of-town trips or when cabin/windshield heating is needed. The smaller battery pack is to be used up and replaced before significant erosion of capacity due to calendar life deterioration, allowing replacement with a fresh new battery having better technology and lower cost, more power, lighter...etc.. 5-8 years later.

This will allow for maximization of profit and much wider public appeal. Tesla can enlist the help of Toyota for the design of the hybrid drive train for the PHEV option/version.

No speak Americano

This is fantastic news for Tesla! And for us at Stretch Limo, Inc. http://stretchlimochicago.com as well! We are considering shifting our fleet towards economy and green cars and might be adding in to the profits of Tesla in the near future. We look forward to seeing this car become the future's livery vehicle. Cab companies already started investing in Tesla, we sure want to be next.

ai_vin

http://mediamatters.org/blog/2013/05/10/fox-gushes-over-tesla-with-no-mention-of-federa/194000

HarveyD

Roger...that's an excellent idea. Wonder why it is not offered 'as an option' for the electric RAV4 and future Teslas, at least for the next 8 to 10 years, or until much higher performance, lower cost batteries become available?

william g irwin

Roger, That is just what I have been waiting for - the 60 hp booster ICE! Perfect! Is this a Tesla plan or your idea of what they should do? I haven't heard of any plans yet.

ai_vin

Roger, if that's the kind of car you want buy a Fisker - oh wait.

Roger Pham

Thank you, Harvey, William and ai_vin for your feedback.
Perhaps the reason why it is not yet offered is that start-up car companies has to deal with small volume of sales and thus have to keep development cost low. Fully-established car companies like FOrd and T0y0t@ want to keep development cost low by sharing the same platform between the HEV version (C-M@x hybrid) and the PHEV version (C-M@x 3nergi). Once development cost is recouped from the C-M@x platform, we perhaps will see an entirely different design for PHEV with much smaller ICE to allow weight and cost reduction while increase internal cargo space.
GM probably is largely owned by shareholders who have more stocks in petroleum, so is in no hurry to make any PHEV or HEV that will command large sale volume.

Sorry, ai_vin, Fisker is too inefficient and too expensive. The ICE component of the Fisker is too big. The serial hybrid design is inefficient in comparison to the serial-parallel hybrid design, the latter can switch from serial hybrid mode at low speeds to parallel hybrid at cruise speed to eliminate ohmic loss.

Roger Pham

Thank you, Harvey, William and ai_vin for your feedback.
Perhaps the reason why it is not yet offered is that start-up car companies has to deal with small volume of sales and thus have to keep development cost low. Fully-established car companies like FOrd and T0y0t@ want to keep development cost low by sharing the same platform between the HEV version (C-M@x hybrid) and the PHEV version (C-M@x 3nergi). Once development cost is recouped from the C-M@x platform, we perhaps will see an entirely different design for PHEV with much smaller ICE to allow weight and cost reduction while increase internal cargo space.
GeeEm probably is largely owned by shareholders who have more stocks in petroleum, so is in no hurry to make any PHEV or HEV that will command large sale volume.

Sorry, ai_vin, F!sker is too inefficient and too expensive. The ICE component of the F!sker is too big. The serial hybrid design is inefficient in comparison to the serial-parallel hybrid design, the latter can switch from serial hybrid mode at low speeds to parallel hybrid at cruise speed to eliminate ohmic loss.

ai_vin

http://climatecrocks.com/2013/05/14/after-trashing-tesla-now-anti-tech-right-says-its-unfair-competition/

HarveyD

Will continued progress in battery technologies come to the rescue.

Will future Teslas (Models X, Y, Z) use much lighter, robust, ultra quick charge 75 kWh, 120 kWh and 180 kWh battery packs?

For faster ultra quick charges, those very high energy future battery packs may be temporarily split into 3 packs of 25 kWh, 40 kWh and 60 kWh respectively? That shouldn't be too difficult to do?

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