During the first quarter of 2014, Tesla Motors produced a record 7,535 Model S vehicles for global delivery; the company also delivered 6,457 cars worldwide—slightly exceeding guidance—while also filling the pipeline of deliveries into Europe and Asia. North American net orders grew sequentially by more than 10% in the quarter. Tesla delivered 1,181 cars with a resale value guarantee (RVG) in Q1.
Non-GAAP revenue was $713 million for the quarter—up 27% from a year ago, while GAAP revenue was $621 million, up 10.5% year-on-year. Q1 non-GAAP net income was $17 million—up 10.3% from Q1 2013 results—while Q1 GAAP net loss was $50 million, compared to Q1 2013 GAAP net income of $11.4 million. Both results include a $6.7 million net gain from a favorable foreign currency impact. (Tesla continues to report both GAAP and non-GAAP results.)
Cash at quarter end, including cash equivalents and short-term marketable securities, increased to almost $2.6 billion, due in part to the issue of $2 billion of senior convertible notes with five- and seven-year maturities. Q2 financials will reflect an additional cash inflow of $267 million from the exercise of the convertible notes over-allotment option by the underwriters.
Q2 & 2014 Outlook. Tesla is planning to deliver some 7,500 Model S vehicles in Q2, moving toward a 2014 goal of more than 35,000 units. The company plans to produce 8,500 to 9,000 cars in the quarter, representing a 13% to 19% increase over Q1. Battery cell supply will still constrain production in Q2 but should improve in Q3, the company suggested.
Production is now at almost 700 vehicles per week, up 15% from the weekly production rate at the end of Q4. By the end of 2014, Tesla expects the production rate to rise to 1,000 vehicles per week.
Tesla said that Model X efforts are on track to ramp up production in the spring of 2015. The company has completed the final studio release of the vehicle, and the tooling process has started with several suppliers. Tesla expects production design prototypes to be ready in Q4 of this year.
Tesla also said that its Gigafactory project is on course to begin battery cell and pack production in 2017. The ultimate location for the Gigafactory is not finalized, and Tesla will start work on at least two locations in parallel in order to minimize risk of delays arising after groundbreaking. Tesla said that its planning discussions with Panasonic and other potential production and supply chain partners “continue to go well”. At full, annualized production, targeted for 2020, Tesla expects battery pack production capacity to reach 50 GWh and cell production capacity to be 35 GWh.
|Recognizing leasing revenue|
|Tesla will recognize lease revenue over the term of the lease in both GAAP and non-GAAP financials. Automotive OEMs recognize full revenue for the price of the vehicle—even if that vehicle is eventually leased—because the vehicle is first sold to an independent dealer.|
Although leasing has begun, Tesla expects to lease only about 200 cars in Q2, due to the lead times between vehicle orders and deliveries.
Tesla has also begun production of powertrains for the Mercedes B-Class EV, and expects to ramp up production and see continued growth during the year.
Tesla plans to invest $650-850 million for the year in capital expenditures for increased production capacity, growth in store, service center and Supercharger footprints, Model X and S development and start of Gigafactory construction. This will lead to being slightly free cash flow negative in 2014, before considering the equity required for leasing.