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Wednesday, July 24, 2019

Tesla (TSLA) reported earnings on Wed 24 July 2019 (a/h)

** charts before earnings **


** charts after earnings **

Tesla misses by $0.76, misses on revs; reaffirms Q3 GAAP profitability, expects positive quarterly FCF, cuts cap-ex, sees production consistent with prior outlook

  • Reports Q2 (Jun) loss of $1.12 per share, excluding non-recurring items, $0.76 worse than the S&P Capital IQ Consensus of ($0.36); revenues rose 58.7% year/year to $6.35 bln vs the $6.44 bln S&P Capital IQ Consensus. 
  • Generated $614 million of free cash flow (operating cash flow less capex) in Q2. Combined with our public offering of equity and convertible bonds (net proceeds of $2.4 billion), we ended the quarter with $5.0 billion of cash and cash equivalents, the highest level in Tesla's history. This level of liquidity puts us in a comfortable position as we prepare to launch Model 3 production in China and Model Y production in the US.
  • Auto gross margin -130 bps to 18.9% in spite of reductions in vehicle ASP and lower regulatory credit revenue; excluding regulatory credit revenue, automotive gross margin improved by ~200bp
  • Outlook: This quarter, we are simplifying our approach to guidance. We are most focused on expanding our manufacturing footprint in new regions, launching new products and continuing to improve the customer experience, while generating and using cash sustainably. Local production and improved utilization of existing factories is essential to be cost competitive in each region. We remain on track to launch local production of the Model 3 in China by the end of the year and Model Y in Fremont by fall of 2020. We are also accelerating our European Gigafactory efforts and are hoping to finalize a location choice in the coming quarters. We are working to increase our deliveries sequentially and annually, with some expected fluctuations from seasonality. This is consistent with our previous guidance of 360,000 to 400,000 vehicle deliveries this year. Additionally, we expect positive quarterly free cash flow, with possible temporary exceptions, particularly around the launch and ramp of new products. We believe our business has grown to the point of being self-funding. We continue to aim for positive GAAP net income in Q3 and the following quarters, although continuous volume growth, capacity expansion and cash generation will remain the main focus. Our 2019 capex is expected to be about $1.5 to $2.0 billion, a reduction from prior guidance. We continue to find opportunities to improve capital efficiency and shift cash outflows to future periods. This estimate includes the development of our main projects, on the timelines referenced, and to expand our Supercharger and service networks.
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