Tesla Reports Mixed Q2, Still Expects To Be Profitable, Cash Flow Positive In 2018

Tesla Inc TSLA exceeded Model 3 production rate targets last quarter, but its achievements didn’t bleed through to the bottom line.

The automaker’s $4.002 billion in revenue beat the Street’s $3.97 billion estimate, but adjusted earnings per share of $(3.06) fell short of consensus forecasts of $(2.81).

Q2 Highlights

Here is how Tesla performed in other metrics:

• Produced 53,339 units in Q2; Delivered 22,319 Model S, X units, 18,449 Model 3 units for total deliveries of 40,768 units.
• Tesla reported cash flow of $130 million against first-quarter outflows of $398 million, and capex of $610 million was “slightly below” last quarter’s rate.
• The end-of-quarter cash balance was $2.2 billion.
• Due to a $103 million restructuring cost, GAAP operating expenses increased 18 percent quarter-over-quarter to $1.24 billion.
• Payables increased sequentially from $2.6 billion to $3 billion.
• Auto GAAP gross margins rose 20.6 basis points, and Model 3 gross margins “turned slightly positive.” The auto segment also increased revenue 47 percent year-over-year and 23 percent sequentially.
• Energy generation and storage revenue increased 31 percent annually while gross margins fell 1,716 basis points.
• The solar business deployed 84 megawatts of energy generation systems representing an 11-percent sequential increase.

Guidance Updates

Management reiterated expectations for GAAP profitability and positive cash flow in the third and fourth quarters. It also anticipates growing cash and cash equivalents.

Additionally, it cut capex projections from just below $3 billion to below $2.5 billion.

Having repeated its 5,000 Model 3 weekly production rate throughout July, the firm expects to increase the rate to 6,000 by late August and produce between 50,000 and 55,000 in the third quarter.

“We believe that increasing capacity by improving utilization of our existing lines and making selective improvements to address bottlenecks rather than creating entirely new duplicated lines will be the most capital efficient approach,” the company letter read.

With deliveries exceeding production, it aims to achieve 15-percent Model 3 gross margins in the third quarter and 20 percent in the fourth quarter.

“Average selling price will remain high for several quarters as we expect a richer mix in the initial wave of Model 3 deliveries to Europe and APAC,” the release read. “We believe future Model 3 cost savings will more than offset the normalization of the Model 3 average selling price in the second half of 2019, resulting in improving gross margins and stable gross profit per vehicle.”

Shares popped in post-market trading. At time of publication, Tesla's stock was up 3.7 percent at $311.90.

Related Links:

Tesla's Q1 Earnings Recap: Per-Share Loss Better Than Expected, Model 3 Updates

Goldman, UBS Remain Tesla Bears Ahead Of Q2 Print, See Capital Raise As Likely