Tesla
  • Tesla
  • A Tesla Model S drives outside the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
  • Tesla
  • A worker assembles a Tesla Model S at the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
  • Tesla
  • A robot puts on the top of a Tesla Model S at the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
  • Tesla
  • A worker works on the Tesla Model S at the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
  • Tesla
  • Assembly workers put together a Tesla Model S at the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
  • Tesla
  • A worker inspects a Tesla Model S car at the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
  • Tesla
  • Assembly workers inspect a Tesla Model S at the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
  • Tesla
  • Robots assembly a Tesla Model S at the Tesla factory in Fremont, Calif., Friday, June 22, 2012. The first Model S sedan car will be rolling off the assembly line on Friday. (AP Photo/Paul Sakuma)
  • Image Credit: Associated Press
Maybe it's just because of our interest in the green automotive sector, but to us, Tesla Motors has got to be the most interesting and exciting company in the US to watch. We get giddy, for instance, over the release of stuff like shareholder letters and financial results, whereas when other companies announce these things, we yawn. Our feelings about today's publication of the California automaker's 2014 first quarter financial results, with accompanying letter and call with financial analysts, is no different. They contained, after all, tons of small news nuggets that help us put together a better picture of how it will move towards its overarching goal of changing the gasoline-powered paradigm.

The important numbers released today are $50 million and 7,535. The first is how much the company lost (on a GAAP basis) – using the non-GAAP method that Tesla prefers, it actually saw $17 million in net income – while the second is the number of cars it produced in the first three months of this fiscal year. Though the reported earnings per share of $0.12 exceeded the expectations of many analysts, it was less than some of the more rosier forecasts, and so the stock (TSLA) is taking a beating in the after hours market and has tumbled down 14.5 percent to $186.85 as of this writing.

Musk gave instructions to the China team that they "spend money as fast as they can without wasting it."

Stock price aside, there is a lot to be happy about. Contrary to some recent reports, Tesla is continuing to see a rise in domestic demand – up 10 percent in the quarter – along with "significant sequential increase in worldwide net orders for Model S." China, the market that could easily become the company's biggest, is also the source of glad tidings with CEO Elon Musk saying he is "blown away" by the level of enthusiasm there. Since getting government approvals, the necessary building out of the Supercharger and Service Center infrastructure needed to support owners is going full speed ahead and Musk gave instructions to the China team that they "spend money as fast as they can without wasting it." Already there is a four-to-five month wait for cars in the country's mid-sized cities, where the work needs to happen, and that has led to some customer frustration.

Speaking of not wasting money, in an effort to increase its gross margin in the short term from just over 25 percent now to its end-of-year target of 28 percent, the company will see its Fremont factory shut for 10 days in July whilst it installs a new, more efficient production line with more automation. Musk says that, apart from batteries, labor and overhead are the biggest areas they can cut costs.

Musk mentioned Model X deliveries might start in the second quarter of 2015.

On the battery Gigafactory front, things appear to be moving forward with shovels going into the dirt at its first site next month and at a second site a month or two after that. Musk also raised the remote possibility that California could be an outside contender. "California is potentially back in the running," he said, but added that it was "improbable" despite the work that the state is doing. Apparently the governor and his team have put a lot of effort into securing the business, though Tesla remains unsure of the state because of the length of time it takes to get approvals for so-called "green field" development. Other jurisdictions have more streamlined processes which is important. If the Gigafactory and Gen III production aren't well synchronized, well, it would be "big trouble."

Of course, things never run perfectly smoothly and there was a bit of bad news for waiting Model X customers. Musk mentioned deliveries might only start in the second quarter of 2015, pushing back the expected date by a couple months. You can read the text of the shareholder letter below.

Tesla Motors Q1 2014 Shareholder Letter



Show full PR text
Tesla Motors, Inc. – First Quarter 2014 Shareholder Letter

May 7, 2014

Dear Fellow Shareholders:

• Record Q1 Model S production of 7,535 vehicles
• Delivered 6,457 Model S vehicles, slightly exceeding guidance
• Net income of $17M and $0.12 EPS (non-GAAP), loss of $50M and $(0.40) EPS (GAAP)
• Expansion in Asia starts with first deliveries into China
• $2.3B raised in convertible notes offerings
• Significant Gigafactory and capacity expansion progress
• On track for more than 35,000 deliveries in 2014

This year we are engaged in the most rapid expansion in Tesla's history. In Q1, we produced a record 7,535 Model S vehicles for global delivery. We also slightly exceeded guidance by delivering 6,457 cars while also filling the pipeline of deliveries into Europe and Asia to support growing global demand.

We are pressing forward on a variety of initiatives to continue our growth in 2014 and beyond. We are expanding our factory capacity to support increased Model S production later this year and the introduction of Model X next year. Extensive development work on Model X is underway and we expect to have production design prototypes ready in Q4. Meanwhile, we are opening new stores, service centers and Superchargers at a faster rate, and later this year we will kick off construction of the Gigafactory. 2014 is already a very busy year.

Growing Global Demand & Scaling Customer Support

In Q1, we saw a significant sequential increase in worldwide net orders for Model S. This upward trend was driven by our greater global footprint and increasing consumer awareness of Model S. Overall, our customers have now driven Model S more than 275 million miles, saving nearly 14 million gallons of gasoline.

Our entry into China has been greeted enthusiastically. After working for more than a year to secure proper government approvals, licenses and facilities, we delivered the first cars in China at customer events in Beijing and Shanghai last month. Each event enjoyed ample media coverage, complete with delighted Model S owners receiving their cars. Tesla received further media attention thanks to the Shanghai government's announcement that Model S drivers in the city will be entitled to free license plates, thereby avoiding the usual public auction price of $10,000 to $15,000 per plate. Since Model S pricing in China was already very competitive, this makes the car's value proposition even more compelling.

We plan to expand in China as fast as possible because we believe the country could be one of our largest markets within a few years. We are also encouraged by how fast we have been able to develop our infrastructure in China when the proper support is in place. With the help of the Shanghai government, for example, we were able to construct a Supercharger station within just a few weeks of site selection. At the start of China deliveries we had three Supercharging sites open, each powered by clean electricity from solar panels. Our plans are to install a large Supercharger network in China.

China Deliveries Event & Supercharger

To support our global growth, we are aggressively accelerating the rate at which we open stores and service centers. This year we plan to increase the number of locations from 2013 by more than 75%. Our Supercharging network will grow at an even faster pace. We recently energized our 100th Supercharger, located in New Jersey, and plan to install 200 more Superchargers globally this year. Our customers have now driven nearly 15 million Supercharged miles for free.

North American net orders grew sequentially by more than 10% in the quarter. As always, we are pursuing our expansion through a direct-sales model to accelerate the transition to sustainable transportation. Selling directly allows us to most effectively communicate the unique benefits of electric cars to potential customers, as well as improve the buying and servicing experience.

While consumers and the vast majority of jurisdictions have overwhelmingly welcomed our direct-sales model, there are still a few states in the U. S. where we face resistance. In those states, we continue to fight to protect our customers' ability to buy directly from Tesla. We believe strongly in the fairness of our position, which has been supported by a long list of consumer activists, economists and influential policy makers. In late April, three directors of the Federal Trade Commission published a blog post that explained the many reasons why Tesla's ability to sell directly is superior for consumers and why efforts to undercut that ability represent "bad policy."

In-Vehicle Paperless Lease Acceptance

Our goal is to streamline the process of acquiring a Tesla and continually reduce the total monthly cost of ownership. Hence we are working to offer financial products delivered in innovative ways. For example, last month we launched Tesla Finance to directly offer leasing for small and medium-sized businesses. This program is straightforward and transparent, and it allows businesses to take advantage of tax deductions for their lease payments. The whole program is designed to be user friendly, with a simplified lease contract and an electronic acceptance process that can even be completed on the Model S 17-inch touchscreen. Leasing through Tesla is now available in 21 of our highest volume states and the District of Columbia. We plan to expand this offering further to more states in the U. S. as well as Canada shortly.

Expanding Vehicle Offerings and Production to Meet Demand

As we grow globally, we are also expanding our vehicle portfolio. Our addressable market will increase with the launch of the right hand drive Model S in the United Kingdom next month, and in Japan and Hong Kong later this summer. Model X efforts are on track to ramp up production in the spring of 2015. We have just completed the final studio release of the vehicle. The tooling process has started with several suppliers and we expect production design prototypes to be ready in Q4 of this year.

We also continue to improve Model S. During Q1, we voluntarily added a titanium underbody shield and aluminum deflector plates to the bottom of all new Model S cars and also made this available as a free retrofit for existing vehicles. While this change was not necessary from a safety perspective, our goal is to give our customers complete peace of mind.

To meet the growing demand for Model S, we have been expanding our internal production capability and have secured production increases from our suppliers, including increased cell supplies from Panasonic. Production is now at almost 700 vehicles per week, up 15% from our weekly production rate at the end of Q4. By the end of 2014, we expect the production rate to rise to 1,000 vehicles per week.

The Gigafactory project is on course to begin battery cell and pack production in 2017. We have not yet finalized the ultimate location for the Gigafactory and we are going to start work on at least two locations in parallel in order to minimize



risk of delays arising after groundbreaking. Planning discussions with Panasonic and other potential production and supply chain partners continue to go well and we are pleased with the high interest level in the project. By the time the Gigafactory reaches full, annualized production in 2020, we expect battery pack production capacity to reach 50 GWh and cell production capacity to be 35 GWh. At that level of production, we do not anticipate any commodity supply constraints.

Q1 Results

As usual, this letter includes both GAAP and non-GAAP financial information because we plan and manage our business using this non-GAAP information. Non-GAAP financials exclude stock-based compensation and non- cash interest expense, and add back the deferred revenue and related costs for cars sold with a resale value guarantee (RVG). The option to obtain financing via our bank partners and get an RVG from Tesla remains popular with our U.S. customers. We delivered 1,181 cars with an RVG in Q1.

Non-GAAP revenue was $713 million for the quarter up 27% from a year ago, while GAAP revenue was $621 million. The average selling price of Model S remained strong. Automotive revenue included $15 million of Toyota powertrain sales and almost $12 million of regulatory credit sales, but no zero emission vehicle (ZEV) credit sales as expected.

During Q1, we achieved a non-GAAP automotive gross margin of 25.4%, and 25.3% on a GAAP basis. This represents a 20 basis point improvement in non-GAAP automotive gross margin sequentially, despite booking an unplanned $2 million reserve for underbody shield retrofits.

Research and development (R&D) expenses were $68 million on a non-GAAP basis and $82 million on a GAAP basis. Non-GAAP R&D expense was up 17% from Q4, as Model X engineering work accelerated and efforts continued to adapt Model S for growing international markets.

Selling, general and administrative (SG&A) expenses were $97 million on a non-GAAP basis and $118 million on a GAAP basis. The 11% sequential increase in non-GAAP SG&A expense was driven mainly by the expansion of our customer support infrastructure.

Q1 non-GAAP net income was $17 million, or $0.12 per share based on 140.2 million diluted shares, while Q1 GAAP net loss was $50 million or $(0.40) per share. Both results include a $6.7 million net gain from a favorable foreign currency impact.

We generated $61 million of cash flow from operations during the quarter. This was after consuming $63 million from increased inventory of in-transit finished vehicles built to specific customer orders. Capital expenditures in the quarter totaled $141 million.

Cash at quarter end, including cash equivalents and short-term marketable securities, increased to almost $2.6 billion, in part because we issued $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 overallotment option by our underwriters. We used a small portion of the gross proceeds to invest in bond hedge transactions, offset by proceeds from a sale of related warrants. As a result, we should avoid any actual dilution from the convertible notes until our common stock climbs over $500 per share. A table published on our website shows the potential dilution from our note offerings at various projected stock prices.

Munich Service Center

Q2 & 2014 Outlook

We expect to deliver about 7,500 Model S vehicles in Q2 as we move toward our goal of more than 35,000 Model S deliveries for the year. We also plan to produce 8,500 to 9,000 cars in the quarter, representing a 13% to 19% increase over Q1. Planned production is again higher than deliveries because of the growing pipeline of in- transit cars to Asia and Europe that have been built-to- order for customers. This includes cars destined for right hand drive markets. The quarterly gap between production and deliveries is expected to decline in future quarters. Battery cell supply will still constrain our production in Q2 but should improve in Q3.

We have started Tesla leasing, but due to the lead times

between vehicle orders and deliveries we expect to only lease about 200 cars in Q2. Many new orders for leased vehicles received in Q2 will be delivered in Q3, so the number of leased vehicles should grow over time.

For leased vehicles, we will recognize lease revenue over the term of the lease in both our GAAP and non-GAAP financials. In contrast, 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. Therefore, to facilitate comparisons with other automakers, we plan to include a supplemental table in future shareholder letters that summarizes the quarterly aggregate price of vehicles leased to customers.

We have just commenced production of Tesla powertrains for the Mercedes B-Class vehicle, a significant milestone in the development of the program. We expect to ramp up production shortly and see continued growth during the year.

We expect non-GAAP automotive gross margin to increase slightly from Q1 to Q2. As manufacturing efficiency and part costs continue to improve, we believe a 28% non-GAAP automotive gross margin by Q4 of this year is still an achievable target.

Q2 operating expenses are expected to grow sequentially by about 30% for R&D and 15% for SG&A. Despite the start of leasing vehicles, investments in R&D and geographic expansion, we expect to be marginally profitable in Q2 on a non- GAAP basis. Based on our current stock price, the diluted shares outstanding are projected to be about 142 to 144 million in Q2.

We still plan to invest $650-850 million for the year in capital expenditures for increased production capacity, growth in our store, service center and Supercharger footprints, Model X and S development and start of Gigafactory construction. With all these initiatives, we expect to be slightly free cash flow negative in 2014, before considering the equity required for leasing.

This should be another year of focused execution of our aggressive expansion plans.


Webcast Information

Tesla will provide a live webcast of its first quarter 2014 financial results conference call beginning at 2:30 p.m. PT on May 7, 2014, at ir.teslamotors.com. This webcast will also be available for replay for approximately one year thereafter.

Non-GAAP Financial Information

Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis. On a non-GAAP basis, financial measures exclude non-cash items such as stock-based compensation, the change in fair value related to Tesla's warrant liability, non-cash interest expense related to Tesla's convertible senior notes as well as one-time expenses associated with the early repayment of the Department of Energy Loan. Non-GAAP financial measures also exclude the impact of lease accounting on Model S related revenues and cost of revenues, as this perspective is useful in understanding the underlying cash flow activity and timing of vehicle deliveries. Management believes that it is useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information internally for its operating, budgeting and financial planning purposes. These non-GAAP financial measures also facilitate management's internal comparisons to Tesla's historical performance as well as comparisons to the operating results of other companies. Non-GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction with financial information reported under U.S. GAAP when understanding Tesla's operating performance. A reconciliation between GAAP and non-GAAP financial information is provided below.

Forward-Looking Statements

Certain statements in this shareholder letter, including statements in the "Q2 & 2014 Outlook" section; statements regarding profitability and free cash flow and cost reduction; statements relating to the progress Tesla is making with respect to product development (including Model X development and production ramp plans), growth in China, right hand drive market launch expectations, schedule for the introduction of future options and variants, delivery and volume expectations of Model S; the ability to achieve vehicle demand, volume, production, revenue, leasing, gross margin, spending, profitability and cash flow targets; future store, service center and Tesla Supercharger expected costs, openings and expansion plans; expansion plans for Tesla Finance; commodity supply constraint expectations; and Tesla Gigafactory plans and expectations are "forward-looking statements" that are subject to risks and uncertainties. These forward-looking statements are based on management's current expectations, and as a result of certain risks and uncertainties, actual results may differ materially from those projected. The following important factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: Tesla's future success depends on its ability to design and achieve market acceptance of Model S and other new vehicle models, specifically Model X; the risk of delays in the manufacture, production and delivery of Model S vehicles; the ability of suppliers to meet quality and part delivery expectations at increasing volumes; Tesla's ability to continue to reduce or control manufacutring and other costs; consumers' willingness to adopt electric vehicles; competition in the automotive market generally and the alternative fuel vehicle market in particular; Tesla's ability to establish, maintain and strengthen the Tesla brand; Tesla's ability to manage future growth effectively as we rapidly grow, especially internationally; the unavailability, reduction or elimination of government and economic incentives for electric vehicles; Tesla's ability to establish, maintain and strengthen its relationships with strategic partners such as Daimler, Toyota and Panasonic; and Tesla's ability to execute on its retail strategy and for new store, service center and Tesla Supercharger openings. More information on potential factors that could affect our financial results is included from time to time in our Securities and Exchange Commission filings and reports, including the risks identified under the section captioned "Risk Factors" in our annual report on Form 10-K filed with the SEC on February 26, 2014. Tesla disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.


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    • 1 Second Ago
  • 78 Comments
      Joeviocoe
      • 11 Months Ago
      Oh... and way to go Dom.... throw any bad news into the Headline... the rest can be buried in the content. That is the modern face of journalism. Shock. But all in all, a very good, thorough and fair article... just gotta get past the attention grabber that misleads people from the start. It is not so bad if people would routinely read completely... but most people don't read past headlines, and thus stay mislead.
        Domenick
        • 11 Months Ago
        @Joeviocoe
        Sorry I was so brief in my first response. I have a couple minutes now. So while I didn't write the headline, I also don't have a problem with it. The $50 million loss is straight from the bullet points of the Shareholder letter and is the main figure people want to know about. Was there a loss or a profit? How Much. We could have gone with the non-GAAP figure of $17 million profit, but then we would stand accused of being misleading. Both numbers are, of course, in the text. Regarding the mention of the Model X, again, it was (arguably) the other most newsworthy bit that surfaced today (during the conference call). Had Elon said the Model X was ahead of schedule, we may very well have gone with that. It's unfortunate if people only read the headline and don't delve into posts a bit more. If people understand the history of the company and the whole scope of its endeavors they would, as "Rotation" mentions in a comment below, not think a $50 million loss at this point is a bad thing, because it's not.
          purrpullberra
          • 11 Months Ago
          @Domenick
          So what's wrong with "Tesla releases Q1 figures plus gigafactory and ModelX news"? I don't believe that wouldn't generate just as many page hits. (If you have data suggesting otherwise I'd love to hear it. It deserves its own article.) There were a lot of interesting bits of news. Highlighting the only 2 negatives in the headline does come off a little bit less than even handed, IMO. It isn't a huge infraction tho ;-) Here's hoping you take over Danny's usual beat!
          Joeviocoe
          • 11 Months Ago
          @Domenick
          Domenick... there were several 'bullet points' to choose from. Only the negatives were chosen. That is called "framing" the story and shows a clear bias. Yes, you CAN negatively frame a positive story using only true statements. While more informed people might not be mislead by such a headline... you have to be naive to think that the majority of people who troll the Internet for negative Tesla headlines are so informed. The headlines themselves go viral faster than the main content of the articles. Other "news" outlets will often troll for the Tesla Headlines... ignore your well-written content, and proceed to write their own article that centers around only the negativity of the Headline. It really does take a conscience effort to be objective in media.. and most fail at it. (sometimes on purpose because as purr mentioned, shock sells more advertising). Choosing a headline that is NOT ONLY factual, but an even representation of the content, is important to objective journalism.
        Domenick
        • 11 Months Ago
        @Joeviocoe
        Thanks for your comment on the article. In my defense, I didn't write the headline.
          CeeJayABG
          • 11 Months Ago
          @Domenick
          Joe, I can't disagree with you, actually. It is true that the accounting can be arcane to the uninitiated and "$50M loss" does require a context for those unfamiliar with Tesla business metrics.
          Joeviocoe
          • 11 Months Ago
          @Domenick
          Well, the larger problem is that negativity sells advertisement. So, with any complex report, there will be good and bad. And we can always count on the bad to be given the spotlight. Would be nice if the author were to make the headline a bit more neutral ;) or at least include your comprehensive explanation in the main article, so it doesn't get buried in the sea of comments to come. *And if I know Autoblog regular readers who have a slight against Tesla because Fox News has been smearing them for years.... they will begin to pour in comments that reflect reading only headlines and thinking that Tesla is once again on the verge of bankruptcy*
          CeeJayABG
          • 11 Months Ago
          @Domenick
          Domenick, FWIW Tesla has only had one quarter (Q1 '13) with a GAAP profit. The ($50M) headline was not wrong. Tesla followers would probably not be too dismayed by this.
          Joeviocoe
          • 11 Months Ago
          @Domenick
          CeeJay... as you explained very well in your explanation.. yep, GAAP loss of $50mil is correct. But I didn't dispute the accuracy. Only the misleading nature of showing only a small part of the truth, which leads to misconceptions of the whole truth. The Headline should not have contained any numbers at all, since no single number could really summarize the report. Domenick.... who writes the headline? Sebastian?
          Grendal
          • 11 Months Ago
          @Domenick
          "I didn't write the headline." Then I'm happy it doesn't say "Four people had deadly heart attacks and 23 people were murdered while Tesla lost $50 million in Q1! Russia invades the Ukraine while Tesla intentionally let's their Model X production slip to nearly 2016!
      2 wheeled menace
      • 11 Months Ago
      http://green.autoblog.com/2014/04/08/teslas-zev-credit-allotment-changing-under-new-carb-rules/ Could this be due to the loss of ZEV credits? Has that been the only thing keeping this company alive?
        Joeviocoe
        • 11 Months Ago
        @2 wheeled menace
        Also... I doubt that such recent changes would effect the Jan/Feb/Mar revenue. And are we even sure that ZEV credits can be counted as earnings before they are sold off to another automaker on that undisclosed ZEV credit market?
        CeeJayABG
        • 11 Months Ago
        @2 wheeled menace
        Hang on a minute, everyone bashing 2-wheel here. It's not irrational to say that the net present value of Tesla's POTENTIAL ZEV credits did take a hit when CARB disallowed the swap. But this would be addressed only by buyers/sellers of TSLA shares trying to judge the value of the company. They do not show up on as an asset. As joe points out this did not affect TSLA Q1/'14 because there was no ZEV Credit revenue reported. In defense of anybody confused by regulatory credits: Tesla had always been cagey about these all the way through mid-last year.
          purrpullberra
          • 11 Months Ago
          @CeeJayABG
          For the record I was talking about the final, "...keeping them alive..." statement. As if the billions in revenue or tens of thousands of sales and the innumerable awards have had nothing to do with Tesla's success. It's a small part of the concerted attempts to belittle Tesla's achievements. 2WM isn't always such a troll nor is he a part of a larger attempt himself but that sentence deserves my comment. And that sentiment, that Tesla survives exclusively due to government handouts, deserves to be ridiculed. I stand by my comment.
        markrogo
        • 11 Months Ago
        @2 wheeled menace
        They've booked nothing at all from ZEV credits for two straight quarters. So, no, your comment is irrelevant.
        Joeviocoe
        • 11 Months Ago
        @2 wheeled menace
        The expenses are the reason. Model S expansion, and R&D for Model X
        purrpullberra
        • 11 Months Ago
        @2 wheeled menace
        Is your ignorance of the facts about Tesla's business strategy the only thing keeping you alive? They spend all the money from car sales to grow the company, it's called business dude. Wow, such genuinely purposeful idiocy.
        raktmn
        • 11 Months Ago
        @2 wheeled menace
        What is "keeping this company alive" is the same thing as many other companies. What keeps them alive is the ability to raise money to pay up front to invest into future revenue streams. That's how large R&D corporations operate. This is nothing unusual, or scary, or negative.
      purrpullberra
      • 11 Months Ago
      He's just Trolling
      Ashton
      • 11 Months Ago
      Wow, glad I'm not waiting for the Model X, or I'd be pretty pissed off. But thankfully, I'm broke and can't afford any of Tesla's models, YAY! s/
        purrpullberra
        • 11 Months Ago
        @Ashton
        Sure, but 99%+ of customers want it done right. So for them the wait will always be worth it.
        Dave R
        • 11 Months Ago
        @Ashton
        Not surprised at all. Tesla has a habit of over-promising and under-delivering when it comes to time-lines.
          Letstakeawalk
          • 11 Months Ago
          @Dave R
          "I can't think of one revolutionary vehicle that ever released on schedule." Ah, Joeviocoe, backpedaling for Tesla. Of course, most of us readily acknowledge the difficulties of setting up an entirely new automotive paradigm, and willing to overlook delays while the sausage-making happens. It took Tesla nearly six years to bring their first sedan to market... and we can't be happier with the result.
          Joeviocoe
          • 11 Months Ago
          @Dave R
          I agree with that, LTAW. I was only commenting on how it for most automakers it is accepted practice, but for Tesla it is " a habit of over-promising and under-delivering"
          Joeviocoe
          • 11 Months Ago
          @Dave R
          A habit that every automaker dealing with a completely new product line, also has. I can't think of one revolutionary vehicle that ever released on schedule. The big difference is the number of people hanging on every word of a single company. The spotlight is certainly fixed on Tesla. How many people here follow the quarterly earnings reports of other automakers?
          purrpullberra
          • 11 Months Ago
          @Dave R
          True that. I'd be disappointed if the first ModelS's were crap when finally delivered. But they weren't, the cars were outstanding from the get go. It leads most customers to believe the wait is worth it. Some will be pissed off though. But that is true no matter what so Tesla needs to do the right thing and slowly keep moving back the production date if that's required to do it right the first time out. That seems to me to be their guiding philosophy.
        NestT
        • 11 Months Ago
        @Ashton
        Somebody is always going to be pissed about something. But anybody that can afford a Model X is not driving something that is a few months from the Junk Yard and usually have more that 2 cars. For most no worries. I was never happy to be broke. Rather wait than not be able to buy.
      RC
      • 11 Months Ago
      Exactly, just like Amazon, Tesla is growing and investing in its future. There is no need to turn a profit.
      purrpullberra
      • 11 Months Ago
      What great news... I'm thankful for the opportunity to buy some more shares. Holy crap, what are people not getting about all the great numbers and positive signs?!? Tesla has no need to be 'profitable' now. They have no need to 'make money on just selling cars right now'. Any particular numbers cited against Tesla ignore all of the demand and progress made in every significant area of operations. Relatively speaking, things are still going flawlessly. Only the ragged, rabid few see negatives here. Nothing is perfect but the trajectory Tesla is on really shows how well they are continuing to execute on all fronts. And China is simply going to adore Tesla well into the foreseeable future. The possibilities there are absolutely enormous and no one can match what Tesla offers. **The prestige ascribed to Tesla cars in China will be unmatchable by anyone** I love how the analysts are working both sides, well, by love I mean loathe. Adam S. at M.Stanley helping Tesla achieve great stock offerings that helped ensure Tesla's survival. And then the 'consensus' of 'analysts' who 'expect' certain numbers and then claim 'disappointment' even when they are beat. Who the eff are these lying pigs and how do they keep their jobs? Do the opposite of what those knifing 'consensus' shysters say and avoid anything their employers advise too; I bet they don't follow their own loony advice. That said, thanks for the opportunity to buy a bit more stock. I have to figure out where I want to try to buy in... how much further might the stock fall?
        • 11 Months Ago
        @purrpullberra
        For the current company valuation to hold they have to show the ability to grow to a market of over 500,000 vehicles per year while sustaining much higher profit margins than their competition. Their competition will not be standing still over the next 10 years. Telsa currently is projected to sell the same number of cars in 2014 that GM sells in a single day. They are getting within a factor of 2-4 of satisfying demand for a $70K+ electric vehicle. Their growth has to come from down market and down market is a price sensitive market.
          raktmn
          • 11 Months Ago
          Ted, Why would Tesla have to sell more than 3 times as many cars as Porsche sold last year in order to be successful? Porsche is one of the most profitable car companies out there today, on a global volume of just 162,145 units last year (and 2013 was a record year!!) If Porsche can be highly successful for decades on way less than 500,000 units per year, why do you think that Tesla needs to outsell Porsche 3 to 1 in order to be successful. That simply does not make any sense, and is unsupported by the facts and figures. The same goes for your argument that Tesla "has to" sell low dollar cars. Porsche doesn't sell a single car that will be below the price of the 3rd generation Tesla that Tesla already plans to build. As for using GM (or Ford or Dodge) as examples of companies making money on huge volume, I don't think you actually know the history of large volume car companies in the US. Large volume US car companies have historically had very low profits when successful, punctuated by bouts of bailouts and bankruptcies (yes, Ford included) during downturns. Definitely not a business model that Tesla wants to emulate.
      CeeJayABG
      • 11 Months Ago
      OK, all this financial stuff isn’t so hard. Here’s the deal for those who don’t feel like reading the 8K. Generally Accepted Accounting Principles (GAAP) establishes a consistent way to report financial performance. Over the years, GAAP standards have been tightened to address such things as stock options which were often not reported during the DotCom era. This doesn’t mean that addressing results on a “non-GAAP” basis is not justified, particularly when certain GAAP requirements overshadow news that needs to be communicated. Here we go. Tesla indeed posted a GAAP loss of ($49.8M) in Q1. Here is how we get to the $17M net income to which Tesla execs refer. (1) Stock-based compensation: Like many “tech” companies, Tesla incentivizes a large group of employees with stock options. The award of options DOES NOT actually affect the operational profitability of the company, but they are expensed upon award. This amounts to $37M (most of it in SGA and R and D lines). This brings us up to ($12.8M) loss. (2) Non-cash interest: I am too lazy to look back at their last 10Q to know exactly what Tesla puts in this bucket, but this category is generally a depreciation or amortization type of expense that does not involve a cash transaction (in other words no money every changed hands). Consistency of methodology is key to these types of entries – I don’t have any concerns here. This amounts to $8.4M in Q1, taking us to ($4.4M). (3) Lease accounting: Tesla does not recognize the full sale value of leased autos since they carry the lease (i.e. , no dealers); they also recognize warranty expense for these vehicles in a fairly conservative way. These are NON CASH expenses, and the “correction” to GAAP is $21.4M. That brings us (surprise!) to $17M non-GAAP income. Believe it or not, there is no trickery here. As for the headline: “$50M loss” is true, but more to the point it should have focused on the difference between Q4/13 and Q1/14 non-GAAP. It dropped from $45M in Q4 to $17M today. The growth in RD and SGA was bigger than I expected. 2-wheel: as for ZEV credits: the gross profit numbers were actually about the same as they were in Q4 despite having NO ZEV credits in Q1, reflecting the 20 basis point GM improvement referenced in the letter. Dave: take a look at the income statement (I'm rounding). Automotive Sales $621M minus Cost of revenues $465M equals Gross profit $156M minus RD and SGA $199M minus other expenses (net) $6M Net income/(loss) GAAP ($50M); see above for GAAP/non-GAAP reconciliation Factory construction is a capital expense (doesn't go to bottom line) and I suspect Superchargers are as well.
        Joeviocoe
        • 11 Months Ago
        @CeeJayABG
        This comment is worth every bit as the main article... should be required reading :) Thanks.
        purrpullberra
        • 11 Months Ago
        @CeeJayABG
        Many thanks for this comment. I love details but have very little patience to find them all out myself. Tesla makes money on the cars they build. And they'll get much better at it soon. There is nothing detractors can say to deny that fact. Re-investing those profits in the company is the only wise thing to do.
          Grendal
          • 11 Months Ago
          @purrpullberra
          I'm not so sure about the "getting better at it." Tesla is going to stick with their 25% gross margins and input whatever extra profit they have into growing the company further. They have a lot more Superchargers to put in around the entire world and a giga-factory or two to build. All of that equals money being spent. I'm not expecting big profits until 2020 or later. Lots of money will be made but little in the way of profits. Ultimately Elon is not all that interested in profits except to let him grow the company and fulfill his EV agenda.
          Grendal
          • 11 Months Ago
          @purrpullberra
          And I have no problem with that. The stock price is beside the point as far as I am concerned. More EVs on the road and improve the technology as much as possible to make it accessible and available to everyone. If the stock ends up at a high price that is just gravy for those of us invested in it.
        • 11 Months Ago
        @CeeJayABG
        So if we pay employees with stock that shouldn't count as an expense? Not counting it as an expense makes a company appear far more profitable than it really is. Imagine if your company paid everyone with stock, it's fake profits would skyrocket. Non-cash interest, same thing, if we can pay suppliers or others we owe money to with stock does that make the expense go away? GAAP is about measuring profits in a meaningful way that doesn't let companies sweep expenses under the rug or pretend that income is coming in that really isn't coming in or is revenue from something you won't be providing for years. When you lease a car to a customer you don't get to count the FUTURE lease income in this year's income statement unless you actually sold the vehicle to a third party (like a bank) that is then doing the leasing. Yes, their income would have been higher if they actually sold the vehicle instead of leasing it, on the other hand, those lease payments coming in next year for vehicles leased this year will count in next year's income. It all averages out in the long run. Tesla is doing fine as long as they can ramp up sales faster than their competitors can catch up on the technology side of things. Mercedes is going to challenge them on the high end and Toyota can compete with anyone for the cost sensitive market. Factory construction and Supercharger costs certainly do "go to the bottom line" as capital costs are depreciated over time (notice how under GAAP the cost of a Supercharger station doesn't get expensed entirely in the year the money is spent, but rather the expense is spread over multiple years. Much like those lease payments are spread over multiple years and not accounted for in the year the vehicle is leased.
          raktmn
          • 11 Months Ago
          Ted, When employees receive stocks as compensation, there is no cash cost to the company. Tesla doesn't go out and buy stocks with cash from the open market to provide those stocks to employees. These are new stocks that are issued. The value technically comes out of the dilution of the holdings of current shareholders, not from the corporation. In fact, companies sometimes GAIN revenue from stock options. For example, if a millionaire executive decides to "Buy and Hold" instead of cashing out, the company pockets the revenue from the stock purchase price. That money is revenue, and is put onto the revenue side of the books. Of course stock option issuance should be reported to investors who are looking at quarterly statements to determine if the company is a good investment. But it is equally important to report numbers that actually reflect the real dollars coming and going from the corporation's pockets, as an indicator of the actual cash flow into and out of that company's accounts. As I stated before, stock options do NOT actually remove any money from a company's accounts. So it is equally important to provide another financial report besides the GAAP numbers to show this. This is where non-GAAP numbers are important, because they adjust for this expense, to show only actual money leaving company accounts for investors who are primarily interested in the company's cash flow, and does not include money that actually comes at the expense of stockholder dilution. As you can see, neither the GAAP, nor the non-GAAP set of numbers tell the whole story. The GAAP numbers don't show that the money for stock options comes out of shareholder dilution, and not out of the company's accounts. Meanwhile, the non-GAAP numbers do correctly show the real dollar impact on the company's cash flow, but they do not show investors how much their ownership is being diluted by new shares being issued. Only by seeing BOTH the GAAP and non-GAAP numbers can smart, well informed investors be fully informed of all these impacts. Providing both GAAP and non-GAAP numbers is all about MORE disclosure, and MORE information for investors. At least more information for those investors who understand the underlying accounting....
        Grendal
        • 11 Months Ago
        @CeeJayABG
        Thank you for the simplified version for those of us not willing to decode the lengthier version.
        MikeE
        • 11 Months Ago
        @CeeJayABG
        So, if I understand this correctly, the pushed-forward revenue from the leases should make the GAAP numbers look better, rather than worse, if and when the number of cars under lease is stable or dropping rather than increasing?
          CeeJayABG
          • 11 Months Ago
          @MikeE
          Mike: yes, although it's a small number as you can see. I think Tesla needs to look at a leasing partner or create a financial arm if they are really going to be a 100,000+ per year manufacturer.
        2 wheeled menace
        • 11 Months Ago
        @CeeJayABG
        You win +2 internets.
      Dave
      • 11 Months Ago
      So, Tesla sold 6,457 cars (they produced 7,535). Probably about $85,000 each. That's $550 million of income. They claim a 25% profit margin. So, that would be $137 million of profit. So, if they took a $50 million loss, that would mean they spent $187 million on Model X R&D and gigafactory / Supercharger / China construction. Or, if we take the non-GAAP $17 million profit, they spent $120 million. I gotta wonder how much money it takes to put a new body on an existing chassis, especially when they've been working on it for years already.
        Joeviocoe
        • 11 Months Ago
        @Dave
        Musk also explained that since the production ramp up from the launch date will be MUCH faster than the Model was... perfection is really needed since Tesla cannot afford many recalls once cars are out on the road.
        NestT
        • 11 Months Ago
        @Dave
        1) Average Selling Price was $105,981 2) All wheel drive with separate motor between the front wheels. Falcon wing doors. Higher center of gravity. New Body plus new interior. 3) Musk is not a committee at GM. He is a perfectionist. Ok is not good enough. Even perfectionist can't be perfect but he will learn from past mistakes.
          Grendal
          • 11 Months Ago
          @NestT
          And the way that naysayers pick apart every little thing that Tesla does it will need to be as good as the Model S is or better.
      CoolWaters
      • 11 Months Ago
      35,000 cars that use ZERO Gallons of gas, are they helping keep the cost of fuel down? Plus, the Volt, Leaf, and all the other hybrids? Peak Oil may just be a minor problem if this keeps on rolling. Exxon sure should be investing in Solar by now, or watch itself die off.
        • 11 Months Ago
        @CoolWaters
        Gasoline sales are a pretty small portion of where a barrel of oil goes, with most of it going to plastics and lubricants. The oil industry would do just fine without gasoline, except that it would go back to being a toxic waste product like before, and we might end up with burning rivers again due to illegal dumping...
          Joeviocoe
          • 11 Months Ago
          You got that WAY BACKWARDS. http://static.seekingalpha.com/uploads/2011/8/16/920026-131347454081073-Edgar-Ambartsoumian.jpeg
        Jon
        • 11 Months Ago
        @CoolWaters
        Exxon won't die off for a long time. Even as we pass peak oil production, oil wells will continue to produce for generations. And as electric cars gain popularity there will be plenty of demand for petroleum for other uses. Unless of course people get serious about global warming and realize we have pulled enough carbon out of the ground.
      CeeJayABG
      • 11 Months Ago
      RC: be careful with this AMZN analogy. AMZN was delivering significant positive cash flow in excess of net income for quite awhile. Having slightly negative income statements was forgiven. They broke this pattern in Q1 and have been substantially punished in the marketplace. With the gigantic upcoming Gigafactory raise, Tesla needs to maintain some balance here.
      Joeviocoe
      • 11 Months Ago
      Listen to the Q&A. Elon said that Panasonic already has signed a Letter of Intent on the Gigafactory partnership.
        Letstakeawalk
        • 11 Months Ago
        @Joeviocoe
        Letters of Intent are meaningless and unenforceable, right? I certainly hope that Panasonic will make an investment, but until they actually commit the money and break ground, it's just talk.
          Joeviocoe
          • 11 Months Ago
          @Letstakeawalk
          Not at all... Letters that are signed are quite meaningful. Sure, not enforceable... but certainly shows more intention than press releases do. But the devils are always in the details. I would like to read exactly what that letter says. For example, the automakers 2009 Letter of Understanding to the Energy companies and governments, shows how automakers agree to provide FCVs by 2015 under the condition of a "sufficiently dense H2 infrastructure". So know that we see 2015 around the corner, we know why automakers are holding back serious commitment.
          Grendal
          • 11 Months Ago
          @Letstakeawalk
          A letter of intent shows that they have enough intent to sign a letter saying so. ;-) I expect it to mean that Panasonic wants to do it but they are still working with their government to get the $1 billion loan to do it.
          raktmn
          • 11 Months Ago
          @Letstakeawalk
          Grendal, a Letter of Intent is more than just a reflection of a passing fancy, or whim of the moment that may fade or reverse with the blowing winds. The letter of intent triggers a "good faith" requirement for each of the parties, where each side has agreed to work in good faith towards the intent of the letter, and not capriciously or wantonly cause the deal to fail. The letter of intent means that while neither side has agreed to a full set of contractual terms of agreement, that both sides have committed to work in good faith towards negotiating a contract. It is a legally binding agreement to work in good faith, where a party not acting in good faith could be liable for damages, or even be held to specific performance. Considering the history between the companies, I'd say the chances are rather high that they will close the deal now that they have signed letters of intent.
      thecommentator2013
      • 11 Months Ago
      50 Million loss? No big deal. Quarterly loss/win announcements are stupid. When do americans begin to think in long terms? Like the Chinese did, do and will keep doing so. Quarter Results are of no importance if you have a very different goal than making plain, profane buck. So...listen to a) a
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