10-QPeriod: Q2 FY2014

Tesla, Inc. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 8, 2014For Securities:TSLA

Summary

Tesla, Inc. (TSLA) filed its Form 10-Q for the quarterly period ended June 30, 2014, reporting significant financial developments and operational progress. The company reported substantial revenue growth, driven primarily by increased Model S deliveries in Europe and China, as well as powertrain sales to Daimler and Toyota. This top-line expansion was accompanied by an improvement in gross margin, attributed to higher production volumes and manufacturing efficiencies. Financially, Tesla significantly bolstered its cash position through substantial convertible senior note offerings, raising over $2 billion. Despite this increase in liquidity, the company continued to incur net losses, a trend consistent with its high investment in research and development for future products like the Model X and Gigafactory. The report highlights ongoing investments in expanding production capacity, global sales and service infrastructure, and the development of new vehicle models, indicating a strong focus on long-term growth and market expansion.

Financial Highlights

45 data points
Beta

Revenue

$769.35M

27.7% Gross Margin

Net Income

-$61.90M

-8.0% Net Margin

EPS (Diluted)

$-0.03

Total Assets

$5.05B

Cash & Equivalents

$2.67B

Free Cash Flow

-$177.35M

Financial Statements
Beta
Revenue$769.35M
Cost of Revenue$556.35M
Gross Profit$213.00M
R&D Expenses$107.72M
SG&A Expenses$134.03M
Operating Expenses$241.75M
Operating Income-$28.75M
Interest Expense$31.24M
Net Income-$61.90M
EPS (Basic)$-0.03
Shares Outstanding (Basic)1.86B

Key Highlights

  • 1Total revenues for the three months ended June 30, 2014, reached $769.3 million, a significant increase from $405.1 million in the prior year period.
  • 2Gross margin improved to 27.7% from 24.8% year-over-year, driven by higher production volume and manufacturing efficiencies.
  • 3Tesla raised approximately $2.3 billion in aggregate principal amount from the issuance of convertible senior notes in March and April 2014, significantly increasing its cash reserves.
  • 4Net loss for the quarter was $61.9 million, compared to a net loss of $30.5 million in the same period of the prior year, reflecting increased operating expenses and R&D investments.
  • 5Research and Development (R&D) expenses more than doubled to $107.7 million from $52.3 million year-over-year, primarily due to accelerated engineering work on Model X and international adaptation of Model S.
  • 6Selling, General, and Administrative (SG&A) expenses also increased significantly to $134.0 million from $60.0 million year-over-year, driven by global expansion of sales and service footprint.
  • 7Cash and cash equivalents surged to $2.67 billion at the end of the quarter, up from $845.9 million at the end of 2013, largely due to the successful convertible note offerings.

Frequently Asked Questions

Tesla's total revenues for the three months ended June 30, 2014, were $769.3 million, an increase of $364.2 million (approximately 90%) compared to $405.1 million for the same period in 2013. This growth was primarily driven by increased Model S deliveries in Europe and China, along with powertrain sales to Daimler AG and Toyota Motor Corporation, partially offset by a decrease in regulatory credit sales.

Tesla reported a net loss of $61.9 million for the second quarter of 2014, an increase from a net loss of $30.5 million in the prior year quarter. While gross profit increased to $213.0 million due to higher sales and improved margins (27.7% vs. 24.8%), the net loss widened due to significant increases in operating expenses. Specifically, R&D expenses more than doubled to $107.7 million and SG&A expenses rose to $134.0 million, reflecting substantial investments in future products (Model X, Gigafactory) and global expansion.

Tesla's cash and cash equivalents increased significantly to $2.67 billion as of June 30, 2014, up from $845.9 million at the end of 2013. This substantial increase was primarily driven by net cash provided by financing activities of $2.10 billion, largely from the issuance of $2.3 billion in convertible senior notes and proceeds from warrant sales in March and April 2014.

Tesla expected to increase Model S production to over 1,000 vehicles per week by the end of 2014, aiming for over 35,000 deliveries for the full year. Key challenges mentioned include ramping up production and deliveries globally, particularly in Asia and right-hand drive markets, potential supplier bottlenecks (though battery cell supply was improving), and managing the expansion of its sales and service infrastructure. The company also noted ongoing development for Model X, expected in spring 2015, and early design work on Model 3.