Following the start of Tesla's (TSLA 2.97%) Model 3 deliveries on July 28, Tesla's second-quarter report gives investors a timely glimpse into the electric-car company's business. Tesla believes the important electric car will help take annual vehicle production from a run-rate of about 100,000 units today to 500,000 units next year.
Beyond some useful new information about the Model 3, Tesla's second-quarter earnings showed fast-rising revenue, growing demand, soaring capital expenditures, and more. Here's a close look at the quarter.
Image source: Tesla.
Tesla earnings: The raw numbers
|
Metric |
Q2 2017 |
Q2 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Vehicle deliveries |
22,026 |
14,402 |
52.9% |
|
Revenue |
$2.79 billion |
$1.27 billion |
119.7% |
|
Adjusted automotive gross margin |
25% |
23.6% |
136 basis points |
|
Adjusted earnings per share |
($1.33) |
($1.61) |
$0.28 |
|
Capital expenditures |
$959 million |
$295 million |
225% |
Data source: Tesla's second-quarter shareholder letter.
Tesla's 120% rise in revenue was driven by a 53% increase in vehicle deliveries, a smaller proportion of vehicles sold with Tesla's residual value guarantee (these vehicles are subject to lease accounting) than in the year-ago quarter, the benefit of incremental revenue from Tesla's late-2016 acquisition of SolarCity, and a seasonal bump in solar revenue.
Tesla's non-GAAP loss per share narrowed on a year-over-year basis from a loss of $1.61 in the year-ago quarter to a loss of $1.33 in the second quarter of 2017. Its GAAP loss per share improved slightly, from a loss of $2.09 in the year-ago quarter to a loss of $2.04 in Q2 of 2017.
Second-quarter capital expenditures soared 225% year over year and 80% sequentially, driven primarily by Model 3-related spending, including investments in production capacity, and expansion of Tesla's customer-support infrastructure ahead of the high-volume vehicle's production ramp-up.
Importantly, Tesla ended its second quarter with over $3 billion in cash.
The Model 3
Given how important the Model 3 is to Tesla's business, it's not surprising that the company's second-quarter update provided lots of information about the $35,000 vehicle. Here are some of the most interesting takeaways from the update about the Model 3:
- Tesla says its previous projections for Model 3 production remain on track; Tesla had previously set targets for achieving a Model 3 production rate of 5,000 vehicles per week before the end of the year, and 10,000 vehicles per week sometime next year.
- Growth in reservations for the Model 3 has continued each month since the vehicle's unveiling last March. Furthermore, growth in Model 3 reservations has accelerated in recent weeks.
- Since the Model 3 handover event on Jul. 28, Tesla is averaging more than 1,800 net new Model 3 reservations per day.
- Tesla has started building Model 3 battery packs and drive units at its Gigafactory.
- Tesla expects to produce 1,500 Model 3s during the third quarter.
- The company expects positive Model 3 gross margin by Q4, and a 25% gross margin for the vehicle in 2018.
The Model 3. Image source: Tesla.
Looking ahead
Demand for the Model S and X increased leading up to the Model 3 launch. And demand for the Model S increased after the Model 3 launch as well. "This growing demand gives us even more reason to expect increased deliveries of Model S and Model X in the second half of this year," management said.
Though the Model S and Model X are Tesla's bread and butter today, the Model 3 will increasingly become the focus of investor attention as Tesla ramps up production of the new vehicle. To support its business growth, Tesla expects capital expenditures of $2 billion in the second half of the year, up from about $1.5 billion in the first half.
Finally, Tesla couldn't help but remind investors that it has another product unveiling around the corner -- its Semi truck.
