Tesla Earnings: Cash and Cash Equivalents Take a Hit

Deliveries are soaring and management is guiding for more big growth. But the automaker's first quarter included its fair share of challenges.

Daniel Sparks
Daniel Sparks
Apr 24, 2019 at 8:01PM
Industrials

Lower-than-expected first-quarter vehicle deliveries announced earlier this month sparked concerns about Tesla's (NASDAQ:TSLA) ability to continue ramping up production and meet a year-end target for total deliveries to increase 45% to 65% year over year. But Tesla management shrugged off these concerns in its first-quarter update, reiterating its ambitious guidance.

Here's a closer look at what else Tesla revealed in its first-quarter update, including negative free cash flow, a higher take rate for Autopilot options, and management's expectations for profitability throughout the rest of the year.

Tesla's Model S, 3, X, and Y

Image source: Tesla.

Tesla's first-quarter results: The raw numbers

Metric

Q1 2019

Q1 2018

Change

Vehicle deliveries

63,019

29,997

110%

Revenue

$4.5 billion

$3.4 billion

33%

Non-GAAP earnings per share

($2.90)

($3.35)

N/A

Data source: Tesla 2019 first-quarter shareholder letter.

As Tesla revealed earlier this month, vehicle deliveries increased 110% year over year. This was fueled by a surge in Model 3 deliveries, which increased from 8,182 deliveries in the first quarter of 2018 to 50,928 units in the first quarter of 2019. Combined Model S and X deliveries, however, fell 45% year over year.

Higher overall deliveries helped revenue climb 33% year over year. But $188 million worth of non-recurring items that negatively affected Tesla's profitability, lower Model S and X deliveries, and about 11,000 vehicles in transit to customers at the end of the quarter weighed on profitability. The company's net loss for the period was $702 million, or $4.10 per share. On a non-GAAP basis, Tesla lost $2.90 per share.

What management had to say

In its fourth-quarter shareholder letter, Tesla said lower Model S and X deliveries were mainly due to "to seasonality, pull-forward of sales into Q4 2018 in the U.S. due to the first scheduled reduction of the federal EV [electric vehicle] tax credit in Q1, and discontinuation of our 75 kWh battery pack."

Tesla remains pleased with Model 3 deliveries, noting the vehicle was "yet again the best-selling premium car in the US in Q1, outselling the runner-up by almost 60%."


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Highlights

  • Free cash flow was negative $920 million, a slight improvement from negative free cash flow of $1.05 billion in the year-ago quarter.
  • Tesla's cash and cash equivalents decreased by $1.5 billion sequentially to $2.2 billion, primarily because of a $920 million bond payment and a higher number of vehicles in transit to customers at the end of the quarter.
  • The automaker's aggressive rollout of Autopilot features recently is resulting in a higher percentage of customers who are paying for Autopilot options.
  • Tesla's automotive gross margin was 20.2%, down from 24.3% in the year-ago quarter.

Looking ahead

Thanks to recently announced improvements to Model S and X and continued global expansion of its Model 3, Tesla expects its "order rate to continue to increase throughout the year as our production levels increase." Management guided for 90,000 to 100,000 deliveries in Q2 and maintained its guidance for 360,000 to 400,000 total deliveries during the full year, up from about 246,000 in 2018.

Tesla also expects to be cash flow positive for the three remaining quarters and return to GAAP profitability in Q3. For Q2, management guided for another quarterly loss but said it will be significantly narrower than in Q1.