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Tesla Motors, Inc. Earnings: Demand Is Robust, Operating Cash Flow Jumps

By Daniel Sparks - Feb 10, 2016 at 7:10PM

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Here are the key points behind Tesla's fourth-quarter earnings report.

Amid a volatile week for the stock market -- particularly for growth stocks -- Tesla Motors (TSLA -1.76%) stock looks poised to contribute its second day of big swings to this wild week when the market opens tomorrow. Shares rose as much as 14% during after-market hours and are up 9% at the time of this writing. An upbeat update on demand, production, cash flow, and guidance may be some of the items that have turned investors optimistic.

Model X. Image source: Tesla Motors.

But first, here's a review of Tesla's financial results for the quarter, compared against the year-ago quarter and the previous quarter.

 

Q4 2015

Q4 2014

Q3 2015 

Revenue

$1.21 billion

$957 million

$937 million

EPS

($2.44)

($0.86)

($1.78)

Non-GAAP revenue

$1.75 billion

$1.1 billion

$1.24 billion

Non-GAAP EPS

($0.87)

(0.13)

($0.58)

Data source: Tesla.

While Tesla's revenue is growing, losses continued to widen on both a GAAP and non-GAAP basis. The wider loss is primarily attributable to a lower gross profit margin, which was pressured by "unfavorable labor and overhead allocations associated with lower-than-planned Model X production volume, and non-recurring asset impairment charges for obsolete painting equipment," as well as for a transition to "improved production processes and designs."

Here are some other notable highlights about the quarter's metrics.

Demand is robust: Model X reservations increased 75% compared to the prior year "despite extremely limited initial exposure for this vehicle," Tesla noted. And orders for the new Model S increased 35% during Q4. Overall, Tesla said it sees no "perceptible impact" from falling gas prices on order growth and that order rates for its vehicles have "continued to increase."

Cash flow is looking up: Tesla's cash flow statement is finally turning upward, with the company reporting $179 million in operating cash flow.

Image source: Tesla Motors.

Overall production: Deliveries during Q4 were up 50% sequentially and 77% compared to the prior year, supported by record production.

Model X production: Only a few hundred Model X units were delivered during Q4, but the company says it is "now significantly increasing our Model X production throughout the balance of the quarter."

Looking ahead
Here's a list of some of the company's expectations during the year.

  • Tesla anticipates approaching a production rate of 1,000 Model X units per week in Q2.
  • The company expects to deliver 80,000 to 90,000 Model S and X vehicles combined in 2016, up from about 50,600 vehicles in 2015.
  • Management anticipates its automotive gross profit margin to improve in 2015, with Model S approaching 30% and and Model X approaching 25% by the year's end.
  • The company still anticipates its capital expenditures during 2016 will actually be lower than in 2015.
  • Tesla expects to be net-cash-flow positive for the full year, as well as achieve non-GAAP profitability for the full year. Plus, the company expects to exit the year with GAAP profitability.
  • The Model 3 will be unveiled on March 31 and management says the important vehicle is on schedule for production to begin in late 2017.

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