Tesla Motors Inc (NASDAQ:TSLA) released its financial results for the first quarter ended March 31, 2015, by posting the current Shareholder Letter on its website:
Starting this quarter, our income statement reflects the new classifications of revenues and costs of revenues to segregate our new vehicle business from our other business activities. “Automotive” revenue and related costs now reflect activities related to the sale or lease of new vehicles including regulatory credits, data connectivity and Supercharging. “Services and other” revenues and related costs include activities such as powertrain sales, service revenue, Tesla Energy and pre-owned Tesla vehicle sales. As usual, we have presented both GAAP and non-GAAP financial information in this letter. A full explanation of our non-GAAP information and reconciliation to GAAP are included in the tables and accompanying footnotes.
Total non-GAAP revenue was $1.10 billion for the quarter, up 55% from a year ago, while GAAP revenue was $940 million. We achieved a Q1 total company gross margin of 28.2% on a non-GAAP basis and 27.7% on a GAAP basis.
Automotive revenue was $1.06 billion on a non-GAAP basis, and is comprised of GAAP Automotive revenue of $893.3 million plus a net increase of $163.7 million in deferred revenue and other long-term liabilities as a result of lease accounting. 10,045 Model S vehicles were delivered in Q1, in line with our April announcement of approximately 10,030 deliveries. The average selling price of Model S increased slightly during the quarter, reflecting a full quarter of sales of P85D and the introduction of 85D. This mix improvement was partially offset by the effect of the strong dollar, which negatively impacted both our average selling price and thus revenue by slightly more than 3% from the prior quarter. As in previous quarters, we offered small discounts when selling vehicles used for either marketing or as service loaners. These discounts were consistent with last quarter. Q1 Automotive revenue included $66 million of total regulatory credit revenue, of which $51 million came from the sale of ZEV credits. In Q1, Tesla directly leased 592 cars to customers, which was worth $63 million of aggregate retail value.
Q1 Automotive gross margin excluding ZEV credits was on plan at 26.0% on a non-GAAP basis, and 25.0% on a GAAP basis. The 330 basis points of sequential improvement in non-GAAP gross margin was driven by lower manufacturing costs and richer mix, offset partially by the strong dollar, expedited shipping costs related to port delays and an increase in warranty reserves of about $200 per car.
Q1 Services and other revenue was $46.6 million, up 47% from a year ago. This includes $22 million of powertrain sales to Daimler and $20 million of service revenue. Q1 Services and other gross margin was negative 3.2%, as compared to 12.1% last quarter. This sequential reduction in gross margin was primarily driven by a planned price reduction for powertrain sales to Daimler.
We improved our operational efficiency in Q1, achieving record deliveries and developing new products while managing to grow operating expenses at a slower rate than expected. Our operating expenses in Q1 were $324 million on a non-GAAP basis, up 9.1% from Q4, and $363 million on a GAAP basis.
Our Q1 non-GAAP net loss was $45 million, or a loss of $0.36 per basic share based on 125.9 million basic shares, while our Q1 GAAP net loss was $154 million or a loss of $1.22 per basic share. Both figures include a $22 million loss, or $0.17 per basic share, related to mostly unrealized losses from revaluation of our foreign currency holdings due to the strong dollar.
Cash and cash equivalents were $1.51 billion at the end of the quarter, down $396 million sequentially, as capital expenditures were $426 million in the quarter. Capital expenditures were primarily for the capacity expansion and tooling associated with Model X and all-wheel drive vehicles, as well as the Gigafactory.
Our Q1 GAAP net cash outflow from operations was $132 million primarily due to the $78 million in cash inflows from vehicle sales to our bank leasing partners which we are required to classify as a financing activity, and a $63 million increase in inventory from customer-configured cars that were in transit for deliveries in Q2.
During the quarter, we closed on a $100 million warehouse line in connection with our direct leasing program, and drew down $78 million of the line by quarter end. We anticipate closing on additional financing lines in the coming months.
In Q2, we expect to produce about 12,500 vehicles, representing a 12% sequential increase. We plan to deliver 10,000 to 11,000 vehicles in Q2, and we are still on track to deliver approximately 55,000 Model S and X cars in 2015. As part of our strategy to optimize operational efficiency while scaling for higher deliveries, we are shipping cars using less expensive rail, rather than by truck, to more regions in the United States and Canada. Also, we are now producing cars based on a uniform regional production mix throughout the quarter. This enables a more stable cadence of deliveries and in turn improves customer satisfaction while reducing cost. Both of these actions should lead to an increase of in-transit customer-configured finished goods inventory.
In Q2, we expect to directly lease about the same percentage of cars that we did in Q1. As always, we will use lease accounting for these cars leased directly through Tesla even in our non-GAAP financial results, as such treatment is consistent with the cash collected on these transactions. We expect to sell about $15 million of our regulatory credits in Q2, including about $5 million of ZEV credit sales.
We expect the Model S average transaction price to decline in Q2 as the dollar has strengthened by about 4% against the euro from the time we last adjusted Model S pricing. This will impact our Q2 gross margin by slightly more than 100 basis points. As a result, we expect non-GAAP automotive gross margin, excluding ZEV credits, to be just under 25% for the quarter at current exchange rates. We also expect some average price pressure from a less rich product mix, but our continuing efforts to improve efficiency and reduce manufacturing costs should offset this impact on gross margin.
In response to the continued strength of the dollar, we have just announced a price increase of about 5% in most European markets. Since this price increase applies to new orders to be delivered in Q3 and beyond, it will not impact our Q2 results.
We expect Services and other gross margin to be slightly better than breakeven in Q2, and continue to improve to about 5% by Q4. The improvement will come from cost reductions on Daimler powertrains as well as increased sales of Tesla Energy and pre-owned Model S vehicles.
Our operating leverage is expected to improve this year, with revenue and gross profit both growing more quickly than operating expenses. Operating expenses should grow roughly 10% sequentially in Q2, and 45-50% for the full year as we invest in product development, including the Model 3, and expand our sales capability.
We still plan to invest about $1.5 billion in capital expenditures this year as we expand production capacity, purchase Model X tooling, continue to build the Gigafactory, and expand our stores, service centers and the Supercharger network.
2015 is off to a strong start, and we are excited about the many opportunities ahead. We expect to continue to develop many more innovative and exciting products in the coming years. (Original Source)
Shares of Tesla Motors closed today at $230.43, down $2.52 or 1.08%. TSLA has a 1-year high of $291.42 and a 1-year low of $177.22. The stock’s 50-day moving average is $207.80 and its 200-day moving average is $215.67.
On the ratings front, Tesla Motors has been the subject of a number of recent research reports. In a report released yesterday, Morgan Stanley analyst Adam Jonas maintained a Buy rating on TSLA, with a price target of $280, which represents a potential upside of 21.5% from where the stock is currently trading. Separately, on the same day, Pacific Crest’s Brad Erikson reiterated a Buy rating on the stock and has a price target of $293.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Adam Jonas and Brad Erikson have a total average return of 18.3% and 15.3% respectively. Jonas has a success rate of 58.8% and is ranked #195 out of 3590 analysts, while Erikson has a success rate of 72.7% and is ranked #1127.
The street is mostly Bullish on TSLA stock. Out of 16 analysts who cover the stock, 10 suggest a Buy rating , 3 suggest a Sell and 3 recommend to Hold the stock. The 12-month average price target assigned to the stock is $266.47, which represents a potential upside of 15.6% from where the stock is currently trading.
Tesla Motors Inc designs, develops, manufactures and sells high-performance fully electric vehicles and electric vehicle powertrain components.