The company’s first-quarter 2015 adjusted results exclude the impact of non-cash interest expenses related to convertible notes and other borrowing of 15 cents per share, and deferred gross profit of 37 cents for Tesla’s Model S cars due to lease accounting. On the other hand, Tesla’s first-quarter 2014 adjusted results had excluded the impact of non-cash interest expenses related to convertible notes of 7 cents per share and deferred gross profit of 15 cents for its Model S cars due to lease accounting. Including these items, the company reported net loss of $1.22 per share in the first quarter of 2015 compared with net loss of 36 cents per share in the first quarter of 2014.
Adjusted revenues jumped 55% to $1.1 billion in the reported quarter. Revenues surpassed the Zacks Consensus Estimate of $1.04 billion. On reported basis, revenues increased 51.5% to $940 million.
Tesla delivered 10,045 cars in the reported quarter, marginally higher than the expectation of 10,030 deliveries. It produced 11,160 vehicles in the quarter, 10% higher than the guidance. The company increased manufacture on its new small drive unit line, in order to satisfy the demand for all wheel drive cars. Tesla also focused on increasing efficiency and was therefore, able to reduce working hours by more than 20% per vehicle.
Revenues (on a reported basis) from Automotive sales jumped to $893.3 million in the quarter from $588.9 million a year ago. The revenues benefited from improved vehicle deliveries and an increase in vehicle prices, partially offset by a stronger dollar.
Revenues (on a reported basis) from the Services and other segment increased to $46.5 million from $31.7 million in the year-ago quarter.
Tesla’s first-quarter 2015 adjusted gross margin was 25%. Also, the first-quarter automotive gross margin (excluding ZEV credits) was 26%. Quarterly gross margin benefited from lower manufacturing costs and richer mix, partially offset by a strong dollar, rising shipping costs due to port delays and an increase in warranty reserves.
Tesla had cash and cash equivalents of $1.5 billion as of Mar 31, 2015, compared with $1.9 billion as of Dec 31, 2014. Long-term debt was $2.5 billion as of Mar 31, 2015, versus $2.4 billion as of Dec 31, 2014.
Cash outflow from operating activities amounted to $131.8 million in the first three months of 2015, compared with cash inflow of $58.7 million in the year-ago period. Capital expenditures increased to $426.1 million from $141.4 million in the first three months of 2014.
Last week, Tesla launched the new Tesla Energy business. On Apr 30, 2015, the automaker launched a $250/kWh industrial Powerpack and a $350/kWh residential Powerwall. Tesla will start high volume production of these products by the third quarter of 2015 in its Fremont factory. The automaker expects that it will also make the products in the Gigafactory from the first quarter of 2016. Tesla believes that the market for its energy products is huge. Moreover, it is easier to expand globally.
The construction of Tesla’s Gigafactory near Reno, NV is going as per plans. The automaker, together with Panasonic Corporation (ADR) (OTC MKTS:PCRFY), will start the manufacture of batteries, right from the cells till the final battery packs, in the Gigafactory in 2016.
Model X Update
Tesla will start shipping the Model X in the third quarter of 2015.
Tesla is optimistic about growth opportunities in 2015. Production volume for the second quarter of 2015 is expected to be around 12,500 vehicles, a 12% increase on a sequential basis. In the second quarter, the automaker expects to deliver about 10,000–11,000 vehicles globally. In order to optimize operational efficiency, the automaker is shipping vehicles through rail in the U.S and Canada. The company will sell about $15 million of its regulatory credits in the second quarter, including about $5 million of ZEV credits.
However, revenues in the second quarter will be adversely affected by a decline in average transaction price due to the strengthening of the dollar by about 4% against the euro. This will adversely affect Tesla’s gross margin by 100 basis points. Thus, automotive gross margin (excluding ZEV credits) is expected to be lower than 25%. Tesla will also be adversely affected by average pricing pressure from a less expensive product mix, which will be partially offset by improvement in efficiency and a reduction in manufacturing costs.
Gross margin from the Services and other segment is anticipated to be slightly positive in the second quarter and expected to improve to 5% by the fourth quarter. The improvement will be driven by cost reductions on Daimler AG (OCT MKTS:DDAIF) powertrains, together with higher sales of Tesla Energy and pre-owned Model S vehicles.
Tesla expects to deliver about 55,000 Model S and X vehicles globally in 2015, up 70% over 2014.
In 2015, operating expenses are expected to increase 45%–50% compared with 2014. The company expects capital expenditures to be $1.5 billion in 2015 in order to facilitate the expansion of production capacity, Model X tooling purchase, the building of the Gigafactory and expansion of stores, service centers and the Supercharger network.
Currently, Tesla carries a Zacks Rank #3 (Hold). American Axle & Manufact. Holdings, Inc. (NYSE:AXL) is a better-ranked auto stock worth considering. It sports a Zacks Rank #1 (Strong Buy).