What to Expect with Tesla Earnings Announcement 2/7/18

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What to Expect with Tesla Earnings Announcement 2/7/18


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Brokedoc

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#1
Tesla Earnings Announcement/Report scheduled for 2/7/18 after the Stock Market Close.

What to expect? Click all the choices you think we will hear. Poll Results will appear after you vote.
 

Brokedoc

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#2
So to get a better idea of what to expect, I looked at the report from Feb 2017. I didn't see any new numbers from Jan of 2017 in the old report so I'm not sure if we'll get updated Model 3 production numbers or just a rehash of the previously released 2017 numbers. Future guidance should be provided like how the report last year estimated 5,000 weekly Model 3s by end of 2017Q4:rolleyes:

Report will be released after market close but more interesting will be the QA scheduled for 2:30pm PST or 5:30 EST.

https://www.teslarati.com/wp-content/uploads/2017/02/TSLA_Update_Letter_2016-4Q.pdf
 

John

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#3
They'll post a record loss for Q4, no doubt. All ears will be on Model 3. Semi and solar news will be interesting but not immediately material.

What I'll be listening for is color about Model 3 production, including any reference to problems/recalls/other hiccups that have occurred since the initial bottleneck in battery module production. For instance, it appears that the production rate took another pause recently (maybe for inverter replacement), but may be coming out of that now/soon. I'll listen for an estimate of where the production rate will get to by the end of the quarter, and perhaps and estimate for quarterly/annual Model 3 production.

I doubt they'll go into this much detail, but I'd be interested in what they've changed since the first shipping units.

Secondarily I'll pay attention to cash flow. What's their cash balance, how do the feel about it, what additional projects may need capital, do they foresee further needs to raise cash in 2018, will it be equity or debt, how interested do they think the market is to fund them, and on what terms?

Many of the analysts will open with congratulations/condolences for Falcon Heavy, assuming the winds clear up for the launch today.
 

MelindaV

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#5
they don't normally get too much into current production (if they have began standard battery or dual motor) or new product announcements (IE Model S refresh V2) though, not that they get into the origin of their execs...
 

c2c

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#6
Really? More people think Tesla will announce that Elon is a Martian than Tesla announcing Standard Battery production?!?!?!?
The roadster and starman will be in Mars orbit path before Tesla takes the revenue hit of lower priced batteries, about 6 months.
 

Brokedoc

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#8
Report

http://files.shareholder.com/downlo...A-CB3CDC1B919F/TSLA_Update_Letter_2017-4Q.pdf


Tesla Fourth Quarter & Full Year 2017 Update


Record Model S and Model X deliveries in Q4 2017

Cash balance of $3.4B entering Q1 2018

2017 revenue of $11.8B, up 55% y-o-y from organic growth

2018 revenue growth expected to significantly exceed 2017 growth

Continuing to target Model 3 production rate of 5,000/wk by Q2 end

2017 was an important year in Tesla’s history. Among other things, we started delivering Model 3 to customers, unveiled the Semi and

the next-generation Roadster, installed the world’s largest battery in Australia, and had record vehicle production and deliveries of

Model S and Model X. We also learned many lessons from the slower than planned production ramp of Model 3. All of this sets the

stage for 2018 to be a transformative year for us.

At some point in 2018, we expect to begin generating positive quarterly operating income on a sustained basis. With the planned ramp

of both Model 3 and our energy storage products, our rate of revenue growth this year is poised to significantly exceed last year’s

growth rate. The launch of Model 3 is what Tesla had been building towards from day one. We incorporated all the learnings from the

development and production of Roadster, Model S, and Model X to create the world’s first mass market electric vehicle that is priced on

par with its gasoline-powered equivalents – even without incentives. Now we are ramping up production significantly, and as we look

ahead in 2018, we are on the cusp of a step change in the world’s transition to sustainability.

ADVANCING SUSTAINABLE TRANSPORT

We continue to target weekly Model 3 production rates of 2,500 by

the end of Q1 and 5,000 by the end of Q2. It is important to note

that while these are the levels we are focused on hitting and we

have plans in place to achieve them, our prior experience on the

Model 3 ramp has demonstrated the difficulty of accurately

forecasting specific production rates at specific points in time.

What we can say with confidence is that we are taking many

actions to systematically address bottlenecks and add capacity in

places like the battery module line where we have experienced

constraints, and these actions should result in our production rate

significantly increasing during the rest of Q1 and through Q2.

Our goal is to become the best manufacturer in the automotive

industry, and having cutting edge robotic expertise in-house is at

the core of that goal. Our recent acquisitions of advanced

automation companies have added to our talent base and are

helping us increase Model 3 production rates more effectively. We

don’t want to simply replicate what we have built previously while

designing additional capacity. We want to continuously push the

boundaries of mass manufacturing.

As we shared previously, in order to incorporate our learnings and be capital efficient, we intend to start adding enough capacity to get

to a 10,000 unit weekly rate for Model 3 once we have first hit the 5,000 per week milestone.

Despite the delays that we experienced in our production ramp, Model 3 net reservations remained stable in Q4. In recent weeks, they

have continued to grow as Model 3 has arrived in select Tesla stores and received numerous positive reviews, including Automobile

Magazine’s 2018 Design of the Year award. We want to thank both our Model 3 suppliers and our customers, who have continued to

be such great partners and advocates, while patiently waiting as the ramp continues to accelerate.

In Q4, we delivered 28,425 Model S and Model X vehicles and 1,542 Model 3 vehicles, totaling 29,967 deliveries. Combined Model S

and Model X deliveries in Q4 grew 10% globally compared to our prior record in Q3, and they grew 28% compared to Q4 2016. As we

indicated heading into Q4, production of Model S and Model X during the quarter was limited to 22,137 vehicles due to reallocation of

some of the manufacturing resources to Model 3 production. This enabled us to reduce our finished-goods inventory to the lowest level

in about 18 months.

Combined Model S and Model X net orders in Q4 were just shy of

Q3’s all-time high. Importantly, combined orders for Model S and

Model X grew significantly in 2017 compared to 2016. There had

initially been concerns about whether Model 3 would cannibalize

Model S and Model X. It seems the opposite is true. In stores

where Model 3 is on display, customer foot traffic has increased

considerably and orders for Model S and Model X have in fact

increased. There has been an even bigger increase in solar and

Powerwall sales.

The upcoming autonomous coast-to-coast drive will showcase a

major leap forward for our self-driving technology. Additionally, an

extensive overhaul of the underlying architecture of our software

has now been completed, which has enabled a step-change

improvement in the collection and analysis of data and

fundamentally enhanced its machine learning capabilities. Our

neural net, which expands as our customer fleet grows, is able to

collect and analyze more high-quality data than ever before,

enabling us to rollout a series of new Autopilot features in 2018 and

beyond.

During Q4, we opened 12 new store and service locations resulting in 330 total locations worldwide at the end of the year. Service

capacity more than doubled in 2017, partially due to new locations, but also through a 50% increase in productivity of existing service

locations, as well as the significant expansion of our Mobile Service fleet, which now has 230 vehicles. We strive to create the best car

ownership experience on the planet, and a big part of that is through not requiring customers to come in to service their vehicle. In

North America alone, Mobile Service is now completing 30% of all service jobs, allowing those customers to never have to leave their

home or office to get their cars serviced. Not surprisingly, Mobile Service has achieved customer satisfaction that averages 98%. In

addition, the cost of servicing with our Mobile Service fleet is significantly lower than from our service centers. It now covers all of North

America and provides a level of convenience and a speed for scaling that is unique and unprecedented in the industry. In 2018, we will

continue to increase our service capacity with the goal of always remaining ahead of the Model 3 ramp.

Our Supercharger network has seen the most significant growth yet. In 2017, 338 new locations opened for a total of 1,128

Supercharger stations globally. Between Supercharger and Destination Charging, we increased capacity by over 90%. In preparation

for Model 3, we opened several large Supercharger stations along our most popular corridors, including between Los Angeles and San

Francisco and between Los Angeles and Las Vegas, both of which have a customer lounge, a café, a display of our energy products

and 40 charging stalls. With continued emphasis on convenient, reliable, and ubiquitous charging, 2018 will be another big year for

Tesla charging infrastructure.

The unveiling of Tesla Semi on November 16 launched Tesla into a

new product category that will have a transformative impact due to

a total cost of ownership that is superior to diesel trucks. Tesla

Semi combines a real-world range of up to 500 miles with

unprecedented performance while pulling a standard payload. Its

distinctive torque enables smooth acceleration to highway speed

even when fully loaded with cargo. Moreover, it has been

designed to dramatically improve safety not only for the driver and

cargo, but also for pedestrians and other cars on the road.

Tesla will be the first Semi customer. We plan to use the Tesla

Semi for our own logistics by transporting Model 3 components

from Gigafactory 1 to Fremont. Additionally, our initial fleet

customers who placed reservations for the Tesla Semi have been

helping us develop the best possible truck.

Also, after developing it in stealth with a very small team, we were

thrilled to surprise everyone with the next-generation Roadster.

Roadster was at the genesis of Tesla, a car that proved electric

vehicles can be fast, exciting and here to stay. The new Roadster

takes this concept to the next level. With 0-60 mph acceleration of

1.9 seconds and maximum speed of more than 250 mph, it will be

the fastest car in the world. When that performance is combined

with its 620 miles (1,000 km) of range, this supercar puts to rest

any debate about the limitations of electric vehicles.

ADVANCING SUSTAINABLE ENERGY

2018 will see major growth in Tesla energy storage deployments, as the production ramp of our storage products is just as steep as

with Model 3. This year, we aim to deploy at least three times the storage capacity we deployed in 2017.

On December 1, 2017, installation of the largest battery in the world was completed ahead of schedule in South Australia. This project

is already generating substantial benefit by meeting high summer demand when supply is limited and by instantaneously responding to

unplanned interruptions or frequency drops in the grid. Due to the success of this project, we're seeing an increase in demand for

Powerpack, our commercial energy storage product. With more electric utilities and governments around the world recognizing the

reliability, environmental, and economic benefits of this product, it’s clear that there is a huge opportunity for us in large scale energy

storage.

Powerwall demand for home energy storage remains exceptionally high, with orders consistently above production levels. We are

increasingly promoting our energy products in Tesla stores and in non-Tesla retail locations. There is a significant cross-selling

potential between Powerwall and our solar products, as evidenced by the fact that a vast majority of the customers who have ordered

Solar Roof have also ordered at least one Powerwall.

In Q4, we deployed 143 MWh of energy storage products, growing

45% from Q4 2016. Deployment of 129 MWh of energy storage in

South Australia will be recognized in Q1 2018 based on commercial

transfer of the site to the customer.

We also deployed 87 MW of energy generation systems in Q4,

which is 20% less than Q3 2017. Solar MW deployed declined as

volumes continue to be impacted by our decision to close certain

sales channels earlier this year and to focus on projects with better

margins. In addition, solar deployments were affected by the short

supply of Powerwalls for customers who wanted solar plus

Powerwall in their house. While volumes may continue to be

impacted by these factors over the near-term, we expect growth to

resume later this year.

We continue to ramp energy sales in Tesla retail stores and are

expanding our presence in partner locations. The mix of our

residential solar sales continues to shift towards cash and loan as

compared to leasing, reaching 54% of total residential solar sales in

Q4, up from 25% in Q4 2016. This has contributed to improved

cash performance of this business.

Initial production of Solar Roof at the Gigafactory 2 in Buffalo started in Q4, and we are ahead of schedule with the hiring targets we’ve

agreed to with the state of New York. As Solar Roof is truly the first-of-its-kind and there is significant complexity in both its

manufacturing and installation, we are deliberately ramping production at a gradual pace. When fully scaled, Gigafactory 2 will be able

to produce enough solar cells to add more than 150,000 new residential solar installations every year. As we ramp production, a

portion of the output will be dedicated for Solar Roof tiles with the balance used in our proprietary high-efficiency retrofit solar panels.

With demand outpacing production, we expect our backlog to remain in excess of one year for the next several quarters.

Q4 2017 RESULTS

Revenue & Gross Margin

Three Months Ended Change

December 31, September 30, December 31,

2017 2017 2016 QoQ YoY

Automotive revenue ($000) $ 2,702,195 $ 2,362,889 $ 1,994,123 14 % 36 %

Automotive gross margin – GAAP 18.9 % 18.3 % 22.6 % 63 bp -364 bp

Automotive gross margin excluding SBC

and ZEV credit – non-GAAP 13.8 % 18.7 % 22.2 % -490 bp -841 bp

 Automotive revenue in Q4 increased by 36% over Q4 2016, mainly due to 35% growth in vehicle deliveries. For 2017, Automotive

revenue was up 52% from 2016. ZEV credit sales in Q4 were $179 million as compared to $20 million in Q4 2016.

 Approximately 23% of Q4 deliveries were subject to lease accounting, which was slightly higher than in Q3. Last week, we closed

a $546 million asset backed securitization (ABS) of our Model S and X lease portfolio, which was our first such offering. This

transaction and future ones like it will free up significant leasing capacity for long-term growth.

 GAAP Automotive gross margin improved slightly compared to Q3 to 18.9%. Non-GAAP Automotive gross margin declined to

13.8% in Q4, which was below our expectations. This is more than fully explained by the slower than expected ramp of Model 3.

Since Model 3 production was in the early stages of the ramp, allocation of full operating costs and depreciation made its gross

margin negative. We are expecting a negative Model 3 gross margin in Q1, while generating positive operating cash flows.

 Model S and Model X gross margin in Q4 declined very slightly compared to Q3. This was primarily due to significant reserves

booked for fixed assets that are no longer in service. We expect Model S and Model X gross margins to increase in 2018 with

improved trim mix and option content, lower cost of acquisition and lower manufacturing costs.

Three Months Ended Change

December 31, September 30, December 31,

2017 2017 2016 QoQ YoY

Energy generation and storage revenue ($000) $ 298,037 $ 317,505 $ 131,385 -6 % 127 %

Energy generation and storage gross margin 5.5 % 25.3 % 2.7 % -1,979 bp 273 bp

 Energy generation and storage revenue in Q4 decreased by 6% compared to Q3. This was mainly driven by seasonal decline in

solar deployment and by our continued focus on more profitable, cash sales.

 GAAP gross margin in Q4 declined significantly as compared to Q3, due largely to several one-time factors and a higher mix of

storage products. Q4 gross margin was impacted by the typical seasonal decline in solar energy production and correspondingly

lower lease revenue in the winter months. We also booked one-time air freight costs for the South Australian battery project and

took write-downs related to legacy commercial & industrial projects that we had committed to prior to the acquisition of SolarCity.

 We expect gross margin to improve significantly in 2018 from higher operational and manufacturing cost efficiencies as well as

deployment of higher-quality commercial projects.

Other Highlights

 Service and Other revenue decreased by 5% compared to Q3 but increased by 81% compared to Q4 2016. Used car sales was

the main driver of this year-over-year growth.

 Service and Other gross loss increased to $89 million due to the significant growth of our service network in Q4 that has not been

fully utilized yet as the Model 3 production ramp works to catch up, reserves for settlements with former customers of Grohmann

and a one-time warranty true-up for used car sales. Gross margin on used cars sales was close to breakeven.

 Operating expenses increased by 5% sequentially to a total of $1.04 billion in spite of significant revenue growth. We continue to

focus on keeping tight control over operating expenses even as we ramp production.

 Basic shares outstanding at the end of Q4 were approximately 168 million.

Cash Flow and Liquidity

Three Months Ended Change

December 31, September 30, December 31,

($000) 2017 2017 2016 QoQ YoY

Cash flows from operating activities $ 509,891 $ (300,562 ) $ (448,209 ) 270 % 214 %

Collateralized lease borrowings 94,894 80,752 212,040 18 % -55 %

Operating cash flows plus collateralized lease borrowings $ 604,785 $ (219,810 ) $ (236,169 ) 375 % 356 %

 Cash flow from operating activities reached $510 million in Q4, achieving a new quarterly record. This was achieved mainly by

improved collection of receivables, inventory reduction of finished vehicles, improved working capital from the ramp of Model 3, and

growth in customer deposits. Cash flow from operating activities in 2017 was close to breakeven.

 The definition of operating cash flow includes cash outflow consumed by vehicle leasing. In order to show our cash flow from

operations before leasing activities, proceeds from collateralized lease borrowing need to be added back. When that is done, our

operating cash flow was $605 million in Q4. Additional $149 million of net funding was received in Q4 through our vehicle lease

warehouse line and tax equity fund to help our cash flows.

 Capital expenditures reached $787 million in Q4. The majority was attributable to Model 3 and Gigafactory 1 production capacity

increases. We are continuing to proactively manage capex spending. Additionally, some capex payments for Model 3 have been

deferred to Q1.

OUTLOOK

2018 will be a transformative year for Tesla, with a high level of operational scaling. As we ramp production of both Model 3 and our

energy products while keeping tight control of operating expenses, our quarterly operating income should turn sustainably positive at

some point in 2018.

We expect Model S and Model X deliveries to be approximately 100,000 in total, constrained by the supply of cells with the old 18650

form factor. As our sales network continues to expand to new markets in 2018, we believe orders should continue to grow. With

demand outpacing production, we plan to optimize the options mix in order to maximize gross margin. As stated above, we continue to

target a weekly Model 3 production rate of 2,500 by the end of Q1 and 5,000 by the end of Q2. Also, we are focused on achieving our

target of 25% gross margin for Model 3 after our production stabilizes at 5,000 cars per week.

We expect energy storage products to experience significant growth, with our aim to at least triple our sales this year. We expect

energy generation and storage gross margin to improve significantly in 2018 as we enter the year with a backlog of higher-margin

commercial solar projects and a more profitable energy storage business due to manufacturing efficiencies from scaling.

Service and Other gross margin should improve in each subsequent quarter in 2018. This will be achieved mainly through improved

service productivity via Mobile Service and better remote diagnostics for Model 3. Diagnostics architecture has been substantially

redesigned for Model 3 in order to reduce physical service visits by more than 50%. Additionally, Superchargers will start generating

revenue in 2018 with pay per use charging primarily by Model 3 customers.

Capital expenditures in 2018 are projected to be slightly more than 2017. The majority of the spending will be to support increases in

production capacity at Gigafactory 1 and Fremont, and for building stores, service centers, and Superchargers.

This year, we are starting a new chapter of our journey. Hundreds of thousands of people will switch to our EVs and many others will

turn their houses into near self-sufficient energy generators. This is the year when we believe we can achieve true cost parity -

producing a premium EV like the Model 3 will be no more expensive than producing an ICE vehicle, something that many believe is not

yet possible. We’ll continue to work as hard as we can to bring sustainable energy generation, storage and consumption into the

mainstream.
 

Michael Russo

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#9
And.... very strong after hours trading... shooting TSLA up!
81989b16-b122-4c63-b5e2-4e2526acf576-png.5516


Edited: growth after hours somewhat tapered down by now though still +1%... likely some short term speculative trading...
 
Last edited:

Michael Russo

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#10
Quote
As we shared previously, in order to incorporate our learnings and be capital efficient, we intend to start adding enough capacity to get to a 10,000 unit weekly rate for Model 3 once we have first hit the 5,000 per week milestone.
Unquote

In other words, could be as early 2H18... hence striving to beat the 5K a week to some extent during the second semester...

Music to my ears... :cool: Magic to my eyes...
 

Brokedoc

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#11
My takeaway summaries:
* Model 3 production still on track for 2500/wk by end of 2018Q1
* Production is limited by battery bottleneck (therefore adding variation to production line with AWD/P and/or interior color choices may come before battery variation with Standard Range)
* POSITIVE Cash flows from operating activities - Short Sellers are going to be bleeding tomorrow...
 

Brokedoc

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#13
So no announcement confirming that Elon is a Martian BUT Fred at Electrek listened in on the QA following and has interesting add-on info:

Elon says Model Y production details will be announced in 3-6 mos.
https://teslaownersonline.com/threa...n-starting-2019-possibly-not-at-fremont.5907/
https://electrek.co/2018/02/07/tesla-model-y-production-plans-elon-musk/

President of Sales and Services, Jon McNeill will be leaving and going to Lyft as COO
https://electrek.co/2018/02/07/tesla-president-sales-service-elon-musk/

New Autopilot features planned for 2018 and FSD coast to coast still planned.
https://electrek.co/2018/02/07/tesla-autopilot-features-2018-coast-to-coast-drive/

Mobile service already doing 30% of service calls.
https://electrek.co/2018/02/07/tesla-mobile-service-30-percent-of-visits/