The share price of U.S. automaker Tesla Motors [NASDAQ: TSLA] fell 11.5 percent yesterday in after-hours trading after the company disclosed a $38 million loss in the third quarter of 2013, the equivalent of 32 cents per share.
But while the markets adjust to the realisation that Tesla’s share price has been overly inflated in months, further inspection of Tesla’s official Q3 earnings show some really promising signs.
Using both the Generally Accepted Accounting Principles (GAAP) and non-GAAP financials — which include things that GAAP financials do not. like free cash flow and core earnings — Tesla’s revenue rose in Q3 when compared to Q2.
Using the GAAP financial reporting method, revenues were $431 million, up from 6 percent in Q2. Using the non-GAAP method, revenues were $603 million, up by 9 percent on Q2. Excluding income from the sale of Californian Zero Emissions Vehicle (ZEV) credits — which Tesla said fell dramatically during Q3 — Tesla says its gross non-GAAP margin increased to 21 percent from 14 percent in Q2. Much of this increase was due to the commencement of Tesla Model S sales in Europe earlier this year, which Tesla says helped offset any drop in income from falling ZEV credit sales.
Further, Tesla says, despite massive investment in expanding its worldwide network of service centres, stores and Superchargers, its cash balance has increased by $49 million to $796 million.
Production, Sales, increasing
In its open letter to shareholders, Tesla disclosed that vehicle production from its Fremont factory now totals 550 cars per week, with what it says is an ‘improved process controls which consistently result in high quality cars.’ As a result, Tesla says it delivered 5,500 cars worldwide, with 1,000 of those vehicles going to European buyers. It’s also worth noting that Tesla says many of the cars sold in Europe helped it bring in extra revenue due to a higher mix of higher-specification cars with 85 kilowatt-hour battery packs.
Although Tesla made more cars in Q3 than it sold, its says this is to account for the time that European cars spend in transit, as well as increasing the number of cars available for Tesla marketing and ‘highly-optioned’ cars for use as service-centre courtesy cars.
Looking forward, Tesla says it plans to increase production over the next few quarters to keep up with demand and has revised agreements with suppliers to ensure it can keep up with this demand. One interesting snippet of information we learn here is that Tesla’s recent agreement with Panasonic was for a ‘minimum’ of 1.8 billion cells, not the 2.0 billion previously reported. That figure Tesla says, “should be viewed as more of a floor than a ceiling.”
Because of efforts to ready the right-hand drive Model S and ensure the Model S complied with safety and operational requirements in various foreign markets, Tesla’s research and development budget for Q3 grew on Q2. In addition, it says, accelerated development work on its next production electric car, the 2015 Tesla Model X, also accounted to a total R&D spend of $48 million on a non-GAAP basis and $56 million on a GAAP basis.
Meanwhile, development for other automakers — including Daimler — continues, with Daimler’s B-Class Electric Drive due to transition from research and development to supply and support in the coming months.
Superchargers make a difference
With 31 Supercharger sites now open in the U.S. alone, and plans to offer complete coverage of Germany, the Netherlands, Switzerland, Belgium, Austria and Denmark and Luxembourg by the end of 2014, as well as coverage for 90 percent of the population for England, Wales and Sweden in the same time frame, Tesla says Supercharger installations are essential to the popularity and value of the Tesla brand.
According to Tesla, 90 percent of all customers opt for supercharging capability when they place their order for a Model S, while Supercharging is among the top five reasons people buy a Tesla.
Further still, an astonishing one third of all Model S cars have been supercharged at least once, with many drivers utilising the network far more frequently.
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