Tesla Jumps After Smaller Than Expected Loss; Warns Cash Burn Is About To Hit Ludicrous Speed

As we previewed yesterday, perhaps more so that the longs it was the company's near record shorts who were expecting today's earnings release to see if their bearish bets on the company will pan out. And while the stock slid all day, losing 4% in regular hours after Jim Chanos announced he was short the car maket, the stock now appears to be jumping in the after hours session having just reported its Q1 results which were as follows:

  • Q1 GAAP Revenue: $1.6Bn, Est. $1.61BN
  • Q1 EPS: $(0.57), Est $(0.60)
  • Q1 Gross Margin 21.7%, Exp. 20.6%
  • Tesla produced 15,510 vehicles in Q1, up 10% from Q4, and said it would produce 20,000 in Q1. We expect this number may be met but the actual number of deliveries will not. 

A modest beat on the bottom line with a smaller loss than expected, while revenue was in line. Tesla also said that "Model S production of 12,851 vehicles met plan, but Model X production of 2,659 vehicles was insufficient to meet our projected level of deliveries." But what was more important to investors was that Tesla reaffirmed full year deliveries which it expects to be in the 80,000-90,000 range.

This is what else Elon Musk previewed in the quarterly letter:

  • Advancing 500,000 unit build plan by two years to 2018
  • Volume Model 3 production and deliveries to start in late 2017
  • Model S orders up 45% compared to Q1 last year, accelerating globally
  • Model X production increased from 507 in Q4 to 2,659 in Q1
  • Cash balance up $245M sequentially inclusive of ABL & exclusive of Model 3
  • Affirming 80,000 to 90,000 deliveries this year

There was not one mention of China in the entire letter.

Of course, this being Tesla, all of the numbers, including revenue, were non-GAAP. Here is what GAAP vs non-GAAP looks like. First revenue:

And then EPS:

 

However, there was just one truly important question - one we asked on Twitter earlier:

We now know: it's not a new product, but actually just a shift in the delivery calendar, because according to Musk, he now expects to deliver 500,00 cash a year not in 2020 but in 2018, and the result will be a surge in CapEx spending:

Given our plans to advance our 500,000 total unit build plan, essentially doubling the prior growth plan, we are re-evaluating our level of capital expenditures, but expect it will be about 50% higher than our previous guidance of $1.5 billion for 2016

Which brings us to the key topic: Tesla's perpetual cash burn. In Q1 Tesla burned another $446 million in cash, bringing the total cash burn over the past year to $2.1 billion.

 

Well, Tesla now has an excuse to burn even more as a result of a boost in CapEx spending to meet its accelerated schedule. And as expected:

Naturally, this will impact our ability to be net cash flow positive for the year, but given the demand for Model 3, investing to meet that demand is the best long-term decision for Tesla.

"Demand" which is based on $1,000 refundable deposits. Meanwhile, Tesla's Cash is now $1.44 billion, up from $1.2 billion three months ago, while it Debt increased by $500 million to $3.1 billion.  The only question is whether Musk will fund his ludicrous cash burn with more debt or an imminent equity offering.