Tesla Misses, Burns Nearly Half A Billion, Warns It Has Hit Bank "Funding Limit": Stock Rises

Following several repeat, and loud, warnings that sales are slowing down, moments ago Elon Musk did not disappoint and reported results that missed substantially on both the top and the bottom line, with non-GAAP EPS of (1.02) nearly twice as bad as what consensus expected.

Q2 results missed on both the top and bottom line:

  • Revenue $1.56B vs. $1.63B est
  • EPS ($1.02) vs. ($0.56) est

But while the adjusted, non-GAAP financials (even revenue)  have never mattered for this most hyped stock ever, the reason why the stock is up in the after hours, is because  TSLA announced Q2 deliveries of 14,402 which were just fractionally better than what Musk had warned a month ago, when he guided down to 14,370. So TSLA basically beat the downward revised guidance.

This is how Musk explained the poor Q2 output:

We delivered fewer cars in Q2 than originally planned as a result of our steep production ramp, which resulted in almost half of Q2 production occurring in the final four weeks of the quarter. Given inflection points in the production ramp and firm shipping cutoffs, shifting production by even a short period of time had a disproportionate impact on the number of cars that were delivered by quarter end

So... Tesla delivered fewer cars because it was producing more cars? Got it.

The company also announced that "production and demand on track to support 50,000 deliveries in 2H 2016", although that is far from suggesting there is demand to fill that supply.

Something else notable: while Model S prices rose modestly, the average Model X price is now declining:

Model S average prices increased 3% sequentially, due to higher option take rates and the modest price increase associated with the Model S refresh. Model X average prices were more than 15% higher than for Model S, despite declining sequentially as mix shifted away from Signature Series variants.

Here is the visual breakdown of the results:

From the report:

In Q2, we delivered 14,402 new vehicles consisting of 9,764 Model S and 4,638 Model X, which was slightly higher than what we stated in our July announcement. Model S remains the market share leader in North America and Europe among all comparably priced four-door sedans, and Model X is quickly gaining ground against similarly priced SUVs in all regions.

An interesting highlight in the outlook, in which Tesla notes that it has reached its funding limit with a banking partner:

We anticipate that direct leasing will rise from 8% of deliveries in Q2 to about 15% of deliveries in Q3, as we have reached our funding limit with a banking partner. We anticipate adding new partners that will allow us to fund our planned growth in the future. We recognize revenue on directly leased deliveries as cash is received over the lease term of typically three years, on both a GAAP and non-GAAP basis.

Why is that a problem? Because as Tesla admitted, as part of its operating cash flow, it commingled receipts from deposits for the Model 3, which have been estimated to be around $300 million.

Our GAAP cash flow from operations during the quarter was $150 million, which included the receipt of Model 3 deposits. After adding $143 million of cash inflows from vehicle sales to our bank leasing partners, our cash flow from core operations was nearly $293 million.

If one nets out the $300 million in one time deposit receipts from the reported $150 million in cash from operations and subtacts $295 million in Capex, the result is another quarter in which TSLA burned nearly half a billion dollars.

 

Despite having $3.3 billion in cash as of June 30 (after the most recent $1.7 billion capital raise) we expect Musk to come asking for another $1-2 billion shortly. After all he has insane growth "projects" to fund.

Despite the disciplined pace of capital spending in the first half of this year, we still expect to invest about $2.25 billion in capital expenditures in 2016, in support of our accelerated production plan for Model 3.

Finally, expect cash burn to really pick up going forward because as the company warns, "total non-GAAP operating expenses should increase sequentially in Q3 and Q4, and we now expect full year 2016 total non-GAAP operating expenses to increase by about 30%. The increases come from engineering, design, and testing expenses related to Model 3 supplier contracts, and higher sales and service costs associated with expanding our geographic presence."

Then again, since no fundamentals matter for the stock, which continues to be driven only and entirely on hype as it burns billions upon billions, we fully expect TSLA stock to surge in the afterhours on the latest algo attack and short squeeze. For now, however, the stock is unexpectedly calm.