Tesla, Inc. Q1 2011 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2011. Tesla Motors, Inc. designs, develops, manufactures, and sells high-performance fully electric vehicles and advanced electric vehicle powertrain components. The company is currently selling the Tesla Roadster and is in the development phase of the Model S sedan, with commercial introduction expected in 2012. As of March 31, 2011, the company had approximately 95.6 million shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Total Revenues | $49.0 million | $20.8 million |
| Gross Profit | $18.0 million | $3.9 million |
| Net Loss | $(48.9) million | $(29.5) million |
| Net Loss Per Share (Basic & Diluted) | $(0.51) | $(4.04) |
| Cash and Cash Equivalents | $100.7 million | $61.5 million |
| Restricted Cash (DOE Account) | $42.9 million | $73.6 million |
| Long-Term Debt (DOE Loan) | $102.5 million | $71.8 million |
| Operating Cash Flow | $(43.3) million | $(27.3) million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 136% year-over-year. Automotive sales rose 63% to $33.6 million, driven by higher Tesla Roadster deliveries and significant shipments of battery packs and chargers to Daimler AG. Development services revenue surged to $15.4 million (from $0.2 million) primarily due to milestones achieved under the Toyota RAV4 EV program.
- Expense Increases: Operating expenses increased 119% to $65.4 million. Research and Development (R&D) expenses jumped 210% to $41.2 million due to Model S alpha prototype builds, engineering headcount increases, and supplier testing. Selling, General, and Administrative (SG&A) expenses rose 46% to $24.2 million due to expanded sales and marketing activities.
- Capital Expenditures: Capital expenditures increased to $20.5 million (from $5.5 million) as the company invested heavily in the Fremont manufacturing facility for the Model S.
- Liquidity: The company drew down an additional $30.7 million under its Department of Energy (DOE) loan facility. Total available liquidity (cash, restricted cash, and remaining DOE loan capacity) stood at approximately $506 million.
Guidance, Outlook, and Risks
- Model S Launch: Management expects to begin customer deliveries of the Model S in mid-2012. The company is currently conducting alpha testing and preparing for beta builds in the Fremont facility.
- Capital Spending: Aggregate capital expenditures for 2011 are expected to range between $190 million and $215 million, primarily for tooling and manufacturing equipment.
- Profitability Outlook: The company expects to continue generating net losses in the foreseeable future as it invests in the Model S program and infrastructure. Profitability is dependent on the successful commercial introduction of the Model S.
- Key Risks:
- Production Delays: Significant delays in the Model S launch could extend the period of limited revenue generation.
- Supply Chain: Dependence on single-source suppliers (e.g., Lotus for Roadster gliders) and potential shortages of raw materials like lithium-ion cells.
- DOE Loan Covenants: The company must meet specific milestones and financial covenants to access the remaining $362.5 million of its DOE loan facility.
- Regulatory: Potential restrictions on direct-to-consumer sales models in various states and changes to EPA range testing procedures.
Investor Verification Checklist
- Verify the timeline and progress of Model S alpha and beta testing milestones.
- Monitor the status of the DOE Loan Facility draw-downs and compliance with financial covenants.
- Assess the sustainability of development services revenue from Toyota and Daimler beyond 2011.
- Review the company's ability to manage capital expenditures within the projected $190M-$215M range for 2011.
- Track the number of Model S reservations and potential cancellation rates as the launch date approaches.