Tesla Beats Estimates, Reports 4th Straight Quarter of GAAP Profits-Live Blog

Eric Jhonsa

Tesla TSLA delivered a strong second quarter on Tuesday, beating analyst consensus estimates for revenues and earnings, maintaining its ambitious target of delivering 500,000 vehicles this year despite the disruptions of the coronavirus pandemic and reporting a fourth straight quarter of GAAAP profits, making it eligible for inclusion in the S&P 500.

For more perspective on Tesla’s earnings, follow Tesla Daily on TheStreet.

For the quarter, the EV maker posted revenue of $6.04 billion and GAAP EPS of $0.50, ahead of consensus estimates for revenue of $5.15 billion and EPS of negative $0.82.

Shares were rising 5.6% to $1,680.99 in after-hours trading on Wednesday after the release of the report. 

TheStreet's tech columnist, Eric Jhonsa, is analyzing the company's earnings report, as well as the call with analysts that's scheduled to begin at 5:30 p.m. ET. Please join us!

Comments (71)
No. 1-50
Eric Jhonsa
Eric Jhonsa

Editor

Tesla's call has ended. Though Tesla's stock went into earnings up 281% on the year, shares are adding to their gains post-earnings, rising 4.7% to $1,666.50 after the company comfortably beat Q2 revenue and EPS estimates, while reporting better-than-expected free cash flow of $418 million.

Tesla also announced that its second U.S. Gigafactory will be in Austin, and that it plans to start Semi truck deliveries next year. The company said that it still has a goal of delivering 500,000 vehicles in 2020, while admitting that achieving this goal has now "become more difficult."

Thanks for joining us.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: We're trying hard to recruit talented people for the Berlin Gigafactory. But the labor mobility in Europe is low, which can create challenges.

Eric Jhonsa
Eric Jhonsa

Editor

Musk notes Tesla has been relying heavily on air freight to get parts shipped due to recent supply chain challenges, which serves to increase costs.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: Demand is not a problem for the Model Y right now. We're trying to solve some production challenges. There's a lot of "firefighting" right now related to supply chain and production issues.

Eric Jhonsa
Eric Jhonsa

Editor

Question about the trade-off between bringing EVs to lower price points and growing operating margins.

Musk claims that autonomy will allow Tesla to achieve both of these goals. Says the thing that bugs him the most is that Tesla's cars aren't yet as affordable as he wants them to be. Asserts that Tesla for now wants to be slightly profitable while driving strong growth.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Tesla's assertion that it can achieve industry-leading operating margins over time, and how much it expects EV credits to boost that margin.

Kirkhorn: We don't manage the business with the assumption that regulatory credits are needed to run the company profitably. Credits will be up in 2020, but we expect they'll eventually fall.

Argues that software-based revenue streams such as FSD will provide a margin boost long-term, as will Tesla's planned ride-sharing network. Also says that operating expenses should drop as a % of revenue long-term.

Eric Jhonsa
Eric Jhonsa

Editor

Kirkhorn: The Shanghai Gigafactory continues to ramp. There's still room to improve cost efficiencies. Also room to improve Model Y margins.

Musk: Locally sourcing more components for Shanghai can have a massive effect on the cost of a vehicle.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: The feedback loop for insurance is traditionally weak. We'll have a strong feedback loop.

He also makes a recruiting pitch for the insurance business. Declares that Tesla wants "revolutionary actuaries."

Eric Jhonsa
Eric Jhonsa

Editor

Kirkhorn: We're still working to expand availability of our insurance product (it's currently available in CA). Working on a telematics-based insurance solution that can effectively use data to gauge how likely a driver is to get into a crash. We've nearly finished the risk and cost analysis for this offering, and hope to offer it in a handful of states by the end of the year, and eventually launch second and third-gen versions.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally-sensitive way.

Adds that a 300-mile range will become "a standard expectation" for EVs.

Eric Jhonsa
Eric Jhonsa

Editor

Musk and another exec talk up Tesla's battery cell and pack advances. Says they'll be able to get a range of nearly 300 miles on Chinese Model 3 units that will rely on cheaper lithium iron phosphate batteries.

Eric Jhonsa
Eric Jhonsa

Editor

Musk insists that long-term, both Tesla's battery and solar businesses will be "enormous." He and another exec also highlight Tesla's Autobidder energy trading platform.

For context, in Q2, Tesla's energy generation & storage operations accounted for 6% of its revenue, roughly even with a year earlier.

Eric Jhonsa
Eric Jhonsa

Editor

Musk (while discussing Berlin's expected efficiency gains): We love manufacturing. We think more people should be involved in it. There's far more opportunity for innovation in manufacturing than in cars. It'll be "a long-term sustainable advantage" for Tesla.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: The "fundamental architecture" of Model Y will be different in Berlin. Will look the same, but the internals will be different and more cost-efficient.

Another Tesla exec adds that a lot of the improvements will involve cutting down on the number of needed parts.

Eric Jhonsa
Eric Jhonsa

Editor

A question about self-driving milestones.

Musk: Right now milestones are related to things like about identifying partially-blocked objects and shifting from 2D to 3D vision. Going from individual pictures to "surround video."

Also talks up AI's long-term potential. Asserts that the people who underestimate it are the ones who can't imagine a computer being smarter than they are.

Eric Jhonsa
Eric Jhonsa

Editor

Question about future opportunities for monetizing the user base outside of FSD purchases.

Musk: Right now FSD is by far the most important thing. The arrival of self-driving functionality through a software update would be one of the biggest step changes in auto history.

He does add that after achieving full self-driving, Tesla will explore offerings related to "productivity and entertainment." He and Kirkhorn note that Tesla has already been experimenting in this area via things like games that can be played on its infotainment system.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: It would be reasonable to assume we would make a compact vehicle of some kind of eventually, as well as a higher-capacity vehicle. But there is "a long way to go" with the Model 3, Model Y and Cybertruck.

Eric Jhonsa
Eric Jhonsa

Editor

The Q&A session is starting.

Eric Jhonsa
Eric Jhonsa

Editor

$48M in deferred revenue was recognized during the quarter related to FSD purchases.

Eric Jhonsa
Eric Jhonsa

Editor

Kirkhorn: Automotive gross margin excluding regulatory credits fell Q/Q to 18.7% due to the impact of the Fremont shutdown.

Eric Jhonsa
Eric Jhonsa

Editor

CFO Zach Kirkhorn now talking.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: I've never been more optimistic or excited about the future of Tesla.

Eric Jhonsa
Eric Jhonsa

Editor

Musk asserts that the latest version of Tesla's self-driving software is "profoundly better" than people realize. Claims it's almost at the point where he can drive from his house to work without intervention.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: The Long Range Model S now has an EPA-tested range of 402 miles.

Eric Jhonsa
Eric Jhonsa

Editor

Musk notes Tesla recently adjusted the price of our solar offerings, and claims it now offers the cheapest solar products in the U.S..

Eric Jhonsa
Eric Jhonsa

Editor

The Cybertruck and Tesla Semi will be built there, as will the Model 3 and Y for customers in the Eastern U.S.. At the same time, Tesla will continue growing its CA operations.

Eric Jhonsa
Eric Jhonsa

Editor

Musk: The second U.S. Gigafactory will be near Austin. 15 minutes from downtown. Right on the Colorado River.

Eric Jhonsa
Eric Jhonsa

Editor

Musk thanks Tesla workers for how they executed in Q2.

Eric Jhonsa
Eric Jhonsa

Editor

Elon Musk talking.

Eric Jhonsa
Eric Jhonsa

Editor

Tesla is going over its safe-harbor statement.

Eric Jhonsa
Eric Jhonsa

Editor

The call is starting.

Eric Jhonsa
Eric Jhonsa

Editor

Here's the webcast link, for those who want to tune into Tesla's call.

Eric Jhonsa
Eric Jhonsa

Editor

As a reminder, Tesla's earnings call starts at 5:30PM ET. I'll be around to cover.

Eric Jhonsa
Eric Jhonsa

Editor

Tesla on its self-driving efforts: "As of Q2, our FSD-equipped cars will either stop at an intersection or drive through it without driver confirmation when it is deemed safe to do so. Ultimately, the necessity for confirmation will be withdrawn completely."

That's progress, but not quite the same as having a fleet of robotaxis on the road.

Eric Jhonsa
Eric Jhonsa

Editor

Following a Q2 in which deliveries (90,891) were well above vehicle production (82,272), Tesla ended June with 17 days of vehicle inventory. That's down from 25 at the end of Q1 and 19 a year earlier.

On a dollar basis, Tesla's total inventories stood at $1.22B at quarter's end, up from $1.05B at the end of Q1 and $698M a year earlier.

Eric Jhonsa
Eric Jhonsa

Editor

As others have noted, the fact that Tesla has recorded another quarter of GAAP profits makes it eligible for being added to the S&P 500. It might not be too long before that happens, given the company's current size and market cap.

Eric Jhonsa
Eric Jhonsa

Editor

Tesla's vehicle lease count continues steadily growing. The company had 54,519 operating leases at the end of Q2, up 3% Q/Q and 40% Y/Y.

Automotive leasing revenue totaled $268M, up 29% Y/Y and equal to 5% of total automotive revenue.

Eric Jhonsa
Eric Jhonsa

Editor

Shares are now up 4.5% after-hours. The Q2 numbers comfortably beat analyst estimates across the board, but Tesla's massive 2020 run-up is naturally tempering how much the stock moves on the news. Will be interesting to see how shares trade tomorrow.

Eric Jhonsa
Eric Jhonsa

Editor

Regarding 2020 deliveries, Tesla says that delivering 500K vehicles remains its target, albeit while admitting that "achieving this goal has become more difficult."

Eric Jhonsa
Eric Jhonsa

Editor

At the end of Q2, Tesla operated 2,035 supercharger stations, up 6% Q/Q and 28% Y/Y.

Eric Jhonsa
Eric Jhonsa

Editor

Tesla's "Services and other" segment, which among other things covers its Supercharger network and vehicle servicing activities, had revenue of $487M (down 20% Y/Y) and a cost of revenue (driven in large part by Supercharger expenses) of $558M (down from $743M).

Eric Jhonsa
Eric Jhonsa

Editor

Excluding $117M worth of year-ago restructuring charges, operating expenses fell 3% Y/Y to $940M.

SG&A spend rose 2% to $661M, but R&D spend fell 14% to $279M.

Eric Jhonsa
Eric Jhonsa

Editor

Solar deployments (impacted some by lockdowns) totaled just 27MW, down 23% Q/Q and 7% Y/Y.

Eric Jhonsa
Eric Jhonsa

Editor

Energy storage deployments totaled 419 MWh, up 61% Q/Q and 1% Y/Y. Tesla says its Megapack battery system generated a profit for the first time.

Eric Jhonsa
Eric Jhonsa

Editor

Thanks in part to free cash flow of $418M, Tesla's cash balance grew by $535M Q/Q to $8.6B. Debt and finance leases ended Q2 at $14.1B.

Eric Jhonsa
Eric Jhonsa

Editor

Capex totaled $546M, up from $455M in Q1 and just $250M a year ago.

Eric Jhonsa
Eric Jhonsa

Editor

Of note: Regulatory credits accounted for $428M of Tesla's automotive gross profit of $1.32B. For comparison, credits totaled $354M in Q1 and $111M a year ago.

Eric Jhonsa
Eric Jhonsa

Editor

In spite of the Fremont shutdown, automotive gross margin was 25.4%. This compares with 25.5% in Q1 and 18.9% a year ago.

Eric Jhonsa
Eric Jhonsa

Editor

Tesla says it has selected a site for a second U.S. Gigafactory, and that preparations are underway.

Eric Jhonsa
Eric Jhonsa

Editor

Shares are now up 7.5% after-hours to $1,711.


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