Updated from 4:33 p.m. to include information about currency gain in Q1.
For the first quarter, Tesla earned 12 cents a share on $713 million in revenue, as it delivered 6,457 Model S units. Tesla produced 7,535 Model S units during the quarter, but was only able to deliver 6,457 due to the number of cars in transit to both Europe and Asia. The company said non-GAAP gross margins were 25.4% for the quarter, slightly above the 25.2% it reported in the fourth quarter. Tesla generated $61 million in cash flow from operations during the quarter.
Analysts surveyed by Thomson Reuters were expecting Tesla to earn 10 cents a share on $699.09 million in revenue.
Tesla did note that it received a $6.7 million net gain in a favorable foreign currency, aiding results.
"The average selling price of Model S remained strong," CEO Elon Musk said in the letter to shareholders. "Automotive revenue included $15 million of Toyota powertrain sales and almost $12 million of regulatory credit sales, but no zero emission vehicle (ZEV) credit sales as expected."
Shares of Tesla dropped in after-hours trading, falling 7.7% to $185.81.
The company ended the quarter with $2.6 billion in cash and marketable securities, due in large part to the $1.8 billion convertible bond offering done in February.
Tesla noted that research and development (R&D) expenses were $68 million on a non-GAAP basis and $82 million on a GAAP basis, due in part to Model X engineering work acceleration, and "efforts continued to adapt Model S for growing international markets."
For the second quarter, Tesla said it expects to deliver about 7,500 Model S units, as the company looks to surpass 35,000 Model S deliveries for the year. The is looking to produce between 8,500 and 9,000 cars for the quarter, up 13% to 19% sequentially.
"The quarterly gap between production and deliveries is expected to decline in future quarters," Musk said in the letter. He cautioned that "[b]attery cell supply will still constrain our production in Q2 but should improve in Q3."
Touching on the company's leasing program, he noted "due to the lead times between vehicle orders and deliveries we expect to only lease about 200 cars in Q2. Many new orders for leased vehicles received in Q2 will be delivered in Q3, so the number of leased vehicles should grow over time. For leased vehicles, we will recognize lease revenue over the term of the lease in both our GAAP and non-GAAP financials."
Musk said Tesla just started production of Tesla powertrains for the Mercedes B-Class vehicle, a significant milestone in the development of the program. "We expect to ramp up production shortly and see continued growth during the year. We expect non-GAAP automotive gross margin to increase slightly from Q1 to Q2. As manufacturing efficiency and part costs continue to improve, we believe a 28% non-GAAP auto motive gross margin by Q4 of this year is still an achievable target."
"We still plan to invest $650-850 million for the year in capital expenditures for increased production capacity, growth in our store, service center and Supercharger footprints, Model X and S development and start of Gigafactory construction," Musk noted. As a result, he expects Tesla to be cash flow negative for 2014, before "considering the equity required for leasing."