Tesla Quarterly Earnings: By the Numbers

Roter Tesla Model S P85, ein Luxus-Elektroauto
allOver images/Alamy
Electric-car maker Tesla (TSLA) reported a loss of $74.6 million for the third quarter, double its loss of $38.5 million for the same time a year ago. Tesla attributed the loss to increased expenses to meet the rising demand for the Model S Sedan, as operating expenses rose to $291 million.

The company lowered their forecast for deliveries of the Model S Sedan by 2,000 vehicles, to about 33,000 vehicles for 2014, citing delays in a planned revamp of a factory. Forecasts for deliveries in 2015 remained the same.

Overall, sales rose to $932 million compared to $603 million in the first nine months of 2013. The introduction of the Model X crossover is now projected for the third quarter of 2015 -- one quarter later than last announced -- coming on top of several other delays in the past year-and-a-half. Tesla's challenge is not demand, but rather production capacity issues, which account for the postponement in delivery time.

Cash fell to $2.4 billion from $2.7 billion at the end of the second quarter, due to capital expenditures and the operating losses noted above, while expenses for Research and Development rose 28 percent in the third quarter.

This earnings release follows the earnings announcements from the following peers of Tesla: Daimler (DDAIY), Ford (F), General Motors (GM), Honda (HMC), Toyota (TM) and Volkswagen (VLKPY)

  • Summary numbers: Revenues of $ 851.8 million, Net Earnings of $ -74.6 million and EPS of $ -0.60.
  • Performance focus more on revenue than bottom-line: Increase in revenue of 97.5 percent vs. change in earnings of -94.1 percent, compared to same period last year
  • Gross margins widened to 37.2 percent from 30.4 percent for the same period last year; operating margins (EBITDA margins) now an improved 3.0 percent from -0.5 percent

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):
Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014
Revenue Growth (YOY)760.9%100.8%10.5%89.9%97.5%
Earnings Growth (YOY)65.3%81.9%-542.7%-102.9%-94.1%
Net Margin-8.9%-2.6%-8.0%-8.0%-8.8%
Return on Equity-25.8%-10.6%-25.2%-26.6%-32.3%
Return on Assets-7.6%-2.8%-5.8%-5.2%-5.7%

Market Share Versus Earnings Growth

Growth companies like Tesla sometimes focus more on increasing market share than on earnings.

Tesla's revenue performance surpassed its earnings performance this quarter. Compared to the same period last year, its revenue rose 97.5 percent, while its earnings declined by 94.1 percent -- suggesting perhaps that the company's focus is on the top-line at the expense of profits. However, its revenue growth exceeded its peers who have announced so far. This points to some likely market share gains, and partially assuages the weaker earnings performance this quarter. (Also, for comparison purposes, revenues changed by 10.7 percent and earnings by -20.7 percent compared to the previous quarter.)

Earnings Growth Analysis

The company's poor earnings performance has not come as a result of a deterioration in operating margins or because of any cost control issues. As a matter of fact, gross margins widened from 30.4 percent to 37.2 percent and operating margins (EBITDA margins) moved from negative to positive territory this quarter-- from -0.5 percent to 3.0 percent to be exact. For comparison, gross margins were 34.8 percent and EBITDA margins 3.4 percent in the quarter ending June 30, 2014.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is quite possible that the company's performance is a result of truly delivering in the marketplace and not simply an accounting prop up using the balance sheet.

Tesla's improvement in gross margins have come at the expense of a deterioration in working capital management, suggesting that the improvements in gross margins are likely trade-offs with the balance sheet and not strictly from operating decisions. Its working capital days have gone up to 199.9 from last year's levels of 73.0 days.

Unusual Items

The company's earnings decline is partially a result of non-operational activity and unusual items such as selling emission credits. In fact, the company showed improvements in operating (EBIT) and pretax margins. EBIT margins went from -7.1 percent to -4.6 percent and pretax margins improved from -8.7 percent to -8.3 percent.

EPS Growth Versus Earnings Growth-Competitors?

While Tesla's Earnings per Share (EPS) declined by -87.5 percent, that metric is better than its earnings, which slid by -94.1 percent. This decline in earnings is worse than the earnings performances announced thus far by its peer group, suggesting that the company is losing ground in generating profits versus its competitors.

Supporting Data

The table below shows the preliminary results along with the recent trend for revenues, net income and other relevant metrics:
Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014
Revenue Growth (YOY)760.9%100.8%10.5%89.9%97.5%
Peer Average Revenue Growth (YOY)3.7%3.0%2.0%2.8%0.7%
Earnings Growth (YOY)65.3%81.9%-542.7%-102.9%-94.1%
Peer Average Earnings Growth (YOY)17.1%69.0%23.0%-14.5%2.0%
Gross Margin30.4%31.6%32.1%34.8%37.2%
Peer Average Gross Margin25.0%24.5%25.4%25.7%25.0%
EBITDA Margin-0.5%3.9%0.0%3.4%3.0%
Peer Average EBITDA Margin10.1%10.7%10.3%10.5%11.2%
Net Margin-8.9%-2.6%-8.0%-8.0%-8.8%
Peer Average Net Margin4.2%5.3%3.5%4.5%4.7%
Peer Average EPS$0.56$0.88$0.92$0.80$0.81
Return on Equity-25.8%-10.6%-25.2%-26.6%-32.3%
Peer Average Return on Equity8.7%12.8%10.7%9.6%12.9%
Return on Assets-7.6%-2.8%-5.8%-5.2%-5.7%
Peer Average Return on Assets3.4%4.3%2.4%2.9%3.4%

Company Profile

Tesla Motors, Inc. designs, develops, manufactures and sells fully electric vehicles and advanced electric vehicle powertrain components. It provides services for the development of electric powertrain components and engages in the sale of electric powertrain components to other automotive manufacturers. Tesla Motors has manufactured its first electric vehicle, Tesla Roadster in 2008. The company was founded by Jeffrey B. Straubel, Elon R. Musk and Marc Tarpenning on July 1, 2003 and is headquartered in Palo Alto, CA.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of TSLA.
Read Full Story
  • DJI26202.73240.290.93%
  • NIKKEI 22520628.019.440.05%
    Hang Seng26048.72-221.32-0.84%
  • USD (PER EUR)1.11-0.0007-0.07%
    USD (PER CHF)1.02-0.0021-0.21%
    JPY (PER USD)106.58-0.0060-0.01%
    GBP (PER USD)1.220.00300.24%