Tesla Q4 2015 Report Paints a Positive Picture Amidst Losses

With release of its fourth quarter shareholder letter today, Tesla Motors revealed widened losses, missed analysts’ projections, but added numerous reasons for an overall rosy picture.

Shareholder letters are by their very nature an exercise of putting one’s best face forward, and Tesla which reports GAAP and non-GAAP numbers has been called an extraordinary practitioner of the art.

Punctuating a tone of aggressive growth and accomplishments, hard financial facts include net Q4 loses that doubled to $320 million on an unadjusted basis equal to $2.44 per share compared to losses of 86 cents per share in Q4 2014.

For all of 2015, Tesla reported loss of $889 million compared to $294 million lost in 2014.

Sunny Side

Shares of TSLA rose 14 percent in after hours trading on the news that was not all bad.

Bulls are chalking things up to growing pains, and for its part, Tesla gave a number of solid markers to document this.

In Q4 alone, we generated $179 million of positive cash flow from our core operations defined as cash flow consumed in operations of $30 million plus cash of $209 million received from vehicle sales to our leasing partners.

“In Q4 alone, we generated $179 million of positive cash flow from our core operations defined as cash flow consumed in operations of $30 million plus cash of $209 million received from vehicle sales to our leasing partners.”

At the end of next month the Model 3 will be revealed, and first deliveries are slated for late 2017 – an amendment from previous reports of “mid 2017.”

Tesla also projects 80,000-90,000 units globally to be sold this year, compared to just under 51,000 last year. And, Tesla reported Model S deliveries increased 76 percent year on year in Q4 2015.

Gross margins, it said are “tracking toward 30 percent” by the fourth quarter of 2016 for the Model S.

In fact, Model S was the only vehicle in its class with growing sales last year. Even on our competitors’ home turf and in countries without government incentives to purchase electric vehicles, Model S is winning. For example, in Switzerland, Model S outsold the Mercedes Benz S-Class, the BMW 7- Series, the Porsche Panamera and the Audi A-8 combined for the full year, and also outsold the Mercedes Benz E-Class. In Germany in Q4, Model S outsold the Porsche Panamera. Finally, across all of Europe last year Model S outsold the Audi A8 and A7 combined and the BMW 7-Series and 6-Series combined.

Tesla Model S was the world's best-selling plug-in car for 2015 but Tesla did not emphasize that. Instead, it noted it beat conventional cars at their own game, an arguably greater accomplishment.

Tesla Model S was the world’s best-selling plug-in car for 2015 but Tesla did not emphasize that. Instead, it noted it beat conventional cars at their own game, an arguably greater accomplishment.

While the Model S now with Autopilot functionality is a success story, last quarter the thrice-delayed Model X saw only 206 deliveries.

SEE ALSO: Tesla Model S Was World’s Best-Selling Plug-in Car in 2015

The rollout is slower than had been hoped, and the Tesla Motors Club forum has numerous early Model X owners sharing anecdotes of miscellaneous issues, including those over quality control.

Tesla has shown itself willing to make things right, and so this too might be chalked up to growing pains.

And meanwhile, it also launched Powerwall via its Tesla Energy division.

Global excitement in Tesla Energy products remains very strong. To accommodate this demand, we transitioned production to the Gigafactory in Q4. While this transition did take slightly longer than we had expected, both Powerwall and Powerpack production is now operating smoothly and expanding at the Gigafactory. The first Powerwalls built at the Gigafactory are now installed in the US, Australia and Germany. In our first main markets, Australia and Germany, we have seen Tesla Energy inbound sales leads quickly exceeding vehicle sales leads, more than doubling our total potential Tesla customer inquiries. We are excited about the potential growth in vehicle sales this new energy customer base could also represent.

A Better Year This Year

Even as mainstream media reports document things such as TSLA is down 40 percent and “The automaker, founded in 2003, has never made a full-year profit,” Tesla says things are getting better.

tesla model s

Tesla Model S.

We expect to generate positive net cash flow and achieve non-GAAP profitability for the full-year 2016. Thus our cash balance at the end of 2016 should increase from the year end 2015 level. We plan to fund about $1.5 billion in capital expenditures without accessing any outside capital other than our existing sources that support our leasing and finished goods inventory. We plan to invest in equipment to support cell production at the Gigafactory, begin installation of Model 3 vehicle production machinery, open about 80 retail locations and service centers, and energize about 300 new Supercharger locations.

Tesla’s shareholder letter can be read here.