Tesla Motors, Inc., Q3 2010 Earnings Call, Nov 09, 2010 - NasdaqGS:TSLA

NasdaqGS:TSLA

Ricardo Reyes, who was the Vice President of Corporate Communications at the time, made the following statements during the Tesla Motors Third Quarter 2010 Earnings Call:

1. Opening Remarks:

   • "Thank you very much, and thank you for joining us this afternoon. Welcome to Tesla Motors Earnings Call for the third quarter of 2010. With me on the call today are Elon Musk, Chairman, Product Architect and CEO of Tesla Motors; and Deepak Ahuja, our Financial Officer."
   • Provided a disclaimer regarding forward-looking statements and safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

2. Closing Remarks:

   • "Thank you. See you in Detroit everybody."

Ricardo Reyes' role during the call was mainly to introduce the call, provide legal disclaimers, and facilitate the transition to other speakers. He also briefly mentioned seeing attendees at the Detroit Auto Show, indicating the company's intention to showcase the Model S prototype at the event.

Elon R. Musk provided updates and insights during the Tesla Motors Third Quarter 2010 Earnings Call. Here’s a detailed summary of his statements:

General Overview:

• Progress Update:

  • Roadster, Model S, and Powertrain programs are progressing well.
  • Completed the purchase of the Fremont factory (formerly NUMMI).
  • Made progress on Powertrain prototypes and Model S alpha prototypes.
  • Model S remains on track for mid-2012 production.

• Strategic Partnerships:

  • Finalized the Toyota RAV4 development systems agreement.
  • Completed all deliverables with Daimler for the Mercedes A-Class battery packs and chargers.
  • Announced a $30 million investment from Panasonic.

• Talent Acquisition:

  • Noted significant talent acquisition across the company, emphasizing the importance of the team for the success of the company.

Roadster Business:

• Q3 Deliveries:

  • Delivered 151 Roadsters globally, a 7% increase quarter-over-quarter.
  • Best quarter for new orders in over 2 years, up 15% from Q2.
  • These orders are new and not from a backlog.

• Global Expansion:

  • Tesla is now present in 31 countries.
  • Completed the TAG Heuer Odyssey of Pioneers, a round-the-world trip with a production electric car.

• Retail Expansion:

  • Opened a new store in Paris.
  • Plans to open the first store in Asia (Tokyo) and in Milan by the end of the year or early next year.
  • Focus on improving the retail experience and making it superlative.

Model S:

• Production and Development:

  • On plan for a mid-2012 launch, with a slow ramp-up through 2012, reaching steady-state production in 2015.
  • Targeting 20,000 units in 2015.
  • Purchased used equipment for the Fremont factory, often at very low prices.
  • Operating permits exceed Model S production requirements, allowing for significant expansion.

• Prototype Progress:

  • Alpha automotive body prototype process underway.
  • First volume line expected to be completed this month.
  • First completed Alpha prototype vehicle expected to be driving by the end of the year.

• Supplier Sourcing:

  • Expect to be 100% complete on supplier sourcing by the end of the quarter, except for a few short-term items.

• Reservations:

  • Over 3,000 Model S reservations, despite no advertising or salesforce promoting the vehicle.
  • Aspiration to sell out the first year of Model S production by the start of production.

Strategic Relationships:

• Daimler:

  • Progressing nicely with the Smart program (1,500 vehicles initially).
  • Delivered a record amount of battery packs and chargers in Q3.
  • Completed redevelopment for the A-Class and are now shifting to production.

• Toyota RAV4 EV:

  • Finalized a $60 million development deal.
  • Delivering RAV4 prototypes since July.
  • Noteworthy that Toyota chose Tesla to provide the complete powertrain, including the motor, gearbox, inverter, battery pack, and charger.

• Panasonic:

  • Long-standing relationship with Panasonic (and Sanyo subsidiary) for 6 years.
  • Panasonic’s $30 million investment is a powerful endorsement of Tesla’s technology.
  • Panasonic cells used in various battery packs and planned for Model S.
  • No exclusivity with the Panasonic deal.

Operational Guidance:

• Near-Term Expenses:
  • Significant expenses expected over the next 9 quarters due to the large investment in the Model S.
  • Focused on long-term profitability and value creation.
  • Roadster and Powertrain businesses have good gross margins approaching 30%.

Closing Remarks:

• Excitement About Future:
  • Anticipated excitement around the Model S prototype at the Detroit Auto Show.
  • Emphasized the importance of focusing on the Model S to ensure it’s a superlative car.
  • Invited analysts and investors to attend the Detroit Auto Show to see the Model S prototype.

These points cover the key aspects of Elon R. Musk’s statements during the call.

During the Tesla Motors Third Quarter 2010 Earnings Call, Deepak Prabhu Ahuja, the then-Chief Financial Officer, provided several insights and updates regarding the company’s financial status and projections. Here is a detailed list of his statements:

Financial Performance

• Quarterly Revenue: $31.2 million, a 10% increase over Q2.
• Automotive Sales:
  • Roadster sales: 151 units in Q3, a 7% increase over Q2.
  • Average selling prices remained relatively constant.
  • Revenue decrease of 5% sequentially to $18.2 million due to a greater mix of leasing versus retail sales in the U.S. market.
  • Powertrain components revenue: Up 6% sequentially to $5.1 million, driven by deliveries of battery packs and chargers to Daimler.
• Development Services Revenues: Increased 80% sequentially to $7.9 million in Q3, primarily due to milestones for the A-Class agreement with Daimler and the amortization of previously deferred revenue.
• Gross Margin:
  • Total gross margin: 30% in Q3, up from 22% in the previous quarter.
  • Automotive sales gross margin: 17%, slightly better than 16% in Q2.
  • Development services gross margin: 68% in Q3.

Operating Expenses

• Research and Development (R&D):
  • $26.7 million for the quarter on a GAAP basis.
  • $25.4 million on a non-GAAP basis.
  • Non-GAAP R&D expenses increased 71% sequentially due to Model S engineering and production development work with suppliers.
  • Headcount increased by 62 employees in production and manufacturing, or about 22% during the quarter.
• Selling, General, and Administrative (SG&A):
  • $20.4 million on a GAAP basis.
  • $17.9 million on a non-GAAP basis.
  • 8% increase in non-GAAP SG&A expenses from the prior quarter due to the expansion of company-owned stores and service networks globally, especially in Asia, and the recruitment of key talent.

Other Income and Expense

• Reflects the change in fair value of convertible preferred stock warrants and the change in fair value of the outstanding DOE warrant.
• Recorded a non-cash accounting gain of $3.1 million for the changes in fair value in Q3.

Net Loss

• Net loss for Q3 was $34.9 million on a GAAP basis and $34.2 million on a non-GAAP basis, compared to a net loss of $26.1 million in the previous quarter.

Balance Sheet

• Unrestricted Cash: $96.6 million at the end of the quarter.
• Total Cash: $184.7 million, including restricted cash in the DOE dedicated account.
• Restricted Cash Balance: $88.1 million remaining in the DOE dedicated account.
• Capital Expenditures: $56.5 million in Q3, primarily for the acquisition of the Fremont facility and related assets.

Cash Flows

• Cash Used in Operating Activities: $46 million in Q3.
• Inventory increased by about $10 million to support the growth in the Powertrain business and Roadster production.

Guidance

• 2010 Revenue Projection: $110 million to $115 million, unchanged from the previous quarter.

Recent Events

• Toyota Agreement: Signed an agreement with Toyota to develop a full powertrain for the electric version of the Toyota RAV4. Expected to generate approximately $60 million in revenue.
• Panasonic Investment: Concluded a $30 million investment from Panasonic, resulting in Panasonic's purchase of 1.4 million shares of common stock directly from Tesla at $21.15 per share.

Closing Remarks

• Emphasized the company's excitement about its long-term opportunities and the focus on delivering the Model S.