Tesla (TSLA) Q1 2020 earnings results and conference call transcript
Published , by Asif Khan
Tesla posted a profit in Q1 of 2020, and shares are jumping afterhours on the news. This is the first time in the company's history that they achieved positive GAAP net income in the seasonally weaker first quarter.
Tesla's Q1 2020 Earnings Release
Highlights
Cash
$1.8B increase in our cash and cash equivalents in Q1 to $8.1B
Operating cash flow less capex (free cash flow) negative
Profitability
$283M GAAP operating income; 4.7% operating margin in Q1
$16M GAAP net income; $227M non-GAAP net income (ex-SBC) in Q1
Gross margin at Giga Shanghai approaching level of US-made Model 3
Model Y gross margin positive in Q1
Operations
Model Y deliveries began, significantly ahead of schedule
Increased Model S range to 391 miles with no increase in battery capacity
Reached production of 1,000 Solar Roofs in a single week
Summary
Q1 2020 was the first time in our history that we achieved a positive GAAP net income in the seasonally weak first quarter. Despite global operational challenges, we were able to achieve our best first quarter for both production and deliveries.
Although impacted by inefficiencies related to the temporary suspension of production and deliveries in many locations, our gross margin remained strong. At Gigafactory Shanghai, further volume growth resulted in a material improvement in margins of locally made Model 3 vehicles. In addition, Model Y contributed profits, which is the first time in our history that a new product has been profitable in its first quarter.
Despite the expiration of various government incentives at the end of last year, Q1 was pacing to be the strongest quarter of deliveries until our operations were interrupted in March. As a result, we remain confident in growing global production capacity as quickly as possible.
We are continuing to significantly invest in our product roadmap, including improvements in technology, as well as localizing production in Shanghai and Berlin.
At the same time, we are diligently managing working capital, reducing non-critical spend, and driving productivity improvements. We believe we are well-positioned to manage near-term uncertainty while achieving our long-term plans.
Outlook
Introduction
It is difficult to predict how quickly vehicle manufacturing and its global supply chain will return to prior levels. Due to the wide range of potential outcomes, near-term guidance of net income and free cash flow would likely be inaccurate. We will again revisit our 2020 guidance in our Q2 update.
Volume
We have the capacity installed to exceed 500,000 vehicle deliveries this year, despite announced production interruptions. For our US factories, it remains uncertain how quickly we and our suppliers will be able to ramp production after resuming operations. We are coordinating closely with each supplier and associated government.
Cash Flow
While near-term cash flow guidance is currently on hold, we are continuing to significantly invest in our product roadmap and long-term capacity expansion plans as we have sufficient liquidity. Model Y production lines in Shanghai and Berlin remain our most important near-term projects.
Profit
While near-term profit guidance is currently on hold, we believe we will achieve industry leading operating margins and profitability with capacity expansion and localization plans underway.
Product
We expect that production of both Model Y in Fremont and Model 3 in Shanghai will continue to ramp gradually through Q2. We are continuing to build capacity for Model Y at Gigafactory Berlin and Gigafactory Shanghai and remain on track to start deliveries from both locations in 2021. Lastly, we are shifting our first Tesla Semi deliveries to 2021.