Tesla (TSLA) Q1 2022 earnings results and conference call transcript
Tesla, the largest EV maker on Earth, just released their Q1 2022 earnings results. Please take a look at all the details.
Tesla's Q1 2022 earnings results have just been released, and the stock is reacting in after-hours trading. The electric vehicle company reported earnings of $3.32/share and revenues came in at $18.8 billion, both beating analyst revenue expectations of $17.75 billion as well as the EPS whisper number of $2.41/share.
Listen to the Tesla (TSLA) Q1 2022 earnings results conference call
We will be streaming the TSLA Q4 2021 conference call on our Shacknews Twitch channel. Stop by if you are into that sort of thing.
Tesla (TSLA) Q1 2022 Earnings Release
Here are some highlights from Tesla's Q1 2022 earnings report:
Cash
- Operating cash flow less capex (free cash flow) of $2.2B in Q1
- Total debt ex. vehicle and energy product financing under $0.1B
Profitability
- $3.6B GAAP operating income; 19.2% operating margin in Q1
- $3.3B GAAP net income; $3.7B non-GAAP net income (ex-SBC1) in Q1
- 32.9% GAAP Automotive gross margin in Q1
Operations
- Production & Deliveries started from Gigafactory Berlin in March 2022
- Production & Deliveries started from Gigafactory Texas in April 2022
Summary
The first quarter of 2022 was another record quarter for Tesla by several measures such as revenues, vehicle deliveries, operating profit and an operating margin of over 19%. Our outstanding recourse debt has fallen below $0.1B at the end of Q1. Public interest in a sustainable future continues to rise, and we remain focused on growing as fast as is reasonably possible.
Expansion of our production capacity is core to our decisionmaking. In the past two months, we began deliveries of Model Y
from Gigafactory Texas and Gigafactory Berlin-Brandenburg (negligible impact on Q1 gross profit). At the same time, we are putting significant efforts into in-house cell production, raw material procurement and supplier diversification.
Challenges around supply chain have remained persistent, and our team has been navigating through them for over a year. In addition to chip shortages, recent COVID-19 outbreaks have been weighing on our supply chain and factory operations. Furthermore, prices of some raw materials have increased multiple-fold in recent months. The inflationary impact on our cost structure has contributed to adjustments in our product pricing, despite a continued focus on reducing our manufacturing costs where possible.
We would like to thank everyone who attended our factory opening events or watched live at home. We’re excited to see people so passionate about mass manufacturing and a sustainable future.
Revenue
- Total revenue grew 81% YoY in Q1 to $18.8B. YoY, revenue was impacted by the following items:
- + growth in vehicle deliveries
- + increased average selling price (ASP)
- + growth in other parts of the business
Profitability
- Our operating income improved to $3.6B in Q1, resulting in a 19.2% operating margin. This profit level was reached while incurring SBC expense attributable to the 2018 CEO award of $48M in Q1. YoY, operating income was primarily impacted by the following items:
- + growth in vehicle deliveries
- + increased ASP
- + reduced cost (COGS) per vehicle despite inflationary pressures
- + lower stock-based compensation expense
- + increase in regulatory credit sales
- - rising raw material, commodity, logistics and expedite costs
- - increase in operating expenses
Cash
- Quarter-end cash, cash equivalents and short-term marketable securities increased sequentially by $0.3B to $18.0B in Q1, driven mainly by free cash flow of $2.2B, partially offset by debt repayments of $2.1B. Our total debt excluding vehicle and energy product financing fell to less than $0.1B at the end of Q1.
OUTLOOK
Volume
We plan to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve
50% average annual growth in vehicle deliveries. The rate of growth will depend on our equipment capacity,
operational efficiency and the capacity and stability of the supply chain. Our own factories have been running below
capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the
rest of 2022.
Cash
We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses.
Profit
While we continue to execute on innovations to reduce the cost of manufacturing and operations, over time, we
expect our hardware-related profits to be accompanied with an acceleration of software-related profits.
Product
The pace of production ramps in Austin and Berlin will be influenced by the successful introduction of many new
product and manufacturing technologies in new locations and ongoing supply chain-related challenges. Factory ramps
take time, and Gigafactory Austin and Gigafactory Berlin-Brandenburg will be no different. We are making progress on
the industrialization of Cybertruck, which is currently planned for Austin production subsequent to Model Y ramp.
For more details from Tesla's Q1 2022 earnings release, head on over to their investor relations website. Shares of Tesla (TSLA) initially jumped above $1,000/share on the release of today's report, but have since pared some of those gains in after-hours trading.
Some interesting stories of note from Tesla's Q1 2022 earnings release:
- Tesla reported 32.9% automotive gross margin in Q1 2022
- Tesla (TSLA) says inflation and COVID outbreaks continue to strain supply chain
- Tesla (TSLA) now has $18 billion in cash on their balance sheet
- Q1 2022 Tesla (TSLA) Solar deployments fell 48% year-over-year
- Nearly 1/2 of Teslas made in Q1 have a lithium iron phosphate (LFP) battery pack
Investors and traders will be keeping their eyes on the TSLA Q4 2021 earnings report conference call which is set to begin at 5:30 PM ET. Tune into our livestream over on Twitch, or check back here for a transcript of the call and Q&A session.
Tesla (TSLA) Q1 2022 conference call transcript
The conference call is set to kick off at 5:30 PM ET. Keep an eye on this article for a transcription of the call right here.
- Conference call set to start in three minutes, stock at $1037/share as of 5:27 PM ET.
- It's 5:30 PM ET and the call has not started.
- The call begins at 5:31 PM ET with just silence
- Elon and Zack are on the call
- Zack has some opening remarks
- Q1 was a challenging but extremely successful quarter for Tesla
- Best ever vehicle delivery numbers, revenue, gross margins, and automotive gross margin
- Higher pricing helped
- Most vehicle delivery wait times are still high
- Per unit vehicle costs increased
- One time benefit of $288 million
- Credit revenue would have declined otherwise
- Storage products suffered due to chip supply chain issues
- Achieved record operating margin
- costs of Berlin and Austin factory ramps will be in automotive going forward
- in the immediate term, we have lost about a month of build volume in Shanghai
- This will affect total build volume in Q2
- Higher ASPs in the backlog should help
- Elon has something to say
- The company faced a lot of challenges in Q1
- Congratulates Tesla team on the great results
- Reiterates 50% growth of EV volumes from 2021
- could be closer to 60% sales growth
- We are also working on a new vehicle that I alluded to at the Giga Texas opening
- Tesla is working on an autonomous Robo Taxi vehicle
- going to be a very powerful product, where we aspire to reach volume production of that in 2024
- volume production of Cybertruck by next year
- People do not realize the magnitude of the Optimus robot program
- Those that are insightful or listen carefully will understand that Optimus will be worth more than the car company, and FSD
- Now investor questions
- Is there any data on FSD progress in 2022?
- Elon, with respect to FSD, I have never really seen any more false dawns than I have seen in full self-driving
- You need to solve real-world AI
- the whole world is built of biological neural networks and eyes
- Need to create computer visions neural net that surpasses humans
- I think we will do that this year
- We have over 100,000 people in the Tesla FSD Beta program
- Experience it for yourself
- Putting out a new release almost every two weeks
- Two steps forward, one step back
- Overall rate of improvement is great
- Next question, How much impact of Shanghai shutdown in Q2?
- Berlin Model 3 ramp question
- Elon - we lost a lot of important days of production
- Tesla Giga Shanghai is coming back with a vengeance
- I think we will see record output per week from Shanghai during the quarter, in spite of the shutdown
- Could be close to Q1 output despite the COVID lockdown
- Q3 and Q4 Shanghai output will be substantially higher
- Likely that we can produce over 1.5 million cars in 2022
- Ramp will take 5 months or so
- How much flexibility do you have on COGS in the short term vs long term?
- On the price increase front, the waitlist for our cars is quite long
- Prices of vehicles ordered now are anticipating supply chain cost growth
- A car ordered today will arrive in some cases a year from now
- We are not demand limited, we are production limited
- Zach adds, there are different ways to calculate raw materials exposure
- 10-15% of Tesla cost structure is related to raw materials
- inflationary pressures have been felt for several quarters
- The timing for the costs to hit the income statement are a bit delayed due to contracts being negotiated
- Pricing is tied to the upcoming renegotiated raw materials contracts
- Another question, Why does Tesla fight dealership laws on a state-by-state basis?
- Elon - We would love to have federal regulation about direct to consumer sales of cars
- Unfortunately, we have to fight it on a state by state basis
- Volume production required for a move to 800 from 400 volts to be worth it
- Bigger vehicles that need higher power during charging on the powertrain side, there are some semiconductor savings for 800 volt, so Tesla Semi and Cybertruck might be better use cases
- How are the 4680 packs performing?
- We are working in all the areas we shared on battery day, and are on track for our five-year goals
- We do not control all commodity costs
- Similar to Model 3, it will take several years to hit the goals we have
- Elon - In a nutshell, 4680 as a structural pack will be competitive with the best alternatives, later this year
- 4680 will be better than the competition later this year
- We are saving huge on capex, utlities, and personnel with 4680
- The cost model is understood, but rate and yield remain unknown variables
- Question on raw material expense management for scale growth
- Where does the tonnage demand of nickel, lithium ion, cobalt, phosphate go for the world as a whole over time?
- Tesla focused on limiting factors
- Mining and refining of lithium appear to be a limiting factor
- Lithium is the biggest cost growth factor
- 2-3% of the pack is Lithium
- The most expensive and heaviest item is the nickel cathode
- We are trying to figure out the right amount of supply production to get to escape velocity for growth
- committed to recycling at all factories
- Elon hints at possible news on the mining front coming later this year
- Aluminum scrap is already being reused
- wheels from practically any car can be used too
- At what rate do you think Giga Berlin and Texas will ramp production compared to Shanghai?
- Elon - Both should ramp faster than previous production ramps
- Lars - if you are waiting for the best Tesla, you will be waiting forever
- Question about Robo Taxi
- Elon - will this be something people can own or service?
- We don't want to jump the gun on a fun product announcement
- Robo Taxi reveal event planned for 2023
- Last investor question
- What is the 4680 run rate now? What is expected for end of year?
- Berlin is not constrained by 4680
- Elon - end of Q3 should have more clarity on the 4680 ramp across factories
- 4680 production is not a risk to the 1.5 million vehicle target this year but does risk 2023 growth potential
- Analyst Dan Levy asks can you talk through the drivers of cost improvements?
- Zach - At a high level, cars produced in Shanghai are lower cost than cars made in Fremont
- Also seeing efficiencies in S and X lines in Cali
- Expedites in Q1 were lower than Q4 2021
- Elon - Kudos to Fremont on achieving record output at the factory
- Next question about the affordability of Model 3 and Y, supply constraints, how do you look at the progress of prices?
- Elon - we absolutely want to make EVs as affordable as possible
- Inflation is at a 30-50 year high
- That inflation appears to be likely to continue in 2022
- Suppliers are under severe cost pressure
- Suppliers requesting 20-30% increases in part costs
- Especially with Robo Taxi and autonomy, we will end up providing consumers with the lower cost/mile transport they have ever experienced
- Elon - I encourage entrepreneurs to get into the lithium business
- Lithium margins are practically software margins
- Can more people get into the lithium business? - Elon Musk
- Impressive to see the modest improvement in COGS for vehicles despite inflation and supply chain issues?
- Economic benefits of Robo Taxi?
- Zach - we will evaluate after shipping Optimus and Robo Taxi to figure out what is next
- Trip Choudry with a question
- Regarding Cybertruck, how will it compare to other pickup trucks with respect to total parts?
- Elon - we have not done a comparison
- Lars - the simplicity of our structure is significant
- Architecture is always working to reduce parts counts
- Ignoring the battery, we are about 20-30% less
- Does Tesla expect to expand in Nevada?
- Elon - we do expect to increase output from Nevada
- Piper Sandler with a question
- The extent to which other plants outside of China are insulated from supply chain issues?
- is there a point at which it could affect other facilities?
- Elon - Yes, there are some things that could affect production globally
- Giga Shanghai is back in production
- So are our suppliers
- we don't think that other factories will be affected
- Other question on Elon's next compensation plan
- Elon - there are no discussions underway regarding my compensation
- Next question from Wells Fargo
- How quickly can raw materials supply be grown?
- Is there even enough time to build that mining capacity?
- How fast can you switch to LFP?
- Lars - half of our vehicles were LFP in Q1
- specifically on the cathode side, flexibility is key
- If you look past this year to 2023 or 2024, we need everybody to do more in the lithium space than they currently are
- Last question
- Goldman Sachs asks when Supercharger network will be made available to rival EVs?
- We do plan to provide third party access, working on solutions in North America
- We are moving in that direction
- We want to do the right things with respect to the charging network - Elon
- Zach - overall charging capacity is important
- Second question about Tesla Insurance
- Tesla is the second-largest insurer of Teslas in the state of Texas
- Customer response has been positive
- A lot of folks are reporting saving money compared to traditional insurance
- Trying to get to 80% availability for American customers
- Insurance models different in the new states
- Becoming fully vertically integrated insurer
- Still scaling
- Elon - side note, having real-time feedback for driving habits is causing Tesla owners to drive in a safer way
- Zach - extremely high retention, and Tesla Insurance has become a passion project for us
- Elon - it is also a feedback loop for Tesla as we can see the exact cost of accidents that helps iteration of parts included in vehicles
- Repair costs to improve as a result of data provided by Tesla Insurance
- That's all folks!
- TSLA stock at $1,029/share at the end of the conference call, holding most of its gains since the earnings release was published
This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.
Full Disclosure:
At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:
Long Tesla via TSLA shares
Short Tesla via out-of-the-money TSLA put options
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