Tesla (TSLA) Q3 2022 earnings results miss on revenue, beat EPS

Tesla has issued its report for Q3 2022 and it appears to be a strong one for the company, in spite of slightly missing its expected revenue total. The automotive maker reported in with $21.45 billion in reported revenue, which Tesla touts as a record, albeit slightly lower than the $21.96 billion that was expected. Meanwhile, its EPS number came in at $1.05 per share, compared to the $0.99 that was expected.

Tesla (TSLA) Q3 2022 Earnings Release

Here are the highlights from the Tesla Q3 2022 earnings report:

Cash

Operating cash flow less capex (free cash flow) of $3.3B in Q3
$2.2B increase in cash and marketable securities in Q3 to $21.1B

Profitability

$3.7B GAAP operating income; 17.2% operating margin in Q3
$3.3B GAAP net income; $3.7B non-GAAP net income (ex-SBC) in Q3
27.9% GAAP Automotive gross margin in Q3

Operations

Record Energy Storage deployments of 2.1 GWh in Q3
Initiated transition to smoother delivery and production mix

SUMMARY

The third quarter of 2022 was another strong quarter with record revenue, operating profit and free cash flow. In the last 12 months, our free cash flow exceeded $8.9B. Our operating margin reached $17.2% in Q3.

We achieved an industry-leading operating margin while encountering material headwinds YoY. Raw material cost inflation impacted our profitability along with ramp inefficiencies from Gigafactory Berlin-Brandenburg, Gigafactory Texas and 4680 cell production. Also, the U.S. Dollar (USD) continued to strengthen compared to all other major curencies in our markets.

Additionally, as illustrated on page 21, we are reaching such significant delivery volumes in the final weeks of each quarter that transportation capacity is becoming expensive and difficult to secure. As a result, we began transitioning to a smoother delivery pace, leading to more vehicles in transit at the end of the quarter. We expect that smoothing our outbound logistics throughout the quarter will improve cost per vehicle.

We remain focused on increasing vehicle production as quickly as possible, by increasing our weekly build rate in Fremont and Shanghai and progressing steadily through the production ramps in Berlin and Texas. Logistics volatility and supply chain bottlenecks remain immediate challenges, although improving. We continue to believe that battery supply chain constraints will be the main limiting factor to EV market growth in the medium and long terms. Despite these challenges, we expect to continue to deliver every vehicle produced while maintaining strong operating margins.

FINANCIAL SUMMARY

Revenue

Total revenue grew 56% YoY in Q3 to $21.5B. 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 YoY to $2.5B in Q2, resulting in a 14.6% operating margin. YoY, operating income was primarily impacted by the following items:
- increased ASP (+)
- growth in vehicle deliveries (+)
- profit growth in other parts of the business (+)
- higher raw material, commodity, logistics, warranty, and expedite costs (-)
- negative FX impact of $250M (-)
- cost of production ramp at Gigafactory Texas and Berlin-Brandenburg and ramp of 4680 cells (material margin impact, smaller profit impact) (-)

Cash

Quarter-end cash, cash equivalents and short-term marketable securities increased sequentially by $2.2B to $21.1B in Q3, driven mainly by free cash flow of $3.3B, partially offset by debt repayments of $0.9B.

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, factory uptime, operational efficiency and the capacity and stability of the supply chain.

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 Texas and Berlin-Brandenburg 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 Texas and Gigafactory Berlin-Brandenburg will be no different. We are making progress on the industrialization of Cybertruck, which is currently planned for Texas production subsequent to Model Y ramp. The initial phase of Tesla Semi deliveries is scheduled to begin in December 2022.

Source: Yahoo! Finance

Tesla's earnings are somewhat surprising given the outlook of last quarter, as well as the increasing commodity and energy prices. However, things are looking up following its factory upgrades in China. Despite today's earnings, Tesla (TSLA) stock appears to be down in afterhours trading.

We'll have more to report from Tesla once the Q3 2022 earnings call begins at 2:30 p.m. PT/5:30 p.m. ET. You can catch that live on the Shacknews Twitch Channel.