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Tesla (TSLA) Q2 2024 earnings results and conference call transcript

Tesla is out with the company's Q2 2024 earnings release. Check out all of the results and the call transcript here.

July 23, 2024 1:25 PM

Tesla is out with the company's Q2 2024 earnings results, and the stock is reacting to the news in after-hours trading. The EV company reported adjusted earnings-per-share (EPS) of $0.42/share and revenues of $25.5 billion. Earnings missed the EPS whisper number and analyst estimate. Revenues did beat Wall Street analyst estimates of $24.8 billion.

Listen to the Tesla (TSLA) Q2 2024 earnings call

Tesla (TSLA) Q2 2024 Earnings Release

Check out the full TSLA Q2 2024 earnings report on the Tesla Investor Relations website.

Highlights

Profitability

$1.6B GAAP operating income in Q2 after restructuring and other charges of $0.6B
$1.5B GAAP net income in Q2
$1.8B non-GAAP net income in Q2

Cash

Operating cash flow of $3.6B in Q2.
Free cash flow of $1.3B in Q2 (AI infrastructure capex was $0.6B in Q2)
$3.9B increase in our cash and investments3 in Q2 to $30.7B

Operations

Record energy storage deployment of 9.4 GWh in Q2
Optimus began performing tasks autonomously in one of our facilities
Cybertruck became the best-selling EV pickup in the U.S. in Q2

Summary

In Q2, we achieved record quarterly revenues despite a difficult operating environment. The Energy Storage business continues to grow rapidly, setting a record in Q2 with 9.4 GWh of deployments, resulting in record revenues and gross profits for the overall segment. We also saw a sequential rebound in vehicle deliveries in Q2 as overall consumer sentiment improved and we launched attractive financing options to offset the impact of sustained high interest rates. We recognized record regulatory credit revenues in Q2 as other OEMs are still behind on meeting emissions requirements.

Global EV penetration returned to growth in Q2 and is taking share from ICE vehicles. We believe that a pure EV is the optimal vehicle design and will ultimately win over consumers as the myths on range, charging and service are debunked.

Progress continued for our AI initiatives in Q2. We reduced the price of FSD (Supervised) in North America and launched free trials to everyone with the necessary hardware. These programs have demonstrated success and are laying the foundation for more meaningful FSD monetization. We expect to see an increase in FSD attach rates for our fleet as the capability improves and we increase awareness of the convenience and safety it offers users.

Overall, our focus remains on company-wide cost reduction, including reducing COGS per vehicle, growing our traditional hardware business and accelerating development of our AI-enabled products and services. Though timing of Robotaxi deployment depends on technological advancement and regulatory approval, we are working vigorously on this opportunity given the outsized potential value. Concurrently, we are managing our product portfolio with a long-term orientation and focusing on growing sales, maximizing our installed base and generating sufficient cash flow to invest in future growth.

Revenue

Total revenue increased 2% YoY in Q2 to $25.5B. YoY, revenue was impacted by the following items:

Growth in the Energy Generation and Storage business (+)
Cybertruck deliveries (+)
Higher regulatory credit revenue (+)
Growth in Services and Other (+)
Reduced S3XY vehicle average selling price (ASP) (excl. FX impact), due to pricing, attractive financing options and mix (-)
Decline in S3XY vehicle deliveries (-)
Negative FX impact of $0.3B (-)

Profitability

Our operating income decreased YoY to $1.6B in Q2, resulting in a 6.3% operating margin. YoY, operating income was primarily impacted by the following items:

Reduced S3XY vehicle ASP as noted above (-)
Restructuring charges (-)
Increase in operating expenses largely driven by AI projects (-)
Decline in S3XY vehicle deliveries (-)
Higher regulatory credit revenue (+)
Growth in Energy Generation and Storage gross profit (+)
Lower cost per vehicle, including lower raw material costs, freight and duties (+)
Lower cost of production ramp of 4680 cells and other related charges (+)

Cash

Quarter-end cash, cash equivalents and investments in Q2 was $30.7B. The sequential increase of $3.9B was a result of positive free cash flow of $1.3B, driven by an inventory decrease of $1.8B and partially offset by AI infrastructure capex of $0.6B in Q2.

Outlook

Volume

Our company is currently between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and introduction of new products, including those built on our next generation vehicle platform. In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next generation vehicle and other products. In 2024, the growth rates of energy storage deployments and
revenue in our Energy Generation and Storage business should outpace the Automotive business.

Cash

We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses. Furthermore, we will manage the business such that we maintain a strong balance sheet during this uncertain period.

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 by an acceleration of AI, software and fleet-based profits.

Product

Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up.

This approach will result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times. This should help us fully utilize our current expected maximum capacity of close to three million vehicles, enabling more than 50% growth over 2023 production before investing in new manufacturing lines.

Our purpose-built Robotaxi product will continue to pursue a revolutionary “unboxed” manufacturing strategy

Tesla (TSLA) Q2 2024 Earnings News Highlights

Check out all of our Tesla news coverage:

Tesla (TSLA) Q2 2024 conference call transcript

Tesla's earnings results conference call is set to kick off at 5:30 p.m. ET. Keep an eye on this article for a transcription of the earnings call right here.

Call kicks off at 5:30 p.m. ET
Elon comments
EV discounts have made things more difficult for Tesla
Says it is a short term issue
Still believe that EVs are best for customers
Elon touts energy division
Not going to talk about the product roadmap here
On track to deliver a more affordable model in the first half of next year
Big differentiator is autonomy
Tesla is pursuing AI from an autonomous driving and robot way
Made progress in FSD during Q2
Improvements on Supervised FSD
Finally merging the highway and city stacks in version 12.5
Most people actually don't know how good the system is
Elon stressing FSD demos
Unsupervised FSD will be a huge demand driver
We postponed the Robotaxi product unveil by a couple months
Shifted to 10/10.
I wanted to make some important changes that will improve the main thing that we are gonna show
Gonna show some other things
Storage business growing faster than anything else
Supply constrained not demand constrained in storage
Looking to more than double battery storage output
Super excited about the progress
Future is incredibly bright
I really just can't emphasize the importance of autonomy on the vehicle side and for Optimus
Tesla producing at volume with unsupervised FSD will take the valuation to something much higher
Long-term Optimus achieves a valuation of (nearly $10-15 trillion)
CFO open remarks
Tesla team rose to the occasion again
Automotive deliveries grew sequentially
Auto business - affordability remains top of mind for customers
Lower ASP affected revenue in Q2 and will also affect Q3
This is the best time to buy a Tesla
Record quarter on regulatory credits
Working to localize supply chains at all Gigafactories
We believe 300 mile range and Supercharger network expansion will help with range anxiety
Cost per vehicle declined when you remove the cost of Cybertruck
We are still ramping Cybertruck and Model 3, but costs are a headwind
Excited that Tesla Energy is achieving expected results
Powerwall and Megapack are driving strong revenue growth
Recognition of storage GWh depends on a few factors
Services and other revenue grew
Impact of reorganization was over $600 million
Still expect $10 billion in capital expenditures for FY 2024
$1.3 billion positive free cash flow
Now hold over $30 billion in cash and other investments
Thanks entire Tesla team for their efforts
Investor questions
Status on the Roadster
Elon says the have completed the engineering, expect to be in production next year
When do you expect the next Robotaxi ride?
Elon - When can you expect the first unsupervised FSD ride?
We should get miles between interventions to be high enough to implement unsupervised by the end of this year, or 2025
Question on Cybertruck being expanded Cyber vehicles?
No comment
4680 battery production question
We currently produce 1400 Cybetrucks per week all using 4680 cells
Question on Dojo supercomputer
Elon says he is very impressed by NVIDIA hardware
Demand for NVIDIA hardware is so high that it is often difficult to get the GPUs, (which he diverted to xAI)
Elon claims Dojo will be needed to have enough training capacity
We have no choice but to double down on Dojo
Next question about Optimus accessories
Elon tries to hold back saying dildos
He succeeds
It will use any accessory that a human would use
Next question, do you feel like you are cheating people from enjoying Tesla by not advertising?
Elon - We are advertising
CFO - 2/3 of Tesla buyers are buying a Tesla for the first time
We have not exhausted all of our options
Next question, updated timeline for giga Mexico
Elon - We are currently paused on Giga Mexico
We will have to see what happens with the election
Trump says there will be EV tarrifs
So it will be a wait and see scenario
Is Tesla still in talks with OEMs to license FSD?
Elon - There are a few, I expect there will be more over time
Last investor question, any updates on investing into xAI and using Grok in Tesla
We would need shareholder approval of any such investment
Analyst questions
Elon, I share your strong enthusiam in AI, but concerns about commercialization arise, did you redirect some AI compute systems to xAI? Similarly, I asked about your ability to hire talent within this AI space? When it comes to capital investments and AI R&D, how do you make investment allocations across all of your companies?
Elon - Tesla had no place to turn the H100 shipments on
It wasn't picking xAI over Tesla, there was no place to actually put them
We have been working 24/7 to expand Tesla Giga Texas, that place will hold the 50,000 GPUs
It was in Tesla's interest to not have GPUs they couldn't turn on
With regards to xAI, there are people who only want to work on AGI, what I was finding was that they were not interested in working on Tesla-specific problems, so they could do an AI startup
They were not going to come to Tesla under any circumstances
CFO - AI is a broad spectrum
We are focused on FSD and Optimus at Tesla
You have to keep that in mind
Elon - I tried to recruit them to Tesla
They refused
So I created xAI
Should we expect other more limited variants with some changes or improvements? Some other variability in form factor over the next year or two?
Elon - Don't want to get into future product announcements
If we announce some great thing, it affects our short-term sales
Next analyst question
When we think about revenue contribution, how do we think about the overall segments over the years?
WIll auto revenue drop below 50% of total sales?
How wil you let users use the compute power of their cars?
Elon - Everyone will want a Tesla Optimus robot
I suspect that the long-term demand for general purpose robots is bigger than EVs
Optimus is the best humanoid robot
We are unique in our ability to make Optimus
Long-term analysis of ARK Invest could lead to a market cap of $5 trillion (several times that after we ship Optimus)
We are headed for an age of abundance
It's a pretty wild future we're headed for
I think distributed compete becomes interesting with AI 5 next generation inference capability
AI 5 end of next year, scale production in 2026
Somewhere near 100 hours of AI compute in the fleet
It would make sense to do distributed inference
It could be used for general purpse computing
Next question
Can you elaborate on FSD licensing?
If you had a cooperative agreement with another OEM, revenue would take years to recognize right?
Elon - Yes
They would have to integrate our AI computer and cameras
And implement a gateway computer with cellular wifi
Follow up, if you did sign an FSD licensing agreement, when would you announce that?
Elon - It depends on the OEM, we would be happy either way
CFO - It depends on the agreement
We will make that determination when we get to that point
Next question
Dan Levy from Barclays asks question on Shanghai
Can you give us a sense on how the strategy changes if more tarrifs are implented?
CFO - On the tarriffs side, EU implemented some, as a result we are altering our import strategy
Focused on building EU cars in Berline
Adjusting as needed
We are still importing Model 3s into Europe out of Shanghai
Still evaluating the ultimate math on this
Cooperating with EU regulators now
Literally one thing, and adjusting as fast as we can
Because of this, you have seen Berlin doing imports into UK, Taiwan, etc
Keep adapting as we go on
Follow up, Robotaxi strategy, can you help us understand which regulations are the ones we should be looking for? To what extent does the strategy shift to nationwide? Is it more geofenced?
Elon - Our solution is a generalized solution
Same rhetoric about making FSD materially safer than human driving
Makes it hard for regulators to deny
I don't think regulatory risk will be a driving factor
Pretty soon, we will ask for regulatory approval for Supervised FSD in Europe, China, and other countries
Unlikely to receive that before the end of the year
Travis - In terms of regulatory approval, all 50 states have similar laws
But state and municipal laws do exist for being a taxi company
CFO - End-to-end network will work well with whatever the training data used so other countries can scale with the FSD software
Next question
George asks GM canceled its pedal-less, wheel-less vehicle, is there a regulatory concern with Robotaxi due to those issues?
Elon canceled it because they can't make it work
Waymo is doing just fine in those markets
FSD take rates color?
CFO - Seen a meaningful increase
We started from a low base, but we are seeing encouraging results
We are trying to make sure that people see how it works when the cars are delivered
CFO has zero interventions on his 20 minute drive to work
We are fixing the sunglasses bug, says Elon
Next question
Robotaxi again
Question about ride-hailing service and the challenges of scaling
Are you already working on that?
Are you looking at partners?
Elon - It will just be part of the existing Tesla app
We'll have a fleet of around 7 million
Immense scale
Car is able to operate 24/7
A bit like AirBnB
AirBnb on wheels
Elon says we will make some Tesla-owned vehicles that will be part of Tesla Network
No third party ride-hailing will be allowed with Robotaxi
Next question on pricing strategy
Compeition is real in China
We are communicating with customers, focused on providing value - Travis
We're not really seeing saturation in global markets
4680 followup, news around equipment suppliers
How far along are you on securing supply chain?
Don't think this will affect 4680 rollout and ramp
Majority of equipment is in-house
We can take our IP stack and have someone else build it
Elon - People don't understand how much demand there will be for storage
If power plants can operate at a steady state, demand for storage will increase 200-400%
Elon - This is a very profound thing
Next question from Wells Fargo
If Trump wins, the IRA could get cut, wouldn't Tesla lose a lot of support if that goes away?
Can you clarify if the IRA ends if it would be a negative for profitability?
Elon - I guess that there would be some impact, it would be devastating for our competitors
The value of Tesla overwhelmingly is autonomy
CFO - We are looking at our business whether or not IRA is there
We always drive ourselves to think about how we can operate with or without credits
Cannot ignore the fundamental sides of the business
IRA becomes meaningless if FSD becomes a reality
The call mercifully ends at 6:30 p.m. ET

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

Asif Khan

CEO/EIC/EIEIO

Asif Khan is the CEO, EIC, and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.