TSLA Q2 2020 Earnings

Call Details

• Call Title: Tesla, Inc. Q2 2020 Earnings Call
• Date: July 22, 2020 at 9:30 PM UTC
• Management Team:
  • Sherry Wilson (Managing Director of Investor Relations)
  • Martin Viecha (VP of Investor Relations)
  • Elon Musk (CEO)
  • Zachary Kirkhorn (CFO)
  • Drew Baglino (SVP of Powertrain and Energy Engineering)

Call Summary

Financial Performance

• Tesla achieved a fourth consecutive profitable quarter in Q2 2020.
• Automotive gross margin excluding regulatory credits reduced sequentially from 20% to 18.7% due to idle capacity charges and lower operational efficiency from shutdowns.
• Regulatory credit revenue increased sequentially to $428M and the company estimates 2020 credit revenue is roughly double 2019.
• Tesla recognized $48M of deferred revenue related to stoplight and stop sign recognition and response, with less than half the $48M flowing to profit after retrofit costs.
• Energy Megapack achieved its first quarterly profit while the energy installation business remained production- and permit-constrained.
• Cash balance increased to $8.6B and the company reported free cash flow of over $400M in the quarter.
• Stock-based compensation increased in Q2 driven by expense related to the next tranche and early vesting of the CEO grant.

Guidance

• Tesla's best estimate for 2020 regulatory credit revenue is roughly double 2019, although the company stated forecasting credits precisely is difficult.
• Full self-driving (FSD) functional completion was described as expected by the end of the year, with a planned rollout of a 4D (video) architecture later this year.
• Tesla announced that three new factories are expected to be in place within the next 12 to 18 months, including Giga Texas and progress on Giga Berlin.
• CFO said the company will continue active cash and working capital management and cost optimization while expanding production capacity.
• Tesla plans to file telematics-based insurance in a handful of U.S. states and aims to have the product in a handful of states by year-end, subject to regulatory approvals.
• The company signaled continued price pass-throughs in Q2 to customers worldwide as a deliberate decision to pass savings on to buyers.