TSLA Q3 2019 Earnings

Call Details

• Call Title: Tesla, Inc. Q3 2019 Earnings Call
• Date: October 23, 2019 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)
  • Kunal Girotra (Senior Director of Energy Operations)
  • Drew Baglino (SVP of Powertrain and Energy Engineering)

Call Summary

Financial Performance

• GAAP automotive gross margin improved sequentially to 22.8% and was over 20% excluding regulatory credits.
• The company recognized $30M of deferred revenue in Q3 related to Smart Summon feature activation.
• The quarter ended with a cash balance of just over $5.3B.
• Year-to-date free cash flow turned positive despite a sequential increase in capex and higher captive leasing mix.
• Captive lease originations increased the lease rate by 50% and materially reduced reported free cash flow in Q3.
• Services and other loss narrowed due to efficiency improvements in fulfillment and operations.
• Foreign exchange benefited net income and other income in Q3 because the company does not hedge its FX exposure.
• CapEx increased in Q3 primarily driven by Gigafactory Shanghai construction and Model Y program spend.

Guidance

• Model Y launch timing was accelerated from fall 2020 to summer 2020 with confidence in reaching volume by mid-2020 at the latest.
• Gigafactory Shanghai entered trial production in October and is expected to reach volume production in a few months.
• The company expects to announce the location of a European Gigafactory before the end of 2019.
• A feature-complete version of full self-driving (FSD) for early access was targeted by year-end 2019, with unsupervised reliability targeted by end of 2020 subject to regulatory approval.
• There are currently no plans to engage in traditional advertising because word-of-mouth is considered sufficient to meet demand.
• Launch and ramp of Shanghai will introduce ramp inefficiencies in Q4 that are hard to precisely quantify.
• Model Y steady-state cost is forecast to be roughly equivalent to Model 3 cost while ASPs for Model Y are expected to be slightly higher than Model 3.