Loss Widens at Tesla Motors - Analyst Blog

By Zacks | November 08, 2012 AAA

Tesla Motors, Inc. (TSLA) reported a wider adjusted loss of $109.6 million or $1.04 per share in the third quarter of 2012 compared with the prior-year loss of $105.4 million or 63 cents. Adjusted loss in the quarter excludes a warrant liability of $1.2 million or a penny. The quarterly EPS missed the Zacks Consensus Estimate by 6 cents.  Meanwhile, on a reported basis, loss was $110.8 million or $1.05 per share in the quarter versus a loss of $105.6 million or $1.00 per share in the year-ago quarter.

Revenues decreased 13.1% year over year to $50.1 million in the quarter. However, it fell short of the Zacks Consensus Estimate of $46.0 million. The sequential improvement was based on increased deliveries of Model S, higher sales of the Roadsters in the international market, and growth in powertrain component sales to Toyota Motor Corp. (TM) for the RAV4 EV.

Revenues in the Automotive sales segment improved 15.7% to $50.0 million in the quarter. The year-over-year growth reflects a 39.4% increase in vehicle, options and related sales to $39.6 million, partially offset by a 29.7% decline in powertrain component and related sales to $10.4 million.

Revenues in the Development services (produces electric vehicle, powertrain components and systems for other automobile manufacturers) declined significantly to $81,000 from $14.4 million in the year ago.

Cost of sales surged 45.5% to $58.9 million from $40.4 million a year ago. As a result, the company incurred a gross loss of $8.8 million versus a gross profit of $17.2 million in the third quarter of 2011.

Costs related to new launches adversely affected the gross margin, which was -17.5% versus 29.9% in the third quarter of 2011. With this, the company witnessed an operating loss of $108.5 million from $64.5 million in the year ago quarter.

Financial Position

Tesla had cash and cash equivalents of $85.7 million as of September 30, 2012 compared with $255.3 million as of December 31, 2011. Long-term debt was $465.0 million as of September 30, 2012 versus $276.3 billion at the end of 2011. Long-term debt to capitalization ratio declined to 106.4% as of September 30, 2012 from 55.2% as of December 31, 2011.

Cash outflow from operating activities increased substantially to $206.0 million in the first nine months of 2012 from $87.3 million in the same period of 2011. Capital expenditures increased to $197.7 million from $143.6 million in the first nine months of 2011.

Guidance

For full year 2012, Tesla anticipates revenues in the range of $400.0 million to $440.0 million, including 2,500-3,000 units' deliveries of Model S to customers in the fourth quarter. The company also expects that with manufacturing efficiencies and planned cost reductions and deliveries of 20,000 vehicles in 2013, gross margin will be 25% for the year.

Further, the company believes that research and development expenses will be flat in the fourth quarter despite new vehicle development, including the launch of smaller battery packs and homologation for European and Asian markets. Capital expenditures are expected to be $240 million for 2012.

Our Take

Palo Alto, California-based Tesla designs and manufactures electric vehicles and electric vehicle power train components for partners including Toyota and Daimler AG (DDAIF). Currently, Tesla retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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