EX-99.1 2 d815233dex991.htm EX-99.1 Prepared by R.R. Donnelley Financial -- EX-99.1

Exhibit 99.1

 

LOGO   

Tesla Motors – Third Quarter 2014 Shareholder Letter

 

•    Highest ever quarterly deliveries at 7,785 vehicles, despite factory shutdown in July

•    Highest ever peak deliveries in a single day of 907 vehicles

•    Majority of Q3 deliveries in North America; 65% increase in NA Sept 14/Sept 13

•    Dual Motor and Autopilot introductions further accelerate Model S demand

•    Model S orders and deliveries alone expected to increase by 50% in 2015

•    Reducing number of Model S options to ramp production faster

 

November 5, 2014

Dear Fellow Shareholders:

Over the past quarter, despite losing almost a month of production due to factory retooling, we delivered the highest number of Model S vehicles ever, with several new records set in North America and worldwide. We also substantially broadened the appeal of the Model S by introducing Dual Motor all-wheel drive and Autopilot. Based on net orders since that introduction, excluding the extraordinary initial demand peak, we are confident of a 50% increase in both net orders and deliveries for Model S alone in 2015.

Our focus will be on scaling up Model S production over the coming year, so no major platform changes to the hardware are planned in the near term. There will, however, be several significant over-the-air software releases – at no cost to owners – that provide added functionality to the Model S fleet.

Product and Market Initiatives

The Model S is the world’s first production car with Dual Motor electric drive. By having two electric drive units, torque can be adjusted at the millisecond level digitally and independently to the front and rear wheels, thus providing unparalleled performance and traction control. This is a fundamental improvement in traction control relative to a gasoline car, which has inherently high powertrain latency and a mechanical shaft connecting the front and rear wheels that is incapable of reacting intelligently to all road conditions. The dual Model S drive units are also able to act independently, providing powertrain redundancy if one fails.

The performance version of the Dual Motor Model S is now the world’s fastest accelerating four-door production car of all time, with a 0 to 60 mph time of 3.2 seconds, matching the legendary McLaren F1, which has two doors. Model S seats up to seven people, plus luggage. Independent testing by Motor Trend achieved an even better 0 to 60 mph time of 3.1 seconds.

We also recently introduced new standard safety features and components of our Autopilot system. Every Model S coming out of the factory (single and Dual Motor) now has the hardware installed for these features. Lane departure warning and speed limit alert, which you can turn off, are now standard safety features included on every new Model S. Automatic cruise control, highway steering and emergency braking will be enabled in the coming months via a remote software update.

We also continue to improve Model S in response to customer feedback. Recent enhancements include significantly more comfortable seats, larger sun visors with better mirrors and less strident warning labels, wider-opening rear doors, a self-closing charge port door, location based air suspension adjustments and generally improved fit and finish. In Q3, we pushed Software version 6.0 to the entire Model S fleet, enabling a host of enhancements and new features, including real time traffic based navigation and a new calendar application that allows the car to adapt to the owner.

 

In partnership with several financial institutions globally, we are also making Model S more affordable, by introducing very compelling consumer leasing in most of the United States and expanding our popular Resale Value Guarantee (RVG) program into several European countries. This enables us to offer lower monthly payments without negatively affecting gross margin.

  

LOGO

Sensor Map of Safety Features & Autopilot System

  


Around the world, the appeal of Model S continues to spread. Today we announced that Model S has achieved a Euro NCAP (New Car Assessment Program) 5-star safety rating, validating our continuing commitment to vehicle safety. We recently introduced Model S to Hong Kong and Japan and plan to start deliveries in Australia by year end. Our recently opened Shenzhen location in China is already one of our highest grossing stores worldwide. We also recently energized our 124th Supercharger in the United States and our 82nd Supercharger in Europe. In China we have installed 23 Supercharging locations in 10 cities and several destination-charging stations at prominent hotels, malls and commercial buildings. Our customers have driven 49 million miles for free using our global network of Supercharger stations.    LOGO
   First Model S Deliveries to Japan

Increasing Capacity To Meet Demand

To accommodate accelerating Model S demand and prepare for the rapidly growing order book of Model X reservations, we are investing to increase production to more than 2,000 vehicles per week by the end of 2015. We began this process with a production shutdown this summer to transition to our new, higher volume final assembly line and expand our Model S body center. The ramp to our target production rate took longer than expected due to system integration challenges, reducing our production by almost 2,000 vehicles. Being unable to increase production fast enough, not lack of demand, is a fair criticism of Tesla. That said, we expect our annual production will increase by over 50% in 2014, again in 2015 and probably for several years to follow. This is unusual in the car industry.

In contrast to Q3, actions to further increase capacity have been designed to be less disruptive, thus enabling us to increase output at a steadier and more predictable pace. For example, our Model X body center will initially be independent from our Model S body center, allowing us to start building Model X bodies without impacting Model S production. We have started to upgrade our second paint shop with state of the art paint application technology and a level of automation that will also have the capacity to cover Model 3 needs.

Future capacity investments extend to the Gigafactory where we have already started to pour concrete for the foundation. A modular build strategy is enabling us to scale construction, capital requirements and capacity commensurate with growing demand. Together with Panasonic we are making good progress toward first cell production in 2016 slightly earlier than originally scheduled. Starting operations earlier will reduce ramp-up risks for Model 3 and provide some potential expansion capacity for Model S and Model X.


Q3 Results

As usual, this letter includes non-GAAP financial information because we plan and manage our business using such information. Our non-GAAP financial information excludes non-cash stock-based compensation and interest expense, and includes deferred revenue and related costs for cars sold with a Resale Value Guarantee or similar buy-back program where we receive cash upon delivery.

This quarter we delivered 7,785 Model S vehicles. Non-GAAP revenue was $932 million for the quarter, up 55% from a year ago, while GAAP revenue was $852 million. Compared to Q2, the average selling price of Model S declined slightly due to the stronger dollar. Automotive revenue for Q3 included $31 million of powertrain sales primarily to Daimler for the Mercedes-Benz B Class Electric Drive. It also included $93 million of regulatory credits, including $76 million of Zero Emission Vehicle (ZEV) credits. ZEV credit revenue was much higher than expected as we closed additional contracts with several OEMs.

 

We directly leased 347 vehicles in Q3 to customers in the United States. For cars leased by Tesla, we make no GAAP to non-GAAP adjustments because the timing of cash payments received over the lease term is consistent with the timing of GAAP revenue recognition. Supplemental tables below disclose the $34 million of aggregate sales value related to these leased vehicles.

 

Our Q3 non-GAAP automotive gross margin was 23.0%, and 22.6% on a GAAP basis, both excluding ZEV credits. Our gross margin excluding ZEV credits would have increased slightly from Q2, but a few mostly one-time items negatively impacted our Q3 gross margin. For cars delivered prior to Q3, we booked a reserve of $14 million primarily to reflect our revised assessment of the costs of our 8 year powertrain warranty. We also incurred one-time manufacturing inefficiencies associated with the transition to the new final assembly line, and international revenue was slightly pressured by the strong U.S. dollar. These one-time events impacted gross margin by about 400 bps.

  

LOGO

Gigafactory Construction – Nevada

Research and development (R&D) expenses were $119 million on a non-GAAP basis and $136 million on a GAAP basis. Non-GAAP R&D expenses were up 28% from Q2 due to engineering efforts on Dual Motor drive, Autopilot system and Model X.

Selling, general and administrative (SG&A) expenses were $138 million on a non-GAAP basis and $155 million on a GAAP basis. The 18% sequential increase in non-GAAP SG&A expenses was driven by our rapid global growth and by the expansion of our customer support infrastructure.

Cash at quarter end, including cash equivalents, decreased $304 million to $2.4 billion. Operating cash outflows were $28 million, and impacted by using $35 million to fund our leasing program and a $60 million increase in receivables. During the quarter we invested $284 million in capital expenditures.

Q3 non-GAAP net income was $3 million, or $0.02 per share based on 142.7 million diluted shares, while Q3 GAAP net loss was $75 million or $(0.60) per share, consistent with our guidance even with the additional one-time items.


Outlook

Production for the full year is expected to be about 35,000 cars, despite entering Q4 with a deficit in production of about 2,000 units from Q3. However, the loss of these cars in Q3 means fewer available to deliver in Q4 and our ability to ramp up production in Q4 is constrained by the complexity of launches related to dual motor and autopilot hardware. Consequently, we expect to deliver approximately 33,000 vehicles for 2014. This is 50% above 2013 deliveries, but 5% to 7% below prior estimates for 2014. Previous projections for 2015 are unaffected.

One of the significant actions we intend to take in order to reduce manufacturing complexity is to simplify our product offering by reducing the number of options and powertrain combinations. This will enhance our ability to scale production in 2015.

We expect to lease about 3,000 to 3,500 cars in North America during Q4. A large portion of these leases will be financed through our new bank partner leasing program. Similar to the accounting for our RVG program vehicles, for GAAP purposes, revenue on vehicles leased via our banking partners will be deferred and recognized over the lease term, but added back to non-GAAP revenue because we receive all of the cash up front on these leases.

 

LOGO

Model S/Model X Final Assembly Line – Fremont

  

We expect non-GAAP automotive gross margin to exceed 28% in late Q4, excluding ZEV credits, as manufacturing efficiencies and part costs continue to improve. Factors weighing on the automotive gross margin for the full quarter include delivery of vehicles built in Q3 with lower manufacturing efficiency and slightly lower average selling prices from weaker European currencies. Model S gross margin itself is generally higher than automotive gross margin which is moderately suppressed due to the significantly lower gross margin on powertrain sales. ZEV credit revenue in Q4 is expected to be quite minimal based on our existing arrangements.

 

Q4 non-GAAP operating expenses are expected to grow sequentially by just under 10% for R&D and SG&A as we wind down Dual Motor development. We expect to earn $0.30 to $0.35 per share in Q4, on a non-GAAP basis. Based on our current stock price, we project between 143 million and 145 million diluted shares outstanding in Q4.

Work continues on the finalization of Model X with the testing of Alpha prototypes and initial builds of the first Beta prototypes. Model X powertrain development is almost complete with the early introduction of Dual Motor drive on Model S. We recently decided to build in significantly more validation testing time to achieve the best Model X possible. This will also allow for a more rapid production ramp compared to Model S in 2012.

In anticipation of this effort, we now expect Model X deliveries to start in Q3 of 2015, a few months later than previously expected. This also is a legitimate criticism of Tesla – we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change.

We plan to spend about $350 million in capital expenditures in Q4 as we continue to invest in even more production capacity, accelerate the pace of Gigafactory construction, and continue vehicle development and our global expansion.

As in the past, we plan to provide 2015 financial guidance in our Q4 Shareholder Letter. 2015 should be another exciting year for Tesla, with accelerating revenue growth and expanding margins.

 

LOGO    LOGO
Elon Musk, Chairman & CEO    Deepak Ahuja, Chief Financial Officer


Webcast Information

Tesla will provide a live webcast of its third quarter 2014 financial results conference call beginning at 2:30 p.m. PT on November 5, 2014, at ir.teslamotors.com. This webcast will also be available for replay for approximately one year thereafter.

Non-GAAP Financial Information

Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis. On a non-GAAP basis, financial measures exclude non-cash items such as stock-based compensation, the change in fair value related to Tesla’s warrant liability, non-cash interest expense related to Tesla’s convertible senior notes as well as one-time expenses associated with the early repayment of the Department of Energy Loan. Non-GAAP financial measures also exclude the impact of lease accounting on related revenues and cost of revenues associated with Model S deliveries with the resale value guarantee and similar buy-back terms, as this perspective is useful in understanding the underlying cash flow activity and timing of vehicle deliveries. Management believes that it is useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information internally for its operating, budgeting and financial planning purposes. These non-GAAP financial measures also facilitate management’s internal comparisons to Tesla’s historical performance as well as comparisons to the operating results of other companies. Non-GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction with financial information reported under U.S. GAAP when understanding Tesla’s operating performance. A reconciliation between GAAP and non-GAAP financial information is provided below.

Forward-Looking Statements

Certain statements in this shareholder letter, including statements in the “Outlook” section; statements regarding gross margin expansion, and profitability, statements relating to the progress Tesla is making with respect to product development, including future Autopilot features, vehicle firmware updates and Model X development and launch plans; the timing, pace of production and international delivery expansion for Model S, including the production volume, rate, and ramp expectation of our new production lines; growth in demand and orders for Model S and Model X; the ability to achieve vehicle demand, volume, production, delivery, revenue, leasing, gross margin, spending, and profitability targets; and Tesla Gigafactory timing, , partnerships, plans and output expectations, including those related to cell production , are “forward-looking statements” that are subject to risks and uncertainties. These forward-looking statements are based on management’s current expectations, and as a result of certain risks and uncertainties, actual results may differ materially from those projected. The following important factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: Tesla’s future success depends on its ability to design and achieve market acceptance of Model S and its variants, as well as new vehicle models, specifically Model X and Model 3; the risk of delays in the manufacture, production and delivery of Model S vehicles, including Dual Motor Model S, or the development, production and delivery of Model X and Model 3 vehicles; the ability of suppliers to meet quality and part delivery expectations at increasing volumes; any failures by Tesla vehicles to perform as expected or if product recalls occur; Tesla’s ability to continue to reduce or control manufacturing and other costs; consumers’ willingness to adopt electric vehicles; competition in the automotive market generally and the alternative fuel vehicle market in particular; Tesla’s ability to establish, maintain and strengthen the Tesla brand; Tesla’s ability to manage future growth effectively as we rapidly grow, especially internationally; the unavailability, reduction or elimination of government and economic incentives for electric vehicles; Tesla’s ability to establish, maintain and strengthen its relationships with strategic partners such as Panasonic; potential difficulties in finalizing, performing and realizing potential benefits under definitive agreements for the first Tesla Gigafactory site, obtaining permits and incentives, negotiating terms with technology, materials and other partners for Gigafactory, and maintaining Gigafactory implementation schedules, output and costs estimates; and Tesla’s ability to execute on its retail strategy and for new store, service center and Tesla Supercharger openings. More information on potential factors that could affect our financial results is included from time to time in our Securities and Exchange Commission filings and reports, including the risks identified under the section captioned “Risk Factors” in our quarterly report on Form 10-Q filed with the SEC on August 8, 2014. Tesla disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

 

Investor Relations Contact:      Press Contact:
Jeff Evanson      Liz Jarvis-Shean
Investor Relations – Tesla      Communications – Tesla
ir@teslamotors.com      press@teslamotors.com


Tesla Motors, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 

                                                                                         
     Three Months Ended     Nine Months Ended  
     Sep 30,
2014
    June 30,
2014
    Sep 30,
2013
    Sep 30,
2014
    Sep 30,
2013
 

Revenues

          

Automotive sales (1A)

   $ 849,009      $ 768,242      $ 430,196      $ 2,236,062      $ 1,386,934   

Development services

     2,795        1,107        1,150        5,633        11,343   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     851,804        769,349        431,346        2,241,695        1,398,277   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues

          

Automotive sales (1B)

     598,472        554,104        324,883        1,615,047        1,090,300   

Development services

     1,481        2,250        3,595        6,674        8,304   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues (2)

     599,953        556,354        328,478        1,621,721        1,098,604   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     251,851        212,995        102,868        619,974        299,673   

Operating expenses

          

Research and development (2)

     135,873        107,717        56,351        325,135        163,523   

Selling, general and administrative (2)

     155,107        134,031        77,071        406,690        184,080   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     290,980        241,748        133,422        731,825        347,603   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (39,129     (28,753     (30,554     (111,851     (47,930

Interest income

     300        467        68        907        97   

Interest expense

     (29,062     (31,238     (6,492     (72,183     (26,705

Other income (expense), net (3)

     (3,090     (1,228     (740     2,401        18,018   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (70,981     (60,752     (37,718     (180,726     (56,520

Provision for income taxes

     3,727        1,150        778        5,685        1,230   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (74,708   $ (61,902   $ (38,496   $ (186,411   $ (57,750
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share, basic and diluted

   $ (0.60   $ (0.50   $ (0.32   $ (1.50   $ (0.49
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation, basic and diluted

     124,911        124,250        121,862        124,217        118,282   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes:

 

(1) Due to the application of lease accounting for Model S vehicles with the resale value guarantee or similar buy-back terms, the following is supplemental information for the periods presented:

 

                                                                                         

(A)    Net increase in deferred revenue and other long-term liabilities as a result of lease accounting and therefore not recognized in automotive sales

   $ 80,544       $ 88,162       $ 171,229       $ 261,212       $ 318,041   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(B)    Net increase in operating lease vehicles as a result of lease accounting and therefore not recognized in automotive cost of sales

   $ 63,981       $ 68,752       $ 138,839       $ 202,476       $ 262,758   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  Under lease accounting, warranty costs are expensed as incurred instead of accrued at the time of sale.

 

(2) Includes stock-based compensation expense of the following for the periods presented:

 

                                                                                         

Cost of revenues

   $ 5,383       $ 3,912       $ 3,017       $ 12,401       $ 5,616   

Research and development

     16,639         14,822         8,707         45,006         24,916   

Selling, general and administrative

     17,136         17,049         9,715         54,572         25,034   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation expense

   $ 39,158       $ 35,783       $ 21,439       $ 111,979       $ 55,566   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(3)  Other income, net, for the nine months ended September 30, 2013 includes the gain from the elimination of the $10.7 million Department of Energy (DoE) common stock warrant liability.


Tesla Motors, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

     Sep 30,
2014
     Dec 31,
2013
 

Assets

     

Cash and cash equivalents

   $ 2,370,735       $ 845,889   

Restricted cash and marketable securities - current

     17,331         3,012   

Accounts receivable

     156,889         49,109   

Inventory

     752,492         340,355   

Prepaid expenses and other current assets

     65,467         27,574   

Operating lease vehicles, net (1)

     617,743         382,425   

Property and equipment, net

     1,404,326         738,494   

Restricted cash - noncurrent

     9,090         6,435   

Other assets

     43,460         23,637   
  

 

 

    

 

 

 

Total assets

   $ 5,437,533       $ 2,416,930   
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Accounts payable and accrued liabilities

   $ 843,933       $ 412,221   

Deferred revenue (2)

     415,891         273,062   

Customer deposits

     227,056         163,153   

Capital lease obligations

     22,398         20,577   

Long-term debt

     2,384,261         586,301   

Other long-term liabilities (3)

     523,739         294,495   
  

 

 

    

 

 

 

Total liabilities

     4,417,278         1,749,809   

Mezzanine equity (4)

     62,161         —     

Stockholders’ equity

     958,094         667,121   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 5,437,533       $ 2,416,930   
  

 

 

    

 

 

 

Notes:

     

(1)     Includes the following increase in operating lease vehicles related to deliveries of Model S and subject to lease accounting, net of depreciation recognized in automotive cost of sales, for the following periods:

     

         Resale value guarantee program (and other vehicles with similar buy-back terms)

     

          Beginning balance

   $ 376,979       $ —     

          First quarter

     69,743         —     

          Second quarter

     68,752         123,919   

          Third quarter

     63,981         138,839   

          Fourth quarter

        114,221   
  

 

 

    

 

 

 

          Ending balance

   $ 579,455       $ 376,979   
  

 

 

    

 

 

 

          Model S leasing program

     

          Beginning balance

   $ —        

          First quarter

     —        

          Second quarter

     11,214      

          Third quarter

     23,824      

          Fourth quarter

     
  

 

 

    

          Ending balance

   $ 35,038      
  

 

 

    

(2)     Includes the following increase in deferred revenue related to deliveries of Model S with the resale value guarantee or similar buy-back terms and subject to lease accounting, net of revenue amortized to automotive sales, for the following periods:

     

          Beginning balance

   $ 227,868       $ —     

          First quarter

     38,188         —     

          Second quarter

     33,586         74,455   

          Third quarter

     27,993         84,577   

          Fourth quarter

        68,836   
  

 

 

    

 

 

 

          Ending balance

   $ 327,635       $ 227,868   
  

 

 

    

 

 

 

(3)     Includes the following increase in other long-term liabilities related to deliveries of Model S with the resale value guarantee or similar buy-back terms and subject to lease accounting for the following periods:

     

          Beginning balance

   $ 236,298       $ —     

          First quarter

     54,318         —     

          Second quarter

     54,575         72,357   

          Third quarter

     52,551         86,652   

          Fourth quarter

        77,289   
  

 

 

    

 

 

 

          Ending balance

   $ 397,742       $ 236,298   
  

 

 

    

 

 

 

 

(4) Our common stock price exceeded the conversion threshold price of our convertible senior notes due 2018 (2018 Notes) issued in May 2013; therefore, the 2018 Notes are convertible at the holder’s option during the fourth quarter of 2014. As such, the carrying value of the 2018 Notes was classified as a current liability as of September 30, 2014 and the difference between the principal amount and the carrying value of the 2018 Notes was reflected as convertible debt in mezzanine equity on our condensed consolidated balance sheet as of September 30, 2014.


Tesla Motors, Inc.

Supplemental Consolidated Financial Information

(Unaudited)

(In thousands)

 

     Three Months Ended     Nine Months Ended  
     Sep 30,
2014
    June 30,
2014
    Sep 30,
2013
    Sep 30,
2014
    Sep 30,
2013
 

Selected Cash Flow Information

          

Cash flows provided by (used in) operating activities (1)

   $ (27,996   $ (1,662   $ 102,033      $ 29,065      $ 130,817   

Cash flows provided by (used in) investing activities

     (291,643     2,610        (77,501     (618,213     (159,912

Cash flows provided by financing activities

     33,755        281,491        24,216        2,131,805        624,906   

Other Selected Financial Information

          

Cash flows provided by (used in) operating activities (1)

   $ (27,996   $ (1,662   $ 102,033      $ 29,065      $ 130,817   

Capital expenditures

     (284,175     (175,685     (76,548     (601,224     (174,790
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow (cash flow from operations plus capital expenditures) (1)

   $ (312,171   $ (177,347   $ 25,485      $ (572,159   $ (43,973
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

   $ 64,972      $ 54,715      $ 28,449      $ 163,955      $ 68,498   
     Sep 30,
2014
    June 30,
2014
    Sep 30,
2013
       

Cash and Investments

        

Cash and cash equivalents

   $ 2,370,735      $ 2,674,910      $ 795,116     

Restricted cash and marketable securities - current

     17,331        11,714        1,265     

Restricted cash - noncurrent

     9,090        7,247        8,110     

(1)     During the three months ended June 30, 2014, we began separately presenting the effect of exchange rate changes on our cash and cash equivalents in our condensed consolidated statement of cash flows due to our growing operations in foreign currency environments. Prior period amounts have been reclassified to conform to the current period presentation.

          

 

Supplemental Model S Leasing Program Information

(in thousands, except for vehicle deliveries)

  

  

 
     Three Months Ended           Nine Months
Ended
       
     Sep 30,
2014
    June 30,
2014
          Sep 30,
2014
   

Vehicles delivered

     347        158          505     

Average per unit price of vehicles delivered

   $ 99      $ 102        $ 100     
  

 

 

   

 

 

     

 

 

   

Aggregate value of vehicles delivered (1)

   $ 34,490      $ 16,046        $ 50,536     
  

 

 

   

 

 

     

 

 

   

Leasing revenue recognized for current period deliveries

   $ 1,117      $ 170        $ 1,287     

 

(1)  Aggregate value is the product of multiplying vehicles delivered by the average per unit price of vehicles delivered


Tesla Motors, Inc.

Reconciliation of GAAP to Non-GAAP Financial Information

(Unaudited)

(In thousands, except per share data)

 

     Three Months Ended     Nine Months Ended  
     Sep 30,
2014
    June 30,
2014
    Sep 30,
2013
    Sep 30,
2014
    Sep 30,
2013
 

Net loss (GAAP)

   $ (74,708   $ (61,902   $ (38,496   $ (186,411   $ (57,750

Stock-based compensation expense

     39,158        35,783        21,439        111,979        55,566   

Change in fair value of warrant liability

     —          —          —          —          (10,692

Non-cash interest expense related to convertible notes

     22,160        23,639        4,260        54,192        6,051   

Early extinguishment of DoE loans

     —          —          —          —          16,386   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) (Non-GAAP) including lease accounting

     (13,390     (2,480     (12,797     (20,240     9,561   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Model S gross profit deferred due to lease accounting (1)(2)

     16,564        18,607        28,732        56,555        48,082   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (Non-GAAP)

   $ 3,174      $ 16,127      $ 15,935      $ 36,315      $ 57,643   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic (GAAP)

   $ (0.60   $ (0.50   $ (0.32   $ (1.50   $ (0.49

Stock-based compensation expense

     0.31        0.29        0.18        0.90        0.47   

Change in fair value of warrant liability

     —          —          —          —          (0.09

Non-cash interest expense related to convertible notes

     0.18        0.19        0.03        0.44        0.05   

Early extinguishment of DoE loans

     —          —          —          —          0.14   

Model S gross profit deferred due to lease accounting (1)(2)

     0.13        0.15        0.24        0.46        0.41   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share, basic (Non-GAAP)

   $ 0.02      $ 0.13      $ 0.13      $ 0.30      $ 0.49   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation, basic (GAAP and Non-GAAP)

     124,911        124,250        121,862        124,217        118,282   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, diluted (GAAP)

   $ (0.52   $ (0.44   $ (0.28   $ (1.32   $ (0.44

Stock-based compensation expense

     0.27        0.25        0.16        0.79        0.42   

Change in fair value of warrant liability

     —          —          —          —          (0.08

Non-cash interest expense related to convertible notes

     0.15        0.17        0.03        0.39        0.05   

Early extinguishment of DoE loans

     —          —          —          —          0.12   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) (Non-GAAP) including lease accounting

     (0.10     (0.02     (0.09     (0.14     0.07   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Model S gross profit deferred due to lease accounting (1)(2)

     0.12        0.13        0.21        0.40        0.36   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share, diluted (Non-GAAP)

   $ 0.02      $ 0.11      $ 0.12      $ 0.26      $ 0.44   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation, diluted (Non-GAAP)

     142,747        140,948        137,131        141,406        131,878   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Under GAAP, warranty costs are expensed as incurred for Model S vehicle deliveries with the resale value guarantee or similar buy-back terms and subject to lease accounting. For Non-GAAP purposes, an estimated incremental warranty reserve of $3.6 million, $3.4 million, $5.0 million is included for the three months ended September 30, 2014, June 30, 2014, September 30, 2013, respectively. For the nine months ended September 30, 2014 and 2013, an estimated incremental warranty reserve of $9.1 million and $9.0 million is included, respectively. Additionally, stock-based compensation of $1.0 million, $0.7 million and $1.3 million is excluded for non-GAAP purposes for the three months ended September 30, 2014, June 30, 2014 and September 30, 2013, respectively. For the nine months ended September 30, 2014 and 2013, stock-based compensation of $2.4 million and $1.8 million is excluded, respectively.

 

(2) Includes deliveries of Model S with the resale value guarantee or similar buy-back terms and not deliveries under the Model S leasing program.


Tesla Motors, Inc.

Reconciliation of GAAP to Non-GAAP Financial Information

(Unaudited)

(In thousands, except per share data)

 

     Three Months Ended     Nine Months Ended  
     Sep 30,
2014
    June 30,
2014
    Sep 30,
2013
    Sep 30,
2014
    Sep 30,
2013
 

Revenues (GAAP)

   $ 851,804      $ 769,349      $ 431,346      $ 2,241,695      $ 1,398,277   

Model S revenue deferred due to lease accounting (2)

     80,544        88,162        171,229        261,212        318,041   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenues (Non-GAAP)

   $ 932,348      $ 857,511      $ 602,575      $ 2,502,907      $ 1,716,318   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (GAAP)

   $ 251,851      $ 212,995      $ 102,868      $ 619,974      $ 299,673   

Model S gross profit deferred due to lease accounting (1)(2)

     16,564        18,607        28,732        56,555        48,082   

Stock-based compensation expense

     5,383        3,912        3,017        12,401        5,616   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (Non-GAAP)

   $ 273,798      $ 235,514      $ 134,617      $ 688,930      $ 353,371   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development expenses (GAAP)

   $ 135,873      $ 107,717      $ 56,351      $ 325,135      $ 163,523   

Stock-based compensation expense

     (16,639     (14,822     (8,707     (45,006     (24,916
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development expenses (Non-GAAP)

   $ 119,234      $ 92,895      $ 47,644      $ 280,129      $ 138,607   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expenses (GAAP)

   $ 155,107      $ 134,031      $ 77,071      $ 406,690      $ 184,080   

Stock-based compensation expense

     (17,136     (17,049     (9,715     (54,572     (25,034
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expenses (Non-GAAP)

   $ 137,971      $ 116,982      $ 67,356      $ 352,118      $ 159,046   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Under GAAP, warranty costs are expensed as incurred for Model S vehicle deliveries with the resale value guarantee or similar buy-back terms and subject to lease accounting. For Non-GAAP purposes, an estimated incremental warranty reserve of $3.6 million, $3.4 million, $5.0 million is included for the three months ended September 30, 2014, June 30, 2014, September 30, 2013, respectively. For the nine months ended September 30, 2014 and 2013, an estimated incremental warranty reserve of $9.1 million and $9.0 million is included, respectively. Additionally, stock-based compensation of $1.0 million, $0.7 million and $1.3 million is excluded for non-GAAP purposes for the three months ended September 30, 2014, June 30, 2014 and September 30, 2013, respectively. For the nine months ended September 30, 2014 and 2013, stock-based compensation of $2.4 million and $1.8 million is excluded, respectively.

 

(2) Includes deliveries of Model S with the resale value guarantee or similar buy-back terms and not deliveries under the Model S leasing program.