Tesla's Latest Shareholder Letter Points to Bright Future

By · November 06, 2012

Tesla Model S

Tesla's latest shareholder letter opens with this promising paragraph.

“The third quarter was a fundamental turning point for Tesla as we successfully transitioned to a mass production car company, growing from manufacturing 5 cars per week at the beginning of the quarter to 100 cars per week by the end. That rate has doubled since last month and is now at over 200 cars per week or 10,000 cars per year, which is at the critical threshold needed for Tesla to generate positive operating cash flow. One month from now,
we expect Tesla to double production again and achieve the target rate of 400 cars per week or 20,000 per year. Despite many short term costs associated with the ramp, Tesla nonetheless expects to get approximately halfway
to the 25% gross margin target by end of year.”

That's the good news from Tesla's 2012 third quarter letter to its shareholders, but there's some bad news as well. Tesla's third-quarter revenue hit $50 million, up 16 percent from 2011's third-quarter results and 88 percent above its 2012 Q2 revenue. Analysts expected only $48.3 million. As for earning per share, Tesla's net lost was 92 cents. Additionally, Tesla reported a third-quarter loss of $110.8 million. Of course, there are a few more negatives found in Tesla's shareholder letter (PDF), but these should not overshadow the company's accomplishments.

Tesla shareholder letter

For example, Tesla completed its draw down of its $465 million DoE loan in Q3, but was able to pre-fund its second loan payment, related to principal and interest, which isn't due until March 2013. Additionally, Tesla's Model S production ramp-up is continuing on pace, with a standing target of delivering 20,000 Model S sedans in 2013. Finally, Tesla expects to reports a gross margin profit in 2013 of 25 percent, and positive free cash flow will come by the end of the fourth quarter of 2012. We'll see if they hit those numbers.

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