Tesla Q4 net loss narrows to $16 million

2013 net losses fall to $74 million as annual revenue soars to $2 billion

Tesla expects 2014 deliveries to rise 55 percent or more to over 35,000 worldwide.

UPDATED: 2/20/14 8:56 am ET

LOS ANGELES -- Tesla Motors Inc. said fourth-quarter net losses narrowed to $16 million from $90 million as the electric-vehicle maker benefited from higher deliveries, strong transaction prices and manufacturing efficiencies.

Fourth quarter revenues were $615 million, up 43 percent from last quarter, while non-GAAP revenues during the period were $761 million, up 26 percent from the third quarter.

The electric-vehicle maker said it earned a $46 million profit based on non-GAAP accounting standards during the fourth quarter. That's compared with a loss of $75 million during the same quarter last year using the non-GAAP measurement.

Tesla said it sold 6,892 cars in the fourth quarter and 22,477 in 2013. Deliveries in Europe made up most of the incremental sales growth, or roughly 1,500 units, in the fourth quarter.

Comparisons to the 2012 fourth quarter are difficult because the automaker had just begun assembling the Model S.

Tesla produced more cars in the fourth quarter than planned, and benefited from lower vehicle costs, primarily through component expense reductions and manufacturing efficiencies.

Jefferies LLC analyst Elaine Kwei estimated Tesla's average sticker price was as high as $108,000 per car in the fourth quarter, and that the company's automotive gross margin reached 25.2 percent.

"The take rate of the P85 model and highly optioned vehicles remains very strong," Kwei said in a report after the company's earnings were released Wednesday.

In the fourth quarter, Tesla also received $13 million in revenue from powertrain-sharing programs with Toyota and Daimler, and $15 million in regulatory credit revenue. The company's fourth quarter results were also bolstered by a $5 million net gain from favorable foreign currency rates.

For the full year, Tesla's net loss narrowed to $74 million from $396 million. Annual revenue soared 387 percent to $2 billion from $413 million.

The company said it expects 2014 deliveries to rise 55 percent or more to over 35,000 worldwide. Model S output is expected to increase from 600 cars a week to about 1,000 cars a week by the end of 2014, the company said. It forecast first-quarter 2014 deliveries of 6,400 vehicles.

Model S output will be constrained by battery cell supplies in the first half of the year, the company added.

Tesla said its owners have amassed more than 200 million cumulative vehicle miles driven, and that 80 percent are using the Model S as their primary vehicle.

Beijing store

The company will begin selling cars in China this spring, where it plans to add stores, service centers and a supercharger network. Tesla said its Beijing store is its largest and "most active retail location" in the world.

This spring, the company will also gradually begin entering right-hand drive markets such as Australia, Japan, Hong Kong, and the United Kingdom.

Tesla expects GAAP-based gross margins to increase from 25 percent in 2013 to about 28 percent by the end of 2014, thanks to "design improvements, better supplier prices and economies of scale," the company said. Improvements in assembly line efficiency also will help, Tesla CFO Deepak Ahuja said.

"We think an automotive gross margin of 28 percent, excluding potential ZEV credit sales, is a reasonable target for [the fourth quarter of] 2014, even if a lower option take rate is assumed. Tesla is not trying to achieve the absolute highest possible gross margin, as this would require following the industry practice of charging excessive prices to customers in certain markets, which we believe is inconsistent with building long term loyalty," the company said in a statement.

Tesla said operating expenses in 2014 are expected to increase "significantly" due to the accelerated pace of development on the Model X crossover -- which begins serial production in early 2015 -- as well as expanding the company's sales, service and charging networks.

"We do need a new final assembly line, which we hope to transfer to in the third quarter or thereabouts," Tesla CEO Elon Musk said in a conference call with analysts. "Also there's a new [body-in-white] assembly facility. That's not needed to reach the production rate, but will help with production assembly, and will be where the Model X is built."

'Jumping in the boat'

Musk is heartened by the strong demand for the Model X, even though the company has "zero marketing" on the crossover. Musk predicted demand for the Model X may exceed that of the Model S, which he forecasts at about 1,000 units a week for the sedan, long-term.

"The fish are jumping in the boat. We're actually not trying to sell the Model X at all, and we're seeing a steady accumulation of deposits," Musk said, although he declined to disclose how many deposits the company has received.

He said an entirely separate production line will have to be built at the company's Fremont, Calif., plant when the smaller Gen III vehicle comes on line in a few years.

"The car business is truly staggeringly big -- $2 trillion in new car sales, not counting service and used cars and accessories. It's a pretty big ramp ahead in terms of reinvestment," Musk said.

Tesla's soaring stock price has sparked a heated debate among analysts and investors over the company's sky-high valuation. The company has a market capitalization of nearly $25 billion, slightly less than half of General Motors' $57.7 billion.

Tesla shares closed down $10.06, or 5 percent, at $193.64 on Wednesday in Nasdaq trading. After the earnings announcement, the shares jumped 12 percent in extended trading.

Musk said raising extra capital "would be a good idea" to also finance the building of a giga-factory to supply Tesla with lithium ion batteries, as well as to protect the company from force majeure events.

Tesla said cash on hand at year's end was $846 million, helped by $130 million in generated cash flow and $40 million in positive free cash.

Other assets include $738 million in property and equipment -- up from $552 million for the same period of last year. Inventories increased to $340 million from $268 million.

Tesla's non-GAAP financial results exclude stock-based compensation and non-cash interest expense, and add back deferred revenue and related costs from its leasing program, the company said in a statement.

Tesla downplayed the significant difference between GAAP and non-GAAP earnings.

"It is important to note that the differences between GAAP and non-GAAP are primarily due to lease accounting for our resale value guarantee and employee stock-based compensation as a result of the increase in our stock price last year," the company said in a statement.

You can reach Mark Rechtin at mrechtin@crain.com -- Follow Mark on Twitter: @markrechtin

Tags: Earnings Tesla

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