Tesla releases Q2 earnings results, reports profit again

Tesla released on Wednesday its Q2 2020 earnings report, crushing expectations for revenue and for earnings.

Tesla said it earned $104 million, or 50 cents a share, in the Q2, contrasting with a loss of $408 million, or $2.31 a share, in the year-ago quarter. Adjusted for one-time items, Tesla earned $2.18 a share, swinging from an adjusted loss of $1.12 a share a year ago. Sales fell 5% to $6.04 billion from $6.35 billion a year ago.

The automaker had a 5% operating margin in the quarter.

Tesla’s cash and cash equivalents increased by $535 million to $8.6 billion in the quarter, with free cash flow of $418 million, according to the automaker.

Tesla produced 82,727 vehicles in the second quarter — a decrease of 20% sequentially and 5% year-over-year — and delivered 90,891.

The automaker said it has the capacity to top 500,000 vehicle deliveres in 2020 despite the production interruptions from the coronavirus pandemic.

Here are some highlights from the report:

Cash
$535M increase in our cash and cash equivalents in Q2 to $8.6BOperating cash flow less capex (free cash flow) $418M in Q2

Profitability
$327M GAAP operating income; 5.4% operating margin in Q2$104M GAAP net income; $451M non-GAAP net income (ex-SBC) in Q2 Four quarters of sequential profitability

Operations
Next US Gigafactory site selected; preparations underwayIncreased Model S range to 402 miles (EPA)Model Y and China-made Model 3 production rates continue to increase

V E H I C L E  C A P A C I T Y

Fremont
Although the Model Y production line was operating for about four months in the first half of 2020 due to shutdowns, we exited Q2 with Model Y production running at installed capacity. This ramp was significantly faster than our initial Model 3 ramp, which took over nine months to reach the same weekly rate. We are installing additional machinery at the Fremont Factory, which is expected to increase total Model 3 / Model Y capacity from 400,000 to 500,000 units per year.

Shanghai
Model 3 has received a strong reception in China, not only becoming the best-selling EV, but also competing with mid-sized premium sedans, such as BMW 3-series and Mercedes C-(even before subsidies and vehicle tax), reduced operating costs and industry-leading standard equipment. Construction for Model Y lines in the Shanghai factory is progressing as planned, with first deliveries expected in 2021.

Berlin-BrandenburgIn
Germany, one of our biggest European markets, Gigafactory Berlin construction continues to progress. As we build new factories, we continue to iterate on the factory and product design to improve efficiency, cost and technology. We are implementing further structural improvements based on our learnings from prior factories.

C O R E  T E C H N O L O G Y

Autopilot & Full Self Driving
Our traffic light and stop sign recognition system is becoming more robust as we continue to collect more data from our customers driving through intersections. As of Q2, our FSD-equipped cars will either stop at an intersection or drive through it without driver confirmation when it is deemed safe to do so. Ultimately, the necessity for confirmation will be withdrawn completely.

Vehicle Software
It has been more than eight years since we delivered our first Model S. During that time, we have regularly updated the software to each of our over one million vehicles. Every week, we review feedback from blogs, social media or aggregators to learn what functionality our customers would like to see next. Over-the-air functionality continues to improve. For example, in Q2 we enabled the interior camera, enabled repeater cameras when parking and improved the user interface.

Battery & Powertrain
We know from our customers that range is an all-important attribute for those looking to switch from their combustion engine vehicle to an EV. Our efforts to maximize range are not slowing down. In July 2020, we announced an updated Model S with an EPA-tested range of 402 miles making it the first production EV in history to break the 400-mile range threshold.

O T H E R  H I G H L I G H T S

Energy Business
Although recently launched and still ramping, Megapack generated a profit for the first time in Q2. Storage deployments increased sequentially to 419 MWh, driven by increases in both Powerwall and Megapack. Autobidder, a real-time energy trading platform that is designed to maximize energy revenue from our utility scale batteries, continues to be an important part of our storage strategy. We recently launched this platform in Europe and started trading on the European Power Exchange, in addition to exchanges in the U.S. and Australia.

Solar
Recently, we made home retrofit solar even more affordable in the U.S., while also offering an increased efficiency panel. At $1.49 per watt, the average Tesla solar system is now one-third less expensive than the industry. The average customer buying a large system in California will likely offset their system cost with a reduced electricity bill in approximately six years. We also introduced a lowest-cost guarantee and money-back guarantee. Our new pricing is made possible by several improvements, such as moving to recommending standard sizes that customers can order with one click online and the reduction of customer acquisition costs through the automation of processes. Solar Roof installations roughly tripled in Q2 compared to Q1. We continue to expand our installation team to increase the deployment rate.

You can read Tesla Q2 2020 Financial Results in pdf here.