Tesla reported $1.6 billion in adjusted revenue and an adjusted loss of $1.06 a share Wednesday, which fell short of analysts’ estimates. On the bright side, Tesla reported operating cash flow of $150 million and said it spent $295 million on capital needs. The result was a free cash outflow of $145 million, good for the best quarterly performance in more than two years.
The best way to read the report is to look at what was included and what wasn’t. Refundable customer deposits for the Model 3 were included in operating cash flow. That could mean a big reversal later. But Tesla left out any updates about the $1,000 deposits. That is more than two months of silence since the company said it had received orders for 373,000 cars.
Meanwhile, capital expenditures are due to increase significantly in coming quarters. The company said in May it expects to spend about $2.25 billion in 2016 to help get the Model 3 ready for mass production. Tesla has spent just over $500 million on capital needs so far this year.
Tesla raised $1.7 billion in May from an equity sale, and now has $3.2 billion on its balance sheet, which offers some cushion. But those spending needs are hardly optional to meet the company’s huge automotive ambitions. And the company’s proposed acquisition of solar energy company SolarCity, which burns prodigious amounts of cash, won’t help.
Shareholders shouldn’t put away their wallets just yet.
Article on WSJ