16:23 | TSLA | (325.89 +6.32)
Tesla beats by $0.59, beats on revs; Model 3 production on track, guides for positive Model 3 gross margin in Q4; Model S and X deliveries increases in back half vs. 1H17
* Reports Q2 (Jun) loss of $1.33 per share, $0.59 better than the Capital IQ Consensus of ($1.92); revenues rose 119.6% year/year to $2.79 bln vs the $2.5 bln Capital IQ Consensus. Preannounced deliveries grew 53% compared to Q2'16 in flat luxury vehicle market. Q2 Automotive gross margin at 27.9% GAAP and 25.0% non-GAAP.
* More than $3 billion cash on-hand at the end of Q2
* Model 3 production on track to achieve previously announced targets; Expecting positive Model 3 gross margin in Q4; targeting 25% margin in 2018
* Projecting Model S and Model X deliveries to increase in 2H'17 vs 1H'17
* With no advertising, paid endorsements or guerilla marketing campaigns, Model 3 net reservations have still steadily climbed every month, and have even accelerated further in recent weeks. Orders for Model S and Model X have also been increasing, both leading up to and following the Model 3 handover event. In July, our weekly net order rate for these vehicles was about 15% higher than our Q2 average weekly order rate. In addition, although too early to draw strong conclusions, we are seeing an even further increase in net Model S orders since the July 28th event. This growing demand gives us even more reason to expect increased deliveries of Model S and Model X in the second half of this year.
* Several factors will influence our non-GAAP automotive gross margin for the rest of this year. The combined non-GAAP gross margin for Model S and Model X in Q3 will decline slightly from Q2, driven primarily by mix shift. Additionally, during the initial phase of the Model 3 ramp in Q3, the volume produced will be tiny relative to the installed production capacity. As a result, Model 3 gross margin in Q3 will be temporarily impacted by the excessive allocation of labor and overhead costs and depreciation over this tiny volume. In the absence of these one-time elevated cost allocations, Model 3 gross margin in Q3 would already be positive, resulting in a positive cash contribution. As capacity utilization improves, Model 3 non-GAAP gross margin is expected to be positive in Q4, and should improve rapidly in 2018 to our target of 25%. Consequently, we expect non-GAAP automotive gross margin to temporarily dip below 20% in Q3, before recovering in Q4 and beyond.
* For the second half of 2017, we expect strong improvement in operating leverage as revenue should significantly increase in the second half of the year as compared to the first half, while operating expenses should remain essentially flat. Capital expenditures should be about $2 billion during the second half of 2017, as we make milestone-based payments for Model 3 equipment, continue with Gigafactory 1 construction, and expand our Supercharger, store, delivery hub, and service networks. While delivering the first Model 3 cars was a major company milestone, we are now focused on the critical steps to ramp Model 3 production. We remain confident in our plans and look forward to the upcoming unveiling of the next exciting addition to our portfolio of electric vehicles -- Semi Truck.