Tesla (TSLA) Q1 2024 earnings results and conference call transcript

Tesla is out with the company's Q1 2024 earnings release. Check out all of the results and the call transcript here.

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Tesla is out with the company's Q1 2024 earnings results, and the stock is reacting to the news in after-hours trading. The EV company reported adjusted earnings-per-share (EPS) of $0.45/share and revenues of $21.3 billion. Earnings beat the EPS whisper number of $0.41/share but missed analyst estimates of $0.51/share. Revenues also missed Wall Street analyst estimates of $22.2 billion.

Listen to the Tesla (TSLA) Q1 2024 earnings call

Tesla (TSLA) Q1 2024 Earnings Release

Check out the full TSLA Q1 2024 earnings report on the Tesla Investor Relations website.

Highlights

Profitability

  • $1.2B GAAP operating income in Q1
  • $1.1B GAAP net income in Q1
  • $1.5B non-GAAP net income in Q1

Cash

  • Operating cash flow of $0.2B in Q1
  • Free cash flow of negative $2.5B in Q1 (AI infrastructure capex was $1.0B in Q1)
  • $2.2B decrease in our cash and investments in Q1 to $26.9B

Operations

  • Increased AI training compute by more than 130% in Q1
  • Record energy storage deployment of 4.1 GWh in Q1
  • Produced over 1,000 Cybertrucks in a single week in April

Summary

We experienced numerous challenges in Q1, from the Red Sea conflict and the arson attack at Gigafactory Berlin, to the gradual ramp of the updated Model 3 in Fremont. Excluding Cybertruck and unscheduled downtime, our COGS4 per unit declined sequentially, driven primarily by lower raw material costs.

Global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs. While positive for our regulatory credits business, we prefer the industry to continue pushing EV adoption, which is in-line with our mission. To support our growth, we have been increasing awareness and expanding vehicle financing programs, including attractive leasing terms for our customers.

While many are pulling back on their investments, we are investing in future growth – including our AI infrastructure, production capacity, our Supercharger and service networks and new products infrastructure – with $2.8B of capital expenditures in Q1.

We recently undertook a cost-cutting exercise to increase operational efficiency. We also remain committed to company-wide cost reduction, including reducing COGS per vehicle. Ultimately, we are focused on profitable growth, including by leveraging existing factories and production lines to introduce new and more affordable products.

The future is not only electric, but also autonomous. We believe scaled autonomy is only possible with data from millions of vehicles and an immense AI training cluster. We have, and continue to expand, both. To make FSD (Supervised) 5 more accessible, we reduced the price of subscription to $99/month and the purchase price to $8,000 in the US.

Revenue

Total revenue declined 9% YoY in Q1 to $21.3B. YoY, revenue was impacted by the following items:

  • reduced vehicle average selling price (ASP) YoY (excl. FX impact), including unfavorable impact of mix (-)
  • decline in vehicle deliveries, partially due to the Model 3 update in the Fremont factory and Giga Berlin production disruptions (-)
  • negative FX impact of $0.2B (-)
  • growth in other parts of the business (+)
  • higher FSD revenue recognition YoY due to release of Autopark feature in North America (+)

Profitability

Our operating income decreased YoY to $1.2B in Q1, resulting in a 5.5% operating margin. YoY, operating income was primarily impacted by the following items:

  • reduced vehicle ASP due to pricing and mix (-)
  • increase in operating expenses partly driven by AI, cell advancements and other R&D projects (-)
  • cost of Cybertruck production ramp (-)
  • decline in vehicle deliveries, partially due to the Model 3 update in the Fremont factory and Giga Berlin production disruptions (-)
  • lower cost per vehicle, including lower raw material costs, freight and duties (+)
  • gross profit growth in Energy Generation and Storage including IRA credit benefit (+)
  • higher FSD revenue recognition YoY due to release of Autopark feature in North America (+)

Cash

Quarter-end cash, cash equivalents and investments in Q1 was $26.9B. The sequential decrease of $2.2B was a result of negative free cash flow of $2.5B, driven by an inventory increase of $2.7B and AI infrastructure capex of $1.0B in Q1.

Outlook

Volume

Our company is currently between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and introduction of new products, including those built on our next generation vehicle platform. In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next generation vehicle and other products. In 2024, the growth rates of energy storage deployments and revenue in our Energy Generation and Storage business should outpace the Automotive business.

Cash

We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses. Furthermore, we will manage the business such that we maintain a strong balance sheet during this uncertain period.

Profit

While we continue to execute on innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of AI, software and fleet-based profits.

Product

We have updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025.

These new vehicles, including more affordable models, will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.

This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times. This would help us fully utilize our current expected maximum capacity of close to three million vehicles, enabling more than 50% growth over 2023 production before investing in new manufacturing lines.

Our purpose-built robotaxi product will continue to pursue a revolutionary “unboxed” manufacturing strategy.

Tesla (TSLA) Q1 2024 conference call transcript

Screenshot of Tesla stock trading afterhours.

Tesla's earnings results conference call is set to kick off at 5:30 p.m. ET. Keep an eye on this article for a transcription of the earnings call right here.

  • 5:30 PM ET - Call begins 
  • Share price at $156.40/share
  • Elon opening remarks
  • In Q1 they navigated some challenges
  • EV adoption rate is under pressure globally
  • Many competitors are pursuing hybrids
  • Tesla team did a great job executing during Q1
  • Record profitability for the energy division during the quarter
  • Also continue to expand our AI training capacity, more than doubling training compute from Q4 2023
  • Updated our future product lineup
  • Half of users have tried FSD
  • billions of miles driven with FSD
  • Our entire road network is designed for biological neural networks and eyes
  • Elon defends using computer vision for FSD
  • Lowered prices of FSD touted
  • August reveal of purpose-built robotaxi
  • Working on expanding Tesla core AI infrastructure
  • No longer training constrained in AI training compute
  • Roughly 35,000 NVIDIA H100s are active for training
  • Expect 85,000 NVIDIA H100s will be deployed for Tesla AI by the end of 2024
  • We are really headed for an autonomous future
  • In the future, gasoline cars that are not autonomous will be like riding a horse or using a flip phone
  • Look forward to things planned ahead
  • CFO statement
  • Energy business touted by CFO
  • Expect 75% growth for energy deployment from 2023
  • Lumpiness in storage deployment may cause fluctuations from quarter to quarter
  • Negative free cash flow of $2.5 billion
  • Mismatch in builds and deliveries blamed
  • Expect inventory build to reverse in Q2 2024
  • Reduced headcount by 10%
  • Savings expected to be $1 billion annually
  • Focused on capex efficiency
  • Savings from initiatives will help Tesla increase AI investment
  • Investor Q&A
  • What is the status of 4680?
  • 4680 cell production increased in Q1
  • Because we are ramping, costs are dropping week over week
  • What is the current status of Optimus? When do you expect to start mass production?
  • Elon - We do think we will have Optimus in the factory doing minimal tasks by the end of this year
  • May be able to sell Optimus by the end of next year
  • Optimus will be more valuable than everything else combined at Tesla
  • Our inference efficiency is the best in AI
  • That will pay dividends in many ways
  • What is the pathway to regulatory approval for unsupervised FSD in the United States?
  • It's been helpful that other autonomous driving companies are also working with regulators
  • The safety numbers are going to be hard to ignore
  • I don't think there will be significant regulatory barriers if we can prove the safety data is there
  • Compares unsupervised FSD to how elevators work without operators now
  • Tesla will be operating the fleet
  • Tesla will be some combination of AirBnB and Uber
  • There will be some cars owned by Tesla
  • But some owned by some end user who chooses when their car can be used
  • At any time, they can have the car come back to them
  • Like AirBnB for cars...
  • 7 million cars going to 9 million to 10s of million worldwide, with a constant feedback loop every time something goes wrong
  • In a same way that Google search has a flywheel feedback loop, it's the same with Tesla at a scale that is probably difficult to comprehend
  • I think there's also potential here for an AWS element down the road
  • If we have powerful inference, there's a potential to run distributed inference when the car is not running
  • Even in an autonomous future, there would still be time for the car's inference computer to do something else
  • CFO says all of FSD is improving based on its own data
  • Musk says we have advanced models that are better than current gen FSD that need some things addressed
  • We have to be careful with what we release to the fleet, or customers in general
  • 12.4 and 12.5 are pretty close to a total retrain of the neural nets
  • Good insight into how well the car will perform in 3-4 months
  • Scaling will help us predict future performance, says CFO
  • Can estimate what's gonna be the future progress based on past data
  • Can we get an official announcement for the timeline of the $25,000 vehicle?
  • We are trying to get the most affordable cars to customers as fast as possible
  • We will talk about this more on August 8, says Elon
  • Unsupervised FSD will be the largest value add ever when it ships (if it ships)
  • Eventually, we are talking about 10s of millions of cars
  • What is the progress of the Cybertruck ramp?
  • Cybertruck hit 1000 vehicles per week in March
  • Continue to ramp while focused on quality and cost reductions
  • Have any of the legacy automakers reached out to Tesla regarding licensing FSD?
  • We are in talks with one automaker about licensing FSD
  • What is the timeline for scaling Semi?
  • We are finalizing the Semi with our learnings from the test fleet and the Pepsi fleet
  • Have begun construction on the Reno factory
  • Can we make FSD transfer permanent?
  • Elon - No
  • Where do you see the megapack run rate by the end of the year? Lathrop facility update?
  • There's nothing limiting the ramp
  • We typically have 12-24 month visibility on shipments
  • Allows us to ramp factory to continue growth
  • Analyst questions
  • Tony Sack of Potatoes from Bernstein asks, "Can you elaborate on the new vehicles? Are they tweaks to existing models? Are they new models? How should we think of them compared to a Model 3 Performance upgrade?"
  • Elon - I think we've said all we will on that front
  • Tony asks Elon where his heart is at among all his companies?
  • Elon - Tesla constitutes the majority of my work time
  • I gotta make sure Tesla is quite prosperous and that it will be in the future
  • Adam Jonas Bro from Morgan Stanley asks, "Hey, Elon, you and your team expect 2024 growth rate lower than 2023. What's your expectation of any growth?"
  • Elon says he expects sales growth in 2024
  • Jonas asks, "How long would it take your best Chinese competitors to copy your best vehicle?"
  • Elon says "I don't know what our competitors could do"
  • We are doing well in China, despite declining sales
  • Cathy Wood said it best
  • We should be thought of as an AI/Robotics company
  • If you ask the wrong question, the right answer is impossible
  • If someone doesn't believe Tesla is going to solve autonomy, I don't think they should be an investor in the company
  • FSD Supervised should convince people that things are improving, says CFO
  • We can't just look at ourselves like a car company
  • Elon - We're putting the actual auto into automobile
  • Alex Potter from Piper Sandler asks, "The thesis hinges completely on AI, neural net, FSD, in that context. What update do you have on any mechanism you have on your desired 25% voting control of the company
  • Elon - Even if I got kidnapped by aliens tomorrow, Tesla would still figure out autonomy. There's enough momentum to solve autonomy for vehicles
  • I would be more reticent with respects to Optimus 
  • I would be uncomfortable if there's not some meaningful level of influence over how that's deployed
  • Shareholders have an opportunity to ratify Elon's compensation plan
  • The company could also buy back shares
  • Next question, what types of roles are being laid off?
  • CFO says headcount reductions have been done across the board
  • CFO - Any tree which grows need pruning
  • The future is really bright, we just have to get through this period and get there
  • Elon says we're not giving up anything significant
  • We've had a long time of prosperity from 2019 to now
  • It is time to reorganize the company for the next phase of growth
  • Just like a human... 
  • You can't have the same organizational structure as you grow
  • Mark Delaney from Goldman Sachs asks, "Potential FSD licensing is in the early stages. Any update on FSD licensing?"
  • Elon says it just needs to be obvious that our approach is the right approach
  • All cars need to be smart cars or no one will buy it
  • Once that becomes obvious, licensing becomes not optional
  • CFO mentions that auto OEMs take a long time to implement things
  • An FSD licensing deal now would take at least three years to make it to the market
  • A good chance we do sign a deal this year, says Musk
  • CFO, it's work on the OEM's side that takes time
  • GS followup on price reductions
  • We can be free cash flow positive while lowering prices - Elon Musk
  • At the end of the day, if you have a great product at a great price, the sales will be excellent
  • The updated Model 3 is a fantastic car - CFO
  • We've added so much value to it, with leases at $299/month
  • George from Cannacord Genuity asks about timing of launching FSD in other geographies like China
  • Elon - there's a bunch of markets where we don't sell cars where we should be selling them
  • End to end neural net based autonomy works pretty well on almost any market
  • We plan to release a supervised FSD system in places where we can get regulatory approval
  • That includes China
  • Follow up on Q1 deliveries and supply constraints
  • Confident in unit growth in 2024?
  • Q1 had a lot of different things that were happening - CFO
  • Macro, attacks at the factory, ramping cybertruck, etc
  • Culmination of all of those activities in a constrained period
  • we think Q2 will be a lot better
  • It was just one thing after another in Q1
  • Complex logistics situation
  • We did overcomplicate the sales process, which we have greatly simplified in recent weeks
  • You can now buy a Tesla in under a minute
  • Colin Rush from Oppenheimer asks what could distributed inference unlock?
  • CFO says the car will be used more
  • It might be wise to use the compute in cars to help with other AI services
  • Elon says its analogous to AWS over at Amazon
  • It seems like kind of a no brainer to use car computers to do something useful
  • If we get to the 100 million vehicle level, you have hardware six or seven by then
  • You could have over 100 gigawatts of usable compute
  • (This is all just back of the envelope off the cuff comments from Elon)
  • Follow up question about 4680 cell target yields
  • Elon says, "We're making good progress on that, but I don't think it is super important in the near term"
  • The ramp is relevant to the Cybertruck ramp
  • For awhile there, it was difficult because every automaker placed battery orders
  • 4680 was a hedge to increasing cost/kilowatt hour for cells
  • We did the cell program in order to address the crazy increase in costs from our suppliers due to giant orders placed by every car maker on Earth
  • Ben from Baird asks nothing cuz he couldn't unmute
  • Strongly recommendation that everyone interested in Tesla stock to drive FSD 12.3 - Elon
  • Wolf Research asks about COGS for the future products
  • All of the existing manufacturing innovations at Tesla are transferable to future products and lines
  • Follow up on 4680 cells, is there an opportunity to sell those cells to other automakers?
  • Orders for batteries from other automakers has dropped materially
  • Dramatically more competitive prices for cells when compared to a year or two ago
  • 4680 helped us understand our suppliers upstream issues
  • Inserting ourselves in the upstream supply chain to lower costs
  • Elon says this is going to wax and wane over time
  • There is gonna be a boom and bust in batter production
  • Kinda like DRAM or something
  • What is true today will not be true in the future
  • Inflation Reduction Act (IRA) complicates the incentive structure for battery production
  • Stronger demand for cells produced in the United States
  • But how long does the IRA last? 
  • About a month ago, Martin Viecha announced that he will be leaving Tesla after seven years at investor relations
  • Martin thanks Elon and the team
  • Elon thanks Martin
  • The call comes to its merciful end at 6:37 pm ET
  • Tesla stock is currently trading at $159/share, up slightly from when the call began

This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.

Full Disclosure:

At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:

Long Tesla via TSLA shares

CEO/EIC/EIEIO

Asif Khan is the CEO, EIC, and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.

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