Electric-car company Tesla (NASDAQ: TSLA) will report its first-quarter financial results on Wednesday, April 24. The earnings release follows an update on vehicle deliveries earlier this month, which revealed worse-than-expected numbers. So investors will be looking to see how the sequential decline in deliveries affected the automaker's financials.
Here are three key metrics investors may want to keep in mind when Tesla report s its first-quarter results.
The range of Tesla products, including at far right the upcoming Model Y crossover. Image source: Tesla.
Tesla's two most recent quarters highlighted impressive cash flow, helping the company's total cash and cash equivalents climb by $1.5 billion during the second half of 2018 to $3.7 billion. This was aided by a total of $1.8 billion in free cash flow (cash from operations less capital expenditures) during the second half of the year.
But this cash position likely declined sharply in recent months. Not only were first-quarter deliveries worse than expected, but Tesla had also already said it expected a loss in Q1. In addition, Tesla paid off a $920 million bond during Q1.
If its cash position decreases too much, the company may need to raise more capital.
There are serious concerns about the demand for Tesla's vehicles. Sure, its first-quarter vehicle deliveries were up 110% year over year, fueled by the production ramp-up of its newest and most affordable vehicle yet, the Model 3. But Model S and X deliveries fell sharply , declining 45% year over year and 56% sequentially.
In addition, Model 3 deliveries were lower in the first quarter of 2019 than in the fourth quarter of 2018, falling 20% sequentially. While this was primarily because the company ended its first quarter with far more vehicles in transit to customers than it had in the prior quarter, it's a trend worth watching.
To gauge demand, look for commentary from management on order rates of its vehicles. Are quarterly orders above Tesla's current production and delivery levels? Was the volume of orders on the rise, flat, or declining in recent months?
Investors should also look to see if Tesla maintains its guidance for positive net income and free cash flow in every quarter beyond Q1. If a quarterly loss persists beyond Q1, the automaker will likely need to raise capital.
In addition, investors should watch Tesla's guidance for full-year deliveries. Will management maintain its full-year outlook for vehicle deliveries between 360,000 and 400,000? With approximately 63,000 vehicles delivered in Q1, quarterly deliveries will need to pick up speed to hit this target range. Furthermore, achieving this volume of deliveries in 2019 is likely necessary for Tesla to make meaningful progress on becoming sustainably profitable.
Tesla will report its first-quarter results after market close on Wednesday, April 24.
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