Friday, August 3, 2018

"Edited Transcript of TSLA earnings conference call..."1-Aug-18 (TSLA)

I was just sent this and haven't had time to compare it against the Alphaville liveblog* or my notes, I'll get to that this weekend.

From Thompson Reuters via Yahoo Finance:

Thomson Reuters StreetEvents
Q2 2018 Tesla Inc Earnings Call
PALO ALTO Aug 3, 2018 (Thomson StreetEvents) -- Edited Transcript of Tesla Inc earnings conference call or presentation Wednesday, August 1, 2018 at 9:30:00pm GMT
TEXT version of Transcript
Corporate Participants...
Conference Call Participants...
Operator [1]
Good day, ladies and gentlemen, and welcome to the Tesla Q2 2018 Financial Results and Q&A Webcast Call. (Operator Instructions) As a reminder, this conference may be recorded.
I would now like to introduce your host for today's conference, Mr. Martin Viecha, Senior Director of Investor Relations. Mr. Viecha, you may begin.
Martin Viecha, Tesla, Inc. - Sr. Director of Investor Relations [2]
Thank you very much, Sherry, and good afternoon, everyone. Welcome to Tesla's second quarter 2018 Q&A webcast. I'm joined today by Elon Musk; J.B. Straubel; Deepak Ahuja; Robin Ren, our Head of Sales; Jerome Guillen, our VP of Trucks; and we also have our autopilot team with us here; Andrej Karpathy, Director of AI; Stuart Bowers, our VP of Engineering; and Pete Bannon, our Director of Silicon Engineering.
Our Q2 results were announced at about 1:00 p.m. Pacific Time in the update letter we published at the same link as this webcast.
During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. (Operator Instructions)
Before we jump into Q&A, Elon has some opening remarks. Elon?
Elon R. Musk, Tesla, Inc. - Co-Founder, Chairman, CEO & Product Architect [3]
Hi, thank you for joining. First of all, I'd like to say, we're incredibly proud of the Tesla team for producing 7,000 Model 3, Model S and Model X vehicles in the last week of June. Those were amazing efforts. So honored to work with such great team to fuse that incredible result. It's like mind-blowing. We continued to achieve 5,000 Model 3s per week, 7,000 combined S, X and 3, multiple weeks in July, showing that we're able to do this on a sustained basis. And we expect to, in the absence of a force majeure or some very unexpected events, be able to achieve an average of 5,000 Model 3s or above for Q3, and 2,000 Model 3, Model S, X or above per week for Q3 as well. So essentially, 7,000 cars a week, plus for -- on average for Q3. So it's an amazing jump from only a year ago when we're producing 2,000 vehicles a week. It's really kind of a mind-blowing leap forward for a manufacturing company. So yes, it's incredible work by the team to do that. Many, many late nights, weekends, extreme amounts of effort and lots of smart ideas. It's amazing.
The results you're seeing is that the Model 3 market share has surpassed all competitor premium, mid-sized sedans combined. So Model 3 market share is now a majority. July was a majority of all premium sedans. That trend is, we think, likely to continue. So it's not -- we do not think it will stop there. I have Robin Ren here, who's our worldwide Head of Sales, to talk about some of the interesting elements that we're seeing in terms of cars that people are trading in, the sales and demand trends. It's looking really, really positive.
We're also getting great feedback from Model 3 from our customers, and we're now delivering the performance dual-motor and all-wheel drive versions. And the Model 3 reviews are outstanding, really couldn't ask for better reviews from some of the toughest critics in the world. And it's -- yes, and just the thing that we're recognizing is that the more Model 3s we deliver to the field, it's actually causing viral growth of our sales. So we deliver our Model 3 to somebody, they love it, they tell all their friends, they are actually -- really, our customers are our primary sales force. They love their car and take their friends for a drive, and that's the thing that fundamentally drives our sales.
But not everyone has Model 3, obviously, so we need to get the cars out there for test drives. As it is right now, not even all stores in North America have Model 3 for test drives. Of course, we prioritize getting cars to customers, but we're soon going to have Model 3s available for test drives in all stores, and both the performance version and the rear-wheel drive version. So we just want people who will not buy a car until they test drive it, just not unreasonable. Although on Sunday, when I delivered it, testing out like direct delivery, which I think is definitely the future, direct delivery from factory to customers or wherever they are. The guy here who bought it have never actually even sat in a Model 3. I'm like, wow, okay, Mr. Raul, how do you feel about the car now? You haven't even driven it. He's like, "I love it. It's amazing." So yes, it seems to be really well-received.
Yes, so I'd approximate 7,000 cars a week. We believe we can be sustainably profitable from Q3 onwards. We'll try to raise that rate of Model 3 production steadily in the coming quarters and try to get to the 10,000 cars a week number as soon we can. What we've found, as we spent a lot of time debugging a wide range manufacturer issues, is that the potential for our existing lines to be able to produce far more cars is much greater than expected that by simplifying production lines, by speeding them up, by, in some cases, having things being done manually instead of automatic, and in other cases having be done automatic instead of manual, we've been able to achieve dramatic improvements to the output of existing lines, which means that our CapEx growing from 5,000 cars a week to 10,000 cars a week is a tiny fraction. CapEx going 5,000 to 10,000 is a tiny fraction to CapEx needing to grow from 0 to 5,000 Model 3s. This is, I think, very good news for capital efficiency of the company. And (inaudible) that's going from future mass market to vehicles that we produce.
So -- and from an operating standpoint, from Q3 onwards, we're going to emphasize, our goal is to be profitable and cash flow positive for every quarter going forward. Now obviously, if there's a big recession or there's a severe force majeure event that interrupts the supply chain, that's not always possible. But we're confident that -- and provided the economy is roughly where it is today, reasonably good and there's not a big force majeure event that we -- I feel comfortable achieving the GAAP income positive and cash flow positive quarter every quarter from here on out. It's -- I'll just say, the major occasional cause is we'll pay back a big loan or something where there may be -- just because we paid back a big loan. But absent that, we'd be cash flow positive.
So once again, I thank the team for their incredible work and our customers for their support. Without the great people we have at Tesla and the customers who put their faith in us by buying our product, we would not be here today. And yes, I've really never been more excited about the future of Tesla. We have a super exciting set of products to bring out in the future. And yes, I mean, sorry if I sound a little tired, I've been working like crazy in the body shop lately. But it's really going great. I'm super excited. Some good people. And a number of the executive team are here. If I could ask the 3 key leaders of the Tesla autopilot team to be here. So I'd like to go from here to see if autopilot leaders at Tesla could introduce themselves and say a bit about what you're working on, what you're excited about in the future. Sorry to put you guys in the spot. But I think we're making pretty radical advances in the quarter, software technology and the vision neural net, and then, very importantly, the Tesla self-driving technology that we've been working on for 3 years is finally coming to fruition. Pete Bannon is going to talk a lot about that. But it's a plug-in replacement for the existing computer, and an order of magnitude improvements in operations per second or frames per second is the way to think about it. And we can go say, they really are key to Tesla full autonomy. And (inaudible) to be really easy to replace. I'll let Pete talk about that. So we're going to start with like Stuart (inaudible)
Stuart Bowers, Tesla, Inc. - VP of Engineering [4]
Okay. Hi, I'm Stuart.
Elon R. Musk, Tesla, Inc. - Co-Founder, Chairman, CEO & Product Architect [5]
You're going to have to talk a lot louder.
Stuart Bowers, Tesla, Inc. - VP of Engineering [6]
Oh, yes, I'll just talk extra loud. So I'm Stuart. Yes, I joined team relatively recently. Incredibly excited kind of to see the foundation the team has built up until this point and building on top of that right now. So right now, a lot of the focus is on Autopilot V9, which is our sort of on-ramp to off-ramp solution that's going to automatically attempt to change lanes, understand what lane the car is in, understand the route the user wants to travel and take that route for the user and ultimately hand back control to that user in just kind of safe and controlled....
...MUCH MORE including a couple versions of the ten billion dollar apology.

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