Deep-Dive X-Ray: Why Tesla’s Cash Flows Trended Higher In Q4

Tesla (NASDAQ:TSLA) posted a stronger than expected set of Q4 2019 results last week, driven by its expanding automotive sales and an uptick in the energy business. Revenues grew to $7.4 billion, marking an increase of 2% year-over-year and 17% sequentially. While Net Income trended lower both on a year-over-year and on a sequential basis, coming in at $132 million, driven by non-cash expenses, the company’s Free Cash Flows expanded to over $1 billion. In this analysis, we break down the key drivers of Tesla’s Revenues, Net Income, and Free Cash Flows.

View our complete dashboard analysis Deep-Dive X-Ray: What Drove Tesla’s Q4 2019 Results?

#1. Tesla’s Revenues

• Tesla’s Revenues improved by about 1% year-over-year and 20% sequentially to $7.4 billion, driven by higher Automotive Revenues and Energy Revenues.
• Automotive Revenues grew by about 20% sequentially and 3% year-over-year, as deliveries soared driven by higher production of the Model 3 sedan.
• ASPs fell YoY due to lower sales of the Model X and S, as well as a higher mix of lease deliveries. However, ASPs saw a slight improvement sequentially, likely due to a slight decline in the rate of leasing over Q4 compared to Q3.
• Tesla’s Services & Other revenues grew by 9% YoY and 6% sequentially, likely driven by a higher base of vehicles on the road.
• Energy Generation & Storage revenues benefited from stronger installations of solar panels and storage systems. Storage deployments grew to 530 megawatt-hours (MWh), from 225 MWh in Q4 2018.

#2. Tesla’s Expenses And Profits

• Tesla’s Net Income trended lower from $210 million in Q4’18 to $132 million in Q4’19, due to slightly lower gross margins and higher operating expenses.
• Tesla’s Gross Profits stood at about $1.39 billion over Q4 2019, down from $1.44 billion in Q4’18, although they improved from $1.19 billion in Q3’19.
• Gross margins declined to 22.5% from 22.8% in Q2’19 and 24% in Q4’18, driven by a higher mix of lower-margin Model 3 vehicles.
• Tesla’s SG&A expenses increased 4.6% year-over-year and 17% sequentially to $699 million, driven by higher delivery volumes and possibly by the company’s steady expansion of its stores and services locations.

#3. Free Cash Flows

• Tesla’s Free Cash flows grew to about $1 billion over Q4’19, up from around $0.4 billion in Q3.
• The difference in Net Income and Free Cash flows is largely due to higher Non-cash expenses over Q4, including Depreciation and Amortization and Stock-based compensation.

For more detail and charts on Tesla’s cash flows, view our interactive dashboard analysis Deep-Dive X-Ray: What Drove Tesla’s Q4 2019 Results?

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams| Product, R&D, and Marketing Teams