Electric car manufacturer Tesla (Tesla shares - ticker TSLA) yesterday afternoon announced the excellent results of the second quarter, with a growth in revenues of 42%. Performance was impressive considering the tough global supply chain and logistics challenges that automotive companies are facing. Notably, Tesla's second-quarter profit exceeded expectations. In addition, thanks to the rapid increase in sales and profits, the company's liquidity has grown substantially.
Tesla's solid financial results stand in stark contrast to the negative free cash flow the company burned for years after its initial public offering in 2010. But things have changed, and Tesla's second quarter 2022 report proves this. .
Profits and liquidity
Thanks to a 27% increase in vehicle deliveries over the previous year, the automaker's net profit nearly doubled. Tesla's non-GAAP (Generally Accepted Accounting Principles) earnings per share increased 57% from the prior year to $ 2,27, clearly beating analysts' forecasts of $ 1,81.
Tesla's auto margin was 27,9%, down just 46 basis points from 28,4% in the previous quarter. Investors should applaud this small setback in an environment where companies with global supply chains face an ever-changing set of challenges.
The operating margin actually improved from 11% in the previous quarter to nearly 15%. This key profitability metric was helped by growth in deliveries, an increase in the average selling price of Tesla vehicles, a reduction in stock-based compensation expenses, and more. This also happened when the company experienced an increase in fixed costs per unit in Shanghai during the quarter, due to closures related to the region's COVID-19 operating restrictions.
All this solid execution means Tesla's already huge cash pile is getting even bigger. The company ended the second quarter with $ 18,3 billion in cash, equivalents, and marketable securities, compared to $ 902 million in the first quarter of 2022. Of this amount, $ 621 million came from free cash flow. Tesla's money from operations net of capital expenditures.
Additionally, $ 936 million comes from converting 75% of the company's Bitcoin purchases into fiat currency. These cash gains were partially offset by $ 402 million in debt repayment.
Lots of reinvestment opportunities
With such a strong cash position, the company reiterated that it continues to have enough liquidity to self-finance its product roadmap and capacity expansion plans. These plans, of course, will require a lot of capital, so the electric car company has no shortage of reinvestment opportunities.
As regards the plans to expand production capacity, Telsa stated that it expects to increase the annual volume of deliveries by approximately 50% over a "multi-year horizon". To this end, Tesla is ramping up production at its Shanghai and Fremont facilities, as well as production at recently opened factories in Texas and Berlin.
Looking further, Tesla continues to develop new products, including the Cybertruck, Tesla Semi, Next Generation Roadster, Robotaxi Service, and more.
Combining Tesla's improved profitability and strong cash position with its significant reinvestment opportunity, the company appears to be in a great position. It is poised to capitalize on a range of growth opportunities and ultimately fuel more significant top and bottom line growth over the long term.