Fluent Essays

The business is Tesla. I need this NLT Friday August 13 at 2pm EST. Thank you. Competencies In this project, you will demonstrate your mastery of the following competencies: Analyze financial and investment decisions that add value to the organization Analyze financing options to maximize investor value Scenario You are a financial analyst for the chosen business that you selected during your Module Two Journal assignment. Your supervisor has discovered last minute that your business’s board of directors is looking for updates on the business’s financial health. Your supervisor has asked you to write a report regarding the business’s current financial health and the available financial options for improving the business. You’ve also been asked to make recommendations as to which options the business should choose to best support its financial health. Your supervisor will then use your report to present to the business’s board of directors, whose members all have varying levels of knowledge in terms of finance. Directions Using the business you chose from the Project Two Business Options List, create a report for your supervisor to share with the board of directors during their presentation. Keep in mind that your report needs to be easy for someone unfamiliar with finance to understand, as not all of the board members for your business fully understand finance. Using Mergent Online, locate the most recent quarterly financial statements for your chosen company, and use these statements to support your analysis throughout the project. Refer to the Project Two Financial Assumptions document located in the Supporting Materials section for the assumptions you need in order to analyze the three available financial options outlined in the Financial Analysis section of the project directions. You are encouraged to use the Project Two Financial Analyst Report template located in the What to Submit section to help complete this project. Specifically, you must address the following: Financial Analysis: In this section of the report, you will use the most recent quarterly financial statements for your chosen business and the Project Two Financial Formulas spreadsheet (located in the What to Submit section) to calculate appropriate financial formulas for assessing the business’s financial health. You will also analyze all three available financial options for improving the business based on your calculations and the provided Project Two Financial Assumptions document. Financial Calculations: Calculate accurate financial formulas to assess the business’s current financial health. Specifically, you must calculate the following: Working capital Current ratio Debt ratio Earnings per share Price/earnings ratio Total asset turnover ratio Financial leverage Net profit margin Return on assets Return on equity Working Capital Management: Explain the impact of working capital management on the business’s operations. Provide examples to support your claims. Bond Investment: Analyze the risks and benefits of the business choosing to invest in a corporate bond, including the necessary ethical considerations, appropriate calculations, and examples to support your analysis. Capital Equipment: Analyze the risks and benefits of the business choosing to invest in capital equipment, including the necessary ethical considerations, appropriate calculations, and examples to support your analysis. Capital Lease: Analyze the risks and benefits of the business choosing to purchase a capital lease, including the necessary ethical considerations, appropriate calculations, and examples to support your analysis. Financial Evaluation: In this section of the report, you will now determine if the three available financial options in the Project Two Financial Assumptions document are appropriate for the business, considering the analysis you did in the first section. You will also explain financing and describe the businesss likely future performance. Financing: Explain how a business finances its operations and expansion. Bond Investment: Assess the appropriateness of a bond investment as a financing option for the business’s financial health, using your financial analysis and other financial information to your support claims. Capital Equipment: Assess the appropriateness of a capital equipment investment as a financing option for the business’s financial health, using your financial analysis and other financial information to support your claims. Capital Lease: Assess the appropriateness of a capital lease purchase as a financing option for the business’s financial health, using your financial analysis and other financial information to support your claims. Short-Term Financing: Explain how potential short-term financing sources could help the business raise needed funds for improving its financial health. Base your response on the business’s current financial information. Future Financial Considerations: Describe the business’s likely future financial performance based on its current financial well-being and risk levels. Use financial information to support your claims. Financial Recommendations: In this section of the report, you will recommend which financing option(s) are the best for the business to choose depending on its financial health. Financial Recommendation(s): Recommend the most appropriate financing option(s) based on the business’s financial health, including a rationale for why the option(s) are best. What to Submit To complete this project, you must submit the following: Financial Analysis Report Submit your completed report as a 3- to 5-page Word document with 12-point Times New Roman font, double spacing, and one-inch margins. Or, you may use the provided Project Two Financial Analyst Report template if you so choose to help you complete your report. You will also need to submit the Excel files for your chosen business’s balance sheet, income statement, and cash flow statement from Mergent Online. Spreadsheet: Project Two Financial Formulas Use this Excel spreadsheet to complete your calculations for the project. You should have already completed parts of the spreadsheet for your Project Two Milestone assignment. All sources, including your Project Two Financial Formulas spreadsheet, should be cited according to APA style. Q2 2021 Update Highlights 03 Financial Summary 04 Operational Summary 06 Vehicle Capacity 07 Core Technology 08 Other Highlights 09 Outlook 10 Photos 11 Key Metrics 19 Financial Statements 21 Additional Information 27 In the second quarter of 2021, we broke new and notable records. We produced and delivered over 200,000 vehicles, achieved an operating margin of 11.0\% and exceeded $1B of GAAP net income for the first time in our history. Supply chain challenges, in particular global semiconductor shortages and port congestion, continued to be present in Q2. The Tesla team, including supply chain, software development and our factories, worked extremely hard to keep production running as close to full capacity as possible. With global vehicle demand at record levels, component supply will have a strong influence on the rate of our delivery growth for the rest of this year. We successfully launched Tesla Vision in Q2, which was mainly possible due to our ability to use data from over a million Tesla vehicles to source a large, diverse and accurate dataset. Solving full autonomy is a difficult engineering challenge in which we continue to believe can only be solved through the collection of large, real-world datasets and cutting- edge AI. Public sentiment and support for electric vehicles seems to be at a never-before-seen inflection point. We continue to work hard to drive down costs and increase our rate of production to make electric vehicles accessible to as many people as possible. Operating cash flow less capex (free cash flow) of $619M in Q2 Net debt and finance lease repayments of $1.6B in Q2 In total, $912M decrease in our cash and cash equivalents in Q2 to $16.2B Cash Record vehicle production and deliveries in Q2 Successful launch of FSD subscription in July Started delivering the new Model S to customers Profitability $1.3B GAAP operating income; 11.0\% operating margin in Q2 $1.1B GAAP net income; $1.6B non-GAAP net income (ex-SBC1) in Q2 28.4\% GAAP Automotive gross margin (25.8\% ex-credits) in Q2 Operations S U M M A R YH I G H L I G H T S 3 (1) SBC = stock-based compensation F I N A N C I A L S U M M A R Y (Unaudited) 4 ($ in millions, except percentages and per share data) Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 YoY Automotive revenues 5,179 7,611 9,314 9,002 10,206 97\% of which regulatory credits 428 397 401 518 354 -17\% Automotive gross profit 1,317 2,105 2,244 2,385 2,899 120\% Automotive gross margin 25.4\% 27.7\% 24.1\% 26.5\% 28.4\% 298 bp Total revenues 6,036 8,771 10,744 10,389 11,958 98\% Total gross profit 1,267 2,063 2,066 2,215 2,884 128\% Total GAAP gross margin 21.0\% 23.5\% 19.2\% 21.3\% 24.1\% 313 bp Operating expenses 940 1,254 1,491 1,621 1,572 67\% Income from operations 327 809 575 594 1,312 301\% Operating margin 5.4\% 9.2\% 5.4\% 5.7\% 11.0\% 555 bp Net income attributable to common stockholders (GAAP) 104 331 270 438 1,142 998\% Net income attributable to common stockholders (non-GAAP) 451 874 903 1,052 1,616 258\% EPS attributable to common stockholders, diluted (GAAP) (1) 0.10 0.27 0.24 0.39 1.02 920\% EPS attributable to common stockholders, diluted (non-GAAP) (1) 0.44 0.76 0.80 0.93 1.45 230\% Adjusted EBITDA 1,209 1,807 1,850 1,841 2,487 106\% Net cash provided by operating activities 964 2,400 3,019 1,641 2,124 120\% Capital expenditures (546) (1,005) (1,151) (1,348) (1,505) 176\% Free cash flow 418 1,395 1,868 293 619 48\% Cash and cash equivalents 8,615 14,531 19,384 17,141 16,229 88\% (1) Prior period results have been retroactively adjusted to reflect the five-for-one stock split effected in the form of a stock dividend in August 2020. EPS = Earnings per share F I N A N C I A L S U M M A R Y Revenue Profitability Cash Total revenue grew 98\% YoY in Q2. This was primarily achieved through substantial growth in vehicle deliveries, as well as growth in other parts of the business. At the same time, vehicle ASP1 declined by 2\% YoY as Model S and Model X deliveries were reduced in Q2 due to the product updates and as lower ASP China-made vehicles became a larger percentage of our mix. Our operating income improved in Q2 compared to the same period last year to $1.3B, resulting in an 11.0\% operating margin. This profit level was reached while incurring SBC expense attributable to the 2018 CEO award of $176M in Q2, driven by a new operational milestone becoming probable. Operating income increased YoY mainly due to volume growth and cost reduction. Positive impacts were partially offset by growth in operating expenses including increased SBC, Model S/X ramp (negative margin in Q2), additional supply chain costs, lower regulatory credit revenue, Bitcoin-related impairment of $23M and other items. Quarter-end cash and cash equivalents decreased to $16.2B in Q2, driven mainly by net debt and finance lease repayments of $1.6B, partially offset by free cash flow of $619M. 5 (1) ASP = average selling price Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 YoY Model S/X production 6,326 16,992 16,097 0 2,340 -63\% Model 3/Y production 75,946 128,044 163,660 180,338 204,081 169\% Total production 82,272 145,036 179,757 180,338 206,421 151\% Model S/X deliveries 10,614 15,275 18,966 2,030 1,895 -82\% Model 3/Y deliveries 80,277 124,318 161,701 182,847 199,409 148\% Total deliveries 90,891 139,593 180,667 184,877 201,304 121\% of which subject to operating lease accounting 4,716 10,014 13,636 13,602 14,492 207\% Total end of quarter operating lease vehicle count 54,519 61,638 72,089 83,032 95,491 75\% Global vehicle inventory (days of supply)(1) 17 14 11 8 9 -47\% Solar deployed (MW) 27 57 86 92 85 215\% Storage deployed (MWh) 419 759 1,584 445 1,274 204\% Store and service locations 446 466 523 561 598 34\% Mobile service fleet(2) 816 833 894 1,013 1,091 34\% Supercharger stations 2,035 2,181 2,564 2,699 2,966 46\% Supercharger connectors 18,100 19,437 23,277 24,515 26,900 49\% (1) ays (aligned with Automotive News definition). (2) In Q2 2021, we began including mobile service vehicles dedicated to tire repair in our mobile service fleet total. Prior period totals have been adjusted to reflect this change.6 O P E R A T I O N A L S U M M A R Y (Unaudited) 0.0\% 0.5\% 1.0\% 1.5\% 2.0\% Q 1 15 Q 2 1 5 Q 3 1 5 Q 4 1 5 Q 1 16 Q 2 1 6 Q 3 1 6 Q 4 1 6 Q 1 17 Q 2 1 7 Q 3 1 7 Q 4 1 7 Q 1 18 Q 2 1 8 Q 3 1 8 Q 4 1 8 Q 1 19 Q 2 1 9 Q 3 1 9 Q 4 1 9 Q 1 2 0 Q 2 2 0 Q 3 2 0 Q 4 2 0 Q 1 2 1 Q 2 2 1 US/Canada Europe China V E H I C L E C A P A C I T Y Global demand continues to be robust, and we are producing at the limits of available parts supply. While we saw ongoing semiconductor supply challenges in Q2, we were able to further grow our production. US: California and Texas Production ramp of Model S progressed over the course of Q2, and we expect it will continue to increase throughout the rest of the year. Given strong U.S. demand, the majority of all Model 3/Y production was delivered in North America. Buildout of Gigafactory Texas continued to progress in Q2 with commissioning having begun in some areas of the factory. China: Shanghai While we experienced minor interruptions due to supply chain challenges and factory upgrades, production in Shanghai remained strong. Per our planned roadmap, we recently introduced a standard range version of Model Y in China, which starts at ¥276,000 post incentives. Due to strong U.S. demand and global average cost optimization, we have completed the transition of Gigafactory Shanghai as the primary vehicle export hub. Europe: Berlin-Brandenburg While our global production lines continue to run as fast as possible, European demand remains well above supply, resulting in growing wait times for delivery. We continue installing equipment, have begun testing tools and are working as quickly as possible toward starting production in Berlin, while growing import volumes in the interim. Installed Annual Capacity Current Status California Model S / Model X 100,000 Production Model 3 / Model Y 500,000 Production Shanghai Model 3 / Model Y >450,000 Production Berlin Model Y - Construction Texas Model Y - Construction Cybertruck - In development TBD Tesla Semi - In development Roadster - In development Future Product - In development 7 Installed capacity ≠ current production rate and there may be limitations discovered as production rates approach capacity. Production rates depend on a variety of factors, including equipment uptime, component supply, downtime related to factory upgrades, regulatory considerations and other factors. Market share of Tesla vehicles by region (TTM) Source: Tesla estimates based on ACEA; Autonews.com; CAAM light-duty vehicles only C O R E T E C H N O L O G Y Autopilot and Full Self Driving (FSD) After selling over a million vehicles equipped with radar, we have collected enough data to start removing it in some regions. The removal of radar, which is enabled by our collection of a vast dataset of corner cases, allows us to focus on vision and increase the pace of improvement. Our first customers downloaded FSD V9 Beta in July, prompting strong positive feedback from current users. Vehicle Software Our team has demonstrated an unparalleled ability to react quickly and mitigate disruptions to manufacturing caused by semiconductor shortages. Our electrical and firmware engineering teams remain hard at work designing, developing and validating 19 new variants of controllers in response to ongoing semiconductor shortages. Battery and Powertrain We have successfully validated performance and lifetime of our 4680 cells produced at our Kato facility in California. We are nearing the end of manufacturing validation at Kato: field quality and yield are at viable levels and our focus is now on improving the 10\% of manufacturing processes that currently bottleneck production output. While substantial progress has been made, we still have work ahead of us before we can achieve volume production. Internal crash testing of our structural pack architecture with a single-piece front casting has been successful. View from vehicle cameras 8 What the vehicle sees (FSD V9 Beta) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 O T H E R H I G H L I G H T S Energy Storage Energy storage deployments more than tripled YoY in Q2, driven mainly by recognition of several Megapack projects. Energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific project milestones. Powerwall remained exceptionally popular as deployments nearly doubled YoY. Energy storage production continues to be held back by supply chain challenges as our backlog remains long. Solar Retrofit and Solar Roof Solar deployments reached 85 MW in Q2, more than tripling YoY. Additionally, cash/loan solar deployments more than quadrupled YoY. Solar Roof deployments grew substantially both YoY as well as sequentially in Q2. Thus far, our solar + storage product remains very popular, and we continue to improve efficiency of our install crews. Services and Other Gross margin of the Services & Other business reached nearly breakeven in Q2, the best result in four years. This improvement was driven mainly by strong performance in used vehicles as well as our continued focus on cost efficiency. 9 Tesla Energy Storage deployments in GWh (can vary meaningfully) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 Tesla Energy Storage deployments in GWh (TTM) O U T L O O K Volume Cash Profit Product We plan to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve 50\% average annual growth in vehicle deliveries. In some years we may grow faster, which we expect to be the case in 2021. The rate of growth will depend on our equipment capacity, operational efficiency, and the capacity and stability of the supply chain. We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses. We expect our operating margin will continue to grow over time, continuing to reach industry-leading levels with capacity expansion and localization plans underway. We believe we remain on track to build our first Model Y vehicles in Berlin and Austin in 2021. The pace of the respective production ramps will be influenced by the successful introduction of many new product and manufacturing technologies, ongoing supply-chain related challenges and regional permitting. To better focus on these factories, and due to the limited availability of battery cells and global supply chain challenges, we have shifted the launch of the Semi truck program to 2022. We are also making progress on the industrialization of Cybertruck, which is currently planned for Austin production subsequent to Model Y. 10 P H O T O S 12 G I G A F A C T O R Y B E R L I N - M O D E L Y F A C T O R Y C O N S T R U C T I O N 13 G I G A F A C T O R Y B E R L I N - P A I N T S H O P 14 G I G A F A C T O R Y T E X A S - M O D E L Y F A C T O R Y C O N S T R U C T I O N 6 months ago Present day 15 G I G A F A C T O R Y T E X A S - S T A M P I N G P R E S S 16 G I G A F A C T O R Y T E X A S - M O D E L Y B O D Y S H O P 17 G I G A F A C T O R Y T E X A S - M O D E L Y F A C T O R Y C O N S T R U C T I O N G I G A F A C T O R Y S H A N G H A I - E X P A N S I O N C O N T I N U E S 18 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3 Q -2 0 18 4 Q -2 0 18 1Q -2 0 19 2 Q -2 0 19 3 Q -2 0 19 4 Q -2 0 19 1Q -2 0 2 0 2 Q -2 0 2 0 3 Q -2 0 2 0 4 Q -2 0 2 0 1Q -2 0 2 1 2 Q -2 0 2 1 0 50,000 100,000 150,000 200,000 250,000 3 Q -2 0 18 4 Q -2 0 18 1Q -2 0 19 2 Q -2 0 19 3 Q -2 0 19 4 Q -2 0 19 1Q -2 0 2 0 2 Q -2 0 2 0 3 Q -2 0 2 0 4 Q -2 0 2 0 1Q -2 0 2 1 2 Q -2 0 2 1 Vehicle Deliveries (units) K E Y M E T R I C S Q U A R T E R L Y (Unaudited) 19 Operating Cash Flow ($B) Free Cash Flow ($B) -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 3 Q -2 0 18 4 Q -2 0 18 1Q -2 0 19 2 Q -2 0 19 3 Q -2 0 19 4 Q -2 0 19 1Q -2 0 2 0 2 Q -2 0 2 0 3 Q -2 0 2 0 4 Q -2 0 2 0 1Q -2 0 2 1 2 Q -2 0 2 1 Net income ($B) Adjusted EBITDA ($B) 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 3 Q -2 0 18 4 Q -2 0 18 1Q -2 0 19 2 Q -2 0 19 3 Q -2 0 19 4 Q -2 0 19 1Q -2 0 2 0 2 Q -2 0 2 0 3 Q -2 0 2 0 4 Q -2 0 2 0 1Q -2 0 2 1 2 Q -2 0 2 1 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 3 Q -2 0 18 4 Q -2 0 18 1Q -2 0 19 2 Q -2 0 19 3 Q -2 0 19 4 Q -2 0 19 1Q -2 0 2 0 2 Q -2 0 2 0 3 Q -2 0 2 0 4 Q -2 0 2 0 1Q -2 0 2 1 2 Q -2 0 2 1 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 3 Q -2 0 18 4 Q -2 0 18 1Q -2 0 19 2 Q -2 0 19 3 Q -2 0 19 4 Q -2 0 19 1Q -2 0 2 0 2 Q -2 0 2 0 3 Q -2 0 2 0 4 Q -2 0 2 0 1Q -2 0 2 1 2 Q -2 0 2 1 Vehicle Deliveries (units) Operating Cash Flow ($B) Free Cash Flow ($B) K E Y M E T R I C S T R A I L I N G 1 2 M O N T H S ( T T M ) (Unaudited) 20 Net income ($B) Adjusted EBITDA ($B) F I N A N C I A L S T A T E M E N T S In millions of USD or shares as applicable, except per share data Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 REVENUES Automotive sales 4,911 7,346 9,034 8,705 9,874 Automotive leasing 268 265 280 297 332 Total automotive revenue 5,179 7,611 9,314 9,002 10,206 Energy generation and storage 370 579 752 494 801 Services and other 487 581 678 893 951 Total revenues 6,036 8,771 10,744 10,389 11,958 COST OF REVENUES Automotive sales 3,714 5,361 6,922 6,457 7,119 Automotive leasing 148 145 148 160 188 Total automotive cost of revenues 3,862 5,506 7,070 6,617 7,307 Energy generation and storage 349 558 787 595 781 Services and other 558 644 821 962 986 Total cost of revenues 4,769 6,708 8,678 8,174 9,074 Gross profit 1,267 2,063 2,066 2,215 2,884 OPERATING EXPENSES Research and development 279 366 522 666 576 Selling, general and administrative 661 888 969 1,056 973 Restructuring and other (101) 23 Total operating expenses 940 1,254 1,491 1,621 1,572 INCOME FROM OPERATIONS 327 809 575 594 1,312 Interest income 8 6 6 10 11 Interest expense (170) (163) (246) (99) (75) Other (expense) income, net (15) (97) 44 28 45 INCOME BEFORE INCOME TAXES 150 555 379 533 1,293 Provision for income taxes 21 186 83 69 115 NET INCOME 129 369 296 464 1,178 Net income attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries 25 38 26 26 36 NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS 104 331 270 438 1,142 Less: Buy-out of noncontrolling interest 31 NET INCOME USED IN COMPUTING NET INCOME PER SHARE OF COMMON STOCK 104 300 270 438 1,142 Net income per share of common stock attributable to common stockholders(1) Basic $ 0.11 $ 0.32 $ 0.28 $ 0.46 $ 1.18 Diluted $ 0.10 $ 0.27 $ 0.24 $ 0.39 $ 1.02 Weighted average shares used in computing net income per share of common stock(1) Basic 928 937 951 961 971 Diluted 1,036 1,105 1,124 1,133 1,119 S T A T E M E N T O F O P E R A T I O N S (Unaudited) 22 (1)Prior period results have been retroactively adjusted to reflect the five-for-one stock split effected in the form of a stock dividend in August 2020. B A L A N C E S H E E T (Unaudited) In millions of USD 30-Jun-20 30-Sep-20 31-Dec-20 31-Mar-21 30-Jun-21 ASSETS Current assets Cash and cash equivalents 8,615 14,531 19,384 17,141 16,229 Accounts receivable, net 1,485 1,757 1,886 1,890 2,129 Inventory 4,018 4,218 4,101 4,132 4,733 Prepaid expenses and other current assets 1,218 1,238 1,346 1,542 1,602 Total current assets 15,336 21,744 26,717 24,705 24,693 Operating lease vehicles, net 2,524 2,742 3,091 3,396 3,748 Solar energy systems, net 6,069 6,025 5,979 5,933 5,883 Property, plant and equipment, net 11,009 11,848 12,747 13,868 15,665 Operating lease right-of-use assets 1,274 1,375 1,558 1,647 1,734 Digital assets, net 1,331 1,311 Goodwill and intangible assets, net 508 521 520 505 486 Other non-current assets 1,415 1,436 1,536 1,587 1,626 Total assets 38,135 45,691 52,148 52,972 55,146 LIABILITIES AND EQUITY Current liabilities Accounts payable 3,638 4,958 6,051 6,648 7,558 Accrued liabilities and other 3,110 3,252 3,855 4,073 4,778 Deferred revenue 1,130 1,258 1,458 1,592 1,693 Customer deposits 713 708 752 745 812 Current portion of debt and finance leases (1) 3,679 3,126 2,132 1,819 1,530 Total current liabilities 12,270 13,302 14,248 14,877 16,371 Debt and finance leases, net of current portion (1) 10,416 10,559 9,556 9,053 7,871 Deferred revenue, net of current portion 1,198 1,233 1,284 1,294 1,318 Other long-term liabilities 2,870 3,049 3,330 3,283 3,336 Total liabilities 26,754 28,143 28,418 28,507 28,896 Redeemable noncontrolling interests in subsidiaries 613 608 604 601 605 Convertible senior notes 44 48 51 Total stockholders equity 9,855 16,031 22,225 23,017 24,804 Noncontrolling interests in subsidiaries 869 861 850 847 841 Total liabilities and equity 38,135 45,691 52,148 52,972 55,146 (1) Breakdown of our debt is as follows: Vehicle and energy product financing (non-recourse) 4,043 4,141 3,930 4,323 3,969 Other non-recourse debt 1,415 605 630 628 14 Recourse debt 7,106 7,448 5,660 4,483 3,977 Total debt excluding vehicle and energy product financing 8,521 8,053 6,290 5,111 3,991 Days sales outstanding 21 17 16 16 15 Days payable outstanding 73 59 58 70 71 23 In millions of USD Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income 129 369 296 464 1,178 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and impairment 567 584 618 621 681 Stock-based compensation 347 543 633 614 474 Other 167 269 230 (46) 115 Changes in operating assets and liabilities, net of effect of business combinations (246) 635 1,242 (12) (324) Net cash provided by operating activities 964 2,400 3,019 1,641 2,124 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (546) (1,005) (1,151) (1,348) (1,505) Purchases of solar energy systems, net of sales (20) (16) (13) (12) (10) Purchase of intangible assets (5) (5) Receipt of government grants 122 6 Purchases of digital assets (1,500) Proceeds from sales of digital assets 272 Business combinations, net of cash acquired (13) Net cash used in investing activities (566) (1,039) (1,047) (2,582) (1,515) CASH FLOWS FROM FINANCING ACTIVITIES Net cash flows from other debt activities 164 (630) (2,074) (1,557) (1,230) Collateralized lease repayments (71) (56) (16) (6) (2) Net borrowings (repayments) under vehicle and solar financing 18 99 (215) 396 (356) Net cash flows from noncontrolling interests Auto (3) (31) Net cash flows from noncontrolling interests Solar (42) (49) (46) (32) (31) Proceeds from issuances of common stock in public offerings, net of issuance costs 4,973 4,987 Other 57 144 56 183 70 Net cash provided by (used in) financing activities 123 4,450 2,692 (1,016) (1,549) Effect of exchange rate changes on cash and cash equivalents and restricted cash 38 86 234 (221) 42 Net increase (decrease) in cash and cash equivalents and restricted cash 559 5,897 4,898 (2,178) (898) Cash and cash equivalents and restricted cash at beginning of period 8,547 9,106 15,003 19,901 17,723 Cash and cash equivalents and restricted cash at end of period 9,106 15,003 19,901 17,723 16,825 S T A T E M E N T O F C A S H F L O W S (Unaudited) 24 In millions of USD or shares as applicable, except per share data Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Net income attributable to common stockholders (GAAP) 104 331 270 438 1,142 Stock-based compensation expense 347 543 633 614 474 Net income attributable to common stockholders (non-GAAP) 451 874 903 1,052 1,616 Less: Buy-out of noncontrolling interest 31 Less: Dilutive convertible debt (5) (2) Net income used in computing diluted EPS attributable to common stockholders (non -GAAP) 451 843 903 1,057 1,618 EPS attributable to common stockholders, diluted (GAAP) (1) 0.10 0.27 0.24 0.39 1.02 Stock-based compensation expense per share (1) 0.34 0.49 0.56 0.54 0.43 EPS attributable to common stockholders, diluted (non-GAAP) (1) 0.44 0.76 0.80 0.93 1.45 Shares used in EPS calculation, diluted (GAAP and non-GAAP) (1) 1,036 1,105 1,124 1,133 1,119 Net income attributable to common stockholders (GAAP) 104 331 270 438 1,142 Interest expense 170 163 246 99 75 Provision for income taxes 21 186 83 69 115 Depreciation, amortization and impairment 567 584 618 621 681 Stock-based compensation expense 347 543 633 614 474 Adjusted EBITDA (non-GAAP) 1,209 1,807 1,850 1,841 2,487 Automotive gross margin (GAAP) 25.4\% 27.7\% 24.1\% 26.5\% 28.4\% Less: Total regulatory credit revenue recognized 6.7\% 4.0\% 3.4\% 4.5\% 2.6\% Automotive gross margin excluding regulatory credits (non-GAAP) 18.7\% 23.7\% 20.7\% 22.0\% 25.8\% R E C O N C I L I A T I O N O F G A A P T O N O N G A A P F I N A N C I A L I N F O R M A T I O N (Unaudited) 25 (1) Prior period results have been retroactively adjusted to reflect the five-for-one stock split effected in the form of a stock dividend in August 2020. R E C O N C I L I A T I O N O F G A A P T O N O N G A A P F I N A N C I A L I N F O R M A T I O N (Unaudited) 26 In millions of USD 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019 4Q-2019 1Q-2020 2Q-2020 3Q-2020 4Q-2020 1Q-2021 2Q-2021 Net cash provided by operating activities - TTM (GAAP) 1,373 2,098 1,856 2,850 2,215 2,405 2,605 2,705 4,349 5,943 8,024 9,184 Capital expenditures TTM (2,563) (2,101) (1,725) (1,365) (1,240) (1,327) (1,502) (1,798) (2,418) (3,157) (4,050) (5,009) Free cash flow - TTM (non-GAAP) (1,190) (3) 131 1,485 975 1,078 1,103 907 1,931 2,786 3,974 4,175 In millions of USD 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019 4Q-2019 1Q-2020 2Q-2020 3Q-2020 4Q-2020 1Q-2021 2Q-2021 Net (loss) income attributable to common stockholders - TTM (GAAP) (1,791) (976) (969) (659) (827) (862) (144) 368 556 721 1,143 2,181 Interest expense - TTM 634 663 672 680 690 685 696 694 672 748 678 583 Provision for income taxes - TTM 27 58 76 81 90 110 89 91 251 292 359 453 Depreciation, amortization and impairment - TTM 1,874 1,901 1,953 2,047 2,074 2,154 2,239 2,227 2,281 2,322 2,390 2,504 Stock-based compensation expense - TTM 678 749 815 828 822 898 901 1,038 1,382 1,734 2,137 2,264 Adjusted EBITDA - TTM (non-GAAP) 1,422 2,395 2,547 2,977 2,849 2,985 3,781 4,418 5,142 5,817 6,707 7,985 TTM = Trailing twelve months In millions of USD 4Q-2017 1Q-2018 2Q-2018 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019 4Q-2019 1Q-2020 2Q-2020 3Q-2020 4Q-2020 1Q-2021 2Q-2021 Net cash provided by (used in) operating activities (GAAP) 510 (398) (130) 1,391 1,235 (640) 864 756 1,425 (440) 964 2,400 3,019 1,641 2,124 Capital expenditures (787) (656) (610) (510) (325) (280) (250) (385) (412) (455) (546) (1,005) (1,151) (1,348) (1,505) Free cash flow (non-GAAP) (277) (1,054) (740) 881 910 (920) 614 371 1,013 (895) 418 1,395 1,868 293 619 In millions of USD 4Q-2017 1Q-2018 2Q-2018 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019 4Q-2019 1Q-2020 2Q-2020 3Q-2020 4Q-2020 1Q-2021 2Q-2021 Net (loss) income attributable to common stockholders (GAAP) (675) (709) (718) 311 140 (702) (408) 143 105 16 104 331 270 438 1,142 Interest expense 146 149 164 175 175 158 172 185 170 169 170 163 246 99 75 Provision for income taxes (9) 5 14 17 22 23 19 26 42 2 21 186 83 69 115 Depreciation, amortization and impairment 470 416 485 503 497 468 579 530 577 553 567 584 618 621 681 Stock-based compensation expense 134 142 197 205 205 208 210 199 281 211 347 543 633 614 474 Adjusted EBITDA (non-GAAP) 66 3 142 1,211 1,039 155 572 1,083 1,175 951 1,209 1,807 1,850 1,841 2,487 A D D I T I O N A L I N F O R M A T I O N WEBCAST INFORMATION Tesla will provide a live webcast of its second quarter 2021 financial results conference call beginning at 2:30 p.m. PT on July 26, 2021 at ir.tesla.com. This webcast will also be available for replay for approximately one year thereafter. CERTAIN TERMS When used in this update, certain terms have the following meanings. Our vehicle deliveries include only vehicles that have been transferred to end customers with all paperwork correctly completed. Our energy product deployment volume includes both customer units installed and equipment sales; we report installations at time of commissioning for storage projects or inspection for solar projects, and equipment sales at time of delivery. Adjusted EBITDA is equal to (i) net income (loss) attributable to common stockholders before (ii)(a) interest expense, (b) provision for income taxes, (c) depreciation, amortization and impairment and (d) stock-based compensation expense, which is the same measurement for this term pursuant to the performance-based stock option award granted to our CEO in 2018. Free cash flow is operating cash flow less capital expenditures. means configured orders for vehicles in production minus cancellations. Average cost per vehicle is cost of revenues automotive sales divided by vehicle deliveries (excluding leases). sales is equal to (i) average accounts receivable, net for the period divided by (ii) total revenues and multiplied by (iii) the number of days in the period. payable is equal to (i) average accounts payable for the period divided by (ii) total cost of revenues and multiplied by (iii) the number of days in the period. NON-GAAP FINANCIAL INFORMATION Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis to supplement our consolidated financial results. Our non-GAAP financial measures include non-GAAP automotive gross margin, non-GAAP net income (loss) attributable to common stockholders, non-GAAP net income (loss) attributable to common stockholders on a diluted per share basis (calculated using weighted average shares for GAAP diluted net income (loss) attributable to common stockholders), Adjusted EBITDA, Adjusted EBITDA margin and free cash flow. These non- t is useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information internally for its operating, budgeting and financial planning purposes. Management also believes that presentation of the non-GAAP financial measures provides useful information to our investors regarding our financial condition and results of operations, so that investors can see through the eyes of Tesla management regarding important financial metrics that Tesla uses to run the business and allowing -GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction with financial information reported -GAAP financial information is provided above. FORWARD-LOOKING STATEMENTS nt, ramp, production capacity and output rates, demand and market growth, deliveries, deployment, service, availability, range and other features and improvements and timing of existing and future Tesla products and technologies such as Model 3, Model Y, Model X, Model S, Tesla Semi, Cybertruck, Autopilot and Full Self Driving software, hardware and equipment, our energy storage and solar products and the battery and … FIN 320 Project Two Financial Analyst Report [Note: To complete this template, replace the bracketed text with your own content. Remove this note before you submit your report.] Financial Analysis, Financial Evaluation, and Financial Recommendation(s) Financial Analysis A. Financial Calculations: Using the most current quarter’s financial statements for your chosen business and the Financial Formulas spreadsheet, calculate the financial formulas below to assess the business’s financial health. · Working capital: · [Write the result of the calculation and what it says about the company’s health.] · Current ratio: · [Write the result of the calculation and what it says about the company’s health.] · Debt ratio: · [Write the result of the calculation and what it says about the company’s health.] · Earnings per share: · [Write the result of the calculation and what it says about the company’s health.] · Price/earnings ratio: · [Write the result of the calculation and what it says about the company’s health.] · Total asset turnover ratio: · [Write the result of the calculation and what it says about the company’s health.] · Financial leverage: · [Write the result of the calculation and what it says about the company’s health.] · Net profit margin: · [Write the result of the calculation and what it says about the company’s health.] · Return on assets: · [Write the result of the calculation and what it says about the company’s health.] · Return on equity: · [Write the result of the calculation and what it says about the company’s health.] B. Working Capital Management: [In one paragraph, explain the impact of working capital management on the business’s operations. Provide examples to support your claims.] C. Bond Investment: [In one paragraph, analyze the risks and benefits of the business choosing to invest in a corporate bond, including the necessary ethical considerations, appropriate calculations, and examples to support your analysis.] D. Capital Equipment: [In one paragraph, analyze the risks and benefits of the business choosing to invest in capital equipment, including the necessary ethical considerations, appropriate calculations, and examples to support your analysis.] E. Capital Lease: [In one paragraph, analyze the risks and benefits of the business choosing to purchase a capital lease, including the necessary ethical considerations, appropriate calculations, and examples to support your analysis.] Financial Evaluation In this section of the report, you will evaluate the three available financial options for the business and recommend which option(s) are the best for the business to choose. A. Financing: [In one paragraph, explain how a business finances its operations and expansion.] B. Bond Investment: [In one paragraph, write your assessment on the appropriateness of a bond investment as an option for the business’s financial health, using your financial analysis and other financial information to support your claims.] C. Capital Equipment: [In one paragraph, write your assessment on the appropriateness of a capital equipment investment as an option for the business’s financial health, using your financial analysis and other financial information to support your claims.] D. Capital Lease: [In one paragraph, write your assessment on the appropriateness of a capital lease purchase as an investment option for the business’s financial health, using your financial analysis and other financial information to support your claims.] E. Short-Term Financing: [In one paragraph, explain how potential short-term financing sources could help the business raise needed funds for improving its financial health. Base your response on the business’s current financial information.] F. Future Financial Considerations: [In one paragraph, describe the business’s likely future financial performance based on its current financial well-being and risk level. Use financial information to support your claims.] Financial Recommendation(s) [In 1 to 2 paragraphs, recommend the most appropriate financing option(s) based on the business’s financial health, and include a rationale for why the option(s) are the best.] 3 RATIOS ACCOUNTING & FINANCIAL RATIOS 2021 March 2021 March CURRENT RATIO (Current Assets / Current Liabilities) TOTAL ASSET TURNOVER RATIO (Total Revenue / Total Assets) Current Assets 24693 Total Revenue 11958 Current Liabilities 16371 1.5083379146 Total Assets 55146 0.2168425634 WORKING CAPITAL (Current Assets - Current Liabilities) : *Note to students: Be mindful of the scale being used in Mergent Online when filling this out. If a number is written as 12.53, that does not mean the total for that item is $12.53. There could be numerous zeros written after it, depending on the scale labeled above. In this example, 12.53 is actually $12,530,000. (To delete this comment, right-click on the WORKING CAPITAL box, then select Delete Comment from the drop-down menu.) FINANCIAL LEVERAGE (Total Assets / Shareholders Equity) Current Assets 24693 Total Assets 55146 Current Liabilities 16371 8322 Shareholders Equity 24804 2.2232704403 DEBT RATIO (Total Debt / Total Assets) NET PROFIT MARGIN (Net Income / Total Revenue) Total Debt 28896 Net Income 1178 Total Assets 55146 0.5239908606 Total Revenue 11958 0.0985114568 EARNINGS PER SHARE (Net Income / Weighted Average Common Shares Outstanding) RETURN ON ASSETS (Net Income / Total Assets) Net Income 1178 Net Income 1178 Shares Outstanding 971 1.2131822863 Total Assets 55146 0.0213614768 PRICE EARNINGS RATIO (Share Price (end of quarter / EPS) RETURN ON EQUITY (Net Income - Preferred Dividends / Shareholders Equity) Stock Price 1.18 NI - Pref. Div. 246 EPS 1.02 1.1568627451 Shareholders Equity 23017 0.0106877525 2020 March ACCOUNTING & FINANCIAL RATIOS 2020 March CURRENT RATIO (Current Assets / Current Liabilities) TOTAL ASSET TURNOVER RATIO (Total Revenue / Total Assets) Current Assets 15336 Total Revenue 6036 Current Liabilities 12270 1.2498777506 Total Assets 38135 0.1582797955 WORKING CAPITAL (Current Assets - Current Liabilities) : *Note to students: Be mindful of the scale being used in Mergent Online when filling this out. If a number is written as 12.53, that does not mean the total for that item is $12.53. There could be numerous zeros written after it, depending on the scale labeled above. In this example, 12.53 is actually $12,530,000. (To delete this comment, right-click on the WORKING CAPITAL box, then select Delete Comment from the drop-down menu.) FINANCIAL LEVERAGE (Total Assets / Shareholders Equity) Current Assets 15336 Total Assets 38135 Current Liabilities 12270 3066 Shareholders Equity 9855 3.8696093354 DEBT RATIO (Total Debt / Total Assets) NET PROFIT MARGIN (Net Income / Total Revenue) Total Debt 26754 Net Income 129 Total Assets 38135 0.7015602465 Total Revenue 6036 0.0213717694 EARNINGS PER SHARE (Net Income / Weighted Average Common Shares Outstanding) RETURN ON ASSETS (Net Income / Total Assets) Net Income 129 Net Income 129 Shares Outstanding 928 0.1390086207 Total Assets 38135 0.0033827193 PRICE EARNINGS RATIO (Share Price (end of quarter / EPS) RETURN ON EQUITY (Net Income - Preferred Dividends / Shareholders Equity) Stock Price 0.11 NI - Pref. Div. 25 EPS 0.1 1.1 Shareholders Equity 9855 0.0025367834 Monthly Time Value of Money - Monthly Compounding Rate of Return Year 1 Initial Investment Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 2 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 3 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 4 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 5 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 6 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 7 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 8 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 9 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Year 10 Month 1 2 3 4 5 6 7 8 9 10 11 12 Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Annual Time Value of Money - Annual Compounding Rate of Return Year 1 2 3 4 5 6 7 8 9 10 Initial Investment Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Investment Value $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 PV Time Value of Money - Present Value Annuity Number of Years Rate of Return $0.00 Payment FV Time Value of Money - Future Value Annuity Number of Years Rate of Return $0.00 Payment PV - Lump Sum Time Value of Money - Present Value of Lump Sum Rate Years $0.00 Initial Investment FV - Lump Sum Time Value of Money - Future Value of Lump Sum Rate Years $0.00 Initial Investment NPV Net Present Value (NPV) Calculator Building Initial Investment Year 1 2 3 4 5 6 7 8 9 10 Annual Cash Inflows Cash Flows $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Discount Rate NPV = $0 Year 11 12 13 14 15 16 17 18 19 20 Number of Years Cash Flows $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Salvage Value Equipment Initial Investment Year 1 2 3 4 5 6 7 8 9 10 Annual Cash Inflows Cash Flows $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Discount Rate NPV = $0 Year 11 12 13 14 15 16 17 18 19 20 Number of Years Cash Flows $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Salvage Value Bonds Initial Investment Annual Cash Inflows Discount Rate NPV = $0 Year 1 2 3 4 5 6 7 8 9 10 Number of Years Cash Flows $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Principal Returned FIN 320 Project Two Financial Assumptions Whenever a business needs to make an investment, the financial options associated with that investment must be carefully considered. This is true whether the business seeks to purchase something as simple as a new building or a piece of equipment, or something as complex as acquiring a new business. Business leaders need to be able to estimate cash flows from an investment and use the net present value (NPV) method to figure out if the investment is worthwhile. This document includes lists for three financial options and their associated assumptions. For your Project Two assignment, analyze all three financial options provided, then select the option or options that add the most value to the business you have selected based on all the information you’ve gathered. Your recommendation should include careful analysis of NPV calculations, financial ratios, working capital analysis, and supportive documents. Remember to evaluate each financial option in the context of the financial ratio analysis and working capital analysis to help you decide which option(s) to recommend to your chosen business in your Project Two assignment. Financial Option 1: Purchase a $10 Million Building Rationale for investment: The business is considering environmental, social, and corporate governance (ESG) factors as part of its investment into a new building for its headquarters. The building itself will be a Leadership in Energy and Environmental Design (LEED)-certified building, but the new site being considered currently houses a large, inactive gas station that sold both gasoline and diesel fuel. The new site also has a sizable repair facility left over that was used for deliveries and tractor-trailer trucks for more than 50 years. While some restoration was performed on the site prior to the new building’s construction, the previous owner ran out of funds before they were ever able to bring the site up to LEED standards. Four large fuel tanks remain on the site, and they will also need to be addressed per LEED standards. Assumptions to consider:  $10 million cash purchase  Building generates additional net profits after tax of $1.25 million per year  20 year expected useful life of building  Salvage value: $1.5 million  Discount rate is 10\% Financial Option 2: Lease of $25 Million in Equipment Rationale for investment: The business’s current equipment is efficient, but it uses a substantial amount of electricity. Operating the production line also creates significant waste material, including waste plastics. The business is looking into leasing newer, more environmentally friendly equipment that will still allow it to be at least as efficient in production as it is now. Assumptions to consider:  Annual cash flows generated with equipment: $4 million  Discount rate is 12\%  15-year useful life  No salvage value Financial Option 3: $30 Million Investment in Bonds Rationale for investment: The business that’s offering these bonds for sale contracts with another business in China to assemble computer components. The Chinese business is known to have used child labor in the past, but claims it has stopped this practice. However, the U.S. business selling these bonds has not investigated to verify whether these claims are true or not. Assumptions to consider:  10-year bond  8\% coupon  Priced at a discount: $95  Discount rate is 9\%