Tesla Second Quarter 2016 Update

Completed Model 3 design phase

Increased automotive gross margin on both Model S and Model X
Exited Q2 consistently producing nearly 2,000 vehicles/week
Production and demand on track to support 50,000 deliveries in 2H 2016
Merger agreement to acquire SolarCity signed, subject to shareholder vote

August 3, 2016
Dear Customers and Fellow Shareholders:
Q2 was certainly busy. We completed the design phase of Model 3, increased vehicle production by another 18% sequentially, rolled out
the biggest aesthetic and functional update to Model S since its initial launch, introduced an upgradeable 60 kWh Model S, increased
automotive gross margin excluding ZEV credits, and completed a $1.7 billion equity raise to end the quarter with $3.25 billion in cash.
Since then, we introduced a similarly upgradeable 60 kWh Model X, shared our future vision for Tesla in The Master Plan, Part Deux,
formally introduced the Gigafactory to the world, and signed a definitive agreement to acquire SolarCity. Through all of this, we remain
focused on launching Model 3 next year as scheduled.

Strong Demand Despite Product Transitions

In line with the first Master Plan published a decade ago, we are focused on making our products increasingly compelling and
affordable. We expanded the functionality and updated the look of Model S, and also introduced 60 kWh battery configurations for both
Model S and Model X. These 60 kWh cars are upgradeable to 75 kWh at any time via a simple, paid software update. This makes our
vehicles more affordable while the ability to upgrade adds the flexibility to increase range and performance at purchase or at any time
thereafter. Optionality like this is something that only Tesla offers.
At the beginning of Q2, we had very few Model X test drive cars in our stores and no refreshed Model S vehicles. Despite not having the
refreshed Model S in stores for the full quarter, and not until June for international markets, Model S orders increased year over year.
With the addition of Model X orders, total Q2 net new vehicle orders rose 67% from a year ago.
In Q2, we delivered 14,402 new vehicles consisting of 9,764 Model S and 4,638 Model X, which was slightly higher than what we stated in
our July announcement. Model S remains the market share leader in North America and Europe among all comparably priced four-door
sedans, and Model X is quickly gaining ground against similarly priced SUVs in all regions.
Introduced in 2013, our resale value guarantee (RVG) helped reassure
customers that Tesla vehicles would retain value over time. Since
both our new and pre-owned Tesla vehicles are selling well, we
discontinued the program in North America. We still offer an RVG
when it can help lower customer monthly payments in certain
international markets that have less compelling financing options.
We are also accelerating store openings and plan to add a new retail
location every four days on average during the remainder of Q3 and
through Q4. We are adding stores in new population-dense markets
like Taipei, Seoul, and Mexico City, while also adding stores in our
most mature markets like California. The quality of our new locations
is also improving as many shopping malls now consider us the new
standard for an anchor tenant based on the amount of foot traffic that
we draw and our very high revenue per square foot.

New Taipei, Taiwan Location

Manufacturing Improvements Prompt Production Increases

During our Q1 earnings call, we spoke about the significant challenges
that we had experienced during our ongoing vehicle production ramp.
Since then, we have made considerable progress. We exited Q2
consistently producing nearly 2,000 vehicles per week and our total Q2
production of 18,345 vehicles constituted a new quarterly production
record, up 18% from Q1 and up 43% from Q2 last year. Production
hours per vehicle also declined throughout the quarter for both cars.
Based on this progress, vehicle production is now on track to support
about 50,000 deliveries in the second half of this year, with automotive
gross margin improvement.
We have completed the design phase of Model 3 and released Model 3
for tooling, production planning and validation. The Model 3 capacity
expansion will reflect our initial efforts to apply our machine that makes
the machine philosophy to vehicle manufacturing, and demonstrates
Model X General Assembly
our intense focus on volumetric and capital efficiency. Some Model 3
production equipment is already on line, including initial capacity in our
stamping and paint centers. Later this year, we plan to begin construction of new Model 3 body and general assembly centers.
Gigafactory construction remains on target to support volume
production of Model 3 in late 2017, and we recently accelerated
construction to reach a rate of 35 GWh/year of cell production in 2018.
This will allow us to meet the needs of our accelerated Model 3
production plan.
Finally, we signed a definitive agreement to acquire SolarCity. Buying
the largest residential solar energy installer and generator in the United
States along with its unique panel technology will further our mission of
accelerating the worlds transition to sustainable energy. We see
significant opportunities for product innovation and integration, and we
shared our initial thoughts on synergies earlier this week.

Q2 Results

Seamless Energy Generation, Storage & Consumption

Total Q2 GAAP revenue was $1.3 billion, while non-GAAP revenue

was $1.6 billion for the quarter, up 31% from a year ago. Total Q2 gross margin was 21.6% on a GAAP basis and 20.8% on a non-GAAP
basis.
Automotive revenue was $1.2 billion on a GAAP basis and $1.5 billion on a non-GAAP basis, which includes a $293 million net increase
in deferred revenue and other long term liabilities resulting from lease accounting used for indirect leases issued through our bank
partners and cars sold with an RVG.
We delivered fewer cars in Q2 than originally planned as a result of our steep production ramp, which resulted in almost half of Q2
production occurring in the final four weeks of the quarter. Given inflection points in the production ramp and firm shipping cutoffs, shifting
production by even a short period of time had a disproportionate impact on the number of cars that were delivered by quarter end.
Model S average prices increased 3% sequentially, due to higher option take rates and the modest price increase associated with the
Model S refresh. Model X average prices were more than 15% higher than for Model S, despite declining sequentially as mix shifted
away from Signature Series variants.
Q2 Automotive gross margin was 23.1% on a GAAP basis. On a non-GAAP basis, gross margin excluding ZEV credits increased over
200 basis points from Q1 to 21.9%. We recognized an insignificant amount of ZEV credit revenue in Q2. The strong sequential gross
margin increase was primarily due to improved manufacturing for Model X and favorable pricing for Model S. Our warranty accrual rates
on new vehicles were generally consistent with Q1.
Q2 Services and other revenue was $88 million, up 15% from a year ago but down sequentially. The decline was primarily due to having
fewer pre-owned cars to sell because of the need to use them to expand our service loaner fleet. Q2 Service and other gross margin was
2.5%, down from 4.7% in Q1, but generally in line with our expectations.

Total Q2 GAAP operating expenses were $513 million and included $61 million of non-cash stock-based compensation. After excluding
non-cash stock based compensation, non-GAAP operating expenses were $452 million, up 8% from Q1. Research and development
expenses increased sequentially as we worked to finalize Model 3 vehicle engineering. Non-GAAP sales, general and administrative
expenses reflect careful expense management and would have been flat sequentially, except for a one-time payroll tax expense of $17
million associated with the exercise of CEO stock options that would have expired this year.
Our Q2 GAAP net loss was $293 million or a $2.09 loss per share on 140 million basic shares, while our non-GAAP net loss was $150
million, or a $1.06 loss per basic share. Both figures include a $0.05 per basic share loss related mostly to losses from foreign currency
transactions.
Cash and cash equivalents rose to $3.25 billion at quarter end, driven by the successful completion of our $1.7 billion secondary offering,
receipt of Model 3 deposits, an incremental $113 million draw against our ABL, and effective cash management. The ABL draw is tied to
operations and mirrors the temporary increase in vehicles in-transit at quarter
end and growth of our direct leasing portfolio.
Our GAAP cash flow from operations during the quarter was $150 million,
which included the receipt of Model 3 deposits. After adding $143 million of
cash inflows from vehicle sales to our bank leasing partners, our cash flow
from core operations was nearly $293 million.
During Q2, we invested $295 million in capital expenditures to increase
production capacity, accelerate Gigafactory construction, and expand
customer support infrastructure. Capital expenditures remain on plan to help
us reach our goal of producing 500,000 vehicles in 2018.
Our captive leasing program remains strong. Tesla Finance directly leased
1,132 cars to customers in Q2, worth $117 million of aggregate transaction
value.

Gigafactory Expansion

Outlook
Production and demand are on track to support deliveries of approximately 50,000 new Model S and Model X vehicles during the second
half of 2016.
Vehicle production efficiency is improving rapidly and we are now increasing our weekly production rate even further. Barring any further
supply constraints, we plan to exit Q3 with a steady production rate of 2,200 vehicles per week, and plan to increase production to 2,400
vehicles per week in Q4.
We anticipate that direct leasing will rise from 8% of deliveries in Q2 to about 15% of deliveries in Q3, as we have reached our funding
limit with a banking partner. We anticipate adding new partners that will allow us to fund our planned growth in the future. We recognize
revenue on directly leased deliveries as cash is received over the lease term of typically three years, on both a GAAP and non-GAAP
basis.
Model S and Model X cost reductions and improved vehicle manufacturing efficiency should offset the margin impact of the expected mix
shift toward our 60 kWh configured vehicles and still drive additional gross margin increases throughout the year. We expect GAAP and
non-GAAP Automotive gross margins excluding ZEV credits to increase by 2-3 percentage points through Q3 and Q4.
Total non-GAAP operating expenses should increase sequentially in Q3 and Q4, and we now expect full year 2016 total non-GAAP
operating expenses to increase by about 30%. The increases come from engineering, design, and testing expenses related to Model 3
supplier contracts, and higher sales and service costs associated with expanding our geographic presence.
Despite the disciplined pace of capital spending in the first half of this year, we still expect to invest about $2.25 billion in capital
expenditures in 2016, in support of our accelerated production plan for Model 3.
As we move ever closer to the launch of Model 3, we remain as excited as ever for the future of Tesla.

Elon Musk, Chairman & CEO

Jason Wheeler, Chief Financial Officer

Webcast Information
Tesla will provide a live webcast of its second quarter 2016 financial results conference call beginning at 2:30 p.m. PT on August 3, 2016,
at ir.tesla.com. This webcast will also be available for replay for approximately one year thereafter.
Non-GAAP Financial Information
Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis. On a non-GAAP basis,
financial measures exclude non-cash items such as stock-based compensation, the change in fair value related to Teslas warrant liability,
non-cash interest expense related to Tesla's convertible senior notes. Non-GAAP financial measures also exclude the impact of lease
accounting on related revenues and cost of revenues associated with Model S and Model X deliveries with the resale value guarantee
and similar buy-back terms, as this perspective is useful in understanding the underlying cash flow activity and timing of vehicle deliveries.
Management believes that it 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. These non-GAAP financial measures also
facilitate managements internal comparisons to Teslas historical performance as well as comparisons to the operating results of other
companies. Non-GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in
conjunction with financial information reported under U.S. GAAP when understanding Tesla's operating performance. A reconciliation
between GAAP and non-GAAP financial information is provided below.
Additionally, on May 17, 2016, the staff of the Securities & Exchange Commission issued new guidance relating to non-GAAP financial
measures used in public disclosures generally as well as in filings with the SEC, such as in earnings releases. We are currently in the
process of evaluating this guidance with respect to our use and presentation of non-GAAP financial measures, and have already taken
certain steps to modify our prior disclosure practices in this area. Such modifications do not change the underlying financial results of our
business or our expectations for our future performance. As we continue to evaluate the SECs guidance, we will determine whether it is
appropriate to make additional changes to our use and presentation of non-GAAP financial measures and will inform our investors as to
our determination at the appropriate time.
Forward-Looking Statements
Certain statements in this shareholder letter, including statements in the Outlook section; statements relating to the progress Tesla is
making with respect to product development; statements regarding growth in the number of Tesla store, service center, Supercharger
locations; statements relating to the production and delivery timing of future products such as Model 3; growth in demand and orders for
Tesla products and the catalysts for that growth; the ability to achieve product demand, volume, production, delivery, revenue, cash flow,
leasing, gross margin, spending, capital expenditure and profitability targets; productivity improvements and capacity expansion plans;
Tesla Gigafactory timing, plans and output expectations, including those related to cell and other production; and opportunities for product
innovation and integration with SolarCity are forward-looking statements that are subject to risks and uncertainties. These forwardlooking statements are based on managements current expectations, and as a result of certain risks and uncertainties, actual results may
differ materially from those projected. The following important factors, without limitation, could cause actual results to differ materially
from those in the forward-looking statements: the risk of delays in the manufacture, production and delivery of Model S and Model X
vehicles and energy products, and production and delivery of Model 3 vehicles; the ability to design and achieve market acceptance of
Model S and its variants, as well as new vehicle models, specifically Model X and Model 3; the ability of suppliers to meet quality and part
delivery expectations at increasing volumes; adverse foreign exchange movements; any failures by Tesla products to perform as
expected or if product recalls occur; Teslas ability to continue to reduce or control manufacturing and other costs; consumers willingness
to adopt electric vehicles; competition in the automotive market generally and the alternative fuel vehicle market in particular; Teslas
ability to establish, maintain and strengthen the Tesla brand; Teslas ability to manage future growth effectively as we rapidly grow,
especially internationally; the unavailability, reduction or elimination of government and economic incentives for electric vehicles; Teslas
ability to establish, maintain and strengthen its relationships with strategic partners such as Panasonic; potential difficulties in finalizing,
performing and realizing potential benefits under definitive agreements for the Tesla Gigafactory site, obtaining permits and incentives,
negotiating terms with technology, materials and other partners for Gigafactory, and maintaining Gigafactory implementation schedules,
output and costs estimates; and Teslas ability to execute on its retail strategy and for new store, service center and Tesla Supercharger
openings. More information on potential factors that could affect our financial results is included from time to time in our Securities and
Exchange Commission filings and reports, including the risks identified under the section captioned Risk Factors in our quarterly report
on Form 10-Q filed with the SEC on May 10, 2016. Tesla disclaims any obligation to update information contained in these forwardlooking statements whether as a result of new information, future events, or otherwise.

Investor Relations Contact:

Jeff Evanson
Investor Relations
ir@tesla.com

Press Contact:
Khobi Brooklyn
Communications
press@tesla.com

Tesla Motors, Inc.

Condensed Consolidated Statem ents of Operations
(Unaudited)
(In thousands, except per share data)

June 30,
2016
Revenues
Automotive (1A)
Services and other
Total revenues
Cost of revenues
Automotive (1B)
Services and other
Total cost of revenues (2)
Gross profit
Operating expenses
Research and development (2)
Selling, general and administrative (2)
Total operating expenses
Loss from operations
Interest income
Interest expense
Other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
Net loss per common share, basic and diluted

Three Months Ended

Mar 31,
June 30,
2016
2015

1,181,852
88,165
1,270,017

1,026,064
120,984
1,147,048

878,090
76,886
954,976

$ 2,207,916
209,149
2,417,065

$ 1,771,410
123,446
1,894,856

909,282
85,959
995,241

779,316
115,264
894,580

666,386
75,220
741,606

1,688,598
201,223
1,889,821

1,298,131
123,282
1,421,413

274,776

252,468

213,370

527,244

473,443

191,664
321,152
512,816

182,482
318,210
500,692

181,712
201,846
383,558

374,146
639,362
1,013,508

348,866
397,211
746,077

(238,040)
2,242
(46,368)
(7,373)
(289,539)
3,649
(293,188) $

(248,224)
1,251
(40,625)
9,177
(278,421)
3,846
(282,267) $

(170,188)
247
(24,352)
13,233
(181,060)
3,167
(184,227)

(2.09) $

(2.13) $

(1.45)

Shares used in per share calculation, basic and diluted

Six Months Ended

June 30,
June 30,
2016
2015

139,983

132,676

(486,264)
(272,634)
3,493
431
(86,993)
(50,926)
1,804
(9,072)
(567,960)
(332,201)
7,495
6,207
$ (575,455) $ (338,408)
$

126,689

(4.22) $
136,330

(2.68)
126,320

Notes:
(1) Due to the application of lease accounting for Model S and Model X vehicles w ith the resale value guarantee or similar buy-back terms, the
follow ing is supplemental information for the periods presented:
(A) Net increase in deferred revenue and other long-term
liabilities as a result of lease accounting and therefore
not recognized in automotive sales

292,653

454,678

242,148

$ 747,331

$ 405,823

(B) Net increase in operating lease vehicles as a result of

lease accounting and therefore not recognized in
automotive cost of sales

97,247

359,098

174,242

$ 456,345

$ 288,065

The table above excludes assumed net w arranty and stock based compensation amounts included in nonGAAP cost of sales.
(2) Includes stock-based compensation expense of the follow ing for the periods presented:
Cost of revenues
Research and development
Selling, general and administrative
Total stock-based compensation expense

6,495
33,506
27,311
67,312

6,403
39,602
43,652
89,657

4,820
19,912
18,603
43,335

12,898
73,108
70,963
$ 156,969

9,421
39,704
37,236
86,361

Tesla Motors, Inc.

Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
June 30,
2016
Assets
Cash and cash equivalents
Restricted cash and marketable securities - current
Accounts receivable
Inventory
Prepaid expenses and other current assets
Operating lease vehicles, net (1)
Property and equipment, net
Restricted cash - noncurrent
Other assets
Total assets
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities
Deferred revenue (2)
Customer deposits
Long-term debt and capital leases
Other long-term liabilities (3)
Total liabilities
Mezzanine equity (4)
Stockholders' equity
Total liabilities and stockholders' equity

Dec 31,
2015

3,246,301 $
24,525
178,594
1,609,607
144,678
2,533,726
3,993,250
71,621
66,650
11,868,952 $

1,196,908
22,628
168,965
1,277,838
115,667
1,791,403
3,403,334
31,522
59,674
8,067,939

1,673,090 $
1,319,907
679,834
3,246,828
2,391,853
9,311,512
37,146
2,520,294
11,868,952 $

1,338,946
1,006,897
283,370
2,649,020
1,658,717
6,936,950
47,285
1,083,704
8,067,939

Notes:
(1) Includes the following increase in operating lease vehicles related to deliveries and subject to lease accounting, net of
depreciation recognized in automotive cost of sales, for the following periods:
Resale value guarantee program (and other vehicles with similar buy-back terms)
Beginning balance
$
First quarter
Second quarter
Third quarter
Fourth quarter
Ending balance
Model S and Model X leasing program
Beginning balance
First quarter
Second quarter
Third quarter
Fourth quarter
Ending balance

1,556,528 $
352,782
217,270

689,689
103,022
170,025
215,337
378,455

2,126,580 $

1,556,528

234,619 $
99,976
72,252

406,847 $

81,636
35,687
39,587
25,162
52,547
234,619

(2) Includes the following increase in deferred revenue related to deliveries with the resale value guarantee and similar programs
and subject to lease accounting, net of revenue amortized to automotive sales, for the following periods:

Beginning balance
First quarter
Second quarter
Third quarter
Fourth quarter

679,131 $
121,836
50,717

376,471
45,334
60,767
67,522
129,037

Ending balance

851,684 $

679,131

(3) Includes the following increase in other liabilities related to deliveries with the resale value guarantee and similar programs and
subject to lease accounting for the following periods:
Beginning balance
First quarter
Second quarter
Third quarter
Fourth quarter

1,430,573 $
344,926
231,848

487,879
118,341
186,957
245,133
392,263

Ending balance

2,007,347 $

1,430,573

(4) Our common stock price exceeded the conversion threshold price of our convertible senior notes due 2018 (2018 Notes) issued
in May 2013; therefore, the 2018 Notes are convertible at the holders option during the third quarter of 2016. As such, the
carrying value of the 2018 Notes was classified as a current liability as of June 30, 2016 and the difference between the principal
amount and the carrying value of the 2018 Notes was reflected as convertible debt in mezzanine equity on our condensed
consolidated balance sheet as of June 30, 2016.

Tesla Motors, Inc.

Supplemental Consolidated Financial Information
(Unaudited)
(In thousands)

Jun 30,
2016
Selected Cash Flow Information
Cash flows provided by (used in) operating activities
Cash flows used in investing activities
Cash flows provided by financing

Three Months Ended

Mar 31,
2016

Six Months Ended

Jun 30,
Jun 30,
2016
2015

Jun 30,
2015

150,337
(319,854)
1,976,584

(249,605)
(233,819)
715,435

(159,516)
(422,837)
218,351

Other Selected Financial Information

Cash flows provided by (used in) operating activities
Change in collateralized lease borrowing
Cash flow from core operations

$
$
$

150,337
142,762
293,099

$
$
$

(249,605)
241,763
(7,842)

$
$
$

(159,516)
118,574
(40,942)

$
$
$

(99,269)
384,525
285,256

Capital expenditures
Depreciation and amortization

(294,720)
183,232

(216,859)
156,460

(405,165)
91,389

(511,579)
339,692

Cash and Investments

Cash and cash equivalents
Restricted cash and marketable
Restricted cash - noncurrent

Jun 30,
2016

Mar 31,
2016

Jun 30,
2015

$ 3,246,301
24,525
71,621

$ 1,441,789
23,980
47,783

$ 1,150,673
20,591
19,774

(99,269)
(553,673)
2,692,019

$ (291,310)
(855,181)
404,507

$ (291,310)
$ 196,535
$ (94,775)

(831,225)
168,501

Supplemental Model S and Model X Leasing Program Information

(in thousands, except for vehicle deliveries)

Vehicles delivered
Average per unit price of vehicles
Aggregate value of vehicles delivered (1)

Three Months Ended

Jun 30,
Mar 31,
2016
2016
1,132
1,405
103
$
106
$
116,899
$
148,994

$
$

631
100
63,127

Leasing revenue recognized

9,228

23,883

16,692

Jun 30,
2015

Six Months Ended

Jun 30,
Jun 30,
2016
2015
2,537
1,223
$
105
$
103
$ 265,829
$ 126,486
$

40,575

15,697

(1) Aggregate value is the product of multiplying vehicles delivered by the average per unit

Non-GAAP Financial Information

This letter includes non-GAAP financial information because we plan and manage our business using such information. Our non-GAAP
measures align the recognition of revenues and costs related to a vehicle sale with the time when the customer takes delivery of the car
and cash is received or owed to us. This contrasts with the approach of other automotive manufacturers who under GAAP accounting
recognize revenue when the vehicle is sold into dealership inventory rather than to end customers, even though in the case of a captive
finance lease they may not collect cash for several years on a consolidated basis.
Our non-GAAP revenue and gross profit is determined by adding back the deferred revenue and related costs for cars sold with resale
value guarantee and where we have collected, or will collect from a bank intermediary in a matter of days, the purchase price of the car in
cash. For cars leased directly by Tesla, we recognize lease revenue and related costs over the lease term and the same way for both
GAAP and non-GAAP purposes. Our non-GAAP expense and per share information also exclude non-cash interest expense and stockbased compensation.

Tesla Motors, Inc.

Reconciliation of GAAP to Non-GAAP Financial Inform ation
(Unaudited)
(In thousands, except per share data)

Jun 30,
2016
Net loss (GAAP)
Stock-based compensation expense
Non-cash interest expense related to convertible notes and other borrow ing
Net incom e (loss) (Non-GAAP) including lease accounting
Model S and Model X gross profit deferred due to lease accounting (1)(2)

Net incom e (loss) (Non-GAAP)

Net loss per share, basic (GAAP)

Stock-based compensation expense
Non-cash interest expense related to convertible notes and other borrow ing

Shares used in per share calculation, basic (GAAP and Non-GAAP)

Net loss per share, diluted (GAAP)
Stock-based compensation expense
Non-cash interest expense related to convertible notes and other borrow ing
Net incom e (loss) (Non-GAAP) including lease accounting
Model S and Model X gross profit deferred due to lease accounting (1)(2)
Net incom e (loss) per share, diluted (Non-GAAP)
Shares used in per share calculation, diluted (Non-GAAP)

(293,188) $
67,312
31,823
(194,053)

(282,267) $
89,657
28,902
(163,708)

(184,227)
43,335
18,171
(122,721)

44,538
(149,515) $

88,458
(75,250) $

61,907
(60,814)

(2.09) $
0.48

(2.13) $
0.67

(1.45)
0.34

0.23

Model S and Model X gross profit deferred due to lease accounting (1)(2)
Net incom e (loss) per share, basic (Non-GAAP)

Three Months Ended

Mar 31,
Jun 30,
2016
2015

0.32
(1.06) $
139,983

(2.09) $
0.48
0.23
(1.38)
0.32
(1.06) $
139,983

0.22
0.67
(0.57) $
132,676
(2.13) $
0.67
0.22
(1.23)
0.67
(0.57) $
132,676

Six Months Ended

Jun 30,
Jun 30,
2016
2015
$

$
$

0.14
0.49
(0.48)

126,689

(338,408)
86,361
37,681
(214,366)

132,996
(224,765) $

108,303
(106,063)

(4.22) $
1.15

(2.68)
0.68

0.45
$

126,689
(1.45)
0.34
0.14
(0.97)
0.49
(0.48)

(575,455) $
156,969
60,725
(357,761)

0.98
(1.64) $
136,330

(4.22) $
1.15
0.45
(2.62)
0.98
(1.64) $
136,330

0.30
0.86
(0.84)
126,320
(2.68)
0.68
0.30
(1.70)
0.86
(0.84)
126,320

(1) Includes deliveries of Model S and Model X w ith the resale value guarantee or similar buy-back terms and not deliveries under the direct leasing program.
(2) Under GAAP, w arranty costs are expensed as incurred for Model S and Model X vehicle deliveries w ith the resale value guarantee or similar buy-back terms and
subject to lease accounting. For Non-GAAP purposes, an estimated incremental w arranty reserve of $11.3 million, $12.6 million, and $10.2 million is included for the three
months ended June 30, 2016, March 31, 2016, and June 30, 2015, respectively. For the six months ended June 30, 2016 and 2015, an estimated incremental w arranty
reserve of $23.9 million and $17.0 million is included, respectively. Additionally, stock-based compensation of $6.5 million, $6.4 million and $4.8 million is excluded for nonGAAP purposes for the three months ended June 30, 2016, March 31, 2016, and June 30, 2015, respectively. For the six months ended June 30, 2016 and 2015, stockbased compensation of $12.9 million and $9.4 million is excluded, respectively.

Tesla Motors, Inc.

Reconciliation of GAAP to Non-GAAP Financial Inform ation
(Unaudited)
(In thousands, except per share data)

Jun 30,
2016
Revenues (GAAP)
Model S and Model X revenue deferred due to lease accounting (1)
Revenues (Non-GAAP)

Gross profit (GAAP)

Model S and Model X gross profit deferred due to lease accounting (1)(2)
Stock-based compensation expense
Gross profit (Non-GAAP)

Three Months Ended

Mar 31,
Jun 30,
2016
2015
$

1,270,017
292,653
1,562,670

274,776

44,538
6,495
325,809

Research and developm ent expenses (GAAP)

Stock-based compensation expense
Research and developm ent expenses (Non-GAAP)

Selling, general and adm inistrative expenses (GAAP)

Stock-based compensation expense
Selling, general and adm inistrative expenses (Non-GAAP)

1,147,048
454,678
1,601,726

252,468

88,458
6,403
347,329

Six Months Ended

Jun 30,
Jun 30,
2016
2015
$

954,976
242,148
1,197,124

2,417,065
747,331
3,164,396

1,894,856
405,823
2,300,679

213,370

61,907
4,820
280,097

527,244

473,443

132,996
12,898
673,138

108,303
9,421
591,167

191,664 $
(33,506)
158,158 $

182,482 $
(39,602)
142,880 $

181,712
(19,912)
161,800

321,152 $
(27,311)
293,841 $

318,210 $
(43,652)
274,558 $

201,846
(18,603)
183,243

374,146 $
(73,108)
301,038 $

348,866
(39,704)
309,162

639,362 $
(70,963)
568,399 $

397,211
(37,236)
359,975

(1) Includes deliveries of Model S and Model X w ith the resale value guarantee or similar buy-back terms and not deliveries under the direct leasing program.
(2) Under GAAP, w arranty costs are expensed as incurred for Model S and Model X vehicle deliveries w ith the resale value guarantee or similar buy-back terms and
subject to lease accounting. For Non-GAAP purposes, an estimated incremental w arranty reserve of $11.3 million, $12.6 million, and $10.2 million is included for the
three months ended June 30, 2016, March 31, 2016, and June 30, 2015, respectively. For the six months ended June 30, 2016 and 2015, an estimated incremental
w arranty reserve of $23.9 million and $17.0 million is included, respectively. Additionally, stock-based compensation of $6.5 million, $6.4 million and $4.8 million is
excluded for non-GAAP purposes for the three months ended June 30, 2016, March 31, 2016, and June 30, 2015, respectively. For the six months ended June 30,
2016 and 2015, stock-based compensation of $12.9 million and $9.4 million is excluded, respectively.