Tesla Inc (NASDAQ: TSLA), the California EV maker reported Adj EPS (non-GAAP) of US $0.80 per share, and record revenue of US $10.744 billion for Q4 2020, exceeding Wall Street's average estimate. After Tesla trading officially closed on January 27, 2021, the company released its Shareholder Letter before its Q4 2020 Earnings Call, which will be hosted today at 3:30 p.m. Pacific Time / 6:30 p.m. Eastern Time.

HIGHLIGHTS

Cash

• Operating cash flow less capex (free cash flow) of $2.8B in 2020
• $4.9B increase in our cash and cash equivalents in Q4 to $19.4B
• Free cash flow $1.9B in Q4

Profitability

• $721M GAAP net income; $2.5B non-GAAP net income in 2020
• $270M GAAP net income; $903M non-GAAP net income (ex-SBC*) in Q4
• $575M GAAP operating income; 5.4% operating margin in Q4
• SBC expense increased to $633M in Q4

Operations

• Half a million vehicles produced and delivered in 2020
• Model Y production at Gigafactory Shanghai started in December 2020
• Updated Model S and Model X launched in January 2021

FINANCIAL SUMMARY

Revenue
Total revenue grew 46% YoY in Q4. 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 average selling price (ASP) declined by 11% YoY as our product mix continued to shift from Model S and Model X to the more affordable Model 3 and Model Y.

Profitability
Our operating income improved in Q4 compared to the same period last year to $575M, resulting in a 5.4% operating margin. This profit level was reached while incurring SBC expense attributable to the 2018 CEO award of $267M in Q4, driven by an increase in our market capitalization and a new operational milestone becoming probable.

Positive impact from volume growth and regulatory credit revenue growth YoY was mainly offset by lower ASP (including price reduction of China-made Model 3 and price reductions of Model S and Model X before the introduction of updated models) but also by a series of notable items. These included a portion of Q@4 SBC charges, vehicle warranty accruals, additional supply chain costs, Model S and Model X changeover costs and other items.

Cash
Quarter-end cash and cash equivalents increased to $19.4B in Q4, driven mainly by our recent capital raise of $5.0B (average price of this offering was -$632/share) and free cash flow of $1.9B, partially offset by early debt repayments (early conversion of convertible notes).

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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.