Traders were looking forward to today's "black box" earnings from Tesla as it would be the first quarterly report that combined Tesla Motors operations with a full quarter from cash-bleeding monstrocity SolarCity following the pair's merger, and would also provide much needed information about the "imminent" launch of the Model 3.

And, as usual, Elon Musk managed to fool those who were only focusing on the headline numbers, which were both good and bad: while TSLA missed earnings, reporting a (non-GAAP) 4Q loss per share of $1.33, or $215 million, far worse than the consensus estimate loss of $0.82. On a GAAP basis, the company reported a loss of $330 million, or $2.04 per share, compared with a loss of $283 million or $2.13 a share in the year-earlier quarter. This amount to a loss of over $13,000 for each of the 25,051 cars delivered in the quarter.

Now the good news: Tesla reported revenue of $2.70 billion, beating estimates of $2.56 billion. However, much of this "beat" was thanks to $214 million in "energy generation and storage" revenues.

Now on to the automotive business which was helped by a 69% increase in the sale of Model S sedans and Model X SUV during the quarter compared to a year earlier. Tesla reported 1Q deliveries of 25,051, the most ever, and said that the company's first half delivery outlook remains unchanged and hopes to deliver 47,000 to 50,000 deliveries, in line with prior expectations.

It provided the following discussion:

Based on our current order and production rates, our first half outlook remains unchanged at 47,000 to 50,000 deliveries, which represents 61% to 71% annual vehicle delivery growth. Moving past Q2, particularly as Model 3 becomes available, one of our challenges will be to eliminate any misperception about the differences between Model S and Model 3.

The company also added the following amusing clarification: "We have seen a belief among some that Model 3 is the newest and more advanced generation of Model S. This not correct.""



The most important question on everyone's mind: when will Tesla being production of the Model 3? The answer - (still) July.

Model 3 activities related to vehicle development, manufacturing equipment installation and supplier readiness remain on plan to start production in July. We will provide guidance on vehicle deliveries for the second half of this year after we have started Model 3 production in July. Given that we will be ramping Model 3 production so quickly, as we’ve noted before, even a couple-week shift in timing can have a meaningful impact on total deliveries.

The bolded sentence suggests that the company is already hedging ahead of ucoming disappointments.

But most interesting was the following projection: "Simultaneously, preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018."

In other words, if all goes according to plan, Tesla will be make half a million Model S cars in 2018. Put us down for the under. Musk is betting the Model 3, a $35,000 four-door sedan, will broaden the company’s appeal and help increase production to 500,000 vehicles next year toward a goal of 1 million in 2020. Tesla made about 84,000 vehicles last year.

Below are the highlights from the company's outlook:

We will provide guidance on vehicle deliveries for the second half of this year after we have started Model 3 production in July. Given that we will be ramping Model 3 production so quickly, as we’ve noted before, even a couple-week shift in timing can have a meaningful impact on total deliveries

Non-GAAP Automotive gross margin should decline by about 250 basis points in Q2 due to the absence of the one-time benefit of Autopilot software revenue recognized in Q1 and fluctuations in product mix. At the same time, we expect that Model S and Model X vehicle costs should continue to decline each quarter based on the execution of our roadmap to improve manufacturing efficiencies

due to the absence of the one-time benefit of Autopilot software revenue recognized in Q1 and fluctuations in product mix. At the same time, we expect that Model S and Model X vehicle costs should continue to decline each quarter based on the execution of our roadmap to improve manufacturing efficiencies We expect Q2 GAAP and non-GAAP operating expenses to be flat to slightly up from Q1, including expenses associated with the final stages of Model 3 development and growth in our customer support infrastructure.

We expect that year-to-date capital expenditures will be slightly over $2 billion by the time we start Model 3 production. We expect additional investments through the remainder of the year as we increase automation and add production capacity.

Some more details about the company's cash flow:

Q1 cash used in operating activities rose from Q4 2016 to $70 million, driven by record vehicle deliveries, as well as higher overall gross margin. The company generated $117 million in cash in Q1 after adding the cash received for vehicle sales to its leasing partners but classified in the financing section of our statement of cash flows.

Capital expenditures was $553 million in Q1, primarily for Model 3 and energy storage manufacturing capacity in Fremont and at Gigafactory 1, as well as for the expansion of customer support infrastructure.

During Q1, the company raised $1.22 billion in net proceeds from the sale of common stock and convertible notes, including the cost of a call spread that increased the effective conversion price of the convertible notes to $655 per share.

$4.0 billion in cash at the end of Q1 is the highest level of cash Tesla has had at quarter-end in our history.

What was not said is how TSLA generated this cash: as the chart below show, the drain of working capital as a source of cash, namely not paying vendors on time, has soared to a new all time high, rising to $2.1 billion for AP, and another $1.5 billion for accrued liabilities.

What will almost certainly not be discussed on the call is also the disappointing trend among Tesla customer deposits, which if anything shows that euphoria for the Model 3 is fading.

Finally, no matter how Tesla wants to spin it, the cash burn remains historic, and after the record nearly $1 billion in cash out the door in Q4, the company burned "only" $622 in freeh cash flow in Q1, the second most on record.

Meanwhile, the "narrative" continues, with Tesla's faithful hoping that one day Tesla will be able to finally become the luxury electric car "Amazon" and crush any potential competition, allowing it to flex pricing and unleash all those overdue cash flows. The only problem is that the competition, between BMW, GM, Porsche and countless Chinese luxury and mid-tier EV makers, is only just now ramping up.