Tesla’s Profitability Claim Was the Milli Vanilli of Cleantech

“Profitability” can be a squishy term for startups — until they file for an IPO and deliver, through the SEC, what’s often the first unfiltered snapshot of their financial situation: the S-1. That’s been the case for Tesla Motors, which filed on Friday to raise up to $100 million through an initial public offering.

Over the years the startup has highlighted specific units — the powertrain supply unit and the core Roadster business — within the company as they became cash-flow positive. Last year Tesla even trumpeted its first-ever “overall corporate profitability” for the month of July. But as Tesla’s filing makes all too clear — it’s generated just over $108.2 million in revenues and has a deficit of more than $236 million — the company as a whole remains far from turning a real sustainable profit and has never been profitable for a single quarter (a 3-month period).

Tesla claimed in August 2009 that it “attained a significant milestone in July when it achieved overall corporate profitability with approximately $1 million of earnings on revenue of $20 million.” CEO and Chairman Elon Musk called it “a bottom-line profitability.”

In a press release, the company attributed this turn of events primarily to sales of its higher margin second-gen electric sports car, the Roadster 2. And wouldn’t that be great — if a few tweaks to the company’s much buzzed-about Roadster could nudge the company into profitability? Well, it didn’t really work that way.

Tesla told us at the time that the $20 million in revenue included “a small percentage of revenue from technology sales,” but that profitability for the month was “based primarily on revenue recorded on cars delivered to customers.” Spokesperson Rachel Konrad acknowledged back in August, “It’s definitely conceivable that we would not be in the black every month going forward as expenditures ramp up” for the Model S project.

Friday’s filing suggests several other factors (in addition to Model S investments) could make a repeat-performance of the July figures difficult for some time to come. Tesla’s only powertrain deal to date, with Daimler, is for a demo project with only up to 1,000 vehicles. The filing with the SEC shows Tesla didn’t start recognizing revenues from actual powertrain sales to Daimler until the last quarter of 2009. Between May and November 2009, however, Daimler made payments to Tesla under a battery pack development agreement, including five months worth of payments that had been deferred until the contract could be finalized in May.

Tesla notes in its filing that its revenues in the three months ended September 30, 2009 “were significantly higher than in prior quarters,” after the company “made a significant effort to increase our production capacity in order to accelerate deliveries to customers.” Some of the 324 deliveries in that quarter were a matter of making good on reservations placed months earlier, rather than simply keeping up with booming demand.

Tesla notes in its filing that in the first nine months of 2009, “A significant portion of the revenue recognized during this period came from fulfilling reservations placed prior to 2009.” Some revenue during that period also stemmed from vehicles that had been delivered in 2008 but received promised powertrain upgrades last year.

Down the road Tesla might not have the luxury of backorders to help boost in revenue in a given quarter if it’s focused on getting the Model S to market. As the company writes, “We may not have a significant wait list of orders for our Tesla Roadster in the future, and we may not be able to maintain or increase our vehicle sales revenue in future quarters.” The company plans to stop producing its current Roadster in 2011 and doesn’t expect to sell a next-gen Roadster until at least a year after the Model S starts production (which at the earliest is 2012). It’s unclear whether Tesla will take reservations — collecting payments and building up a wait list –for the Roadster model during that time (in fact, Tesla anticipates it’s possible that “Regulators could review our practice of taking reservation payments,” and require the company to halt or restructure this practice).

So what does Tesla say its saving grace for profitability will be? Relatively high-volume sales of the long-planned Model S — at an estimated 20,000 per year. As BusinessWeek put it, “It’s hard to see that [those volumes] happening. It took Toyota three years to get to that kind of annual sales clip with the Prius, and it sold for less than half the price.” If and when Tesla goes through with the IPO, we’ll be able to see in black and white (and for a while, probably red) how that plan plays out.

Image courtesy Niklas’ photostream Flickr Creative Commons.