Tesla spent $583 million in employee termination expenses in Q2 2024

Tesla (NASDAQ:TSLA) has posted its SEC Form 10-Q for Q2 2024 on its Investor Relations website. The document, which provides a comprehensive unaudited report of Tesla’s financial performance during the second quarter, provided some important context on some of the electric vehicle maker’s results. These include the $622 million restructuring costs that were listed by the EV maker in its Q2 2024 Update Letter.

Tesla noted in its Q2 2024 Update Letter that its profitability and operating expenses were affected by restructuring charges worth $622 million. Tesla watchers observed that without this one-time charge, the company’s earnings per share would have been notably higher. For context, Tesla posted non-GAAP EPS of $0.52, lower than the Street’s expectations of $0.61-$0.62. 

Main driver of Tesla’s miss was a giant one-off item of $622M for restructuring charges. We have to wait for the 10-Q but this will be mostly the 2Q headcount reduction! Without this item, EPS would be 58% higher!!! pic.twitter.com/jQv9rDY6Cn

— AJ (@alojoh) July 23, 2024

Paul Marino, Chief Revenue Officer at GraniteShares, told Teslarati that Tesla’s $622 million restructuring charge definitely affected the company’s earnings per share. “The $600 million restructuring charge is definitely part of the EPS miss, and higher than the $350 million that was disclosed and expected as part of the layoff announcement… No one should be surprised by the quarter, even if they were hoping for a surprise,” Marino stated. 

As could be seen in Tesla’s Form 10-Q, the lion’s share of the $622 million restructuring costs was allotted to employee termination expenses. Tesla recognized $583 million of employee termination expenses in Q2, which were likely triggered by CEO Elon Musk’s widespread workforce reduction efforts. While Tesla is expected to see savings from its restructuring, the company’s Form 10-Q suggests that it is quite expensive to fire employees. 

10Q is out

Of the $622m restructuring expenses, $583m were for the layoff. pic.twitter.com/xYEuY8mF4e

— Aleð•andra Merz (@TeslaBoomerMama) July 24, 2024

“In the second quarter of 2024, we initiated and substantially completed certain restructuring actions to reduce costs and improve efficiency. As a result, we recognized $583 million of employee termination expenses in Restructuring and Other in our consolidated income statement. These expenses were substantially paid during the quarter with the remaining unpaid immaterial accrual recorded in Accrued liabilities and other in our consolidated balance sheet as of June 30, 2024,” Tesla wrote in its Form 10-Q. 

Tesla Chief Financial Officer (CFO) Vaibhav Taneja discussed the electric vehicle maker’s restructuring costs during his remarks at the Q2 2024 earnings call. “The impact of our recent reorg is reflected in restructuring and other on the income statement. Just to level set, this was about $622 million of charge, which got recorded in the period. And I want people to remember that we called it out separately on the financials,” Taneja said, though he also highlighted that Tesla reverted to free cash flow of $1.3 billion in Q2 “despite restructuring payments being made in the quarter, and we ended the quarter with over $30 billion of cash and investments.”

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