2015 Q1 Discussion thread for Delivery numbers, Earnings Report and Conference Call

[mrdoubleb]

Good report overall specially that they reiterated 55K deliveries this year.

Some points to digest.

- $1.5B cash in hand, and $1.5B planned expenses this year.
- Q2 should be smooth but Q3 suddenly becomes battleground. In Q3, margins will be affected due to new ramp of the X. In the 2nd half, Tesla will have to deliver 34K cars. That's a huge ask considering that Model X won't ship until late Q3. It may have issues to ramp up production too quickly. Something to watch out for.
- I expect Tesla to offer a secondary in Q3. It is too much risk launching Model X in late Q3 while not having enough money for black swan events. I would like Tesla to have at least a B on hand anytime. Without secondary, the math does not add up.

I don't think they expect to bulide more than 2k Model X this year. In fact a little while back (maybe Q4 call?) Elon said they could do 55k with S alone.
Also, by Q3 the EU price increase should offset the strong USD.
As for 1.5B in cash and 1.5B to be spent. Lookd like they will empty the reserves by EOY, but 2 things to consider:
- The 1.5B expenditure is for the entire year. The 1.5B in reserves is at the end of Q1. So the Q1 spending is already done.
- That money is there exactly for this purpose. That's why they raised it: Mocel X, Model 3 and Gigafactory. If they were not doing any of these developments or were seriously behind and would still be burning cahs like that I'd be worried. But given the above, I'm not.

 

[austinEV]

Same short comments about "massive cash burn" and "horrible Q2 guidance".

cash burn: the operations is profitable (if I am reading this right); they are spending cash on the factory per plan.
Q2 guidance: It is true that the 1H production is much less than the 2H, which they have been clear about. I am not sure I have ever heard the explanation for that.

 

[aznt1217]

cash burn: the operations is profitable (if I am reading this right); they are spending cash on the factory per plan.
Q2 guidance: It is true that the 1H production is much less than the 2H, which they have been clear about. I am not sure I have ever heard the explanation for that.

This was already known. They can't keep using the same argument. Anyway, look out for our Best Analyst Questions from John Lovallo tonight.

 

[mrdoubleb]

cash burn: the operations is profitable (if I am reading this right); they are spending cash on the factory per plan.
Q2 guidance: It is true that the 1H production is much less than the 2H, which they have been clear about. I am not sure I have ever heard the explanation for that.

Must have something to do with the new paint line coming online. At least partially.

 

[austinEV]

This was already known. They can't keep using the same argument. Anyway, look out for our Best Analyst Questions from John Lovallo tonight.

Agree, if that is the best Bear argument that just confirms its a great report.

 

[Johan]

This was already known. They can't keep using the same argument. Anyway, look out for our Best Analyst Questions from John Lovallo tonight.

Maybe we'll hear Elon and Adam Jonas giggling in the background as he speaks.

 

[FANGO]

Q2 guidance: It is true that the 1H production is much less than the 2H, which they have been clear about. I am not sure I have ever heard the explanation for that.

Production is expected to increase 12% from Q1 to Q2. So we have 11k, 12.5k, and then assume another 12% for the next two quarters and you have 14k and 15.5k. Add those up to get 53k. Now, that's just production and not deliveries, so subtract say 3k to get full year of 50k deliveries. Then add 5k Model X. 55k.

That's assuming they don't increase production by more than 12% in each of 3/4Q

 

[Derek Vinyard]

from StreetInsider...

Not sure where the $939.88 came from...nonGAAP was $1.1 Billion

go to the last page of the shareholder letter (GAAP vs non-GAAP)

 

[Vger]

Best at report in a long time. Ok. Tee up the call. I think Elon, JB and Deepak will do fine.

Only question is whether Elon will be in relaxed and satisfied mode (indicated by him tweeting about the Dragon test while he waits for the CC), or whether he will come out swinging at the skeptics and be all fired up and taking names...

 

[aznt1217]

Maybe we'll hear Elon and Adam Jonas giggling in the background as he speaks.

I'd like to hear from Andrea James. She's been quiet recently.

 

[hershey101]

Cory Johnson on BloombergTV was being such a f**king moron after earnings broke I wanted to IB him and tell him to shut up and do some research.. blah blah "cash burn" blah blah "price increase" blah blah "loosing money" blah blah "heavily subsidized" blah blah "for millionaires".

 

[Derek Vinyard]

Production is expected to increase 12% from Q1 to Q2. So we have 11k, 12.5k, and then assume another 12% for the next two quarters and you have 14k and 15.5k. Add those up to get 53k. Now, that's just production and not deliveries, so subtract say 3k to get full year of 50k deliveries. Then add 5k Model X. 55k.

That's assuming they don't increase production by more than 12% in each of 3/4Q

+1

 

[pGo]

I don't think they expect to bulide more than 2k Model X this year. In fact a little while back (maybe Q4 call?) Elon said they could do 55k with S alone.
Also, by Q3 the EU price increase should offset the strong USD.
As for 1.5B in cash and 1.5B to be spent. Lookd like they will empty the reserves by EOY, but 2 things to consider:
- The 1.5B expenditure is for the entire year. The 1.5B in reserves is at the end of Q1. So the Q1 spending is already done.
- That money is there exactly for this purpose. That's why they raised it: Mocel X, Model 3 and Gigafactory. If they were not doing any of these developments or were seriously behind and would still be burning cahs like that I'd be worried. But given the above, I'm not.

I am not worried by the burn either. However, any business must need cushion to overcome unexpected events specially in manufacturing where things may not get resolved like a software patch.

Good catch on $1.5B for the entire year. Even then, having only a few hundred M $$ in the bank is not a good idea come September. I still feel that Tesla is setting up for a Q2 beat and then they will go for a secondary.

 

[Johan]

I'd like to hear from Andrea James. She's been quiet recently.

Agreed. She usually has some really good questions that broaden the perspective.

Also: anyone want to take a bet on how many times Elon and Deepak use the phrase "Production constrained" during the call? I'll keep count. My guess is 8 times.

 

[austinEV]

Production is expected to increase 12% from Q1 to Q2. So we have 11k, 12.5k, and then assume another 12% for the next two quarters and you have 14k and 15.5k. Add those up to get 53k. Now, that's just production and not deliveries, so subtract say 3k to get full year of 50k deliveries. Then add 5k Model X. 55k.

That's assuming they don't increase production by more than 12% in each of 3/4Q

Doh, I should have done the math. It just felt like the line had to bend. I tip my hat to you.

 

[swaltner]

on a side note: anyone noticed how they used the blue 70D picture of the 70D press kit and added the subtitle "all wheel drive 85D" under it? LOL.

I always assumed that light blue Model S was a P85D, even though the caption in most places says 70D. The reason being, that vehicle has red brake calipers, which are only available on the P85D.

 

[FredTMC]

Only question is whether Elon will be in relaxed and satisfied mode (indicated by him tweeting about the Dragon test while he waits for the CC), or whether he will come out swinging at the skeptics and be all fired up and taking names...

With this solid report I'm fine with either version of Mr Musk. Really. He's the man

please though Elon, no F bombs on the call. Saying "bullsht" on the call was kinda borderline IMO

 

[glhs272]

No mention of CPO program?

 

[FANGO]

Cory Johnson on BloombergTV was being such a f**king moron after earnings broke I wanted to IB him and tell him to shut up and do some research.. blah blah "cash burn" blah blah "price increase" blah blah "loosing money" blah blah "heavily subsidized" blah blah "for millionaires".

Heh. I'd like to see him tell us how to build factories for free. And price increase because of strong dollar? That's the thing you're going to pick?

By the way, I have a Tesla which I bought, it wasn't subsidized (bought it used across state lines, didn't even get the state subsidy!), and I'm not a millionaire. So, y'know.

Also this is my response to every "subsidy" thing: Fossil fuels are way more expensive than you think | Dana Nuccitelli | Environment | The Guardian Gas cars are subsidized at ~$4/gallon, and over a 10-20 year lifespan that means a 26mpg gas car will benefit from 17-34k in subsidies, just in terms of the health and environmental damage they are doing in operation and making everyone else pay for. If anything, Tesla has *less* subsidies - particularly when compared to large luxury sport sedans, which get below average mpg, and thus will benefit more from these subsidies. And yet Tesla is still doing very well despite the disadvantage.

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No mention of CPO program?

It's mentioned briefly in the letter ("We expect Services and other gross margin to be slightly better than breakeven in Q2, and continue to improve to about 5% byQ4. The improvement will come from cost reductions on Daimler powertrains as well as increased sales of Tesla Energy andpre-owned Model S vehicles. ", and also when talking about how they'll be reporting revenue from now on, new auto sales vs. used sales + everything else). Just not really in terms of total sales etc, probably mainly because it has only picked up since the quarter ended.

 

[Bunky]

I liked the theme of operations 'maturing' in the letter.