Near-future quarterly financial projections

[Stars aligned]

Does anyone know why GS is amongst the top 10 institutional Tesla shareholders and nevertheless constantly bash the company? And they even increased their holdings > 35% last quarter?

Positioning for a big surge maybe?

mid-August we will know what they did in Q2. They always file in the last-possible day.

Edit: source Nasdaq institutional-holdings

 

[ReflexFunds]

I don't buy this. You assume zero registrations spilled over from Q3 into Q4. They had crazy tent sales at the end of Q3 and their logistics/paperwork was in dire trouble due to never before registering cars at that rate. They had the same tent sales at the end of Q4, but it was their second time doing it so they presumably improved. You again assume zero spillover at the end of Q1, when they "delivered half the cars in the final 10 days". You further assume a ~50% spike in GHG value in 2019. This is too many assumptions without evidence.

On the other hand, we know for a fact Tesla entered into a deal with FCA in Q1 that for the first time gives Tesla emissions revenue for European sales . This deal is a much more logical explanation for the spike in non-ZEV credit revenue.

We don't have much information so we have to make some assumptions. Some of the clearest information we have though is from FCA that 2019 EU credits are no more than EUR120m "well, in terms of the second question, the compliance costs for EMEA for this year, we're target -- we're expecting at around EUR 120 million".

The more insane side of the TSLAQ community was extremely excited about the increased US registration delays in Q4/early Q1 (proof that Tesla and PWC were faking the accounts obviously), but I can't remember the exact increase from Q3 delays. Adjusting for a continuous spillover each quarter doesn't make such a huge difference though.
Another possibility is that Tesla US production exceeded its FCA ghg credit contract in 2018 - if FCA committed to a maximum number of credit purchases per year it is possible Tesla had to start accumulating some GHG credits in Q4. These may have all been sold in Q1 with the new GM and FCA contracts.
Hard to know for sure, but I definitely think the Q1 spike was most likely to be a combination of some US timing impact and higher US prices per credit.

I don't mean to always disagree with you btw, I like your contribution here!

 

[Doggydogworld]

We don't have much information so we have to make some assumptions. Some of the clearest information we have though is from FCA that 2019 EU credits are no more than EUR120m "well, in terms of the second question, the compliance costs for EMEA for this year, we're target -- we're expecting at around EUR 120 million".

The more insane side of the TSLAQ community was extremely excited about the increased US registration delays in Q4/early Q1 (proof that Tesla and PWC were faking the accounts obviously), but I can't remember the exact increase from Q3 delays. Adjusting for a continuous spillover each quarter doesn't make such a huge difference though.
Another possibility is that Tesla US production exceeded its FCA ghg credit contract in 2018 - if FCA committed to a maximum number of credit purchases per year it is possible Tesla had to start accumulating some GHG credits in Q4. These may have all been sold in Q1 with the new GM and FCA contracts.
Hard to know for sure, but I definitely think the Q1 spike was most likely to be a combination of some US timing impact and higher US prices per credit.

I don't mean to always disagree with you btw, I like your contribution here!

The EUR120m is just penalties. This article says 2019 compliance would be EUR390m instead of 120m without the Tesla deal, so the two things are obviously separate. It also says:

Last year FCA had cash outlays, between credits and compliance payments, of about 600 million euros. That figure, which includes the U.S., will rise “moderately” this year.​

The 200m non-ZEV + 140m deferred includes:

1. US Q1 GHG from FCA (perhaps w/ some Q4 spillover)
2. Q1 EU pooling from FCA
3. EU pooling pre-payment (mostly deferred)
4. US GHG from GM (might include 2018 credits FCA didn't buy)
5. Other minor stuff​

I can't put hard numbers on each item, but Occam's Razor says the big jump in non-ZEV payments is from the new things, #2-4 on the list.

Registration delays were not a new thing in Q4. Search "registration delay" (or $54,000 Paperweight, lol) and you find plenty of cases with Q3 cars. One example. People in this thread still didn't have plates in December for Q3 cars. A Seeking Alpha article in early January included a lot of data from Q3.

Don't worry about disagreeing. I come here to find people who don't agree with me. That's how I learn.​

 

[ReflexFunds]

The EUR120m is just penalties. This article says 2019 compliance would be EUR390m instead of 120m without the Tesla deal, so the two things are obviously separate. It also says:

Last year FCA had cash outlays, between credits and compliance payments, of about 600 million euros. That figure, which includes the U.S., will rise “moderately” this year.​

The 200m non-ZEV + 140m deferred includes:

1. US Q1 GHG from FCA (perhaps w/ some Q4 spillover)
2. Q1 EU pooling from FCA
3. EU pooling pre-payment (mostly deferred)
4. US GHG from GM (might include 2018 credits FCA didn't buy)
5. Other minor stuff​

I can't put hard numbers on each item, but Occam's Razor says the big jump in non-ZEV payments is from the new things, #2-4 on the list.

Registration delays were not a new thing in Q4. Search "registration delay" (or $54,000 Paperweight, lol) and you find plenty of cases with Q3 cars. One example. People in this thread still didn't have plates in December for Q3 cars. A Seeking Alpha article in early January included a lot of data from Q3.

Don't worry about disagreeing. I come here to find people who don't agree with me. That's how I learn.​

I think the EUR600m in 2018 was mostly US GHG credit purchases from Tesla and Honda and a $77m US fine. Fiat Chrysler paid $77 million in U.S. fuel economy penalties in 2018 - Reuters

For 2019 in EU i think their message was that fines would have been EUR390m if they did nothing, but this 2019 EU fine has now been avoided 80% through Tesla pooling and 20% through new technology. So FCA avoided a EUR312m (80%*390) EU fine through a EUR120m payment to Tesla - or c.38%, which seems reasonable.

 

[pschubert61]

Q2 revenue I say 6.2 billion USD.

 

[dgatwood]

Does anyone know why GS is amongst the top 10 institutional Tesla shareholders and nevertheless constantly bash the company? And they even increased their holdings > 35% last quarter?

My guess? They hold it because they think it is going to grow, and they bash it because they want to increase their holdings and prefer to buy low.

 

[neroden]

I found this snippet in the Q1 transcript from Elon: "So if we have to fully optimize for profitability in Q2, I think we can do it, but then we would be unable to unwind this crazy wave of deliveries and it also helps our working capital within the quarter to not have the wave."

Good point.

So, has the wave really been unwound? Not so much if I look at European realtime deliveries and Elon's mail to go out for a record delivery quarter.

Indeed it hasn't.

That said, I doubt Tesla would get to S&P inclusion levels even if they did optimize for GAAP profit (which they might have).

GAAP neutral + 100mn ZEV + 90mn from Maxwell yearly revenues + some help from reserves or whatever... I still give the 251mn a >35% chance. With a little luck, and within the GAAP rules, I think it is an act of will.

But certainly I wouldn't bet my house on it.

 

[Spacemanspliff]

Trying to learn here.

How does a company post a negative net income yet post positive operating cash flow?

Where does the roughly 450M in Depreciation come back from?

Is the 200M stock based compensation added back because its not a true "cost" ?

 

[anthonyj]

I think Mr. Larry Ellison needed a good amount of ZEV credits in Q2. You know, for experimental reasons.

 

[AlexS]

can someone estimate how much Tesla saves in q2 compared to q1 thanks to 7% job cuts?

 

[EVNow]

Trying to learn here.

How does a company post a negative net income yet post positive operating cash flow?

Where does the roughly 450M in Depreciation come back from?

Is the 200M stock based compensation added back because its not a true "cost" ?

Those 2 are non-cash expenses.

Ofcoure, that depreciation has already been paid with cash earlier as Capex. stock based compensation will be paid in stock in the future (some of it in the current quarter as well).

 

[Stars aligned]

can someone estimate how much Tesla saves in q2 compared to q1 thanks to 7% job cuts?

I expect not too much, maybe flat. Increase in stock based compensation may neutralising savings again. See snippet from last Q's 10-Q below. And I don't expect anything from R&D.

If there is any savings at all it would be below 50mn.

But we won't have that 43mn restructuring cost anymore.

 

[Spacemanspliff]

Those 2 are non-cash expenses.

Ofcoure, that depreciation has already been paid with cash earlier as Capex. stock based compensation will be paid in stock in the future (some of it in the current quarter as well).

So operating cash flow basically backs out prior cap ex expenses via depreciation. How do they come to 500M? Just glancing at Q4 2018 they had 1.9B and now its 500Mish each quarter. If they are underspending on capex now (roughly 300M) how does that play out in the future?

Does the "Changes in operating assets and liabilities, net of effect of business combinations" usually refer to inventory? Q4 it was +199M and Q1 its -676M.

 

[EVNow]

So operating cash flow basically backs out prior cap ex expenses via depreciation. How do they come to 500M? Just glancing at Q4 2018 they had 1.9B and now its 500Mish each quarter. If they are underspending on capex now (roughly 300M) how does that play out in the future?

Depreciation is complicated. There are fixed amounts as well as variable amounts depending on # of cars produced. There was a discussion around this in this thread you can search for - which gives some details.

Does the "Changes in operating assets and liabilities, net of effect of business combinations" usually refer to inventory? Q4 it was +199M and Q1 its -676M.

It is inventory, receivables, payables etc. In the spreadsheet I posted it is rows 15 through 24.

 

[Stars aligned]

So operating cash flow basically backs out prior cap ex expenses via depreciation. How do they come to 500M? Just glancing at Q4 2018 they had 1.9B and now its 500Mish each quarter. If they are underspending on capex now (roughly 300M) how does that play out in the future?

Does the "Changes in operating assets and liabilities, net of effect of business combinations" usually refer to inventory? Q4 it was +199M and Q1 its -676M.

I've seen this as well, my interpretation is they sold assets and leased back.

 

[EVNow]

I've seen this as well, my interpretation is they sold assets and leased back.

No - the big difference was inventory increase in Q1 because they couldn't deliver a lot of cars. As I said here before, the reverse happened in Q2 - so we'll see a big drop in inventory and a big cash flow increase.

 

[Fact Checking]

It is inventory, receivables, payables etc. In the spreadsheet I posted it is rows 15 through 24.

Have you posted the latest version of your spreadsheet, if not, would you mind posting it again? Thanks!

 

[EVNow]

Have you posted the latest version of your spreadsheet, if not, would you mind posting it again? Thanks!

Here. I've cleaned up a bit from the last time I posted.

 

[Stars aligned]

No - the big difference was inventory increase in Q1 because they couldn't deliver a lot of cars. As I said here before, the reverse happened in Q2 - so we'll see a big drop in inventory and a big cash flow increase.

And see also this snippet from Q2 update:

• We adopted the new leasing standard, ASC 842 on January 1, 2019, which resulted in (i) recognition of right-of-use assets of $1.29
  
  billion (as “Operating lease right-of-use assets”) and lease liabilities of $1.24 billion for operating leases on the consolidated balance sheet, and (ii) de-recognition of build-to-suit lease assets (from “Property, plant & equipment”) and liabilities of $1.62 billion and $1.74 billion, respectively, with the net impact of $96.7 million recorded to accumulated deficit.
  

 

[EVNow]

And see also this snippet from Q2 update:

• We adopted the new leasing standard, ASC 842 on January 1, 2019, which resulted in (i) recognition of right-of-use assets of $1.29
  
  billion (as “Operating lease right-of-use assets”) and lease liabilities of $1.24 billion for operating leases on the consolidated balance sheet, and (ii) de-recognition of build-to-suit lease assets (from “Property, plant & equipment”) and liabilities of $1.62 billion and $1.74 billion, respectively, with the net impact of $96.7 million recorded to accumulated deficit.

None of these have cash flow impact. It didn't even have P&L impact - just moving around numbers in B/S.