Near-future quarterly financial projections

[EVNow]

bloomberg estimates:


eps adj: -.35 (beat 4 of 8)
eps gaap: -1.437 (missed 6 of 8)
rev: 6.435b (beat 7 of 8)
gr mg: 17.06%
op profit: 86.469m
ebitda: 598m
net inc adj: -44.132m (missed 5 of 8)
net inc gaap: -261.769m
net debt: 8.895b
deprec: 476.289m
fcf: 235.541m
capes: -583.875m
nav: 5.777b

EPS is close to my estimate (-0.35 vs -0.31). Revenue is 6.435B vs 6.523B - close enough.

But FCF with 583M capex should be about $800M. So, either I'm very wrong or the analysts are very wrong.

 

[defc0n]

FCF jumps out as an easy beat to me.

Do news headlines ever really talk about cash flow following the release of quarterly financials? Always seems to focus on profitability and revenue from what I recall.

Basically I worry about the news that is going to say “Tesla unprofitable on record number of deliveries”

 

[neroden]

That was the "old way". At-the-money options were counted as zero expense. It was absurd, but as @Fact Checking points out we did it that way forever until tech companies realized what a huge loophole it was and started really exploiting it. In defense of the FASB, employee stock options were rare in the 30s when the rules were put into place and there wsa no standard way to value them. Myron Scholes and Robert Merton won the 1997 Nobel Prize for Economics for the now-famous options pricing equation they developed with Fischer Black (who unfortunately died in 1995 and was thus ineligible). Their work dated from 1973 but took time to be accepted by the accounting profession. And then it took another decade to overcome lobbying from corporate execs who absolutely did not want to count the mega-millions in compensation they granted themselves as an expense on the income statement.

Anyway, near the bottom of your article is says that since 2005 you must use Black-Scholes or a similar method to estimate the fair market value of the options, then count that as an expense over the vesting period. Exactly the same as if you paid suppliers in options, or sold options in the market and used the cash to pay suppliers or employees. As it should be.

The problem is that Black-Scholes is garbage. Sure, it's better than nothing if you're trying to guess option value given *zero actual information*, but it makes blatantly false assumptions about the probability distribution of future stock prices. These bad assumptions are something you have to remove in order to do a realistic financial analysis of a company.

 

[neroden]

Deferred Revenue is an interesting Topic !

Can somebody explain why there are 2 lines for Deferred Revenue - Balance sheet from March 2019?

Deferred revenue 762,810

Deferred revenue, net of current portion 1,157,343

For arcane historical reasons, "current" in GAAP means stuff which will reconcile within 1 year.
So the "current portion" of debt is due within a year.

Deferred revenue is revenue received where Tesla still owes an obligation associated with the revenue, so hasn't earned it. Then the "current portion" of deferred revenue is revenue where the obligation will be satisfied within one year.

If you look at the subheadings, the first one is "Current Liabilities: Deferred Revenue" and the second one is the rest of deferred revenue. Add them together to get total deferred revenue.

Tesla expects to "earn" the $762,810 within 12 months, and the rest of it they're not sure that they will.

 

[tmoz]

Unless the majority of people driving Tesla’s are are doing so mostly on road trips, I doubt they’re making a lot of money. I am willing to bet most of the usage comes from locals with free supercharging, whether with credits or free lifetime. And all the SC stations are located in shopping centers and grocery stores. So, it’s super convenient for locals to charge for free if they have that option. At least in my area, the Tesla SC rates are more expensive than charging at home, more than twice as much if you compare with off-peak EV rates. Doesn’t make any sense to pay those rates when day to day driving.

A map of KWh consumed by geographical area per superchargers would be really interesting. It's almost tempting enough to apply for a job at Tesla just to work on that big data set.

 

[neroden]

I don't see a path to 18k and 20k S/X production, though.

Disagree. There is no way Tesla is cutting down below that on a regular basis; demand is too high to do that.

Now, in Q2 they weren't fully ramped up, so we won't see until Q3. But I think after the "Raven" alterations and the combination of S &X body lines, the production line simply has higher efficiency, and can do more per shift than you think.

They can do 14.5k with one shift. They can add another 1-2k with OT, but 18-20k requires adding a half shift or something weird. If there's enough demand they can re-hire a second shift and go back to 27k, but IMHO killing off the SR/75D (again) says they will stick with one shift plus seasonal OT.

No way. 16.5k/quarter is only 66K/year. They were selling over 100K last year, and Model X sales were still rising. If Model X production was kept up, you'd be talking about a 66% drop in Model S production. That would be leaving money on the table.

I'd estimate S/X at 15k for Q3 and 17-18k for Q4.

No chance. Too low. It's going to be 18K-20K (for Q3 and Q4) That fits with known demand.

 

[neroden]

Anyone know where the shipping port is located that GF3 would use?
Seems like it is really close. I also worry that any significant rise in ocean sea levels would be very bad news for GF3.

It would be. However, they appear to have elevated the ground level *and* surrounded the whole thing with drainage channels and possibly pumps, so they have some room for the occasional storm-driven / seasonal flooding on top of small sea level rises. The whole thing is inside a larger seawall for Shanghai, of course.

The location is probably completely toast by 2050 anyway, but it will have paid for itself by then.

 

[EVNow]

No chance. Too low. It's going to be 18K-20K (for Q3 and Q4) That fits with known demand.

They do have 10k s+x in inventory. Unlike Model 3, I think they can do completely order based production of s+x. Esp, given the changing mix, and combined line, it would make a lot of sense.

They can bring down the s+x inventory - no need to keep s+x as loaner cars any more. No need to use them for mobile service anymore. 3 can do those duties.

I can see s+x inventory drawn down to about 5k by end of Q4. So, even if they make ~16k s+x, they can sell ~19k s+x per quarter in Q3/Q4. I'd like to see them increase that to 20k, and have atleast 80k s+x sales per year. But, Tesla might be considering how X volume will change once Y gets introduced. This could be the reason for production cut of s+x and removal of SR s+x. Anyone buying SR s+x is likely to buy Y, once it comes out.

 

[neroden]

So, let's WAG it -- suppose S & X both see *30%* drops in long term demand due to 3 and Y respectively. Which I think is too high an estimate. That still requires 17.5K/quarter production capacity.

I don't think Tesla is stupid in this particular fashion. I think they have set up a line where they can do that much, without doing anything weird or overly expensive like "half shifts". The original X body line (now doing S & X) was originally supposed to produce S&X when projections were for about 80K/year... I suspect it can still produce close to that. The GA line may have gotten more efficient to eliminate the need for more shifts.

In short, I believe the current "Raven" S/X line is set up to produce somewhere between 18K and 20K per quarter. The prior lines could produce 25K per quarter.

16.5K/quarter would be a 34% reduction in sales for S & X together, which is just too harsh: I don't see it happening even after Model Y comes out. Particularly with new markets opening up (Brazil!)

 

[defc0n]

I strongly suspect the 3 cannibalizes the S quite a bit more than the Y will do to the X. Once the S and X has just as capable tech again (charging speed...), I believe demand recovery will surprise to the upside.

The capabilities of the S and X need to stand above the 3 and Y, and that isn’t always the case at the moment.

 

[KSilver2000]

A map of KWh consumed by geographical area per superchargers would be really interesting. It's almost tempting enough to apply for a job at Tesla just to work on that big data set.

I guess you can kind of approximate it.
The count of existing and planned SC locations in the SF Bay Area by end of 2019 is about 50 stations with an average of 15 to 20 stalls per location. You can take a utilization rate of say 8 hours per day at 70kW.

Back to my point, though, 50 stations and none are on the I-5, which is the main road trip route up and down CA. So, I bet the vast majority of charging is done by locals with free credits or lifetime benefit.

Some people on here tend to criticize those that take advantage of the free charging. But, I feel Tesla likes to promote that behavior by installing so many stations close together and at large retail parking lots.

 

[tmoz]

I guess you can kind of approximate it.
The count of existing and planned SC locations in the SF Bay Area by end of 2019 is about 50 stations with an average of 15 to 20 stalls per location. You can take a utilization rate of say 8 hours per day at 70kW.

Back to my point, though, 50 stations and none are on the I-5, which is the main road trip route up and down CA. So, I bet the vast majority of charging is done by locals with free credits or lifetime benefit.

Some people on here tend to criticize those that take advantage of the free charging. But, I feel Tesla likes to promote that behavior by installing so many stations close together and at large retail parking lots.

I should have worded my interest more clearly. For a given supercharger, state the annual consumption at that supercharger for reference, and also map the home location (region) of the visiting cars with a symbol or color denoting how many KWh those regions have consumed from that SC alone. That would also allow one to make a histogram of KWh consumed vs the distance away from home on the x-axis.
One could do that for all SC stations and then make some generalizations about the percentages of usage the SC doles out as a function of distance away from the car's home of residence.

 

[Fact Checking]

No chance. Too low. It's going to be 18K-20K (for Q3 and Q4) That fits with known demand.

Another thing: pull-forward from Q3 to Q2 due to the $1,875 tax credit cliff is only ~1.8% of the S/X ASP, which according to your "1 month pull forward per 5% price gap" model is equivalent to only about 10 days July demand pulled into June.

The Raven backlog alone should be much more than that. (The new Raven adaptive suspension is reportedly super smooth, plus they might be sandbagging the Raven charging speed, to be announced and unlocked as a demand lever in the future to boost demand.)

Also note that they recently stopped the "Free Lifetime Supercharging" perk on CPO Teslas, which suggests the pre-Raven inventory is gone.

I too would expect better S/X deliveries in Q3 than Q2.

 

[Doggydogworld]

In short, I believe the current "Raven" S/X line is set up to produce somewhere between 18K and 20K per quarter. The prior lines could produce 25K per quarter.

That's possible and would make some sense. We're just guessing, though.

I agree with @defc0n that Model Y won't cannibalize the X that much. People buy the X for the extra seating and the trick doors, neither of which the Y has (3rd row in the Y is kind of a joke).

 

[Thekiwi]

I can see the Y eating into X demand somewhat - some people just want the CUV/Hatchback and they want a Tesla and the X is the only choice at present. Perhaps the pickup might take a little from X as well when it arrives? Another factor that might impact demand a little from the opposite end: the roadster launch might pull people up from X/S (a nice problem to have).

All of this as to be somewhat countered long term by the growth in EV adoption overall. Surely as the overall proportion of EVs being sold increases, so too will the amount of luxury vehicles (especially as range steadily improves higher and charging network ubiquity increases).

From a “near term quarterly projection” standpoint I agree that Q2 is too soon to tell about an adjusted quarterly rate - Q3 would be e better normal run rate to use. I would say 70k will remain the guided lower end target of 2019 production.

 

[tmoz]

I'm waiting to buy the Y because the X is too big for me. If I find out the Y is too small for me, I may spring for the X.
So, it may stimulate some X sales as well. How much it stimulates vs cannibalizes is TBD until we both a) see the model Y and b) see consumer reaction. Both seem really hard to predict.

 

[tmoz]

The answer to our game is less than 24 hrs away. I can hardly wait.

 

[EVNow]

I agree with @defc0n that Model Y won't cannibalize the X that much. People buy the X for the extra seating and the trick doors, neither of which the Y has (3rd row in the Y is kind of a joke).

Lot of times people want 3rd row of seats just for short trips (kids' friends). Anyway, since Y is 1/2 the price of X, atleast some % of people will buy that instead of X. Percent is difficult to determine.

BTW, people who now buy S (over 3) because of space, may also buy Y instead. So, we will see some cannibalization of both S & X by Y. Then some more by Pickup.

 

[Zaxxon]

So, we will see some cannibalization of both S & X by Y. Then some more by Pickup.

But of course we'll mostly see cannibalization of RAV4, CR-V, X3, Q5, etc.

 

[Buckminster]

(3rd row in the Y is kind of a joke)

I think that the practicality of the 3rd row will end up being surprisingly good.