Near-future quarterly financial projections

[Yggdrasill]

So we agree it is nonsense then? Lane assist has been around for awhile, it would be considered a FSD feature, rolling it out is not newsworthy.

Lane assist is EAP. Roughly it goes something like this:

Standard features:

- AEB
- Collision warning
- Collision avoidance
- Blind spot assist
- Speed limit assist

EAP:

- Lane assist
- TACC
- Lane change assist
- Self park/summon

FSD:

- Traffic lights
- Stop signs
- Making turns on local roads
- Roundabouts
- Upgraded self-parking

Basically everything that takes the level 2-3 EAP up to level 4-5 falls under FSD.

Also, Tesla has never promised level 5. Level 4 at most, but Tesla could probably recognize all the FSD revenue even if they never make it above level 3.

 

[Reality]

Also, Tesla has never promised level 5. Level 4 at most, but Tesla could probably recognize all the FSD revenue even if they never make it above level 3.

Maybe, it is capitalized so it could be legally defined as something besides what is considered level 5. Always have to assume Tesla language is misleading.


Now I am genuinely curious how much the 1.3b in def revenue relates to FSD/EAP

 

[Zhelko Dimic]

Can you send me what they said if you still have it? That doesnt make sense to me on anything except leases maybe.

It would seem like in order for that to be true you would have to have deferred expenses related to the development of the software too. Maybe I am not thinking about it right.

No deferral of software expenses, Tesla makes a choice to recognize it immediately, and revenue is recognized piecemeal as features are delivered. there was a great discussion on this when it was relevant because of the switch to AP 2.0(software rewrite), end of 2016 or so... With numbers and everything that we dug out somewhere...

 

[luvb2b]

ir seemed very clear on this, as i directly inquired whether or not any autopilot revenue was left unrecognized at the end of q1 2017.
there was some eap revenue they had not recognized yet (as of 17q1) and this also applies to fsd features.

i had also asked about margins - at that time they were recognizing expenses for eap and fsd when the cars were sold, so when the deferred revenue got booked it came at 100% gross margin.

i think this might be a 20-30m boost to q2 with no impact on cash.

i'd expect fsd accounting to proceed similarly as they start to enable features.

here's from the 10k:

As of December 31, 2017 and 2016, we had deferred $498.9 million and $291.2 million, respectively, related to the purchase of vehicle maintenance and service plans, access to our Supercharger network, internet connectivity, autopilot and over-the-air software updates.​

separately chanos is now expecting q3 gaap profits as well, although he thinks on the back of some gimmicky one-time items.

Honestly, things like that have nothing to do with my thesis so I dont pay much attention. I was mostly speaking to my understanding of GAAP.


Also, a 2017 Q1 SH letter stating there is def revenue (bundled with FSD) that relates to EAP and not specifying leases does not exactly dispute anything I stated.

I would find it very odd for any part of the EAP sales price on a sold car to not be fully recognized. And even if it's not, it is meaningless to the overall thesis.

 

[Reality]

separately chanos is now expecting q3 gaap profits as well, although he thinks on the back of some gimmicky one-time items.

I agree with this as well (edit: I agree that Q3 profitability is very possible on the backs of gimmicky one time items like spiking all the highest M3's and some other accounting tricks like releasing FSD revenue as you have now convinced me of), i could see an argument of wait until Q3, let them have their one-quarter of profitability, then pound the short position. I dont think im going to do that other than maybe naked shares.


Solvent companies dont have to have their CEO buy shares at the most illiquid times in order to pump the stock price.

Q3 might have GAAP profitability, but Tesla has zero viability long term without a change of management and cash infusion.

 

[Reality]

Man Claiming the FSD revenue in Q3 makes total sense now. It explains the "releasing FSD features" tweet when everyone knows Tesla self driving tech is garbage (source: lots of dead people and navigant research). Try and claim delivery of at least part of "FSD" and pour more one-time revenue into that quarter at 100% margin.

You are definitely right that they are doing that.

Does it not scare you that they have to play so many games just to be able to show 1 Q of profitability? I guess you think its just what it takes to get over the hump then after that it's smooth sailing, other than the 900m due in Q1'19 of course.

 

[bdy0627]

I agree with this as well (edit: I agree that Q3 profitability is very possible on the backs of gimmicky one time items like spiking all the highest M3's and some other accounting tricks like releasing FSD revenue as you have now convinced me of), i could see an argument of wait until Q3, let them have their one-quarter of profitability, then pound the short position. I dont think im going to do that other than maybe naked shares.


Solvent companies dont have to have their CEO buy shares at the most illiquid times in order to pump the stock price.

Q3 might have GAAP profitability, but Tesla has zero viability long term without a change of management and cash infusion.

For a company on its deathbed, there sure are a hell of a lot of people wanting to own this stock these days.

 

[Reality]

For a company on its deathbed, there sure are a hell of a lot of people wanting to own this stock these days.

stock price bro!

 

[neroden]

Had these reductions been made let's say in Q4 last year, you'd be right. But now, not really. Because they actually don't help. Remember Tesla willll pay almost full salary AND severance packages in Q2 for those workers. So Q2 is going to be worse than if they had not done this. Q3 is the first quarter that it could make a positive contribution. But that chapter was already projected to be profitable and cash flow positive regardless!

Here's my guess : production isn't as efficient as hoped for and they had to higher more production associates than originally planned. To compensate for lower margins on M3 they are pruning costs elsewhere.

I'll also say that in my opinion (widely stated for the last several years), Tesla management has been a chaotic mess, due to lots of growth and no focus on organization. I don't know if this round of layoffs will actually fix that mess (probably not), but something needed to be done, so this may simply be an attempt to fix the problems which have finally gotten to Musk's attention.

Tesla may have decided to "bite the bullet" on this in Q2 because it had to be done eventually, and they didn't want to do it in Q3 and turn Q3 from a slight profit to a slight loss. There is some evidence of timing decisions related to one-time expenses like this which they had to do *sometime* -- they're pulling them forward into Q2 or pushing them out to 2019.

 

[neroden]

I agree for residential solar. They can’t seem to turn that sector around. Better to scrap it completely.

Oh no. You haven't noticed the plan? They're still selling residential solar, but the stated plan is to sell every system with Powerwalls. So the product line will be

Solar Roof + Powerwall
Normal Solar Panels + Powerwall
Powerwall


I suspect that there was some serious redundancy between the SolarCity employees and the Powerwall sales & service and they're merging them.

 

[neroden]

very surprised keybanc raising up 3 deliveries for q2 to 30k. that would imply no gaming of the 200k i think and no withholding of deliveries, and then much of my modeling would be wrong around this quarter.

on the other hand, it could be canadian demand far exceeds my view.

or they are just wrong. i think it's b or c.

I'd love to know their sampling method, and whether it includes Canada.

We have evidence that Canadian demand is *massive*. Now that former hashish dealer and drug trafficker Doug Ford, brother of the late crack-smoking mayor Rob Ford, is the Premier of Ontario (leading the so-called "Progressive Conservatives"), *everyone* thinks the Ontario electric car rebate will be repealed. But it hasn't been repealed yet. Cars will be shipped as fast as humanly possible until the repeal passes.

Given the situation, I would expect Tesla to push all Ontario customers ahead in the queue until the repeal actually hits... or until the end of Q2 since the US tax credit phaseout will almost certainly start for Tesla in Q3. Whichever happens first.

(Of course, the side effect will be very low Ontario sales of Model 3 for the next year or so after the boom in sales, as demand is pulled forward. We saw this in Hong Kong too.)

 

[Reality]

@luvb2b what do you make of the lack of invites reported on TMC? I am honestly not sure what to make of it. I don't see how it could be a positive thing. Burst invite any day now and bring in a bunch of deposits?

 

[schonelucht]

Oh no. You haven't noticed the plan? They're still selling residential solar, but the stated plan is to sell every system with Powerwalls.

There is absolutely zero reason to sell solar together with the Powerwall. Let installers market and sell the damn thing to their customers. Same for solar roof.

 

[luvb2b]

i'm much less scared now that my position is back to showing a gain.

i had q3 around breakeven, but the pushout of q2 deliveries and the "games" just put it cleanly over the top.
but q4 in my modeling was a clean standalone profit. and the opex cut boosted that even further.

the 900m due in q1 is all convertible, so the share price advance could solve that.

Man Claiming the FSD revenue in Q3 makes total sense now. It explains the "releasing FSD features" tweet when everyone knows Tesla self driving tech is garbage (source: lots of dead people and navigant research). Try and claim delivery of at least part of "FSD" and pour more one-time revenue into that quarter at 100% margin.

You are definitely right that they are doing that.

Does it not scare you that they have to play so many games just to be able to show 1 Q of profitability? I guess you think its just what it takes to get over the hump then after that it's smooth sailing, other than the 900m due in Q1'19 of course.

 

[schonelucht]

Seems like a significant part of the lay offs are engineers too. Means both severance package in Q2 and cost savings in Q3 will be higher than I first anticipated. Still, really surprising to see automation engineers being let go in this round.

 

[Reality]

i'm much less scared now that my position is back to showing a gain.

i had q3 around breakeven, but the pushout of q2 deliveries and the "games" just put it cleanly over the top.
but q4 in my modeling was a clean standalone profit. and the opex cut boosted that even further.

the 900m due in q1 is all convertible, so the share price advance could solve that.

nice, my position flipped red this week

 

[neroden]

There is absolutely zero reason to sell solar together with the Powerwall. Let installers market and sell the damn thing to their customers. Same for solar roof.

Your opinion. I'm simply sharing Elon Musk's opinion. He currently disagrees. :shrug:

 

[neroden]

Seems like a significant part of the lay offs are engineers too. Means both severance package in Q2 and cost savings in Q3 will be higher than I first anticipated. Still, really surprising to see automation engineers being let go in this round.

This sounds to me like Grohmann engineers replaced certain American engineers.

 

[neroden]

@luvb2b what do you make of the lack of invites reported on TMC? I am honestly not sure what to make of it.

My opinion: a shortage of Canadians on TMC.

We should see more reports once the pipeline for the Great Canadian Delivery Push is full, which might happen tomorrow or next week.

 

[Reality]

Seems like a significant part of the lay offs are engineers too. Means both severance package in Q2 and cost savings in Q3 will be higher than I first anticipated. Still, really surprising to see automation engineers being let go in this round.

Where did you get this?

Also it makes sense if they are only thinking how to survive in the short term