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Near-future quarterly financial projections

Discussion in 'TSLA Investor Discussions' started by luvb2b, May 23, 2018.

  1. The Accountant

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    You make a very valid point but I gave a short-cut explanation so that non-accountants may undertand better.
    Everyone has a different level of accounting knowledge so please don't think I am talking down to you.
    I am going to explain this in simple terms not only because Cost Accounting is complex but because other members reading this may not understand accounting principles.

    Let use these numbers:
    Fremont Q1: Fixed Costs of $300m and 86,000 cars produced = $3,500 fixed costs per car
    Fremont Q2: Fixed Costs of $300m and 50,000 cars produced = $6,000 fixed costs per car

    Because of the shutdown with only 50,000 cars produced, margins were hurt by $125m.
    The fixed costs per car in Q2 is higher by $2,500 ($6,000 - $3,500 = $2,500)
    Since cost per car is higher in Q2 vs Q1 - then 50,000 autos at a higher cost of $2,500 = $125m

    Once Q3 gets back to 86.000 unit or higher, margins will improve by $125m (as mentioned earlier this could be as high as $250m)

    Now...your confusion was valid. I won't do the math here but if Idle Capacity Accounting was not applied, about $88m of the $125m would have been expensed anyway to the P&L as cars were sold but about $37m would have been on the balance sheet with the 15,000 cars remaining in inventory. Tesla uses FIFO (First In - First Out) Method for inventory.

    But my main point is that we will see margins improve by $125m to $250m in Q3 as production ramps back up and fixed costs per car decline back to $3,500.

    Everyone confused by now? I am! :eek:
     
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  2. Cosmacelf

    Cosmacelf Well-Known Member

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    @Doggydogworld's explanation that it is a quarterly "timing difference" worked for me :) ... because if I try to work through it at your level of detail my brain hurts.
     
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  3. adiggs

    adiggs Active Member

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    Making many smaller forecasts will frequently generate offsetting errors, yielding a higher level forecast that is more accurate than the individual smaller fc. It's a tendency - not a rule, but that's a well known pattern that leads to being 'lucky'.

    And GAAP EPS is what we were all focusing on this quarterly report, if it were the only number we cared about. Excellent result :)
     
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  4. TNEVol

    TNEVol Member

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    I marvel that 2 semesters of cost accounting on the way to law school actually helps even if I don't remember much.
     
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  5. The Accountant

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    It's way too early to start publishing Q3 2020 Estimates
    .....Ahh what the heck, let's do it anyway.

    No matter how you run the numbers, there is no way to come up with a bad quarter.
    Below are scenarios for deliveries of 135k, 145k & 155k delivering GAAP income of $400m, $490m & $583m, respectively.
    In each scenario, Tesla would have GAAP profit even without Regulatory Credits (assumed at $230m).
    The estimates below do not include any upside for additional FSD features released and no assumption for the Deferred Tax Allowance benefit (which I expect to see in either Q3 or Q4).
    I may need to adjust my CEO compensation expense as I learn more from the Q2 2020 10Q filing
    Of course these are my early estimates and will change as I get updated data and feedback from other members.

    upload_2020-7-26_12-53-59.png
     
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  6. The Accountant

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    #3806 The Accountant, Jul 26, 2020
    Last edited: Jul 26, 2020
    Q3 2020 vs Q3 2019
    - Record Deliveries - 145,000
    - Record Sales - $8.3B
    - Record Operatiing Income - $752m
    - Record GAAP Income - $490M
    - Impressive Operaing Leverage - Growth of 188%


    upload_2020-7-26_13-5-11.png
     
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  7. The Accountant

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    I see that my Very Early Q3 Estimate above is up on Twitter already.....I'm fine with that.
    In case anyone from Twitter is visiting this thread, below you can find my level of accuracy for Q1 and Q2 2020:

    upload_2020-7-26_18-23-26.png
     
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  8. Mo City

    Mo City Active Member

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    Were you given credit on Twitter by whoever reposted it?

    2nd question: Do you have prelims for Q4 and 2021?
     
  9. The Accountant

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    Yes - I was given credit for the Q3 estimate on Twitter. Posted by a Twitter account that I enjoy reading (a TSLAQ parady account).
    I don't have Q4 or 2021 completed. I usually work one quarter at a time.
    @FrankSG has very good estimates for future periods.
     
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  10. graphilwar

    graphilwar Member

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    The nice thing is that you’ve been conservative on the bottom line vs. actual. So when I look at your estimate, I have some measure of confidence that the estimate is in the ball park but not wildly too high.
     
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  11. heltok

    heltok Member

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    Just a small fix, variance is the error squared:
    Variance - Wikipedia
     
  12. The Accountant

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    Thanks
    I was trying to shorten the title "Actual vs Estimate" to one word. I will use Act vs Est the next time I publish.
     
  13. CorneliusXX

    CorneliusXX Active Member

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    I like to us "∆" in the headings to denote the difference when I have narrow columns.
     
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  14. heltok

    heltok Member

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    Deviation, difference, error, delta, ∆ also works. Sometimes I can be lazy and use diff even though some computer scientists might get mad at me for doing it! =)

    Ok enough off topic, great work! I just worry that difference/deviation/delta of the production and deliveries will be rather large this quarter, it could be a good quarter to unwind the wave. 150k produced and 140k delivered seems plausible to me...
     
  15. JusRelax

    JusRelax Member

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    As far as I understand it (I am not an accountant by any means), this would have a deterimental effect on free cash flow, but not on net income. It should have a slightly positive effect on net income for this quarter if they unwind the wave.
     
  16. The Accountant

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    #3816 The Accountant, Jul 27, 2020
    Last edited: Jul 27, 2020
    Unwinding the wave has a negative impact on the P&L in the quarter when the unwinding occurs.
    For example, to unwind the wave in Q3, Tesla would have to put some September production on ships which would not become a sale until October (Q4). With the wave intact, all September production is delivered in the US resulting in Sept Sales (Q3).
    Unwinding the wave is the right thing to do from a cost perspetive (delivery costs bunched up at quarter end is not efficient).
    Once Giga Berlin is up and running, the delivery wave will be for the most part over with no impact to the P&L.
     
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  17. heltok

    heltok Member

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    Also I think it makes sense to always have some inventory of some Performance S/X/3 in every country for people who would rather pay more than wait longer. Right now in Sweden there are zero S/X in inventory:
    New & Used Electric Cars | Tesla
     
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  18. mrdoubleb

    mrdoubleb Active Member

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    #3818 mrdoubleb, Jul 27, 2020
    Last edited: Jul 27, 2020
    Right. Didn't want to interrupt this exchange but I feel like this was a valid conversation 2 years ago, maybe even a year ago. Tesla just couldn't "afford" this. Now with Shanghai up and running and Berlin a year out, the risk/sacrifices outweigh the benefits of accelerating this by a few quarters.
     
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  19. Thekiwi

    Thekiwi Active Member

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    Anyone care to speculate what sort of gain Tesla might be getting in Q3 thanks to the falling USD?
     
  20. JusRelax

    JusRelax Member

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    @JBRR had a lengthy post (attached below) regarding this topic in the main thread. He estimated that it would result in ~$80m.

     
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