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Near-future quarterly financial projections
- Thread starter luvb2b
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- elon is an ass
Yes, very positive news BUT really need to know the monthly MIC production to determine how many were sent to Europe.
I am not quite as optimistic as Rob M - need confirmation of the ramp in Fremont - but getting towards that figure.
TSLA Q4 2020 Estimate by Matt (Pre-P&D Report)
Deliveries
Q1 2020 (A): 88,400
Q2 2020 (A): 90,891
Q3 2020 (A): 139,593
Q4 2020 (E): 189,000
Revenue
Q1 2020 (A): $5.99b
Q2 2020 (A): $6.03b
Q3 2020 (A): $8.77b
Q4 2020 (E): $11.67b
Gross Margin
Q1 2020 (A): 20.6%
Q2 2020 (A): 21.0%
Q3 2020 (A): 23.5%
Q4 2020 (E): 24.3%
Operating Income
Q1 2020 (A): $0.28b
Q2 2020 (A): $0.32b
Q3 2020 (A): $0.81b
Q4 2020 (E): $1.63b
Net Income
Q1 2020 (A): $0.02b
Q2 2020 (A): $0.10b
Q3 2020 (A): $0.33b
Q4 2020 (E): $1.10b
Non-GAAP EPS
Q1 2020 (A): $0.23
Q2 2020 (A): $0.44
Q3 2020 (A): $0.76
Q4 2020 (E): $1.27
GAAP EPS
Q1 2020 (A): $0.02
Q2 2020 (A): $0.11
Q3 2020 (A): $0.27
Q4 2020 (E): $0.98
The Accountant
Active Member
CEO Compensation Award Update
My estimate for Q4 Stock Compensation expense has increased to $600m (from $443m) due to the higher expected CEO Compensation Award expense.
In Q3 2020, Tesla had deemed 4 Operational Milestones as "Achieved" and 2 Op Milestones as "Probable" (see table below).
I expect that the $6B Adj EBITDA milestone will be achieved in Q4 changing the status from Probable to Achieved.
I also expect Tesla to deem the $8B and $10B Adj EBITDA as Probable in the Q4 10Q filing (changing it from the "Not Probable" status).
See the changes to my model in the red outline below.
Tranche 5 - This will be achieved in Q4 and the remaining unamortized amount has to be taken in Q4 ($120M)
Tranche 6 - I believe the $8B Adj EBITDA will be achieved by Q3 2021 and thus the amortization has to be accelerated so that the amortization is completed by Q3 2021.
Tranche 7 - I believe the $10B Adj EBITDA will be achieved by Q4 2021. This has 2 effects: Tranche 7 moves from Not Probable to Probable causing a catch up amortization for the periods it was not being amortized and amortization will need to be accelerated as amortization needs to be completed by Q4 2021.
Tranches 8 & 9 - I still have these as Not Probable but if Tesla deems the $12B and $14B adjusted EBITDA as probable, we could see more expense in Q4 2020.
These numbers can be wildly different than what we see Tesla record in Q4 as there is much judgment involved in assessing probabilities.
My estimate for Q4 Stock Compensation expense has increased to $600m (from $443m) due to the higher expected CEO Compensation Award expense.
In Q3 2020, Tesla had deemed 4 Operational Milestones as "Achieved" and 2 Op Milestones as "Probable" (see table below).
I expect that the $6B Adj EBITDA milestone will be achieved in Q4 changing the status from Probable to Achieved.
I also expect Tesla to deem the $8B and $10B Adj EBITDA as Probable in the Q4 10Q filing (changing it from the "Not Probable" status).
See the changes to my model in the red outline below.
Tranche 5 - This will be achieved in Q4 and the remaining unamortized amount has to be taken in Q4 ($120M)
Tranche 6 - I believe the $8B Adj EBITDA will be achieved by Q3 2021 and thus the amortization has to be accelerated so that the amortization is completed by Q3 2021.
Tranche 7 - I believe the $10B Adj EBITDA will be achieved by Q4 2021. This has 2 effects: Tranche 7 moves from Not Probable to Probable causing a catch up amortization for the periods it was not being amortized and amortization will need to be accelerated as amortization needs to be completed by Q4 2021.
Tranches 8 & 9 - I still have these as Not Probable but if Tesla deems the $12B and $14B adjusted EBITDA as probable, we could see more expense in Q4 2020.
These numbers can be wildly different than what we see Tesla record in Q4 as there is much judgment involved in assessing probabilities.
Last edited:
dc_h
Active Member
If they recognize added CEO incentives, doesn’t that imply they should recognize the tax loss carry forward should be recognized as well?
Looking forward With Fiat merger, credits should go up next year.
Looking forward With Fiat merger, credits should go up next year.
Doggydogworld
Active Member
Global GAAP "adjusted EBITDA" does not necessarily correlate with US taxable income, for more reasons than I can list.
PSA is in good shape, by some measures the best of any OEM in Europe.
A couple of issues with this update:
1. Tranche 5 doesn't vest until Q1 2021 (assuming $6B Adj EBITDA in Q4).
2. The $35B revenue milestone should be achieved soon (Q1 or Q2 2021) and is the likely operational milestone for Tranche 6.
The Accountant
Active Member
Thanks for the feedback.
Point #1 - if Tesla achieves $6B in Adjusted EBITDA in Q4 2020, why would it vest one quarter later in Q1 2021? The need for Board approval?
Point #2 - I totally missed the $35B revenue milestone. Makes me wonder now if Tranche 8 will be deemed probable...as follows:
Tranche 6 probable with $35B Revenue milestone
Tranche 7 probable with $8B Adj EBITDA milestone
Tranche 8 probable with $10B Adj EBITDA milestone
Yes, the Board approval and the official results (10K) is what I was thinking but I could be wrong. Surely the shares won't be exercisable until 10K. But if you think it makes accounting sense to record the vesting on Q4, I'm sure you are right.
From the Q3 2020 10-Q:
It appears that the Adjusted EBITDA numbers aren't considered met until they are calculated and released on the 10-Q.
The Accountant
Active Member
Q4 2020 Projections
Highlights:
Highlights:
- Record Revenues of $11.0B
- Record Gross Profit of $2.6B
- Record Operating Income of $1.0B
- Record GAAP Earnings of $0.6B
- Record non-GAAP Earnings of $1.4B
- Record Non-GAAP EPS of $1.22 (analysts are estimating $0.93)
- I have increased Stock Based Compensation to $792m due to increased CEO Award Expense (see separate post on this).
- I do not assume the Deferred Tax Allowance benefit is recognized this quarter (see separate post on this).
- My revenues were increased by $294m due to Foreign Exchange (FX) impact (weaker US$); likewise, my Cost of Revenues & SG&A were increased by $202m due to FX.
- I may make changes to this forecast as more information comes in or based on your comments.
The Accountant
Active Member
The Accountant
Active Member
Compared to Prior Year:
Awesome Opearing Leverage
Awesome Opearing Leverage
- Revenues grow 49%
- Gross Profits grow 87%
- Operating Income grows 189%
- Non-GAAP Income grows 253%
The Accountant
Active Member
CEO Performance Award – Q4 2020 Impact
I now have Stock Based Compensation at $792m.
I assume:
I now have Stock Based Compensation at $792m.
I assume:
- Tranches 4 & 5 are fully achieved in Q4 2020 and fully expensed.
- Tranche 6 will be achieved in 2021 as $35B Sales milestone is realized – this accelerates expense in Q4.
- Tranches 7 & 8 become “Probable” requiring Catch-Up adjustments.
- There is a risk of higher expense if Tesla deems Tranches 9 and 10 Probable.
- There is much judgment involved and thus the actual numbers may be significantly different.
Thanks for all you do. Wall Street has the same numbers that you do, especially now that the total number of deliveries are out. I just don't know how their expected Non-GAAP EPS is only $0.93. Your calculation looks solid. The following link (I am unsure how accurate it is): The expected Net Income for 2020 is about $1.276 billion. Tesla's net income after 3 quarter is about: $0.420 billion. So $1.276 billion - $0.420 billion = $0.8535 billion (for Q4 2020)
TESLA, INC. : Financial Data Forecasts Estimates and Expectations | TSLA | MarketScreener
Todesbuckler
Member
Thank you @The Accountant!
I also updated my sheet (far less advanced than the one from the accountant) including a 2021 outlook with relative aggressive ~970k deliveries. Resulting in ~ 6 USD non-GAAP EPS compared to 3.88 USD analyst average.
Note: No FSD advancements included in the GM calculation.
I also updated my sheet (far less advanced than the one from the accountant) including a 2021 outlook with relative aggressive ~970k deliveries. Resulting in ~ 6 USD non-GAAP EPS compared to 3.88 USD analyst average.
Note: No FSD advancements included in the GM calculation.
Todesbuckler
Member
In general, I rather model the gross margin conservative and would be happy for higher rates.
In this case, I assume the percentage of regulatory credits (which are 100% gross margin) to revenues is decreasing (even so they might increase on an absolute level).
Looking into 2021: The higher amount of made in China cars, with likely higher gross margins per car, could result in overall higher gross margins if Tesla does not decrease the price. In addition, higher FSD revenues recognition could materially increase gross margins going forward.
The Accountant
Active Member
Deferred Tax Valuation Allowance
Since I am not a tax expert any comments from tax professionals, CPAs, etc would be appreciated.
Copying @st_lopes
TL;DR:
It is possible that Tesla may have Tax Losses even when they report GAAP pre-tax Income due to the fact that employee stock options generate higher tax deductions than GAAP expenses. As such, the Deferred Tax Benefit of $1.9B may not be recognized in Q4 2020. I am leaving the Tax Benefit out of my estimates to be conservative.
Background
From 2004 to 2019, Tesla accumulated pretax losses of $6.9B which means that future tax profits of $6.9B will not be taxed as Tesla can offset the 2004-2019 losses against the future income.
This creates a tax benefit of $1.9B as follows (the numbers are approximate):
Accumulated Net Operating Losses $6.9B
US Federal & State Tax Rate x 28%
Income Tax Benefit $1.9B
Accounting
Normally a company would take the tax benefit each year as the losses were incurred (in Tesla's case, from 2004 to 2019).
But because it was not assured that Tesla would ever be tax profitable, this benefit was not taken (this is not uncommon for start-ups). Once it becomes "more likely than not" that Tesla will generate future taxable income, the benefit comes to the income statement immediately (all or a portion).
GAAP Profits vs Tax Profits
I was convinced that Tesla would realize this benefit in Q4 with the expected strong earnings but now I am not certain.
This is because you can realize GAAP profits but still have a tax loss on your Tax Return.
One big difference between GAAP accounting and Tax Accounting is the way Stock options are treated.
For GAAP, they are valued at the time of grant using a model (usually the Black Scholes model). For Tax purposes, the expense is the actual FMV less the strike price when exercised. With the run up in the stock price, these will generate large tax deductions.
Let's look at Elon's comp award.
The first Tranche of Elon's award had a GAAP expense of $277m but if Elon was to exercise today at $730 a share, the Tax deduction is a whopping $5.6B ($5.3B higher than GAAP).
The reason for this is that Tesla will take a deduction that equals the income that Elon will report.
For Tranche 1 with a $730 exercise price, Elon would report income of $5.6B if exercised today and pay tax on that while Telsa would take the $5.6B deduction.
Recognizing the $1.9B Benefit
Elon won't likely exercise his options soon but there are many employees with stock options exercising each quarter generating large tax deductions and if that number is large enough, Tesla may delay recognizing this tax benefit. See Tesla's comment from the 10K:
I believe the likelihood of recognizng the benefit in Q4 2020 is 50/50 but I am keeping it out my Q4 model to be conservative.
Since I am not a tax expert any comments from tax professionals, CPAs, etc would be appreciated.
Copying @st_lopes
TL;DR:
It is possible that Tesla may have Tax Losses even when they report GAAP pre-tax Income due to the fact that employee stock options generate higher tax deductions than GAAP expenses. As such, the Deferred Tax Benefit of $1.9B may not be recognized in Q4 2020. I am leaving the Tax Benefit out of my estimates to be conservative.
Background
From 2004 to 2019, Tesla accumulated pretax losses of $6.9B which means that future tax profits of $6.9B will not be taxed as Tesla can offset the 2004-2019 losses against the future income.
This creates a tax benefit of $1.9B as follows (the numbers are approximate):
Accumulated Net Operating Losses $6.9B
US Federal & State Tax Rate x 28%
Income Tax Benefit $1.9B
Accounting
Normally a company would take the tax benefit each year as the losses were incurred (in Tesla's case, from 2004 to 2019).
But because it was not assured that Tesla would ever be tax profitable, this benefit was not taken (this is not uncommon for start-ups). Once it becomes "more likely than not" that Tesla will generate future taxable income, the benefit comes to the income statement immediately (all or a portion).
GAAP Profits vs Tax Profits
I was convinced that Tesla would realize this benefit in Q4 with the expected strong earnings but now I am not certain.
This is because you can realize GAAP profits but still have a tax loss on your Tax Return.
One big difference between GAAP accounting and Tax Accounting is the way Stock options are treated.
For GAAP, they are valued at the time of grant using a model (usually the Black Scholes model). For Tax purposes, the expense is the actual FMV less the strike price when exercised. With the run up in the stock price, these will generate large tax deductions.
Let's look at Elon's comp award.
The first Tranche of Elon's award had a GAAP expense of $277m but if Elon was to exercise today at $730 a share, the Tax deduction is a whopping $5.6B ($5.3B higher than GAAP).
The reason for this is that Tesla will take a deduction that equals the income that Elon will report.
For Tranche 1 with a $730 exercise price, Elon would report income of $5.6B if exercised today and pay tax on that while Telsa would take the $5.6B deduction.
Recognizing the $1.9B Benefit
Elon won't likely exercise his options soon but there are many employees with stock options exercising each quarter generating large tax deductions and if that number is large enough, Tesla may delay recognizing this tax benefit. See Tesla's comment from the 10K:
We continue to monitor the realizability of the U.S. deferred tax assets taking into account multiple factors, including the results of operations and magnitude of excess tax deductions for stock-based compensation.
I believe the likelihood of recognizng the benefit in Q4 2020 is 50/50 but I am keeping it out my Q4 model to be conservative.
