Near-future quarterly financial projections

[The Accountant]

I think it's a tongue-in-cheek post.

Decreasing auto margins of ~2% combined with steady price increases throughout the year doesn't make a whole lot of sense. Auto margins have increased each quarter since 4Q20.

But you're right. Reading it literally is incorrect.

The point that some Analysts with Buy Ratings post conservative estimates in hopes of praising an earnings beat is a fair position. I don't agree with that but it's possible.
However, to then support it by saying that these analysts assume a 5% margin on incremental units is disingenuous and meant to deceive.

 

[MP3Mike]

Well I was wrong, the Bitcoin impairment for Q3 was $51M: https://tesla-cdn.thron.com/static/...;filename="TSLA-Q3-2021-Quarterly-Update.pdf"

Operating income increased substantially YoY mainly due to vehicle volume growth and cost reduction. Positive impacts were partially offset by ASP decline, growth in operating expenses, lower regulatory credit revenue, additional supply chain costs, Bitcoin-related impairment of $51M and other items.

 

[The Accountant]

Well I was wrong, the Bitcoin impairment for Q3 was $51M: https://tesla-cdn.thron.com/static/TWPKBV_TSLA_Q3_2021_Quarterly_Update_SI1AKE.pdf?xseo=&response-content-disposition=inline;filename="TSLA-Q3-2021-Quarterly-Update.pdf"

Hopefully this will the last time we see a charge.

 

[heltok]

If we ignore the generally accepted retarded accounting practices, did Tesla make more profit hodling Bitcoin than selling cars in Q3?

 

[mongo]

If we ignore the generally accepted retarded accounting practices, did Tesla make more profit hodling Bitcoin than selling cars in Q3?

Nah (ignoring operations)
3.6B gross automotive revenue
2.5B total bitcoin holdings (1.3B profit)

 

[heltok]

Nah (ignoring operations)
3.6B gross automotive revenue
2.5B total bitcoin holdings (1.3B profit)

Net income attributable to common stockholders (GAAP): $1618B
Bitcoin: $1300B
Total profit: $2918B of which Bitcoin was 44%.

 

[MP3Mike]

Net income attributable to common stockholders (GAAP): $1618B
Bitcoin: $1300B
Total profit: $2918B of which Bitcoin was 44%.

No, none of the $3.6B of gross profit is attributable to Bitcoin. (They can't recognize the gain until they sell it.)

 

[heltok]

No, none of the $3.6B of gross profit is attributable to Bitcoin. (They can't recognize the gain until they sell it.)

Like I cannot recognize my TSLA gains until I sell them. Still I will act as if my networth has increased as I have the option to sell them if I decide to.

 

[mongo]

Net income attributable to common stockholders (GAAP): $1618B
Bitcoin: $1300B
Total profit: $2918B of which Bitcoin was 44%.

Yah, and 44% is less than 56% (1.3<1.6). So normal business was more profitable.

No, none of the $3.6B of gross profit is attributable to Bitcoin. (They can't recognize the gain until they sell it.)

They were adding the given bottom line profit to the bitcoin profit for a cashed out total of 2.9B, not using the 3.6B gross profit.

 

[mrdoubleb]

@The Accountant could you help us understand Tesla's debt situation?

Gary Black says Tesla has 16 Bn cash and 8 Bn debt. I think that 16 Bn may not include the Bitcoin position which is currently worth about 3 Bn or so I was told.

In any case the more confusing part - for me - is the debt listed on page 22 of the balance sheet.

"Current portion of debt and finance leases shows" 1.7 Bn, "Debt and finance leases, net of current portion" shows 6.4 Bn (and has been decreasing very nicely!). So do I add these up and is that how i get total debt (8.1 Bn, probably what Gary was referring to)?

But then they break this debt down, and "Vehicle and energy product financing (non -recourse)" shows 4.5 Bn. If this is the leasing amount provided by financial partners (banks) than I agree with those who say this should not really count as the company's debt as the customer who leases the vehicle pays this monthly, plus if they default, quit the lease, or total the car, tesla can sell the car or collect insurance, thus this debt is 100% (well, ok maybe 90%) covered all the time.

This would only leave "Total debt excluding vehicle and energy product financing" at 2,1 Bn. Is that all? Does Tesla really only have 2,1 Bn debt vs 16 Bn (+3?) in cash?

In either case the current junk rating is ridiculous, the question is how ridiculous.

Thanks in advance!

 

[The Accountant]

@The Accountant could you help us understand Tesla's debt situation?

Gary Black says Tesla has 16 Bn cash and 8 Bn debt. I think that 16 Bn may not include the Bitcoin position which is currently worth about 3 Bn or so I was told.

In any case the more confusing part - for me - is the debt listed on page 22 of the balance sheet.

"Current portion of debt and finance leases shows" 1.7 Bn, "Debt and finance leases, net of current portion" shows 6.4 Bn (and has been decreasing very nicely!). So do I add these up and is that how i get total debt (8.1 Bn, probably what Gary was referring to)?

But then they break this debt down, and "Vehicle and energy product financing (non -recourse)" shows 4.5 Bn. If this is the leasing amount provided by financial partners (banks) than I agree with those who say this should not really count as the company's debt as the customer who leases the vehicle pays this monthly, plus if they default, quit the lease, or total the car, tesla can sell the car or collect insurance, thus this debt is 100% (well, ok maybe 90%) covered all the time.

This would only leave "Total debt excluding vehicle and energy product financing" at 2,1 Bn. Is that all? Does Tesla really only have 2,1 Bn debt vs 16 Bn (+3?) in cash?

In either case the current junk rating is ridiculous, the question is how ridiculous.

Thanks in advance!

Yes - You're correct . . .Recourse Debt is only $2.1B. We will get details of this when the 10Q comes out.
Here was the Debt at June 30. We know they paid down the 2025 Notes in Q3 so what is left is what I highlighted in yellow. It totaled $2.2B at June 30.

 

[mrdoubleb]

Yes - You're correct . . .Recourse Debt is only $2.1B. We will get details of this when the 10Q comes out.
Here was the Debt at June 30. We know they paid down the 2025 Notes in Q3 so what is left is what I highlighted in yellow. It totaled $2.2B at June 30.

View attachment 724140

Thanks, that's amazing!

 

[EVNow]

Yes - You're correct . . .Recourse Debt is only $2.1B. We will get details of this when the 10Q comes out.
Here was the Debt at June 30. We know they paid down the 2025 Notes in Q3 so what is left is what I highlighted in yellow. It totaled $2.2B at June 30.

View attachment 724140

It’s incredible how a fast growing, capital intensive company can have so little debt. And they can cheaply raise as much money as they need selling stock ...

 

[dc_h]

It’s incredible how a fast growing, capital intensive company can have so little debt. And they can cheaply raise as much money as they need selling stock ...

They can raise as much money as they need selling cars.

 

[EVNow]

They can raise as much money as they need selling cars.

But not $5B in a day

Won't be surprised if we see a "small" cap raise soon < 1%.

 

[CorneliusXX]

But not $5B in a day

Won't be surprised if we see a "small" cap raise soon < 1%.

How come? Accelerated CapEx, or just to fortify the balance sheet further?

 

[EVNow]

How come? Accelerated CapEx, or just to fortify the balance sheet further?

10-Q hinted at somewhat accelerated capex (some $8B a year). This can be raised with free cash flow - but easier with a cap raise.

Tesla still has junk debt rating - so debt is not a good way to raise money at this time. Far cheaper to issue stock.

 

[LYTRIDR]

Won't be surprised if we see a "small" cap raise soon < 1%.

How come? Accelerated CapEx, or just to fortify the balance sheet further?

I personally would be shocked if Tesla dilutes for a cap raise at the moment.

• Tesla reported a $164M decrease in cash in Q3 2021
• Had $16.065B cash on hand at the end of Q3
• Paid down debt of $1.5B

At this rate of cash burn, Tesla could continue for 100 quarters, however, within 2 quarters they will have paid down ALL of their debt. Additionally, within that time, they will have doubled the number of factories in production, reduced by 2 the number of new factories being constructed, and likely had a credit upgrade to investment grade.

Elon has stated that they are not capital constrained for production, but that they cannot find enough good uses to spend the war chest in an effective manner. With a year's worth of vehicle production already sold, FCF about to explode, and no place to spend the money, why would they dilute shareholders? It just does not seem like first principles thinking to do so.

 

[Rarity]

10-Q hinted at somewhat accelerated capex (some $8B a year). This can be raised with free cash flow - but easier with a cap raise.

Tesla still has junk debt rating - so debt is not a good way to raise money at this time. Far cheaper to issue stock.

I hunted that reference down. Perhaps more like $5-$7 billion a year. I would definitely support higher spending on this, if Tesla could use it well. I note that Google, for example, spends $22 billion a year.

Cash Flow and Capital Expenditure Trends

Our capital expenditures are typically difficult to project beyond the short term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in future global market conditions. We are simultaneously ramping new products in the new Model S and Model X, Model Y, Megapack and Solar Roof, constructing or ramping manufacturing facilities on three continents and piloting the development and manufacture of new battery cell technologies, and the pace of our capital spend may vary depending on overall priority among projects, the pace at which we meet milestones, production adjustments to and among our various products, increased capital efficiencies and the addition of new projects. Owing and subject to the foregoing as well as the pipeline of announced projects under development and all other continuing infrastructure growth, we currently expect our capital expenditures to exceed $6 billion in 2021 and be between $5 to $7 billion in each of the next two fiscal years.

Our business has recently been consistently generating cash flow from operations in excess of our level of capital spend, and with better working capital management resulting in shorter days sales outstanding than days payable outstanding, our sales growth is also facilitating positive cash generation. On the other hand, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects. Moreover, as our stock price has significantly increased, we have seen higher levels of early conversions of “in-the-money” convertible senior notes, which obligates us to deliver cash and or shares pursuant to the terms of those notes. Overall, we expect our ability to be self-funding to continue as long as macroeconomic factors support current trends in our sales.

 

[The Accountant]

I personally would be shocked if Tesla dilutes for a cap raise at the moment.

• Tesla reported a $164M decrease in cash in Q3 2021
• Had $16.065B cash on hand at the end of Q3
• Paid down debt of $1.5B

At this rate of cash burn, Tesla could continue for 100 quarters, however, within 2 quarters they will have paid down ALL of their debt. Additionally, within that time, they will have doubled the number of factories in production, reduced by 2 the number of new factories being constructed, and likely had a credit upgrade to investment grade.

Elon has stated that they are not capital constrained for production, but that they cannot find enough good uses to spend the war chest in an effective manner. With a year's worth of vehicle production already sold, FCF about to explode, and no place to spend the money, why would they dilute shareholders? It just does not seem like first principles thinking to do so.

I agree. I am expecting Tesla to generate, at a minimum, $14B in Cash from Operations in 2022.
With say $8B in CAPEX, that leaves $6B to add to their bank account.