Near-future quarterly financial projections

[brian45011]

So I only had a quick look at your numbers, but this reduction looks (wildly) invalid for several reasons:

Apologies if it alarmed you.

• You reduced ASP from $59k to $55.5k, while the Troy Model tracker estimates Q3 ASP based on deliveries - i.e. Q2-made cars will be accounted in the Q3. Troy's tracking estimates a current average ASP for Q3 of $60.2k.
• But even if we take the 11,166 Q2-made Model 3's in transit, they are a minority of the cars delivered in Q3. If we go with your estimate of 52,500 Q3 deliveries then that still leaves 41,334 Q3-made cars delivered in Q3 - and you assign an inexplicably low ASP of $56k to them - which is barely higher than the Q2 ASP of $55.4k.

Fixing that omission alone adds about +$246m in revenue to your estimate.

There is a typo (my bad) in my M3 ASP value shown in the Assumptions--it should be $57,500. You can verify it by dividing the M3 Revenue by 52,500 M3 deliveries. Tesla does not report Operating Statement categories by model so every one guesses as to the as reported splits among S, X, and M3. 11,166 is 21% of my estimated 52,500 M3 deliveries (some other minor fraction of those estimated deliveries could be from the 1,473 M3s in Finished Goods Inventory at the beginning of the quarter). There is also some component of the LR versions in the 41,334 remaining. Troy's estimate is but one data point--the Q3 numbers will report the average for the quarter not what is current at the end of the quarter. Using the weighted average between your estimated ASPs of $55k and $60k for M3 deliveries produced during Q2 and Q3, respectively, yields an ASP $58,650 and increases M3 Revenue by $60 million vice $246 million. luvb2b's ASP was $59,000

But there's more that looks unsupported:

• The Troy Model S/X tracker is currently projecting a Q3 S/X ASP of about $106.5k - you used $102k.
  • I estimated $103k which is ex-regulatory credits; luvb2b estimated $104k. Are you adopting Troy's estimate?
• You used 23,500 Model S/X deliveries, while Tesla guided for 27,000. I.e. you are predicting a serious miss.
  • Yes, for the reasons offered in note 1. Tesla has not guided to anything for Q3, only for all of 2018
• These two factors account for a potential revenue gap of $476m (!).
  • The effect on Gross Profit is far less since there is a corresponding "gap" in COGS
• You also reduced Model S/X margins from 27% to 26% - another drop of $24m in revenue.
  • luvb2b's 27% apparently includes regulatory credits; my 26% does not. The difference between our Gross Profits is less than $26 million--almost all of that is because of my lower estimate of deliveries
• You inexplicably reduced Model 3 gross margin to 13%, which is significantly below the guided 15%. Considering that ASP increased significantly in Q3 due to the much higher than expected take-rate of AWD, EAP/FSD and Performance, these will increase not just revenue but margins as well. I.e. even a 15% assumption might turn out to be conservative. This factor alone removes at least $63m of net income.
  • Not inexplicable--attributed in Note 2. to the 11,166 vehicles carried over from Q2 production for which GM% was at best slightly positive. The Q2 Shareholder Letter was internally inconsistent about M3 Gross Margin.
    • "Model 3 gross margin turned slightly positive in Q2" but also
    • "Model 3 gross profit excluding non-cash items shifted from negative in Q1 to positive in Q2,"

Legal and consulting expense is likely in the peanuts category - litigation tends to be the most expensive in the immediate pre-trial phase, none of them are at that stage yet, and unlikely to get there. The facts are also pretty narrow in most of the controversies which limit the scope of any discovery (another source of litigation expense).

We'll see. You may be underestimating the number of hours associates and junior partners can bill while conducting internal familiarization of corporate digital and paper documents in the process of preparing responses to the SEC's subpoena and the DOE's informal RFI . Those associates and junior partners are also busy answering multiple Shareholder Derivative actions and girding up for the inevitable motion practice. The scope of discovery is limited to ANYTHING that may lead to admissible evidence. Defense costs, experts, settlements and judgments in other on-going litigation are also charged to SG&A.

Elon tweeted on August 13:

"I’m excited to work with Silver Lake and Goldman Sachs as financial advisors, plus Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson as legal advisors, on the proposal to take Tesla private" {The former two later also received SEC subpoenas}​

Apparently, the Board of Directors separately retained Wilson Sonsini Goodrich & Rosati and Latham & Watkins plus the public relations specialty firm Joele Frank; and some Directors many have retained their own individual attorneys. (IMO, there is a legitimate issue as to whether the corporate indemnity covers the cost of those retained by Elon, since he claimed to be acting as an individual and not as CEO nor Board Chairman. Another poster in a different thread opined this issue should not be discussed further; I only mention it in this thread because it affects the Operating Statement)

You increased Model S/X Sales expenses by $274m - why? They are mature products, if then Model S/X became more efficient and margins improved significantly in Q2 already. Q3 margins might be even better due to higher deliveries, which distributes fixed costs/overhead more.

You have it exactly backwards. luvb2b's S/X COGS is $274 million more than mine--again largely because his delivery estimate is higher.

All estimates are, a priori, imprecise--often, too low a presumed value in one category may be more than offset by too high of one in a counteracting category. Wildcards this quarter include regulatory credits, currency effects, and NCI's. I'll update my estimates after the delivery 8k and CARB's ZEV report.

It's unclear if you are adopting luvb2b's projections in their entirety or using Troy's estimates in your own modeling. If the latter, why not share it to advance the discussion?

 

[Fact Checking]

Apologies if it alarmed you.

It didn't - but in hindsight my reply was overly rushed and confrontative in tone, apologies for that!

I'm glad we are having this on-topic discussion and your input is much appreciated.

There is a typo (my bad) in my M3 ASP value shown in the Assumptions--it should be $57,500. You can verify it by dividing the M3 Revenue by 52,500 M3 deliveries.

Ok, that explains it - and the typo didn't propagate to the lines as you mention, it only propagated to my calculations.

I still think the Q3 ASP is possibly too low: the $57.5k -> $60.2k difference is $141m of revenue, but see below for more details on how I think Troy's ASP estimates and the gross margin guidance should be applied.

But $57.5k is an entirely fair, conservative estimate for Q3 M3 ASP.

Tesla does not report Operating Statement categories by model so every one guesses as to the as reported splits among S, X, and M3.

Note that none of Tesla's direct competitors are disclosing financials per model that I'm aware of - neither Daimler, Porsche, nor BMW does so. The cash cow models and problem child models are usually closely held proprietary secrets.

I.e. the S/X/3 split reporting Tesla provides for some of the metrics is already unusually granular.

11,166 is 21% of my estimated 52,500 M3 deliveries (some other minor fraction of those estimated deliveries could be from the 1,473 M3s in Finished Goods Inventory at the beginning of the quarter). There is also some component of the LR versions in the 41,334 remaining. Troy's estimate is but one data point--the Q3 numbers will report the average for the quarter not what is current at the end of the quarter. Using the weighted average between your estimated ASPs of $55k and $60k for M3 deliveries produced during Q2 and Q3, respectively, yields an ASP $58,650 and increases M3 Revenue by $60 million vice $246 million. luvb2b's ASP was $59,000

Yeah, so what I tried to point out is that your estimate deviated from Troy's estimate with the stated reason not looking plausible, so I was probing that reason: the way I understand Troy's estimates, the fact that 11k of Q3 vehicles were made in Q2 should already be incorporated in Troy's Q3 ASP estimates "automatically", as the estimates are AFAICT based on measurements of configurations sampled at delivery time, and thus are representative of Q3 ASP as-is, without having to judge how the vehicles got there.

The main part where Troy's methodology is uncertain is not the tail but the head of deliveries IMO: recent deliveries and in particular end of quarter bursts of production and deliveries.

But, Troy's estimates are only valid to the extent the numbers are accurate and the methodology is valid, which it might not be, of course. It doesn't help that Troy's spreadsheet is listing the ASP estimate as a Q2 figure, while it's clearly a current Q3 figure.

I believe @luvb2b's ASP for both Model S/X and Model 3 was based on an older version of Troy's estimates plus a conservative down-marking of it based on gut feeling, before the recent update of Troy's Q3 estimate to beyond $60k.

Measured M3 ASP slowly creeping up in Q3 would be expected if we take the fact that July deliveries were dominated by lower ASP cars from Q2 and also started with a week of very low production due to the July 4th factory shutdown.

I estimated $103k which is ex-regulatory credits; luvb2b estimated $104k.

I believe luvb2b used an older version of Troy's estimates for S/X, plus an arbitrary discount for added caution. (If you are looking for an edge and your model is already better than most Street estimates then being overly cautious in assumptions can pay off without hurting the edge.)

But using a lower estimate is perfectly fine, and might turn out to be the correct number - I was just probing for the reasons behind the lower estimates.

Yes, for the reasons offered in note 1. Tesla has not guided to anything for Q3, only for all of 2018

So 2018 S/X deliveries so far were 21,800 and 22,300, and they guided for a minimum of 100k deliveries annual (and reiterated this guidance in Q2), and if in Q3 they deliver 23,500 as you estimate then they'd have to deliver 32,400 in Q4, which is way and beyond any previous maximum S+X quarterly deliveries.

This is why I asked whether you consider Q3 a S+X deliveries miss - only 23,500 S+X deliveries in Q3 would all but guarantee such a miss.

Note that:

• Both 2016 and 2017 Q3 deliveries were much higher than your estimate: 24,500 and 25,930.
• Tesla guided that S+X received 'record' high new orders during 2018, which would map to record availability of customers to deliver to.
• Since Q3 profitability is more of a question mark than Q4 profitability, it would be in Tesla's interest to move forward any S+X Q4 deliveries it can to Q3, which are their highest margin products.
  
• In fact we do know that despite having record high S+X new orders, Tesla also pulled a number of S+X demand levers that would further increase Q3 deliveries: such as their decision to allow lease holders to take delivery before their lease is up.

I.e. for me it's already hard to find a valid reason to estimate lower than 26.4k+28k deliveries for Q3+Q4 which luvb2b used, which is a conservative split of their 2018 guidance and assumes close to record level deliveries in Q4, let alone an estimate lower than the historical Q3 S+X deliveries they did before, which your estimate assumes.

I.e. I was probing the reasons behind this decision in your S+X delivery estimates. Are you worried about signs of softening of Model S/X demand? I don't think any of the reports in the quarter are indicating that, but I might have missed something.

The effect on Gross Profit is far less since there is a corresponding "gap" in COGS

Yeah, I used your typo-ed ASP and your unit count - with the correct ASP your numbers add up.

luvb2b's 27% apparently includes regulatory credits; my 26% does not. The difference between our Gross Profits is less than $26 million--almost all of that is because of my lower estimate of deliveries

True!

Not inexplicable--attributed in Note 2. to the 11,166 vehicles carried over from Q2 production for which GM% was at best slightly positive.

Is this a valid assumption?

Tesla's reported gross margins are based on deliveries, which in Q2 were very low at 18k due to the 200k VIN limit, and which quarter was front-loaded with a burst of 2k vehicles made in Q1. If production efficiency improved gradually during the quarter then it's probably safe to say that the units made near the end of the quarter carried a better CoG than the vehicles made in Q1 and earlier during the quarter.

Also, this argument also assumes that production inefficiencies are a significant portion of the Model 3's CoG, which is not automatically true: for example if at this stage much of the gross margin is dominated by unit count and how fixed costs/overhead distributes among more units, then it doesn't matter nearly as much when a particular unit was made, what matters is the overall mix of options and the unit count.

The Q2 Shareholder Letter was internally inconsistent about M3 Gross Margin.

So here are the Model 3 gross margin disclosures in the Q2 shareholder letter:

• "Model 3 gross margin turned slightly positive in Q2 even though we were still ramping production and did not yet deliver any All-Wheel-Drive or performance models. This was a significant achievement in the ramp of Model 3, as a result of dramatic reductions in manufacturing costs through lower labor hours per unit, reduction in ramp cost, higher leverage of fixed costs and lower material costs."
• "Model 3 gross profit excluding non-cash items shifted from negative in Q1 to positive in Q2, driving significant improvement in cash profitability."

(I just noticed after writing this that you quoted the same language in the in-line comments that I missed at first sight, so we seem to be on the same page so far.)

If by 'internal inconsistent' you mean the fact that Tesla excluded stock based compensation effects from their M3 margin calculation, that's entirely justified to get a correct picture about M3 margins: stock comp is basically a cost that is largely decoupled from the number and quality of Model 3's made, it scales with headcount and fluctuates wildly based on the vagaries of the vesting schedules and the stock price.

It also makes sense considering that in Q2 had a big run-up in the share price, after spending months at lower levels, which I believe created a significant amount of pent-up demand in Tesla employees exercising equity compensation, so late Q2 could have featured an unusually high level of stock options being exercised, driving up stock comp.

So while I'm fairly certain that Tesla did that in the report to increase overly pessimistic margins, I also think that from a modeling perspective the earlier we exclude stock comp from source numbers the better, and then only add it back in the final estimate based on some guess about headcount growth and probable stock comp behavioral patterns.

(I could be wrong about that though: for example if much of stock comp is not options and ESPP but straight quarterly or bi-annual equity compensation in shares, then stock comp would be dominated of how the schedule of stock comp meets the stock price. Does anyone know the structure and typical schedule of Tesla's equity plans?)

All estimates are, a priori, imprecise--often, too low a presumed value in one category may be more than offset by too high of one in a counteracting category.

Yeah, absolutely.

Wildcards this quarter include regulatory credits, currency effects, and NCI's. I'll update my estimates after the delivery 8k and CARB's ZEV report.

I can see two other wildcards as well:

• stock comp (as mentioned above), which AFAICT is obscuring true gross margin trends, moves R&D expenses around, and which also has a direct bottom line effect on GAAP-income,
• and the effect of the China tariffs: how much of the new tariff costs did Tesla pass through to customers and how did this impact demand, options mix, income and margins from China sales?

 

[brian45011]

(I could be wrong about that though: for example if much of stock comp is not options and ESPP but straight quarterly or bi-annual equity compensation in shares, then stock comp would be dominated of how the schedule of stock comp meets the stock price. Does anyone know the structure and typical schedule of Tesla's equity plans?)

Stock-Based Compensation
We use the fair value method of accounting for our stock options and restricted stock units (“RSUs”) granted to employees and our employee stock purchase plan (the “ESPP”) to measure the cost of employee services received in exchange for the stock-based awards. The fair value of stock options and ESPP is estimated on the grant or offering date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally require significant judgment. The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally four years for stock options and RSUs and six months for the ESPP. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period (prior to 2017, net of estimated projected forfeitures). For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individual performance milestones when the achievement of each individual performance milestone becomes probable. For performance-based awards with a vesting schedule based entirely on the attainment of both performance and market conditions, stock-based compensation expense is recognized for each pair of performance and market conditions over the longer of the expected achievement period of the performance and market conditions, beginning at the point in time that the relevant performance condition is considered probable of achievement. The fair value of such awards is estimated on the grant date using Monte Carlo simulations. As we accumulate additional employee stock-based awards data over time and as we incorporate market data related to our common stock, we may calculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based awards and the stock-based compensation expense that we will recognize in future periods. Stock-based compensation expense is recorded in cost of revenue, research and development expense and selling, general and administrative expense {forfeitures come into play, particularly with high turnover churn, because ISOs are only valid within 90 days after cessation of employment.}​

SEC Filing | Tesla, Inc.
2010 Equity Incentive Plan
2010 Employee Stock Purchase Plan
(I think the IRS would be very interested if Tesla were using some form of stock-based compensation beyond the four corners of these filings.)

I do not fully understand all the minutiae. Employees can sell ESPP shares accrued in the prior semi-annual period on the first of March and September. A sound financial plan is to fill the pipeline initially, wait for LTCGs to apply, and then begin harvesting the "15% lower of" gains. Lower-level employees can use market-based options (without reporting) for hedges during the LTCG holding periods.

See comments up-thread about Elon's 2018 CEO Incentive Plan and it's current effect in SG&A.

While relatively minor, the corporation's share of employment taxes is recognized when options are exercised. (It's only been material once in May 2016--when Elon exercised options that were expiring at the end of that year.)

All this works fine in a rising share price environment, but can adversely affect morale if the share price is falling.

 

[Fact Checking]

I do not fully understand all the minutiae. Employees can sell ESPP shares accrued in the prior semi-annual period on the first of March and September. A sound financial plan is to fill the pipeline initially, wait for LTCGs to apply, and then begin harvesting the "15% lower of" gains. Lower-level employees can use market-based options (without reporting) for hedges during the LTCG holding periods.

Firstly, thanks for the quote - it means that most stock comp expenses are estimated at the time of hiring, so the timing of employees exercising options shouldn't matter to stock comp. What does matter is performance based awards and the 'the relevant performance condition is considered probable of achievement' trigger condition, which depends on current stock price and other performance metrics.

In terms of the 3 main stock comp categories:

1) ESPP

I think ESPP works the following way, roughly: employees that enroll in the program can dedicate up to 15% of their cash salary for ESPP purchases. During the 6 month period the ESPP price is 85% of the lowest stock price the stock made in those 6 months. With a volatile stock that's a very good deal: you get not just the 15% discount, but half of the average volatility bonus as well.

Since annual cash compensation for Tesla is around 2.4 billion dollars, and the Tesla ESPP program is reportedly popular, let's assume that 10% of all cash compensation gets rolled into the ESPP program. That's $240m annual, $120m bi-annual.

In the March-September period the TSLA price had a low of around $250 and was around $300 early September. So the resulting ESPP purchase price would be $212.50 to employees. But the 'grant date' would be March 1: a starting price of $335 and a fair amount of implied volatility which I'd guess to be at least $50 for a 6 months period. So if we try to guess their ESPP options price modeling, we can use ($335-50)*0.85 = $242.25 as the price they used as a cost, and $92.75 as the estimated benefit the employee receives per share. $120m/$242.25 is ~495,000 shares, which at $92.75 a share adds up to $45.9m per 6 months, or $22.9m per quarter - a significant cost contribution from ESPP alone. (If I did the math right, and my confidence level in this is low.)

2) RSU

RSU is a simpler structure, at least in principle: it's a straight stock units bonus of about 15% of cash comp on average according to Glassdoors, etc. - vested over 4 years, counted from the hiring date (i.e. not batched). I.e. the scope is $360m annual, with cost estimated at the date of hiring based on current daily closing price of the stock. Since the number of RSU units is a straight 15% of the cash salary of the employee at the time of hire, the value granted should be a straight $360m annual - $90m quarterly, fluctuating with mass hiring/layoff effects and seasonal patterns.

3) stock options and performance awards

The hardest to estimate, I believe, are stock options: typically awarded to top talent and executives, plus the performance awards that are available to a broader set of employees. Since they are using Black-Scholes and Monte-Carlo simulations to value these, I find it very hard to replicate their assumptions with any reasonable accuracy. It gets further complicated by the fact that there's no averaging of large numbers, the exact date and grant conditions of the top say 100 options packages matters to the future time-line of expensing them, with the top 10 mattering most, probably.

But for new executives the exercise price of the stock option packages is typically priced at the current stock price at the date of hire, so in principle the main cost should again be the volatility premium of the options, estimated and expensed over the vesting period.

The performance awards trigger conditions seem harder to describe. Has anyone here attempted to do that?

Summary: I.e. the stock comp baseline would be roughly $22m (ESPP) + $90m (RSU) quarterly expense baseline (=$112m), where the RSU part is largely stock price invariant, plus the variable effect of new stock options awarded, or old stock options triggering and being re-valued.

It's all way too vague, tentative and imprecise I think, with a very low level of confidence.

 

[neroden]

Nobody may have thought about this, but...

... the drop in stock price in mid-August means that stock option grants after that are "valued" lower for purposes of corporate reporting. So it increases the chances of showing a GAAP profit.

The expensing of stock options grants is nonsense; it's a form of double-counting since they're already present in dilution. But that's GAAP for ya.

However, wackily, Musk's antics may have guaranteed GAAP profit by reducing the line item for stock-based compensation. :eyeroll:

 

[ggr]

Firstly, thanks for the quote - it means that most stock comp expenses are estimated at the time of hiring, so the timing of employees exercising options shouldn't matter to stock comp. What does matter is performance based awards and the 'the relevant performance condition is considered probable of achievement' trigger condition, which depends on current stock price and other performance metrics.

In terms of the 3 main stock comp categories:

1) ESPP

I think ESPP works the following way, roughly: employees that enroll in the program can dedicate up to 15% of their cash salary for ESPP purchases. During the 6 month period the ESPP price is 85% of the lowest stock price the stock made in those 6 months. With a volatile stock that's a very good deal: you get not just the 15% discount, but half of the average volatility bonus as well.

Since annual cash compensation for Tesla is around 2.4 billion dollars, and the Tesla ESPP program is reportedly popular, let's assume that 10% of all cash compensation gets rolled into the ESPP program. That's $240m annual, $120m bi-annual.

In the March-September period the TSLA price had a low of around $250 and was around $300 early September. So the resulting ESPP purchase price would be $212.50 to employees. But the 'grant date' would be March 1: a starting price of $335 and a fair amount of implied volatility which I'd guess to be at least $50 for a 6 months period. So if we try to guess their ESPP options price modeling, we can use ($335-50)*0.85 = $242.25 as the price they used as a cost, and $92.75 as the estimated benefit the employee receives per share. $120m/$242.25 is ~495,000 shares, which at $92.75 a share adds up to $45.9m per 6 months, or $22.9m per quarter - a significant cost contribution from ESPP alone. (If I did the math right, and my confidence level in this is low.)

I have an N=1 data point, from my old job as an executive at Qualcomm. You are mostly correct, except that the discount applied to the lower of the beginning and ending of the period stock prices, not the lowest during the period.

2) RSU

RSU is a simpler structure, at least in principle: it's a straight stock units bonus of about 15% of cash comp on average according to Glassdoors, etc. - vested over 4 years, counted from the hiring date (i.e. not batched). I.e. the scope is $360m annual, with cost estimated at the date of hiring based on current daily closing price of the stock. Since the number of RSU units is a straight 15% of the cash salary of the employee at the time of hire, the value granted should be a straight $360m annual - $90m quarterly, fluctuating with mass hiring/layoff effects and seasonal patterns.

Many Sillycon Valley style companies have switched from issuing options (below) to issuing RSUs. I don't know what Tesla does in this regard. The 15% you mention may be the industry average, but (again, N=1) at some companies the RSU budget is independent of the compensation budget, and depends on that period's (half year, full year) performance of the company, and is then allocated out to individuals (not necessarily proportionally to salary).

3) stock options and performance awards

The hardest to estimate, I believe, are stock options: typically awarded to top talent and executives, plus the performance awards that are available to a broader set of employees. Since they are using Black-Scholes and Monte-Carlo simulations to value these, I find it very hard to replicate their assumptions with any reasonable accuracy. It gets further complicated by the fact that there's no averaging of large numbers, the exact date and grant conditions of the top say 100 options packages matters to the future time-line of expensing them, with the top 10 mattering most, probably.

But for new executives the exercise price of the stock option packages is typically priced at the current stock price at the date of hire, so in principle the main cost should again be the volatility premium of the options, estimated and expensed over the vesting period.

The performance awards trigger conditions seem harder to describe. Has anyone here attempted to do that?

Normal in the Valley used to be options, even in small amounts, for pretty much all non-labor staff (even secretaries etc.). When maybe 2/3rds of your workforce get issued options, it has a significant effect on the company accounts. I don't understand the details, not being an accountant, but it actually helps (or helped, before the recent changes to GAAP accounting) when the employees exercised the options, as the options appear as a liability on the balance sheet.

Summary: I.e. the stock comp baseline would be roughly $22m (ESPP) + $90m (RSU) quarterly expense baseline (=$112m), where the RSU part is largely stock price invariant, plus the variable effect of new stock options awarded, or old stock options triggering and being re-valued.

It's all way too vague, tentative and imprecise I think, with a very low level of confidence.

Unfortunately I have to agree with the low level of confidence. Tesla is pretty secretive about compensation details.

 

[brian45011]

2) RSU
RSU is a simpler structure, at least in principle: it's a straight stock units bonus of about 15% of cash comp on average according to Glassdoors, etc. - vested over 4 years, counted from the hiring date (i.e. not batched). I.e. the scope is $360m annual, with cost estimated at the date of hiring based on current daily closing price of the stock. Since the number of RSU units is a straight 15% of the cash salary of the employee at the time of hire, the value granted should be a straight $360m annual - $90m quarterly, fluctuating with mass hiring/layoff effects and seasonal patterns.

The only TSLA disclosures about RSU grants I have found were for Section 16 grants in Form 4s. Some implications about Tesla's compensation approach might be deduced from Deepak Ahuja's initial Form 4 when he returned as CFO after "retiring early" about 21 months earlier. http://ir.teslamotors.com/index.php/static-files/294f888e-787d-43d4-a713-f0121361c469

Upon his return he received about $10 million in zero basis RSUs that vest over a four year period between March 2018 and 2021. IIRC, the annual meeting proxies show his salary remuneration as $500,000/year. (He also received an equal 42,661 share options in ISOs & NQSOs with a strike price of $246.17.)

There may be a few other high level executives below the Section 16 reporting requirements that also are granted zero-basis RSUs but I hope there are not many.

 

[ggr]

The only TSLA disclosures about RSU grants I have found were for Section 16 grants in Form 4s. Some implications about Tesla's compensation approach might be deduced from Deepak Ahuja's initial Form 4 when he returned as CFO after "retiring early" about 21 months earlier. http://ir.teslamotors.com/index.php/static-files/294f888e-787d-43d4-a713-f0121361c469

Upon his return he received about $10 million in zero basis RSUs that vest over a four year period between March 2018 and 2021. IIRC, the annual meeting proxies show his salary remuneration as $500,000/year. (He also received an equal 42,661 share options in ISOs & NQSOs with a strike price of $246.17.)

There may be a few other high level executives below the Section 16 reporting requirements that also are granted zero-basis RSUs but I hope there are not many.

My understanding of "zero basis" RSUs is simply that they don't incur tax at the time of granting them, rather when they vest. At the time of vesting, the cost of the stock at the time is taxed as income. Most companies automatically sell enough of the vested stock to cover the tax withholding at the time. From the company's point of view it costs the same as a cash bonus, but you can't vest cash over time.

 

[GeorgeSymonds]

• The Troy Model S/X tracker is currently projecting a Q3 S/X ASP of about $106.5k - you used $102k.

I've managed to get hold of the data and work out the average advertised price of all the new inventory on one of the trackers listing about 2000 MS and MX in the US - on the basis that with that volume the figure is roughly proportional to the MS/MX market, the average comes out at $108k which is even higher.

Whether that figure varies by country I don't know but as a data point I found it potentially useful.

 

[brian45011]

I've managed to get hold of the data and work out the average advertised price of all the new inventory on one of the trackers listing about 2000 MS and MX in the US - on the basis that with that volume the figure is roughly proportional to the MS/MX market, the average comes out at $108k which is even higher.

Whether that figure varies by country I don't know but as a data point I found it potentially useful.

Is that the averaged "offered" price or the averaged "sold" price? The EV-CPO site shows various discounts from original asking (offered) prices (admittedly, the age and mileage of never-titled vehicles plays a role in the discounting)

Also, there have been various anecdotal claims of negotiating lower-than-offered transactions for vehicles in inventory, particularly in the final weeks of a quarter.

As more EV alternatives come to market, Tesla's "no discounts" policy may come under stress.

 

[generalenthu]

Looks like one-time autopilot revenue will be recognized in Q3 as well.

Elon Musk on Twitter

 

[mongo]

Looks like one-time autopilot revenue will be recognized in Q3 as well.

Elon Musk on Twitter

Deferred revenue was reported as $576,321,000 last quarter (Q1 was $536,465,000). Need a @ValueAnalyst poll on how much of that is EAP, and how much of EAP will be considered completed...

 

[ValueAnalyst]

Deferred revenue was reported as $576,321,000 last quarter (Q1 was $536,465,000). Need a @ValueAnalyst poll on how much of that is EAP, and how much of EAP will be considered completed...

Not a good poll question, as it’s highly technical and accounting-related, so most people would be guessing. You’d likely get 25%ish answer among four options.

This is something I looked into but couldn’t figure out with high confidence. The best we can say, and even this has holes, that Tesla has collected $1B+ in Autopilot cash, but the total amount listed in update letters as recognized is not nearly as much.

 

[ValueAnalyst]

Looks like one-time autopilot revenue will be recognized in Q3 as well.

Elon Musk on Twitter

I don’t know if this fact alone means revenue will be recognized. Tesla is very vague about its autopilot revenue/profit recognition.

 

[mongo]

Not a good poll question, as it’s highly technical and accounting-related, so most people would be guessing. You’d likely get 25%ish answer among four options.

This is something I looked into but couldn’t figure out with high confidence. The best we can say, and even this has holes, that Tesla has collected $1B+ in Autopilot cash, but the total amount listed in update letters as recognized is not nearly as much.

Q4 '17 deferred was over a billion. Are there other items in that total besides EAP/FSD?

 

[ValueAnalyst]

Q4 '17 deferred was over a billion. Are there other items in that total besides EAP/FSD?

A bunch of items. I’m on my phone atm, but you can find the list in form 10-k and 10-q

 

[Todd Burch]

I don’t know if this fact alone means revenue will be recognized. Tesla is very vague about its autopilot revenue/profit recognition.

I don’t think it’s a coincidence that the update is coming out before end of Q3.

I believe Tesla released an autopilot update near end of quarter in the past in order to recognize revenue.

 

[luvb2b]

couple of quick comments for @Fact Checking and @brian45011 :

my asp estimates are derived as a function of auto revenue recognized, adjusted for % of vehicles leased. i take forward the estimates when the 3 is introduced using tesla's commentary around asp's (they were flat, or went up a little, etc.). i made no use of 3rd party estimates based on actual purchases.

my asp's include non-zev credits because that's how tesla lumps together revenue in the auto line. so a 59k asp would be actually 58.25k at retail with ~$750 of non-zev credits.

stock based comp starting last quarter includes a 50-60m quarterly bump for elon's compensation package. that should be included in the baseline that was discussed so that stock based comp should be expected to run around 200m+ again.

 

[ValueAnalyst]

I don’t think it’s a coincidence that the update is coming out before end of Q3.

I believe Tesla released an autopilot update near end of quarter in the past in order to recognize revenue.

Do you know how much AP revenue Tesla recognized in Q1, the last major update?

 

[Todd Burch]

Do you know how much AP revenue Tesla recognized in Q1, the last major update?

No, but I bet SOMEONE does or is willing to look it up .