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Near-future quarterly financial projections
- Thread starter luvb2b
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- elon is an ass
Buckminster
Well-Known Member
Can someone like @luvb2b or @ReflexFunds do a conservative model of financials based on the following guidance from the ER letter:
- Expecting to deliver 360,000 to 400,000 vehicles in 2019
- Aiming to more than double energy storage deployments to over 2 GWh in 2019
- Annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020.
- Target a 25% Model 3 non-GAAP gross margin at some point in 2019
- Operating expenses will grow by less than 10% in 2019
- Restructuring actions taken in Q1 will reduce our costs by about $400 million annually
- 2019 capex is expected to be about $2.5 billion
Deliveries, take-rates, ASPs and gross margins:
P&L:
Cash flow:
P&L:
Cash flow:
Your take rates for Q3 '19 and Q4'19 add up to 104%.
Good point! Thanks. I earlier increased P take rate due to removal of S 75D offer, but obviously forgot to update it all. Take rates are only used to determine ASP and gross margin so will only make $10m or so difference but I'll update.
Fact Checking
Well-Known Member
One minor formatting request: would it be possible to right-align the column label fields as well ("FY19", etc.), similarly to the numbers?
Right now there's an offset that makes it ambiguous at first glance which column of numbers belongs to which quarter.
mershaw2001
I'm short the short sellers
@ReflexFunds Why did zev credits go to zero in 2019 for the whole year? I thought that most recently one analyst just modeled a whopping 400 m in zev credits for the first quarter.
Fact Checking
Well-Known Member
Nice, thank you very much for sharing this!
A question about Chinese and European Model 3 deliveries:
- in Q1->Q2 you are estimating 12k+22.2k -> 13.1k+24.3k China+EU deliveries, but this is only an increase of +3.2k.
- In U.S. deliveries you are estimating a Q1->Q2 increase of 22.8k -> 37.5k, which is an increase of 14.7k units.
- Total Q1->Q2 increase in Model 3 deliveries is 18k units.
- Tesla's production and deliveries guidance for Q1'19 is:
- "While the number of Model 3 vehicles produced should increase sequentially in Q1, deliveries in North America during Q1 will be lower than the prior quarter as we start delivering cars in Europe and China for the first time. As a result of the start of Model 3 expansion into Europe and China, deliveries will be lower than production by about 10,000 units due to vehicle transit times to these markets."
- We can take Model S+X "in-transit" figures for a baseline of how a 'smoothed' international delivery pattern looks like: in 2018 Q1,Q2,Q3,Q4 Tesla had 4060,3,892,3776,1897 Model S+X's "in transit" at quarter end. It's remarkably stable, with a slight reduction at the end of year which is probably explained by the seasonal Fremont shutdown in the last 2 weeks of the year. But Q1->Q2 variance in "in-transit" vehicles is remarkably stable to within ~200 units.
- I'd expect international Model 3 deliveries to be similarly stable over Q1->Q2 - the point of "filling the pipeline" is to keep it running smoothly - exactly what we can observe in the more mature Model S+X international delivery logistics chain.
- But your numbers do not appear to be showing such stability in the international delivery pipeline: if Model 3 production in Q1 outpaces deliveries by ~10k units due to international deliveries, according to Tesla's guidance, then Q2 must IMO necessarily show the benefits of those in-transit vehicles: an increase of about 10k units in deliveries (assuming similar levels of Q2 production). Your numbers suggest an increase of only +3.2k units.
- By Q4 you are estimating 17.2k+25.8k deliveries, which is +8.8k increase, roughly in line with the Q1 guidance of +10k production over deliveries - but why would Tesla want to delay deliveries for 3 quarters? Why wouldn't they gain most of the benefits from filling the logistics pipeline in Q2 already, and have Q3 and Q4 gains from incremental increases in production and seasonal patterns?
- Tesla's usual seasonal pattern is that Q1 is the weakest quarter of the year, with deliveries increasing in Q2.
A related question: in Q3 and Q4 your total Model 3 estimated delivery rate is 83k and 86k units, which corresponds to 6.3k/week and 6.5k/week sustained production rate. Tesla guided:
"Model 3 production volumes in Fremont should gradually continue to grow throughout 2019 and reach a sustained rate of 7,000 units per week by the end of the year."
I.e. your numbers suggest that Tesla would miss their 2017 Model 3 production target significantly? Given that they already reached 7k/week peak rate in single-day stress-testing in December 2018 already, what is the reason they shouldn't be able to reach 7k/week sustained by the end of 2019?
Fact Checking
Well-Known Member
A question about your opex estimates.
Tesla defines "GAAP opex" as R&D + SG&A + "other".
For FY2019 Tesla guided the following:
"Our operating expenses will grow by less than 10% in 2019, thus creating massive leverage given the top line growth in 2019."
How do you interpret the "less than 10%" figure, is it relative to Q4'2018 opex levels, or relative to FY2018 opex? The more logical comparison would be Q4'2018, because that already sees the benefits of several cost cutting measures. Guiding +10% over all of 2018 would be pretty meaningless in that it includes "ancient history" quarters such as Q1 and Q2 of 2018, with various temporary expenses and inefficiencies that have no relevance for 2019.
If we take Q4'2018 opex levels, they were 667.5+356.3+5.6=$1,029.3m. A 10% increase would give $1,132.2m for Q4'19. Your estimates for Q4'19 are 870+335+5=$1,260m, which is 22.4% higher - more than twice Tesla's guidance.
Do you expect Tesla to miss their opex guidance, or is your reading of their guidance different from mine? You include a 30% increase in R&D costs - which would assume significant new R&D hiring - which would be discretionary action taken by management, and would result in an opex guidance miss.
Fact Checking
Well-Known Member
Another question is EAP take rate in Q1: you include 60% take rate for Q4'2018, which I suspect can be supported from the introduction of the Medium Range and the expiry of the tax credit that probably moved some demand forward and stretched buyers financially who still wanted to take advantage of the full $7.5k tax credit.
But in Q1 and Q2 you estimate an EAP take rate of 50% and 55%. Why would it drop? EAP is getting progressively better:
- Navigate on Autopilot (which is planned to gain a no-confirmation variant in a couple of weeks),
- Advanced Summon,
- in Q1/Q2 we also have the inrush of high ASP European/Asian orders (and if Q3 is any measure then EAP take rate usually increases when there's a rush of high ASP configurations),
- plus there's an increasing body of video evidence of EAP saving people from accidents via autosteer - which should incrementally increase the confidence of existing customers to upgrade to EAP.
- in Q2 we'll probably have the introduction of HW3 in all new hardware.
- In Troy's tracker the EAP take rate consistently hovered in the ~80% range in Q3'2018. While it's a self-selecting survey, the Q3 ASP was pretty accurate, to within $1k, which suggests that it was pretty close to a representative sample of Q3 buyers.
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Fact Checking
Well-Known Member
I was wondering about the following "accounts receivable" and "accounts payable" mystery:
[TD2]
Accounts payable
[/TD2] [TD2]
Inventory
[/TD2] [TD2]
Accounts receivable
[/TD2]
[TD2] $1,860,341 [/TD2] [TD2] $2,067,454 [/TD2] [TD2] $ 499,142 [/TD2]
[TD2] $2,075,333 [/TD2] [TD2] $2,220,336 [/TD2] [TD2] $ 440,349 [/TD2]
[TD2] $2,359,316 [/TD2] [TD2] $2,438,111 [/TD2] [TD2] $ 453,539 [/TD2]
[TD2] $2,385,778 [/TD2] [TD2] $2,471,382 [/TD2] [TD2] $ 607,734 [/TD2]
[TD2] $2,390,250 [/TD2] [TD2] $2,263,537 [/TD2] [TD2] $ 515,381 [/TD2]
[TD2] $2,603,498 [/TD2] [TD2] $2,565,826 [/TD2] [TD2] $ 652,848 [/TD2]
[TD2] $3,030,493 [/TD2] [TD2] $3,324,643 [/TD2] [TD2] $ 569,874 [/TD2]
[TD2] $3,596,984 [/TD2] [TD2] $3,314,127 [/TD2] [TD2] $1,155,001 [/TD2]
[TD2] $3,404,451 [/TD2] [TD2] $3,113,446 [/TD2] [TD2] $ 949,022 [/TD2]
Inventory levels were at around $2.4b through most of 2017, and accounts receivable was around $500m-$600m.
Inventory increased by about 40% by the end of 2018, due to the ramp-up of the Model 3 production pipeline. But accounts receivable increased even more, to $950m, which is a 85% YoY increase. This is rather counter-intuitive, because payment is taken at delivery and payment clearing delays are relatively short in the T+1 - T+2 range in the U.S., which was the majority of Model 3 deliveries.
Also note that the Q4 FCF does seem to be a bit "expectation managed" to me: $910m is just above Q3's $881m.
Based on that I'm wondering whether Tesla was saving up a bit of accounts receivable cash flow in Q4, to improve Q1 free cash flow? I think they have several discretionary tools to delay payments, in exchange for a bit higher interest income from the payment processing financial institutions, etc.
Note that there's a similar counter-intuitive trend in the accounts payable figures as well: there's a decrease of -$192.5m in accounts payable, despite Tesla making more cars and having a 3% sequential increase in car-sales revenue.
They did highlight it in the Q4 update letter:
Tesla didn't volunteer any explanation for the decrease in payables outstanding, but I don't think there's many scenarios under which Tesla would have been forced to pay suppliers faster - my working hypothesis is that it was primarily voluntary, to transfer Q4 FCF to Q1.
To do so Tesla had some discretionary leeway to manage expectations: they could have paid suppliers in Q4 faster than required, to drain some of the Q4 FCF, which would then help Q1 FCF via payables expansion.
(This could also have built some goodwill with suppliers, who have probably seen early Q4 payments as a welcome bonus to counter-act some of the possibly contracting ICE order books, in a critical end of year quarter.)
TL;DR: while neither of these factors would have an impact on revenue or income due to accrual accounting, but they could have a significant positive effect on Q1'19 free cash flow and cash flow, in the "hundreds of millions of dollars" range.
The motivation would be to counteract the cash position effect of the -$920m March convertibles repayment and of the ~10k vehicles in transit logistics artifact due to European and Chinese deliveries.
| Quarter |
| Dec 31, 2016 |
| Mar 31, 2017 |
| Jun 30, 2017 |
| Sep 30, 2017 |
| Dec 31, 2017 |
| Mar 31, 2018 |
| Jun 30, 2018 |
| Sep 30, 2018 |
| Dec 31, 2018 |
Inventory levels were at around $2.4b through most of 2017, and accounts receivable was around $500m-$600m.
Inventory increased by about 40% by the end of 2018, due to the ramp-up of the Model 3 production pipeline. But accounts receivable increased even more, to $950m, which is a 85% YoY increase. This is rather counter-intuitive, because payment is taken at delivery and payment clearing delays are relatively short in the T+1 - T+2 range in the U.S., which was the majority of Model 3 deliveries.
Also note that the Q4 FCF does seem to be a bit "expectation managed" to me: $910m is just above Q3's $881m.
Based on that I'm wondering whether Tesla was saving up a bit of accounts receivable cash flow in Q4, to improve Q1 free cash flow? I think they have several discretionary tools to delay payments, in exchange for a bit higher interest income from the payment processing financial institutions, etc.
Note that there's a similar counter-intuitive trend in the accounts payable figures as well: there's a decrease of -$192.5m in accounts payable, despite Tesla making more cars and having a 3% sequential increase in car-sales revenue.
They did highlight it in the Q4 update letter:
"Operating cash flow remained strong although our days payable outstanding decreased significantly, partially limiting the positive impact of working capital."
Tesla didn't volunteer any explanation for the decrease in payables outstanding, but I don't think there's many scenarios under which Tesla would have been forced to pay suppliers faster - my working hypothesis is that it was primarily voluntary, to transfer Q4 FCF to Q1.
To do so Tesla had some discretionary leeway to manage expectations: they could have paid suppliers in Q4 faster than required, to drain some of the Q4 FCF, which would then help Q1 FCF via payables expansion.
(This could also have built some goodwill with suppliers, who have probably seen early Q4 payments as a welcome bonus to counter-act some of the possibly contracting ICE order books, in a critical end of year quarter.)
TL;DR: while neither of these factors would have an impact on revenue or income due to accrual accounting, but they could have a significant positive effect on Q1'19 free cash flow and cash flow, in the "hundreds of millions of dollars" range.
The motivation would be to counteract the cash position effect of the -$920m March convertibles repayment and of the ~10k vehicles in transit logistics artifact due to European and Chinese deliveries.
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Just to add to the data for your calculations... although I would expect you guys are familiar with the European Model 3 order tracker.
- Performance take rate is 16%, 84% is LR AWD
- 27% is base black, the rest is more expensive colors. The most expensive white and red are close to 30% together
- White interior is 20%
- AP take rate is 72% AP&FSD is 5% on top of that.
- 26% go for an upgrade to the 19" wheels
I'm modelling ZEV credits at $0 for now to be conservative until we get a court resolution of EPA's attempt to end California's ZEV program. I do think California will win eventually. Frankly I think it is criminal that the EPAs mandate now appears to be to prevent states and cities from protecting their environment and saving 10s of 1000s of lives.
I think Toyota etc will be hesitant to buy ZEV credits until they learn whether ZEV credits will be ruled worthless. It doesn't look like Tesla has sold any material ZEV credits since the EPA launched its proposal in August and Q1 overall profit guidance of close to zero seems to be consistent with close to 0 ZEV credit sales again in Q1.
My Model 3 production numbers are:
4Q18 61.4k or 5.12k/week for 12 weeks of operation and 1 week downtime
1Q19 67.0k or 5.58k/week over 12 weeks
2Q19 75.0k or 6.25k/week over 12 weeks
3Q19 83.0k or 6.92k/week over 12 weeks
4Q19 86.0k or 7.17k/week over 12 weeks
I am assuming Tesla's 7k/week guidance is roughly on a 12 week/quarter of production basis. It could instead mean the quarter average, but then it gets harder to reconcile the 360-400k total deliveries guidance.
I am not including any GF3 production in 2019 yet, hopefully I will add this to Q4 in 3-6 months if Tesla appears to remain on track.
The 10k Model 3s in-transit to Europe/Asia is a one time structural shift, so you shouldn't expect it to reverse later in the year. Assuming quarter end delivery patterns remain smooth, there should now always be roughly 10k 3s in-transit to RoW at end of Q. I think European sales and deliveries have likely been heavily prioritised in Q1, partly due to the higher ASP, but also due to seasonality and some temporary tax credit demand pull forward to Q4 in the US. In Q2 MR should be released in Europe so may no longer be much higher margin than US, and US demand should be back to normal - so Tesla will dedicate more production capacity to US in Q2. This is my reason for an increased US mix in Q2 and a more limited QoQ increase in RoW deliveries.
Opex guidance would normally be annual yoy rather than QoQ. Tesla's guidance is slightly unclear, but it is provided in the context of discussing the FY19 yoy top line growth.
My forecasts correspond to 10% SG&A & R&D growth in FY19 over FY18, excluding restructuring items. I think they may come in lower than this, but a step up in the sales and admin infrastructure in Europe and China in Q1 will be required given the launch of Model 3 deliveries. I also think later in the year we will start to see a build up of China admin and R&D staff to strengthen its China presence ahead of GF3 launch.
I agree R&D is discretionary, but Tesla are getting great returns on investment on new innovation so they should keep on spending. My R&D increase is only small though, +5% QoQ in 1Q19 and +4% yoy for FY19. Where do you see 30% increase?
Fact Checking
Well-Known Member
Q4'18's $667.5m vs. the $870m estimated for Q4'19 - that's a YoY 30.3% growth in quarterly R&D expenses.
I don't disagree with you on great RoI for R&D expenses - I just think a 30% increase in Q4'19 would go against the spirit of their guidance. Technically you could be right that it's full year opex they are guiding for, which would offer an artificially high baseline with the high FY'2018 total opex.
