Near-future quarterly financial projections

[anon]

In my opinion Tesla is effectively bankrupt. The only reason it hasn't declared one is that the suppliers are holding it up.

As many have pointed out elsewhere, the Accounts Payable is usually delayed by a quarter. The sequential revenue drop is quite steep. If AP scaled normally, Cash would be lower by another 1Bil+.

So intra-quarter cash would most likely have turned negative. If Tesla paid suppliers on usual timelines that is.

Tesla needs to raise a few billion within a span of low single digit weeks. Or else this is game over already.

But what about the impact of the warehouse loan?

 

[gluu]

In my opinion Tesla is effectively bankrupt. The only reason it hasn't declared one is that the suppliers are holding it up.

As many have pointed out elsewhere, the Accounts Payable is usually delayed by a quarter. The sequential revenue drop is quite steep. If AP scaled normally, Cash would be lower by another 1Bil+.

So intra-quarter cash would most likely have turned negative. If Tesla paid suppliers on usual timelines that is.

Tesla needs to raise a few billion within a span of low single digit weeks. Or else this is game over already.

This is a valid theory, however if Panasonic was really limiting Tesla from producing more Model 3's, it make sense that Panasonic would be giving them some leeway in payment terms since they are by far Tesla's largest supplier. If Tesla dies, so does Panasonic's battery business, in Japan and the US Giga. We should expect that the AP trick is repeatable.

 

[generalenthu]

Oops Wong thread!

Regarding talk on takeover, it is not going to happen. Any big company worth its name is conflicted. Aapl and good are squarely competing. FB has its own issues. MSFT may actually be able to take a significant stake in the open market at these prices without moving the market much.

Existing investors like ellison might be locked out. That said I think it is a no brainier for Norway's fund to take a stake. Don't know what they're smoking given their mandate. Even if they take a 20% stake, that would be insignificant in terms of their allocation.

Buffet may be interested at these prices, but you'll need to woo him and give warrants, etc. Not worth it IMO.

Speaking of which, where is tencent?

 

[Spacemanspliff]

Of the 12,000 S&X delivered what percentage do we believe were 75kwh?

And what were prior quarters take rates for 75kwh?

 

[Doggydogworld]

But what about the impact of the warehouse loan?

Warehouse loans finance leased cars until they pool enough leases for a securitization. ABL finances inventory (mostly).

IMHO Tesla's cash bottomed around 800-900m around March 1 when they paid the 920m convertible. I wrote a post on the Investor Roundtable thread with my calculations (needless to say, it was ill-received). The delivery rate in early March was high enough to more or less cover daily cash burn, the ABL expansion in early March put them back in the comfortable range of 1b+. Massive deliveries the last 10 days pushed cash back up to 2.2b.

This assumes they didn't get several hundred million cash from FCA in February.

 

[gluu]

Twitter

Apparently ARK knew about the retooling! Wish I had knew this in advance as well...

 

[30seconds]

With all the cars in transit why will Q2 not be profitable?

 

[EVNow]

With all the cars in transit why will Q2 not be profitable?

My guess is they hope to be profitable but want that as a beat rather than a miss.

Given a near constant s&ga and R&D costs, there is a level of deliveries after which they will make money. That level is not over 100k.

BTW, the in transit cars don't change much or may increase because of uniform manufacture and delivery, rather than waves.

 

[Doggydogworld]

With all the cars in transit why will Q2 not be profitable?

If they really get rid of the wave this time they they'll have more cars in transit on 6/30.

It doesn't take much of an ASP reduction to be unprofitable at 90k cars. Or even 100k with a SR+ heavy mix. VIN registrations have been overwhelmingly RWD since mid-Feb. Like 8:1. They have a ton of AWD VINs banked, so production hopefully won't be that slanted.

 

[generalenthu]

With all the cars in transit why will Q2 not be profitable?

In addition to the points above, there will be healthy mix of leased vehicles, where both costs and revenues are accrued as lease payments come in. If the GM is spread out and there will be both an income drag and to a smaller extent a cashflow drag. Smaller drag on cash because they can always securitize their lease receivables. But there will be a wrench in the works with their unique lease structure with no buyback option and such. May be @jbcarioca has an idea on how that works.

 

[EVNow]

In addition to the points above, there will be healthy mix of leased vehicles, where both costs and revenues are accrued as lease payments come in. If the GM is spread out and there will be both an income drag and to a smaller extent a cashflow drag. Smaller drag on cash because they can always securitize their lease receivables. But there will be a wrench in the works with their unique lease structure with no buyback option and such. May be @jbcarioca has an idea on how that works.

How does the lease reflect in the P&L ? Does a part of it go in both lease revenue & cost every quarter ?

The lease structure is actually not that unique, it is a close end lease i.e. no buy option at the end of lease. Used to be quite common, I believe, earlier - though it has become uncommon now.

 

[elasalle]

How does the lease reflect in the P&L ? Does a part of it go in both lease revenue & cost every quarter ?

The lease structure is actually not that unique, it is a close end lease i.e. no buy option at the end of lease. Used to be quite common, I believe, earlier - though it has become uncommon now.

If all leases can be bundled and sold to 3rd party before EOQ, almost everything would be $$ revenue right? (Could happen because M3 volumes will be higher, so bundling can be done faster)

 

[EVNow]

If all leases can be bundled and sold to 3rd party before EOQ, almost everything would be $$ revenue right? (Could happen because M3 volumes will be higher, so bundling can be done faster)

Yes - but I guess not all. May be a month worth of lease (or 2 weeks) will be left over.

 

[EVNow]

I've been doing very rough estimates to answer the question why would Tesla have a loss if they can deliver 90k cars. It has to do with ASP & Margin. Both fell in Q1 compared to Q3 & Q4 resulting in Q1 '18 type losses.

The margin in Q1 fell from 24.7% to 20.3%. Will this improve with better delivery numbers (i.e. how is the depreciation done - is it purely production based or is it partly fixed) ?

ASP for 3 for Q1 I think fell below 50k (47k ?). This used to be about 56k in Q4 and Q3.

If they improve these in Q2 & Q3 - we can see small losses/profits. For eg., if we see 90k total delivery in Q2 (20k + 70k) - even with small improvements in margin (20% to 22%) and ASP (s+x 103k to 105k, 3 47k to 50k) - we'll see a loss of 155M (compared to 702M in Q1). This assuming no big changes in any other item.

BTW, this "Net income (loss) attributable to noncontrolling interests ..." is such a weird item. From Q3 to Q4, it went from +56M to -70M. This is a net change of 126M. If this item had stayed the same in Q4, the profit would have nearly doubled from 139M to 265M - and would have been a big beat instead of a small miss. So, this item can make a difference between big loss in Q2 or a small loss.

 

[neroden]

SBenson: In my opinion, you're full of it. Until the 10-Q comes out we won't have a good sense of Tesla's access to loans (though it increased), but as long as they actually keep delivering large numbers of cars (something they didn't manage to do very effectively in Q1) they are at zero risk of needing to raise capital.

 

[neroden]

I've been doing very rough estimates to answer the question why would Tesla have a loss if they can deliver 90k cars. It has to do with ASP & Margin. Both fell in Q1 compared to Q3 & Q4 resulting in Q1 '18 type losses.

The margin in Q1 fell from 24.7% to 20.3%. Will this improve with better delivery numbers (i.e. how is the depreciation done - is it purely production based or is it partly fixed) ?

Yeah, annoyingly it's partly fixed, so it will improve with higher delivery numbers (it's really supposed to be production based, but GAAP is weird)

ASP for 3 for Q1 I think fell below 50k (47k ?). This used to be about 56k in Q4 and Q3.

If they improve these in Q2 & Q3 - we can see small losses/profits. For eg., if we see 90k total delivery in Q2 (20k + 70k) - even with small improvements in margin (20% to 22%) and ASP (s+x 103k to 105k, 3 47k to 50k) - we'll see a loss of 155M (compared to 702M in Q1). This assuming no big changes in any other item.

BTW, this "Net income (loss) attributable to noncontrolling interests ..." is such a weird item. From Q3 to Q4, it went from +56M to -70M. This is a net change of 126M. If this item had stayed the same in Q4, the profit would have nearly doubled from 139M to 265M - and would have been a big beat instead of a small miss. So, this item can make a difference between big loss in Q2 or a small loss.

This is basically accounting shenanigans used for harvesting tax credits Tesla can't use and various other similar purposes.

This is one reason to ignore profit/loss and look at cashflow. Tesla are predicting positive (operating cash flow - capital expenditures) in Q2.

 

[EVNow]

This is one reason to ignore profit/loss and look at cashflow. Tesla are predicting positive (operating cash flow - capital expenditures) in Q2.

If we use @luvb2b estimates from page 80 (which is close to Q1 ER) - we see (operating cash flow - capital expenditures) is -900M. For this to be +ve, but no profit, something else has to change a lot. It will take me a while to figure out cash flow estimates ...

BTW, @luvb2b is showing only small differences in depreciation/amortization over the quarters. So, I guess its mostly fixed with a bit of variability by production. That will affect margins - so as production increases the margins should do too.

ps : Here's my very rough calculation.

 

[generalenthu]

How does the lease reflect in the P&L ? Does a part of it go in both lease revenue & cost every quarter ?

Pretty much yes.


Regarding your margin comment, with increasing volumes, it goes up with higher production, not deliveries. Tooling is per unit depreciation. Rest is straight line.

There's also a fixed cost absorption thing, which I suspect is more than depreciation. Things like utilities, line & logistics employees, etc.

 

[Doggydogworld]

If we use @luvb2b estimates from page 80 (which is close to Q1 ER) - we see (operating cash flow - capital expenditures) is -900M. For this to be +ve, but no profit, something else has to change a lot. It will take me a while to figure out cash flow estimates ...

BTW, @luvb2b is showing only small differences in depreciation/amortization over the quarters. So, I guess its mostly fixed with a bit of variability by production. That will affect margins - so as production increases the margins should do too.

ps : Here's my very rough calculation.

View attachment 401115

Your Model 3 ASP is way too low. You're trying to shoehorn 12.1k S/X and 50.9k 3s into 3509m of revenue, which obviously doesn't fit. You need to use 4010m revenue instead. The 3509m is after a 501m reduction due an adjustment for prior period sales with Resale Value Guarantees. Similarly, you need to add back 409m of COGS. ASP/Revs should be something like:

(12,091 S/X sold - 1,260 S/X leased) * 100k S/X ASP + (50,928 Model 3s sold * 55k 3 ASP) = 4010m

I guess at 100k ASP for S/X due to massive discounting in the last month when most of the sales happened. This was partially offset by a shift in mix as they stopped making 75Ds and only sold those out of inventory.

Your effective gross margin is lower than Tesla's 20.3% because they include leasing and you do not. Leasing margins are higher due to the way they calculate them. Instead of:

(sales price - COGS) / sales price

leasing gm is:

(sales price - COGS) / (sales price - residual value)

The smaller denominator makes gross margin higher. When the lease ends, if the customer buys the car Tesla recognizes the residual as both revenue and COGS. If Tesla gets the car back they recognize CPO sale price as revenue and residual as COGS (both go into Services & Other).

 

[EVNow]

Pretty much yes.


Regarding your margin comment, with increasing volumes, it goes up with higher production, not deliveries. Tooling is per unit depreciation. Rest is straight line.

There's also a fixed cost absorption thing, which I suspect is more than depreciation. Things like utilities, line & logistics employees, etc.

Yes luvb2b assumes a depreciation/amortization cost of 457M and 496M in Q1 and Q4 - for productions of 76k and 91k. So about 10% difference in Dep/Amor for 30% difference in production.