Near-future quarterly financial projections

[The Accountant]

Cheaper than paying salary to compete with FANG in the Bay area and it's more attractive to factory line worker.

@The Accountant
Would you mind breaking out the Stock Comp line to CEO Award and Employee? That should provide some additional clarity.

See the bottom 3 rows.
In Q3, of the $450m I have estimated, $260m is the CEO Award and $190m is Employee Stock Compensation.
However, this is distorted by the large catch-up charges for Tranches 2 & 3.
Q1 for example was $66m CEO Award and $145m for Employee Stock Compensation,

 

[Thekiwi]

It's a stock grant, cost per car is $0 (regardless of what GAAP accounting says). If Elon took a salary, then it would impact the cash level profit.

Yes I realise it is a non-cash expense, but unfortunately its a real GAAP net income expense which is what grabs the headlines come earnings season.

If anything, I think its worth mentioning as a retort to those bears pointing out when regulatory credits push Tesla into GAAP profit, that GAAP profit has a large negative impact from SBC and the underlying non-regulatory credit income is even stronger than it appears if not for SBC expense.

(I should point out I have zero problem with regulatory credit income as a legitimate source of profits).

 

[kengchang]

Yes I realise it is a non-cash expense, but unfortunately its a real GAAP net income expense which is what grabs the headlines come earnings season.

If anything, I think its worth mentioning as a retort to those bears pointing out when regulatory credits push Tesla into GAAP profit, that GAAP profit has a large negative impact from SBC and the underlying non-regulatory credit income is even stronger than it appears if not for SBC expense.

(I should point out I have zero problem with regulatory credit income as a legitimate source of profits).

Most analysts uses non-GAAP earning/EPS, we cared about GAAP profit due to SP500 inclusion criteria...

See the bottom 3 rows.
In Q3, of the $450m I have estimated, $260m is the CEO Award and $190m is Employee Stock Compensation.
However, this is distorted by the large catch-up charges for Tranches 2 & 3.
Q1 for example was $66m CEO Award and $145m for Employee Stock Compensation,
View attachment 587881

Ya, I mean on your Cash Flow statement. Up to ya though

 

[ammulder]

Most analysts uses non-GAAP earning/EPS, we cared about GAAP profit due to SP500 inclusion criteria...

Well, in talking to more bearishly-inclined observers, they'd say "Tesla's never posted an annual profit!" and I'd point to the increasing free cash flow or whatever and they'd say "the reason we have GAAP accounting is that you can fudge anything else. GAAP is all that matters!"

So I wouldn't say it's strictly true that GAAP profit is only important vis-à-vis the S&P 500... I think it will be a key bear-thesis-crushing milestone to show consistent GAAP profitability.

 

[st_lopes]

Well, in talking to more bearishly-inclined observers, they'd say "Tesla's never posted an annual profit!" and I'd point to the increasing free cash flow or whatever and they'd say "the reason we have GAAP accounting is that you can fudge anything else. GAAP is all that matters!"

So I wouldn't say it's strictly true that GAAP profit is only important vis-à-vis the S&P 500... I think it will be a key bear-thesis-crushing milestone to show consistent GAAP profitability.

As an accountant myself, I often tell people that GAAP, IFRS, Canadian ASPE all provide their means of biased presentation (read: some level of manipulation), especially as it relates to estimate heavy income statements. Cash flow statements though, much more difficult to skew.

One of many reasons that GJ is an absolute farce of an equity analyst. He just doesn’t understand basic accounting.

 

[Artful Dodger]

I’m just stating this, not implying anything about fairness etc:

$450 million stock based compensation / 150,000 cars is $3,000 per car.

No, Tesla has produced more like 1 million cars since Elon began working for free 2 yrs ago, more like $500/car. In the meantime, TSLA shareholders have benefitted wildly.

In the next 2 yrs Tesla will step that up to 1+M cars per year. That's worth every penny.

Cheers!

 

[erha]

For tranche 4 to be achieved, the market cap needs to reach $250b (the operational milestone of $3b EBITDA has already been achieved). If TSLA’s share price averages $406 from now until Sept 30, it will bring the 6-month average to $250b…earning Elon Tranche 4. This would mean that the $122m (in yellow) would be accelerated into Q3.

Today's action makes this seem fairly likely (currently trading at 414)

 

[Thekiwi]

No, Tesla has produced more like 1 million cars since Elon began working for free 2 yrs ago, more like $500/car. In the meantime, TSLA shareholders have benefitted wildly.

In the next 2 yrs Tesla will step that up to 1+M cars per year. That's worth every penny.

Cheers!

$450 million is just the stock based compensation estimate for the current quarter. If you want to compare to 1 million+ cars over last couple of years you would have to also include the stock based compensation expense over that same time frame - which would still come to thousands of dollars per car.

As I said up front I'm not making a statement about ether its fair or not, or whether its right or wrong - just pointing out how much it is costing versus the amount of cars currently shipping. it will look a lot better in 2 years time when quarterly volumes are approaching half a million per quarter and hopefully the bulk of Elons compensation has been accounted for already.

 

[StarFoxisDown!]

$450 million is just the stock based compensation estimate for the current quarter. If you want to compare to 1 million+ cars over last couple of years you would have to also include the stock based compensation expense over that same time frame - which would still come to thousands of dollars per car.

As I said up front I'm not making a statement about ether its fair or not, or whether its right or wrong - just pointing out how much it is costing versus the amount of cars currently shipping. it will look a lot better in 2 years time when quarterly volumes are approaching half a million per quarter and hopefully the bulk of Elons compensation has been accounted for already.

You're original comment was in relation to show much Elon's pay package was costing per vehicle, but that cost only started being factored in the past couple of quarters. As someone mentioned before Elon was working for free the past few years. The stock based compensation before Q1 was purely employee stock compensation across the entire company, specifically excluding Elon, which is a normal expense for a company, especially a tech company nowadays. So it doesn't seem logical to add in the stock based compensation for the past few years when the original post was more about Elon's specific pay package and how much it was costing per vehicle.

 

[Thekiwi]

You're original comment was in relation to show much Elon's pay package was costing per vehicle, but that cost only started being factored in the past couple of quarters. As someone mentioned before Elon was working for free the past few years. The stock based compensation before Q1 was purely employee stock compensation across the entire company, specifically excluding Elon, which is a normal expense for a company, especially a tech company nowadays. So it doesn't seem logical to add in the stock based compensation for the past few years when the original post was more about Elon's specific pay package and how much it was costing per vehicle.

Incorrect - my original post just used $450 million total stock based compensation figure (which was The accountants estimate for Q3) - didn't mention anything about Elons pay package.

 

[StarFoxisDown!]

Incorrect - my original post just used $450 million total stock based compensation figure (which was The accountants estimate for Q3) - didn't mention anything about Elons pay package.

My bad, for some reason I could have sworn the comment was in relation to the Elon's portion of the $450 million but like you said, you just said total stock compensation

 

[Thekiwi]

My bad, for some reason I could have sworn the comment was in relation to the Elon's portion of the $450 million but like you said, you just said total stock compensation

All good. Let us pretend I never brought it up and we can return to normal NFQFP discussion.

 

[Thekiwi]

 

[Doggydogworld]

The stock based compensation before Q1 was purely employee stock compensation across the entire company, specifically excluding Elon,....

That's incorrect. They've been counting expenses for Elon's most recent option package since March 2018. They also counted expenses from his 2012 package until fairly recently.

 

[vikings123]

@The Accountant or anybody else.

Hypothetical dumb question about CEO tranches:

Instead of intentionally tanking the share price would it not make more sense for Zach/Elon to rework CEO contract terms if Elon is willing to?

Just like Tom Brady did a favor to the Patriots to help reduce salary cap impacts? Or is that not allowed by the SEC?

 

[MP3Mike]

Hypothetical dumb question about CEO tranches:

Instead of intentionally tanking the share price would it not make more sense for Zach/Elon to rework CEO contract terms if Elon is willing to?

Why would Elon's comp package tank the share price?

 

[vikings123]

In an earlier post, I had estimated that if the Stock Price averaged $406 for the remainder of September, then Elon would earn tranche 4.
The $406 was incorrect as I was counting weekends. The stock would need to trade at $478 to reach the 6 month market cap average of $250B. Considering the SP is currently at $372, averaging $478 in the next 13 trading days may not be likely - hopefully we're safe.

Crazy that we are now hoping for the stock to stay down to avoid a non cash expense this quarter.

Why would Elon's comp package tank the share price?

I mean the other way around, see the two posts I quoted above yours.

edit: One of the implications was that the ATM offering was designed to tank the stock price which would offset any chances of Elon getting tranche 4.

 

[The Accountant]

@The Accountant or anybody else.

Hypothetical dumb question about CEO tranches:

Instead of intentionally tanking the share price would it not make more sense for Zach/Elon to rework CEO contract terms if Elon is willing to?

Just like Tom Brady did a favor to the Patriots to help reduce salary cap impacts? Or is that not allowed by the SEC?

Someone with Corporate Governance Law experience could probably answer this best. The Tesla Compensation Committee developed the CEO Performance Plan and Shareholders approved it in March 2018. My guess is that it would require the Compensation Committee to propose a change and if material enough would require Shareholder approval.

 

[MP3Mike]

I mean the other way around, see the two posts I quoted above yours.

edit: One of the implications was that the ATM offering was designed to tank the stock price which would offset any chances of Elon getting tranche 4.

That is just a BS theory in my opinion. (And if true is probably illegal, they aren't allowed to manipulate the stock price.)

I don't think any amount of stock price increasing is going to get tranche 4 to vest during Q3, as they still need to meet another operational goal that is only reported as part of the quarterly reporting. But it is pretty much guaranteed that tranche 4 will vest in early Q4. (Like as soon as they release the quarterly results.) At the current stock price it will hit the market cap goal around 9/28. I don't know if that means they have to account for it in Q3 or not. (I hope not.)

As far as them re-working the comp plan, I don't think they could just do that, as it was approved by the board and then sent to a shareholder vote for final approval. So I would think that they would have to come back to us for another shareholder vote if they wanted to change it.

 

[The Accountant]

Help Needed with EAP & FSD Revenue Recongition.
Linking to @mongo 's post on Enhanced Auto Pilot for discussion here:
Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable

I would like to get feedback from members on two questions:
1. EAP - The full $4k would be fully recognizable to sales as all compoents are delivered.
What is your estimate of a take-rate? 2%? .... 5%?

2. FSD - Not all of the $8K is fully recognizable. Some of the revenue is deferred due to features not yet delivered. In my model I have been using 50% reconized and 50% deferred but I can see now that this is wrong. If EAP is $4k and FSD deliveres more (e.g. Traffic Light/Stop Sign), then the recognized portion of the $8k has to be higher than $4k (50%).
Should FSD be $5k recognize now and defer $3k or $6k recognize now and defer $2k?
It depends on how you value what is left to be delivered.