Unfortunately not. I am nowhere near as talented as Rowan Atkinson
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Near-future quarterly financial projections
- Thread starter luvb2b
- Start date
In the main investors' thread @SOULPEDL speculated about the timing of Tesla offering FSD subscriptions. It raised a couple of questions in my mind and thought it would be great to get the opinion of those of you with an accounting background (e.g. yourself and @The Accountant):
Thanks
- When Tesla has FSD on general release and offers FSD on subscription in addition to one-off purchase do you think this will impact the way that it is reported in the accounts - perhaps it will get a distinct line under automotive revenues?
- In this case would you expect the ongoing costs of developing FSD to move from R&D to cost of revenues?
Fresh off a week ban for making the mistake of responding to a GME post in the main thread! Our mods were a little trigger happy and left me a wonderful message of how I repeatedly went off topic in main yet provided no warnings or deletions leading up to the ban. Sorry for the delay in this response!
Tesla deciding to disclose premium connectivity or FSD as a separate line item will ultimately come down to the materiality of those revenues relative to rest of business. With a potential monthly subscription option and hopefully higher take rates, there likely will be a point that they start to disclose it as a separate line item, but I personally don’t expect to see it for at least a couple years. As an example, I believe Apple only started disclosing services as a separate revenue item in the last 2-3 years.
On your second question, I can’t see the costs relating to continued development of FSD ever moving off of the R&D line. One of the reasons that software services have such high margins is that they don’t have high costs of sales/services (COS), since all of the engineering related to their development were flowing through R&D over several years and are rarely capitalized to balance sheet and subsequently amortized as a component of COS. The core logic would be that the continued R&D has nothing to do with the current release of FSD, which is what the revenues ultimately relate to. So, the COS have to be matched to the current revenues, which again would have very limited incremental costs if any.
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Thanks for setting out your view on this - very helpful. I guess I have been thinking of this too much in terms of the (internal) management accounting I have been used to seeing to justify ongoing R&D (development) expenditure on building/enhancing software products.
Thanks again
Artful Dodger
"Neko no me"
Tesla Valuation Allowance (VA) from the 2020 10-K:
tsla-10k_20201231.htm
Sounds like Elon's CEO compensation plan is generating sufficient tax deductions to obviate the need to claim the VA at this point. It has now grown to $2.93B (and will be claimed when needed).
Sweet.
Cheers!
tsla-10k_20201231.htm
"As of December 31, 2020, we recorded a valuation allowance of $2.93 billion for the portion of the deferred tax asset that we do not expect to be realized.
The valuation allowance on our net deferred taxes increased by $974 million, increased by $150 million, and decreased by $38 million during the years ended December 31, 2020, 2019 and 2018, respectively.
The changes in valuation allowance are primarily due to additional U.S. deferred tax assets and liabilities incurred in the respective year.
We have net $260 million of deferred tax assets in foreign jurisdictions, which management believes are more-likely-than-not to be fully realized given the expectation of future earnings in these jurisdictions.
We did not have material release of valuation allowance for the years ended December 31, 2020, 2019 and 2018.
We continue to monitor the realizability of the U.S. deferred tax assets taking into account multiple factors, including the results of operations and magnitude of excess tax deductions for stock-based compensation.
We intend to continue maintaining a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Given the improvement in our operating results and depending on the amount of stock-based compensation tax deduction available in the future, we may release the valuation allowance associated with the U.S. deferred tax assets in the next few years.
Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded."
The valuation allowance on our net deferred taxes increased by $974 million, increased by $150 million, and decreased by $38 million during the years ended December 31, 2020, 2019 and 2018, respectively.
The changes in valuation allowance are primarily due to additional U.S. deferred tax assets and liabilities incurred in the respective year.
We have net $260 million of deferred tax assets in foreign jurisdictions, which management believes are more-likely-than-not to be fully realized given the expectation of future earnings in these jurisdictions.
We did not have material release of valuation allowance for the years ended December 31, 2020, 2019 and 2018.
We continue to monitor the realizability of the U.S. deferred tax assets taking into account multiple factors, including the results of operations and magnitude of excess tax deductions for stock-based compensation.
We intend to continue maintaining a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Given the improvement in our operating results and depending on the amount of stock-based compensation tax deduction available in the future, we may release the valuation allowance associated with the U.S. deferred tax assets in the next few years.
Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded."
Sounds like Elon's CEO compensation plan is generating sufficient tax deductions to obviate the need to claim the VA at this point. It has now grown to $2.93B (and will be claimed when needed).
Sweet.
Cheers!
So as soon as Tesla’s market cap stops skyrocketing and Elon is not getting paid, then a huge chunk will be released and make the price skyrocket again. So no downside?Tesla Valuation Allowance (VA) from the 2020 10-K:
tsla-10k_20201231.htm
"As of December 31, 2020, we recorded a valuation allowance of $2.93 billion for the portion of the deferred tax asset that we do not expect to be realized.
The valuation allowance on our net deferred taxes increased by $974 million, increased by $150 million, and decreased by $38 million during the years ended December 31, 2020, 2019 and 2018, respectively.
The changes in valuation allowance are primarily due to additional U.S. deferred tax assets and liabilities incurred in the respective year.
We have net $260 million of deferred tax assets in foreign jurisdictions, which management believes are more-likely-than-not to be fully realized given the expectation of future earnings in these jurisdictions.
We did not have material release of valuation allowance for the years ended December 31, 2020, 2019 and 2018.
We continue to monitor the realizability of the U.S. deferred tax assets taking into account multiple factors, including the results of operations and magnitude of excess tax deductions for stock-based compensation.
We intend to continue maintaining a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Given the improvement in our operating results and depending on the amount of stock-based compensation tax deduction available in the future, we may release the valuation allowance associated with the U.S. deferred tax assets in the next few years.
Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded."
Sounds like Elon's CEO compensation plan is generating sufficient tax deductions to obviate the need to claim the VA at this point. It has now grown to $2.93B (and will be claimed when needed).
Sweet.
Cheers!
Artful Dodger
"Neko no me"
Projecting the current trend forward (5-wks since peak SP), TSLA 6-Mth closing average SP could reach a near-term peak at ~$600M in about mid-April (subject to extrapolation issues projecting 6 wks on 5 wk trnd)
Were that to occur, presumably some adjustment would be made to SG&A expenses for Elon's 12th tranche ($650B level). However since this is a small amount relative to the 11 tranches previously incurred over the previous 10 months, I don't think the adjustment will have substantial consequences for SG&A.
Further, it would almost currently amount to a slight delay since clearly the Mkt Cap to TSLA will far exceed those levels over the next 5 years (here's a summary of the terms of the package):
Tesla Announces New Long-Term Performance Award for Elon Musk | Jan 23, 2018
Cheers!
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Doggydogworld
Active Member
Tesla only accrues expenses for tranches deemed achieved or probable. So far there are 7 such tranches which correspond to market caps from 100b to 400b. Stock price movements above 400b have no effect on Musk's stock comp expense. In fact I don't think any stock move can affect Q1, though I'll defer to @The Accountant on that.
Doggydogworld
Active Member
Troy's estimates are better than Wall Street's.
this is RBC estimate: 170K; so not wall street consensus. I think wall street consensus is going to be around that. Troy's is at 172K as of 3-16-2021.
Tesla : Should Deliver 170,000 Automobiles in Q1, RBC Capital Says
-- Tesla is forecast to deliver 170,000 automobiles in Q1, which would be a 92% increase from a year earlier, RBC Capital Markets said in a note Thursday. The brokerage expects 164,800 Model 3/Y and...
m.marketscreener.com
The Accountant
Active Member
Q1 2021 Projections
With 170k vehicles delivered, Tesla should:
With 170k vehicles delivered, Tesla should:
- generate 9.9B in Revenues (+65% vs 2020)
- achieve Gross Profit of $2.1B – this could be an all-time record as I am projecting $2,099k GP vs the prior record in Q4, 2020 of $2,066k.
- deliver GAAP earnings of $421M ($0.37.eps) – this would be an all-time high as well
- deliver Non-GAAP earnings of $855m ($0.76 eps)
Attachments
The Accountant
Active Member
Here is how my Q1 2021 projections look versus Q4 2020:
The Accountant
Active Member
Some key point about my Q1 2021 projections:
Gross Profit % is better in Q1 due to:
- Stock Based Compensation drops from $633m in Q4 2020 to $433m in Q1 2021 as the the CEO Award charge is lower.
- Regulatory Credits assumed to be about $420m in Q1 as the Tesla/FCA/Honda pool is still intact for 2021
- R&D and SG&A is lower in Q1 2021 vs Q4 2020 due to lower Stock Based Compensation expense
- Interest Expense is lower in Q1 2021 vs Q4 2020 as there was one time $105m charge in Q4 2020 for early extinguishment of debt.
- I assume that Tesla does not recognize the benefit of the Deferred Tax Allowance in Q1.
Gross Profit % is better in Q1 due to:
- Improved Energy margins from -4.4% in Q4 to flat in Q1
- Improved Service margins from -21% in Q4 to -15% in Q1
- lower mix of Models S&X which now have a lower GP % than Models 3&Y
- lower stock based compensation in Q1 2021 (which impacts COGS, R&D and SG&A)
- Stock Based Compensation drops from $633m in Q4 2020 to $433m in Q1 2021 as the the CEO Award charge is lower.
- Regulatory Credits assumed to be about $420m in Q1 as the Tesla/FCA/Honda pool is still intact for 2021
- R&D and SG&A is lower in Q1 2021 vs Q4 2020 due to lower Stock Based Compensation expense
- Interest Expense is lower in Q1 2021 vs Q4 2020 as there was one time $105m charge in Q4 2020 for early extinguishment of debt.
- I assume that Tesla does not recognize the benefit of the Deferred Tax Allowance in Q1.
The Accountant
Active Member
Here is my analysis of the CEO Award and Stock Based Compensation for Q1 2021:
Deliveries are really hard to estimate this quarter due to lack of visibility of the magnitude of the impact of the logistics problems that Elon has mentioned. However the actual MIC figures for January and February look as if the ramp is proceeding there pretty much as envisaged. I have assumed no S/X deliveries in Q1 but have more than 170k 3/Y deliveries (always optimistic
) so revenues and GAAP earnings are broadly in line. I have assumed lower credits and slightly higher R&D.If the FSD Beta is made available and S/X deliveries are underway prior to the Q1 ER, sentiment should be fairly positive. Good news on the 4680 ramp, Semi and Berlin timeline would also be very helpful.
ByeByeJohnny
Active Member
Looks good to me
I've seen others predict around 5k for X/S as well but I gotta ask. Do we know they had that many of the old models left? Because otherwise it would be zero or really close to zero.
Edit: Actually looked up that article that had US registration numbers for January. They say
"The Model Y crossover led the way in January, chalking up 11,461 of the brand's 23,974 registrations. The Model 3 sedan was close behind, at 10,151."
So 23974-11461-10151=2362 which we can presume to be X/S. Add Europe/China and a few left over for February and maybe even March and 5000 sounds within reach.
Tesla's U.S. Registrations Are On The Rise In A Big Way, New & Used
I've seen others predict around 5k for X/S as well but I gotta ask. Do we know they had that many of the old models left? Because otherwise it would be zero or really close to zero.
Edit: Actually looked up that article that had US registration numbers for January. They say
"The Model Y crossover led the way in January, chalking up 11,461 of the brand's 23,974 registrations. The Model 3 sedan was close behind, at 10,151."
So 23974-11461-10151=2362 which we can presume to be X/S. Add Europe/China and a few left over for February and maybe even March and 5000 sounds within reach.
Tesla's U.S. Registrations Are On The Rise In A Big Way, New & Used
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The Accountant
Active Member
Looks good to me
I've seen others predict around 5k for X/S as well but I gotta ask. Do we know they had that many of the old models left? Because otherwise it would be zero or really close to zero.
Edit: Actually looked up that article that had US registration numbers for January. They say
"The Model Y crossover led the way in January, chalking up 11,461 of the brand's 23,974 registrations. The Model 3 sedan was close behind, at 10,151."
So 23974-11461-10151=2362 which we can presume to be X/S. Add Europe/China and a few left over for February and maybe even March and 5000 sounds within reach.
Tesla's U.S. Registrations Are On The Rise In A Big Way, New & Used
I think US registrations have a lag. Meaning that much of January's registrations relate to December's deliveries.
Your original comment that 5,000 Model S/X may be too high is valid. I am banking on total deliveries being about 170k.
If I reduce Model S/X by 4k units and increase Model X/Y by 4k units my GAAP income only changes from $421m to $411m. So not a big difference as @JohnnyEnglish had mentioned in an earlier post. I a not too worried about mix but I would like to see a delivery number of 170k or higher.
ByeByeJohnny
Active Member
Hmm. Sounds logical.
But can there be much lag? Wouldn't a proportional part of 3/Y then also have lagged bringing the true January sales much lower than those 24k? Last week of December must have had significantly higher US 3/Y sales than the last week of January (then being delayed into February). Even if just the last week of December was delayed the 21.6k reported as 3/Y in January would probably be something 15k and then the remaining months would have lower numbers too. That just doesn't really fit with any other info we know.
Edit: Not sure how it works in ths US but looking at some countries in Europe where we can see the daily numbers from official sources the numbers correspond exactly. Meaning that the huge numbers last week of quarters drops to almost nothing first days of new quarter. So at least over here a car counts as registered on the day it's sold.
But can there be much lag? Wouldn't a proportional part of 3/Y then also have lagged bringing the true January sales much lower than those 24k? Last week of December must have had significantly higher US 3/Y sales than the last week of January (then being delayed into February). Even if just the last week of December was delayed the 21.6k reported as 3/Y in January would probably be something 15k and then the remaining months would have lower numbers too. That just doesn't really fit with any other info we know.
Edit: Not sure how it works in ths US but looking at some countries in Europe where we can see the daily numbers from official sources the numbers correspond exactly. Meaning that the huge numbers last week of quarters drops to almost nothing first days of new quarter. So at least over here a car counts as registered on the day it's sold.
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Doggydogworld
Active Member
Just under 5500 S/X inventory at YE20. This includes brand new "50 mile" cars, newish showroom and test drive cars as well as older loaners. They'll probably hold on to most of the loaners for a while.
If I read your numbers correctly, we can add another important point:
- GAAP earnings exceed regulatory credits for the first time (if only by a small margin, but there seems to be a reasonable chance)?!
