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Near-future quarterly financial projections
- Thread starter luvb2b
- Start date
petit_bateau
Active Member
Was just going through the list of items called out in Q3 for margin compression - higher raw material costs, stronger dollar, logistics inefficiencies due to an increased delivery number.
I think the one silver lining is USD, which is materially lower than it was at end of Q3. Not sure how long it takes the raw material price drops to flow through given the contractual agreements. Logistics issues could be same or worse I'd think and margins perhaps a good bit lower due to the incentive at the year end.
17% more deliveries, couple of points in margin compression, flat to slight increase in opex.. I am spitballing 99 cents in GAAP EPS and about 10c more for non GAAP. Where are the experts at?
I think the one silver lining is USD, which is materially lower than it was at end of Q3. Not sure how long it takes the raw material price drops to flow through given the contractual agreements. Logistics issues could be same or worse I'd think and margins perhaps a good bit lower due to the incentive at the year end.
17% more deliveries, couple of points in margin compression, flat to slight increase in opex.. I am spitballing 99 cents in GAAP EPS and about 10c more for non GAAP. Where are the experts at?
I'm no expert, but I'm leaning toward $1.10 GAAP on $500M (pessimistic version of $800M) additional automotive gross profit.
Probably a lot hinges on whether the FSD unearned revenue is going to be recognized. While the one-time boost is likely going to be ignored, they will likely talk about how this is significantly margin accretive on the call.
At this point i dont think we will reclaim the deferred tax asset from prior losses in the foreseeable future. The price difference between the options price and price at the time of exercise for Elons comp is a giant mountain that sits in tax loss, that will take a really long time to monetize, and then there is another aircraft carrier load of options that will be approaching their vest date by '28 if I remember correctly. Again this is my read, anyone who believes otherwise, please correct!
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Lower earnings on higher number of deliveries vs Q3 would be pretty hard to explain to the street
A wild guess, the Shanghai factory shutdown in late Dec was decided after Q3 earning call, So Zach's "50% production growth" comment assumed full production out of Shanghai. Otherwise, it is hard to reconcile 35K fewer cars in mere 2 months
The Accountant
Active Member
There may be margin compression but you are missing a couple of items that are more favorable in Q4 than Q3.
- currency Q4 vs Q3. The Yuan is weaker by 3.8% but the Euro is stronger by 1.2%. Thus production vehicles from Shanghai shipped to Europe have 3.8%less costs than Q3 but 1.2% higher sales price vs Q3 when converted to US$.
- Model Y is a higher % of total vehicles sold in Q4 than Q3 and the Y has better margins than the model 3 - so there is a sales mix benefit with higher skew of Model Ys
- There is a GEO mix benefit as well. Average selling prices and margins are higher in Europe than China. Europe should be up 80% in Q4 vs Q3 while China will be up only about 10%.
- Huge improvement in margins coming out of Austin/Berlin as they ramped from 24k units in Q3 to 53k units in Q4 (combined).
Now the negatives are huge too - price cuts in China, the Dec price cuts in the US. Weaker Canadian $ and British Pound (Q4 to Q3).
At 427k deliveries I had margins actually increasing but now with the 405k, this may swing my numbers to a slight margin decrease. Still need to revise the model.
Thank you! didnt realize the EUR / RMB divergence. That does sound great!
Relatedly, Elon kind of sort of acknowledged solid cashflow here. Does look high with the current deliveries, especially given the increase in inventory is ~$1.7B. Not sure it can get there unless Capex has taken a huge fall, which might still be possible with both Austin and Berlin development mostly complete.
The Accountant
Active Member
As you point out, that inventory build is going to hurt FCF unless they get a corresponding increase in Accounts Payable.
In Q3, increased Inventory decreased cash flow by $2.3B but Accounts Payables increased cash flow by $3.2B . . .but I am not sure if we get that same favorable accounts payable cash flow effect in Q4. Cash flow will be difficult to forecast.
petit_bateau
Active Member
Good point
Q3 EPS was $0.95 GAAP
Q3 +17% QoQ vehicles growth in Q4 would be $1.11 GAAP
After including Q4 P&D my model spits out $1.19 GAAP
I am likely on the high side as I assume vehicle GM% Q4=Q3 at 28%, plus a hefty further increase in storage revenue, and no shares dilution.
So somewhere between $1.11 and $1.19 would be reasonable for GAAP.
The % inventory build in S/X was far higher than the % inventory build in 3/Y, whilst the % build split between S/X and 3/Y went in the other (contradictory) direction - from 5.8% to 4.9% (i.e. that is not the cause of the inventory build). That will tend to depress ARPV and also likely GM%. I don't think the frantic price cuts to push over 400k sales at EOQ came early enough to significantly affect GM% on their own.
However those late/wild price cuts (which were mostly US-specific) do suggest to me that someone somewhere kept on denying there was an issue until it was too late to do anything about it in a significant way. Someone high enough up the food chain to block a move, then make a late wild move. Someone very much distracted by other matters and who should know better. Someone who the collective management and board are evidently unable to control. In contrast the China pricing activity, and the Europe pricing activity, were carried out in a much less frantic and more measured manner through the quarter.
Did you model anything for cash pile interest returns over Q3?
Should be a couple of pennies at least.
If they don’t get that they should let me manage it! I can buy short term t bills like a pro!
petit_bateau
Active Member
No I didn't. I'm a very simple person. I just assumed -$52m from interest & other reduced to $0 going forwards.
Doggydogworld
Active Member
AP increases with production, which was +20% Q/Q. That would imply 2.8b AP growth. But....... production in the back half of the quarter is what counts. Those are the parts and materials still unpaid at EOQ. That's why Q2 AP was not down from Q1, even though production was down ~50k units. The Zero-Covid factory shutdown happened early in Q2 so it didn't really affect AP.
I figure Shanghai production was down 10-20k in the back half of Q4 vs. Q3 (~105k vs. ~120k). Fremont was flattish while TX+Berlin were probably +20k in the back half. That's pretty flat overall, which points to little or no increase in AP in Q4.
The Accountant
Active Member
Just curious if the FCF is impacted differently by unassembled parts as compared to assembled unsold cars.
i.e. which inventory are you referring to?
EVNow
Well-Known Member
If a car is sold, Tesla would get the money, which would pay for all the parts/labor (and margin). If not, Tesla may have to pay for all those things, but not get any revenue in return, which reduces cash on hand.
