Q1 2017 Earning projections

[dc_h]

Too soon? With 50,000 cars projected in the first half and TE showing 130 million in Q4 revenue and projections for faster growth from TE then TA, what is Q1 looking like?

I think Q1 deliveries are likely around 25,000, but production is likely possibly below 25,000 due to 2-3 weeks of down time for Model 3 preparation. Assuming TE has much faster growth then TA, I would expect a minimum of $200 million in TE revenue, and leaving the quarter on pace of closer to $500 million in quarterly revenue. They can also recognize $8000 for about 20,000 Q4 cars in Q1 or $160 million. That gets revenue up to about 3 billion and again allows Tesla to end the quarter up another 500 million in cash balances, in spite of accelerated capex.
Personally I thought Q4 was the highest risk quarter of the year. So ending Q4 up $300 million is amazing.

 

[RobStark]

Tesla will recognize $5k for Enhanced Auto Pilot but not the $3k for Full Self Drive in Q1.

 

[dc_h]

Tesla will recognize $5k for Enhanced Auto Pilot but not the $3k for Full Self Drive in Q1.

So about 120 million. Another 250 million from residual value accounting changes.

 

[neroden]

Too soon? With 50,000 cars projected in the first half and TE showing 130 million in Q4 revenue and projections for faster growth from TE then TA, what is Q1 looking like?

Q1 may be *very confusing*.

A big question mark is whether Tesla will adopt the new revenue recognition standard early or wait until Q1 2018. It is not entirely clear what the revenue recognition standard will do to SolarCity calculations, but it seems like it will be significant. A second big question mark is whether Tesla will adopt the new lease recognition standard or wait until Q1 2018 or 2019, and again it may be significant to the accounting.

Particularly the balance sheet will make a lot more sense; it's not clear to me what it'll do to the income statement. It looks to me like there will be a lot of "deferred revenue" recognized upfront on lease or PPA contract signing, as opposed to being invisible on the balance sheet until the payments are made.

I've been trying to puzzle out the effects of the rules changes; I am no accounting expert. I also don't know how SolarCity has been accounting for their existing PPAs and leases. A key point is that all the accounting has to be redone for the *old* contracts so there will be one massive one-time accounting change.

Under the old system, the options were: service contract, capital lease, operating lease. I believe the PPAs were treated as a service contract. I can't figure out whether the leases were treated as capital leases or operating leases.

Under the new system, the options are: service contract, sales-type lease, direct financing lease, and operating lease, and I'm pretty sure nearly all of Tesla's leases will be classified as sales-type leases, though some might be classifed as direct financing leases. How the PPAs will be classified is another matter.

New leased panels will show up on the balance sheet as the removal of the solar panel system from the balance sheet, and the addition of a lease asset equal in value to the present value of the future payment stream (plus an estimate of the residual value). This asset will then decrease as lease payments are made (so lease payments won't change the balance sheet). It will increase each year as the present value of the payment stream changes, effectively going up by the original estimated interest rate which was used to discount the future payment stream when estimating present value. (Oy.)

It looks like *all the old leases* have to be recalculated, which is going to cause one massive change to the accounting.

The PPA accounting changes too and I totally haven't deciphered it...

Anyway, I think there's going to be LOADS of noise in Q1 if they do change the accounting.

 

[Mario Kadastik]

You are rolling all of Q4 cars into it. They actually started the production mid-October so there's some production in Q4 that was pre-AP2. I'd estimate ~20k cars with 97% take rate and they may or may not have accounted for 1k cars as those got the software 31.12. So around 100M.

The accounting change would be really good if someone could do the math on what the expected impact on moving to the new GAAP accounting scheme is. I wonder if Jeff Evans would answer if we asked him if TSLA is planning to implement the swap to new GAAP rules starting from Q1 '17.

 

[mrdoubleb]

Also isn't AP optional? Are we just assuming everyone opts for it?

 

[Mario Kadastik]

Also isn't AP optional? Are we just assuming everyone opts for it?

I think the take rate is extremely high, definitely 90+%

 

[bonaire]

TE will have larger numbers if big projects like those discussed recently come online. But I don't know anything as big as the one at Mira Loma - or even half as big. The SGIP project data doesn't indicate a lot of activity for Q1 - but then again, SGIP registration is not required and some waiting list activity may keep some larger scale projects from signing up for the state incentives. I was expecting to see more from the NY state sector (ConEd or otherwise) but very little news. Hard to tell without more details (10-K?) but was Mira Loma paid for in Q4 or will it be realized in Q1?

 

[neroden]

The accounting change would be really good if someone could do the math on what the expected impact on moving to the new GAAP accounting scheme is. I wonder if Jeff Evans would answer if we asked him if TSLA is planning to implement the swap to new GAAP rules starting from Q1 '17.

Actually he might well answer these questions. "What quarter is Tesla adopting the new GAAP rules for revenue recognition? What quarter is Tesla adopting the new GAAP rules for lease recognition?"

Anyone know a way to contact him which doesn't go into a black hole?

 

[dc_h]

Looking at the TE revenue, up 463% from Q3 and Solar City only being 1/2 a quarter, is anyone ready to guess\estimate TE revenue for Q1? Storage revenue was probably about 50 million based on 98 MWh of storage delivered, but with the GF running, that number should at least double, yes/no?
With TE at 130 million and storage at 50, solar must have been about 80 million, with ~5 weeks of revenue. Does that peak end of year, or should this be steady? I don't see Tesla store sales of solar picking up until Q2 at best.
Based on the above, it seems like TE should be at least 300 million and if GF is producing and selling storage, 400 to 500 million seems reasonable.
Will TE be like Model 3 with thin margins until this scales up? They showed 2.7% margins for TE, I would guess this would rise to 5-10% in Q1 or Q2, and start rising as the current phase hits full production.
I think TE revenue numbers in Q1 and Q2, assuming TA is around 2.2 billion with about 25,000 Model S&X sold, could be a short term driver. Sounds like Elon is going to stay fairly quiet about the Model 3 until they are rolling off the line for the first employees.

 

[Mario Kadastik]

Actually he might well answer these questions. "What quarter is Tesla adopting the new GAAP rules for revenue recognition? What quarter is Tesla adopting the new GAAP rules for lease recognition?"

Anyone know a way to contact him which doesn't go into a black hole?

Well looking at e-mail formatting of various Tesla employees it's probably [email protected] but best to CC [email protected] too. So... should we all write or just one of us?

 

[neroden]

Just one would be better, as long as that one can make a very clear, concise letter.

 

[Mario Kadastik]

Just one would be better, as long as that one can make a very clear, concise letter.

Then I vote you send it, you already had part of the mail prepared.

 

[neroden]

I'd rather not because my email has been known to lose incoming messages (overly aggressive spam filtering at the server, I think) and I don't want to miss the reply.