q1 2018 earnings estimates

[luvb2b]

my earnings model for q1 2018. comments welcome. thank you.

…

ls veh % total

avg price s+x

avg price model 3

revenue

auto sales ex 3

auto sales mod 3

auto leasing

1 time autopilot

zev credits

total auto

energy storage

solarcity

grohmann

services/other

total revenue

cost of revenue

auto sales ex 3

auto sales mod 3

auto leasing

total auto

energy storage

solarcity

grohmann

services & other

total cost of rev

gross profit

auto gaap ex 3 gm

auto-zev ex 3 gm

model 3 gm

auto-zev incl 3 gm

storage gm

scty gm

grohmann gm

services gm

opex

tesla r&d

tesla sg&a

1time acq cost

solarcity r&d

solarcity sg&a

total opex

op income

interest inc

interest exp

scty interest

other income exp

1time scty gain

pretax income

income tax

net income

non-cont int.

net inc to common

basic shares

diluted shares

diluted gaap eps

gaap net income

- stock based comp

- one time scty

non-gaap net income

non-gaap diluted eps

[TD2] luv q1-18 [/TD2][TD2] Dec-17 [/TD2][TD2] Sep-17 [/TD2][TD2] Mar-17 [/TD2] [TD2] 0.23 [/TD2][TD2] 0.23 [/TD2][TD2] 0.21 [/TD2][TD2] 0.26 [/TD2] [TD2] 98.00 [/TD2][TD2] 98.15 [/TD2][TD2] 100.84 [/TD2][TD2] 108.06 [/TD2] [TD2] 53.00 [/TD2][TD2] 53.00 [/TD2][TD2] 53.00 [/TD2][TD2] 0.00 [/TD2] [TD2]1,645,028[/TD2][TD2]2,148,241[/TD2][TD2]2,064,390[/TD2][TD2]2,000,060[/TD2] [TD2]433,540[/TD2][TD2]81,726[/TD2][TD2]11,766[/TD2][TD2]0[/TD2] [TD2]349,755[/TD2][TD2]293,086[/TD2][TD2]286,158[/TD2][TD2]254,540[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]35,000[/TD2] [TD2]0[/TD2][TD2]179,142[/TD2][TD2]575[/TD2][TD2]0[/TD2] [TD2] 2,428,323 [/TD2][TD2] 2,702,195 [/TD2][TD2] 2,362,889 [/TD2][TD2] 2,289,600 [/TD2] [TD2]171,828[/TD2][TD2]80,037[/TD2][TD2]44,505[/TD2][TD2]5,244[/TD2] [TD2]218,000[/TD2][TD2]218,000[/TD2][TD2]273,000[/TD2][TD2]208,700[/TD2] [TD2]-3,000[/TD2][TD2]-2,600[/TD2][TD2]11,100[/TD2][TD2]22,400[/TD2] [TD2]300,000[/TD2][TD2]290,617[/TD2][TD2]293,181[/TD2][TD2]170,326[/TD2] [TD2] 3,115,151 [/TD2][TD2] 3,288,249 [/TD2][TD2] 2,984,675 [/TD2][TD2] 2,696,270 [/TD2] [TD2]1,271,446[/TD2][TD2]1,740,075[/TD2][TD2]1,661,834[/TD2][TD2]1,496,649[/TD2] [TD2]553,150[/TD2][TD2]259,556[/TD2][TD2]93,788[/TD2][TD2]0[/TD2] [TD2]224,641[/TD2][TD2]191,541[/TD2][TD2]175,224[/TD2][TD2]166,026[/TD2] [TD2] 2,049,237 [/TD2][TD2] 2,191,172 [/TD2][TD2] 1,930,846 [/TD2][TD2] 1,662,675 [/TD2] [TD2]189,010[/TD2][TD2]131,715[/TD2][TD2]59,188[/TD2][TD2]6,473[/TD2] [TD2]152,600[/TD2][TD2]150,000[/TD2][TD2]178,100[/TD2][TD2]145,300[/TD2] [TD2]11,000[/TD2][TD2]11,000[/TD2][TD2]10,100[/TD2][TD2]14,900[/TD2] [TD2]366,000[/TD2][TD2]365,576[/TD2][TD2]357,301[/TD2][TD2]198,976[/TD2] [TD2] 2,767,848 [/TD2][TD2] 2,849,463 [/TD2][TD2] 2,535,535 [/TD2][TD2] 2,028,324 [/TD2] [TD2] 347,303 [/TD2][TD2] 438,786 [/TD2][TD2] 449,140 [/TD2][TD2] 667,946 [/TD2] [TD2]25.0%[/TD2][TD2]20.9%[/TD2][TD2]21.8%[/TD2][TD2]27.4%[/TD2] [TD2]25.0%[/TD2][TD2]20.9%[/TD2][TD2]21.8%[/TD2][TD2]26.3%[/TD2] [TD2]-27.6%[/TD2][TD2]-217.6%[/TD2][TD2]-697.1%[/TD2][TD2]0.0%[/TD2] [TD2]15.6%[/TD2][TD2]13.2%[/TD2][TD2]18.3%[/TD2][TD2]26.3%[/TD2] [TD2]-10.0%[/TD2][TD2]-64.6%[/TD2][TD2]-33.0%[/TD2][TD2]-23.4%[/TD2] [TD2]30.0%[/TD2][TD2]31.2%[/TD2][TD2]34.8%[/TD2][TD2]30.4%[/TD2] [TD2]466.7%[/TD2][TD2]523.1%[/TD2][TD2]9.0%[/TD2][TD2]33.5%[/TD2] [TD2]-22.0%[/TD2][TD2]-25.8%[/TD2][TD2]-21.9%[/TD2][TD2]-16.8%[/TD2] [TD2]320,000[/TD2][TD2]319,637[/TD2][TD2]301,622[/TD2][TD2]239,070[/TD2] [TD2]540,000[/TD2][TD2]542,290[/TD2][TD2]512,998[/TD2][TD2]446,637[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]67,000[/TD2] [TD2]35,000[/TD2][TD2]35,000[/TD2][TD2]30,000[/TD2][TD2]44,800[/TD2] [TD2]140,000[/TD2][TD2]140,000[/TD2][TD2]140,000[/TD2][TD2]127,988[/TD2] [TD2] 1,035,000 [/TD2][TD2] 1,036,927 [/TD2][TD2] 984,620 [/TD2][TD2] 925,495 [/TD2] [TD2] -687,697 [/TD2][TD2] -598,141 [/TD2][TD2] -535,480 [/TD2][TD2] -257,549 [/TD2] [TD2]6,000[/TD2][TD2]6,280[/TD2][TD2]5,531[/TD2][TD2]3,090[/TD2] [TD2]-65,000[/TD2][TD2]-99,363[/TD2][TD2]-68,409[/TD2][TD2]-46,146[/TD2] [TD2]-54,000[/TD2][TD2]-47,000[/TD2][TD2]-48,700[/TD2][TD2]-53,200[/TD2] [TD2]-12,000[/TD2][TD2]-41,677[/TD2][TD2]-24,390[/TD2][TD2]-18,098[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2] -812,697 [/TD2][TD2] -779,901 [/TD2][TD2] -671,448 [/TD2][TD2] -371,903 [/TD2] [TD2]20,000[/TD2][TD2]-9,094[/TD2][TD2]-285[/TD2][TD2]25,278[/TD2] [TD2] -832,697 [/TD2][TD2] -770,807 [/TD2][TD2] -671,163 [/TD2][TD2] -397,181 [/TD2] [TD2]-50,000[/TD2][TD2]-95,457[/TD2][TD2]-51,787[/TD2][TD2]-66,904[/TD2] [TD2] -782,697 [/TD2][TD2] -675,350 [/TD2][TD2] -619,376 [/TD2][TD2] -330,277 [/TD2] [TD2]170,000[/TD2][TD2]168,314[/TD2][TD2]167,294[/TD2][TD2]162,129[/TD2] [TD2]170,000[/TD2][TD2]168,314[/TD2][TD2]167,294[/TD2][TD2]162,129[/TD2] [TD2] -4.60 [/TD2][TD2] -4.01 [/TD2][TD2] -3.70 [/TD2][TD2] -2.04 [/TD2] [TD2]-782,697[/TD2][TD2]-675,350[/TD2][TD2]-619,376[/TD2][TD2]-330,277[/TD2] [TD2]140,000[/TD2][TD2]134,348[/TD2][TD2]112,653[/TD2][TD2]103,717[/TD2] [TD2]0[/TD2][TD2]27,950[/TD2][TD2]18,225[/TD2][TD2]11,571[/TD2] [TD2]-642,697[/TD2][TD2]-513,052[/TD2][TD2]-488,498[/TD2][TD2]-214,989[/TD2] [TD2] -3.78 [/TD2][TD2] -3.05 [/TD2][TD2] -2.92 [/TD2][TD2] -1.33 [/TD2]

 

[bdy0627]

Yikes! That's an ugly one. But we knew it would be. Bears are going to have a lot of fun with this ER. They will obviously point out that the more model 3s TSLA sells, the more money it loses. We can't get to Q3 financials soon enough.

 

[ValueAnalyst]

Yikes! That's an ugly one. But we knew it would be. Bears are going to have a lot of fun with this ER. They will obviously point out that the more model 3s TSLA sells, the more money it loses. We can't get to Q3 financials soon enough.

1Q18 results may not matter, if Tesla continues to ramp Model 3 production ahead of what's baked in the stock price.

Profitability of Model 3 is what matters most, and 1Q18 results will not tell us that. 2Q18 will.

 

[mongo]

my earnings model for q1 2018. comments welcome. thank you.

…

ls veh % total

avg price s+x

avg price model 3

revenue

auto sales ex 3

auto sales mod 3

auto leasing

1 time autopilot

zev credits

total auto

energy storage

solarcity

grohmann

services/other

total revenue

cost of revenue

auto sales ex 3

auto sales mod 3

auto leasing

total auto

energy storage

solarcity

grohmann

services & other

total cost of rev

gross profit

auto gaap ex 3 gm

auto-zev ex 3 gm

model 3 gm

auto-zev incl 3 gm

storage gm

scty gm

grohmann gm

services gm

opex

tesla r&d

tesla sg&a

1time acq cost

solarcity r&d

solarcity sg&a

total opex

op income

interest inc

interest exp

scty interest

other income exp

1time scty gain

pretax income

income tax

net income

non-cont int.

net inc to common

basic shares

diluted shares

diluted gaap eps

gaap net income

- stock based comp

- one time scty

non-gaap net income

non-gaap diluted eps

[TD2] luv q1-18 [/TD2][TD2] Dec-17 [/TD2][TD2] Sep-17 [/TD2][TD2] Mar-17 [/TD2] [TD2] 0.23 [/TD2][TD2] 0.23 [/TD2][TD2] 0.21 [/TD2][TD2] 0.26 [/TD2] [TD2] 98.00 [/TD2][TD2] 98.15 [/TD2][TD2] 100.84 [/TD2][TD2] 108.06 [/TD2] [TD2] 53.00 [/TD2][TD2] 53.00 [/TD2][TD2] 53.00 [/TD2][TD2] 0.00 [/TD2] [TD2]1,645,028[/TD2][TD2]2,148,241[/TD2][TD2]2,064,390[/TD2][TD2]2,000,060[/TD2] [TD2]433,540[/TD2][TD2]81,726[/TD2][TD2]11,766[/TD2][TD2]0[/TD2] [TD2]349,755[/TD2][TD2]293,086[/TD2][TD2]286,158[/TD2][TD2]254,540[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]35,000[/TD2] [TD2]0[/TD2][TD2]179,142[/TD2][TD2]575[/TD2][TD2]0[/TD2] [TD2] 2,428,323 [/TD2][TD2] 2,702,195 [/TD2][TD2] 2,362,889 [/TD2][TD2] 2,289,600 [/TD2] [TD2]171,828[/TD2][TD2]80,037[/TD2][TD2]44,505[/TD2][TD2]5,244[/TD2] [TD2]218,000[/TD2][TD2]218,000[/TD2][TD2]273,000[/TD2][TD2]208,700[/TD2] [TD2]-3,000[/TD2][TD2]-2,600[/TD2][TD2]11,100[/TD2][TD2]22,400[/TD2] [TD2]300,000[/TD2][TD2]290,617[/TD2][TD2]293,181[/TD2][TD2]170,326[/TD2] [TD2] 3,115,151 [/TD2][TD2] 3,288,249 [/TD2][TD2] 2,984,675 [/TD2][TD2] 2,696,270 [/TD2] [TD2]1,271,446[/TD2][TD2]1,740,075[/TD2][TD2]1,661,834[/TD2][TD2]1,496,649[/TD2] [TD2]553,150[/TD2][TD2]259,556[/TD2][TD2]93,788[/TD2][TD2]0[/TD2] [TD2]224,641[/TD2][TD2]191,541[/TD2][TD2]175,224[/TD2][TD2]166,026[/TD2] [TD2] 2,049,237 [/TD2][TD2] 2,191,172 [/TD2][TD2] 1,930,846 [/TD2][TD2] 1,662,675 [/TD2] [TD2]189,010[/TD2][TD2]131,715[/TD2][TD2]59,188[/TD2][TD2]6,473[/TD2] [TD2]152,600[/TD2][TD2]150,000[/TD2][TD2]178,100[/TD2][TD2]145,300[/TD2] [TD2]11,000[/TD2][TD2]11,000[/TD2][TD2]10,100[/TD2][TD2]14,900[/TD2] [TD2]366,000[/TD2][TD2]365,576[/TD2][TD2]357,301[/TD2][TD2]198,976[/TD2] [TD2] 2,767,848 [/TD2][TD2] 2,849,463 [/TD2][TD2] 2,535,535 [/TD2][TD2] 2,028,324 [/TD2] [TD2] 347,303 [/TD2][TD2] 438,786 [/TD2][TD2] 449,140 [/TD2][TD2] 667,946 [/TD2] [TD2]25.0%[/TD2][TD2]20.9%[/TD2][TD2]21.8%[/TD2][TD2]27.4%[/TD2] [TD2]25.0%[/TD2][TD2]20.9%[/TD2][TD2]21.8%[/TD2][TD2]26.3%[/TD2] [TD2]-27.6%[/TD2][TD2]-217.6%[/TD2][TD2]-697.1%[/TD2][TD2]0.0%[/TD2] [TD2]15.6%[/TD2][TD2]13.2%[/TD2][TD2]18.3%[/TD2][TD2]26.3%[/TD2] [TD2]-10.0%[/TD2][TD2]-64.6%[/TD2][TD2]-33.0%[/TD2][TD2]-23.4%[/TD2] [TD2]30.0%[/TD2][TD2]31.2%[/TD2][TD2]34.8%[/TD2][TD2]30.4%[/TD2] [TD2]466.7%[/TD2][TD2]523.1%[/TD2][TD2]9.0%[/TD2][TD2]33.5%[/TD2] [TD2]-22.0%[/TD2][TD2]-25.8%[/TD2][TD2]-21.9%[/TD2][TD2]-16.8%[/TD2] [TD2]320,000[/TD2][TD2]319,637[/TD2][TD2]301,622[/TD2][TD2]239,070[/TD2] [TD2]540,000[/TD2][TD2]542,290[/TD2][TD2]512,998[/TD2][TD2]446,637[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]67,000[/TD2] [TD2]35,000[/TD2][TD2]35,000[/TD2][TD2]30,000[/TD2][TD2]44,800[/TD2] [TD2]140,000[/TD2][TD2]140,000[/TD2][TD2]140,000[/TD2][TD2]127,988[/TD2] [TD2] 1,035,000 [/TD2][TD2] 1,036,927 [/TD2][TD2] 984,620 [/TD2][TD2] 925,495 [/TD2] [TD2] -687,697 [/TD2][TD2] -598,141 [/TD2][TD2] -535,480 [/TD2][TD2] -257,549 [/TD2] [TD2]6,000[/TD2][TD2]6,280[/TD2][TD2]5,531[/TD2][TD2]3,090[/TD2] [TD2]-65,000[/TD2][TD2]-99,363[/TD2][TD2]-68,409[/TD2][TD2]-46,146[/TD2] [TD2]-54,000[/TD2][TD2]-47,000[/TD2][TD2]-48,700[/TD2][TD2]-53,200[/TD2] [TD2]-12,000[/TD2][TD2]-41,677[/TD2][TD2]-24,390[/TD2][TD2]-18,098[/TD2] [TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2][TD2]0[/TD2] [TD2] -812,697 [/TD2][TD2] -779,901 [/TD2][TD2] -671,448 [/TD2][TD2] -371,903 [/TD2] [TD2]20,000[/TD2][TD2]-9,094[/TD2][TD2]-285[/TD2][TD2]25,278[/TD2] [TD2] -832,697 [/TD2][TD2] -770,807 [/TD2][TD2] -671,163 [/TD2][TD2] -397,181 [/TD2] [TD2]-50,000[/TD2][TD2]-95,457[/TD2][TD2]-51,787[/TD2][TD2]-66,904[/TD2] [TD2] -782,697 [/TD2][TD2] -675,350 [/TD2][TD2] -619,376 [/TD2][TD2] -330,277 [/TD2] [TD2]170,000[/TD2][TD2]168,314[/TD2][TD2]167,294[/TD2][TD2]162,129[/TD2] [TD2]170,000[/TD2][TD2]168,314[/TD2][TD2]167,294[/TD2][TD2]162,129[/TD2] [TD2] -4.60 [/TD2][TD2] -4.01 [/TD2][TD2] -3.70 [/TD2][TD2] -2.04 [/TD2] [TD2]-782,697[/TD2][TD2]-675,350[/TD2][TD2]-619,376[/TD2][TD2]-330,277[/TD2] [TD2]140,000[/TD2][TD2]134,348[/TD2][TD2]112,653[/TD2][TD2]103,717[/TD2] [TD2]0[/TD2][TD2]27,950[/TD2][TD2]18,225[/TD2][TD2]11,571[/TD2] [TD2]-642,697[/TD2][TD2]-513,052[/TD2][TD2]-488,498[/TD2][TD2]-214,989[/TD2] [TD2] -3.78 [/TD2][TD2] -3.05 [/TD2][TD2] -2.92 [/TD2][TD2] -1.33 [/TD2]

Q1 deliveries were 11,730 S and 10,070 X Tesla Q1 2018 Vehicle Production and Deliveries (NASDAQ:TSLA), total of 21,800. With your 98k sales price, shouldn't it be 2,136,400 in non 3 sales (v.s. 1,645,028)?

 

[luvb2b]

some percentage of cars are leased and can't be recognized as revenue in current period. this is not new, you'll see it in past quarters as well. that's for s/x only, for model 3 i assume all are sales.

Q1 deliveries were 11,730 S and 10,070 X Tesla Q1 2018 Vehicle Production and Deliveries (NASDAQ:TSLA), total of 21,800. With your 98k sales price, shouldn't it be 2,136,400 in non 3 sales (v.s. 1,645,028)?

 

[mongo]

some percentage of cars are leased and can't be recognized as revenue in current period. this is not new, you'll see it in past quarters as well. that's for s/x only, for model 3 i assume all are sales.

Ah, the 0.23 line is leased, so multiplying by 0.76 gets your number. Thanks!

I'm not following Q2 '17 then. They delivered 22,026, with the 108.06 sales price and 0.26 lease rate you list, I get a revenue of 1,761,296. Your revenue line gives 2,000,060 vs the reported amount of 2,013,852. Reported leasing revenue being 272,764 or 12% of the total. ZEV was only 100,000 so something seems off (probably me).

 

[luvb2b]

i didn't show q2 data. only q1 for yoy compare, and q3/q4 17

Ah, the 0.23 line is leased, so multiplying by 0.76 gets your number. Thanks!

I'm not following Q2 '17 then. They delivered 22,026, with the 108.06 sales price and 0.26 lease rate you list, I get a revenue of 1,761,296. Your revenue line gives 2,000,060 vs the reported amount of 2,013,852. Reported leasing revenue being 272,764 or 12% of the total. ZEV was only 100,000 so something seems off (probably me).

 

[mongo]

i didn't show q2 data. only q1 for yoy compare, and q3/q4 17

So yeah, it was me.
(explains the mental dissonance i had looking at the months)

 

[luvb2b]

i did have q2 17 in a prior earnings thread, try to find q3 or q4 2017 would probably see how it shook out there.

So yeah, it was me.
(explains the mental dissonance i had looking at the months)

 

[mongo]

i did have q2 17 in a prior earnings thread, try to find q3 or q4 2017 would probably see how it shook out there.

q3 and q4 lined up, that's why I thought q2 was off since the math was working (and Q2 was off, way off, as in totally off the list)

 

[Reality]

I think you are low on leasing revenue with the new rules, and high on Gross Margin @ 16% of auto, overall looks like a solid model though. I think net Income is closer to 950k, but they definitely do everything possible to keep it under a billion.It is going to be a really really bad looking set of financials.

Really great model

 

[generalenthu]

At this juncture, I think a cash model is a more valuable than an earnings model. I think there is a narrow pathway to end the year at $1B. The big question is how much of model 3 expense is depreciation vs direct costs. We should be able to back in to the rest. Elon and Deepak did guide to a 3.5B capital investment this year, which makes things rather tight. There should be a small offset from increased negative working capital from the 3 ramp.

 

[luvb2b]

do you know how new rules are expected to impact leasing revenue? are you referring to pulling forward some of the deferred revenue and realizing this quarter? please clarify and expand comment.

gross margin i assumed s/x return to 25% and model 3 is running -25 to -30% at current volume levels. so yes could be high if they are only low 20s for s/x margin. it seemed that those lines were running at high efficiency though.

I think you are low on leasing revenue with the new rules, and high on Gross Margin @ 16% of auto, overall looks like a solid model though. I think net Income is closer to 950k, but they definitely do everything possible to keep it under a billion.It is going to be a really really bad looking set of financials.

Really great model

 

[luvb2b]

are you sure it's that narrow?
in my further modeling i can see q3 and q4 numbers coming in very high, cash generated from ops at 600m-900m ranges. additional lease securitization can fill the gap and they could self-fund capex, at least to the end of the year. i feel something has to go very wrong for cash to get anywhere near 1b by end of year.

At this juncture, I think a cash model is a more valuable than an earnings model. I think there is a narrow pathway to end the year at $1B. The big question is how much of model 3 expense is depreciation vs direct costs. We should be able to back in to the rest. Elon and Deepak did guide to a 3.5B capital investment this year, which makes things rather tight. There should be a small offset from increased negative working capital from the 3 ramp.

 

[TMSE]

@luvb2b
Thanks for the model and estimates. What would be breakeven delivery numbers for S/X/3 to achieve non-GAAP or GAAP profitability or +ve free cash flow?

 

[luvb2b]

prefacing the discussion with these are all estimates based on a lot of educated guesswork. we don't have good info on model 3 margins. my models there are crude approximations with only a few data points as input (only 2 quarters of data really).

by positive cash flow do you mean:
a. "positive cash from ops"
b. "positive free cash flow" (cash from ops - opex)
c. "net cash flow"

(a) happens fairly quickly. there's nearly 650m of combined depreciation and stock based comp which is all non-cash type of expense. also the delay between customer delivery and supplier payment benefits tesla's cash from operations. i think you hit (a) this quarter with 25k s/x and >25k 3's.

(b) free cash flow depends on capex, but assuming 1b in quarterly capex and no additional cash contributions from solar roofs and tesla energy products i estimate you need 25k s/x + >80k 3's per quarter.

(c) net cash flow can turn positive between (a) & (b). for example think about those 25% of vehicles that are leased each quarter. that's cash going out for production costs etc but not brought back in as sales b/c sales are realized over time. for the direct leases (non-guaranteed) they can securitize those leases and sell them to bring in more cash. just back of the envelope: 5k s/x at 100k each going on lease each quarter is 500m of leases per quarter. haircut those 20% for those that can't be securitized and you can recover 400m a quarter of cash. if you believe that, then about 25k s/x + 60k 3's per quarter will get you to being able to sustain capex with operations and lease securitization and no outside financing. this could be why tesla claims they won't need additional cash this year.

@luvb2b
Thanks for the model and estimates. What would be breakeven delivery numbers for S/X/3 to achieve non-GAAP or GAAP profitability or +ve free cash flow?

 

[Reality]

Forecasting Cash flow is a little silly because it can be manipulated

 

[trentbridge]

I am surprised at the Model 3 gross margins at -28%. All the cars sold - 8180 - of them are the LR versions at $53,000 each. That's implies a cost of $73,600. I don't see how Tesla expected to be "ops cash flow" positive on this vehicle..in the first quarter under that assumption.

If we assume an "overhead" of $200,000,000 per quarter and base costs of parts and labor at $38,000 per vehicle - it would give you a cost in Q4 for overhead of $129,000 plus $38,000 per Model 3 = $ ( -215% gross margin) - then in Q1 2018 this would become $200,000,000 divided by 8160 = $24,509 per vehicle. $o a total cost of $62,509 (gross margin -15%)

The machinery used on the production line is depreciated over the first million vehicles so that cost should be consistent with the number produced and sold. I'd expect the engineering and management overtime was very heavy in both periods as the bottlenecks were worked on.

 

[ValueAnalyst]

prefacing the discussion with these are all estimates based on a lot of educated guesswork. we don't have good info on model 3 margins. my models there are crude approximations with only a few data points as input (only 2 quarters of data really).

by positive cash flow do you mean:
a. "positive cash from ops"
b. "positive free cash flow" (cash from ops - opex)
c. "net cash flow"

(a) happens fairly quickly. there's nearly 650m of combined depreciation and stock based comp which is all non-cash type of expense. also the delay between customer delivery and supplier payment benefits tesla's cash from operations. i think you hit (a) this quarter with 25k s/x and >25k 3's.

(b) free cash flow depends on capex, but assuming 1b in quarterly capex and no additional cash contributions from solar roofs and tesla energy products i estimate you need 25k s/x + >80k 3's per quarter.

(c) net cash flow can turn positive between (a) & (b). for example think about those 25% of vehicles that are leased each quarter. that's cash going out for production costs etc but not brought back in as sales b/c sales are realized over time. they can securitize those leases and sell them to bring in more cash. just back of the envelope: 5k s/x at 100k each going on lease each quarter is 500m of lease assets created each quarter. so just sell those even at some haircut and you can recover 400m a quarter of cash. if you believe that, then about 25k s/x + 60k 3's per quarter will get you to being able to sustain capex with operations and lease securitization and no outside financing. this could be why tesla claims they won't need additional cash this year.

Thanks for the post.

One correction: "positive free cash flow" (cash from ops - CapEX), not "opex," but that's a crude shortcut to the actual definition.

More importantly, please consider including a discussion on Tesla's cash conversion cycle. This is key for understanding 2018.

Unlike its peers, Tesla enjoys a very quick accounts receivable collection cycle combined with a very favorable accounts payable cycle. This means, as Tesla's revenue growth accelerates even further in the coming quarters, Tesla's operating cash inflows will precede its operating cash outflows. This is what Elon Musk meant by "Nirvana" in 2Q17 earnings call:

... So obviously, the Nirvana is that we can make the car and get paid for the car before we have to pay our suppliers, which then the faster you grow, the faster your cash position grows.Obviously, that's like the – that's the promised land right there. And that's how – it's what we've aimed for. And I think we'll achieve that maybe not immediately but pretty quickly.
​

Tesla recently stated it won't need external capital this year, primarily because of this phenomenon, but also because CapEx will run less than $1 billion per quarter this year. Much of the CapEx needed to get to 5,000 weekly Model 3's has already been spent, and Tesla has adjusted its 2H18 growth plans downward. Cash flow projections should be adjusted accordingly.

 

[TMSE]

@luvb2b
Thanks for the great explanation on different cash flow scenarios! I am more interested in positive cash from ops. It is highly likely that Tesla achieves it in this quarter.

prefacing the discussion with these are all estimates based on a lot of educated guesswork. we don't have good info on model 3 margins. my models there are crude approximations with only a few data points as input (only 2 quarters of data really).

by positive cash flow do you mean:
a. "positive cash from ops"
b. "positive free cash flow" (cash from ops - opex)
c. "net cash flow"

(a) happens fairly quickly. there's nearly 650m of combined depreciation and stock based comp which is all non-cash type of expense. also the delay between customer delivery and supplier payment benefits tesla's cash from operations. i think you hit (a) this quarter with 25k s/x and >25k 3's.

(b) free cash flow depends on capex, but assuming 1b in quarterly capex and no additional cash contributions from solar roofs and tesla energy products i estimate you need 25k s/x + >80k 3's per quarter.

(c) net cash flow can turn positive between (a) & (b). for example think about those 25% of vehicles that are leased each quarter. that's cash going out for production costs etc but not brought back in as sales b/c sales are realized over time. for the direct leases (non-guaranteed) they can securitize those leases and sell them to bring in more cash. just back of the envelope: 5k s/x at 100k each going on lease each quarter is 500m of leases per quarter. haircut those 20% for those that can't be securitized and you can recover 400m a quarter of cash. if you believe that, then about 25k s/x + 60k 3's per quarter will get you to being able to sustain capex with operations and lease securitization and no outside financing. this could be why tesla claims they won't need additional cash this year.