Q2 2013 Results - Expectations and Projection

[maekuz]

I have tried to model a projection of the Q2 2013 results (see attachment) but there are a some/many open questions and i would really appreciate if you could chime in and tell me your expectations and what kind of estimates or data you are using to forecast the Q2 results.

I started with an estimated numbers of cars produced/delivered and used the forward-looking statements from the investors call and the 10-Q (e.g. gross margin is expected to be in the "high teens" ~ i assumed it to be 19%) to calculate/estimate financial data like revenues or expenses. Please feel free to point out any errors i made. I am trying to learn here and this is my very first take on this matter.

Using this back-of-the envelope calculation it looks like Tesla would need a gross margin well above 20% to get profitable in Q2 2013. Revenue from ZEV credits is said to be declining and this should be a given, taking into consideration that the numbers of cars delivered in Q2 will be roughly at the level of Q1 but in Q2 there will be a higher rate of 60kWh cars (meaning less EV credits per car). Expenses will be slightly higher than in Q1 and that leaves not much room for a profit. I was wondering if there is a financial benefit from repaying the DOE loan early that would reflect on the Q2 results?

What do you think?

 

[Bgarret]

I have tried to model a projection of the Q2 2013 results (see attachment) but there are a some/many open questions and i would really appreciate if you could chime in and tell me your expectations and what kind of estimates or data you are using to forecast the Q2 results.

I started with an estimated numbers of cars produced/delivered and used the forward-looking statements from the investors call and the 10-Q (e.g. gross margin is expected to be in the "high teens" ~ i assumed it to be 19%) to calculate/estimate financial data like revenues or expenses. Please feel free to point out any errors i made. I am trying to learn here and this is my very first take on this matter.

Using this back-of-the envelope calculation it looks like Tesla would need a gross margin well above 20% to get profitable in Q2 2013. Revenue from ZEV credits is said to be declining and this should be a given, taking into consideration that the numbers of cars delivered in Q2 will be roughly at the level of Q1 but in Q2 there will be a higher rate of 60kWh cars (meaning less EV credits per car). Expenses will be slightly higher than in Q1 and that leaves not much room for a profit. I was wondering if there is a financial benefit from repaying the DOE loan early that would reflect on the Q2 results?

What do you think?

Some good work...but you multiplied your ZEV credit revenue by a 22% Gross Margin number...ZEV is 100% margin - changes things dramatically. Also curious about using 4900 delivered. Please let me know your thoughts.

Thanks,

 

[sleepyhead]

I also think your interest expense is off. Last quarter they had to pay interest on the DOE loan and this quarter on the convertibles, which have a lower? 1.5%? interest rate. Interest expense should not be higher than last quarter.

I think auto revs should be lower, since more cheaper models are sold such as 60kWh. You can't do this proportionally to Q1.

Development services revenue will probably be higher as well, if not a lot higher.

ZEV credits are going to decline, because there is less demand for these credits. Has nothing to do with more 60kWh being produced. My understanding is that Tesla has more credits than it can sell anyway. As more manufacturers introduce EV's, less demand to buy these credits from Tesla. That is why Tesla is modelling in $0 in Q4, but I would bet they still get some money from these credits through next year as well.

 

[Citizen-T]

I also think your interest expense is off. Last quarter they had to pay interest on the DOE loan and this quarter on the convertibles, which have a lower? 1.5%? interest rate. Interest expense should not be higher than last quarter.

I think auto revs should be lower, since more cheaper models are sold such as 60kWh. You can't do this proportionally to Q1.

Development services revenue will probably be higher as well, if not a lot higher.

They did start selling the P85+ though. And they seem to have sold an awful lot of them.

 

[maekuz]

Some good work...but you multiplied your ZEV credit revenue by a 22% Gross Margin number...ZEV is 100% margin - changes things dramatically. Also curious about using 4900 delivered. Please let me know your thoughts.

Thanks,

Yes, the ZEV are wrong. Thanks for finding that mistake, I will correct the numbers tomorrow (right now im on mobile).

As for the 4,900 sold (or 4,800):

i based that estimate on the VIN#s posted here at TMC. There are scheduled deliveries for late june in the range of the 13,1xx to 13,5xx. I took a conservative approach and choose 13,100 for the calculation: I subtracted the delivery numbers for Q4 2012, Q1 2013, 250 Company Cars and 500 cars not delivered but on their way to europe. Thats how i got 4,800 deliveries for Q2. This seems to be in line with the reported battery shipments of Panasonic.

- - - Updated - - -

I also think your interest expense is off. Last quarter they had to pay interest on the DOE loan and this quarter on the convertibles, which have a lower? 1.5%? interest rate. Interest expense should not be higher than last quarter.
...

Tesla sold convertible bonds for $600 million. At 1,5% interest per annum ($9 million) this means $1,5 million for two months.

- - - Updated - - -

...

I think auto revs should be lower, since more cheaper models are sold such as 60kWh. You can't do this proportionally to Q1.

...

ZEV credits are going to decline, because there is less demand for these credits. Has nothing to do with more 60kWh being produced. My understanding is that Tesla has more credits than it can sell anyway. As more manufacturers introduce EV's, less demand to buy these credits from Tesla. That is why Tesla is modelling in $0 in Q4, but I would bet they still get some money from these credits through next year as well.

Yes, a valid point. I will try to estimate the mix of 60kwh and 85kwh.

The ZEV revenue should be in line with this mix (5 ZEV credits for the 60kwh model, up to 7 credits for the 85kwh). I dont see the demand declining because ICE sales are strong and EV sales didnt pick up that much speed in 2013 (EV sales figures here: http://www.hybridcars.com/market-dashboard/)

 

[EV2BFREE]

Does the battery swap technology add to the amount of ZEV credits per vehicle? Or is is strictly charge time?
The info from California is as follows:


Type III ≥ 100 miles per charge
Must be capable of replacing
95 miles (UDDS ZEV range)
in ≤ 10 minutes
or
≥ 200 miles per charge


Type IV
≥ 200 miles per charge
Must be capable of replacing
190 miles (UDDS ZEV
range) in ≤ 15 minutes

Type III gets 3 ZEV credits and Type IV gets 4 credits. That means if the battery swap is counted, Tesla could be getting 1 extra credit per vehicle.

 

[maekuz]

It looks that way, see here: ZEV credits - Page 2

 

[Right_Said_Fred]

Why are company cars not being counted? From what I hear and read quite a lot of these cars (loaners) have pretty quickly been sold.

 

[maekuz]

Why are company cars not being counted? From what I hear and read quite a lot of these cars (loaners) have pretty quickly been sold.

The assumption is that these sold company cars are being replaced constantly because they need loaners, cars for show rooms, etc. to conduct daily business. With a growing numbers of show rooms the number of company cars will grow as well.

 

[maekuz]

Update

I did an update on the Excel-File:

• automotive revenue - the number reflects a 40/60-mix of 65kWh/85kWh-models (the 40/60 ratio looked like a TMC consensus to me)
• ZEV credits - the number reflects the 40/60 mix (lower credits for the 65kWh-model) but i didnt apply another discount for a weakening demand of ZEV credits (i dont see it: EV sales didnt go through the roof but ICE sales did - ZEV credit demand should remain moe or less equal)
• gross margin guidance for Q2 is "in high teens" and includes the ZEV credits - i adjusted the calculation accordingly
• share count of common stock - took the number from the financial filing Tesla Motors - Free Writing Prospectus - Filing under Securities Act Rules 163/433

Based on that numbers Tesla will have to come up with a gross margin beyond 20% and Model S deliveries beyond 5,000 to deliver a profit in Q2. That is quite a stretch but who knows?

View attachment 130625_Tesla_Fundamentals.xlsx

 

[Norse]

There is alot of European cars that has been delayed and wont reach costumers in Q2, how much will this effect the numbers?

 

[maekuz]

There is alot of European cars that has been delayed and wont reach costumers in Q2, how much will this effect the numbers?

I don't see any effect on Q2 results because the european deliveries haven't been factored into the Q2 guidance.

EDIT: But they will definitely boost Q3 results

 

[toastypasta]

Bottom line, are we expecting a big enough surprise in Q2 to see a big jump to say $130?

 

[maekuz]

Bottom line, are we expecting a big enough surprise in Q2 to see a big jump to say $130?

I see two questions:

1. Will Tesla post a profitable quarter? If so, shares will definitely jump.
2. If its not a profitable quarter but in other ways an excellent quarter (e.g. gross margin expanded or sales expanded) will the shares jump? I dunno.

 

[toastypasta]

I think we need to see a profit. Tesla blew away numbers last quarter, we need the same this quarter.
Gross margin i think is the number 1 priority of this company. Promising 25% GM by the end of the i think the 3Q is pretty insane. We need to see a modest bump in GM this quarter to stay on pace.

I see two questions:

1. Will Tesla post a profitable quarter? If so, shares will definitely jump.
2. If its not a profitable quarter but in other ways an excellent quarter (e.g. gross margin expanded or sales expanded) will the shares jump? I dunno.

 

[maekuz]

With 22% gross margin and 4,900 cars sold in Q2 Tesla would be profitable in my projection. I think they can deliver 4,900+ and they have to push gross margin (incl. ZEV credit) well above 20% in Q2 to get 25% gross margin in Q4 (excl. ZEV credits).

So, yeah...I think its possible but it would be quite an achievement.

 

[FredTMC]

With 22% gross margin and 4,900 cars sold in Q2 Tesla would be profitable in my projection. I think they can deliver 4,900+ and they have to push gross margin (incl. ZEV credit) well above 20% in Q2 to get 25% gross margin in Q4 (excl. ZEV credits).

So, yeah...I think its possible but it would be quite an achievement.

I'm shocked no one seems to know if any EU cars have been on the boat or not. Does anyone have any insight ?

 

[Norse]

I'm shocked no one seems to know if any EU cars have been on the boat or not. Does anyone have any insight ?

They were to be delivered in June, but will probably come in July. So I do think this effect Q2, also the Norwegian Krone has weakened 10% to dollars, and With the price fixed, Tesla will loose some Money here.

Someone should investigate this. DonPedro, Johan?

 

[maekuz]

They were to be delivered in June, but will probably come in July. So I do think this effect Q2, also the Norwegian Krone has weakened 10% to dollars, and With the price fixed, Tesla will loose some Money here.

Someone should investigate this. DonPedro, Johan?

From the shareholder letter Q1 2013 http://ir.teslamotors.com/common/do...963626&filename=Q1 13 Shareholder Letter.pdf:

While we expect to build about 5,000 Model S vehicles in Q2, some cars will be in transit to Europe for start of deliveries in Q3. As a result, we expect to deliver slightly over 4,500 vehicles during Q2, all in North America.

 

[Volker.Berlin]

From the shareholder letter Q1 2013 http://ir.teslamotors.com/common/do...963626&filename=Q1 13 Shareholder Letter.pdf:

As far as can be told from communication of European individuals with Tesla representatives, this information is now outdated and European deliveries will only affect Q3. I hope I'm wrong (German reservation holder since 2009) but based on the information that can be found on this and the German forum, I'm afraid that's correct.