Unless we are cool with a credit event, minimum required cash balance must be necessarily higher than restricted cash.
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Near-future quarterly financial projections
- Thread starter luvb2b
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- elon is an ass
Unless we are cool with a credit event, minimum required cash balance must be necessarily higher than restricted cash.
Some of it involved Silevo's In Process Research & Development:
"During the three months ended June 30, 2018, we concluded that a portion of the IPR&D was not commercially feasible, and consequently recognized an abandonment loss of $13.3 million in research and development operating expenses.During the three months ended June 30, 2018, $26.5 million of IPR&D was put into production, and we expect to complete the remaining research and development efforts in the second half of 2018, but there can be no assurance that the commercial feasibility will be achieved."
Clearly the $13.3 million was added to R&D expense during the quarter. I think[?] the $26.5 million will be recognized as amortization expense in COGS of solar products using that technology over its useful life.
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Some color of SG&A and stock-based comp increases:
Useful detail on restructuring charges... charge, cash vs. non-cash, savings going forward:
The following was Gene Munster's estimates: "For starters, we expect a one-time charge of $130-$150M split between cash and stock, detailed on the Jun-18 earnings call. More importantly, the quarterly op-ex savings going forward should be about $80M ($320M annually)"
IOW, the one-time charge was less than expected, but quarterly savings are less than expected as well.
"SG&A expenses increased $213.0 million, or 40%, in the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. The increase was primarily due to a $70.2 million increase in office, information technology and facilities-related expenses and sales and marketing activities to support our business expansion. Additionally, there was a $60.5 million increase in stock-based compensation expense related to the 2018 CEO Performance Award and stock awards granted for new hires and refresher employee stock grants. To support the continued growth of our business, there was an increase of $41.6 million in employee and labor related expenses."
Useful detail on restructuring charges... charge, cash vs. non-cash, savings going forward:
"During the second quarter of 2018, we carried out certain restructuring actions in order to reduce costs and improve efficiency. As a result, in the three months ended June 30, 2018, we recognized $34.0 million of one-time employee termination expenses and estimated losses from sub-leasing a facility. Employee termination expenses of $26.2 million are expected to be substantially paid by the end of the third quarter of 2018, while the remaining amounts were non-cash. Also included within restructuring and other activities was $56.1 million of expenses (materially all of which were non-cash) from restructuring the energy generation and storage segment, which comprised of disposals of certain tangible assets, the shortening of the useful life of a trade name intangible asset and a contract termination penalty. In addition, we concluded that a small portion of the IPR&D is not commercially feasible. Consequently, we recognized an impairment loss of $13.3 million in the three months ended June 30, 2018. The restructuring actions will result in an estimated cost savings of approximately $100.0 million for the remainder of 2018. There were no restructuring actions during the three or six months ended June 30, 2017."
The following was Gene Munster's estimates: "For starters, we expect a one-time charge of $130-$150M split between cash and stock, detailed on the Jun-18 earnings call. More importantly, the quarterly op-ex savings going forward should be about $80M ($320M annually)"
IOW, the one-time charge was less than expected, but quarterly savings are less than expected as well.
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Great! I don't project any ZEV/GHG credits for conservatism purposes, so anything is upside to my model.
part of an offline discussion i was having with @Reality which i felt is worthwhile to throw out for discussion. posted with permission.
@Reality asked: Interesting thing to note, but the "tesla positive gross margin for model 3" was excluding non cash items per the update letter. I missed that part. How does that change your modeling?
my reply thus far which requires some further development:
that's a good find.
here's one comment in the gross margin para:
here's the other comment in the cash flow para:
non-cash items would be sbc & depreciation i guess. they give us sbc and it's only a couple hundred bucks a unit, so we can ignore that.
these 2 statements together indicate it's not only depreciation math that is driving positive gross margin, but also real cash cost reductions (maybe lower parts or labor?).
so the new piece of information here is that excluding depreciation, the model 3 was negative gross margins 18q1. i think i had a -24.5% gm impact of depreciation and model gm at 20.3%, meaning i had estimated gm excluding depreciation as positive by several percentage points.
what this tells me is i probably modeled too much depreciation in 18q1 and/or model s/x gm was higher than i thought and model 3 gm was lower than i thought.
i'll have to go back and review the commentary around all of that.
@Reality asked: Interesting thing to note, but the "tesla positive gross margin for model 3" was excluding non cash items per the update letter. I missed that part. How does that change your modeling?
my reply thus far which requires some further development:
that's a good find.
here's one comment in the gross margin para:
Model 3 gross margin turned slightly positive in Q2 even though we were still ramping production and did not yet deliver any AllWheel-Drive or performance models.
here's the other comment in the cash flow para:
Model 3 gross profit excluding non-cash items shifted from negative in Q1 to positive in Q2, driving significant improvement in cash profitability
non-cash items would be sbc & depreciation i guess. they give us sbc and it's only a couple hundred bucks a unit, so we can ignore that.
these 2 statements together indicate it's not only depreciation math that is driving positive gross margin, but also real cash cost reductions (maybe lower parts or labor?).
so the new piece of information here is that excluding depreciation, the model 3 was negative gross margins 18q1. i think i had a -24.5% gm impact of depreciation and model gm at 20.3%, meaning i had estimated gm excluding depreciation as positive by several percentage points.
what this tells me is i probably modeled too much depreciation in 18q1 and/or model s/x gm was higher than i thought and model 3 gm was lower than i thought.
i'll have to go back and review the commentary around all of that.
"...expecting roughly 15% in Q3 • Expecting to produce 50-55k Model 3s in Q3; deliveries should exceed that...
Model 3 gross margin should grow significantly to approximately 15% in Q3 and to approximately 20% in Q4 predominantly due to continued reduction in manufacturing costs and to some extent an improving mix
Model 3 gross margin should grow significantly to approximately 15% in Q3 and to approximately 20% in Q4 predominantly due to continued reduction in manufacturing costs and to some extent an improving mix
If the number of M3s in transit at the end of Q3 does not change from the end of Q2 (11,470), that would mean about 20% of the guided ~55,000+ deliveries in Q3 will carrying Q2's COGS/GM%. Hypothetically, if Q2's M3 GM % were breakeven, then Q3's M3 production GM% would have to average about 19 % in order for Q3's delivery GM% to be at the guided ~15%. This could also mean that the 20% GM for Q4 could be easily achievable.
well nuts... all this hard modeling work may go to waste in a take private scenario. thankfully i wasn't dumb enough to play with long term out of the money options, as that would be a devastating financial and emotional loss if go-private occurs. still, taking out the stock at 420 is a far cry from the s&p 500 index addition at 600 that i was looking forward to.
Our only hope is that something drives the stock above $420 before the stockholder vote.
This go-private deal is sufficiently complicated -- how is Musk going to enable all existing stockholders to continue as private equity holders? I don't know of a previous example, so the paperwork will be massive -- that it will take a long time. If it extends past Q3 deliveries and earnings, it's likely that the the stock price will skyrocket past $420 before the stockholder vote. (Or, of course, a short squeeze could drive the stock past that level.)
If the stock is well above $420 when voting starts, I figure the go-private deal will either be called off or will raise its tender offer price.
Beyond shorts (or late entries into the TSLA long camp), no one has a reason to purchase above 420, so the SP should settle down post coverage.
Would conversion to private paperwork/ logistics be any worse than the solar City merger?
Edit: yes, yes it would...
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Hell yeah. Much, much, MUCH worse. The SolarCity merger was a trade of public listed shares for public listed shares. A going-private deal where people can keep some of their shares gets FAR more scrutiny for MANY reasons.
If this were a straight cash buyout of everyone, it would be simple. Even if he offered US-domiciled accredited investors who own after-tax shares the opportunity to carry on as owners of the private company, it would be simple.
He claims to be offering "*all*" stockholders the option of continuing, and that's going to be HELLA complicated. I can't think of an example of this ever being done, and I expect him to renege on it. See the complaints by foreign TSLA holders and by people who hold TSLA in 401(k)s and IRAs.
Duh, I must be up too late (which was due to figuring out which accounts were easiest to convert)...
working through 10q and seeing warranty reserve per vehicle jumped up in 2018q2. must be setting aside for model 3 repairs is my guess.
I suppose this rolls into the gross margin number. If so, is it fair to say that when issues with the 3 are fixed, those expenses are offset against this reserve rather than getting lumped into Service costs?
Correct. Warranty repairs are added to cost of goods in the quarter the original car was originally sold and then never re-appear on the cost statement. With the exception of a mismatch between the amount reserved for a particular car and the actual warranty repairs. Then eventually (at the lastest when the warranty fully expires) Tesla needs to reconcile the difference and record an exceptional gain or loss.
Thanks!
Is there an estimate for how the reserve for model 3 compares to the reserve for S. Longer term, I think it'll be fair to assume that the numbers are the same as % of ASP.
my estimates are crude but i think they may be reserving around 1k more for model 3 than model s/x. s/x i think they reserve around 2.3-2.4k per vehicle. i think 3's they are reserving in the range of 3.2-3.6k per vehicle. someone else could review and verify.
those numbers would migrate lower over time as 3's had less build issues.
those numbers would migrate lower over time as 3's had less build issues.
Makes sense. With the documented paint problems, they'll probably be using that warranty reserve.
