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q2-q4 2018 financial projections

Discussion in 'TSLA Investor Discussions' started by luvb2b, May 23, 2018.

  1. Fact Checking

    Fact Checking Active Member

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    #1361 Fact Checking, Nov 7, 2018
    Last edited: Nov 7, 2018
    Indeed, true - I under-estimated cash inflow. Another mistake in my estimates are the long term debt maturities due in 2018/2019/2020:
    • Q4'2018: $230m convertible senior notes
    • Q4'2018: $185m term loan note
    • Q1'2019: $920m convertible note
    • Q4'2019: $566m convertible note
    That's $1.901b due in the next nine quarters - about $211m per quarter outflow.

    So the $2.5b-$3.0b guidance Tesla gave for the 8 quarters of 2019 and 2020 maps to a guidance of $625m-$750m of capex outflow per quarter - which I suspect distributes into similar levels of depreciation flows in the GAAP space.

    $625m-$750m plus $211m average debt maturities gives a baseline level of expected operating cash flow of $836m-$961m - comfortably below Q3 levels (60-70% of operating cash flow), that should give some buffer space both to stay free cash flow positive, for bigger spikes of debt maturities that are front-loaded in 2019, and any seasonal fluctuations or higher expenses (such as tariffs) from operations.

    Am I missing anything, or does Tesla's capex guidance for 2019-2020 indeed look conservative?
     
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  2. EinSV

    EinSV Active Member

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    Given the cash generated in Q3, I agree their CapEx projections look conservative. The extra cash generated should dramatically improve their balance sheet, allowing them to get better loan terms/lower interest rates, improve credit ratings and also have a cash cushion for the next economic downturn. And also set the stage for the next round of GF building after 2020.
     
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  3. Fact Checking

    Fact Checking Active Member

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    Yeah, that's another improvement they could do over the next 2 years, right now interest paid is pretty significant:



    luv q4-18eSep-18Jun-18Mar-18
    income sheet
    interest inc6,0006,9075,0645,214
    interest exp-107,000-122,220-110,582-102,546
    scty interest-53,000-53,000-53,000-47,000
    cash flows from fin
    debt issued100,000114,9421,267,7461,775,481
    debt repayments-400,000-195,760-879,328-1,389,388
    coll lease borrowing100,000-142,568-113,426-87,092
    forex effect47,937-6,370-22,61110,102


    If I'm reading @luvb2b's numbers right then interest payments are in the $160m-$170m per quarter range, which is consuming about ~2.5% of their gross margins. I.e. they could improve their margins by another couple of percentage points by improving their balance sheet and getting rid of the worst, highest interest rate debt load.

    The ~20% cash generation margin they demonstrated in Q3 is a very strong forcing function that will push Tesla towards growth and higher efficiency levels.
     
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  4. Waiting4M3

    Waiting4M3 Active Member

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    Tesla's balance sheet also affect their ability to offer leases, if I understand some exchanges in investor thread correctly.
     
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  5. smorgasbord

    smorgasbord Active Member

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  6. Esme Es Mejor

    Esme Es Mejor Member

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    That’s a great headline, but a garbage article. Instead of admitting blame for doing a terrible job of modeling Tesla’s results, they blamed Tesla for having $189 million in automotive regulatory credits.

    The problem with this argument is that these credits scale with sales and are fairly predictable. If Financial Times failed to include them in their model, that’s their fault, not Tesla’s.

    In the first six months of 2018, Tesla sold ~70k vehicles and reported regulatory credits of just over $134 million. Once we knew Tesla sold over 83k vehicles in Q3, we should have expected regulatory credits of more than $158 million. $30 million away from the $189 million reported, but much more accurate than Financial Times’ estimate of $0.

    If we want a more complicated but more accurate model, we can estimate how many vehicles were sold in North America, where most of the regulatory credits are earned. All Model 3 were sold in North America, as were about 1/2 of all S/X.

    In the first half of 2018, Tesla sold just over 48k vehicles in North America, and reported $134 million in credits, just over $2.7k per vehicle. In Q3, Tesla sold about 70k vehicles in North America. Multiply that by $2.7k per vehicle and you get $189 million, which is exactly the regulatory income Tesla reported.
     
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  7. Robertj

    Robertj Member

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    I think the operating cashflow of $ 1,394 m for the 3 months will be seen as possibly been much larger,
    easily $ 1,800 m

    When reviewing the 10 Q the change in accounts receivable over the 3 months increased $ 587 m
    , roughly $ 500 m to $1.1 b

    This appears to be commented on by Deepak on the call , and also in the 10 Q as relating to deliveries at the weekend
    at the end of quarter

    So , I could see the December quarter operating cashflow of easily over $ 2 b
     
  8. mongo

    mongo Well-Known Member

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    It seems Musk agrees with you
    Elon Musk on Twitter

     
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  9. generalenthu

    generalenthu Member

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    @luvb2b since the Q has been out for a few days, I was hoping you'd indulge US with your take on how q3 panned out relative to your estimates and what it means for Q4.
     
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  10. luvb2b

    luvb2b Member

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    q3 was much better than i anticipated. the main highlight is dramatic improvement in gross margins of automotive products. cash gross margin of model 3 is really quite amazing, and model s/x gross margins seem to have crossed 30% which is just stunning.

    i think as the tax credit sunsets they will for sure be able to take price reductions on s/x to keep the end-user price the same in the usa. i would still expect a meaningful cliff of demand in s/x due to the tax credit runoff.

    the 3 demand pipeline should remain quite full due to overseas orders.

    cash generation of the whole company is remarkable. in particular note that they took up receivables, didn't expand payables very much, and still generated (from memory) 1.4b cash from operations. i think if they wanted to do it, they could have put that number near 2b. this is a great sign and you should find that credit markets start to remove the bankruptcy premium.

    large external risks remain from tariffs and general global slowing, but due to the tax credit runoff and the full pipeline, i would expect q4 to be an equal or greater quarter for both cash generation and earnings. 19q1 will lag slightly due to the tax credit runoff, but the demand pipeline staying full will still mean solid cash generation. it may not be a stretch to start thinking about a >4b cash balance after the debt payments for q1 are settled.

    if it goes as i see it, s&p 500 addition would come probably after the may 19 report.
     
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  11. AlMc

    AlMc 'Senior Moments' member

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    @luvb2b : Thanks ^^^^^^^^^^^^^^^^^^^^^^^. Don't be a stranger;)
     
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  12. Dreadnought

    Dreadnought Member

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    The combination of demand peaking EOY anyways due to tax credit being just around the corner plus getting cut in half will probably pull demand forward in a significant way IMHO - for US only, obviously. If my assessment is correct, new orders will already drop by end of November as delivery would be in 2019 (with few exceptions for inventory and Californian customers).

    As a consequence, I expect that Tesla will start building cars for export already in the second half of December. IIRC, shipping to China takes longest and should be the first batch, followed by European, then Canada. Following this sequence, they should be able to deliver anything built before end of February within Q1. As there is always some spillover into the next Q, I see no impact to Q4 except for positive effect of generally improved continental distribution.

    I don't have a good grip on demand for Canada but my perception is that there were little to no shipments in several months due to prioritization of US, so assuming some backlog there.

    Appreciate if anybody with local knowledge about demand for CAN and transit times (comparable to US East Coast?) can weigh in to validate my assumptions.

    Any residual domestic demand would lighten up the forecast.

    Disclaimer: These are just my more or less educated WA guesses, intended as food for thought.
     
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  13. Hogfighter

    Hogfighter Professional Lurker

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    Perhaps I will be proven wrong, but I refuse to believe that the current EV incentives in the US will remain as they are. It’s difficult to believe that the current administration would give $7,500 to purchase a foreign car, but not for one built in the US.
     
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  14. avoigt

    avoigt Active Member

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    For our modeling experts:

    "This study has material impact on the Consolidated Balance Sheet: the Resale Value Guarantee item realistically should be big fat 0 instead of $0.6B"
    Vladimir Grinshpun on Twitter


    [​IMG]
     
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  15. Mich

    Mich Member

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    I'm not an expert on this, but the risk is still there so there need to be some cash allocated.
    If true the risk will never become imminent and the .6b$ will be free cash at some point in time.
     
  16. EinSV

    EinSV Active Member

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    #1376 EinSV, Dec 3, 2018
    Last edited: Dec 3, 2018
    @luvb2b using your estimate for auto R&D and SG&A I calculate Q3 automotive operating margins at 10.8%.

    6,098,766 (auto rev)
    (4,525,202) (auto COGs)
    (315,848) (auto R&D)
    (599,876) (auto SG&A)
    =657,840 (auto operating profit)

    10.8% auto operating margin

    Obviously there is some estimation involved in distributing opex between auto, solar and storage, but do you think that is a reasonable estimate of Q3 auto operating margin?

    Related question/clarification -- where is storage opex in your split between auto and "Solar City" and does that impact auto operating margins?
     
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  17. defc0n

    defc0n Member

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    For Q4, shouldn’t we expect to see the avg sales price for model 3 decrease as P3D backlog has been worked through, along with the addition of the lemurs? I’m still expecting an equal quarter as Q3 in terms of profitability as total deliveries will increase around 8% according to @Troy.
     
  18. Troy

    Troy Active Member

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    @defc0n, Model 3 average sale price is available on the survey tab here:

    Teslike Model 3 Order Tracker #3

    It shows $57,516 for Q4 vs $60,332 for Q3. That's 4.7% decrease. $57,516 includes cars that are scheduled to be delivered between now and end of the quarter.
     
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  19. luvb2b

    luvb2b Member

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    the honest answer is i don't know where storage is exactly. i am guessing it's mostly in tesla - but not sure.

    the split i carried forward from the merger, as a way to try to separate what solarcity might be contributing. at this point so far removed from the merger its really mostly guesswork on my part.

     
  20. brian45011

    brian45011 Active Member

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    It's not true and very misleading. The resale value guarantee liabilities are more than off set by Operating Lease Vehicles on the asset side of the Balance Sheet.

    When a Resale/Residual Value Guarantee transaction was originated, ALL the cash for the full purchase price was paid up-front when the vehicle was first titled by the individual buyer or Banking Affiliate lessor. Over the term of the guarantee, the deferred revenue is recognized ratebly and the cost of the vehicle is depreciated so that at end of the guarantee period, both the liability and the depreciated asset value are equal at the guaranteed value. If the beneficiary of the guarantee keeps rather than returning the vehicle at the end of the guarantee period, both the remaining liability and the vehicle's remaining net asset value are removed from the Balance Sheet with no effect on the Income Statement (other than a small amount of warranty reserve is booked since warranty costs are expensed during the guarantee period.)

    If the guarantee beneficiary returns the vehicle at the end of the period, cash is used to pay the beneficiary the contractually agreed guaranteed amount, and the vehicle becomes part of Finished Goods Inventory at the lower of cost (remaining un-depreciated ledger value in Operating Leases) or market.

    The most recent Cash Flow from Operations section shows Tesla used $2.8 million for Operating Lease vehicles in 3Q18 and $188.9 million YTD
     
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