Q3 2013 results - projections and expectations

[CarGuy1340]

Q4 Margins

FWIW, I was told I couldn't get a S60 until Feb 1st week, they are booked/sold out until Jan 2014. I take that as a great sign for sales but not so sure how production is coping up so far..

I would speculate Tesla wants to avoid delivering any S60's in Q4 to help make their 25% GM target...

- - - Updated - - -


View attachment 34311[/QUOTE]

Great research Staplegun! One question, these are the base prices and not optioned prices? How do you think about the option price increases in August?

 

[techmaven]

I think this is going to be the biggest surprise in Q3. In Q1 almost all of the cars delivered were ordered before the $2500 price increase, and it was mostly after the initial P85 spike. In Q2 nearly all of the ~730 US 40kwh cars were delivered which really pushed down ASP. This quarter we will see the full effect of the $2500 price increase, no 40kwh cars, the second price change (increase) will be mostly in play, the first full quarter with the performance plus option, and we have the spike of highly equipped cars from the first wave of EU deliveries. Everything is lining up for a high ASP this quarter.

Overall, I would agree. I confirmed my order and was one of the last to do so under the old pricing scheme in August. However, I could choose delivery well into 2014 and my DS commented that quite a few people still have older configurations on order. I wanted my car ASAP and it was delivered at the very end of Q3 with a VIN just under 20,000. Therefore, the second price increase is in play, but I don't think it would have taken much effect in Q3. A friend did choose to go with the new pricing scheme and his was delivered the same weekend with a VIN just over 20k.

 

[StapleGun]

Do we know how many 40kWh S's were delivered in Q2?

If i recall correctly they were sold at negative margin. I'm not sure any of the Avg Sale price models have taken this into consideration. This along with the overall price increases, decoupling of options, and Performance+ addition, i think Average Sale price is underestimated by many and likewise Product Margin is being underestimated.

The total number of 40kwh cars sold is very close to 730, and I believe the vast majority (>80%) were delivered in Q2.

Great research Staplegun! One question, these are the base prices and not optioned prices? How do you think about the option price increases in August?

Yes, these are base prices. I don't have much data on options so I can't really speculate on that. However the August price change should have very little effect in Q3. A small percentage of the Q3 cars delivered will be under the new scheme and it's not a drastic difference. However, I think it's safe to assume this was a very calculated move to boost margins, so in Q4 and Q1 '14 these will probably boost ASP by 1-3%.

Overall, I would agree. I confirmed my order and was one of the last to do so under the old pricing scheme in August. However, I could choose delivery well into 2014 and my DS commented that quite a few people still have older configurations on order. I wanted my car ASAP and it was delivered at the very end of Q3 with a VIN just under 20,000. Therefore, the second price increase is in play, but I don't think it would have taken much effect in Q3. A friend did choose to go with the new pricing scheme and his was delivered the same weekend with a VIN just over 20k.

Thanks for the data. The increase went into effect on August 3rd and Aug/Sept. US deliveries were lower than normal due to the EU push (which were not under the new scheme). So your friend is probably one of very few that managed to order after Aug. 3rd and receive it in Q3.

 

[DonPedro]

Yes, these are base prices. I don't have much data on options so I can't really speculate on that. However the August price change should have very little effect in Q3. A small percentage of the Q3 cars delivered will be under the new scheme and it's not a drastic difference. However, I think it's safe to assume this was a very calculated move to boost margins, so in Q4 and Q1 '14 these will probably boost ASP by 1-3%.

Hmm, this actually reduces my outlook for the GM in Q3 a bit. My reasoning has been that if they are going from 14% in Q2 to 25% in Q4, the likely intermediate step should be 20% or 21% (since it always gets harder towards the end). However, if there is a "free" 1-2% boost in Q4, then they have to do less in each quarter on the cost side.

(On the other hand, of course, they may be planning to overperform and deliver a GM of >25% in Q4, but now I am just looking at guidance).

 

[DonPedro]

My final prediction ahead of Monday:

 

[fjm9898]

Don i can get behind that 5650 number 100%. like i said i was shooting for 5700 from the look of the deliveries table (tossed out 5800 as a hope for a higher number, but more i read i put myself at 5700)
i would put the low end at 5500 and high end at 5900. hence my 5700. But his history serves me i was off by ~150 last quarter. (so 5550?)

Don can you plug in my numbers real quick. (this would be my bottom)
ASP 99
GM 20
Cars 5550

 

[hershey101]

Are we modeling expenses correctly?
They stated that R&D expenses would increase "significantly" and so would SG&A.. Last quarter they spent 100M with 52M in R&D... a 3M inc. in R&D doesn't seem "significant" to me... Maybe expenses should be $120M total?

 

[fjm9898]

this thread got linked on SA - Tesla Motors Inc (TSLA): The Mother Of All Tesla Articles: A Complete Examination Of Tesla - Seeking Alpha

 

[austinEV]

Posted on the poll discussion as well, but here is my position on Q3. I am super long on stocks and Nov options. I think the recipe for a Q3 pop of 10% or more is simpler than people think. The stock is beaten down 20% from highs. So there is much less to worry about a "sell the news" reaction. That whole expression is "Buy on the rumor, sell on the news". There is no buying in anticipation so much less concern of a sell on good news. The number of cars sold, and profits are not going to be great but then again they aren't the main focus. What people will care about is the future. The earnings beat can come from any or all of these:

1) progress on 25%+ GM goal. I think they will beat on this and guide for Q4 meeting greater than 25% for the year. The end of the year is basically now so its easy for them to know.
2) international demand. They will mention something about deliveries and demand in Norway and Europe. Then China, China, China. All they have to do is breathe about "higher than anticipated" or "brisk demand" or "100k Beijing store visitors" or "working with potential partners in China to meet demand" or anything China flavored would be the headline for the next day.
3) Model X progress. They said essentially nothing about it on the Q2 call which was a real disappointment. This time they will have something to report, like first builds or waiting lists. A mention of real progress on Gen III would be great too, if just model or something. I doubt we will see a rendering until 2015 or so but who knows...
4) Supplier issues. Previously they have stated that they are supply constrained and not demand constrained. They could have long ago been running 24/7 to make more cars but could not for supplier constraint and would not want to until GM% was up. Now that GM% is near target, all they need is a few supplier issues to clear up and then they could bend the curve up in production to keep up with Europe demand and grow. If they DID this (sales higher than TMC consensus something crazy like 6k) the stock will go up 20%. If they talk about how its happening, almost as good. If they hint that they are down to the last few issues also very good.

If I am wrong and it goes down for no good reason then I will have lost half what I have made this year. Then I just hold my core stock position for a few years and make it back.

 

[Mario Kadastik]

Larken posted in the chat thread this Vid: Tesla-Chef Elon Musk im Interview - Frontal 21 - ZDFmediathek - ZDF Mediathek


the interesting to me part from so far what I've seen is Elon claiming, that Tesla is producing at an annual rate of 25-30k and they hope to double that by next year. So the original 800/week end of 2014 number (40k annualized rate) seems to be upgraded to 50-60k or ca 1000 cars / week rate by end of 2014. This is what EM also claimed battery availability to be going forward and is confirmed by the battery deal. So I think we'll see at the ER an upgrade on the 2014 guidance on total cars as well as the year end rate.

 

[uselesslogin]

Larken posted in the chat thread this Vid: Tesla-Chef Elon Musk im Interview - Frontal 21 - ZDFmediathek - ZDF Mediathek


the interesting to me part from so far what I've seen is Elon claiming, that Tesla is producing at an annual rate of 25-30k and they hope to double that by next year. So the original 800/week end of 2014 number (40k annualized rate) seems to be upgraded to 50-60k or ca 1000 cars / week rate by end of 2014. This is what EM also claimed battery availability to be going forward and is confirmed by the battery deal. So I think we'll see at the ER an upgrade on the 2014 guidance on total cars as well as the year end rate.

And didn't he say Model X would be "about the same?" So in 2015 100,000+ cars may be possible.

 

[fjm9898]

I had the day off today and i have been doing alot of reading and watching.
I have been a bear this last week on TSLA, but the more i read i cant see how TSLA is going to be a miss next week. Well besides Cramer just said he is a bull on earnings.. haha. I know there are alot of haters on Cramer but i am in a few stocks he is in ON MY OWN ACCORD, MU, KR, and CREE and they are all doing awesome this year, so i cant get on his case to much.

Anyway my point was i have flipped from being slightly bearish on the ER to being a bull. I pulled the last of my reserves and i will buy on any dip in the next two trading days before earnings. However i am 0-5 this ER season and all due to guidance issues which leads me to why i am going to be bullish on TSLA.
We all know we are going to make the 21k or more, EPS is going to be positive and most likely beat, at least by a little, but guidance is king this ER season. (Why i pulled out of short term SPWR) So why did i jump back to bull even though the stock has got the S kicked out of it this past month? (Emotion turned me bear like a pansy)
Ok getting the S kicked out if it was nice to give us pop room, we all know that. More importantly, Elon is a known sandbagger and i dont see any facts at all that prove otherwise that would cause this ER to be a flop. Sandbagging has become popular in the market but there are so many naysayers and Tesla is still so young and lack of eyes on the stock in the past they are not picking up on this yet. (Him being quoted at slight over 500 when we have a picture showing 570, he is just watching his ass)
Then the recent beat down and people getting the clue, VINS ARE NOT ACCURATE! Expectations are being lowered again and shorts are jumping on the bandwagon to try and kick TSLA in the teeth.
As much math as we have done on this forum and we are taking a very careful approach, we are going to beat EPS, by a little i suspect, its enough. As i said its about guidance.

Here are my ER assumptions:

Min MS sales - 5500. (My expectation 5700)
Min GM - 20% (My expectation 20%)
Min ASP - 99k (My expectation 100k)
Min EPS - 0.11 (My Expectation 0.14)
(EPS is based on my own guesses for ZEV credits, R&D, ect. They are a complete Wild Card at this point)

So Street has a current view of 0.11
I think we will have a very slight beat just to keep the street happy and Elon wont allow for a miss.

Here comes the guidance that will cause the pop. I think any combo of the following are possible: (the larger the combo plat the larger the pop)
Increase 2013 production guidance to 21.5k (not a big deal if he does or doesnt. I see the 21.5k number being tossed out and a possible of 22k actually coming close Q4, pending production ramp speed)
Elon will state he sees good demand of 45k+ MS world wide next year. (20k US, 15k Europe, 10k Asia with more Asia demand possible as they expand and get more exposure in the region)
Elon will probably sandbag and announce a goal of 40k MS next year, although i would like to hear 45k to keep the 100% growth in play. (WILD CARD - possible 1000 MX? since we still dont have any MX info as of yet, would be nice to get confirmation MX will ship Q4 2104)
Elon will announce supply chain problems are almost all fixed up, but have a few more to sort. (This is the big clue, I am going to expect Q1-Q2 2014 to see a pop in MS production that he is not going to tell us about once the last supply constraints are solved. This will allow production rate to move up quickly and allow for a 3rd shift, 5day work week, to keep GM up. This in turn will allow for a 45-50k MS production)
Elon will say 25% GM will be achieved and hint at a possible beat of 26-27% for Q4.
Super charger Expansion is on Schedule and possible increased rate in EU as MS demand will force the hand.

Pending the Combo, we could see anywhere between 180 and 200 end of next week.

Disclaimer:
TSLA will remain no larger then 25% of my portfolio.
I am expressing my opinions and mine alone. Do your own do diligence before making your trade choice (though i think we are all bulls here anyway)
Good Luck to us all.

 

[hershey101]

And didn't he say Model X would be "about the same?" So in 2015 100,000+ cars may be possible.

Key point. They are "slightly" profitable, and "slightly" cash flow positive!
I'm not a finance guy, but that definitely sounds like a much bigger deal. I don't think the street has accurately priced in positive cash flow.

 

[NStar]

I'd like to add my speculation form another angle.


We know the guidance vs. actual delivery for the past 2 quarters were as follows:
Q1: 4500 vs. 4900
Q2: slightly over 4500 vs. 5150 (also guided 5000 production but some cars would be in transit to Europe for Q3)

Guidance for Q3 was slightly over 5000 production as a result of considerable number of vehicles being in transit to Europe at end of Q3

Based on above I feel Elon’s “sandbagging” strategy is being conservative to the extent that can allow a not-too-big but meaningful beat, like around 10-15%. This makes sense since if the guidance is low-balled too much it will cause some concern, and having a too big of earning beat due to low guidance is not healthy either (causing unrealistic expectations for future) .

He also seems to like to use the number of vehicles being in transit as a buffer zone to play safe. For example the Q2 guidance was actually lower than Q1 sales, and the reason he gave was the cars being in transit to Europe. That way he could adjust the number of cars to Europe at the end of Q2 based on actual production# to achieve the level of ER beat he liked. It turned out that there were very few cars shipped to Europe at end of Q2, and Tesla was able to beat the delivery# by 650 in Q2, which was great but probably not blow-out. So it looks like he did have to play with the number of cars in this “buffer zone” to get the ER results he liked.

Now the Q3 guidance almost feels like the exactly same strategy used as in Q2. It’s only slightly over 5000, which is not more than the 5150 Q2 sales. And the reason he gave was again (more) cars in transit to Europe. We also learned that there were still some cars shipped to Europe in Sept. but the number dropped very significantly from previous months. This had to be for the purpose of getting the sales# he liked, which I believe will be around 5600-5700 based on the above hypothesis (and it also matches the 570/week production rate we found out in early Q4). I don’t feel Q3 sales will be higher than 6000 (unless it’s a total surprise to Elon too) because in that case he should have given a Q3 guidance# better than actual Q2 sales, or not choose to reduce Sept. shipment to Europe by that much.

So I’ll speculate 5600-5700 Q3 sales, Q4 guidance similar to Q3 sales due to cars in transit to China, 2013 full year sales raised to 21.5K. I think there could be some upside potential but cannot imagine it can get much worse than this.

 

[DonPedro]

Don can you plug in my numbers real quick. (this would be my bottom)
ASP 99
GM 20
Cars 5550

Keeping my other assumptions:

Non-GAAP EPS: $0.17
GAAP EPS: -$0.27

- - - Updated - - -

Are we modeling expenses correctly?
They stated that R&D expenses would increase "significantly" and so would SG&A.. Last quarter they spent 100M with 52M in R&D... a 3M inc. in R&D doesn't seem "significant" to me... Maybe expenses should be $120M total?

You're looking at GAAP R&D, and comparing it to assumptions of non-GAAP R&D. Non-GAAP R&D has followed the following trajectory the past 3 quarters: $68m ---> $47m ---> $44m. It is anyone's guess what a "significant increase" from these levels is - my sense is $55-60m.

I don't think they have guided anything on SG&A. The past 3 quarters: $31m ---> $41m ---> $50m. Since like a linear projection is right here, putting it at $59-60m.

 

[Mario Kadastik]

Not quite sure which thread to put it to as it has short and long term impact, but it looks like a huge amount of orders went from sourcing parts to In Production and it doesn't seem to have any geographic preference or when people were originally in queue. I see in the delivery sequencing thread and November delivery thread that people who had delivery targets in end of November and in December got to In Production yesterday. People in EU with January delivery dates got to in Production and so did my order. Yet two weeks ago Tesla told me that they expect my car to enter production end of December.

I have no clue what this means, the most obvious explanation is a software glitch that changed everyones status to In Production (that'd be a bummer) or that Tesla decided to favor TMC members and pulled a lot of people forward. Then again the other MS order in Estonia (an S60) also went into production as I found out last night over e-mail and he's not frequenting the forum. If this is really true, then it might indicate a serious rampup in November in production that might be gearing for a great end of year production rush. If indeed my car enters production now, then I will get it this year still and this would affect Q4 numbers a lot. As Q4 guidance is part of the Q3 ER, then this tidbit might be of interest. I guess we'll have to wait until one of us lucky upgrades gets through to Tesla to confirm that the car is INDEED in production until we all start celebrating, but if this really happened, then it may well mean that Tesla has solved supply issues to large part and can ramp up the production fast enough that they are pulling Dec-Jan deliveries forward.

 

[Benz]

Not quite sure which thread to put it to as it has short and long term impact, but it looks like a huge amount of orders went from sourcing parts to In Production and it doesn't seem to have any geographic preference or when people were originally in queue. I see in the delivery sequencing thread and November delivery thread that people who had delivery targets in end of November and in December got to In Production yesterday. People in EU with January delivery dates got to in Production and so did my order. Yet two weeks ago Tesla told me that they expect my car to enter production end of December.

I have no clue what this means, the most obvious explanation is a software glitch that changed everyones status to In Production (that'd be a bummer) or that Tesla decided to favor TMC members and pulled a lot of people forward. Then again the other MS order in Estonia (an S60) also went into production as I found out last night over e-mail and he's not frequenting the forum. If this is really true, then it might indicate a serious rampup in November in production that might be gearing for a great end of year production rush. If indeed my car enters production now, then I will get it this year still and this would affect Q4 numbers a lot. As Q4 guidance is part of the Q3 ER, then this tidbit might be of interest. I guess we'll have to wait until one of us lucky upgrades gets through to Tesla to confirm that the car is INDEED in production until we all start celebrating, but if this really happened, then it may well mean that Tesla has solved supply issues to large part and can ramp up the production fast enough that they are pulling Dec-Jan deliveries forward.

That would be great news. But that would also have to mean that buyers who do not have a VIN assigned to them as yet, that they will soon be informed that a VIN has been assigned for their Model S. And a few of these people will post their assigned VIN's in Craig's NEW VIN THREAD: http://www.teslamotors.com/en_EU/fo...ead-please-post-your-newly-assigned-vins-here

 

[fjm9898]

well Mario that would confirm one of my guidance statements above. If true then it came a bit quicker then i expected and push Q4 to be a blowout.

Elon will announce supply chain problems are almost all fixed up, but have a few more to sort. (This is the big clue, I am going to expect Q1-Q2 2014 to see a pop in MS production that he is not going to tell us about once the last supply constraints are solved. This will allow production rate to move up quickly and allow for a 3rd shift, 5day work week, to keep GM up. This in turn will allow for a 45-50k MS production)

 

[Convert2013]

well Mario that would confirm one of my guidance statements above. If true then it came a big quicker then i expected and push Q3 to be a blowout.

With exponentially growing organic demand just in the US alone and with China and Europe wild cards we will see how quickly they start hiring for 3rd shift and some weekend shifts in 2014. I think we all will be pleasantly surprised.

 

[abtsm]

Can somebody explain to me the two different diluted share count numbers in the Q2 shareholder letter? On Page 7 (GAAP income statement), they report 118,194 for "shares used in per share calculation, diluted" but on page 10, they use 130,503 for "shares used in per share calculation, diluted (GAAP and Non-GAAP)". In the 10Q, they use the 118,194 number.