Q4 2013 results - data points, projections and expectations

[Bgarret]

Hi Bgarret, thanks for taking time to share your thoughts.

In Q1 2013 ER (Tesla Motors Inc (TSLA): Tesla Motors' CEO Discusses Q1 2013 Results - Earnings Call Transcript - Seeking Alpha): (bold face is my emphasis)

Elon Musk - Chairman, CEO, and Product Architect
I mean, I think we’re – I would realistically handicap it at zero for the fourth quarter …
Patrick Archambault - Goldman Sachs
Okay.
Elon Musk - Chairman, CEO, and Product Architect
… which is not, I mean, we will sell them if we can, but as we really anticipate saturating demand for ZEV credits, probably in the third quarter. So maybe that’s not true, but I wouldn’t – for purposes of modeling our financials, I’d recommend assuming zero percent credits in Q4.
It appears pretty clear that Elon is telling investors to expect zero or close to zero ZEV credit income for Q4.

I'm still open to seeing evidence that Tesla has significant Q4 ZEV income but until then it's probably wise to heed Elon's advice.

Does anybody know how much ZEV income Tesla had in Q3 2012?

Thanks Dave,

I had remembered the quotes from the conference call, but thanks for getting the actual transcript. I republished some of the transcript, but changed the parts that were highlighted - and this is the difficulty of trying to parse the language on what Elon is saying...and what he is saying. I agree with your justifiable caution base on Q3 and Elon's comments, but he seems a little cagey on this, almost like his language on the secondary offering in May's conference call. Tesla did saturate demand in Q3 - to 100% of the demand for ZEV credits for the fiscal year from October 1, 2012 to September 30, 2013. But it is a new year and there is now 110% of the previous year's requirement to fill (based on 10% more cars sold) and everyone is at 0. Additionally, at the end of this year there is a 330% jump in demand with very little material changing in the way of new credits coming on the market.
In the conference call response Elon is specifically addressing 25% Gross Margins and not counting ZEV in it and saying they shouldn't use ZEV for modeling...I think this is correct, but it is also potentially a lot of sandbagging.

It is also interesting to determine how you pre-guide to a greater than 20% growth in revenue with a less than 15% beat on cars delivered (less than 6900 vs. less than 6000 guidance.) There is another 5%+ of revenue growth unaccounted for, or at least $30+ million in revenue from what source....a 5% greater uptake on options, maybe?

TESLA REVENUE EXPECTED TO EXCEED GUIDANCE BY 20% IN FOURTH QUARTER

SALES DRIVEN BY SUPERLATIVE SAFETY RECORD AND EXCELLENT COLD WEATHER PERFORMANCE

TUESDAY, JANUARY 14, 2014

PALO ALTO, Calif. – Tesla sales in the fourth quarter of 2013 were the highest in company history by a significant margin. With almost 6,900 vehicles sold and delivered, Tesla exceeded prior guidance by approximately 20%. A higher than expected number of cars was manufactured as a result of an excellent effort by the Tesla production team and key suppliers, particularly Panasonic.

The two key drivers of demand were the superlative safety record of the Model S and great performance under extremely cold conditions.

I think Tesla did exceed revenue by 20%....and I bet by even more than 20% as companies usually reserve some additional good news for the conference call. If you have a good idea where the additional $30+ million of revenue came from, please let me know.

Here is another good link that breaks down some of the ZEV and Carb historical information by StopCrazyApp. It doesn't answer your question about Q3 2012, but those are hard number to get.

ZEV credits

Caution is definately in order, but I think that the ZEV is less than dead based on some of the points in this and the preceding posts.

Cheers...

 

[uselesslogin]

I saw this note which looks like a general Tesla is doing good analyst update:
Tesla Motors Inc (TSLA) Growth Is Just Getting Started: Stifel

But I was puzzled by this line:
"We are lowering our FY13 non-GAAP EPS estimate to $0.62 from $0.73 (Street: $0.59) to reflect in the increase in units vs. our prior estimates and our expectation for lower gross margin."

They are still modeling a 25.2% gross margin ex-ZEV and I guess they were modeling higher than that in the past. Still, I don't see how more units will lead to less gross margin especially when I am under the impression they used existing production capacity and it was the fact Panasonic was able to get more batteries delivered that caused the boost. Can anyone tell me if I am missing something?

 

[c041v]

I saw this note which looks like a general Tesla is doing good analyst update:
Tesla Motors Inc (TSLA) Growth Is Just Getting Started: Stifel

But I was puzzled by this line:
"We are lowering our FY13 non-GAAP EPS estimate to $0.62 from $0.73 (Street: $0.59) to reflect in the increase in units vs. our prior estimates and our expectation for lower gross margin."

They are still modeling a 25.2% gross margin ex-ZEV and I guess they were modeling higher than that in the past. Still, I don't see how more units will lead to less gross margin especially when I am under the impression they used existing production capacity and it was the fact Panasonic was able to get more batteries delivered that caused the boost. Can anyone tell me if I am missing something?

I too was puzzled. The only contributing factors I could see would be increased labour cost (more O/T) or some large marginal component cost once a certain threshold was realized. Either way, neither of those make much sense to me, and I wouldn't think they would be enough for such a hit to the EPS. I think it's a misleading line, and the "expectation for lower gross margin" is the relevant part of that statement.

Curious to hear the thoughts of our resident experts...

 

[kenliles]

My guess is they are just correcting a over exuberant GM position by couching it in this language. The only other I can think of is that the increased volume is coming from Asia-Europe so for their model the new market costs factor into a trim of the GM. Otherwise I can't get there from here, either

 

[PeterJA]

Motley Fool calculation:

Last quarter, Tesla reported 5,500 deliveries on $603 million in revenue. This comes out to around $109,600 per vehicle. Based on 6,900 deliveries for the fourth quarter, we should therefore expect revenue of around $756 million.

Gross profit
Tesla set a target of 25% gross margin on sales for the fourth quarter. Twenty-five percent of $756 million comes out to $189 million in gross profit; from that $189 million, subtract out R&D, overhead, and interest.

R&D plus overhead
Tesla said to expect a 25% increase in R&D expense and a 20% increase in overhead. Those amounts were $48 million and $67 million last quarter, respectively, so expect them to be $60 million and $80.4 million for this quarter, for a total of $140.4 million.
Subtract the $140.4 million from the $189 million in gross profit, then take away the $2.2 million in interest expense -- based on Tesla's disclosures and forecasts, the result is $46.4 million in earnings (assuming Tesla meets its expectations, which it rarely misses).

Per-share-earnings estimate
Based on 139 million fully diluted shares, look for Tesla to post at least $0.33 in earnings per share compared to analysts' estimates of $0.16 per share at the time of this writing.

Tesla Motors Inc.'s Earnings May Be Easier to Guess Than You Think (TSLA)

 

[chickensevil]

Motley Fool calculation:


Tesla Motors Inc.'s Earnings May Be Easier to Guess Than You Think (TSLA)

Just saw that, and was coming here to post it. I think this is the best breakdown on the pricings which I think is STILL assuming zero ZEV credits. So if we get anything off of that we will see even higher than .33 per share. If the market doesn't go ape-**** over a 100% beat on EPS... I am going to throw in the towel, lol. But seriously, I am totally buying more shares, because I feel like we are going to have another REALLY sweet ride

I am hoping to make as much as I possibly can over the next month or so to fund the purchase of my car, haha!

So on the for real, what would make the stock drop at this point? And I mean drop hard...
1. Something fishy in the financials when they announce.
2. Something horrid from NHTSA (although they have already strongly hinted that they don't see any real issue with Tesla's car, given they said that EV's are not worse than ICE, they just have different risks.)
3. More fires???
4. Some horrid court case rulling making Tesla unable to sell any more cars in the US? (stupid auto dealers)
5. Something that scares people away from them when they guide for 2014 and the giga-factory. (I have seen future expectations cause problems in other stocks...)
6. Tesla goes Union

Those are pretty much all I can reasonably think of over the next month or so to the earnings release... and most of those seem pretty out there as far as actually ever happening.

 

[30seconds]

this looks like it is mixing and matching GAAP and non-GAAP. In third quarter there it was GAAP $603m revenue, 24% margins, $56m R&D expense, $77m SG&A, net loss of 0.32/share. Per non-GAAP is was $431m revenue, 22% margins, $48m R&D expense, $67m SG&A, net profit of 0.12/share.

Replacing the $603m with the $431m but carrying out the same calculations you would get $541m revenue x 25% margins = $135m - $140.4m - $2.2 = ($7.4m) non GAAP loss.

Using the GAAP numbers and the $756m revenues with 25% margins = $189m - $70m R&D expense - $92.4m SG&A - $2.2m = 24.2m profit

needless to say neither of these is a particularly good way to do this, however given the big top line revenue beat (driven by 6900 sales) and that R&D expense doesn't scale with revenues, however SG&A may to some extent, it is pretty likely that the bottom line will be much better than expected.

 

[RationalOptimist]

this looks like it is mixing and matching GAAP and non-GAAP. In third quarter there it was GAAP $603m revenue, 24% margins, $56m R&D expense, $77m SG&A, net loss of 0.32/share. Per non-GAAP is was $431m revenue, 22% margins, $48m R&D expense, $67m SG&A, net profit of 0.12/share.

Replacing the $603m with the $431m but carrying out the same calculations you would get $541m revenue x 25% margins = $135m - $140.4m - $2.2 = ($7.4m) non GAAP loss.

Using the GAAP numbers and the $756m revenues with 25% margins = $189m - $70m R&D expense - $92.4m SG&A - $2.2m = 24.2m profit

needless to say neither of these is a particularly good way to do this, however given the big top line revenue beat (driven by 6900 sales) and that R&D expense doesn't scale with revenues, however SG&A may to some extent, it is pretty likely that the bottom line will be much better than expected.

I think you may have mixed up your GAAP and non-GAAP labels here? GAAP has lower revenues because of lease accounting...

 

[30seconds]

that's what I get for not proofing my work. very sloppy of me!

 

[Robert.Boston]

But seriously, I am totally buying more shares, because I feel like we are going to have another REALLY sweet ride

I am hoping to make as much as I possibly can over the next month or so to fund the purchase of my car, haha!

If you are bullish on short-run TSLA performance, consider buying calls instead of stock. For each dollar of TSLA price increase, you will realize a much higher % increase in call value than in stock value.

Call options have much more risk, of course: if you get the timing wrong, you lose. Long-dated calls ("LEAPS") largely step around that issue, but they're trading at a substantial premium these days.

 

[AlMc]

If you are bullish on short-run TSLA performance, consider buying calls instead of stock. For each dollar of TSLA price increase, you will realize a much higher % increase in call value than in stock value.

Call options have much more risk, of course: if you get the timing wrong, you lose. Long-dated calls ("LEAPS") largely step around that issue, but they're trading at a substantial premium these days.

I would add that if you have not done options before and are considering them you should study them first to understand them better. In addition, commit only money that you are not afraid to lose. While I know this comment could apply to all stock/investments it is particularly true of short term options. I have seen both sides of 'weeklies' (short term options). VERY high risk/reward. Correctly timed (and watched closely) you can double, triple or even '10 bagger' your investment. I made 135% on 180s today in 3 hours. I have also lost an entire position in the same amount of time.

 

[InTheShadows]

I agree completely with AlMc. I too have seen both sides. I always ask myself "how would I feel if I loose all of this that I am about to spend. More often than not it has happened, especially when buying otm options.

 

[chickensevil]

I appreciate the suggestions toward options. I consider myself a rather smart person, and although I get the gist of how options work, applying that thought into a logical order for them never seems to make sense to me. I I don't know what part of them I am not quite understanding... It seems simple in theory, but then the application of it kills me. I would basically need to have complete throw away money on a cheap stock to "play around" with them so I can understand it better, I am just not willing to risk the capital on the learning curve, lol.

When I first got into stocks, I took a huge risk, dumping a ton of money left and right on different stocks... but I felt like I at least understood the market basics to do that and not be completely throwing money away. It took me about 1 to 2 years from that initial purchase before I really felt like I understood the ins and outs of timing and analyzing and such, and surprisingly held rather flat (not losing but not gaining money). Options... I just... I dunno. I can't seem to get my head around it well enough to do.

Sorry for the slight derail of the topic here, haha! But I think for now I will stick with stock, maybe someday when I really feel like I have cash to throw away again, I will risk it and figure it out. Right now though, I need to be *somewhat* safe with the money, since I am planning to use a lot of it on my down payment (wouldn't want all my money just disappearing on me).

 

[Lessmog]

I appreciate the suggestions toward options. I consider myself a rather smart person,
- - -
Right now though, I need to be *somewhat* safe with the money, since I am planning to use a lot of it on my down payment (wouldn't want all my money just disappearing on me).

I think you just proved that bolded part.

 

[AlMc]

Interesting article: http://us.rd.yahoo.com/finance/exte...ckers-running-out.html?puc=yahoo&cm_ven=YAHOO Concerns 'green/white' stickers in Cali and TMs advantage because of them.

 

[PeterJA]

Autodata strikes again

This morning, my broker sent me a Reuters story about Kia's new EV, stating the following:

U.S. demand for electric vehicles has confounded some of the old-line carmakers, including General Motors Co and Nissan Motor Co, that were early movers in the marketplace.

Both companies have had to slash prices and offer other aggressive incentives on their EVs -- and still been outsold by the Tesla Model S, a battery-powered luxury sedan offered by newcomer Tesla Motors Inc that is double the price of Nissan's Leaf and GM's Chevrolet Volt.

This evening, my broker sent a "corrected" version of the story:

Both companies have had to slash prices and offer other aggressive incentives on their EVs - and still barely outsold the Tesla Model S, a battery-powered luxury sedan offered by newcomer Tesla Motors Inc that is double the price of Nissan's Leaf and Chevrolet Volt.

In 2013, Tesla sold just over 19,000 of its pricey S models, according to full-year sales figures from Autodata, compared with more than 22,000 for Leaf and more than 23,000 for Volt.

For a firm that claims its business is providing auto data, Autodata seems really bad at counting auto data. Last summer, their bogus sales data for Tesla provoked several FUD articles on Seeking Alpha.

Reuters fans may want to tell their journalist (James B. Kelleher) that Tesla's 2013 deliveries were:
Q1 4900
Q2 5150
Q3 5500
Q4 6900
total 22,450, so Autodata is incompetent or corrupt or both.

http://www.reuters.com/article/2014/02/06/usa-kia-electric-vehicle-idUSL2N0LA1BS20140206

 

[techmaven]

total 22,450, so Autodata is incompetent or corrupt or both.

http://www.reuters.com/article/2014/02/06/usa-kia-electric-vehicle-idUSL2N0LA1BS20140206

It would be relatively accurate if they were talking about U.S. only sales. However, that article has been amended to eliminate the Autodata reference.

 

[PeterJA]

It would be relatively accurate if they were talking about U.S. only demand. However, that article has been amended to eliminate the Autodata reference.

Ah, amended again. Maybe the error was not Autodata's, this time.

 

[Norse]

It's easy to forget that there are other countries besides the US isnt it?

 

[Jonathan Hewitt]

It's easy to forget that there are other countries besides the US isnt it?

There are? :O :O :O