Q4 2015 Earnings prediction

[jesselivenomore]

Some very crude back of the envelope math for Q4 earnings since we now know the deliveries numbers:

Since Q4 deliveries are up 50% from Q3, I will use that proportion for all revenue calculations. This is assuming vehicle sale prices remained constant, which may not be accurate. However, that is balanced out by assuming 0 revenues for Tesla Energy, which is very conservative.

GAAP

Q3 revenue 936.8M COGS 705.3M gross profit 231.5M
Q4 revenue 1405.2M COGS 1058M gross profit 347.2M

In the Q3 letter it is stated: "Operating expenses should increase slightly in Q4, but reflect a further decline in Model X developmentexpenses, offset by increased costs related to expanding our global sales capability and developing Model 3."

So I take that as R&D declining slightly sequentially while SG&A increasing. Overall I am guessing an increase of 2%.

Q3 operating expense 415M
Q4 operating expense 423.3M

Q4 interest income 0.3M
Q4 interest expense 29M
Q4 income tax 2M

Q4 net loss -106.8M

Shares 129M
Loss per share -0.83

However most estimates from analysts I see are non-gaap, so add a few provisions.

GAAP net loss -106.8M

Assume stock based compensation flat from Q3 = 50M
Non-cash interest expense 20M

Q3 gross profit deferred due to lease accounting 77M
Q4 increase by 50% = 115.5M

Q4 net income (non-gaap) 78.7M

Shares 129M
Profit per share 0.61


Can someone look over these numbers to see why they may be off. The consensus non-gaap estimate I see currently is at 0.1, so a 0.61 profit would seem pretty good.


EDIT:

Forgot about 0 ZEV credits in Q4. Adjusted numbers:

Q3 ZEV credit revenue 39M

Q4 GAAP net loss -145.8M
Q4 non-GAAP profit 39.7M

129M shares

profit per share 0.31 (non-gaap)

 

[uselesslogin]

Well, I mean if you assume operating expenses increases 10% instead then you lose $0.25 from your estimate. In any event, I see no issue with your underlying math so it just depends on what assumptions are made.

 

[jesselivenomore]

Well, I mean if you assume operating expenses increases 10% instead then you lose $0.25 from your estimate. In any event, I see no issue with your underlying math so it just depends on what assumptions are made.

I guess that depends on what Tesla's definition of "slightly" is, according to Q3 letter. The question is how did they get the huge increase in Q4 sales? Was it from the referral program/pent up demand after X reveal/clearing out backlog? If that is the case then SG&A shouldn't be up too much. If the sales were from opening a bunch more stores then SG&A could be high. Were there a lot of store that opened up in Q4?

 

[Ingenieur]

Tesla Bear here:

I expect Gross Margin to drop by 3-4% in total, due to referrals, discounts, loaners, currency effects, less favorable model mix (S70) and Model X.
I also expect OpEx to rise by 3-5%, Tesla paid a lot to third partes in Denmark in order to be able to deliver all those cars on time for example.

I expect GAAP Loss of 200-250 Mio if there are no ZEV Credit sales as Tesla guided in Q3, obvious lower loss by the amount received for ZEV Credits.
Analysts expect 10 Cent profit Non GAAP vs 58 cent last Quarter, means 68 Cent improvement or ca 90 Mio.

 

[jesselivenomore]

Sorry guys, I just caught a big mistake in my numbers:

Tesla guided for 0 ZEV credit revenue in Q4, while they sold 39M in Q3. This needs to be subtracted from the total.

Q4 net income (non-gaap) 78.7M - 39M = 39.7M

Shares 129M
Profit per share 0.31

Okay, this is much closer to analyst estimates. Still a decent beat but not quite as ridiculous as in the OP. Also remember this does not account for any Tesla Energy revenue/profit.

 

[Electrifying]

Q3 gross profit deferred due to lease accounting 77M

Shouldn't this figure be $86M? From Q3 investor letter consolidated statements of operations:

Footnote 1A: net increase in deferred revenue due to lease accounting: $307M
1B: Cost of revenue not recognized due to lease accounting: $221M

So extra 86M deferred.

 

[Fallenone]

I think revenue is too optimistic. Tesla has done a lot of things to push out 17k S in Q4 and all of that hurts margins. Plus, 0 rev from Tesla Energy is not conservative at all. If they booked any sales in Q4, it would be all over the news. All we heard were plans, not deliveries.

 

[FredTMC]

Some very crude back of the envelope math for Q4 earnings since we now know the deliveries numbers:

Since Q4 deliveries are up 50% from Q3, I will use that proportion for all revenue calculations. This is assuming vehicle sale prices remained constant, which may not be accurate. However, that is balanced out by assuming 0 revenues for Tesla Energy, which is very conservative.

GAAP

Q3 revenue 936.8M COGS 705.3M gross profit 231.5M
Q4 revenue 1405.2M COGS 1058M gross profit 347.2M

In the Q3 letter it is stated: "Operating expenses should increase slightly in Q4, but reflect a further decline in Model X developmentexpenses, offset by increased costs related to expanding our global sales capability and developing Model 3."

So I take that as R&D declining slightly sequentially while SG&A increasing. Overall I am guessing an increase of 2%.

Q3 operating expense 415M
Q4 operating expense 423.3M

Q4 interest income 0.3M
Q4 interest expense 29M
Q4 income tax 2M

Q4 net loss -106.8M

Shares 129M
Loss per share -0.83

However most estimates from analysts I see are non-gaap, so add a few provisions.

GAAP net loss -106.8M

Assume stock based compensation flat from Q3 = 50M
Non-cash interest expense 20M

Q3 gross profit deferred due to lease accounting 77M
Q4 increase by 50% = 115.5M

Q4 net income (non-gaap) 78.7M

Shares 129M
Profit per share 0.61


Can someone look over these numbers to see why they may be off. The consensus non-gaap estimate I see currently is at 0.1, so a 0.61 profit would seem pretty good.


EDIT:

Forgot about 0 ZEV credits in Q4. Adjusted numbers:

Q3 ZEV credit revenue 39M

Q4 GAAP net loss -145.8M
Q4 non-GAAP profit 39.7M

129M shares

profit per share 0.31 (non-gaap)

Numbers I post below are Non-GAAP... For example: include leased cars as Revenue (not deferred)
Wall Street only cares about "Non-GAAP"

Lets start with Revenue

Q4'15 Revenue: $1,900M

Tesla sold 17400 cars in Q4 (includes some are Inventory cars). Assume ASP of $110k (WAG).
Q3 ASP was 107k ($1240M Rev / 11603 cars)

I think service rev contributes $100M easily. Q3 was $88M. If ASP was only $100k, then service Rev makes up difference and still leads to Rev overall of $1900M

I'm also neglecting Energy Storage revenue.

Please refute this $1.9B revenue estimate. Thanks!

 

[Fallenone]

I think ASP of $100k is more likely. With so few X delivered, and no major changes in the S, the ASP can hardly go up. Factor in the inventory sales, it should bring the ASP down a few k. But all in all, non-GAAP $1900M sounds about right.

Numbers I post below are Non-GAAP... For example: include leased cars as Revenue (not deferred)
Wall Street only cares about "Non-GAAP"

Lets start with Revenue

Q4'15 Revenue: $1,900M

Tesla sold 17400 cars in Q4 (includes some are Inventory cars). Assume ASP of $110k (WAG).
Q3 ASP was 107k ($1240M Rev / 11603 cars)

I think service rev contributes $100M easily. Q3 was $88M. If ASP was only $100k, then service Rev makes up difference and still leads to Rev overall of $1900M

I'm also neglecting Energy Storage revenue.

Please refute this $1.9B revenue estimate. Thanks!

 

[FredTMC]

I think ASP of $100k is more likely. With so few X delivered, and no major changes in the S, the ASP can hardly go up. Factor in the inventory sales, it should bring the ASP down a few k. But all in all, non-GAAP $1900M sounds about right.

Thanks!

So, Gross Profit (non-GAAP):

Q3'15 was $312M. Gross Margin was 25.1%

Tesla's Outlook for Q4 was that GM% would decline "slightly"

So, I assume 24.5% for Q4'15
and Q4'15 Gross Profit of $465M

Please refute these Q4'15 Gross Profit numbers...

 

[Fallenone]

I'm much more pessimistic on gross margins. X is still in the process of optimizing production, meaning the GM for X could be as low as the S in late 2012, which was 8%. Thanks to the little share of X in the total deliveries, this won't affect much. But with the referral program and the continue rise of the dollar, I think overall GM would be around 23% or even lower.

Thanks!

So, Gross Profit (non-GAAP):

Q3'15 was $312M. Gross Margin was 25.1%

Tesla's Outlook for Q4 was that GM% would decline "slightly"

So, I assume 24.5% for Q4'15
and Q4'15 Gross Profit of $465M

Please refute these Q4'15 Gross Profit numbers...

 

[ecarfan]

Is there an announced date/time for the Q4 2015 ER call?

 

[FredTMC]

I'm much more pessimistic on gross margins. X is still in the process of optimizing production, meaning the GM for X could be as low as the S in late 2012, which was 8%. Thanks to the little share of X in the total deliveries, this won't affect much. But with the referral program and the continue rise of the dollar, I think overall GM would be around 23% or even lower.

Thanks again. I'm more optimistic on GM than 23%. In my opinion, they had a pretty good idea how things were going at the time of the EC in Nov.

- - - Updated - - -

Is there an announced date/time for the Q4 2015 ER call?

no. Not announced yet as far as I can tell

Should be around feb 10th

 

[Fallenone]

Makes sense, since they said "slightly" half way through Q4 and $ already rose quite a bit then.

Thanks again. I'm more optimistic on GM than 23%. In my opinion, they had a pretty good idea how things were going at the time of the EC in Nov.

- - - Updated - - -



no. Not announced yet as far as I can tell

Should be around feb 10th

 

[FredTMC]

Makes sense, since they said "slightly" half way through Q4 and $ already rose quite a bit then.

Yep.

Finally, let's discuss.... Drum roll, please... Free Cash Flow (FCF)!

In Q3'15 tesla listed the FCF numbers. See attached sheet from ER
There was ($203M) in operating flows AND $392M Capex. Combined was ($596M) for FCF for Q3'15

my basic Question is how to calculate FCF for Q4'15? I know that tesla originally was hoping for positive FCF for Q4'15' but on the last EC they said it would slip into Q1'16. Not sure if I'm supposed to include R&D and SG&A in calc of FCF or not.

From my my prior calculation, tesla could have around $465M in Gross Profit in Q4'15 and they provide Capex guidance of $500M in Q4'15. If the FCF is simply GP minus Capex then they will miss FCF by $35M. Not much...

 

[mmd]

Numbers I post below are Non-GAAP... For example: include leased cars as Revenue (not deferred)
Wall Street only cares about "Non-GAAP"

Lets start with Revenue

Q4'15 Revenue: $1,900M
!

Wow! From where do you come up with these? Why don't you simply take Q3 automotive revenue (service revenue is not related to new sales in Q4) and multiply that by 17400/11603 (delivery ratio of Q4:Q3)? That gives automotive revenue of $1.2785 billion vs. $852M in Q3 of 2015.
I would also scale it down by 3% to account for inventory sales and referral discounts. Then, add/subtract the other numbers and see what you get.

For FCF: Check Q3 letter. There is no non-GAAP FCF. 'Free cash Flow' appears exactly once under GAAP financials. Please just stick to the GAAP calculations for FCF. For cash flow, you can't include the unrealized revenues of leased vehicles, as is done in non-GAAP. Then see what you get. That will also resolve some of the confusions you are having above.

 

[Fallenone]

Yes, when they calculate their FCF they didn't include the leasing deferred revenue in it (actually the numbers don't quite match with 0 deferred revenue either, seems like they take the lease revenue of that quarter in their FCF to me).

If the leasing revenue cannot be included in the FCF, then it would even be quite a challenge for them to be FCF positive in 2016 Q1. My rough calculation is under the assumption that opex and capex together are cut by 50% compared to Q3 2015, which is about 400m. 12k S with ASP 95k (some 2015 year end referral/discount sliding in, plus X drawing away some high end buyers) and 5k X with ASP 135k. Service and Energy assume to be 10% of automotive revenue. Overall GM 23% (X is getting bigger share but GM on X is still not optimized, thus the lower overall GM). Then I got about 400m too. Quite close and the delivery numbers are a tall order.

Wow! From where do you come up with these? Why don't you simply take Q3 automotive revenue (service revenue is not related to new sales in Q4) and multiply that by 17400/11603 (delivery ratio of Q4:Q3)? That gives automotive revenue of $1.2785 billion vs. $852M in Q3 of 2015.
I would also scale it down by 3% to account for inventory sales and referral discounts. Then, add/subtract the other numbers and see what you get.

For FCF: Check Q3 letter. There is no non-GAAP FCF. 'Free cash Flow' appears exactly once under GAAP financials. Please just stick to the GAAP calculations for FCF. For cash flow, you can't include the unrealized revenues of leased vehicles, as is done in non-GAAP. Then see what you get. That will also resolve some of the confusions you are having above.

 

[mrdoubleb]

So just a thought here... Do you guys think Tesla could have pulled of that huge increase in deliveries with flat staff numbers? If not, should we factor in increased delivery staff across the whole chain (i mean they may have needed to increase other staff for that too, not just the delivery specialists)? Is that as significant enough number to impact these back of the envelope estimates?

 

[FredTMC]

Wow! From where do you come up with these? Why don't you simply take Q3 automotive revenue (service revenue is not related to new sales in Q4) and multiply that by 17400/11603 (delivery ratio of Q4:Q3)? That gives automotive revenue of $1.2785 billion vs. $852M in Q3 of 2015.
I would also scale it down by 3% to account for inventory sales and referral discounts. Then, add/subtract the other numbers and see what you get.

For FCF: Check Q3 letter. There is no non-GAAP FCF. 'Free cash Flow' appears exactly once under GAAP financials. Please just stick to the GAAP calculations for FCF. For cash flow, you can't include the unrealized revenues of leased vehicles, as is done in non-GAAP. Then see what you get. That will also resolve some of the confusions you are having above.

I'm only interested in NON-Gaap. Not Gaap. Wall Street don't care no nothing about dat Gaap.

17400 deliveries X 110k = 1900M

by comparison, Q3'15 rev was 1240M. It's the first line from "Q3 results" section of ER. See below

- - - Updated - - -

So just a thought here... Do you guys think Tesla could have pulled of that huge increase in deliveries with flat staff numbers? If not, should we factor in increased delivery staff across the whole chain (i mean they may have needed to increase other staff for that too, not just the delivery specialists)? Is that as significant enough number to impact these back of the envelope estimates?

Tesla provided this guidance in their Q3'15 outlook. Short answer is they guided to only a "slight increase" in Q4 total operating expenses vs Q3. Q3'15 total operating expense was 415M. The R&D part was ~$178M and the balance was for SG&A

 

[mmd]

My rough calculation is under the assumption that opex and capex together are cut by 50% compared to Q3 2015 ..

Your ASP seems close enough. But the part in bold looks like a stretch. Sales increased so much, but opex halved? Also, hard to cut capex when the company is still growing.

- - - Updated - - -

I'm only interested in NON-Gaap. Not Gaap. Wall Street don't care no nothing about dat Gaap.

17400 deliveries X 110k = 1900M

by comparison, Q3'15 rev was 1240M. It's the first line from "Q3 results" section of ER. See below


-

IMO, only the automotive revenue should be scaled up by 17400/11603, not the non-auto revenue. That was $1.16B for 11603 cars in Q3. So, $99,970 per car sold. If you do an exact calculation ( with these assumptions, of course), for Q4, we get:
17192 Model S * $100k model s non-gaap asp + 208 Model X * $144k = $1,748 M

Still not quite $1.9B. I think the ASP you are using is too high. Not sure what that is based on. Since Tesla is not mentioning the ASP in the recent letters, better just multiply the total auto revenue with the ratio of sales. We could ignore the Model X ASP, as there were only 208 of them.

On the bright side, COGS line may be lower than usual, as Tesla sold more cars than it produced (17400 vs. 15400, may be).