having said that, can we model such quarters? If they froze capital expenditures what is the EPS?
By nature CapEx isn't counted against your EPS. You are totally expected, as a company, to take your profits and either A: Reinvest them into the company (capex) or B: Give the money back to the shareholders (dividends). Anything else and you are likely to just make shareholders upset.
I think the problem/question is, what is the cost of their rapid expansion to cover the globe and the R&D associated with keeping ahead of the curve? Sadly, R&D does count in your OpEx which was 167,154 the last Q. If you assume Tesla has a moat so wide they could just sit on their laurels and do nothing for just 1 quarter. They would post a GAAP profit of 64,708 thousand (64.7M$). This would be
0.51 EPS. Is this perhaps what you are seeking?
Current quarter on GAAP numbers they had an OpEx of 362.5M and a CapEx of 426M. This is where I think everyone is getting that their burn rate per quarter is at 500M$ (roughly) and why they say Tesla will be "dead" at the end of the year.
Just for fun, looking though another lens: Non-Gaap GP was 311M$ with 324M$ OpEx (147M$ R&D and 176M$ SG&A) with the same 426M$ CapEx. So if you dump out the R&D they would have been 311M$ - 176M$ = 135M$ in Profit. Then their
EPS would have been 1.08$.
If you could somehow pullout their SG&A that is being done today for future growth (like opening up new stores and employees at the factory which wouldn't be needed if they were to just do their 50k a year number instead of growing into 100k+ cars) then they would look even better. Heck if you did that you could likely keep some of the R&D costs in there as you would be able to afford to burn through that since you aren't having all these employees eating through your money.
If you apply this thought to Q4, let's assume 17k deliveries (pretty much the bottom number of what they need to do to hit 55k this year), and 106k ASP (I think with the X and being all the Signature and Performance deliveries first, those will hold the ASP high), and keep the 28% GM would come out to
504.6M$ GP. If SG&A stays relatively flat (let's assume that while they continue to add more stores, they get far more efficient at the factory with their employees to counter balance) that would be 176M$ and let's also say that R&D returns to the Q1/2014 levels at 81.5M$ (Since they won't have the X burdening them anymore this would strictly be R&D costs on minor improvements to current products... Storage, S, X, and the small R&D spending going on to bring forward a Model 3 Prototype which is still sort of cheap at this point), that will keep your
OpEx at 257.5M$. Now, let's take CapEx (because we are looking for Free Cash Flow) and assume that it is cut in half. Still some costs happening on the Gigafactory, although it should be almost finished at this point, since they are moving equipment in there Q1 of 2016, but no major costs happening on the Model 3 and the S and X was all invested up through Q3. So
CapEx in half would be 213M$. Total Cost is 470.5M$.
So all said: 504.6M$ GP - 470.5M$ Spending =
34M$ in Free Cash.
The scary thing... in order to make Free Cash while not totally stopping CapEx, will mean that no matter how you slice the GAAP vs Non-GAAP numbers, could we possibly be in for a GAAP profit surprise come Q4??? So much for 2020... All this taken from one statement regarding "free cash flow"... hrmmmm... Might be time to bet the house on cheap shares today, to sell come Feb next year...
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Yes, I did totally just pull numbers out of thin air, I will admit this, and please don't assume that these are going to be their numbers as Q4 is still a ways off (maybe too far for the short term thread???), but I am continually perplexed by the "Free Cash" comments made by the Company, and even if they totally tank their CapEx spending... if you are cash flow positive, you are going to be either very close to, or right at GAAP profitability. Even if this only lasts for 1 quarter's results, I think the affect it will have on the short term shareprice is quite dramatic. I don't believe it will last, as Wall Street will end up totally mad at the company come Q1 earnings when they go right back into the negatives as they ramp up spending for Model 3, but for just 1 quarter, I think the shock and awe is going to be immense.
If I wanted one last capital raise in order to fund a multi-factory expansion, this is how I would time it. Not saying they will do a capital raise, just that if I were to try to do it, that is when and how I would execute.
