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sleepyhead's Q2 Earnings Preview

Discussion in 'TSLA Investor Discussions' started by sleepyhead, Aug 5, 2013.

  1. sleepyhead

    sleepyhead Active Member

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    #1 sleepyhead, Aug 5, 2013
    Last edited: Aug 6, 2013
    Disclaimer:

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    http://www.teslamotorsclub.com/announcement.php?f=119


    Please find the attached financial model at the bottom of the post.

    Note: All of my numbers are on a non-GAAP basis, which excludes stock-based compensation and reverses effects of lease accounting.

    Q2:

    5,200 cars delivered,
    $568 million in revenue
    $0.32 EPS
    23.1% gross margin including all credit sales

    FY13:
    23,100 cars delivered,
    $2,476 million in revenue
    $1.38 EPS
    24.9% gross margin including all credit sales

    Analyst Consensus:
    Q2:
    $393 million in revenue
    -$0.17 EPS

    FY13:
    $1,840 million in revenue
    -$0.03 EPS

    Highest Analyst’s Estimate:
    Q2:
    $478 million in revenue
    -$0.05 EPS

    FY13:
    $2,160 million in revenue
    $0.27 EPS


    Q2 earnings release will be all about two items:

    Demand – demand has been very strong and if you listen to Elon talk, it sounds like it is getting even stronger, “demand is not the problem, but rather supply is.” Specifically, battery production is holding Tesla back from producing even more than their current 25k – 30k annualized run rate. A new battery supply deal with Samsung will alleviate this issue. There are still many doubters that believe that demand is falling off and they will be caught by surprise on the earnings call.

    Gross Margin – Will Tesla be able to achieve its 25% gross margin target by Q4? On Q3 2012 conference call, Elon mentioned that Tesla can achieve these margins with an annualized rate of 20,000 vehicles produced. At a 25,000+ run rate, Tesla should have no problems reaching this milestone. From Q1 conference call Elon said, “unless we really screwed the pooch, you'll see the 25% gross margin number in Q4.” Seems like everything is progressing a little quicker than Elon’s previous conservative guidance, which is extremely positive.

    Modeling assumptions for Q2:

    Vehicles Delivered – 5,200. Evidence points to 5,450 vehicles produced, so if you subtract loaners then 5,200 seems like a reasonable number.

    Average Selling Price - $92,000. ASP for Q1 was just under $96k, and I expect a lower ASP in Q2 due to a higher mix of 60 kWh and 40kWh cars, partially offset by strong demand in Performance Plus models. This equates to $478m in auto sales for Q2.

    GHG/CAFÉ credits – Same as Q1 at 3.6% of auto sales. This number is likely to increase in the near future. In June the Obama administration has increased the “social cost” of carbon emissions in federal regulations

    ZEV Credits - Elon said in Q1 conference call:
    "Yeah, so we’re expecting a decline in the credit revenue for Q2 and then probably fairly significant decline in Q3 and as I said back right now, we’re not expecting anything in Q4. That’s our – I mean, it might be some ZEV credit revenue in Q4, but we’re not accounting on it. I don’t have – I can’t give anymore precision than that at this time."

    The expected decline in Q2 was probably due to three factors:

    • 4,500 deliveries expected vs. 4,900 in Q1.
    • Higher mix of 40 kWh and 60 kWh cars that generate less credits than 85 kWh models.
    • Lower selling prices of credits.

    Since Tesla delivered significantly more vehicles than it guided for, I don’t expect the ZEV credit revenue drop-off to be significant in Q2.

    Development Services – Slight increase from $6.6m in Q1 to $10m in Q2.

    Gross Margins – I used 10% gross margin on auto sales excluding any credits (I have taken out the GHG/CAFÉ credits as well as ZEV credits). The pure auto sales gross margin for Q1 was at 1.8%, which was a 9% increase from Q4 2012. Elon on Q1 conference call:

    It's worth noting that when you see the gross margin for Q1, we're giving you obviously the gross margin average over the quarter. And so the gross margin at the end of Q1 was significantly better than at the beginning of Q1.

    Average Q4 gross margin was around -7%, so let’s assume that they ended Q4/started Q1 at about -2% gross margin run rate. We can then assume that Q1 gross margin ended at around 5% - 8% range. If Tesla is to reach 25% gross margin in Q4, then my 10% Q2 gross margin number may actually be conservative. Including GHG/CAFÉ credits my gross margin number is 13.1%. This sounds conservative to me, but maybe I am a bit too optimistic on ZEV credits; chances are that any differences will offset.

    Research and Development Expense- From Q1 shareholder letter “slight increase”, therefore I modeled a 5% increase from Q1.

    Selling, General and Administrative - From Q1 shareholder letter “moderate increase”, therefore I modeled a 10% increase from Q1.

    Other Income - $6m of FX gain. The Yen has continued to weaken at a similar pace to Q1 and therefore modeled in a similar number.

    Weighted average shares outstanding, fully diluted –This number has increased by almost 6 million due to recent round of capital raising done in the middle of Q2; the other 6 million will kick in in Q3.

    Provision for Income Taxes – This amount is very minimal at 1%. US income will still be tax free for a while due to net operating loss carryforwards from previous years. International income will still be taxed. My estimate is probably on the high side, but it is immaterial.

    GAAP Earnings

    Stock-based compensation - Q2 expenses under GAAP will have an additional $15million of stock-based compensation if you follow the pattern from Q1. Note that TSLA’s share price has increased significantly and might weigh on this expense category possibly leading to a number higher than $15m.

    Lease Accounting
    – On Q1 conference call Elon said that approximately 25% of cars sold are financed through Tesla. If we assume that 40% of those vehicles are returned to Tesla after three years, then 10% of all vehicles sold will fall under the lease accounting rules.
    There could have been additional one-off GAAP items as well.

    On a GAAP basis, I have modeled $514 million in revenue and $0.11 EPS.

    Important Notes:
    Net income in my financial model is most sensitive to gross margin and ASP does not affect net income as much (but will impact revenue significantly). It is important to note that lower ASP’s will also mean lower gross margins. A 6% change in ASP changes EPS by $0.02, while a 2% increase in gross margin will change EPS by $0.07.

    The wildcard here are ZEV credits. There is downside risk to this number and every $1.3m equates to $0.01 EPS. As previously mentioned I still see upside risk to gross margin and these risks could hypothetically offset each other.

    Other risks in my model include higher than expected R&D or SG&A expenses and lower FX gains.

    Guidance:
    In Q1 Tesla announced its arrival and in Q2 it will announce that it is here to stay!

    Elon’s goal is to advance the production of EV’s around the world and the sooner the better. If you have listened to his interviews, you will hear that he is not entirely convinced that it is not too late to save the planet, hence the idea to colonize Mars. Every year that goes by is one year closer to getting to the point of no return. In order to get other auto manufacturers serious about EV development, Tesla has to show them how profitable it is. Therefore, this is not the time to low-ball guidance in order to under-promise and over-deliver. This is the time to make a statement.

    I think that raising guidance to at least 23,000 deliveries for the full year will be a good start. But more importantly a $1.00 EPS guidance for the full year will certainly get the attention of other auto manufacturers. Tesla has not previously guided an EPS number, but it would be prudent to do so now that they have better visibility into the next couple of quarters.

    Gross margin guidance excluding ZEV credits will be in the low 20’s for Q3 and Elon will give confirmation that Tesla will achieve an average gross margin over 25% in Q4; possibly higher due to new options pricing and popularity of Performance Plus models.

    Feedback:

    Please let me know what you guys think about the model and help me find weaknesses in my modeling assumptions. Your input is greatly appreciated and I will try to update the model if the TMC consensus is different from what I modeled in.

    Cheers,

    sleepyhead
     

    Attached Files:

  2. aznt1217

    aznt1217 Active Member

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    Excellent Model. Although... you forgot one other sales driver. Clothing! jk. Let's see how close it comes in :biggrin:
     
  3. RationalOptimist

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    Nice work...

    Nice work, Sleepyhead. If that's close to what happens, it will be a happy week. Did European plans change? I thought 500 cars from Q2 production were reserved for Euro sales and would not generate revenue this Q.
     
  4. deonb

    deonb Active Member

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    I don't see a specific breakout of the composition. But I'll just ask some questions:

    Firstly, did you take into account the effect of the 400 or so 40kW's that were delivered at a deep loss? Amortized over 5400 vehicles it is $750 per vehicle.

    Secondly, there was a price hike (was it 3.5%?) between cars delivered in Q1 and Q2, which took effect at the end of December 2012. All cars delivered in Q1 were finalized before December 2012, so the effect of that price increase only factor into Q2 deliveries. Considered?

    - - - Updated - - -

    Oh yeah. Unless a boat with 500 cars sank on the way to Europe, there weren't any EU cars that were made in Q2.

    Nobody in Europe has a car yet, and indications are that they were loaded on the boat in July or August. See the August newsletter over here:
    http://www.teslamotorsclub.com/showthread.php/19683-Europe-Newsletter-August-2013

    So if follows that all deliveries went to the U.S and Canada.
     
  5. sleepyhead

    sleepyhead Active Member

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    #5 sleepyhead, Aug 5, 2013
    Last edited: Aug 5, 2013
    I did not do a specific breakout of the composition, because gathering all of the data will drive you nuts and your estimate will be wrong anyway. In order to simplify I simply lowered the ASP from $96k in Q1 to $92k in Q2 and applied a 10% gross margin on pure auto sales (this was 1.8%) in Q1. I figured that the higher mix of 40 and 60 cars would be partially offset by popularity of Performance Plus as well as any price increases (including those on 21" wheels, etc.)

    My model is largely driven by gross margin estimates and rightfully so, since this is what is going to drive earnings in Q2. I tried to be conservative as much as possible, but my results are blowing the analyst's results out of the water anyway. Time will tell I guess.

    @RationalOptimist - There is evidence that points to Euro delivery delay until Q3, and instead Tesla sold as many cars as it could in Q2.

    Edit: $750 per vehicle is less than 1% of gross margin. My guess is that on pure autos (excluding any credits) the gross margin can come in at anywhere between 7% and 15%. One thing I have learned working as an analyst is not to get caught up in the details, because you are going to be wrong anyway.

    My goal here was to show that, at least in my mind, the sell-side analysts are way off in their assumptions. Therefore I posted this and would like to know if you guys see any weaknesses in this model. Why would my numbers be significantly different from Wall St.?
     
  6. deonb

    deonb Active Member

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    Agreed. Ok, looks reasonable.

    Can't wait for Tesla to reach 17.5% GM from Autos just to go and beat Joe Peterson over the head with it*. Looks like you have that after Q2 unfortunately. What's the chances of that before?


    * 17.5% GM from Autos makes Tesla profitable without any credits, whether ZEV, CAFE or T-Shirts.
     
  7. sleepyhead

    sleepyhead Active Member

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    I don't have the answer to that one, but I am fairly confident that Tesla is currently producing at gross margin over 17.5%.

    Elon said that once they make a change on the factory floor, it takes 6-8 weeks for those cost savings to feed into the financials. So this is my best guess (really just a guess based on my gut feeling):

    Start of Q1 - running at -2% gross margin. Working 70 hours/week and paying double time above 60 hours.
    Feb - March - down to 50 hours per week. Finishing Q2 at about 6% gross margin.
    April - about 6-8 weeks later after implementing a change that reduced overtime significantly, so cost savings are starting to show up. Let's say 8% GM.
    May - Further incremental improvements leading to 9% - 10% gross margin. Then closed the factory down for memorial day weekend for retooling.
    June - Now running two shifts? and producing 550 - 600 cars/week for quarter end crunch. More cars means less fixed costs (such as manufacturing overhead) spread over to each car. So margins probably got above 15% to end q2.
    Q3 - 6-8 weeks later cost savings start showing on financials so today we are probably running at 20% gross margin (plus 4% GHG/CAFE almost gets you to 25%). The recent price increases will probably bump this up a little.

    In Q4 I can easily see 25% GM from Autos alone. With GHG/CAFE credits it should approach 30% after the recent price hikes.
     
  8. DaveT

    DaveT Searcher of green pastures

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    Thanks, sleepyhead. Great contribution. Here are my thoughts.

    1. I think your numbers (revenue, units, earnings, expenses, GM) look fairly reasonable to me. 5200 is at the top end of my estimates because of loaners, more cars for showrooms (and test drives), and cars in transit to owners.

    2. I agree if Tesla can give an EPS guidance for 2013 and forecast profit for 3rd and 4th quarters, then that will be very positive. Add to this a raised 23,000 car guidance and a profitable Q2, then we might have blowout earnings.

    3. My big concern is that Tesla might have spent more in Q2 than we are expecting. Namely:
    - Supercharger rollout (but this should be amortized over a number of years)
    - Factory assembly personnel (this would go under auto production)
    - General admin/selling at factory, stores, service centers and HQ
    - Research/dev engineers
    The reason being is that a Bloomberg article quoted Elon as saying that they had 3,000 employees at the factory (2,000 in assembly). I didn't believe it at first because their annual report says they have 3,000 employees as of Dec 31, 2012 across their entire company, this includes the factory, Palo Alto HQ, stores, service centers, etc. I estimate they had 2000 at the factory and 1000 across Palo Alto HQ, stores and service centers. So in a matter of just several months, Tesla grew from 3,000 total employees to 3,000 just at the Fremont factory. Now the Fremont factory also has vehicle engineering and delivery specialists there (powertrain engineering and more personnel are located at Palo Alto HQ). So, my rough estimates are they now have 3,000 in Fremont (2,000 assembly, 1,000 engineers, delivery specialists, other), several hundred at Palo Alto HQ, and at least several hundred across stores and service centers (especially because they opened a significant number of new stores and service centers in Q2. So, I'm thinking they might have 4,500 (maybe up to 5,000) employees across the company. A huge ramp up from 3,000 at year-end 2012. I was so incredulous at first, I emailed Bloomberg and they said they quoted Elon correctly. I didn't believe it, so I emailed Tesla directly and they got back to me saying that the quote was correct. And now, I've seen other Tesla employees (ie., Gilbert Passin) saying they have 3,000 employees at the Fremont factory.

    Anyway, just a bit concerned that Q2 will have higher expenses with selling/general/admin and with r&d. And that this might eat into the overall profit some and Tesla will hopefully still post a profit but maybe not as high as your forecasting. Hopefully, I'm just over-concerned.
     
  9. FredTMC

    FredTMC Model S VIN #4925

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    Yep, excellent contribution, Sleepyhead. I have same concern regarding #3 above. Big increases head count and new service centers and stores. Thoughts? I think your spreadsheet shows ~ 10% v Q1. I fear it may be larger.
     
  10. confy

    confy Member

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    Sleepyhead, thanks for the post. You mentioned that your numbers were non-GAAP. What about the analyst estimates?

    TIA
     
  11. mulder1231

    mulder1231 Active Member

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    Sleepyhead, did you take into account the cost of the recall? Or would that be accounted for as a one-time charge and ignored/forgiven by the analyst?
     
  12. CapitalistOppressor

    CapitalistOppressor Active Member

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    No, you are correct to be concerned. Also, folks tend to forget that Tesla promised $200m in CapEx for 2013.

    - - - Updated - - -

    The recall cost was small.

    Even if Tesla's spokeswoman was off by an order of magnitude(unlikely, since it was just a bracket), its just not worth sweating when key pieces of the model face such gigantic uncertainty.

    Sleepyhead seems to be mostly attempting to illustrate how likely it is that Tesla will handily beat the absurdly low consensus forecast, as opposed to asserting a level of precision that it simply isn't possible to achieve right now. A million dollars here or there just isn't important in that context.
     
  13. Buran

    Buran Member

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    Great posts all, this is very close to my own estimates, and I agree with your general conclusion that revenue especially will again come as a big surprise.

    A contribution regarding issue #3, the increase in costs: In my financial model I have assumed that selling and general administrative costs is a log function of number of stores. I then get a higher increase than you do, from 47m (I assume your lower figure is non GAAP) to ~53.2m based on 39 operational stores end Q2 (all GAAP figures from Q10s). See attached graph. I think it is reasonable that they get slowly declining cost of these and hence the log in my model. In any event, I get a 13% increase Q1 to Q2, so, yes, sightly higher than your 10% estimate.
    Modeling sales and gen adm.jpg

    Finally, a contribution to the merchandise sales. I think this is quite a lot and really hidden in the automotive revenue. Take a typical Q of 5000 delivered. Assume 25% buy the High power wall connector (1200 USD), 10% buy winter tiers (2400 USD) 20% of all customers buys a jacket @ 100 USD, 50% a T-shirt or two or something equivalent @ some 50 USD, 10 additional people for each car sold buys something in the store without buying the car @ 25 USD, and some other assorted sales of all the cute gear for babies etc. then I get this to on the order of 5m per Q! Elon said "We sell millons" referring to apparel only. Add High power wall connector and other stuff and adapters etc for the Model S and I think this is not insignificant. Since the margin of this is likely upwards of 50% it adds on the order of 0.02 EPS in my model!
     
  14. NigelM

    NigelM Recovering Member

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  15. Norse

    Norse Active Member

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    They`ve been sold out for months!
     
  16. sleepyhead

    sleepyhead Active Member

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    #16 sleepyhead, Aug 6, 2013
    Last edited: Aug 6, 2013
    I took the analyst estimates from finance.yahoo.com, since I know they use non-GAAP numbers. The only difference this time around is that there will be lease accounting and it is impossible to tell if analysts are adjusting for lease numbers or not. If my estimate of 10% of cars fall under lease accounting is correct, then this will have about a $50m impact on Revenue (still puts my numbers about $40m higher than the highest estimate of all analysts). As far as net profit goes, lease accounting will only take away about $0.05/share. The bigger non-GAAP item would be stock-based compensation expense (about $0.15/share), which finance.yahoo.com does exclude.

    1. I agree with you that some of my costs may be on the low side and maybe deliveries are just a tad optimistic, but at the same time you had a 14%-15% gross margin number incl. GHG/CAFE and I am using only 13.1%.

    If we take away 100 deliveries down to 5100 cars then that will impact revenue by $9m, but will impact net income only by $0.02. I used an ASP of $92k that is $4k lower than Q1 due to higher mix of 40 and 60 cars. But as deonb pointed out, there was a ~$2.5k price increase that effectively started in Q2; remember also about popularity of perf. plus cars. If ASP was $94k instead then this would offset the 100 cars.

    You can't subtract cars in transit, because there were cars in trans at the end of Q1 as well and these will more or less offset. There was also 100 cars delivered in Q1 buy not recognized as deliveries due to errors in paperwork.

    I am fairly confident that at least 5,100 cars have been delivered assuming that the 5,454 production number is accurate. 5,200 is just my best guess, but I don't think that I will be off by more than 100 cars.


    2. I really hope they do give out EPS guidance for the rest of the year. I think that Elon will give these numbers out to reward all of the loyal TSLA investors. We all know that the company will be profitable this year, so it is time to make it official to crush to rest of the shorts. Unless of course they decide on huge spending to accelarate stores, service centers, and charging infrastructure, which would be consistent with creating long-term shareholder value (at the cost of short-term).


    3. I agree that costs might be higher, but let me ask you this: During what month did they open most stores and service centers? If they gradually opened these during the first 6 months of the year, then my SG&A estimate is probably close. If they opened most of them in March/April then SG&A might be a few $million more. If they opened them late in Q2, then it will have a lot smaller impact on Q2 results.

    Tesla guided towards "moderate" SG&A growth in Q1 and it only went up about 3%. So I modeled 10% for "moderate" growth in Q2. Even if I model in 20% then this will only take away another $0.03 - $0.04 EPS. Anything above 20% increase is not "moderate" in my book and even 20% over the course of a quarter is stretching that definition.

    As far as increase in "fremont" employees goes, I think you will be surprised how little impact this will have. I am guessing that they added 1,000 employees to run a second shift, which means that the first shift is now working only 40h/week and no more overtime. The second shift's salary is part of COGS, and since they are producing more cars there is less fixed costs/manufacturing overhead to spread over each car. I think this impact is not as big as it may first sound.

    4. Even If you add another $3 - $5 million for R&D, then the company will still earn over $0.20/ share on a non-GAAP basis; and this would be my worst case scenario. Unless of course I overestimated ZEV credits significantly.

    I still have a feeling that there might be upside to my gross margin number though.


    Cap Op - I don't think that CapEx has any material impact on income statement, but it sure will impact Balance Sheet and Cash Flows; unfortunately I do not have enough time to model those. $200m amortized over 20 years is $10m/year or $0.02 EPS per quarter. But Tesla gets to capitalize interest expense into CapEx, so this spending might actually have a negligent impact on P&L as far as Q2 goes.

    Thanks for pointing out that my main goal was to show that Tesla will handily beat the absurdly low consensus forecast. If my numbers turn out to be somewhat accurate and the stock does not jump higher, then I think that the SEC should investigate this situation. A lot of retail investors are relying on analyst estimates/recommendations, so if they got it completely wrong then the stock should continue to go up.



    Buran - I agree with you that merchandise sales will be huge, especially in the future. Heck I bought an expensive $22 "future Tesla owner" onesie for my son when I walked into the store.

    Could you give us some of your numbers to see how they compare to mine as well as the analysts out there? Specifically revenue, gross margins, and net income; both GAAP and non-GAAP basis.



    Bottom line is that, unless I significantly overstated ZEV, Tesla should be on track to earn at worst $0.20/share even if you include the effects of lease accounting. If you add back stock-based compensation to get to a GAAP number then you are still looking at a small profit. Of course there could be one-time items that we don't know about that could be enough to push a small GAAP loss. In my mind, if I take the worst case scenario for every line item (excl. wildcard ZEV) then the company is still profitable on a non-GAAP basis.


    Revenue is going to be over $500 million and that is going to come as a shock to many people. I think that gross margins will come in higher than expected, especially going forward into Q3 and Q4.

    - - - Updated - - -

    I edited the OP to include this disclaimer. Everything I wrote is just in the interest of spurring discussion, I do not recommend anyone to act on my numbers since following Tesla is not my full-time job and I could be wildly inaccurate in some of my assumptions.

    Thanks,

    sleepyhead
     
  17. Blurry_Eyed

    Blurry_Eyed MS Sig #267, MX Sig # 761

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    At Teslive, I seem to recall Jerome say that they basically doubled the service headcount in the second quarter. If that's the case, how would that impact your model?
     
  18. Buran

    Buran Member

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    Sure, here are the key bits:

    I model all with the data in the income statements of the 10-Qs, and my understanding is that this is GAAP(?). I am quite unfamiliar with this as we seldom have the equivalent dual track analysis in Sweden. However, in the following I have not included the lease effect, as I think that Wall street will simply look at the figures as of they were all sales. For now. When Tesla provide better guidance, we will have to include this in the correct way.

    Deliveries: 5050, think 5200 is possible, but prefer a lower estimate as there is a growing amount of cars in transit each Q since the company is expanding. There are also lags in cars entering the service system etc. and a big uncertainty of the VINs. I however believe that the VINs are not "scrambled", just messed up now with EU deliveries and continuous batching. Also, remember that Elon have said that they on occasion have had a large number of cars on hold in production, or perhaps even in body in white due to hiccups in parts delivered. I hope that in a couple of months in this will clarify and VINs will be trustworthy again.

    Model S revenue: 460m based on ASP of 91700. Think the number of P85 and P85+ is high, 40s were very low, 60s are just 30% and people by ALOT of addons. The latter was a big explanatory factor to the revenue surprise in Q1.

    Drivetrain: 9m, simple average of previous Qs
    ZEM 56m: 20% decrease this Q, just my guestimate
    GHG/Cafe: 17.6m: same per car as last Q
    Merchendise exc: 5m

    Total rev: 560m

    Toal costs of revenue and GM. 430 with gross margin of everything 30%, it was 21% on 10-Q figures in Q1. I model 16% automotive margin in Q2, my estimate was 4% on automotive margin with GHG/CAFE included but without ZEM in Q1, and -11% in Q4 2012. I have assumed a steady growth toward target of 25% in Q4 and that means roughly 10% margin on Model S right now when the improvements have started to kick in. The rest is from the credits and merchandise. My interpretation of the credits issue is that ZEM is not counted on, but GHG/CAFE is. Exclude also GHG/CAFE and you get 12% GM on automotive.

    CAPEX: Same 5% increase in R&D as you, and my 13% modeled Sales cost increase per above get me to 111m costs.

    Bottom line: 16m net profit and 0.13 EPS.

    Agree that a big uncertainty is actual margin on Model S. Could be more like 7-8% and that they are not on track toward 25% due to continued supply problems...
     
  19. sleepyhead

    sleepyhead Active Member

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    From 10Q:

    Selling, general and administrative expenses during the three months ended March 31, 2013 were $47.0 million, an increase from$30.6 million during the three months ended March 31, 2012. The $16.4 million increase in our selling, general and administrative consistedprimarily of a $7.2 million increase in employee compensation expenses related to higher sales and marketing headcount to support salesactivities worldwide and higher general and administrative headcount to support the expansion of the business, a $5.7 million increase in office,information technology and facilities-related costs to support the growth of our business, a $2.6 million increase in professional and outsideservices costs and a $0.9 million increase in stock-based compensation expense related to a larger number of outstanding equity awards due toadditional headcount and generally an increasing common stock valuation applied to new grants.We expect selling, general and administrative expenses to increase moderately for the remainder of 2013 as we continue to increaseour vehicle selling and servicing capabilities. In addition, future equity awards may result in an increase in selling, general and administrative
    expenses.

    I am going with a 10% increase or $4.5 million since they used the word "moderate increase". SG&A has gone up 50% over last year and if you apply 10% per quarter then you will get close to that 50% increase again. Even if I modeled in a 20% increase instead of 10%, it would only impact EPS by an additional $0.03. It is also important to know at what point in the quarter did these stores and service centers open. I highly doubt that SG&A grew by more than 20% in the quarter though. The unknowns are: ZEV, R&D, and Gross Margin.

    I am more worried about the impact of higher stock price and the effect on the stock-based compensation portion of GAAP earnings, but am not exactly sure what kind of impact it will have.

     
  20. justdoit

    justdoit Member

    Joined:
    Aug 2, 2013
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    Location:
    San Jose, CA
    What I still don't understand is why these numbers are so different from other analysts. I think the most optimistic estimate from Wall Street is a loss of 5c share. Do they have data we don't or vice versa?
     

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