TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

Thinking about Q1 2013 earnings

Discussion in 'TSLA Investor Discussions' started by luvb2b, Mar 18, 2013.

  1. luvb2b

    luvb2b Member

    Joined:
    Mar 18, 2013
    Messages:
    305
    Location:
    thebeach
    hello all. my first post here. been following this company a long time and i luv them.

    i have been thinking about first quarter earnings a lot lately, esp after the last call when elon was adamant they would be profitable. until the 10k was released i couldn't make the math work. you guys have probably read the comments on seeking alpha etc talking about how there is no way tesla could make a profit. for example:
    Despite Tesla's Light Results, It Could Be Turning The Corner - Seeking Alpha

    the light bulb for me came on with the revelation that the various environmental credits added up to $40.9 million in 2012. using 2750 model s sales, that number works out to an insane $15k per car. considering they only earn the credits in a dozen or so states, it's even more amazing as it implies the credit value per vehicle sold in a qualifying state is probably something like $25-30k. all guesswork on my part. further research indicates that the 85kwh pack seems to qualify for maybe 50+% more credits than the 60kwh pack, although this is not clear to me as there are two types of credits at work: ghg and zev.

    now a second light bulb has come on lately in reviewing the various delivery threads. we are starting to hear about vin numbers as high as 87xx getting scheduled delivery at the end of march. there are multiple reports in vin #8000s. considering the delivery numbers were 2750 last year, it seems like they must be well past their target of 4500 vehicles this quarter. is it possible they will produce 6000 cars in q1? that's what that vin number 87xx seems to indicate. i don't want to be so optimistic, so i am working with a number around 5200.

    finally my last light bulb is in reading the forums about the problem reports. it seems that even though the number of model s on the road will triple this quarter vs. end of q4 2012, the number of problems are not exploding. that's consistent with what they said on the call, that the problems and issues with the car have gone down substantially. in some ways the biggest risk they face is a recall, but that might even be manageable if it was a small item (10000 cars x $2000 to fix each is still only $20m plus whatever reputational hit they take).

    i am very curious what people think of my estimates as i have laid out below, if they sound realistic? also i really wonder if that delivery number could get to around 6000 the way the vin numbers are progressing. anyone have thoughts on that? every time i read about someone going to a service center sounds like they are loaded with model s's being prepped for delivery.

    anyway, i run the math this way:

    on revenues:
    model s avg price $85000 x 5200 = $442 million (note: maybe low based on mix of p85/85/60 & options)
    enviro credits $15000 x 5200 = $78 million (note: using $15k per car in credits, see above)
    add development services = $5 million


    total revenue = $525 million

    on gross margin:
    assuming they get automotive gross margin (excluding enviro credits) to +5%, which seems plausible given higher production. gross margins would be:
    model s: $22.1m
    enviro credits: $78m
    dev services: $3m


    total gross profit = $103.1 million

    on operating expenses:
    now figure $63m in r&d (declines from prior q as they projected) and $47m of sg&a (increase from prior q), gives you $110m in gaap expenses. take out the non-cash items, about $13m in stock based comp and $7m in depreciation and amortization... you got $90m in non-gaap expenses.

    on ebitda:
    implies ebitda of $13.1m, or about 11-12c per share. high estimate on the street has non-gaap eps at 2c. there's substantial upside to this if my delivery numbers end up being conservative, which based on the vin's i'm seeing is possible.

    on incremental upside:
    each additional 100 units would add $8.5m in revenue as follows:
    revenue model s: 75000 x 100 = $7.5m (lower for 60kwh deliveries)
    enviro credits: $10000 x 100 = $1m (lower for 60kwh deliveries)

    assuming higher efficiency on later units, the gross margin impact of an additional 100 units may be $1.75m as follows:
    10% gross margin on model s = 10% of $7.5m = $0.75m
    enviro credits: $1m

    total ebitda impact of additional 100 units: about 1.5c per share.

    on reservations
    if there's one worry i have it's here. the reservations seem to have fallen quite a bit in q1 vs. q4. it wouldn't surprise me if they got only 3k new reservations. if they ripped through 6k existing reservations, had another 1.5k cancellations, then the end of q1 reservation count will be: 15k (q4) - 6k (production) - 1.5k (cancels) + 3k (new) = 10.5k reservations remaining at the end of q1. if reservations don't pick up in q2 this will get the shorts blabbering again.

    on future quarters
    in light of the above, the comments on the call about future quarters start to make sense too. musk had said that the impact of enviro credits would decline, but margin would increase to compensate. so just hypothetically if you were to assume for q2:

    5000 units x $82000 sale price = $410m sales plus
    5000 units x $5000 enviro credits = $25m credits equals
    $435 million total revenue

    gross margin improve to 20% on automotive, then gross profit:
    on model s: 20% x 410m = $82m plus
    enviro credits: $25m equals
    $107m gross profit
    and once again you'd be talking about positive ebitda, maybe even 15c per share? incremental upside for each additional 100 units would be around 3c per share i'd guess.

    and that's higher than the previous quarter even though the total revenues are $435m vs. $525m as estimated above.

    summary
    basically in summary, i am proposing that the shorts have far underestimated the value of the enviro credits, and that the production has scaled up faster than anyone expected.

    thanks for your inputs.
     
  2. Zzzz...

    Zzzz... Member

    Joined:
    Aug 19, 2012
    Messages:
    867
    Location:
    East Asia/Canada
    I read an article about Tesla supplier few days ago. That plant was producing parts at a rate of 500 per week... Do the math. If you want, I could find a link.
     
  3. FredTMC

    FredTMC Model S VIN #4925

    Joined:
    Dec 26, 2012
    Messages:
    3,016
    Location:
    Orange County CA
    Great post. Thanks

    couple comments.

    Regarding Gross Margins. I distinctly remember from the Q4 call that the enviro credits were not part of the Gross Margin target of 25% per car. TM hopes to get to 25% GM by end of this year.

    I also recall that TM was looking to have GM in "the teens" for Q1.
     
  4. jeff_adams

    jeff_adams Member

    Joined:
    Mar 18, 2013
    Messages:
    617
    Location:
    Monterey
    I wouldn't be too worried about reservations. It seems like they are starting to ramp up in Europe and Asia. When Tesla can promise delivery to those markets, the numbers will surge
     
  5. c041v

    c041v Member

    Joined:
    Jan 7, 2013
    Messages:
    509
    Location:
    Edmonton, AB
    Excellent addition.

    I have a comment regarding the average price per unit. Being somewhat ignorant of the geogrpahical breakdown of the tally, I believe it is worth noting that in Canada, the price of a fully loaded 85 kwh Performance is just over $120,000 CDN. I think even a decent 60 kwh model will run into the mid 80's. I'm not sure what the prices are like in Europe or any other country outside of the US, but given the sales split proposed by Elon, I believe it is worthwhile to perhaps consider a higher selling price, especially in future quarters. The Canadian dollar is within a few percent of parity, so it's not like the forex will account for too much of a difference.

    It may also be worthwhile to consider the S derivatives that will undoubtedly boost margins with minimal expense to Tesla.
     
  6. hcsharp

    hcsharp Active Member

    Joined:
    Jun 7, 2011
    Messages:
    2,537
    Location:
    Vermont
    Tesla claims to have priced the Canadian version to bring in virtually the same profit as the US version.
     
  7. Zzzz...

    Zzzz... Member

    Joined:
    Aug 19, 2012
    Messages:
    867
    Location:
    East Asia/Canada
    Yeah, difference comes mostly from an import tax and extra delivery expenses. May be Tesla's Canadian prices were priced somewhat conservatively, to make sure an extra expenses are covered, but difference would be non material, probably a grand if not less extra profit per unit.

    - - - Updated - - -

    I would love to see Tesla insource battery cells production, or buy cells produced in North American plant. At least for Canadian market that would mean tax free import. But realistically insourcing wount happen anytime soon. But might be that would be a good idea to do such thing for GenIII, which would be oriented on more price sensitive market... And Nissan is already manufacturing cells in US for the new Leaf.
     
  8. luvb2b

    luvb2b Member

    Joined:
    Mar 18, 2013
    Messages:
    305
    Location:
    thebeach
    Zzz: please post the link or that supplier article. TIA. 500 per week x 12 weeks would be 6000 units.
    FredTMC: correct, accordingly I separated gross margin on automotive from the value of the credits, for example note that for my q2 rough-in I used:
    gross margin improve to 20% on automotive, then gross profit:
    on model s: 20% x 410m = $82m plus
    enviro credits: $25m equals
    $107m gross profit

    I agree with the comments on CAD sales.
     
  9. Eberhard

    Eberhard #421 Model S #S32

    Joined:
    Oct 17, 2010
    Messages:
    1,141
    Location:
    Germany
    please remember, elon told, that the production can be ramped up to 60.000 unit/year (including Model X?) before more assembly lines have to be added, just by moving from one shift to 3 shifts and maybe working 7 days/week.
     
  10. luvb2b

    luvb2b Member

    Joined:
    Mar 18, 2013
    Messages:
    305
    Location:
    thebeach
    agreed that reservations in those markets should ramp. but q1 has been slow relative to q4, for example 18500 was reported in us jan 15 and 19711 on mar 3. that's less than 30 per day in the us for most of the quarter. data from the michiganmodels threads seems to point to around 3000-3500 total new reservations for q1.
     
  11. Zzzz...

    Zzzz... Member

    Joined:
    Aug 19, 2012
    Messages:
    867
    Location:
    East Asia/Canada
    Here we go.

    Key point:
    That's why a part of perhaps the most advanced automobile ever made ships from Chautauqua County, 500 every week.

    But even more interesting is another claim:
    Jamestown Plastics' president Jay Baker disclosed Tesla wants 650 of the liners by early autumn.
    From the context it looks like 650 per week by September. That seems to imply that S production in September should reach 650 units per week.:smile:

    - - - Updated - - -

    I contacted "news", hope GCR will write an article about this disclosure...
     
  12. gregincal

    gregincal Active Member

    Joined:
    Oct 26, 2012
    Messages:
    2,138
    Location:
    Santa Cruz, CA
    Total reservations shown in that thread has been about 42 per day for the first two months of the year (as you say, 30 per day is US only). That would be 3800 for the quarter which is probably a minimum, so your estimate seems low. This is the slowest quarter of the year for car sales in general, though.
     
  13. luvb2b

    luvb2b Member

    Joined:
    Mar 18, 2013
    Messages:
    305
    Location:
    thebeach
    interesting post on yahoo finance today by temagami67. he estimated revenues as follows:

    Model S 4800 units, $98k ARP = $461M.
    Roadster 12 units, $140k ARP = $1.7M.
    Toyota 250 units, $30k ARP = $7.5M.
    ZEV+GHG 4800 units, $12k = $56.4M.
    Devt Serv = $5M
    Total Revenue = $531M.

    compared to my estimate he's slightly higher, with lower units, lower enviro credits, and higher selling prices than i had. however the conclusion is generally the same, that revenues will beat estimates by a wide margin. the street consensus for the quarter is $465m and the high estimate is $528.4m. i'm pretty sure at some point the analysts are going to have to raise these numbers.

    also saw delivery scheduled for another 87xx and a 88xx vehicle. so they must be on track to produce 6000+ cars this quarter. that's so much better than i ever imagined, and i bet the higher production rates translate to higher gross margins too.
     
  14. Clprenz

    Clprenz Member

    Joined:
    Jan 22, 2013
    Messages:
    497
    Location:
    Bloomington, Illinois, United States
    I am quite interested in the recent pick up in production, I would be fantastic if they brought it up to 25k a year and possibly higher as Zzzz said. I also emailed the author to ask for source :). I think I will be picking up some more shares in this dip!!!! Fantastic news, just waiting to hear one of Elon's Tweets that the SEC would freak out about!!
     
  15. Grendal

    Grendal Active Member

    Joined:
    Jan 31, 2012
    Messages:
    2,521
    Location:
    Santa Fe, New Mexico
    I don't think we will ever see any similar tweets from Elon, because the SEC probably gave him an earful and possibly a firm hand slap for the last one.
     
  16. Yuri_G

    Yuri_G Member

    Joined:
    Nov 8, 2012
    Messages:
    318
    Location:
    Raleigh, NC
    Remember, even if those VINs are delivered this quarter, that doesn't necessarily mean all of the VINs before them were delivered. I would expect the number of cars delivered in Q1 to be close to the 4500 goal.
     
  17. JRP3

    JRP3 Hyperactive Member

    Joined:
    Aug 20, 2007
    Messages:
    10,124
    Location:
    Central New York
    In a recent video, this one I think, Elon said they were delivering 500 cars per week.
     
  18. mulder1231

    mulder1231 Active Member

    Joined:
    Jan 1, 2012
    Messages:
    1,043
    Location:
    Menlo Park, CA
    My buy order got filled yesterday at $35. Today looks like a move away from the $35 level, hope this trend will continue all the way to the next earnings call, as expectation/speculation starts building.
     
  19. avatar

    avatar Member

    Joined:
    Sep 13, 2012
    Messages:
    187
    Location:
    Seattle, Washington, United States
    Hi - Does anyone know when the Q1 reports are going to be out? Even roughly?
     
  20. carrerascott

    carrerascott FUEL FTR

    Joined:
    Nov 15, 2012
    Messages:
    893
    Location:
    Charlottesville, Virginia
    Mid April? Based on Q4 coming out in mid February.
     

Share This Page