Thinking about Q1 2013 earnings

[scriptacus]

According to Cory Johnson, all Model S now cost $100,000+ because there is no 40kw option. Also according to Cory Johnson they were only able to make 367 cars per week. The last Tesla related thing I saw from him was him questioning their ability to sell 20k/yr by implying that the 5k sold last year was a demand issue, not a supply issue.

Stellar research from him, once again.

 

[Citizen-T]

Oh, and don't forget that they are giving away the Supercharger option for free to incentivize people to buy the car. This is why it is so easy to make money in TSLA. The people we are trading with have bad information. Works for me.

 

[ppl]

Anyone considering dropping yen into cost calculation on earnings. They pay for battery in yen that has already been devalued by 30 % compared to US dollar. Today bank of japan announced even more aggressive policy to devalue yen (of course will not see that effect till 2 nod or 3 qtrs. ) but the initial 30% will show up I'm 1 qtr. battery a major cost of materials for the car

 

[Robert.Boston]

The question is whether Tesla agreed on a fixed battery price in yen or dollars. My guess would be dollars; o/w, Tesla would have had a huge F/X risk. Even if they had fixed the price in yen, they should have entered into a currency hedge to remove that F/X risk. So, in any case, I don't expect that they are getting much upside from the yen devaluation in the short run. It certainly could help reset pricing in the next round of contract negotiations, though.

 

[Clprenz]

Q1 estimate

Just to peep in, I ran multiple scenarios and I came up with a EPS of .1 to .17 . thanks to Tesla for telling us that they are profitable on a GAAP basis and have delivered 4750 cars, you can only have two other factors. The price for each emission credit they are selling and what profit margin they have reached. For my estimated that they spent 113 million, 55 million in general and 58 million in R&D. I think that the most probable case is 16% margin and 10,000 per car. Which out to EPS of .05, with total revenue of 491 million. And a aprox. profit of 6,304,000

We could also see an even better scenario of 12,000 per car in credits which brings up the EPS to .13!
These estimates are all using Cold hard facts that on average each person add 12,000 on each car.
My production estimates are as following :
900 60’s
2300 85’s
1550 P85’s

Any thoughts? or opinions

 

[DrJohnM]

Thank you for the analysis.

Just one question that you could help me with... You have USD55m expenses for General but I would assume that the majority of that would be factored into your margin calculation. I assume that the margin is the (unit sold price) - (the unit cost to produce). Should I assume that the unit cost to produce should include all inputs, such as materials, energy and labour? If so, General should just be the bit that is not producing cars or in R&D. Is it overstated?

 

[ppl]

The question is whether Tesla agreed on a fixed battery price in yen or dollars. My guess would be dollars; o/w, Tesla would have had a huge F/X risk. Even if they had fixed the price in yen, they should have entered into a currency hedge to remove that F/X risk. So, in any case, I don't expect that they are getting much upside from the yen devaluation in the short run. It certainly could help reset pricing in the next round of contract negotiations, though.

2011 filing of their contract has the entry of currency paid redacted. So only insiders no this (no I am not with the high command). However it also has clause that with 60 day notice either party can exit agreement so they could renegotiate this at anytime

 

[mlascano]

Agreed. Seems like he will exercise his options, then Tesla will announce what they are going to do with that money. To me faster roll-out of the Supercharger network doesn't amount to being more significant than profitability. WHAT DO YOU HAVE UP YOUR SLEEVE, ELON?!?!?!

So what happened with Elon's options? Were they exercised? Would we get an SEC filling alert if so?
I'm assuming no one knows for certain but there was so much speculation around prior to Tuesday's announcement...

 

[Soundart]

i have been thinking a lot about the guidance the past few days. here are the comments from cfo ahuja on the call:

"Deepak Ahuja - CFO: I think if you consider the combination of Model S sales of our powertrain sales, our development revenue and mid-teens gross margin, I think the guidance would probably lead you to somewhere along those lines close to something in the breakeven range to slightly positive, should be close to break-even. We were hoping to beat that."

i've been going over the numbers a few times, and it's very hard to make it work. but ahuja seems to indicate that yes, clearly the guidance should get you to breakeven. The biggest missing piece in the equation would be the credits. i created a table comparing the income statement in q4 with guidance and management projections for q1 (see below). i used aggressive reductions in expenses and put gross margin at the high side of mid-teens. i used $10 million for development services revenue. and i still couldn't get to positive non-gaap on my spreadsheet.

so fine, then i started taking up the average revenue per vehicle. $90k to $100k? not enough. $105k? still not positive non-gaap. average revenue per car has to be $110k to get to positive non-gaap earnings. i think there's been reasonable consensus that the average selling price is only about $90k. the implication is that the remaining $20k per vehicle is coming from credits.

i had been struggling to figure out how they could go from $15k per vehicle last year to $20k per vehicle this year in credit sales. all along i had assumed that tesla had sold credits for all 2,650 vehicles sold last year. but considering they were closing sales furiously in the last weeks of the quarter, did they have time to sell all the credits before the end of the year? for example, let's say they only sold credits for 2,100 cars produced in 2012. in that case the average credit revenue per vehicle would be $19,500 per car. yikes.

in that case they have an additional 550 credits they could sell built into they guidance for q1, on top of the 4,500 from current quarter forecasted sales. could the credits this quarter be closer to $20000 per vehicle on average? that's what the guidance seems to imply... how else can they reach $110k average revenue per car to make the guidance consistent with their statements of breakeven non-gaap?

i can't emphasize how important this question is, because if that $20,000 number is correct it will be almost $100 million contribution to revenues and gross profit with 5,000 units sold. if they could swing the automotive gross margin ex-credits positive then earnings will be... gasp! breathtaking.

any comments? maybe i will make on more revision to my model, which is currently assuming $10k in credits per vehicle. also i should note tesla's non-gaap earnings includes amortization. my q1 model was for ebitda, so there will have to be another adjustment i make there too.

	Revenues	2012Q4	Guidance	2012Q4
A	Auto Sales	294,377	4500 x 110k????	495,000
B	Dev Services	11,955	Assume $10 million	10,000
C=A+B	Total	306,332		505,000
	Cost of Sales
D	Auto Sales	278,710
E	Dev Services	3,765
F=D+E	Total	282,475		419,150
G=F-C	Gross Profit (loss)	23,857	17% of revenue	85,850
	Operating Exp/Income
H	R&D	68,832	lower 15%	58,507
I	SG&A	45,908	down 5%	43,613
J=H+I	Total	114,740		102,120
K=G-J	Operating Income	(90,883)		(16,270)
L	Interest Income	85		-
M	Interest Expense	(27)		(100)
N	Other Income	746		500
P=K+L+M+N	Income before Tax	(90,079)		(15,870)
Q	Provision for Taxes	(147)		(150)
T=P-Q	Net Income	(89,932)		(15,720)
	Reconcile to Non-GAAP
T	Net Income	(89,932)		(15,720)
U	Stock-based Comp	14,416		15,000
V	Warrant Liability Chg	958		1,000
W=T+U+V	Non-GAAP Income	(74,558)	slightly positive	280

Luv, I appreciate you sharing your analysis. I'm just curious how you've adjusted your model given Teslas sales info earlier in the week. Are you able to reconcile to their sales/profitability figures?... And do their figures contradict that of your unrevealed source?

Apologies if you've already addressed this, but I didn'tfind it.


Thanks.

P.s. First time poster, long time telsa fan (both car and stock).

 

[luvb2b]

i need more clarity on whether the doe warrant liability is being reversed. some analyst reports say it is. once i figure that out then i can post an update. my unrevealed public source is only production, not sales.

sales of 4750 seems a bit low to me. it would imply 1100 vehicles in transit based on my production estimate of 5400.

 

[Mnlevin]

This is all very interesting, and sounds like there is alot of "inside knowledge" here. My question is WHY did the CFO strike and SELL his options on April 1??? Did he need the money? Does he think the price will fall?? is he not a long term believer in the company?

 

[JRP3]

It seems that some at Tesla are taking very small salaries and using the stock as income.

 

[Nicu.Mihalache]

This is all very interesting, and sounds like there is alot of "inside knowledge" here. My question is WHY did the CFO strike and SELL his options on April 1??? Did he need the money? Does he think the price will fall?? is he not a long term believer in the company?

This was a date set one year in advance (Automatic Sell - Tesla Motors, Inc. (TSLA) Insider Trading Activity (SEC Form 4) - NASDAQ.com).

So the real question is why a press release with new guidance few weeks before the earnings release?

 

[aznt1217]

This is all very interesting, and sounds like there is alot of "inside knowledge" here. My question is WHY did the CFO strike and SELL his options on April 1??? Did he need the money? Does he think the price will fall?? is he not a long term believer in the company?

You do realize you are insinuating illegal activity lol. Like the post after said it was set in advance. Announcement came at end of Q1, where Elon believes it's a turning point for the company. They just want to garner even more demand so they can ramp up production even more and gauge the market even more for the next year.

 

[vgrinshpun]

I remember hearing from Tesla Manufacturing VP (Gilbert Passin) that maximum capacity for the Model S platform "line" is 100,000 units per year. This dove-tails with Elon mentioning 500 cars/week production during the Q4 2012 call. 500 cars/week --> 25,000 cars/year (one shift). This would correspond to 75,000 cars/years for a three shift operation, increasing to 105,000 cars years for the operation in three shift, seven days a week.

 

[Curt Renz]

I remember hearing from Tesla Manufacturing VP (Gilbert Passin) that maximum capacity for the Model S platform "line" is 100,000 units per year. This dove-tails with Elon mentioning 500 cars/week production during the Q4 2012 call. 500 cars/week --> 25,000 cars/year (one shift). This would correspond to 75,000 cars/years for a three shift operation, increasing to 105,000 cars years for the operation in three shift, seven days a week.

Only about 20% of the factory space is currently being utilized.

 

[kenliles]

Only about 20% of the factory space is currently being utilized.

true and that's a great resource to have for future; but I think the issue at hand is what production could be accomplished under the same CapX (no more lines). I'm not sure 500/week is just one shift though. Is that a known?

 

[vgrinshpun]

I am trying to determine what was the Model S Q1 margin. I've put sizable portion of my resources in TSLA because I believe in their great potential, but somewhat concerned that they are yet not able to make money on Model S.

The analysis below is based on Tesla’s original Q1 2013 projection made during the Q4 2012 call and in the corresponding letter to the shareholders: break even on non-GAAP basis with mid-teens gross margin (assumed 15%) on a volume of 4,500 cars. It also uses Tesla revised Q1 results released on April 1: breaking even on the volume of 4,750 cars, GAAP basis.

According to these calculations the original Q1 projection was based on -9.4% margin. Using revised projection yields improved gross margin (16.8% vs 15%) and improved, though still negative, Model S margin of -6.2%. Note that original projection seemed to be using essentially the same margin as Q4 2012.

During the Q4 2012 call Elon was emphatic that Tesla will meet or beat internal goal of 25% margin on Model S without considering the regulatory credits. It is hard to understand how the margin could improve from -6.2% to 25% assuming that Tesla was already able to eliminate most of the manufacturing inefficiencies during Q1. Could it be that Tesla will realize step improvement in battery cell pricing once production increases into the second half of the year?

Any thoughts on the analysis?

Assumptions:
Regulatory credits per car – same as Q4 2012
Total for Credits, Power Train & Sales – as required to break even on non GAAP basis (4,500 cars)
Power Train Sales = Services Sales
Stock Based Compensation – same as Q4 2012
Services Margin - same as Q4 2012
Power Train Margin = 0.3

- - - Updated - - -

true and that's a great resource to have for future; but I think the issue at hand is what production could be accomplished under the same CapX (no more lines). I'm not sure 500/week is just one shift though. Is that a known?

Based on what Elon said during the Q4 2012 call the 500/week is a one shift output. This also matches the goal of under 5 min for final assembly time per car that was mentioned in the National Geographic mega-factories video.

 

[30seconds]

I can think of a number of factors that would improve margins in Q2/3 over Q1
1. Volume based purchase discounts that continue to kick in at different levels
2. Reduced need of rework at factory line as improvements made
3. Reduced need of rework by rangers / service centers as improvements made
4. Falling battery costs
5. No 40kWH pack to produce
6. Higher price points than anticipated

 

[luvb2b]

wow you're going to find this is way off the truth. the services and powertrain sales are not going to be $68 million dollars each for the quarter. so your revenues are going to be off by probably at least $120 million (you're way high).

also there's a few shortcuts you seem to be taking trying to work through to get to the bottom line figures that are probably making things harder than they should be. if you look back through my posts i had a table of their income statement projection with formulas on the left hand side. i would suggest following that template with your own numbers, because that will at least get you matching up line item-to-line item with what tesla's report will look like.