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Let's play the "Guess Tesla's Financials" game

I've been having a bit of a debate on my Youtube channel with a Tesla hater who thinks TM is heading for bankruptcy real soon. I don't think so. So it got me thinking what might TM's financials look like going forward. Elon suggested they wouldn't be profitable until 2nd half of 13, so assuming that, assuming they are at full production in Q1, assuming an average selling price, and taking Q3 actuals as a starting point I came up with the following. Most numbers are complete wild guesses.

                             Q3         Q4         Q1        Q2
Mode S Sold (#)             253       2500        5000      5000
Revenue ($m)                 50        225         400       400
Gross Margin (%)            (17)        10          15        20
Gross Margin ($)             (8.5)      22.5        60        80
R&D                          62         40          40        40
SG&A                         38         45          50        55
Operating Profit (Loss)    (108)       (62.5)      (30)      (15)
Cash                        330        267.5       237.5     222.5

Anyone else want to take a stab?

(BTW - Tesla Stock currently up 2% on the news from TM exec Jerome Guillen that the plant is running at full capacity and on schedule to meet full production numbers for 2013)

I would guess that R&D goes up, not down. There are still couple of billion things to do before they are "done".

Also Model S sold in Q4 is closer to 3000 if not over and Q2 is higher than 5000.

Doubt that Q4 is 3000 since highest reported VIN was in the 3200 and lots of lower VIN were not delivered. However they might play with the sale vs delivered numbers. Sales could be delivered + any car that has left the TM plant (in transit or sitting in the stores, service centers, parking across NA). That could mean closer to 3000.

TM won't go bankrupt anytime soon

looks pretty reasonable to me actually

I have Aiken delivery and my vin is 3424. So maybe 5000 is possible.

Yeah, now that they shipped a ton of cars and got $200M cash for them, they are in no immediate danger. The problem would be if they had expensive fixes required for cars they have shipped, or if they production rate exceeds the reservation rate and they run out of reservations before they are shipping the Model X.

jat;
If they're producing faster than reservations are coming in, they can just dial back one shift.

I'll give you a datapoint that may be telling. I am reservation holder 16,XXX, and just got my Configuration email last night. I was shocked, expecting it in a couple of months (it didnt tell me when to expect the vehicle, but I have to take seriously the prospect of getting the car earlier than expected -- which is no good, because I have a year left on my current lease, and will either have to defer my reservation or cancel it -- depending upon how good cash flow looks on Tesla's quarterly call).
DId I get it this Configure email this fast because:

1. They have had a flurry of reservation cancels or deferrals ahead of me, which means less expected cash flow and more need to use up their reservation reserve -- not a good thing,

2. They cynically expect a good portion of the late December, pre-price rise reservations like me to not be ready yet to buy their cars, so by forcing us to configure now, they drive us into either an immediate booked order, to increase bookings before the quarterly call in February (I will not play that game), or to defer into 2013 increased pricing and take away our pricing "grandfathering", increasing margins by 3% or so (if I don't configure now, I am allowed to defer my reservation, but lose my 2012 pricing), or

3. Is the reservation book so much more powerful than we all expect, and they need to further ramp up production to satisfy it, with good long term impact on financials.

My guess is choice number 2 -- he's trying to pump his order numbers for the quarterly call. I'd love it to be #3, because I love this car and greatly admire the company, but I dont see it -- the Tesla needs one more iteration of refinements and more developed financing and trade-in options before the floodgate of knowledgable BMW buyers takes the plunge. Hopefully we get these as part of the quarterly call. I have until Feb 19 to configure, after the call, so I am holding onto my config email until after the call.

Maybe they're producing 800-1000 cars/wk, or can to fill the orders. The number sold by the call is almost as important as the Y/E number. As far as reservations, remember that no active marketing has yet occurred.

I think Elon can maintain the 25% gross margin even on the GenIII cars because there will be no head-to-head equivalents.

I think the deliveries for the 4th quarter are just slighty higher, maybe 2550-2600 absolutely no more. The R&D should be lower than Q3 signification probally 35 million. Then back up to 50 or so and growing with Gen 3 devo. and Model X devo. Pretty close though

@brooklynrab - they have said they expect everyone who placed a reservation in 2012 to have their car by summer this year. That would be consistent with about a 10-15% cancellation rate. Considering how long some people have been waiting, that seems reasonable to me.

@brooklynrab - Your order is 16k, they shipped at least 3k last year, and they're claiming 20k production per year and its almost february. Doesn't it seem like the right time to get your configuration email?

Didn't GB give an indication of they were mid-guidance on Q4 sales/deliveries at a recent Q&A in Detroit? In any case, I think what's going to drive the stock will be the forward looking guidance on production rate and the reservation rates. I expect both to be positive news. I have yet to show the car to someone without them wanting one... badly. Parked next to an exec of my company and was showing it to him. After a brief ride, pulled in next to his M3 and he said "I guess this is the last one of these I'll have" referring to an ICE. Just showed 4 co-workers during lunch... blown away and one said "I know what I want for Christmas."

Can't wait to see what JUST word of mouth and showing off to friends and passersby will accomplish. The Tipping Point book covers this kind of stuff. IMO, Tesla's nearly there.

If about 3k have been sold by end of 2012, then that reservation number 16XX is about 13k cars produced (give or take 10-15% cancelations) in 2013. Still have 7K to sell before year end, so it's feasible 16XX will be ready by summer. Will probably have to see reservation numbers in 22K-25K level (or significant European res numbers) being ready to configure to hit year end goal.

As far as hitting 25% gross margins, the CFO stated on the Q3 conference call that it will be through other balance sheet efficiencies rather than bringing down cost of revenue. Means they will likely be counting on increased reservation payments as well as carrying less inventory, more accounts payable, marketable security yields, reduced capital expenditure (short term), depreciation, ZEV credits, etc... I think the reservation payment cash flow will be a blessing and a curse until they achieve profitability since they've already spent 130m+ over the past few years. As cars are sold, this 130m+ will reflect a negative cash flow on the books and hold back profitability.

I think this might be a significant factor in why Elon is projecting profitability later in the year.

I think your Q4 is high and future R&D will go up. As long as there is not a major recall, things should be fine. Stock is up 2% as I type @ $35.96...

Flow of funds analysis and profitability are 2 different accounting animals. Someone with an accounting background could jump in and elaborate please.

However,

Jk2014, When a reservation payment is applied to a sale, that has nothing to do with profitability. It is a balance sheet issue.

nickjhowe,

Overall I think your guesstimates are a good starting point. However, for calculating cash on hand at end of quarter you must add a line for loan repayments, and another for net deposits, (the net sum of deposits applied to sales or refunded vs new deposits received).

I should have said that my analysis excludes loan repayments as I have no idea what their repayment schedule is (they said they were renegotiating it). Likewise I make no allowance for revenue from other sources (Roadster resale, Daimler, Toyota, etc.), nor for deposits. I was trying not to recreate the entire P&L, but get a rough ball park feel for what things might look like. Obviously it is inaccurate, but an interesting thought experiment.

This is the most fun thread I've read in a while -- some sharp-headed analysis, not just fanboy-ism!

Based on the analysis several of you present, it does seem plausible that I'd be getting my configure email around now, if one assumes not much greater a cancellation rate than previously and a heightened production pace (make hay while the sun shines). Hopefully the glitch fixes they have been doing and expect to do (like the fogger retrofit) wont be too expensive and are still on a small enough delivered base not to be extreme, and I would have expected they budgeted for these. I haven't seen or heard anything about anything catastrophic, like the batteries doing a Boeing.

None of the batteries are doing a boing either.

<:-( Sorry, couldn't resist.

Brian H: by "boing", may I assume you mean "Boeing"?

Nick: Interest expense is pretty predictable. The loans carry about a blended 2% interest rate. That's about $2.25-2.50 million per quarter. Any payments against principal do not change their earnings, although they do impact on their available cash.

ron;
No.

Counting down the days to the 4th quarter earnings report. I'm wondering if we might be underestimating the increases in expenses that were incurred in the rush to hire enough people to execute that year end push to get the cars delivered?

I also wanted to keep this thread active. I really hate it, when at the drop of a hat, someone starts a new thread on a topic instead of adding to an already existing thread.

I agree, sg&a will probably be up quite a bit in q4 with an increasing amount in 2013. Personally I think profitability will be more elusive that elon thinks. They will want to ramp up sales and marketing in 2013. That's not a bad thing, but profitability might slide into 2014...

So my Jan 22 guess at the Q4 financials is below, plus the actuals:

                            Guess       Actual 
Mode S Sold (#)             2500        2400   
Revenue ($m)                 225         306   
Gross Margin (%)              10           8   
Gross Margin ($)              22.5        24.5   
R&D                           40          69   
SG&A                          45          46   
Operating Profit (Loss)      (62.5)      (90) 
Cash                         267.5       221.5

Overall not too bad, but the Operating Loss was out quite a bit - almost completely because my guess for R&D expenditure was way off.  Looks like Q1 will be more like I expected it to be.  Also looks like average selling price was higher than my guess, I assume because of exclusive 85kWh deliveries.

Ooops. Forgot to close the tag.

So my Jan 22 guess at the Q4 financials is below, plus the actuals:

                            Guess       Actual 
Mode S Sold (#)             2500        2400   
Revenue ($m)                 225         306   
Gross Margin (%)              10           8   
Gross Margin ($)              22.5        24.5   
R&D                           40          69   
SG&A                          45          46   
Operating Profit (Loss)      (62.5)      (90) 
Cash                         267.5       221.5

Overall not too bad, but the Operating Loss was out quite a bit - almost completely because my guess for R&D expenditure was way off. Looks like Q1 will be more like I expected it to be. Also looks like average selling price was higher than my guess, I assume because of exclusive 85kWh deliveries.

And here's my new estimate for Q2 and Q3:

                             Q3         Q4         Q1        Q2
Mode S Sold (#)             253       2400        4500      5000
Revenue ($m)                 50        306         382.5     400
Gross Margin (%)            (17)         8          17        20
Gross Margin ($)             (8.5)      24.5        65        80
R&D                          62         69          30        30
SG&A                         38         46          50        55
Operating Profit (Loss)    (108)       (90)        (15)       (5)
Cash                        330        221         200       190

Typo: Q1 and Q2...

These are GAAP figures. A 15m loss in Q1 (GAAP) equates to about break even non GAAP (or so it would seem from the previous shareholder letters)

nickjhowe -- you don't see a profit happening in Q1? Elon stated he is confident in slight profit in Q1 and potential every quarter this year...


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