Numbers:
- 1Q Adj Loss/Shr $3.35, Est. Loss/Shr $3.41
- 1Q Rev. $3.41B, Est. $3.32B
- Tesla reported 19.7% gross margins for Q1, beating Wall Street estimates. Model S and Model X are now above 25%,
- Cash burn in the quarter looks to be $1.05 billion
Misc:
- Customer deposits up to $984 million from $854 million
- says it will reach full GAAP profitability in Q3 and
- company had $3.2 billion in cash on hand.
- says it can get to 5,000 Model 3 units a week in about two months.
- Solar City seems done as a consumer product, After installing just 87 megawatts in the fourth quarter, it deployed even less in 1Q -- 76 megawatts.
- Tesla's 5.3% bonds are unchanged at 89 cents on the dollar,
- Tesla will not offer a leasing option on the Model 3 this year. Translation, Telsa needs cash and needs it right now in a big way.
- "Our Model 3 general assembly line consists of fewer than 50 steps, which is about 70% less than conventional assembly lines. All Model 3 vehicles use only one standard body frame, down from more than 80 for Model S, a wiring harness that has 50% less mass than average vehicles, and a fraction of the number of controllers, connectors and CPUs."
- "At this stage, we are expecting total 2018 capex to be slightly below $3 billion, which is below the total 2017 level of $3.4 billion." Open Question... how do you ramp up car manufacturing from 2500 to 5000 to 10,000 per week and reduce CapEx at the same time. Seems like eithr Capex estimates will blow out or prodcution will but both can't coexists. Check bond yields....
- Tesla spent $146 million on interest payments in 4Q -- roughly the same interest expense as GM, a company with approximately 10 times more revenue. Interest expenses rose to $149.5 million last quarter.
In case you ever feel like its a waste of time, I, for one, appreciate your posts with notes + numbers.
Its so easy for conversations about these things to get derailed about, oh, I dunno, flying cars, that its great having your post with hard numbers there to keep the discussion grounded.
Its great that companies have big dreams and grand visions, but how will it work out in the numbers?
It's really something I do for my job, I just put them here as well. I think I often get penalized by the HN algorithms because a post can get edited 4-5 times.
> I’ve often thought a git diff style view would be interesting.
I used to think so to but I no longer think having the history of a comment has much value.
If someone is consistently making dishonest edits people will call them out on it without needing to point to an integrated version history.
Mist edits are made probably to fix grammatical and factual mistakes. Who cares about the history for that.
What I do wish for instead would be that you could request deletion of a response to your comment after you’d remedied some error that they pointed out because once fixed that comment is no longer needed. So A writes a comment, B corrects them. A fixed their comment and attributes B then sends a deletion request to B.
However at that point perhaps full collaborative editing would be useful, like they have on the Stack Exchange sites and Wikipedia. Then comment history would be useful so that you could inspect individual comments and revert them.
I have a specific type of collaborative editing in mind for sites like HN, and Reddit, namely that threads of multiple comments would be summarized and condensed into single comments so that they are fast to read through for people that visit the thread in the future. Again, contributors would be attributed and would get a share of the karma when the summary is upvoted corresponding to how much information they contributed.
Of course that is a nice idea in theory but probably not realistically doable. It would be impossible to find enough people that are both willing to do this work and at the same time do so with an “objective” eye, and to not even get paid for it.
Encyclopedic articles and Q&A sites are a good fit as we’ve seen with Wikipedia and the Stack Exchange sites. For general discussions I think it would not.
I really enjoy your posts too, thanks! Stupid questions: can you explain 'wall street estimates'? I've heard it a million times, and I get that there are people at the company that make estimates and also analysts at financial firms (investment banks?) that supposedly take a stab at what the earnings per share will be, but-- who are they? What determines if somebody 'counts' as an analyst? How are estimates recorded so that they show up in yahoo finance? What are the motivations and abilities those analysts have to be right?
There are a number of providers that aggregate analysts forecasts (including financial information giants like Bloomberg, Factset and Thomson Reuters and small companies specialised in this business).
Sometimes the investor relations departments give an “official” consensus that they use as reference (at least some ex-US companies do so). For example, see the link to the Vara-provided consensus at https://www.investor.bayer.de/en/stock/analysts/consensus/
The whole business of beating consensus is a bit of a farce, as the forecasts are continously revised (sometimes the company will directly tell analysts that expectations have to come down). So it can happen that the results are 1% above the current forecast, but the current forecast is 10% below where it was one month ago.
For example, looking at the evolution of Q2 estimates for Tesla:
One year ago, the EPS forecast was -0.37.
Two months ago it was -2.19, last month -2.26.
Now it stands at -2.29, and it may be revised down now that Q1 results are available.
As we get closer to the end of the quarter the trend may continue. If, for example, right before the earnings announcement the consensus estimate is -3.25 and the actual EPS is -2.90 then it will be a strong beat...
That's like asking what counts as art. There are some major museums who hire curators, who in turn buy art. Similarly, there are some large financial companies that publish advice, who hire analysts. You "count" if people listen to you.
In theory there's a strict separation between trading and research departments. (People on the trading floor cannot even enter the area where research sits.) This doesn't mean that there isn't some conflict of interest, but the industry and regulators are aware of it and at least in principle there are ways to mitigate it.
Any conflict of interest could be seen as an illegal pump-and-dump scheme. It's a fuzzy line, but disclosing one's positions helps avoid the wrath of the SEC.
"What determines if somebody 'counts' as an analyst? How are estimates recorded so that they show up in yahoo finance?"
I'm no insider, but I feel like a lot of this comes down to Bloomberg terminal. That seems to be where lots of people get their aggregates of estimates, at least as a common starting point.
Ditto. I'm surprised u/chollida1 hasn't considered making a little newsletter/blog for this content (with the advantages that HTML/etc provide for text and data formatting) and then submitting the link to HN. Even just writing and posting in Github Markdown would feel easier than using HN's plaintext editor.
”how do you ramp up car manufacturing from 2500 to 5000 to 10,000 per week and reduce CapEx at the same time.”
That could be possible if the production line for the larger production rates is mostly done, and all that’s needed is fine-tuning robots, training personnel, and starting to run the factory 24/7.
I also see the quarterly cash burn of $1.054 billion, and also don't understand how the company could reduce capex by $0.4 billion this year at the same time it aggressively ramps up Model 3 production... seems optimistic.
Looks like Tesla will need to raise more cash fairly soon.
That is fairly simple. The main CapEx is installing a new line, setting up supply chain, acquiring robots, programming robots. Once you are done with that, you then just need to crank out cars.
More like saying that once you have the chairs, desks and computers, you just need to write the software. The developer salaries are operating expenses (opex.)
Isn't that the point though? That for building this kind of plant, you spend the money up front and then spend a lot of time, but less money, actually making it work.
From the outside that will look like a reduction in CapEx (once the up-front spend is done) followed by a "mysteriously" cheap ramp-up in production volume.
I saw a chart showing the same periods from S and X production. Apparently the highest capex comes right before ramp up since they have bought new equipment, tuned the process etc. As those issues are resolved you need less and less capex. But I am not an expert.
random thought: they said most of the cash was to start the gigafactory, now that they've changed to expansion from "near"(c) full production, maybe they really need none or near none ?
>- "Our Model 3 general assembly line consists of fewer than 50 steps, which is about 70% less than conventional assembly lines. All Model 3 vehicles use only one standard body frame, down from more than 80 for Model S, a wiring harness that has 50% less mass than average vehicles, and a fraction of the number of controllers, connectors and CPUs."
There is a lot to unpack in this statement...
I find it hard to believe there were 80 unique body models for the model S. The S has 3 major trims and about 3 major options that could even theoretically change things like wiring harnesses or body panels. This seems to me another Elon overstatement (air resistance and heat and robots oh my...).
also, re his later subcontractors comment. I have been given the impression here and by industry friends that subcontractors are increasingly unwilling to work with them.
No, the claim about future Model 3 production may be forward looking, but the claim about the number of Model S body frames that do (not will in the future) exist and the comparison to the number of Model 3 frames that exist doesn't magically become forward-looking because it supports a forward looking claim.
Still...80...? He's not saying exterior panels or different parts...he basically said frames. Even if we assume that they (insanely) have significant different bodies for each trim of the S, that means they have >25 different version of the design. That can't be right.
This is all the reason why major auto manufacturers have product 'architectures'.
There were six battery sizes on this vehicle. The largest is almost twice the size of the smallest. They may have modified the design several times to either fit or support different battery configurations.
Maybe some unplanned changes around 120/230V and safety?
The bonds pay 5.3% of their $1000 face value in interest every year, or $53.
You can buy this bond for $890, so the effective interest rate is actually 53 / 890 = 5.96% per year.
The fact that the price of the bonds is unchanged indicates that Tesla's earnings report didn't cause any change in market expectations of the company's ability to repay the bonds in full.
The price could drop to, say, 79 cents on the dollar if there's a greater probability that Tesla goes bankrupt and the bonds won't be repaid.
Bond prices also fall when market interest rates increase since that $53 per year isn't as competitive if other investments yield more.
Thanks for your explanation, let me see if I understand.
They promise to give $1,000 in some years, plus $53 per annum until that happens. That promise is currently worth $890. But if people were worried about the repayments, that might fall to $790. So they get less money for taking on the same debt.
Have I understood?
What are the rates at companies like Apple or Exxon?
Apple has bonds that pay 3.85% that mature in 2043.
They're currently trading at about 95 cents on the dollar, for an effective yield of 4.05%.
There's nearly zero risk that Apple will default. Their bonds sell at a discount because market interest rates have increased since the bonds were issued, making them worth less.
Note that Tesla's bonds yield almost a full percentage point more than Apple's bonds, which reflects Tesla's higher probability of default.
But if investors were really worried about default, they'd demand a lot more than an extra 1%.
It's worth noting that a 2043 bond is a very very different beast to a 2025 bond. The further in the future maturity happens, the more risk there is of a change in circumstance which results in default.
> What are the rates at companies like Apple or Exxon?
Anytime they issue a new bond, figures change so difficult to give a straight answer. For Apple, bonds typically range around 3/3.5% yield. And prices of the bond usually stay above 90 cents on the dollar, AFAIK (not an expert)
For 89 cents you can buy a Tesla bond with a face value of $1 which accrues at a rate of 5.3% per annum (so would have a face value of 105.3 cents after one year). Tesla will hopefully pay back the face value but they may not if they go bankrupt.
Some bonds don't but you are correct these bonds do. However it isn't guaranteed that coupons will be paid on time especially if a company is in financial difficulty.
The bond denomination is 1000 and usually brokers have minimum lot size of 10, so it would be $8900. However many brokers have minimum trade size of $10K on bonds as well, so the "ask your broker" is the best advice :-)
You can buy a bond that forces Tesla to repay you $1 in X years, for 89 cents.
Bonds trading below value happen when there is uncertainty whether it can actually be repaid in the future by the company (e.g. maybe it is unsecured debt).
If repaid the yield would have been 5.3% per annum + the 11% difference it trades below value
Yes Tesla's latest unsecured bonds have a coupon rate of 5.3% which they pay biannually. So for a bond with a face value of $1 they will pay you ~2.6 cents every 6 months.
How do you understand the lease-vehicles line in the balance sheet? From $4.1bn down to $2.3bn. I understand there's some accounting change, but I don't see where the other side of that missing $1.8bn shows up.
It has been a while since I have taken an accounting class, but I am pretty sure the deposits can't be recognized as revenue since they also count as a liability. They are only recognizable as revenue once that liability has been cleared, basically once Tesla has delivered the car. It would be like issuing a bond, a positive cash flow event that doesn't alter the company's revenue or total value.
I would suggest reading the section on solar in Tesla's letter[1].
They put some of the blame for declining solar sales on the fact that customers are waiting for powerwall. They expect sales to pick up as powerwall sales pick up.
You're confusing editorializing and actual data. "Solar city is done" is an editorial opinion by the poster based on the lower installed Megawatts this quarter from last, it isn't necessarily reflective of Tesla's actual plans.
An equally valid perspective is it's currently a low priority compared to just getting Model 3 out the door. There are occasional comments by Musk that they're still very much interested in consumer solar roofs and certainly Powerwall. Granted, it's also a valid point to say "the proof is in the pudding" and point out the lower actual installed capacity this quarter.
It seems like there’s a disconnect between expected revenue and the stock price. If people took the expected revenue from analysts seriously then they’d have to believe that Tesla was nearly insolvent.
- 1Q Rev. $3.41B, Est. $3.32B
- Tesla reported 19.7% gross margins for Q1, beating Wall Street estimates. Model S and Model X are now above 25%,
- Cash burn in the quarter looks to be $1.05 billion
Misc:
- Customer deposits up to $984 million from $854 million
- says it will reach full GAAP profitability in Q3 and
- company had $3.2 billion in cash on hand.
- says it can get to 5,000 Model 3 units a week in about two months.
- Solar City seems done as a consumer product, After installing just 87 megawatts in the fourth quarter, it deployed even less in 1Q -- 76 megawatts.
- Tesla's 5.3% bonds are unchanged at 89 cents on the dollar,
- Tesla will not offer a leasing option on the Model 3 this year. Translation, Telsa needs cash and needs it right now in a big way.
- "Our Model 3 general assembly line consists of fewer than 50 steps, which is about 70% less than conventional assembly lines. All Model 3 vehicles use only one standard body frame, down from more than 80 for Model S, a wiring harness that has 50% less mass than average vehicles, and a fraction of the number of controllers, connectors and CPUs."
- "At this stage, we are expecting total 2018 capex to be slightly below $3 billion, which is below the total 2017 level of $3.4 billion." Open Question... how do you ramp up car manufacturing from 2500 to 5000 to 10,000 per week and reduce CapEx at the same time. Seems like eithr Capex estimates will blow out or prodcution will but both can't coexists. Check bond yields....
- Tesla spent $146 million on interest payments in 4Q -- roughly the same interest expense as GM, a company with approximately 10 times more revenue. Interest expenses rose to $149.5 million last quarter.