Lean liquidity, continued spending and inflated deposits highlight Tesla's 10-Q disclosures



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After Tesla's lovers' party in the second quarter, I was looking forward to Tesla's 10-Q. & nbsp; This is one of the least revealing calls for results I've listened to in 26 years of monitoring actions and, as is customary, Tesla waited several days after the publication of its results to file its 10-Q . & nbsp; It was ranked Monday and there were several interesting revelations, none of which were addressed during the call.

New Tesla electric powered cars, including the Tesla Model 3 on a car transporter truck waiting for delivery near the company's headquarters and plant in Silicon Valley, Fremont, California on July 28, 2018 (Photo by Smith Collection / Gado / Getty Images)

Tesla had only $ 230 million under its June 30 credit agreement, its largest source of cash financing. & nbsp; I broke the story in Forbes In May, Tesla amended its credit agreement to allow the inclusion of the Fremont plant and vehicles in transit to its Dutch processing plant. & nbsp; It seems that Tesla has not done it yet on June 30th. & nbsp; Of the $ 1.83 billion available under the Tesla Credit Agreement, $ 1.598 billion was drawn as of June 30.

That's not enough for a global automaker. not enough. & nbsp; If the call has taught us anything is that Elon Musk has no idea what the legal definition of "force majeure" is, but it came to the crucial point. & nbsp; In the world of car manufacturing, things are happening. In the absence of a safety margin, Tesla is riskier than ever as a business entity.

The much-awaited Tesla deposit figure contains funds that are not deposits at all, so analysts overestimate the amount of real consumer payments for Tesla cars.. & nbsp; The adoption by Tesla of the new FASB accounting standard for revenue recognition (ASC 606) this year has the effect of inflating deposits as canceled service plans are now accounted for as deposits. & nbsp; That added $ 58.5 million to Tesla's reported deposit figure. As a result, apple deposition at June 30 would have been $ 883.6 million, not $ 942.1 million.

What's really interesting is what's in the deposit line. & nbsp; From 10-Q:

Customer deposits consisted mainly of cash payments made by customers when they placed an order or reservation for a vehicle or energy product, as well as any additional payments made up to the time of delivery or the end of the installation, including the fair value of any client transaction. in vehicles applicable to the purchase of a new vehicle.

Is the value of the trade accounted for as a deposit? & nbsp; Really? Any record is a snapshot, of course, but how many Priuses, Leafs, BMW 3 Series (all listed by the Tesla management among the top 5 trades for the 3 models) have been accounted for as deposits as of June 30? & nbsp; Even 1,000 cars with an auction value of $ 25,000 would have added $ 25 million to Tesla's deposits.

When one also realizes that orders for already inflated deposits include the Model S, X, Powerwall and Roadster models, the calculation needed to cancel 420,000 reservations for Model 3 simply does not fit. & nbsp; Tesla has opted for a model reservation for the model 3 (order configuration of $ 2,500 per car), the figures of the third quarter will be confused anyway. In the end, it is those who realize "order book" for models 3 of "more than 400,000 units" make a miscalculation.

Tesla management predicted that the current capital expenditure rate of $ 2.5 billion on an annualized basis ($ 625 million per quarter) would prevail until the middle of 2019. & nbsp;CFO Deepak Ahuja had indicated that the $ 2.5 billion rate would be valid until the end of the year, but the 10-Q was the first preview of Tesla's planning for 2019. & nbsp;

Assuming the company's capex rate and guided figure for interest expense in the third quarter is $ 170 million, Tesla will need to generate at least $ 800 million in cash flow from operations in one quarter. given to create economic value. & nbsp; Second-quarter operating revenue was (-130 million USD) in comparison.

Given the broadening of Tesla's revenue base and the large amounts invested in gigafactories 1 and 2, there is not much left for what we call analysts "growth capex." & nbsp; Tesla's future product plans include the Y model, the semi Tesla and the locally produced cars in China, but I do not believe that Tesla can fund any of these projects (let alone all) with a quarterly spend of $ 625 million. dollars. & nbsp; Although Musk said that local sources of financing would be used for the construction of the plant in China, it was still not necessary for the companies to commit to launching such a project.

I'm going to have more about Tesla 10-Q disclosures in my Forbes column tomorrow.

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After Tesla's lovers' party in the second quarter, I was looking forward to Tesla's 10-Q. This is one of the least revealing calls for results I've listened to in 26 years of monitoring actions and, as is customary, Tesla waited several days after the publication of its results to file its 10-Q . It was tabled Monday and there were several interesting revelations, none of which were discussed during the call.

New Tesla electric powered cars, including the Tesla Model 3 on a car transporter truck waiting for delivery near the company's headquarters and plant in Silicon Valley, Fremont, California on July 28, 2018 (Photo by Smith Collection / Gado / Getty Images)

Tesla had only $ 230 million under its June 30 credit agreement, its largest source of cash financing. I broke the story in Forbes In May, Tesla amended its credit agreement to allow the inclusion of the Fremont plant and vehicles in transit to its Dutch processing plant. It seems that Tesla has not done it yet on June 30th. Of the $ 1.83 billion available under the Tesla Credit Agreement, $ 1.598 billion was drawn as of June 30.

That's not enough for a global automaker. not enough. If the call has taught us anything, it is that Elon Musk has no idea of ​​what is the legal definition of "force majeure", but he was coming to the crucial point. In the world of car manufacturing, things are happening. In the absence of a safety margin, Tesla is riskier than ever as a business entity.

The much-awaited Tesla deposit figure contains funds that are not deposits at all, so analysts overestimate the amount of real consumer payments for Tesla cars.. Tesla's adoption of the new FASB accounting standard for revenue recognition (ASC 606) this year has the effect of inflating deposits, as cancellable service plans are now accounted for as deposits. This added $ 58.5 million to the reported amount of Tesla deposits, so that an apple apple deposit figure as at June 30 would have been $ 883.6 million, not 942.1 millions of dollars.

What's really interesting is what's in the deposit line. From 10-Q:

Customer deposits consisted mainly of cash payments made by customers when they placed an order or reservation for a vehicle or energy product, as well as any additional payments made up to the time of delivery or the end of the installation, including the fair value of any client transaction. in vehicles applicable to the purchase of a new vehicle.

Is the value of the trade accounted for as a deposit? Really? Any record is a snapshot, of course, but how many Priuses, Leafs, BMW 3 Series (all listed by the Tesla management among the top 5 trades for the 3 models) have been accounted for as deposits as of June 30? Even 1,000 cars with an auction value of $ 25,000 would have added $ 25 million to the amount of Tesla deposits.

When one also realizes that orders for already inflated deposits include the Model S, X, Powerwall and Roadster models, the calculation needed to cancel 420,000 reservations for Model 3 simply does not fit. Tesla has opted for a booking model for the Model 3 (USD 2,500 per car), the figures for the third quarter will be confusing. In the end, though, those who design a "backlog" for models 3 of "more than 400,000 units" commit a miscalculation.

Tesla management predicted that the current capital expenditure rate of $ 2.5 billion on an annualized basis ($ 625 million per quarter) would prevail until mid-2019. CFO Deepak Ahuja had indicated that the $ 2.5 billion rate would be valid until the end of the year, but the 10-Q was the first preview of Tesla's planning for 2019.

Assuming the company's capex rate and guided figure for interest expense in the third quarter is $ 170 million, Tesla will need to generate at least $ 800 million in cash flow from operations in one quarter. given to create economic value. Second quarter operating cash flow was (-130 million USD) in comparison.

Given Tesla's growing revenue base and large sums invested in gigafactories 1 and 2, there is not much left for what we analysts call "growth capex". Tesla's future product plans include Y-models, Tesla semi-automobiles and locally-produced cars in China, but I do not believe Tesla can fund any of these projects (let alone) with quarterly expenditures of $ 625 million. dollars. Although Musk said that local sources of financing would be used for the construction of the plant in China, it was still not necessary for the companies to commit to launching such a project.

I'm going to have more about Tesla 10-Q disclosures in my Forbes column tomorrow.