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Tesla: 10-Q Paints Worse Picture

May 07, 2018 3:44 PM ETTesla, Inc. (TSLA)193 Comments
Bill Maurer profile picture
Bill Maurer


  • The accounting change had some major impacts.
  • More credits sold than previously disclosed.
  • Customer deposits jump not what it seemed.
  • Language regarding production ramp changes.

Early Monday morning, we received the 10-Q filing from Tesla (NASDAQ:TSLA) after the company reported earnings last week. Many were curious to see this document, especially as it related to a major accounting change adopted during Q1 from the company. Unfortunately, now that we have the document in front of us, the situation looks even worse for Tesla.

It would take a while to discuss every single impact of the new accounting change involving revenue from customers with contracts. I pasted the portions of the balance sheet below to show all the changes. Perhaps the most important one is that customer deposits jumped by $56 million in the Q4 period, and $58 million in the Q1 period.

(Source: 10-Q filing linked above)

This is primarily because customer deposits now include "prepayments on contracts that can be cancelled without significant penalties, such as vehicle maintenance plans". These have been reclassified from deferred revenue to customer deposits. So for all those bulls that thought the $130 million jump in deposits during Q1 was bullish, almost half of it was due to the accounting change.

The change also had a decent size impact on the income statement. First, a little more than $130 million in extra revenues were reported, with a cost of revenues of $95 million, meaning around a 27% above average gross margin on the increased revenue. This change also added $36 million to the bottom line, reducing the net loss by more than 4.4%, of which almost 90% was applied to common stockholders.

The second major item is that Tesla disclosed regulatory credit sales of $80.3 million. There's nothing wrong with this, as we've seen the company sell hundreds in millions in credits over the years. The main issue is that in the investor letter, they only detailed $50.3 million in ZEV credit sales, as seen in

This article was written by

Bill Maurer profile picture
I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year. Disclaimer: Bill reminds investors to always do their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.

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