Tesla (NASDAQ:TSLA) popped the champagne corks when it achieved GAAP positive earnings of $22 million in Q3 2016.
But $139 of its revenues came from the sale of ZEV credits, which had been hoarded to make a Q3 splash.
How much revenue came from CAFE/GHG credits? That was the question asked by Barclay's Brian Johnson during the earnings call.
"Mouse nuts", responded the Tesla CEO celebrated for his communication skills. That was the only answer he gave.
We here show that the mouse nuts totaled about $30 million. In other words, without them, Tesla was GAAP negative.
The calculation of revenues arising from the sale of CAFE/GHG credits is complicated because Tesla no longer discloses in its quarterly reports the amount of such revenues. Thus, we have to tease the number out by inference and implication.
We do have some highly useful information. For the 12 quarters prior to 2016, the quarterly average of revenues from the sale of CAFE/GHG credits was about $15 million. This gives us an important baseline.
(As you will see in what follows, it appears that, with rising Tesla deliveries, this average has risen to more than $20 million in 2016.)
Let's use three different approaches to arrive at the Q3 "mouse nuts" number.
1. Quarterly Comparison Calculation
Tesla's 2016 10-Q indicates the firm recognized $114.7 million more in regulatory credits during Q3 2016 than during Q3 2015. We know from the shareholder letter that Tesla had Q3 revenues of $139 million from the sale of ZEV credits.
Filings from 2015 show Tesla reported $39 million in ZEV credits and about $15 million in CAFE/GHG credits during Q3 2015. Thus, sale of ZEV credits account for $100 million of the $114.7 increase, and sale of CAFE/GHG credits account for the other $14.7 million.
Adding the incremental $14.7 million of CAFE/GHG revenues to the $15 million base yields about $30 million for Q3 2016.
2. Variation on Quarterly Calculation
As noted, Tesla's 2016 10-Q indicated regulatory credit revenues for Q3 2016 increased by $114.7 million relative to Q3 2015.
Earlier filings disclosed that Q3 2015 regulatory credit revenues totaled a hair over $53 million. Thus, the total regulatory credit revenues in Q3 2016 is the sum of the base ($53 million) and the increase ($114.7 million), or a total of $167.7 million.
Subtracting the $139 million in ZEV credit revenue yields $28.7 million in CAFE/GHG credit revenue.
(Montana Skeptic has long subscribed to the anti-sugar wisdom of Gary Taubes, but tolerates cheating during the holidays. TUNA9 photo)
3. Nine-Month Comparison Calculation
Tesla's total regulatory credit revenue during the first nine months of 2015 was $146.4 million.
The Q3 2016 10-Q disclosed that those revenues increased by $113.9 million during the first nine months of 2016, relative to the same period in the prior year.
Thus, total regulatory credits during the first three quarters of 2016 are $260 million.
Let's subtract nine months of ZEV credit revenue (which is reported) to calculate the nine months of CAFE/GHG credit revenue (which is not reported).
Tesla reported about $57 million of ZEV credit revenue during the first two quarters of 2016, and another $139 million during Q3, for a total of $196 million.
That leaves $64 million in CAFE/GHG revenues. It appears from the earlier calculations that almost half of that (about $29 million) was recognized in Q3, and the balance split between the first two quarters of 2016.
Without the sale of the regulatory credits, Tesla would have had (another) GAAP loss in Q3 2016. Tesla hoarded its regulatory credits and sold them to achieve its "pie-in-the-face" quarter.
I'm writing more about this in an article to be published as soon as Tesla releases its Q4 2016 delivery numbers.
I was aided greatly by the truly fine work of Seeking Alpha member notasmidgeon and Seeking Alpha contributor Andreas Hopf.
Any mistakes in performing the analysis are, however, only mine.
Disclosure: I am/we are short TSLA VIA OPTIONS.