Why isn’t everyone satisfied with what Tesla Inc. reported as its third-quarter results?
Tesla TSLA, -3.33%[1] delivered more cars to customers in the third quarter than it did in all of 2016, and delivered for investors $271 million in pretax operating profit, its first profitable quarter in two years, and only its third ever.
But not everyone is cheering. Skeptics, especially prominent short sellers such as Jim Chanos, who tweets as @WallStCynic, and Rob Majteles, @treehcapital on Twitter, continue to express doubts about the company and its numbers, in particular whether Tesla made all the deliveries to customers it says it did.
Margins and cash accounting fraud tends not to disturb most, until later when can no longer pretend. But, when skank hits revenue recognition, as it always does and will start to with Tesla (changed rev rec Q1, awaits audit and K), everyone gets cranky.
(disclosure: short $tsla) https://t.co/ad1jylz5V8[2][3]
— Rob Majteles (@treehcapital) November 3, 2018[4]
(2) From the Recode interview. So despite the massive 3Q profitability swing highlighted in my spreadsheet, $TSLA was “staring-death-in-the-face” in September?! pic.twitter.com/N7U94oy9O7[5][6]
— Diogenes (@WallStCynic) November 2, 2018[7]
A spokesman for Tesla declined to comment.
It’s important to make sure that the final transfer of control of the cars to end customers, including legal paperwork, occurred during the third quarter for all transactions recorded as sales in the quarter. That’s the accounting standard for determining whether Tesla posted as revenue only what it was allowed to recognize.
On a post-earnings-report conference call on Oct. 24, CEO Elon Musk said “the car is only counted as delivered if it reaches the end customer and all the paperwork is completed correctly. So it’s the highest possible standard for considering a sale a sale.” That is consistent with what the company said was its interpretation of the new revenue-recognition accounting standards that became effective Jan. 1, 2018.
Tesla reported $5.878 billion in automotive sales, 88.5% more than in the second quarter. That is a phenomenal accomplishment by any measure, but in particular for a company that admitted in its earnings press release that “vehicle delivery and logistics” were its main challenges as its delivery system went through a similar “ramp” to what its production process had gone through in the second quarter.
Making sure to confirm delivery volumes match revenues recorded is also important from a cash-flow perspective. “We can only get the check when we give the car to the customer,” Musk said during the conference call. In August, he said, two-thirds of the way through the quarter, “the average time in North America to get a car from the...