Tesla Motors (TSLA, Nasdaq), the US electric vehicles manufacturer, reported today full year 2013 EBBS of $40 million, or $0.33 per fully diluted share. The stock traded up 8.4% in the after-market, to a $279.97 high.
The company is following a few other social media and technology companies in moving from the traditional –but outdated- US GAAP earnings per share (EPS) reporting towards the new non-GAAP earnings before bad stuff (EBBS). Sector leading companies such as Twitter (TWTR), Amazon (AMZN) and Facebook (FB) are thought to be considering a similar move.
“We realize this is a metric you may not be familiar with,” Tesla CEO Elon Musk said in a conference call with analysts. “But we think you will agree it’s a vast improvement over the usual GAAP earnings”.
The company also reported a net loss of $3.2bn, or $26.11 per share on revenues of $69,346.17, down from earnings of $15 million on revenues of $562 million in Q1 2013.
“EBBS gives us the discretion we need to get away from the noise of market and demand ups and downs to the true, intrinsic, intended earnings of the company,” Elon said. “This in turn will enable us to give Wall Street the consistent, steadily rising earnings numbers it wants and deserves.”
Analysts reacted positively to the change. “Initially I was taken aback by the multibillion-dollar net loss,” said Adam Jones, an Institutional Investor All-Star electric vehicles manufacturers analyst with Morgan Pacific Crest & Company Securities in Albuquerque. “But then the company shared with me its EBBS figures for past years and I was stunned with the steady improvement it’s made. I mean, a 37.1% increase every year on the dot. I think these guys have finally got their act together”.
Jonas upgraded his recommendation on Tesla from strong outperform, his firm’s second-lowest rating, to extremely strong buy. “With a P/EBBS ratio of less than ten,” he wrote in an email to clients, “Tesla is priced to move higher.”
Even earnings purists had positive comments about Tesla’s innovation. “At least EBBS is easier to pronounce than EBITDA,” said Jean Blackledge, editor of The Accounting Review Journal.
Other corporate executives were admiring. “This is something we were already looking at, but I congratulate Tesla for beating us to it” said Wang Chuanfu, CEO of Tesla’s Chinese competitor BYD. “It sure would have come in handy for the earthquake which destroyed our sole manufacturing plant last year.”
Elon said the inspiration for EBBS came after a faulty battery on Tesla’s Model-S resulted in a major malfunctioning, with most cars catching fire back in November.
“Not only were we suddenly exposed to massive liability judgements, but we didn’t have any revenues because everybody was afraid to get anywhere near our cars”, Elon recalled. “So when Deep [Tesla’s CFO Deepak Ahuja’s] and I were down at our annual executive retreat in the Maldives last month, he said to me, ‘You know, Elon, if all this bad fire stuff hadn’t happened, we would be having a pretty good quarter.’ And I said, ‘Deep, you’re a genius!”.
In the past Tesla had asked analysts to value it on the basis of, in succession: operating earnings; potential car sales; time spent by customers browsing at Tesla stores; number of @TSLA mentions on Twitter; and garage occupancy rates (GOR). “That’s all over now,” Elon said. “I think on EBBS we’ve found something we can stick with for the next few months”.