Tesla's profitability key to its Q4 earnings report

Yahoo Finance's Pras Subramanian on Tesla's big earnings report due out after the bell on Wednesday.

Video Transcript

ADAM SHAPIRO: OK, we're going to talk about going public, and we're going to go north of the border because it was announced today that a very popular bottled water company, Flow Water, is going to hit the Toronto Stock Exchange some time through a SPAC kind of deal before the June-- before the end of June. And we're inviting into the stream Flow Water founder and CEO, Nicholas Reichenbach, to talk about why Flow is so popular. Because I got to point out to you, congratulations on what's coming up for you--

NICHOLAS REICHENBACH: Thank you, thank you.

ADAM SHAPIRO: --but your water, which is growing dramatically, I can get the same quantity, more or less, if I buy Poland Spring, and it's cheaper. So what is it about Flow that has people flocking to buy it?

NICHOLAS REICHENBACH: Well, first and foremost, thank you for having me on the show. And yeah, it's very exciting times for Flow as we prepare the company to go public in the Toronto Stock Exchange in early May. Why people love Flow so much, it all originated from my family's artesian mineral water spring that's been with us for about five generations.

And it releases the highest quality still mineral water in the North American market. So we have the highest dense minerals inside the water than any other water company sold in the US and Canadian marketplace. And that's why our 17.5 million customers buy Flow. 65% of them buy it because of the quality of the mineral water inside it and the taste profile that the minerals have, calcium, magnesium, potassium, and zinc.

Poland Springs is not a mineral water, it's a springwater sold in plastic. So on top of having a high quality premium mineral water with the benefits of alkalinity and electrolytes, we also decided to put it in a non-plastic bottle. So we use a Tetra Pak, this is the package design itself, which is mainly made from plant-based material, paperboard, trees, and even our cap is made out of sugarcane.

So 35% of our customers buy because we're the most environmentally sustainable package in our TT beverages, and we happen to put a high quality still mineral water inside with all added benefits of organic-certified flavors. And now we're infusing our waters with natural vitamins that we just announced two weeks ago, as well as functional ingredients, like [INAUDIBLE]

SEANA SMITH: Yeah. Nicholas, why are you doing this now when you're going public through a reverse merger, I guess? Why did you decide to do it that way? What opportunity does this present your company just in terms of future growth?

NICHOLAS REICHENBACH: Yeah, so the reason why we're going public on the TSX through a reverse takeover is it's much easier and faster. And obviously, the costs are a lot less than a virgin IPO. And we can bring the company public within the next couple months as we move towards international standards on our accounting. So it's a better route to market faster.

On top of that, the reason why the company is going public is we've been experiencing hypergrowth now for the five years since I incepted the company. And even in the midst of COVID, we grew over 40% last year. And our average growth rate is over 100% year over year.

And since we've now put all of our efforts on launching in the US market, we have a US domestic spring in Virginia as well as our Tetra Pak facility in Verona, Virginia, producing all domestic products in the US, we're looking to expand our asset base by having more facilities and even acquiring more springs and moving into-- in the US market, moving to put more accelerated growth into sales and distribution, even in the midst of this summer, where we're going live on our national listings with Target and Walmart and all of our other amazing retailers that are carrying Flow.

So the primary focus is have the initial public offering or the public offering to raise the necessary capital, which we're targeting around $70 million Canadian to be able to inject that growth in the US market in both our asset-- vertical integrated asset strategy with our plants and springs, but also our sales and distribution strategy to support our national listing that are going live with Target and Walmart and Whole Foods--

ADAM SHAPIRO: Nicolas--

NICHOLAS REICHENBACH: --and CVS and others.

ADAM SHAPIRO: Yeah, when you talk about you're in 30,000 chains just in the United States and Canada, but when you start going out to the other springs, do you still have the same mineral content, the same taste? Or do you then change the branding of, if I'm buying Flow from a Virginia spring versus a spring that might be in Canada or somewhere else?

NICHOLAS REICHENBACH: Well, we were lucky and very fortunate that we acquired a spring in Verona, Virginia, just outside of Satin in the Shenandoah Valley, that almost had the identical mineral content that Flow had, within only 2% chemistry difference and almost exactly the same taste profile. So we're on the hunt for other springs in the US market that actually have a very similar profile. We know of two or three that we're looking into.

And so it would all be branded Flow as we grow the business. We also have a permit on our Virginia spring that allows us to grow just out of that facility and add more machines on that would service the entire US market. But we would be looking to expand our current spring or look for additional springs and plants in strategic locations. But all branded Flow with exactly the--

ADAM SHAPIRO: Great.

NICHOLAS REICHENBACH: --same profile and very similar chemistry.

ADAM SHAPIRO: We wish you all the best. Nicholas Reichenbach is the Flow Water founder and CEO. And we will be right back.

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SEANA SMITH: Tesla is set to deliver results after the bell tomorrow, the stock up just over 100% in the last three months alone. We want to bring in Pras Subramanian for what we can expect tomorrow. And Pras, I guess the big question is whether or not Tesla is going to live up to all the hype.

PRAS SUBRAMANIAN: Yeah, and really it's, you know, put up or shut up time for Tesla and Elon Musk. You know, like you said, the stock up over 100% in this quarter alone, added to the S&P 500 recently. They delivered 500,000 vehicles, just shy of then, in 2020. So some really good numbers here.

But what Wall Street's watching is profitability and rising profitability, at that. So you look at the numbers, a couple things to watch here, you know. Adjusted EPS, $1 and a penny for the quarter. That would be six straight quarters of profit and 136% year-over-year growth. Revenue, 10.3 billion. Again, 548% year-over-year growth.

Adjusted net income, and EBITDA, of course, also rising a lot, EBITDA there 76% year-over-year growth at $2.18-- I'm sorry, $2.18 billion. So a lot of things to watch there, Seana, from a profitability standpoint.

ADAM SHAPIRO: Pras, you look more like a BMW guy to me. But if, you know, the people who love Teslas, I got to ask you, even if they missed [INAUDIBLE], it seems as if the supporters, the people who just adore Tesla and Elon Musk, don't care.

PRAS SUBRAMANIAN: Yeah, and you know what? You're absolutely right, because we're looking at this market now detached sort of from fundamentals, right? Not that Tesla was always attached fundamentals, but, you know, let's say profitability, not necessarily there. Well, what if Elon has a very aggressive delivery estimate for 2021?

Like, you know, 700,000 vehicles or maybe the cash on hand is growing or China, really bullish comments on China. That could also pump the stock up. And not to mention, stuff on their new battery setup. So, you know, you're right, there are a number of things that you can watch for the bulls to kind of keep their eye on besides your standard sort of metrics, like, are they making money?

SEANA SMITH: And Pras, I mean, if they don't live up to expectations, we've seen this stock really skyrocket so significantly. I said up over 100% in the past three months, up, what, 680% in the past year alone. I guess, how prepared should we be for that initial pullback if we do see Tesla fall short?

PRAS SUBRAMANIAN: I think that's that edge of the mountain that people are sort of afraid of. You know, you're either climbing up or you're actually hanging from it, right? And I actually-- I can't answer that question because, you know, this stock is just not exactly attached to reality. You mentioned, what, 600% over the last year.

It's just mind-blowing to me where this company has gone. But again, I think it comes down to, are we going to hear stuff about the batteries, you know, autonomous services, services that people are sort of looking at as a way to grow their profitability? So those are the things that I think these investors and bulls will be watching for.

But you're right, and he kind of hiccuped. And Elon hinted at this before. He said, we need to really execute and we cannot show weakness in profitability because he knows that the stock could kind of fall out from there.

SEANA SMITH: He does. But he also, whenever he sends out some type of encouraging tweet, the stock seems to recover very quickly. So we'll see what happens. Pras Subramanian, thanks so much for taking-- or breaking that down for us.