Master of the House... that song from Les Miserables was running through my head this morning as I read that Tesla's (TSLA) Master of Coin, aka CFO Zach Kirkhorn, had announced his departure from Tesla, effective at year-end.
Of course, despite having been subjected to viewing Les Mis on Broadway, I really only know that song because it was featured in a Seinfeld episode, memorably by Elaine's dad, played by the gruff Lawrence Tierney of Reservoir Dogs fame.
But why would Zach, who would have been in grade school when that Seinfeld episode aired, decide to leave Tesla? I have been analyzing stocks since Zach was in grade school, and I know damn well that CFO's don't announce their resignations mid-quarter for "no reason." The departure of the highest-ranking financial executive at any company, should be a huge red flag for Wall Street. Those questions need to be asked.
To be fair, Tesla shares are falling today on a slightly green day for the Nasdaq, but, really, I think we need to get to the bottom of this. Of course, we have the most gullible, Musk-loving cadre of sell-side analysts following this company and making excuses for every underwhelming quarterly performance in revenues and operating income, the two key metrics for TSLA.
With this group of "experts" on the case, we will probably never know why such a young man would leave such a powerful position at what is, by far, the world's most highly-valued automaker. Even if one is bestowed the flowery title of Master of Coin (Elon's doing, I would assume), CFO is still a material position. So material, in fact, that Zach was one of only four TSLA executives highlighted in Tesla's 2023 proxy statement.
Shouldn't we ask questions about his impending departure? Isn't that our job? Well, I am closer to the media chair than the analyst's chair these days, so I can revel in the fact that instead of wall-to-wall coverage of Kirkhorn's departure, the financial media is focused on a proposed cage match between Elon and Meta (META) CEO Mark Zuckerberg. Seriously. A cage match?
But, as always, I have my spreadsheets. TSLA shares have popped this year, obviously, after a brutal 65% decline for full-year 2022, but what about the actual financial performance of the company. That's Zach's milieu. How is Tesla (as opposed to TSLA) really doing?
With a couple keystrokes to update my sheet, it throws out the inescapable conclusion that Tesla's cash flow return on assets has been abysmal for the past few quarters. But where are the analyst calls on that? And why am I not seeing that on FinTV?
With new plants in Austin, Texas and Gruenheide, Germany and capacity additions at Tesla's facility in Shanghai, Elon has built an empire. But, from a financial - not stock price - perspective, the marginal returns on the additional assets have been destructive to TSLA's return on those assets, not additive to it.
Here, as calculated by me, is Tesla's CFROA (cashflow return on assets) on a quarterly basis for the past two years. Cash flow is cash provided by operations minus cash used in investing, average assets are presented as a 12-month trailing figure, and these are both very basic calculations and both are standard practice in equity analysis.
Tesla's CFROA (Excelsior Capital Partners Analysis)
| 2Q21 | 6.63% |
| 3Q21 | 5.84% |
| 4Q21 | 6.35% |
| 1Q22 | 10.75% |
| 2Q22 | 10.22% |
| 3Q22 | 11.09% |
| 4Q22 | 2.51% |
| 1Q23 | 0.02% |
| 2Q23 | -1.24% |
So then, was Zach Kirkhorn forced out as CFO because TSLA's cash flow return on assets has trended so massively downward? And does his departure reflect Tesla's Board's anticipation of still more disappointing quarterly financial results from TSLA to come?
I honestly don't know... but at least I have the data... and at least I ask the questions.
