Tesla Inc. is widely expected to report its sixth straight quarterly profit on Wednesday – and possibly its first quarter of $ 1 billion. What follows is a notable year in which Tesla’s stock split and jump rose, the company joined the S&P 500 index, and sold nearly half a million cars.
Two years ago, the world‘s leading electric car manufacturer had a difficult phase behind it. Elon Musk, Tesla’s Chief Executive Officer, informed employees in an open letter dated January 2019 that the company needed to reduce its workforce by 7% and increase Model 3 production rates to survive. Later that month, the CEO told analysts that Tesla would need to cut costs and vehicle prices to avoid bankruptcy.
And there was one more thing. When the profit call ended, Musk dropped a bomb: Deepak Ahuja, the longtime chief financial officer who previously worked at Ford Motor Co., is retiring. A then unknown protégé of the finance team, Zachary Kirkhorn, would replace him after a short transition period.
Investors Concerned: Was Ahuja’s departure another sign of turmoil and leadership qualities running for the exits? Tesla’s PR team didn’t have a basic biography or photo of Kirkhorn at the time. The announcement of the surprise dumped stocks.
Kirkhorn, 36, remains a mystery to the average investor, but he has made a name for himself. He has backed Tesla’s balance sheet with a series of successful capital increases, adopted a more conservative forecasting approach, and provided greater cost-cutting discipline that has helped Tesla act more like the S&P 500 company it has become.
“People still don’t really know who Zach is, but they know what he’s done,” said Gene Munster, managing partner at Loup Ventures. “He’s a shy person and I don’t think he likes to speak publicly. But it was a remarkable turnaround.”
Although he participates in all of Tesla’s winning calls, he is not a conference attendee. Several sell-side analysts said they had never spoken to him on the phone. Tesla executives did not respond to an email related to this story.
But the numbers speak for themselves. He excelled by the standards that most CFOs measure. Tesla shares are up more than 1,300% during his tenure. On the day Musk announced that Kirkhorn would take over Tesla’s market cap on January 30, 2019, the market cap was $ 53 billion. At the close of trading on Monday, it was around $ 835 billion. At this rate, a trillion dollar valuation may not be far away.
The company’s shares posted gains of up to 1.7% early, trading at 0.84% at $ 884.09 at 9:55 a.m. in New York on Tuesday.
Tesla’s large market cap has less to do with financial tech than with the automaker tackling manufacturing problems, growing concerns about climate change, and a wave of EV mania on Wall Street. Kirkhorn has capitalized on the company’s success by building a fortress balance sheet that raised $ 12 billion in 2020 alone. The company has reported profits, but has also exceeded analysts in the game of expectations and often exceeded their consensus estimates.
“I don’t know Zach personally, but he taught Tesla to promise too little and to deliver too much,” said Gary Black, a bullish private investor. “You seem a lot more disciplined.”
Not everyone is a fan. Hedge fund manager David Einhorn, a longtime critic of Tesla for cutting the automaker’s shares, has publicly questioned the company’s accounting practices. The President of Greenlight Capital in an April tweet called on the CFO and Musk to explain what Einhorn believed to be inconsistencies in Tesla’s demands. He recently called the rally a “fad” in his inventory.
Kirkhorn is one of four senior executives at the helm of the world‘s most valuable automaker. 49-year-old Musk is the company’s public face and voice. Drew Baglino, senior vice president of powertrain and power engineering, shared the stage with Musk on Battery Day last fall. Jerome Guillen, the president of the automotive industry, previously ran sales and is loved by early customers who still have emails from him.
Kirkhorn attended the University of Pennsylvania where he participated in the Jerome Fisher Management and Technology Program. This enabled him to graduate in 2006 with two undergraduate degrees: Economics from Wharton School and Mechanical and Applied Mechanics from Penn Engineering. (Musk also went to Penn). He did a short internship at Microsoft Corp. and then took a position as a business analyst at McKinsey & Company.
It was there that he met his husband, according to a 2018 wedding announcement in the New York Times. The couple owns a house in the hills of Oakland, California, not far from Tesla’s Palo Alto, California headquarters, according to public records.
He joined Tesla in March 2010 as a senior analyst in the finance department. Eighteen months later, he left the company for an MBA from Harvard Business School – which, according to Musk, wasn’t necessary. After graduation, Kirkhorn returned to work under Ahuja and Jason Wheeler, who served as CFO from 2015 to 2017 when Ahuja returned. Tesla released its first report on Diversity and Inclusion last month, and Kirkhorn was featured in a section titled “Proud Of Our People.” It was found that he was promoted five times.
Several former colleagues and perennial investors who know Kirkhorn said he was deeply committed to Tesla’s mission for clean energy. They describe it as very close to Tesla’s products, considering engineering and manufacturing as well as finance. On calls to win, he talks at length about Tesla’s other sources of income, from selling regulatory credits to what the company calls “full self-driving” software and future insurance products.
“The auto business is capital-intensive and Tesla was more capital-efficient under Zach,” said Dick Amacher, a former engineer and product planner at General Motors Co., who owns two Tesla models and shares in the company. “A financial leader should provide guidance on future strategy and the results speak for themselves.”
The first half of 2019 was marked by Musk’s sudden decision to close stores – a step he took days later – but which rocked Tesla’s sales force and confused shareholders. A bullish Wall Street broker rated the automaker’s falling share price “humble” in June of this year, and two others warned of a deteriorating sales outlook. That discomfort was further fueled when veteran Chief Technology Officer J.B. Straubel left unexpectedly in July.
“When Zach came, he had the worst job in the world,” said Munster. “He had to deal with Elon and save a really complicated company.”
By the third quarter of 2019, Tesla was showing progress in improving its bottom line. At a major turning point, the automaker reported its first profit in nearly a year, beating analysts’ expectations for a loss. He stunned watchers with the news that the Model Y crossover would start months earlier than expected – a big deal for a well-known company for deadlines.
“We are fast approaching our next phase of growth and our financial health will continue to strengthen,” Kirkhorn told analysts on a profit call in October 2019. “We continue to focus on reducing costs, which enables rapid investments in future programs and growth. “
Tesla’s $ 3.7 billion cash on hand at the end of 2018 was $ 14.5 billion as of the end of Q3 2020, the most recent figure available. Musk recently called this a “war box”. Tesla will spend some of that money on global expansion. New car and battery systems are being built in Austin, Texas and Berlin.
Kirkhorn has a Twitter account, but his tweets are protected. When Tesla reported the total number of its deliveries earlier this month, it announced the publication on LinkedIn.
“Half a million cars in 2020! Congratulations to the Tesla team, our new customers and those who support our journey,” he wrote in the post. “I’m looking forward to another exciting year.”
(Except for the headline, this story was not edited by GossipMantri staff and published from a syndicated feed.)