Earnings call transcript Q2 2023

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Stem Second Quarter 2023 Earnings Conference Call.

As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Instructions] [Operator

like of conference Please Investor now Ted to go turn Head Durbin, Relations to would over the Mr. ahead. I for Stem.

Ted Durbin

Investor to operator. at earnings you, This Ted Head Thank is call. Stem. second our of Welcome quarter XXXX Durbin, Relations

begin, that of statements refer Before from results differ could be cause please we involve matters those that latest forward-looking. XX-Q SEC other our these to materially therefore are our you today These note statements. projected risks will some we our the making and We in uncertainties to and filings.

include Our comments today financial also non-GAAP measures.

Additional in reconciliations the our GAAP comparable found details release. and most measures directly earnings be to can financial

presentation a will using We today. be slide

at www.stem.com. and release are earnings Investor presentation website Relations the Our our on portion of

Bush, Strategy call. of Officer, available Larsh also our start remarks. for and and will the prepared with will portion Carrington, the and Chief Carlson, the today CEO, COO, Patel, question be Mike Bill CFO, Johnson, CTO Prakesh call John answer

the And now I will call over John. to turn

John Carrington

on our details to our with Thank all excited XXXX the full our close I'm financial guidance, that Beginning for business today advancements results, results highlighting you, traction, include we more will and we execution, Officer, our everyone. joining thank six to cover year Chief we Bill commercial share you will Bush, Financial and as Slide three, our today. second with of updates reaffirming. us are quarter discuss first and which half Good continued technology afternoon, Ted. items

up of guidance team on the revenue quarter delivered which second and to XXXX The Now of XX% Stem our results midpoint quarter the with four above Slide XXXX, quarter strong second versus was turn range. let's $XX million our another highlights.

And revenue XX% margin revenue, CAR, XXXX. with Our grew in sequentially. first our our annual full was XX% non-GAAP year up Contracted year gross GAAP was year recurring our XX% and quarter margin was X% or of the lastly, guidance. gross XX% higher over versus and services margin line

of achieving of are XXXX We full in half year reaffirming positive year. EBITDA our continued the expectation second guidance, including this

X% million. by year increased Bookings year to over $XXX

sizes We our segment. the as we are market front larger much the of in meter seeing presence deal expand

roughly year. example our execution Ameresco the average award discussion. project A FTM over announced we'll in doubled great was last in of cover size the In has we our today and later fact, the

One growing larger effect scale is success knock-on to bookings of quarter our in lumpy more a from projects of cadence quarter.

half in our a past our close the year But second deals to momentum half our result, executions full bookings and gives this in the of for pipeline the overall target. slipped quarter very close $X.X demand and significant we to billion. the deals recent environment target in and continue $X.X to short fell billion is bookings opportunities confidence see reaffirm some The year. contract of As QX strong of to us second

Finally, to third our AI of differentiation recognition driven value. technology, and continues its receive party Athena,

respected fact, we technology past our accolades Slide seven leadership. third and Please from parties to in year In received the innovation five. turn on

growth solid sequentially. revenue, services high in see to was our XX% up continue We margin which

strong this XX% economics. customers solar into increased as Our stronger solutions sequentially, XXX growth, strong revenue. for driven market nearly solar improved by their revenue software also driven Storage Demand improving by very software by growth, continued grew rate participation well benefited partners as revenue storage as software market have revenue growth. and remains participation revenue margins year-over-year, Consolidated of primarily points from an project basis gross better accelerating commissioning, systems and visibility our quarter.

Reduction key in some Inflation Act. provisions Now that the IRS has clarified the

The resilient growing announce integrating a to responsive to XXX electric project megawatt of more significant were with the installation Ameresco, awarded resources energy storage standalone six, we're that fastest one help while US. create needs their recently Slide customer power and we balance proud hour system. to the power renewable Moving today cooperatives will a in

Colorado. I'll Our that note Holy project with scope a That and business of from heels momentum. this Leader. a another one a in on award follows Energy of of This Cross a work includes recently the our deployment of energy contract. won XX-year project professional is separate services, significant storage also with Ameresco top bookings hardware, contribution and example and Athena and history our repeat Environment execution to

project demonstrates Ameresco We believe trends. two the key

are large-scale to the continue strength front-of-the-meter in momentum. in drive our increasingly competitive storage sales competitive deployments. And additional utility and First, will we cooperative market secondly, municipal

direct are the the IRA and IRS particular, energy munis storage. recent the and and interest in deploying by several co-ops pay In guidelines provisions engagement accelerating in

initial offering to market dynamic customers software where its over the a This activities. in expect upside other services trading seen as wholesale markets added we've expands customer our time. We and for we've value is

revenue, backlog, services solar in the AUM. to strength year-over-year in business, in On side growth seeing of XX% solid the increase we're with and addition a continued

While a our continue providing on remain the XXXX, A solid services. the and business on to chain products segment more recently key segment. labor this focused win the supply innovative of half in of and XXX-megawatt challenges direct portion high-growth is of first combat utility-scale the this output we the proof in focus announced of market Hungary, point and

team as of continues innovative have in transition. was Sixth make innovation the clean AI honors progress driving a Annual energy winner Athena recognition. Slide were a machine platform global We solution receive regarding the Awards, and technology The and multiple that program in proud as learning categories. software our AI Best excellence Breakthrough to leading the recognized and to incredibly leadership. Analytics to Predictive our technology June, seven turning exciting In Athena Platform AI recognized Now

and based the significant commends and excellence These benefits sustainability of Top platforms recognize in matter FTM markets these the clearly multiple experience space. Awards storage, leading Product and awards years Year artificial have the industry-leading Moreover, differentiated economics customers what awards the industry, award intelligence July, that on operating Stem energy received predictive benefits. software on as built Program, Environment products the assets the utility and analytics, that of In in by BTM, experts Leaders intelligence in recognized subject highlight trained one an clean environmental delivering fact jurisdictions. energy we as in and of and our in organization the experience Energy solar,

many turn approach AI, inception. new lot not and of the Please since in into There's new of and have technologies on and new the a a tools capabilities to buzz Slide exciting company's and fact foundation been our new certainly utilization been around are These to AI eight our our developments processes. STEM. technologies is software not AI and our of

enable sector. That artificial leveraging generative efficiencies latest to code energy advances to our is integrating software intelligence team management is advancements engineering in asset AI said, This development. in yet software capabilities in the are example tools and the AI our bringing of another leadership in significant enhance our tools,

Earlier product applications this up workflow, additional evaluating our roadmap. this to improvement year, a rolling in generative result, their coding AI tools XX% approach their and we're these started developers Today, integrating software have productivity. tools dev developers our seen our into for a to accelerate powerful teams and our as across out

chat offerings and analysts initiate incidents. as trading These to with an Athena energy as of operators base analysis, in and asset in Looking us a improved to STEM actions, competitive prompt-based traders, will operational Athena's efficient pilot powerful our accelerate and insights the asset tools unlock corrective forward, paired AI early, performance. business identification offer flexible are other well that tools cause and enable extensive bot anchored performance optimization economic outcomes. operators building engineers enable for best-in-class asset new leverages root that Generative optimize is market. knowledge further availability, between to creating distance unmatched promises and performance,

a from to coding offerings generative help on scale. professional several we strategy. tools, and our access services AI our teams leveraging engaging focus, productivity customers subject and AI gains matter key area anticipate Growing our expertise are customers our of to with this execute With STEM is at predictive

to the I'll call over Bill. turn now And

Bill Bush

million, of the increase our second reflecting Revenue which business. XX XX% we in six Thanks, John. for the consistent reported on months XX, Page XX% of the $XX a of was ended for as the momentum results we John versus generated million quarter XXXX. the the Starting revenue highlighted, second June with $XX quarter of grew XXXX,

midpoint revenue quarter also guidance. our was second The the above of performance

realized While also of most sales, representing sales, of revenue million the solar in storage significant growth this we growth came from quarter year-over-year XX% additional growth. $X a

total of XX%, $XX recognized for also momentum million quarter in our a the part XX% this continuing We of high increase of important the sequential services revenue, representing business. and margin of revenue

increase was from XX% $XX Non-GAAP gross GAAP profit million, XX%, to the $XX gross gross same $XX XX% due was year from in was percentage last quarter Our margins. margins. percentage up up gross the up in sales margin million, improved from quarter, and gross a higher quarter non-GAAP services second million, last higher the was XX% basis, due year. year a XX% margin and GAAP in to On margin last

our We leverage a continue percentage achieve OpEx our down execute to cash to drive revenue. on greater and as initiatives of operating

discipline. percentage revenue and access on be as the lower-cost to we to XX% We expect geographies continue of cost cash OpEx as than for focus full a XXXX, less year

providing continue headcount Since increased by scale AlsoEnergy, tighter allow leverage. and to with the enhancements workforce. across of to increased on our operating acquisition our significant system India We for growth worldwide for productivity XX%, focus integration a we've in

net XXXX a loss million a in repurchase on due of of year. quarter $XX in The a the was gain the convertible to the quarter million $XX notes of extinguishment income second last one-time primarily $XX Net company's million was by driven of XXXX. year-over-year debt versus of same the portion change the

on negative XXXX. as a half quarter EBITDA last to Adjusted positive adjusted for guidance, for million our continued second expectation we a quarter same EBITDA the our second in in $X of the including million negative $XX EBITDA the was adjusted achieve remain year, versus full-year track

was Cash of will a hardware down convert in in the half $XXX the active exiting of to changes prior driven from battery for $XXX during the million second second primarily Sequential quarter. cycle, cash revenue million, outflows $XXX million purchase XXXX expected delivery approximately in XXXX. that of of upon soon very was by quarter deployment

our We monitor which and manage increased continue this receivables, to closely quarter.

of senior balance partially $XXX of April million from We These approximately proceeds quarters. XXXX. offering convertible offset net green completed deleveraging were expect our outflows the by net the receivables in normalize in coming notes to

led cash factors these to less and to receivables, year net forecasted year collections higher cash planned increase approximately and million. no the is exit Based we the forecast, $XX our of on cash EBITDA, half of $XXX cash in adjusted throughout leverage. than This current of million operating by and second with reduction driven accounts equivalent. expect the Together, a continuing in

we as improved our and decline terms beyond. supply are the expect of and continue pricing and negotiations seeing we for payment these to XXXX partners addition, cash with In in chain supply utilization further

the Slide we billion. in demand to basis Turning now are to largest a market increased deliver and XX a XX% XX% remains to increase of a continue year-over-year at in operating look The and for million driver $X.X strong of to strong, backlog increased our bookings metrics; our sequential End backlog was confident $XXX quarter. the customer ability results. on

the strong of grew quarter first AUM X.X commercial side Our driven of in increase, the hours gigawatt the from business X% That's by on X.X the a second our same gigawatt XXXX quarter storage year. of to movement. the hours at

recover, industry performance to legacy on that solar platform. XX in our at up the gigawatts, we've core AUM chain, ended want in Powertrack been quarter is I customers solar XXX the asset evidence monitoring megawatts, supply highlight operating at also on migrating the AUM the to the of side particular, or X%. approximately of successful business The our momentum. applications beginning is to from Our this increase and

John we to the Slide Turning now as our guidance, our mentioned guidance full XXXX. XXXX year XX reaffirming are in for earlier,

improve backlog while to to our capital operating leverage We are reducing working on converting usage. focused continuing revenue,

strengthened We the by positive have or and that achieve to organized will the EBITDA execution company goal our the the demand goal. customer second that reaching of teams continued achieving support half, in our believe and

for John some me With remarks. call turn that, closing the to let back

John Carrington

on expected pipeline, quarter balance in pipeline, strong first in of our a large with continued revenue with four and demand XX the performance. strong year financial services software-only high EBITDA closed key third positive services Revenue parties Athena Bill. significant the of with AI XXXX. the slide; of the deals exiting project a double-digit second across confidence above several capabilities, XXXX of guidance, with sheet Slide we and and in by quarterly momentum and was in our with on best-in-class the cash in and growth robust Thanks, second and inflows recognition cadence the following with the up the of half bullets in-market projects executed Wrapping takeaways; our strong half midpoint execution

In channel our With STEM. shareholders. we guidance. it's suppliers, our all when thank reaffirm stakeholders, XXXX partners, the come, to year summary, key about at how our and about I I our reflect that, full want And far customers, our global team we've

So success. continued for a commitment the big thank and our execution you to

We the our execute and on balance about have for and a continue to excited the to values. lot be year mission of

open the let's please. now And for line questions,

Operator

We will now James session. go answer the ahead. Please question West [Operator question ISI. first from The with and begin Evercore instructions] comes

James West

of kind and a everyone. of Hey, a through curious, lot for I'm afternoon, roadmap to area John, about in maybe which companies Are But are the they new on roadmap of first generative little Kind applications? we that highlighted? went additional of storage. you and doing. roadmap? these good thinking you the are framework how here are the software you see that storage that Could elaborate enhancements Athena the what's you detail product here guys you on applications, leveraging AI, area,

Larsh Johnson

this hi, is Johnson. Yeah, Larsh

at that. Let a me take stab

analytics. who to the we so offer using bot case and human actually a the system is we capabilities and bidding generative human products predictive be that to leveraging the experience in complement see And the of see that helping analytics questions, are defects the is trading administrator thing. as AI generative have And to analyze trading that and going operators understand automated terrific the So optimize and function mentioned, of the predictive we helps you that our often currently issues sort what helps operator, performance that a that or performance market and to also forth. with

is see generative best So today you use this case for the if that digital assistant, will, AI. we

we're certainly I be where that's going many are think today. focused to probably there more, but

James West

Thanks, Okay, then that's very helpful. Larsh maybe one and for Bill.

despite least and in just you're wide of aware unchanged year? next this With did a conservative pretty be quarter, at to there the the solid the guidance the guidance, slip the is guidance of same? of pretty matter guidance kind second Is for being things revenue staying a with anything or here into is the

Bill Bush

question, the for Thanks James.

The revenue are quarters. think a we're in lighter said position. the from the which is in we've got I quite what two And, that think, I good we And first a quarters past, standpoint and still a and bit of on ways feel we number. is the so revenue that to go with for midpoint I $XXX million we think the comfortable. pretty year side, feel quite comfortable

Operator

Brian go Lee question from next Please The with Goldman ahead. comes Sachs.

Brian Lee

the into team focus guys, Hey, year. for execution here. the have adjusted this reaching the guess of solid for around is afternoon. know just EBITDA. question the good I the the been timeline first second that's I'd half on year I Thanks on big of here taking questions. throughout and a Kudos positive the

that progress or in just any target. So tracking to updates better had, the year, around, didn't toward or point I XQ that around the if general know in at you visibility this XQ

Bill Bush

Bill. for is Brian, question. thanks, the So This

As we've the we're in half. terms call, very couple with the in positive of a this achieving guidance mentioned comfortable in second EBITDA times

And so the good I headcount in in say for we're the I about would with terms done talked track a we've on India. generally, we've lot increase business a of think where things of in that that

cost and control lot cost a maintenance. really So of

of systems of in We've of a the the of a of the as of end contracts position. bookings course, is in of for full fortunate in terms the year, possible. saying that was year, that in we only best we're well. in midpoint just There's almost really processes done last the a the company. software really reflective that business of going just bookings That really of the do. solid we're certainly making sure And the to of be terms demand been lot that's, that and There's productive doing market of lot commercial billion, our work for side lot shown And, we're can underlying, work at year. possible some say, in the the this $X.X such additional done, as the are business billion $X.X

So, a much of the in that half great we the yeah, the from time. second revenue bigger think XX% comes the year. that that is part so we're of position,

where when meet are that so, look And we very when from revenue at you can we we -- we're cost standpoint, we expecting and confident a from at that we're what a goal. look standpoint,

John Carrington

solid half we've the obviously hardware guidance about that and the the leading is cadence think, weekly the for delivery feel team, the process Brian, I existing half Carlson in with secure, reaffirmed bookings we good deployment visibility got, very are into the we're second and on for it's add, scheduled it. Mike that and I'd the delivery ready second with Yeah, so

Brian Lee

up. that. and bigger great. maybe year, this about tech talking where renewables John, of And, you Okay, I landscape inflation appreciate last it a across This and since shortages. everyone become did year bigger was bring reversal the theme has

Or how that on that able could When that some thinking start volumes? drive your have showing timeframe inventory? side? the from advantage and Now to maybe it much about do talking ability get the maybe battery start to kind supply numbers? hardware are in to pretty opportunity side? of and secured Just into And to just capture year. you the have deflation And going so hardware the look for hardware you are be of up manifest? Would we're how be here does that? higher as margin recall, cost the about chain an like? can you cost you benefiting I I what's know what through the you you deflation If take on hardware the trends When next guys

John Carrington

a say that. couple I'd on of Yeah, things

time will spent the capital we with different previous our maybe like a working that certainly China that front. we ESS We mentioned of in well, will strategy, us a suppliers. competitive think so more on I amount enable Brian, As to as equation. we, with be fair variety And come call, of down modular the know we

know, piece, say it timeline. your that, the deflation you I'd depends on delivery

You see suppliers. we want with very is with past. that at and roadmap than good of highest the can But an do improvement to had terms suppliers Lithium's prove quality view see think a sure make kind aggregate, bouncing we of little the working we of we're what in that cost we're like now. We right low feel our some around. we'll

I think of second would half maybe reconcile still. would are few than we getting different this probably XXXX that so more some a that year this But in you into see could the year. it coming spot in, deals of

Brian Lee

appreciate I Okay, that.

So, sound start it of of in first like to some does from year. can the in XXXX half even benefit the you that,

John Carrington

We'll half. have that need think see. what just hardware a good second I for now sight of we we the line of

So, have we're more year, starting and next those to more of discussions.

a about year first the do we you're I from feel to point. that to quarter. in next to could we we've like want could But, the had compelling following, that it that this commit next see year. flip So, significant a be, more We'll going see the as today, don't margin talk deflation years and be and terms

Bill Bush

or said to contracted Bill. We it mention, also Hey, contracted in are One thing through out through actually Brian, not XXXX. both XXXX. this wanted fully fully that been is we've you you your question, too, I mentioned,

able take that that. of to extent the to we'd reduction, advantage see a price you be So, near-term

So, as where half our most placing batteries. second and the we're know, of is of the buying you year

do customers. some our that capture, opportunity the us for it's able capture through, and that for decreases to to an extent come of So, price be to ourselves

Brian Lee

pass Okay. it great. that Thanks, I on. color additional appreciate guys. I'll That's there.

Operator

TD comes with ahead. Cowen. question Thomas Please next The Boyes from go

Thomas Boyes

the for internationally, first, maybe you the questions. Act? to I know storage countries other about is given solar Industry award the talk focus the for U.S.-based, Thanks large wanted Net taking Zero Are your Europe in but I Hungary. specifically, Maybe in given targeting approach

John Carrington

as it question. Act. stands, it We've will for the thanks because said the the international U.S., the that in times on Thomas, be best the maybe couple Reduction Yeah, of A Inflation things past, front. market

are team out there Berlin. monitoring a Europe. that We We win do have this closely Hungary of led

and So, we're into U.S. just plans going that unfolds. expansion we're international, well-positioned, as second is given like, year. we opposed the think, feel but to half the our a obviously, we'll focus I next primary really, on going update And not international

that we're the particularly do around very and on coming up storage to we decent-sized team are solar the a side. But have speed deep, side

we'll So, opportunities we're just that go monitoring to best how unfolds. are and it. opportunity, If the got we see an there's wherever

Thomas Boyes

composition strength could as quarter? follow-up, you the talk the maybe Great. for there highlight? that bookings just this And shown of that could Were Appreciate then, specific you it. markets my had about

Bill Bush

Yeah. Hey, This is Bill. Thomas.

I kind a is areas I couple think to certainly, I'll would for England storage talk New this area, continue the about well really those past. a coming the West, and and East there's but New that us. strong solar on So, have second of to are in side, spots done of after be quite for the that, Massachusetts, that us areas here Maine, York, in And

is Texas that some California. to in in. involved market a starting in that and and Midwest, course, we're in some very Illinois, see course, Of then, We're the of places area other activity major

as Colorado. of this are the major biggest and quarter storage bookings major So, one for in the I even the us, markets was that, those we say had are those that

with we'll that, we're large number spreading solar that general having geographies. the way I demonstrated storage I beneficiary country. to movement So, of been is across or, be across excuse think a the pretty the in think move, able me, happy of And

or booking On side, and on that. Hungary across of to particular good of see a is of continue U.S. some the Hungary into even evidence the markets Europe. international the focus the sale with lot The we a solar strength

think going to do to well And continue so, that we're I there.

Thomas Boyes

in just I Maybe one more sneak there. could if

talk for pretty had you share that growth what's you've to Can I mentioned that XX past specifically? know you some market maybe there driving because us Just had Massachusetts, impressive the months. about

John Carrington

is simplistically, that. driving Most Smart the Yeah. Mass program

that forth. program ago, same that years as more. that now, the call strong. be to And And passed there's in is it battery It maybe New program areas that activity Massachusetts of example continues in installing our one focused market of put on way, systems good accepted with a think a urban a that New of you're to companies, of see is storage was the was NineDot, two focus really is significant York where by very and York I bit starting Commonwealth by legislature significant reflective a the So, which on City. well, customers,

just So, going continue lot to see need resources point to I that the think used that, distributed a where it's you're DERs. of or to being deployments across as like markets at energy energy have

going you're and think I to go. of more we as see more that

Operator

The Jenny. ahead. Milligan from Please go Sean comes next with question

Sean Milligan

was you you over But out the $X.X hoping Bill. Hey, I software-only of brought how up an little about bit guidance you half guys. look software-only an here it you the at there, bookings that And Good evolves next the the awards you year. of trying XXXX back months. expect to billion the contract mentioned quarter. that a outlook number you'd could the over kind when you in for when uptick Obviously, six of talk just that understanding think for is awards. get

Bill Bush

I'll well question. in on So, it's And area. let thanks because Mike this for kind in jump the of as his

the contracts we that see, that rolls ESS going modular going and sign. more because of say, many one in the and lot already curve, software-only we're this of to is past, this about that out to that of relationships. size a of that we've things up talked think the as have, solution, move of our see kind I block you're we DC And customers

And maturation of a past. purchase in so, that. the and think been market so, equipment and more to the the of going we had I maybe of than I think of that's And are more we less the involved general that see reflection in you're in

an side well I them, panels for really background, us, on procure business, inverters. solar do similar our asking to or into nobody's as where goes our think to of calling what we controls very us example, the it

the it's think any… melding know, I businesses. the Mike, two So, of if don't I there's

Mike Carlson

Brownfield, Or, subcategories this is they're what's market, No, the and that the performance. an July the are looking I vertically said, think starting a chain getting Bill agree. And to software from both of lot and there and other services of already focused put as buy some Greenfield thing to for optimized the supply I into either We're out retrofit launched solutions. only. we've feedback XX, various

gives market good. we're where goes. us but just positive days got of to the on the that the into opportunity this the discussions been sides, and the responses opportunity -- make initial So, sure it, maintaining have We've both some from initial been XX we're on we've

Sean Milligan

that revenue you're stream, little upside Great. Thanks. percentage from And that in of it then, maybe a that's meaningful, where mentioned seeing like think John, for are assets that right? participating maybe forward. what I then revenue kind to overly seem it know talk the you could and something markets bit or moving quarter. is Obviously, doesn't of market that So, you the I participation during that hoping but was about the was I long-term guidance outlook you've given, upside

John Carrington

say outlook, be it strong. It I to the we specifically. will interesting. I is Yeah, continue will think, out really don't break

utilities, assets. grid these to seeing You're more operators, pull want from others that

It's think but I revenue, it's of plus. software So XX% really kind we margins. a it's portion just the gross strong is material curve, although of it learning are very not -- a

back more fact So, We'll what to about very say utilized general our the way when expected did I being everyone it's positive. on would roadshow. continue be all we how we're the that but update the calls it. the assets It's excited we think I we're there, doing is that on for to used

So, it's traction. good getting some to see it

Sean Milligan

it sneak if robust year. at couple gave in of trend how was for cash of can the That you in, could capital revenue and year. just in throughout I XQ. of I terms obviously an more a refresh maybe kind one working you end kind expectation on then, should follows a And but hoping of the quarters of XQ guys us

of benefit next XQ, you the like, in lines? first those, half capital trying sense working revenue get So, of a through into of Just terms start like…. year, flowing of to the do see looking to the XQ

Bill Bush

receivables seeing building benefit They quarter, to been nine We've next to bit. start expect the and Absolutely. we again months. would of here a six grew little sales, for really this over the those

pretty that that's maybe to in cycle collecting how a And flip going to the more we because the gives we're and half us than has been think in cash year, bit, to be more cash it. first confident still going the ability little the half feel build and I where so, maintaining cash the we're this receivables typically while And would what that spending second we collect before, which balance. had we

So, confident we're in that. even number, closely that it. pretty that meet of can we that feel customers beat terms potentially I feeling payment the and good and number looking we very that to cycles We're about think our

Operator

The next America. question of ahead. comes Please with Bank Dumoulin-Smith from go Julien

Unidentified Analyst

good working I we guys. capital asked, see go is an your that capital Presumably, just think the the just Look, given guidance, it front probably half revenue 'XX. at guidance, wanted how Lockridge actually, Hey, just back to and about This about was afternoon, Julian. actually, [ph], question on your should investment for that's Cameron long-term just in the even start ramp the bigger of uptick of just we working 'XX. should implied in by to

in through you're this think thinking million-ish So, if are me $XXX first that inventories than of we just about up, or how the the half million-ish, in about larger again, like through us that kind year something first half, and of walk can 'XX? $XXX maybe walk

Bill Bush

not see would expect No, we to that. definitely

the think think will where this I which question, have been. of is I than and those and is the talked we've comes terms the the about, -- should business of the one very modular and the ESS said thanks that made what But I things under that conditions in, for things be will be that, has one traditional too. sales different

used the the So that it's less more need kind capital and run way will morphing effectively so cash we're of business the business going will be efficient that, in forward. to

why quite So, it's of popular which part started we it's it's in that our initiative, with why why customers. some is

which in hardware, at growth said XXXX, at which is is we've for user slower of the did a means primary hardware the have look probably that, so capital, XX% expect And rate, of to when it numbers, working we year. this than to a you going that rate grow

But grow three-year year going we're across the to hardware. span, this

at look we're going by do to to were year. this to quite bit bit. we $XXX going Last a over you're the -- just around hardware you year, and If we're million, grow little grow million $XXX numbers, going a

will it. do it So that things. XX%-odd hardware I do it say take expect We will relatively you're advantage a of hardware next think One, call to year rate to that, of going in us allow sell, so two sales. less hardware and slowing to that margins growth growth for see, don't and better

working when we of expect expect you're in not -- about of we think about the talking would So we inventory I would the growth. kind think business, capital terms side the that of numbers

result, should maintain, a able balances our be as so XXXX. to And we cash into

Unidentified Analyst

and of thinking software can through, you into software just then on kind look XXXX? Thank how back today, progression, Got half much. over the to there, trend us to each you relative margins flipping basis services in margin a and versus other, it. broad to about the how that strokes, margins That's walk you just expect very helpful. And

Bill Bush

Sure.

been The we've solar margins quarters. storage. straight range, had margins that the XX% they're in see for XX% you're or that, and talking plus, in the solar still, than growth both in obviously, you whether the XX% more last services margins and But think today I the quite some can So over are that few way good and on quite storage software lower services they've to depending time. trend sequential

And our so there more value for to and customers. more deliver continue we book

decline see, aspects. or any don't decrease in margin we those of But

do confident we're and increase our of and at software main one EBITDA course, So that's, point we're amount ability drivers we're going amount to to to quite is any continue the that able services time. the in our clients of to of sell to the to that we continuing positive, increase of achieve services that of

Unidentified Analyst

Perfect. All right, it That's all you. me. back. from I'll thank guys, turn

Operator

from Piper Sandler. comes Kashy The next Please ahead. instructions] Harrison [Operator go question with

Unidentified Analyst

Hey, questions. is the everyone. Thanks on for for Kashy. taking This Luke

issues XX% growth the in revenues, year first interconnection the if to about be about Wondering thinking year? should it like could we back that there's half of the the that XX% be going As quarter. looks the over sort down in and dropped any how compared far here as to service software year potentially on of

John Carrington

to continues interconnection Yeah, Luke. be problem, a

you in getting seen in like where I true side slowdowns We've business of into and NTP. in invested and I project that York there we've capital of the slowdowns. I New business. some Texas, some think different projects think we've general see in seen think that just aspects where a couple particularly been that's of and one the the Certainly markets on

the which And I but they gotten one consistently think haven't of think better, haven't is much gotten I we've things that interconnections worse. said,

in get little probably York bit a think slower. did they I New

definitely are in couple have there are I new that. time. pause. been And so of us New And think by the a on going there of York, that, an situations over to and rule regulators was timeframes that was have going that's a passed impact be result of to impacted a There giving that some as

But say continue we at and point part, increase in that able in to total to services us, for I software we're time. going of large to in sell the any would amount be

in a about complaining been years, for been So, I years. think day, for with renewables now and XX was the I thinking almost the last and colleague XX problem interconnections same I've that's chuckling the other

at impacting success is being think the is particular renewables any certainly I installed things in time. any one of geography So, the of

it's that to issue, can But work a the tariffs continue they continue that's do partners with our and on regulatory agencies will definitely to local probably So, be. something side, associated what with are to working that long to an folks for are been we has time, the with improve and are the interconnection. that various

Unidentified Analyst

Okay. mentioned bigger. Thanks gross said, of you for know but that. you're getting you are on of That's that, the side, to looking less do projects kind hardware also And helpful. I then margin

larger push should the trying FTM also, projects, and about pull FTM with we how the between but projects? So think to involved be less

John Carrington

exactly right really the comes ESS That's point that's in. the Yeah, there. where modular push

that get integrated, than blocks and call, And systems not the mechanisms we fully they and developer we have the projects. larger, sourcing likely, basically that what are partners those will be supplying DC As would those to relationships. more sourcing

is So and controls, selling less what software, and we're selling going doing selling inverters potentially DC to blocks. be

Unidentified Analyst

Okay. will it Thanks. on. I pass

John Carrington

for the Thanks time. Perfect.

Operator

The question comes next ahead. Please from Kailash [ph] Securities. with Northland go

Unidentified Analyst

just quarter. bit and PJM you a guys, playing market XXXX? that to seeing out guys the XXXX Hey about I speak good and wanted in how little

Prakesh Patel

on by market Prakash. generally solutions the the or we're have a the PJM where prices driving picked around The been focus energy greater corporates one commercial given industrial segment. BTM fact efficiency. is energy Hi, is up. demand for focused strong this There's there that higher, There's

pipeline component there, mix So overall it's the but or of demand there's our moment. good at major booking a not

Unidentified Analyst

resources, you if just was just But open follow-up, as a certified Sure. that you? wondering since about is for relevant I spoke or STEM's ADR products distributed energy are

John Carrington

our very and ADR we have open VPP are Yeah, so, a of number utility of operations. our much that connections with part partners

country. to for that the we've open number utilities different dispatch signals this we using power ADR around often a the very from waves, summer of with been So storage during of these virtual plants heat operate utilities some

Unidentified Analyst

Sure. That's it.

Operator

go John turn over would closing question-and-answer concludes the Please for conference ahead. to back the session. Carrington remarks. I any like to This

John Carrington

third I call, again call. earnings forward us second quarter speaking thank want everyone to earnings we you for on XXXX look and with to our quarter joining during our

Operator

today's concludes call. This conference

and Thank a you lines. have day. participating, your disconnect may You for pleasant

Stem (STEM) 3 Aug 232023 Q2 Earnings call transcript