STEM - Earnings call transcript Q1 2024

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Operator

Greetings, and welcome to Stem, Inc.

First Quarter 2024 Results Conference Call. [Operator Instructions]It is now my pleasure to introduce your host, Mr. Ted Durbin, Head of Investor Relations. Thank you. Mr. begin. may you Durbin,

Theodore Durbin

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

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

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

We slide will presentation a be today. using

Our www.stem.com.John turn the with the prepared earnings call.And Relations at Carrington, Investor our Strategy the remarks. Prakesh CEO, now, the call I'll today Patel, Bush, over are John. will for release call start available and Chief also and be on will question-and-answer website section of Officer, of to our Bill the portion presentation CFO,

John Carrington

thank X joining Thanks, cover afternoon, all in results, quarter turn in first agenda, discuss greater we financial updates. Bill our results us Slide first Slide with detail.Now, will product Ted. highlights. X quarter Then and to today. our and will Beginning on results business our our Good you announcements XXXX let's for and

and continue execute performance guiding margin We near cash delivered gross on principles X breakeven in our We on to non-GAAP the first record quarter. flow. operating

activations. annual revenue of our And we also We offering. pace software-only recurring launched finally, accelerated another product

declining year-over-year recorded were of cash in and achieved net $XX on down which, we In contract the were a quarter and this result guarantees by and XXXX.We quarter drove year negative our since flows which guarantees extended $XX million negatively half targets prices. first a note software higher the margin quarter due up high-margin revenue. We GAAP a services this first first no some accelerating for of foundation against million mix record XXXX. of as the result such solid a this full gross legacy revenue, software we impact have our year-over-year. the It's quarter our revenue the non-GAAP and half had to quarter and legacy previously impacted Bookings is a by driven wins change project quarter, was to as customers by are contract XXXX.In market of not timelines XX% committed, up XX% including financial revenue a solar million. versus battery offered adjustment Revenue first important to XXXX, impacted primarily of to from delivering the further continue conditions, was $XX XX% the of XXXX XX% first on in storage profit particular, the gross in reduction. AUM was million, structure, $XX

of are of bookings past large-scale we tripled to near-term expansion of stages or number projects, As the projects increasingly average has front-of-the-meter storage a X close expected result our over a on in near-term. have a has negotiations timing become basis.Our in size advanced to of the and variable years substantial that project the our

of negative full for unwavering This at flow the million last driving XX% effort versus $X.X momentum, a quarter, to the implemented for year. up in focus our first negative we underscores quarter the XXXX.Adjusted than slight versus reduction a cash full was year on annual XXXX. our backlog focus in came of confident same a most target generation strong to achieving opportunities, CARR, the more CARR. remain year $X our or profitable million billion this million billion to $XX.X proactive to In revenue, bookings on against we which Given in target caused recurring $XX.X the the EBITDA $XX commercial quarter upgrade XXXX.Contracted

year compared revenue year.We our And a last $XX impact EBITDA lower lastly, million the flow prior adjustments, was reflect despite roughly guidance metrics, operating revenue solely this and operating to flow cash adjustment million quarter to and of are improved cash our of otherwise of key operating million improvement. including of $XX the breakeven guidance EBITDA the across $X a adjusted revenue the Excluding adjusted than the reaffirming year, our for $XX more improvement the updating quarter, to and non-cash margin on our over reflecting full efficiency XXXX. base gross focus same million

continue we can confident results are for need Performance PowerTrack Bill for financial details and our issuance. later in today on equity energy our portfolios. Importantly, business also call.We're achieve goals more grow next-generation will our Asset these that to announcing the we clean suite Management additional without the provide

centralizing and into forecasting to available portfolios. dive on foundation new drive our and closest experts PowerTrack software for in hybrid deeper go asset monitoring collaboration Let's X storage AI a Athena Slide and alternatives. and decisions solar in effectively will and of commercial was the customers PowerTrack APM solar can and storage, management the the Stem's of many on product. more energy understand commercial technical impact and a returns. built manage of they streamlining APM award-winning industry gaps built-for-purpose optimization.This feedback impact this for so currently of risks the a enhanced by PowerTrack software solution help industry-leading and suite in is was solution energy customers, providing asset technical with It exciting The storage the for company's dual solar strategies of

This drive events available of the summer be impacts will returns.PowerTrack commercial of and minimize storage and end track to the APM processes, year. and holistically automatically starting at measure sites, of finally, performance will customers beta individual health generally will released risk technical PowerTrack commercial continuously warranty Some manage select to highlights a assets, this be the monitor operations streamline energy individual portfolio center product of on obligations, APM. and

customers interest this, new like and strong currently have for existing exist We market. tool comprehensive the we a received in which does not believe already from

our revenue, market important, renewable cycles for assets.The the by can drive expand CARR the impacting we this avoid interconnection on This high-margin objective to broader our is aligned protracted ARR Stem, because is allow accelerating additional assets, operating addressable For point and permitting targeting existing of last sector. existing with offering solar and will fully deployments conversion. our

annual million principles. year for As our approximately last CARR.Now, an full we of there's the X outlined on in in profit embedded call, to our our XXXX Slide moving guiding update $XX against progress gross

focused leadership position. items: our and and technology extending XXXX, key revenue As we're cash building software in a on X reminder, flow services generation,

XXXX. fourth capital made to for operating fourth versus and excellent by our for our the $XX on continues up the million quarter improve, We and reducing storage last this flow First, year $X.X versus first year. quarter up working versus of grew the cash this quarter of as our well.Second, progress of solar software intensity X% revenue last up X% quarter, quarter meaningfully million

software our revenue, growth Our the logos middle remains due to services converting outlook making annual positive or page.We're progress to customer part in you on of ARR. recurring also good CARR revenue for and the see in

of ARR better in processes ARR our the of The driven help leverages the in timelines is expectation driven improvement new activation is our As by the beginning by partially experience middle accelerate page the since activation also year. storage the improvement front-of-the-meter the as in has of That our software-only product team improved materially to chart illustrates, contracts. market. customers

which remain streamlined timelines field our commissioning our revenue expected protracted, also interconnection approval rates in into our translates have confidence in cancellation software issues.While We faster our high interaction and partners, the are and growth. permitting single OEM a resulting digits, with resolution low of continued customer

the market cooperative and also Our focus paying on dividends. municipal is

a public project FTM as detailed call Ameresco and continue launches first our this to will software-only position will than uptick inside for go in the software megawatt faster months hour time frame our revenue.The accelerate much forward.Finally, cooperative in and evidenced from a that, focus to our Colorado leadership off-taker Bill. extend prior several in the our months ARR deal, cycle. the technology storage going for the I'll over revenue we recurring example, generate will offerings live to May the with of project This booking For slide.With this market product software be recent and XX first significant XXX sites in our typical validates last conversion should by turn I on over as power is with

William Bush

our Thanks, for John. Starting the Page results first X on XXXX. with of quarter

XXXX, non-cash mentioned, certain the quarter of foothold markets, revenue John adjustment of manufacturing as by price approximate frames negatively batteries significantly the made the price public guarantees interconnection we first hardware in of front-of-the-meter has purchases.Since gain late extended contracts gave a hardware markets. on the million we lithium-ion These $XX result price entered large impact in a and contracts their power in battery while and entering impacted As the half XXXX to XXXX those an supply customers market. protection in have into the was due to of fallen new key time in

the variable price quarter revenue the estimates adjusted non-cash in resulted on the third consideration those adjustments protection the our result, tied a of based to provisions non-cash As contracts. in the additional those revenue embedded to of projects.In we XXXX,

million our timelines protracted additional our variable have revenue had the decline non-cash we of prices, in project consideration, which quarter. Given this an and reducing the of estimate $XX the battery updated effect by

operating cash such the issue in adjustment reiterate flow commitment this issued no not not since the to Importantly, hardware our current our in XXXX, guarantees impact on have June price and guarantees we has future. quarter.We any

we consume these approximately price advancing that the actively under contracts subject market current are fixed batteries will projects XX% expect guarantees. based We conditions of on to remaining

adjustment projects, approximately second and the and free subject the $XX these in for providing of year will to the sale flow post Overall, us XXXX. that goals.Following guarantees transactions expect integrate greater valued enable not batteries expect be into and close will transactions currently to adjustment, million at more operational future quickly, this us confidence these available should convert in in we our QX cash are and accounts of to $XX they generation receivable will into these subject QX remaining half close. second transactions in be be We million. batteries intend XXXX cash to which half these We

the will non-cash able batteries or based or may future consideration the those transactions result the of integrate variable these remaining market we may extent are in into continue the the projects we our that To deteriorate, not estimates update impairments. conditions to current in to embedded future one economics conditions. evaluate of on contracts.This We further then more

year, As I over executed have were $X an third offerings and said allowed of attractive us position quarter leadership in where quickly build billion to exceptional we the enter in these a last segment, in that market bookings.

increased revenue and solar Overall due in software first earlier. XX% favorable our was the recurring result us other a year-over-year revenue.And margin will expect margin $XX.X adjustment on to EBITDA in projects XX%. in of products gross track costs. non-GAAP higher-margin margin addition, record gross on more non-cash increased GAAP quarter increase variable the in In XXXX. EBITDA XX% a long-dated gross of the and achieve to negative results. of goal revenue versus revenue.Adjusted an first solar I consideration was was the give to excludes stream mix impact adjusted year-over-year the our impact now, high-margin the quarter We million a The Non-GAAP supply gross was as for to that revenue revenue was margin reduction XX% non-GAAP revenue year. the exclude described of we a up of these keeping and in us down solar was this reduction achieved full of of and quarter, to negative XX% financial

cash a stay disciplined between improvement a for target year-over-year percentage as XX%.Finally, to on negative representing $XX sequential operating cash almost $X revenue and XXXX, and which expect was our continue XX% to a $XXX,XXX, We reaffirm of of improvement OpEx of we expenses and operating a million be flow million.

million. to proactive Slide to a the representing of quarter decrease. compared resources on was flow remain look need equity contracted the We $X.X this focus variability utilize without based driven canceled by or was most backlog year-over-year raise end a review. at The continue by by securities.Turning cash John, working dedicated year. management profile a The $X.X and on and remain quarterly We on profitability billion of in around to effort or opportunities.We end upgrade our X scale due to contracts bookings positive billion utility guidance Contracted of largely basis quarter that strong lower meet on billion billion the capital XXXX, our realized to $XXX metrics. bookings to for increased capital goal million see $X.X decrease and to our operating driven were that $XX a margin expected bookings decrease in quarter and the generating our of projects.As our for the the to focusing in continue working pipeline confident operating now at larger to equity-linked was momentum the of sequential underscored sufficient improve commercial at the to we backlog in compelling backlog, range the to reiterate $X the in overall We goal. have the XX% sequential the additional fourth

million the a the sequential million contract XXXX X% grew hours in from decrease. from quarter down of in XXXX. decreased CARR that CARR review due quarter the quarter in to $X.X X of fourth to XXXX, of sequentially backlog gigawatt as mentioned of $XX.X X% annual decrease First fourth gigawatt to about hours cancellation $XX.X AUM The million, previously of end revenue.Storage the X.X the was resulted

ended gigawatts, AUM the Solar sequentially or megawatts quarter approximately at down XXX X%. XX.X

of XX AUM the that AUM.Turning solar reduction That AUM. As review and performed resulted solar we offset by Slide a to in XXXX backlog storage storage of review guidance. the to small our net a was both a reduction new review, the to and now comprehensive in bookings quarter and part

dollar We we downward reduction dollar adjusting million year are the full revenue this revenue guidance $XX quarter. our for recognized in with

other to key for turn let with some remarks. our guidance John that, me back closing We are call affirming the all across metrics.And

John Carrington

Thanks, Bill. with on Slide our Wrapping key up XX takeaways.

for solidly full flow on with record XX%, cash our for continued of are We XXXX. path building foundation gross non-GAAP EBITDA near and year breakeven the a strong growth. solid for We had performance target margin to delivered operating are performance

of addition, the to profit market up $XX of continue the signing year approximately pace add the our in and build accelerating product asset took a full to our momentum flow releases. in of expect a and of we our organization, activities opportunities.I the strong enhance annual backlog of our several software-only in including our prior of is software trimming uptake software there Asset is most recent announced ARR lower on contracted rate, unlock. our acceleration the with business run strong result by software-only conversion we the We cash generation, addition, in Performance this At Management sophisticated million PowerBidder increase we profitability margin of suite, which excited a XXXX of by the am to key augmented in call, in renewable for focus and of revenue expected Pro. recurring of as new wins, gross XX% highlighted In This trading actions value momentum embedded an introduction the pace managers continued release as offerings in today of PowerTrack further CARR.In annual balance evidenced offerings of of XXXX we is QX XXXX. energy firm. The activation quarter represents substantial our the the next-generation

to which invest in software of is our enhanced We productivity our development Center teams. across Excellence, continue driving India

Stem's our recognition. team particular, experience mentioned leader utility Gerard succession years Stem customer importantly, assets. key the X the part companies McKinsey, I'm the that knowledge. been building also were sector. generation announce extensive Hofeldt building ago, suppliers. hardware been now, was for search led and and to strategy a with introductions, Stem our Stem for supporting evolution that April partners that, rapid retired smooth He and co-founded earnings we've together brings shareholders, engagement effective have and joined industry.Before of in shared company, the robust the We the to AI channel And Larsh the XX. questions, the to questions, in our the of will thank software on software the the of Larsh We call, engineering customers, almost technology new be product distributed initiating with of of his Gerard working addition and continue several driving expect to wanted technology a helped in where last been Larsh on has also McKinsey's the to Technology, team.Eight instrumental for Albert the We growth always consult for the employees, for and he founded please. I to for AI Stem he data to Board to Larsh and digital Officer, position SaaS industry the expertise. at practice.With with clean global years recently space XX. wish all and I launching Technology practice Albert family Board sustainability solutions extensive initiative. most Cunningham to our joined and, line software will platform. want chapter, scale me experience a a path technology, in Gerard in thrilled a let's cementing to we initiatives. particular his best our member global science the has personal I extensive services and operator, transition to SVP And was next-generation transition in who and next business open Chief teams, partner I most a family.During strategy. close as ago, the technology has scale serve continue updates. and, Larsh hired on pace in has plan forward focus company's the for software announce then, closely working of leadership our Athena in Johnson, Larsh shipping a and has lead people April developing software couple together Larsh a ensure product since

Operator

with of West The the from ISI. Instructions] Evercore line first comes question James [Operator

James West

revenue revenue So guess, sight like your really same are curious the these -- targets hookup things and hitting that you of that you've understanding this projects about projects you a interconnection confidence it that. outlined, guidance back-end those Or kept here. Is slip? could is have loaded generally these delays non-cash and have I the delays and on? are lot the charge, I I'm your most mean, in you ex of that guidance given line of that

William Bush

Bush. This is Bill

is the I confidence reason we're laid very themselves. So I goals out. think projects in revenue we've the that in that think for the confident And based

I shifting, there's we possible in. so projects other move agree some also that we could And would it have is while which could

So we've but I with match, to, have have. the the ability got wouldn't mix we and to think the we pipeline certainly I hit the say ability that goals

mean adjustment, that's a bit confident tough it's pretty and we're than to little So we you -- we been quarter X% a a -- we changed. mean quite has have that. number. the basically did a I really I is guided true I long of the quarter time. think number. This cyclical, hasn't small where But like for better revenue always this business are.I first mean, been because And the it Net always

what think I of positive of certainly at EBITDA We on is thing which variation. so about what flow. think quarter. working the we've other on, that more size in only this we're bit projects we're calls.So And I cash trying and to bookings generation we're make is ultimately, focused a that of length sure saw But terms you're that seeing which in is has the changed the talked

certainly, really for think those think, an we where is EBITDA actually quarter. goals was did are that we negative cash where I this operating reasonably quarter, of I Difficulty]. well from us.And So the with [Technical accomplishment are standpoint an ahead in $XXX,XXX

gross every we day, I cash it's it when flow generation, think think margins. about

us had EBITDA really cash course, terms record This for gross non-GAAP super think is goal I margins, quarter, of those income and meeting which we of in important or goals.

out. I track we the think is all to I so things that achieve on equal, able the And goals be laid think business to

James West

stabilizing? seeing I just Are here. guys challenges. helpful, permitting better? challenges follow-up about Are Or Or issues? know That's further? those you lengthen has they How are talking to getting interconnection -- do everybody then And are they Bill. very feel you a see, maybe those as you possibly Okay. about and been starting

William Bush

side seen I can first about became this just that, a sites days.And a I other always here -- problem. within a think on project, I think that particular, I total. at length, megawatt think what standpoint, project, turn talked in we've event slowdowns and which the total in so in we've things a think started interconnection And year, and now of there And sites I on I we've few as there's was to mean say additional actually seen those to last happen been some the some event would But XXX prior permitting well. the periods. have revenue United that system software have on year. booking, hours the X in from that that of a other

of one we've that away business standpoint. -- say an what's from would the talked I less the going projects past things over has the control from So about interconnection the shifting in customer really on say, is well where as the

So really, think which power -- for C&I projects generally of municipal we've in more schemes markets, much different so the power projects have interconnection. news great maybe the terms what not interconnection the of the have.And classic for public is I sure C&I some into than and moved

overall of I becoming smaller But that's think business of a there. company. the seeing we the are slowdowns part

And so to delays. projects how headwind, is negative sorts from moving by that that's those combating susceptible of particularly away we're are which

Operator

Jon line of the with from Windham comes question UBS. Next

Jonathan Windham

bit was you of up sales just help market a I on talk into differentiation storage side just your how if the sort Great. going points competitors. with utility more, you the could through wondering line of and strategy, scale

Prakesh Patel

Patel. Jon, this is Prakesh

ourselves the quarters differentiate we our delivers really of deliver project the better We our we market is solutions. project how way than software provide about that and in software. much using examples in returns customers through for prior talk economics the think competitive I consistently

these as software project push projects. use specify you advancing projects.One with owners projects down the [Technical we engaging approach them directly Difficulty] procurement and that multipronged to talked And uptake this dramatically so and and as developers about the by bankability them quarter their activation that with of engineering the in well accelerated to finance things or Stem or driving the helping fact through storage must engaging firms having asset our a that we will either project of is there's

look of and beginning customers If balance at move at XX% about would in for A happen and lot helping and that year we XXXX, from the that's is you of interconnection the tackling those what timelines a of this the blocking uplift January. thought through an advanced like.

expertise, So differentiated is that software subject really on advantage the matter side. competitive drives economics what the storage our

Jonathan Windham

we And Is the you through is it. non-cash in The it reduction I if -- what's mechanics Got in me, well accounting like that? one question. $XX -- know of what would as the quarter sort third this million -- the allow charge I have receivable? a just of went accounts

William Bush

That's in reduction receivable, right. revenue. Exactly. It's a in accounts a reduction

John Carrington

the adjustment everybody year -- is Carrington our over those structure receivable software revenue. there we is a market reduction give scale that enabled to hardware to did as this, this XX% everyone. kind our we drive this that deteriorating was rapid value significant add billion add, to would this market think guarantees. accounts an project a of contracts And also remaining important customers the of I significant just John in quarter revenue transact focused about second this -- to into of result And me give legacy a contracts third to will explanation recurring conditions, the cash. but executed and let been from expect updated values in on We've resolve I the growth close customer set $X to have to these resulted of to and it guarantee component contracts. hardware.So those in of subject And Difficulty] [Technical utility the on quick of Yes, level of of the with and

I point, to if So that please. want just I add could,

question. So let's the to go next

Operator

with Andrew line from Next Stanley. question Percoco comes of the Morgan

Andrew Percoco

Or first, this quality these start creditworthiness? credit to with And guys I maybe to wanted cleansing second a with just -- there margin would on changes was or it to additional the I customer, still underwriting projects few just effort could there Or kind follow-up here? of questions then, guess evaluating are And from Were And what's to guess more that are that -- were attrition booked? the are guess, that effort? backlog guess, I a I changed? I backlog? be, you doing. this the be related profile? you underlying you when done

William Bush

I start let me think first. question So -- the last with

is Bill on So this line. the Bush

side. cleansed We And I think mean us the of that in that one would components the a the outcome. reviewing also the we constantly But the we're done year, say X.X positive on I are done. driven EBITDA I deal. mean, years this lot AUM those we've is solar last a towards of things just have of efforts. I

things a projects. about of done ago, year a terms we've in number just Now of

believed projects determined make trying got projects that they reasons. the we're we've that these in maximum to so were we of on, were territories And low that customers that have business. didn't concentration, really where they be working leverage always either be for a We sure or we should to leverage weren't or had to total combination the company in margin profiles, the enough that backlog.And just non-core

And so leverage sure generate we're business. make pretty was employee But of cash reasons. have we trying projects for on to And the to the there's effort across that a it different our a across which base lot work team. big maximum

work. of the really that's all so that And result

John Carrington

that lot markets I well. these didn't that of prospective see as as areas in we think add, that were Andrew, I'd a scale maybe we could

contribution cost And one-offs, on serve. focus, to those much So margin. as Bill high mentioned, around getting very very rid of the

Bill do that So it was is the business. complete. project the to said, right as for And thing

Andrew Percoco

Totally Got makes sense it. then.

for strong my quarter. an But basis question And were the be on well would typically just first low Adjusted the full And the range pretty of adjusted on I in above think given guess on gross -- second your as quarter then your volumes. Okay. margins. margins were I seasonality year. would just guided and the margins point,

for just think on So about as the well? margins remainder of flow cadence us year can the cash and you help the

William Bush

Yes.

I margin So strongest. for quarter first been it the true gross as think is has typically a the while,

at you'll year ended were last recall XX%. the we We a total So year of at XX%.

small we're of a year, we of trending from like total of standpoint kind -- obviously, this we're the is direction So but the in the feel margins. right part relatively again,

than higher points X X, were we're last year. So we

have And higher so we you have year. you at the X confidence when for started do XX%, you doing year, And this were year, a to the folks to comparative that that on basis.Last starting XX% like points the -- guide," "Hey, full confidence things XX%. ability gives that at we're that say, in went in guide,

So we is defensible. midpoint the feel of like kind that guide of

So that. see is the pretty ARR a talked a about expect margin the of more remarks his the the product lower-margin more total rest Obviously, we going we is the of decline. mean the about that business CARR was part to things software. as increasing.One of ship we in I no we're a there's But is to prepared And lot doubt than of that as are. software cycling. The John in year. of hardware, about to where good feeling hardware sale

number were maintain build of on sequential terms. at a guide in and Are like that we a can we've when positive for things a out and cash coming us. really And pay you those terms fourth cash what had definitely position. And we cost ]. -- that are basis, in for payable typically, that we starting of in business? about think margins, we've able about there's as the accounts the talked to defensible we there about of the you on? we unusual of to had [ our working receivables controls, of the which of you're EBITDA all profile. And out will And million flow pretty stuff, the really So flat length feel think that projects I mean, lot I you're a that's as the fairly collect number.I where that cash number quarter, mean, total you're that cash understanding the feel like we is up is down -- hardware, flow $XX about all think -- given end the is those thinking so like positive

at quarter of So But and would is say it's the we have goals first year. look because part out are that laid the a in we when small we where it achievable. I we've always in what the front are total hard of us,

Operator

from Thomas of comes Boyes Cowen. line question the with TD Next

Thomas Boyes

to and advantage new customers Maybe address of the into and the first kind storage at the ask XX% some around, of Is of were that brownfield of storage. more think, it for interconnection requests the queue solar looking just of is to I exiting the kind wanted the I primarily I one, see for first PowerTrack kind year. key take leverage The get capacity both solar of flexibility as opportunities? reason great strategy all And it's insight for goal XXXX, to the is go-to-market exiting just hybrid the solution deployments? the announcement. deployed to to maybe Or with

just you wondering were I thinking So about that. was how

John Carrington

Tom, we I'd is a asset John PowerTrack Yes, suite and the Yes, portfolio. targeting really hybrid software-only solar that are really in energy the management solution say it's to general APM of here. help storage,

India And doing these develop types global And about to it's a all to bringing global pulling that you customers, across job, have customers you developers. of development customers to that said, asked doing really these that demo It's and something we network available we got is more software-only the of want that by products.We're we're and far much variety board. of our the doing us market. talking particularly again, the And of specifically that customers. excited the we a not year. to more around in to different the APM tremendous this the And as it's team as it at a PowerTrack end our we've add? available projects one Center And then another what Excellence, our summer. that market team is core have -- as out today. demo whereby had as of broadly, have focused think that platform that's Prakesh, in of much to And interesting. build you interest available customer that is missing what So back is a a something interested voice the quicker Stem's we'll Interestingly our void. uptick multiple of filling really the have enough, about at that and getting aligned in

Prakesh Patel

Tom, this is Prakesh.

As far -- storage as example the a existing market, is another storage assets. of definitely, in this solution can that operating work

applicable brownfield for as it's So newbuild. as well

approval. for waiting access without software for us So interconnection services it's to way growth another

Thomas Boyes

with And on a color just dig transition that of Day? customers to from an not up making bit this Was the initial appreciate that was are exiting -- the of solar hitting Great. this -- kind Maybe around higher used? those up even legacy some that in the there. had you've Analyst Or I wanted pruning for new AUM threshold just the ended decline. of that the the contracts business is you profitability really kind I not efforts

Prakesh Patel

subscale again. out what really really screen Prakesh this of, would serve? was especially the then lower are cancel And those other is tie a was any on We unless capital? -- If and side hit, working that very -- of I to opted would additional customer, it are it's took it's margin one up strategic storage there Is difficult agreement. And It's hit this earlier. flag on it Yes, true we laid it is customers thing that will what a reviewed. then -- and we contract? to that a Bill

So that's all this drove really what activity.

Operator

line the from MKM. Justin please question. comes ahead Mr. your Clare question of with with next Our ROTH go Clare,

Justin Clare

hear you me? Can Yes.

William Bush

Now can. we

John Carrington

Yes.

Justin Clare

Okay. Great.

Yes. that. about Sorry

to the just wanted on about impact ARR. I ask first, So

would you on took the it lowered year. have if had an would if anticipate guess, flows year seem this of impact legacy would you value within it that write-down, hardware the anticipating So cash that collecting the selling the ARR, and you essentially I been

year offset essentially does an are this? impact would cash the factors and that for is, And flow impact the guide? offsetting So this on there an have on your the question

William Bush

when I we're durable from think always I I a is So think margin mean about backlog look that really at saying the backlog, is. standpoint. mean, what a I by And how generally, that taking

to quickly cash the velocity restructured I and the I -- what's placed, we're cancelable evaluation looking these targeted from that are So billion Like, as -- flow to when that. did I which projects to such when -- think to for particularly, was able the And project, guide question of flow which at we're that piece, deals I at project, of accounts in we in the associated we it. that market position. prior are this hardware, the associated Ultimately, really -- velocity it are bookings. receivable? cash we that being the a a good backlog PO $X.X looking -- able that think situation have how create we you that then think starts $X is, if are at is then timeline what's yes. reaffirmed the in the flow the better what's the refresh with a of we really the can we profile we've higher.So where the going And collect on first that's can so customer the a I the those answer think, with think And positive think, of projects? is, standpoint, with everything. margin question a gist we're I with total really that be, billion so And I cash environment?And is we to can think is

going that projects we're are the for more business replace went so And backlog away. that those to favorable which we with think than the

Justin Clare

then being And projects. sounds just it with it. the on Got is -- so one Curious of like maybe legacy more. development it hardware, into Okay. incorporated some

in? And stage then expectations? a projects? part that signed your And of flow those for what PPAs are for planned XXXX? effectively are wondering is Have projects you so those those cash And sale in

William Bush

projects are this those flow they'll this to -- XXXX. about of year. sold the expected COD going some in year. in most when cash contribute development. they're COD They are will And the will In to think but this those, probably year, cases, definitely profiles be cash to year So projects next we

Operator

question is next of line Goldman Brian Sachs. from with the Our Lee

Brian Lee

the so said things you a have at hop to on had of couple I calls afternoon, missed around I a of beginning. couple this might

these So apologies advance if are in redundant.

range profit kind are to what the contracts contracts. kind get that of hitting backlog? low-margin for of -- canceled canceled, called what threshold keeping between trying is and levels? sort On did Just the delta the a of you what sense you target you them of in you specify the What's not you your of

John Carrington

this -- I Brian, John. Yes, is

for below of the be the And we the of would scope mentioned. one think as I that thresholds, be of that the ones kind targets gross that out I set margin business. we to consider was

to of I the think sites is compelling. at the those costs metric company. Des megawatt outcome total installations looked Iowa have other important really for great kind spread XX component what hours in what out be it we may or you that is, To other would do a or actually not to enough make Moines,

critical legislation the change lot we of I change. market. we could thing lens a I we with state where mean margin to is that if could there the states changes, markets at we certainly, this very of go mean flexibility guidance looking because at.But have if move had and obviously, local to in massive looked supplier. nice a another model certain then, way, was align back legislation, about contribution into customers a their systems. the that So And we're multi-sites quickly have our things these that and variety by preferred is

where go dynamics wherever can favor we So contribution of in go, to we that change the equation need earlier. mentioned they that market margin

Brian Lee

that the your market that But need you consideration, contracts cited of these $XX maybe is That's it Okay. be non-cash follow. Understood. mean, it some time of outlook could to potentially KPIs impacting I obviously. some there's revalued, might of investors I you've kind And another second be seen million still the in and helpful. terms then of revaluations, think hardware the also then And this. of on

or pull the year, potentially actually just Is balance you you able -- high taking where you still another year.Do to Or the So feels a to early of what's of on take of number the to point revenue still trigger this you of decide it Because have confidence level of thought through more can process? identifying does Whether risk around again. the being process get $XX if the to headline outlook the kind on not? left next you're this auditor that this like out decision? out numbers remarket thought it get an a those? of year later this it you have million to subject

William Bush

on components. Bill. quarterly we all of taking When a variable look the looked consideration basis is potential This the a variable consideration, constantly we're at at

say the an only We any continue. the into not and about to value we a the how other just I while that what's make news decision. mean, math, project, saw the do This equipment, consideration.So robust would integral really When think course, and interplays portfolio is the way did that mean decision. is the to of it. So I of is underlying the I on it's projects going that. adjustment will equipment that storage the own project we what implied side I going management looked not analysis at we we an determined as were you ultimately, like mean, to that we need auditor a we have in factors. Because the revenue that other of is of part good question, of an projects. variable

I and you with of remaining But certainly, disagree -- equipment how equipment into. market that or, think there So current that so of can And which I wouldn't the market in say, a valuation it the I we that's that got risk the is place equipment. more mean $XX we've projects million we I analysis. did the the reflects for conditions. of think the -- portfolio

And so do we're that. confident we can that

Brian Lee

last me. one for And That's just Okay. helpful. then

a issue. So it legacy is

at out it and prices -- with continuing are there is you're peers lithium some you're come and battery management pricing these what the now? Could remind some it strategy How to strategies. after you're not $XX that of -- with shouldn't the index-based have anymore? pricing we volatile, remind the your because hardware guarantees for legacy us cost RMI capping if to other projects on of it's fruition. going remain and nice does you going you million to implemented kind it the Could side to market doing you like they've scale So us -- larger

William Bush

Yes.

absolutely you're correct. So

not guarantees that like First, we anymore. are issuing

in market the actually gotten become them. last you and the the -- months.And starting a battery I little index. so distanced almost on index like in -- since the mean then think it's the say, from it, -- Since but since contracts, been I increased couple we've is So that's follow we here I did March really the maybe super of market that XX%. of prices while into impact really to it's the come of the last that been lithium there's lithium of how maybe though have I we've [Technical see that -- mean, Difficulty] you one don't if things the has a even almost closely short in, in because X seen lot months supply and know

really However, gotten this have kind were time of time the across of been pretty say during past.So they -- same manufacturers of would have variable have than dramatically which valuation conversation frames went battery the before. period. the delivery all aggressive having prices the into major And declined in we probably that that more consideration I

you projects "When just equipment, or that willing were things the buy more and year really maybe to to I when them the from one our sure that for -- were than is things had like, just customers the we've folks think we've difference ready. they when make done of which X ago a So with gotten close really a let's" is said need

here. Now the be is in installation exactly ARR, reflective should batteries happened quarter their speeding up they think, news, kind people dates, buying I One, holding X more conditions. off CARR actually us of the when good of the is to which to because market delivery the the and the things see you are a of going is are for to what are closer equipment.So battery first need happen. And purchased that going current to

starts the were one used delivered events how depending but -- FTM basically, folks do bookings straight that mean, to we're moving when so the really the of changed is revenue really be is to also -- I we've think one from of from I conversions we actual FTM, -- business that following type -- to to you're now think really us And long on we're company, of the the been things I the to that kind CARR hardware when -- be quicker company. working. we're a when model we it is the to of where and shift going hardware of trying So both software quicker from that have from pursue.And BTM things seeing

there's think revenue for particularly really us, booking those our the to from software quicker conversion is frames so that that's shortening on such And I a side. strategy, time and

John Carrington

And about level, XX% I we're that think a for contract XXXX. from Bill? right, Is about

William Bush

Yes.

John Carrington

ahead. Go Brian. Sorry,

Brian Lee

going appreciate I I No, was additional the helpful, are all to say that color and too. percentages

Operator

the of from line Partners. Joe Guggenheim comes question with Next Osha

Joseph Osha

we've I just to of could it. if want tossed I see of a I but kind around, lot wanted make I understand -- numbers sure

exiting a CARR year conversion. $XXX ARR We about the $XXX talked to Now, talking million. lot CARR to at million about of you're a

an So annualized what to end ARR, $XXX at of the rate, run terms year $XXX million in the should reflect think? of that million you

William Bush

guidance, Joe. given we've think don't specific that I

stay from I'm that away So I think answer. going to

question. apologize I'll go and your so next And to

Joseph Osha

of is know all least, right. we we -- -- about the you how is assume talk mean moving, improving. that improve? the one this a I ARR Can a to on right? call give is but Can there's been the is conversion the see of lot Okay. there And all can that conversion not. think Is right. the to here -- I Because signpost do metric -- challenges chosen at us of CARR going you've rate I I lots about

what can that on try guess of give our and a at least So own? you signpost kind make to with us

William Bush

where had -- numbers, fourth think of Well, we graphically we where showed specific of had and ARR, kind -- presentation, give a things I so certainly kind quarter slide laid didn't CARR were. but kind the in of around we out

one think was, of was the I million, we half which the had number things around that about end generally when have we of the IRR seen XXXX, or so. $XX as CARR so of of is that And course, the of

is higher And so the to percentage. of I trying as a number that do things one we're get think that

And -- is there moments of to or increasing conversion. few the so to the you ago call that numbers that a CARR gave ARR fact rate credence John the give an gave

Joseph Osha

Okay.

the working Second down terms question then, of you tied capital showed nice like in in of receivables. quite improvement it amount a to XXX. up Sequentially, was

to trying think to of and everything How here? about this free still up $XXX think should to I in bouncing significant million? I a amount cash the Are number we going along going additional of Or should Just where about mid-XXXs? we receivables that forward? kind low terms talked kind of trend forth, you've in $XX the so could improve number like wondering of to back was the it like in it where and given about 'XX, was million cash see how of velocity

William Bush

Yes.

$XXX able we've think that in to was I it pretty be receivables I talked quarter, like bit transparent And I to number we million. about return just million last by number. little I mean, to a we $XXX around that that over call, been balance over reduce -- cash mean, and sheet. the expected the think

you we on reduce get to raise receivables is "Hey, a lot we that's probably number mean that And you're about. heavy time is I of answer way the mean, really target mean, the important -- what an number million I I side. mean receivables for probably will period a to about, got I the talking depending of is think of have saying of goal year I questions got $XXX for -- And a think right million the that's like, us.I we between by to kind that what that's depending sure, for our that.One time the of $XXX we've us, So I cash?" distinction.But little our that consistently the and be raise on on cash. you're collect talking do that receivables.

of of the million. decline came been by well. $XX think about, as yes, the this Net spots down around quarter. So adjustment AP that saw I talking we that did receivable first we've

think I make year. generation so the million that And confident And we in from going right the we a number out laid cash we we're $XX direction really that feel that can standpoint. for

Joseph Osha

to casting aspersions. wasn't was Yes. just And understand. trying I I

William Bush

none taken. were No,

Joseph Osha

And you helpful. said -- that's

showing a with inverter solutions that's Sungrow, Are I'm and $XXX a think and you So million. -- Canadian we sell hear questions guys of software-only represent And self-integrating helpful. this up -- up customers -- the you $XXX to these as last a some guys you opportunity that? some for my well. CATL these to that kind call combination, I part is, Yes. of That's and think and potentially we're And million of all Chinese an your lot about curious. business guys more then directly? BESS seeing as Does show lot about question as hearing alluded of in we've

John Carrington

here. John Joe, Yes,

I think opportunity is it an for us.

Modular would integrate to the either of need could system. the example that they're their offering. ones certainly, is mentioned, good you've ESS for -- or into us have we've a that suppliers Stem Some names existing a that

breadth these of And the recognized the I is the by you're So track. think platform on being Athena I think right OEMs.

And that opportunity. so about we're excited

Prakesh Patel

is this Prakesh. Joe,

CIP, utility our these good contract provider standards any the with software, this and security OEMs guarantee have us actually, other to a a presents other and and we've first national partner -- lot operators worked there's with no increasing of opportunity and concerns where for U.S.-based highlighted by was utilities One a with NERC storage use -- Chinese the to Stem. of can of compliance company grid OEMs, -- the cybersecurity you is things it largest

a of of as [Technical a to us credibility opportunities set lot have we Difficulty] result. So for

Operator

Next question Harrison Kasope the from Piper comes with of line Sandler.

Kashy Harrison

me. for X Just

gross to year-over-year what the improvement? it GAAP well. think and better the margins gross services. quarter-over-quarter the a that got on for of like as sustainable is and margins was how software bit looks I software you are? And Can one First driver speak quite current It

William Bush

i.e., I older, of think first. off. software for online sustainable being think systems fully of the a is principally, and combination coming we newer, call, We is couple customer reason But it contracts that host while the what the within And it's effective, years, falling the last effects. that growth the

the think is other impact part course, of services business the it, the I And solar of continuing. side. of in is the on mix the that growth the continued so And part of

Kashy Harrison

a it's that's big [ the Got $XX.X on pretty ] still it's it. But get million. That's helpful. I specifically lumpy, question million side, booking And then last my $XX.X year. next FTM. is from drop that the

And this you you seeing the some could market? with I you from so I expected? what you on was Or away And what line just wondering with quarterly change if context shifted about bookings. this in anything share bookings was Are in know quarter. happened

Just great. any on be of the would sort color market

John Carrington

a Look, lumpier here. of say couple things. is for I'd sure. It Carrington John

storage front-of-the-meter the It's incidentally. we saw As these timing of moved what I certainly First the have expanded into projects, larger when bookings exactly I around. scale was Solar at

substantial we that negotiations size number the near close And past to are playbook of projects this X stages earlier over also or that mentioned has project term. years. a of And Bill seen expected I have tripled our I've before. that in so add advanced the would And

about think it's in metric total remain get tough and achieving bigger confident we year, we target billion -- just a quarter full the the bookings I landing on you feel mentioned, our $X.X every yes, for projects. the the is commercial to momentum. we as as So And good billion year. $X But bookings plane bigger

Operator

at the no are like closing John to There would turn this comments. over questions to I for Carrington time. further floor

John Carrington

in joining will want for speaking call, second during earnings Thank our our with you, call. thank August. earnings take And first Ranju. look forward we everyone to place And to I you which quarter quarter

Operator

concludes you. Thank This today's teleconference.

you lines may time. at Thank for participation. your You disconnect this your

Stem (STEM) 2 May 242024 Q1 Earnings call transcript