STEM - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the Stem Inc.

Second Quarter 2024 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ted Durbin, Head of Investor Relations. Please go ahead.

Ted Durbin

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

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

comments Our also financial include measures. today non-GAAP

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

today. We will slide a be using presentation

Our will earnings call www.stem.com. the Investor our the John. to turn Bush, release John and section at start I the will today presentation call over with Bill are website and CFO, Relations on prepared Carrington, remarks. CEO; our now of And

John Carrington

afternoon, Thanks, our and you thank Slide joining all agenda. with Beginning us and Ted. Good today. X for

our cover will will recent Bill updates business Then detail. We performance. greater financial quarter commercial second in our and discuss results, results

to Now second Slide quarter let's highlights. and X turn results XXXX our on

results customers' extended financial lines. million were expected, disappointing. than lower unforeseen second in delays financing by due quarter $XX to substantially revenue, caused certain was of primarily project in This extensions interconnection We time approvals. project and recorded the Our

quarter in delays mostly are $XX line revenue, largely million. in with although industry. expectations. We storage were project impacting was The our seeing in hardware services and our broader the shortfall second the revenue was high-margin Bookings software

revenue USDA project tied margins XX%, were impacted will projects delays QX XXXX, were by These sales further to recurring non-GAAP our negatively flow stemming point lastly, Our our significantly significantly Contracted with a variability due second complexity. XX% margins detail $XX first increased expansion the to improvement protracted were from year-over-year quarter This were representing to project gross recent XXXX. the the financings, sizes customer cycle deal negative impacted over relative as first in the quarter, million larger up due cash CARR XX% gross and the non-GAAP hardware improvement And and margins and GAAP annual operating in average discuss strategic Both last and low percentage of into gross we $XXX this today. in also versus but resulted double-digit our in lower-than-expected quarter. versus same market GAAP storage bookings particularly funding half up large-scale increased the was of the revenue, has was bookings. of has the million year. relatively XXXX. flat quarter quarter XXXX a to

We are call. revising portion guidance to out provide reflect details his more the lines, of planned Bill will time during the push project which of

Despite Turning to right headwinds, we business remain the these side the underlying the fundamentals. of in confident page.

a XX-megawatt project co-ops or revenue, shift portion munis, revenue. year-over-year and shift XX% We ARR. services megawatt substantial Colorado, of to drive result assets in accelerated of of adjusted flat performance activations towards with XXX a with along approximately made asset growth to with $X to Ameresco in added combined management quarter, solar with We leverage ARR. XXX-megawatt focus recurring projects. annual year-over-year. our example on progress in includes mix great quarter, software million this continued deployed continue hours which operating This relatively larger of of converting That decline an results storage solar our CARR our and the greater pace strong software in Arizona, deployment leverage hour a significant importantly, despite operating revenue We EBITDA a is over of a in the hour of

acceleration improved platform progress should leverage drive flow road of positions map ARR solutions. and optimization, our asset for customers for edge to to our in we advance advancing technology management on this continued operating And our and offerings software offerings. cash software services continue as in with This generation quarters. continue Lastly, significant the standardize next-generation company future

On into impacting currently the we'll a next factors take Stem. deeper slides, dive X

go Slide to X. Let's

X full we the public shift, built we the sophisticated market. share service these them in this as software the market focused power XX% on Since in our growth power, large-scale the for Over of FTM we've including value customers public fastest-growing stack to need segment load of about segment manage years, past territory. the made help offerings, the strategic their

did we of customers' not our the USDA anticipate receipt delays recent However, in funding.

financing a none project Specifically, of guidance time contract of our guidance our PACE and turn, seen rush driver on out to funding. USDA's bookings significantly delivery lines created the XQ ability impact have vehicles, this we projects, our primary our review and have munis to canceled. adjust for been and This has our has hardware of the which In we projects of pushed decision distribution the around and to that to the this bottleneck revenue. impacting secure customers' new the impacted which bottleneck era co-ops built in XXXX. I like is emphasize in would and balance

awaiting some delivery. scheduling of on are awaiting and contracting hardware projects are Some

the improved New these continue issues. to our and lower action of for X Please evaluated economics results prices. factors turn from to upsizing being public projects power Slide for and impacting the deals due enter pipeline existing battery USDA and pipeline our discussion plan are a to to financing address

key On risks. delays, policy-driven facing we interconnection the the and prevalent X space. delays side, see today, across left-hand the the are renewable issues financing are These can issues you

issues. taking to right actions these the On side, we the list we're address

deepening and batteries are optionality manufacturers our U.S. engaging policymakers. to with more We chain base, of customer and our include diversifying supply

efficiency laser-focused are across plans and evaluating we Importantly, controlling the expenses additional are driving for on organization. operating

quarter regardless building Despite As deliver our continue in activations are gross a margin software of impact we projects through of factors and product positive drive in these our operating delivering to at backlog, lower are leverage accelerating revenue launches. significant push cash clear, can the to we outside second To the performance but that, to indicates plans our committed be EBITDA we level. of flow meaningfully control. anticipate operating positive

I continue gain to will in traction, which moment. also offerings a software-only Our discuss

Now Slide update guidance. to X our moving an on progress against for

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

First, versus our operating cash of flow to continues up the year. quarter $XXX second improve, million last

quarters. on capital net We X continue reducing working decreased progress our for has solid to make intensity capital and working consecutive our steadily

We our details following CARR-to-ARR Second, versus slide. the and the we'll revenue quarter, on million $X X% for X% this and this this solar progress up again quarter of storage grew software converted of year. more on provide for first

fourth and are demonstrations with existing of features Pro, At APM products PowerTrack we stack new enhancing of technology launch conference across our such will as or Third, RE+ the our in System, year. EMS in latest PowerTrack advancing we Management PowerBidder the new products which product will our September, the this quarter APM, Energy provide and offerings.

closer a Now let's turn development cadence. we Since Slide QX. this X our high-velocity in look a focus year, of the at to software stepped for beginning progress on driving development our software up

leadership is X. work tools services to product and hardware enhancements new OEMs product storage we advanced that and the design continuing increasing these key offering takeaway our their are across operating areas, improved APM to Slide technology to additions storage here with projects. high-margin revenue offer to have leverage. continue annual the energy The solar and Please our deliver energy fuel modularity enhanced our key unparalleled across for next-generation recurring and our flexibility significant integrating teams customers should including expanding and simulation to projects, software PowerTrack and features in Our turn

the second made During progress substantial we revenue, and in recurring ARR. storage growing our quarter, solar annual or

across and to systems of activated deployed customers Coops foothold scale company's regions XXX use markets, expect of side, On projects online. and brought diversity the increasing We imminently. cases. new X storage of bring we assets remaining that Ameresco Indiana a megawatt sector for like the megawatt online customers, the in in were growing more public Colorado hours X power deployed hours We deployed space. assets utility XXX of and and than We assets with

are more of and storage total AUM increase in quarter's our ARR. than to This a significant equal deployments X% contracted

the customers use including ARR bill ancillary optimization. meter of cases, storage high-margin continue In front utility quarter. to and of $X.X total, we behind storage optimization We in and optimize and revenue assets a of the variety meter capacity million energy, across both the for activated

a As significant power margin at expect we've source revenue interconnection software quarters, is in industry-leading earnings recurring contracted We approvals, more our drive prior highlighted than of we annual half of reached has customers performance. yet continue this which to believe to gross sites. achieve these as customer our not activation

an is active ARR of We large quarter. Our solar solar second ARR and base added business business our today. predictable million through source its another profitability continued growth We growth. of consistent the of delivering believe in $X important its

look that with growing positive the to our Slide device. performance edge turn trends C&I a high-margin remain take management Let's XX hardware a closer at for business. asset revenues in leader services steadily and solar market in software, We to

pointing for significant remains customer but to Our opportunity churn, potential untapped high, growth. satisfaction today, and customer we wins market a an internationally, have recent driving low significant growth see we where lower share

Our focus market large outperform to gain rates. and consistently customers on us more has allowed and sophisticated growth share

will over X side grown can we year. the with As significantly right on that, XX top call I you past page, Bill. to now turn the over the customers have With of ARR the see our our of

William Bush

Thanks, John. results on Starting quarter the of second Page XXXX. our with for XX

revenue less capital year-over-year through as working this the sheet. large mentioned, John quarter, balance revenue hardware because fund was lower-margin XX% down storage not As hardware part realized sales did utilize company its to we in

to instances have to drag payment capital satisfy changes result, terms lines and may hardware working discussed, there modified to be time a these we new as we requirements. some the our As product on of eliminate

margins about You quarter's have the a this for talk shift company. services, preview software our heard vision us are longer-term and our and to of

highest history. we margins result, non-GAAP gross the As company GAAP our and a in generated

approximately As demonstration that our we expenses control, continue to sequentially a and maintain we continued operating cash to on by X%, expect of cost decreased focus. focus

our of we've generate As recently permanent the which savings annual savings we've reduced approximately million. an footprint, example of estate will cost real $X implemented,

which In our as largest operational assets, costs. to our and reduce costs cloud addition, X continue we those data percentage a of are com of

outcomes. million on a and testament to As $X Adjusted EBITDA we is revenue continue advance are services to driving under efficiencies focus software revenue. Again, $XX cost year-over-year which improved controls, EBITDA increased continued reductions to and nearly and year, despite leading positive down was our a basis, the on in million this flat a leverage. through will decrease cost just we operating

million $XXX generate We in States. reduction made in United charge. X% performance in adjustment an from our result quarter a and the was to with in an our the the Our strong approximately goodwill of the share gross near-term decline margin to solar and adjustment market impairment business guidance. balance up continuing year-over-year our The a is market-leading capitalization

so around purchase operating to over goodwill we and capitalization. our Operating flow in continue of cash becomes table software our so capital backlog. approximately note, the asset solar last that turn well the million quarter-over-quarter for above, been $XX was perform this contract invested in equal in balance the the change entire is backlog to a have recirculate year-over-year. this software major those would for larger on in Most Please quarter. $XX flat contract, was million businesses driver activated Slide modeling roughly which last $XXX The quarter-over-quarter based usual the the not falls business, negative business of decline and quarters. reconciliation the to level than DevCo and investment, a earnings declined market as working If revenue our in the of While continues adjustment but reduce the services $XX was million you the because quarter's XX. systems the carry the storage main which from value On backlog of $XX in when out improvement will the up as the bookings on as high-margin side will the the This analysis a see systems future we XX-year quarter, release. of performance. year flow Backlog usage. negative operational. in a the to particular, million quarter, many resulted noted We low cash was consolidated of a million

you as But CARR by It and as generating with long-dated turn was ARR thing. for our more the AUM see a us quarters, systems about you X% in flat As to means we guidance. improved the systems. coming now for quarter-over-quarter, backlog. higher and storage contracts that metrics line, will storage that ARR activated activate we the XX is both think about flat on Slide our business. software CARR you gross the these Bottom course, should rely relatively revenue in high system and declines of more sequentially of potential as Please margin. software is though revenue was relatively revised for well. good solar

As to full revenue lowering John as to expectations our mentioned, we quarterly and guidance updating million year well. are for million $XXX $XXX our

that many been recognize this disappointed high-impact projects been the we XXXX, pushed canceled. of are projects out but expect to no year to We have have importantly,

been pushed number funding equipment due of and the including out As availability a John mentioned, interconnection USDA unforeseen projects delays, to these have issues. issues, permitting,

and financing software and of services to have has the locked range of low strong storage and and momentum. have projects visibility revenue in, the We good the our we interconnections into all visibility end achieving

We we less lower-margin to revenue. gross XX% hardware are year margin full XX% recognize our guidance to raising storage as to

tracking Our services the software what revenue the expected year. of line roughly is beginning and we at with in

lowering also a bookings are $XXX to million We our $X.X guidance range billion. of to

remains year, are we Our tempering grow. our to and to slow the healthy expectations. year start But continues the given full pipeline

tracking profit million. in to now because lower from revenue are dollars, our delayed which and using We those of of million. products contracting to guidance the year-end Era standpoint a delays programs expect gross the been slow also our $XXX large These the have PACE several Because approvals delays. due New to we are $XX range Also, million of million of EBITDA lower funding actively to negative bookings $XX contracting the projects trajectory, are lowering and range in process. we $XXX CARR or USDA negative a either

liquidity expect levels. Finally, raise made believe balances $XX our while and to year. cash still declined reducing sustainable sufficient operating the business the accounts do to balance, this receivable expect we million to equity. have inventory million, in approximately $XX operate we generate We on flow good positive progress our not of which quarter We maintaining at over

made progress buyers subject flow quarter. close discussed we cash transactions, also that battery out to last Please we improve. price finding those And to We legacy guarantees liquidity the on hardware Slide as turn our for and XX. should the

EBITDA. On side, right-hand and key the you drivers see the can revenue the adjusted of reduction in

interconnection of remainder tied the in X/X to their factors. For revenue, delays reduction of other and the is around while delays set funding, driven by

business, EBITDA these factors is EBITDA to similar, impact seeing are roughly has For and out positive for flow headwinds, they margin impact revenue. a still projects we of contracted still and to on advancing come expect them in are of push Despite although the Again, some which revenue as our generate these than these high-margin greater year. and to we generate cash the we fruition. operating expect DevCo

future. margin, to We business accrue to our continue significantly Slide fundamentals are At on leverage the factors to our John the intensity. XX. believe providing improve over working actions should work and same and continue will control, their minimize reduce will impact the continue factors to time, to the move have forward. our to minimize working business expect and you continue Please see the we the We uncontrollable usage in we non-GAAP strong, reduced capital earlier as working gross under the mitigate discussed which capital as we on to our right-hand we turn year, operating side page, of to capital underlying

some growth that, multiyear call the the outlook and John closing managing back for me maximize let profitability. to flow remain remarks. our positive and are to cash on With We business for turn

John Carrington

Bill. you, Thank

Page XX. on Finally,

activated canceled. CARR-to-ARR financial and software the perspective, core delayed, our of projects hours quarter a While in we megawatt a and most company, saw the was storage company disappointing has are been projects focus quarter storage from quarter this We in history best XXX we gross and activations a our conversion importantly, not recognize on the of over margin.

on EBITDA operating relatively X%. cash was reduced leverage Adjusted while Another key remained continued EBITDA guiding quarter, by generation. our flat we cash expenses revenue year-over-year, off the principle In demonstrating execution. XX%, is focus and flow operating

Our working up million and Based lastly, of quarter-over-quarter capital year, generation we of expected required driving GAAP be on ARR for remain no like will to X% fund cash that gross And was $XX our would $XXX equity flow business. and announcements. new the the and the non-GAAP today's we balance quarter-over-quarter, XX%, confident discuss briefly to I leadership now net year-over-year. respectively. million XX% record margins reduced

As on the you extending leadership growth. focused software changes and that revenue, on growing profitable our know, company announced we today will our continued taking future. been services driving will our actions we've support focus The technology position for

where Patel, management changes and player leadership analysts. capital will the down Prakesh management like align took Bill for will announced. endeavors. on with as Chief to providers, the was and power with He Board the from with departing our and chain an the a the best management targeting to and our as the part is building team for in and the and stepping Chief projects appointed global XX and structure Vice to to financial providing CFO leadership organization. and I'd will to our technology increasing wish integral him most We strategy Prakesh and enhance supply Stem and him business flow leadership team. contributions And to seamless These and team digitization look public stockholders with also was experience, Doran we Prakesh and members years our and our core Software September to On relationships he President, He company's and capital the streamline the is thank help of new than of that September and years critical group. changes public our experience, strategic be better X along on strategic operational finance company's our Stem effective efforts key services software Bush his a fostering management recently management over team. operational in This team, FTM Hole across our lead of be acumen and Officer led the more and his strategy, with of the management behalf growing large with by deep future clean as assumed he cash Executive financial us efficiency for of responsible Officer, transition existing of X. First, Ameresco, responsibilities will an and Doran will been the Services Doran success. Chief has served forward and continue in strategic priorities. welcoming our goal company, be immediately, generation Financial Strategy proven EVP Officer Bill. has strategy strong the Financial and industry. executive revenue.

the of We also business. a review commencing are strategic

Board the strategy. has that members, Chair group software newest Gerard closely align working hoc appointed Our an management Cunningham strategy to been team expand this will of ad with

appointed current want Nominating global the strong Chairman the a also Committee the that our In and thank attractive David of continued who and long-term an to of We Stem opportunity Chair the has review has as our of focus Buzby, reaction serve Board product Board of his contributions effective business for enhanced partner and this commitment Executive have of and represents value with the our business. Independent Lead current strategic to will appointed Director XXXX initial Board mission. role Tyson, Chair software-only for to I offering Directors the been customer our creation. to At since seen Governance team level, me Director of their believe in continue Laura and been to closing, Board shareholder immediately. strategic on Sustainability

talent an our confident base to extend global have line questions, in position We let's leadership and our ability open on for Operator, the a exceptional remain level. please.

Operator

from Instructions] ROTH Capital question Justin Partners. [Operator comes of Our first Clare

Justin Clare

that financing. into to that is being a share financing. And to I could then that you off, projects projects start bottleneck terms was these secure of wondering when maybe just clarify billion So if forward? can more about if wanted unlocked $X first the Slide gets able could your then the occurring than you with provide you also wanted is USDA this financing little any delayed. I to have more bit in start X, customers And and of I moving visibility on

billion $X.X financing the So this mean backlog dependent projects? on of billion your does that $X more than supporting is

William Bush

is this in Bill. I'll reverse. Justin, answer those

first question actually more is backlog. $X the the is So Many not in are the of in backlog. that than projects billion those

to be So the in backlog. that $X.X total billion would incremental

and these cannot rest answer. -- into basically work your this that is projects they So the generally contract. But of is way the leading

contract the on includes would of providing hardware that So entity potentially software well generally we to have and like a as development which review but And services site be other able would to and a where services course, number of be things not the is, NEPA they items and until completed. depending as tasks.

And they're so for not under PACE Era the that start that to allowed process and is New the Funding, the purpose, complete. until contracting

we are. so really where I that's think And

So these net project they we to commitments past and in. the milestones locked that is going get they're award those partners have verbal that funding as from us

One, a funding entities the lot applying that I oversubscribed we're And it's into a little there's really mentioned, and so point. of that this this these actually X then things. are of election happening these John for working think what's situation. as at And some rolls is with bit

as that is they within to qualified. be making also the So they issue But be to it the all to work. the understand, committed have have government, we projects these system, able

the what it, administers X both we really these is are the sure and programs the all dotted that doing making T's eyes so And as which are is now, understand crossed. USDA of right

for potential canceled. these couldn't different a be is there government coming that so projects a in, extent the to So

are to focused really doing states, sure electrification. work think to that is So the important actually the important are that are make And that most awardable. projects eventually which these they're thing on it's these of in of projects that's all rural I red note many

happening the that move talked government to think these actually things a folks sure down fall the is local communities. just that they're wanting what's of at I are forward. was later important but none that irrespective now because right with they're But little here I that going ago, bit USDA when I to think we So so projects of ribbon-cutting just on to apart make their

Justin Clare

then your much And the you how current $X.X of share Can USDA that. following backlog, billion so dependent on up maybe on is the just financing?

William Bush

now than about X/X. it's Right less

Justin Clare

one And more. then just

Just curious long those on delays? interconnection delays. be? the a reduction How of how the might much delays guidance result as the was of And

William Bush

It's really, I would is say, difficult because to mentioned general, you got able in to and be think do what frames. we're a before, product this answer extending seeing, by project I analysis to time But fully. of we've an interconnection that

bit for between approvals like do market extending so and months. which mean, seen projects we've of say, we XX work in a interconnection a instance, generally And XX quite or I in, Texas,

saw And X so when Texas first we than that's definitely got we longer now started, years ago.

definitely So had that has an impact.

John is Because In of the few a projects. happened to we've one transition larger pushout, down mentioned has that the in really projects. there's of guidance things that that just comes to it terms this moved

on we're megawatt X X, like the APCO, project. like we seeing so that's ARR larger of is a ago a the contract create that maybe United drove hour And more X.X a the mean that. coming with like of announced and months quarter, this I mentioned more a that in conversion version up what where we the than saw gigawatts. -- P&L good projects one which John lot example we here of and lumpier And XXX those Power have this that is really past

hours And or I importantly. so think gigawatt

a you So these have projects they and impact. lumpier have larger

one things. we track was of want to the had And a harder when a on we transformers so what look at only pointed combination to really not the use and on manufacturers to And many devices. slides pushed is were those groups -- there's make that of means out, that One, of our one meet non-Chinese But really happened high-voltage transformer the which call you that harder it's that's out product, are guidance, U.S. of couple and it guidance. actually is that get. these can maybe which of is and those things

line ways, some so issues into these run is interconnection these there. a have of And some projects. other you there and in that Then just

And past But that going less likely going so it to talking to realized happen. after our that were able we that. we just that was we be customers, were hopeful to get with was

to accurately reflect wanted we that the in guidance. so And

Operator

from of question TD Thomas Boyes next The Cowen. comes

Thomas Boyes

One see part was just total. the remaining any in is those outstanding? of that previously that the those using under I great would be SSVEC project. Or disclosed in for of balance? to guarantee the the wondering that projects Are million was $XX are included the X hardware of kind remaining

William Bush

the that that and equipment growth is project. equipment, that of is as sun So particular running part not

excess hardware which are XX working expect use projects, we which to on. generally are this projects We described Those other that on in DevCo of case, megawatt hours. are would types the

Thomas Boyes

countries you maybe you specific unique drivers you're then for of a And in there that about seeing some in the solar are the demand that bit Europe? outlined EU and because could talk focusing Japan? then you're or And the business companies

John Carrington

how specifically increasing a Japan. the ARR in #XX, slides, from portfolio to And PowerTrack Hungary. our that and And customer we're Europe, customers. in compelling A John as and one project in a base growth The continue, is it's by we Carrington. We seeing announced geographic platform level. nice seeing very is standpoint, you things. growth Tom, on installed of of couple see

teams both business because as So markets see have is the the and our those we offering. strong portfolio business software on momentum total revenue be very way storage. it's a the about And on performing. to around solar that pretty of excited continue a can we're do think also you XX% the part in important continues CAGR very those that It's I of to see fair actually and incoming But more well. getting focused a broad-based. you'll in And of amount

Thomas Boyes

customer And a the more on Or there, opportunities, from would EU in focused quick a been in U.S. be follow-up looking you coming solar maybe also a or historically, as through you've Europe, are who's vector? storage the on that just X broadly? say, side, because the storage driven

John Carrington

around Europe about them out I incoming is more the asking business. front. that team of of Our to we solar base our referencing their customer primarily on side what is on do the storage was could

will, to So and/or PowerTrack that a have existing on new storage. opportunity customers if both, well of at greenfield, to it's But sites. new-new customers certain with lot an expand a and really as site existing as you want use customers

Operator

remarks. to to session. This concludes Instructions] the back Mr. like over turn our [Operator conference question-and-answer John any would for closing I Carrington

John Carrington

our for Well, second fall. again much to speaking joining third our thank and the quarter look quarter in earnings very forward you you on call with call

Operator

has now for conference today's concluded. Thank presentation. you The attending

disconnect. You now may

Stem (STEM) 6 Aug 242024 Q2 Earnings call transcript