STEM Stem Inc

Revising Full Year 2024 Guidance Activated $3 million of ARR in 2Q, Representing +7% QoQ Growth Expect Full Year Positive Operating Cash Flow Bill Bush to step down as CFO effective September 2, 2024; Doran Hole to be named CFO as part of planned succession

Second Quarter 2024 Financial and Operating Highlights

Financial Highlights

• Revenue of $34.0 million, down from $93.0 million (-63%) in 2Q23
• GAAP gross profit of $9.4 million, down from $11.9 million in 2Q23
• GAAP gross margin of 28%, up from 13% in 2Q23
• Non-GAAP gross profit of $13.5 million, down from $16.4 million in 2Q23
• Non-GAAP gross margin of 40%, up from 18% in 2Q23
• Net loss of $582.3 million versus net income of $19.1 million in 2Q23, due to a one-time non-cash $547 million impairment of goodwill
• Adjusted EBITDA of $(11.3) million versus $(9.5) million in 2Q23
• Operating cash flow of $(11.9) million versus $(165.4) million in 2Q23.
• Ended 2Q24 with $89.6 million in cash and cash equivalents, versus $112.8 million at the end of 1Q24
• Revising guidance for key metrics for full year 2024

Operating Highlights

• Bookings of $25.4 million, versus $236.4 million in 2Q23, driven primarily by increased quarterly variability associated with Stem’s continued expansion into large, utility-scale projects
• Contracted backlog of $1.6 billion, up from $1.4 billion (+14%) at end of 2Q23
• Contracted storage assets under management (“AUM”) of 5.8 gigawatt hours (“GWh”), unchanged from 5.8 GWh at end of 1Q24
• Solar monitoring AUM of 26.9 gigawatts (“GW”), unchanged from 26.9 GW at the end of 1Q24
• Contracted annual recurring revenue (“CARR”) of $90.1 million, up from $74.9 million (+20%) at end of 2Q23, and up from $89.3 million (+1%) at end of 1Q24

 

Stem, Inc. (“Stem,” “we” or the “Company”) (NYSE: STEM), a global leader in artificial intelligence (AI)-driven clean energy solutions and services, announced today its financial results for the three and six months ended June 30, 2024.

“Our financial performance during the second quarter was a disappointment,” said John Carrington, CEO of Stem. “Revenue during the period was substantially lower than expected, primarily due to unforeseen extensions of project timelines caused by certain customers’ USDA-related project financing delays and protracted interconnection timelines in the quarter. While our strategic expansion into the large-scale storage market has resulted in significantly larger average deal sizes, it has also led to increased variability, greater project complexity, and longer sales cycle than we anticipated, which negatively impacted our bookings and operating cash in the quarter.

“We remain confident in the underlying business fundamentals and we are encouraged by our significant operating leverage, as evidenced by relatively flat adjusted EBITDA results despite a 63% decline in revenue compared to the same quarter last year. During the quarter, we accelerated the pace of software activations, delivered continued strong performance across our solar asset performance management business and drove a greater mix of software services revenue, as evidenced by a material improvement in GAAP gross margins of 28% and non-GAAP gross margins of 40%, a 1500 and 2200 basis point improvement, respectively, relative to Q2 2023. In addition, we continue to drive reductions in net working capital with a $79 million decline in 1H 2024.

“We are adjusting our full year 2024 guidance to account for our latest financial results and the expected continuation of interconnection and USDA funding delays. These factors have negatively impacted our financial performance including revenue, bookings and cash, and are expected to push certain projects from the second half of 2024 into 2025. Partially offsetting the revenue decrease is an improvement in non-GAAP gross margins, which are benefiting from project mix and a proactive focus on driving profitable projects. Importantly, we expect to generate positive operating cash flow this year. We do not anticipate the need to raise additional equity, largely owing to our continued reduction in working capital intensity.

“While many of the issues we are facing are beyond our direct control, we are disappointed in revising our guidance. Nonetheless, we remain relentlessly focused on reducing costs, managing cash, and building free cash flow to drive resiliency over the long-term. This, coupled with our focus on our guiding principles for 2024, cash flow generation, building software services revenue, and extending our technology leadership position, is expected to drive value over the long-term.”

Key Financial Results and Operating Metrics (in $ millions unless otherwise noted):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2024

2023

 

2024

 

2023

Key Financial Results

 

 

 

 

 

 

Revenue

$

34.0

 

$

93.0

 

 

$

59.5

 

 

$

160.4

 

GAAP Gross Profit (Loss)

$

9.4

 

$

11.9

 

 

$

(14.8

)

 

$

12.9

 

GAAP Gross Margin (%)

 

28

%

 

13

%

 

 

(25

)%

 

 

8

%

Non-GAAP Gross Profit*

$

13.5

 

$

16.4

 

 

$

27.3

 

 

$

31.5

 

Non-GAAP Gross Margin (%)*

 

40

%

 

18

%

 

 

30

%

 

 

18

%

Net (Loss) Income

$

(582.3

)

$

19.1

 

 

$

(654.6

)

 

$

(25.7

)

Adjusted EBITDA*

$

(11.3

)

$

(9.5

)

 

$

(23.6

)

 

$

(23.2

)

 

 

 

 

 

 

 

Key Operating Metrics

 

 

 

 

 

 

Bookings

$

25.4

 

$

236.4

 

 

$

49.2

 

 

$

599.9

 

Contracted Backlog**

$

1,578.5

 

$

1,364.3

 

 

$

1,578.5

 

 

$

1,364.3

 

Contracted Storage AUM (in GWh)**

 

5.8

 

 

3.8

 

 

 

5.8

 

 

 

3.8

 

Solar Monitoring AUM (in GW)**

 

26.9

 

 

26.0

 

 

 

26.9

 

 

 

26.0

 

CARR**

$

90.1

 

$

74.9

 

 

$

90.1

 

 

$

74.9

 

*Non-GAAP financial measures. See the section below titled “Use of Non-GAAP Financial Measures” for details and the section below titled “Reconciliations of Non-GAAP Financial Measures” for reconciliations.

** At period end.

Second Quarter 2024 Financial and Operating Results

Financial Results

Revenue decreased 63% year-over-year to $34.0 million, versus $93.0 million in the second quarter of 2023. The decrease was largely driven by lower hardware revenue primarily due to a decrease in demand for hardware systems from the extension of certain project-related timelines.

GAAP gross profit (loss) was $9.4 million, or 28%, versus $11.9 million, or 13%, in the second quarter of 2023. The year-over-year increase in GAAP gross margin (%) was primarily driven by a higher mix of Services revenue in the quarter.

Non-GAAP gross profit was $13.5 million, or 40%, versus $16.4 million, or 18%, in the second quarter of 2023. The year-over-year decrease in non-GAAP gross profit ($) was largely due to lower storage hardware revenue.

Net loss was $582.3 million versus second quarter 2023 net income of $19.1 million. The year-over-year change was primarily driven by lower revenues in the current quarter and a one-time impairment of goodwill in the quarter. The impairment charge represents 100% of the total amount of goodwill previously recorded on the balance sheet of the Company.

Adjusted EBITDA was $(11.3) million compared to $(9.5) million in the second quarter of 2023.

The Company ended the quarter with $89.6 million in cash and cash equivalents, as compared to $112.8 million in cash and cash equivalents at the end of the first quarter 2024.

Operating Results

Contracted backlog was $1.58 billion at the end of the second quarter of 2024, compared to $1.64 billion as of the end of the first quarter of 2024, representing a 4% sequential decrease. The slight decrease in contracted backlog in the quarter was driven by the conversion of backlog to revenue and low bookings additions in the quarter.

Bookings were $25.4 million in the second quarter of 2024 versus $236.4 million in the second quarter of 2023. Bookings remain highly variable due to the Company’s expansion into large front-of-the-meter (FTM) storage projects, combined with delays in customer receipt of IRA-related funding.

Contracted storage AUM was effectively unchanged sequentially to 5.8 GWh for the second quarter of 2024. Solar monitoring AUM of 26.9 GW for the second quarter of 2024 was also unchanged sequentially.

CARR increased 1% to $90.1 million at the end of the first quarter of 2024 versus $89.3 million at the end of the first quarter of 2024.

The following table provides a summary of backlog at the end of the second quarter of 2024, compared to backlog at the end of the first quarter of 2024 ($ in millions):

End of 1Q24

$

1,639.6

 

Add: Bookings

 

25.4

 

Less: Hardware revenue

 

(18.9

)

Software/services activations

 

(46.8

)

Amendments/Cancellations

 

(20.8

)

End of 2Q24

$

1,578.5

 

Management and Board Updates

Today the Company announced that Doran Hole has been appointed as Executive Vice President and Chief Financial Officer of the Company, succeeding Bill Bush, who will be stepping down as Chief Financial Officer effective September 2, 2024. Mr. Bush will continue to serve as CFO until September 2, 2024 and will continue to lead our strategy targeting public power and large scale FTM projects along with the supply chain team. In addition to the CFO role, Mr. Hole will oversee the Company’s software and services group, focused on delivering high quality customer relevant software and service solutions, including the recently announced Athena® PowerBidder™ Pro product. David Buzby, current Chairman of the Board of Directors, has also been appointed Executive Chair of the Board. We are also commencing a strategic review of our business. Our newest Board member, Gerard Cunningham, has been appointed Chair of an ad hoc Software Strategy Working Group that will work closely with the management team to develop this strategy. The Company also announced today that Stem is streamlining its management structure by eliminating the Chief Strategy Officer role. Prakesh Patel is departing from the Company, effective immediately, with his responsibilities assumed by existing members of the management team.

Recent Business Highlights

On July 29, 2024, Ameresco announced the successful completion of construction of multiple battery energy storage systems in collaboration with United Power, an electric cooperative in Colorado. The assets are designed to provide 313 MWh of battery storage capacity to the United Power electric distribution system across multiple sites. Ameresco integrated Stem’s AI-driven clean energy software to efficiently operate and maintain the systems.

On June 11, 2024, Stem and Arizona Electric Power Cooperative (AEPCO), a not-for-profit, member-owned electric generation and transmission (G&T) cooperative, in partnership with Prometheus Power (Prometheus), a national renewable energy developer, announced the deployment of a co-located storage and solar project to help deliver clean, reliable power to its distribution co-ops and public power members. The project for Sulphur Springs Valley Electric Co-op (SSVEC), an AEPCO member co-op, includes a 40-MWh energy storage system and an existing 20-MW photovoltaic system that will integrate Athena®, Stem’s award-winning AI-driven clean energy software, to continuously operate and monitor the storage system for maximized performance on a single, unified platform. The SSVEC project is the first of three similarly sized deployments that Stem will collaborate on with Prometheus to provide Stem’s services for AEPCO’s other managing co-ops. All three projects are expected to come online by the end of the year.

Outlook

The Company is updating its full year 2024 guidance ranges as follows ($ millions, unless otherwise noted):

Previous

Updated

Revenue

$567 - $667

$200 - $270

 

Non-GAAP Gross Margin (%)

15% - 20%

25% - 30%

 

Adjusted EBITDA

$5 - $20

($30) - ($20)

 

Bookings

$1,500 - $2,000

$600 - $1,100

 

CARR (year-end)

$115 - $130

$100 - $110

 

Operating Cash Flow

Greater than $50

Greater than $15

See the section below titled “Reconciliations of Non-GAAP Financial Measures” for information regarding why Stem is unable to reconcile Non-GAAP Gross Margin and Adjusted EBITDA guidance to their most comparable financial measures calculated in accordance with GAAP.

The Company is updating its full year 2024 revenue projected quarterly performance as follows:

 

1QA

2QA

3QE

4QE

Revenue

$25M

$34M

$30M-$50M

$110M-$160M

Some Factors Affecting our Business and Operations

As previously disclosed, the Company entered into certain contractual guarantees pursuant to which, if a customer were unable to install or designate hardware to a specified project within a specified period of time, the Company would be required to assist the customer in re-marketing the hardware for resale by the customer. Such guarantees provide that, in such cases, if the customer resold the hardware for less than the amount initially sold to the customer, the Company would be required to compensate the customer for any shortfall in fair value for the hardware from the initial contract price. The Company accounts for specified contractual guarantees as variable consideration. The Company reviews its estimate of variable consideration, including changes in estimates related to such guarantees, each quarter for facts or circumstances that have changed from the time of the initial estimate. Due to recent market conditions, the Company recorded a net revenue reduction of $33 million in hardware revenue during the three months ended March 31, 2024, and no such net revenue reduction during the three months ended June 30, 2024. The reduction in revenue was related to deliveries that occurred prior to the current fiscal year.

The Company has not issued such guarantees since June 2023, and does not intend to issue any new guarantees in the future.

The Company is actively advancing projects under fixed price contracts that it expects will consume approximately 50% of the remaining hardware subject to guarantees, based on current market conditions. It is anticipated that these transactions will close in the second and third quarters of 2024, at which point they will not be subject to future adjustment. The Company believes that these transactions will enable it to convert accounts receivable into cash more quickly. The remaining hardware subject to guarantees are currently valued at approximately $50 million, after giving effect to the $33 million adjustment. The Company intends to integrate this hardware into development projects, which are expected to be available for sale late in the second half of 2024 and to be operational in the second half of 2025. The Company will continue to evaluate the economics of these transactions based on then-current conditions. Any remaining hardware that is not integrated into future projects remain subject to potential future updates to estimates of variable consideration, which may result in one or more future impairments.

Stem continues to diversify its supply chain, integrate additional energy technologies, and deploy a portion of its balance sheet to help position the Company to meet the expected significant growth in customer demand. We are subject to risk and exposure from the evolving macroeconomic, geopolitical and business environment, including the effects of increased global inflationary pressures and interest rates, potential import tariffs, potential economic slowdowns or recessions, and geopolitical pressures, including the armed conflicts between Russia and Ukraine, and in the Gaza Strip and nearby areas, as well as tensions between China and the United States, and unknown effects of current and future trade and other regulations. We regularly monitor the direct and indirect effects of these circumstances on our business and financial results, although there is no guarantee of the extent to which we will be successful in these efforts.

Use of Non-GAAP Financial Measures

In addition to financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), this earnings press release contains the following non-GAAP financial measures: adjusted EBITDA, non-GAAP gross profit and non-GAAP gross margin.

We use these non-GAAP financial measures for financial and operational decision-making and to evaluate our operating performance and prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our operating performance, such as stock-based compensation and other non-cash charges, as well as discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results, to the extent that competitors define these metrics in the same manner that we do. We believe these non-GAAP financial measures are useful to investors both because they (1) allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) are used by investors and analysts to help them analyze the health of our business. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP measures, if any, reported by other companies. In addition, other companies may not publish these or similar measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP. For reconciliation of adjusted EBITDA and non-GAAP gross profit and margin to their most comparable GAAP measures, see the section below entitled “Reconciliations of Non-GAAP Financial Measures.”

Definitions of Non-GAAP Financial Measures

We define adjusted EBITDA as net income (loss) attributable to Stem before depreciation and amortization, including amortization of internally developed software, net interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including gain (loss) on the extinguishment of debt, revenue constraint, reduction in revenue, excess supplier costs, change in fair value of derivative liability, transaction and acquisition-related charges, litigation expense, restructuring costs, and income tax provision or benefit. The expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude when calculating adjusted EBITDA.

We define non-GAAP gross profit as gross profit excluding amortization of capitalized software, impairments related to decommissioning of end-of-life systems, excess supplier costs, reduction in revenue, and including revenue constraint. Non-GAAP gross margin is defined as non-GAAP gross profit as a percentage of revenue.

The Company generally records the full purchase order value as revenue at the time of hardware delivery; however, for certain non-cancelable purchase orders entered into during the first quarter of 2023, the final settlement amount payable to the Company is variable and indexed to the price per ton of lithium carbonate in the first quarter of 2024 such that the Company may increase or decrease the final prices in such purchase orders based on the price per ton of lithium carbonate at final settlement. Lithium carbonate is a key raw material used in the production of hardware systems that the Company ultimately sells to customers. The total dollar amount of such purchase orders for the indexed contracts is approximately $52 million. However, as a result of the pricing structure in such purchase orders, the Company recorded revenue in the first quarter of 2023 of approximately $42 million in accordance with GAAP, net of a $10 million revenue constraint, using a third party forecast of the lithium carbonate trading value in the first quarter of 2024. Because the Company had not before used indexed pricing in its customer contracts or purchase orders and had not previously constrained revenue related to forecasted inputs of its hardware systems, the Company believes that including the $10.2 million revenue constraint from the first quarter of 2023 into non-GAAP gross profit enhances the comparability to the Company’s non-GAAP gross profit in prior periods. The Company expects to receive, pursuant to such purchase orders, final consideration of at least $34 million. The Company recorded the full cost of hardware revenue for these indexed contracts in the first quarter of 2023.

As stated above, in certain customer contracts, the Company previously agreed to provide a guarantee that the value of purchased hardware will not decline for a certain period of time. The Company accounts for such contractual terms and guarantees as variable consideration at each measurement date. The Company reviews its estimate of variable consideration each quarter, including changes in estimates related to such guarantees, for facts or circumstances that have changed from the time of the initial estimate.

See the section below entitled “Reconciliations of Non-GAAP Financial Measures.”

Conference Call Information

Stem will hold a conference call to discuss this earnings press release and business outlook on Tuesday, August 6, 2024, beginning at 5:00 p.m. Eastern Time. The conference call and accompanying slides may be accessed via a live webcast on a listen-only basis on the Events & Presentations page of the Investor Relations section of the Company’s website at https://investors.stem.com/events-and-presentations. The call can also be accessed live over the telephone by dialing (877) 407-3982, or for international callers, (201) 493-6780 and referencing Stem. An audio replay will be available shortly after the call, and can be accessed by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671. The passcode for the replay is 10191244. The replay will be available until Friday, September 6, 2024. An archive of the webcast will be available shortly after the call on Stem’s website at https://investors.stem.com/overview for 12 months following the call.

About Stem

Stem provides clean energy solutions and services designed to maximize the economic, environmental, and resiliency value of energy assets and portfolios. Stem’s leading AI-driven enterprise software platform, Athena® enables organizations to deploy and unlock value from clean energy assets at scale. Powerful applications, including AlsoEnergy’s PowerTrack, simplify and optimize asset management and connect an ecosystem of owners, developers, assets, and markets. Stem also offers integrated partner solutions to help improve returns across energy projects, including storage, solar, and EV fleet charging. For more information, visit www.stem.com.

Forward-Looking Statements

This earnings press release, as well as other statements we make, contains “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words such as “expect,” “may,” “can,” “believe,” “predict,” “plan,” “potential,” “projected,” “projections,” “forecast,” “estimate,” “intend,” “anticipate,” “ambition,” “goal,” “target,” “think,” “should,” “could,” “would,” “will,” “hope,” “see,” “likely,” and other similar words. Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about our financial and performance targets and other forecasts or expectations regarding, or dependent on, our business outlook; our expectations around future estimates of variable consideration in connection with guarantees of certain customer contracts, and the resulting effects on revenue; our ability to secure sufficient and timely inventory from suppliers; our ability to meet contracted customer demand; our ability to manage our supply chains and distribution channels; our joint ventures, partnerships and other alliances; forecasts or expectations regarding energy transition and global climate change; reduction of greenhouse gas (“GHG”) emissions; the integration and optimization of energy resources; our business strategies and those of our customers; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; our ability to manage our supply chains and distribution channels; the effects of natural disasters and other events beyond our control; the direct or indirect effects on our business of macroeconomic factors and geopolitical instability, such as the ongoing conflict in Ukraine; the expected benefits of the Inflation Reduction Act of 2022 on our business; and our future results of operations, including adjusted EBITDA and the other metrics presented under Outlook. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including but not limited to our inability to execute on, and achieve the expected benefits from, our operational and strategic initiatives; our inability to secure sufficient and timely inventory from our suppliers, as well as contracted quantities of equipment; our inability to meet contracted customer demand; supply chain interruptions and manufacturing or delivery delays; disruptions in sales, production, service or other business activities; general macroeconomic and business conditions in key regions of the world, including inflationary pressures, general economic slowdown or a recession, rising interest rates, changes in monetary policy, instability in financial institutions, and the prospect of a shutdown of the U.S. federal government; the direct and indirect effects of widespread health emergencies on our workforce, operations, financial results and cash flows; geopolitical instability, such as the ongoing conflicts in Ukraine and the Gaza Strip and nearby areas; the results of operations and financial condition of our customers and suppliers; pricing pressures; severe weather and seasonal factors; our inability to continue to grow and manage our growth effectively; our inability to attract and retain qualified employees and key personnel; our inability to comply with, and the effect on our business of, evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability, and evolving labor standards; risks relating to the development and performance of our energy storage systems and software-enabled services; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the risk that our business, financial condition and results of operations may be adversely affected by other political, economic, business and competitive factors; and other risks and uncertainties discussed in this release and in our most recent Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, actual results or outcomes, or the timing of these results or outcomes, may vary materially from those reflected in our forward-looking statements. Forward-looking statements and other statements in this release regarding our environmental, social, and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social, and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Statements in this earnings press release are made as of the date of this release, and Stem disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events, or otherwise, except as required by law.

Source: Stem, Inc.

STEM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share amounts)

 

June 30, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

89,649

 

 

$

105,375

 

Short-term investments

 

—

 

 

 

8,219

 

Accounts receivable, net of allowances of $4,155 and $4,904 as of June 30, 2024 and December 31, 2023, respectively

 

206,351

 

 

 

302,848

 

Inventory

 

33,213

 

 

 

26,665

 

Deferred costs with suppliers

 

20,125

 

 

 

20,555

 

Other current assets

 

10,582

 

 

 

9,303

 

Total current assets

 

359,920

 

 

 

472,965

 

Energy storage systems, net

 

67,518

 

 

 

74,418

 

Contract origination costs, net

 

9,921

 

 

 

11,119

 

Goodwill

 

—

 

 

 

547,205

 

Intangible assets, net

 

152,144

 

 

 

157,146

 

Operating lease right-of-use assets

 

11,138

 

 

 

12,255

 

Other noncurrent assets

 

90,902

 

 

 

81,869

 

Total assets

$

691,543

 

 

$

1,356,977

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

63,103

 

 

$

78,277

 

Accrued liabilities

 

63,362

 

 

 

76,873

 

Accrued payroll

 

10,719

 

 

 

14,372

 

Financing obligation, current portion

 

15,139

 

 

 

14,835

 

Deferred revenue, current portion

 

57,974

 

 

 

53,997

 

Other current liabilities

 

6,349

 

 

 

12,726

 

Total current liabilities

 

216,646

 

 

 

251,080

 

Deferred revenue, noncurrent

 

88,944

 

 

 

88,650

 

Asset retirement obligation

 

4,122

 

 

 

4,052

 

Convertible notes, noncurrent

 

524,771

 

 

 

523,633

 

Financing obligation, noncurrent

 

47,366

 

 

 

52,010

 

Lease liabilities, noncurrent

 

11,832

 

 

 

10,455

 

Other liabilities

 

599

 

 

 

416

 

Total liabilities

 

894,280

 

 

 

930,296

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

Preferred stock, $0.0001 par value; 1,000,000 shares authorized as of June 30, 2024 and December 31, 2023; zero shares issued and outstanding as of June 30, 2024 and December 31, 2023

 

—

 

 

 

—

 

Common stock, $0.0001 par value; 500,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 162,587,526 and 155,932,880 issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

16

 

 

 

16

 

Additional paid-in capital

 

1,223,739

 

 

 

1,198,716

 

Accumulated other comprehensive income (loss)

 

94

 

 

 

(42

)

Accumulated deficit

 

(1,427,071

)

 

 

(772,494

)

Total Stem’s stockholders’ equity (deficit)

 

(203,222

)

 

 

426,196

 

Non-controlling interests

 

485

 

 

 

485

 

Total stockholders’ equity (deficit)

 

(202,737

)

 

 

426,681

 

Total liabilities and stockholders’ equity (deficit)

$

691,543

 

 

$

1,356,977

 

 

STEM, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except share and per share amounts)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2024

 

2023

 

2024

 

2023

Revenue

 

 

 

 

 

 

 

Services and other revenue

$

15,103

 

 

$

16,360

 

 

$

29,943

 

 

$

31,033

 

Hardware revenue

 

18,896

 

 

 

76,586

 

 

 

29,525

 

 

 

129,318

 

Total revenue

 

33,999

 

 

 

92,946

 

 

 

59,468

 

 

 

160,351

 

Cost of revenue

 

 

 

 

 

 

 

Cost of services and other revenue

 

10,955

 

 

 

11,756

 

 

 

20,939

 

 

 

23,260

 

Cost of hardware revenue

 

13,669

 

 

 

69,319

 

 

 

53,345

 

 

 

124,226

 

Total cost of revenue

 

24,624

 

 

 

81,075

 

 

 

74,284

 

 

 

147,486

 

Gross profit (loss)

 

9,375

 

 

 

11,871

 

 

 

(14,816

)

 

 

12,865

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

10,944

 

 

 

13,680

 

 

 

22,070

 

 

 

26,086

 

Research and development

 

15,281

 

 

 

14,156

 

 

 

29,417

 

 

 

27,600

 

General and administrative

 

15,846

 

 

 

18,904

 

 

 

34,406

 

 

 

36,701

 

Impairment of goodwill

 

547,152

 

 

 

—

 

 

 

547,152

 

 

 

—

 

Total operating expenses

 

589,223

 

 

 

46,740

 

 

 

633,045

 

 

 

90,387

 

Loss from operations

 

(579,848

)

 

 

(34,869

)

 

 

(647,861

)

 

 

(77,522

)

Other (expense) income, net:

 

 

 

 

 

 

 

Interest expense, net

 

(4,631

)

 

 

(3,903

)

 

 

(9,338

)

 

 

(5,680

)

Gain on extinguishment of debt, net

 

—

 

 

 

59,121

 

 

 

—

 

 

 

59,121

 

Change in fair value of derivative liability

 

1,477

 

 

 

(2,576

)

 

 

1,477

 

 

 

(2,576

)

Other income, net

 

794

 

 

 

1,840

 

 

 

1,360

 

 

 

1,401

 

Total other (expense) income, net

 

(2,360

)

 

 

54,482

 

 

 

(6,501

)

 

 

52,266

 

(Loss) income before provision for income taxes

 

(582,208

)

 

 

19,613

 

 

 

(654,362

)

 

 

(25,256

)

Provision for income taxes

 

(62

)

 

 

(491

)

 

 

(215

)

 

 

(400

)

Net (loss) income

$

(582,270

)

 

$

19,122

 

 

$

(654,577

)

 

$

(25,656

)

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common stockholders, basic

$

(3.59

)

 

$

0.12

 

 

$

(4.09

)

 

$

(0.17

)

Net loss per share attributable to common stockholders, diluted

$

(3.59

)

 

$

(0.26

)

 

$

(4.09

)

 

$

(0.17

)

 

 

 

 

 

 

 

 

Numerator used to compute net (loss) income per share:

 

 

 

 

 

 

 

Net (loss) income attributable to Stem common stockholders, basic

$

(582,270

)

 

$

19,122

 

 

$

(654,577

)

 

$

(25,656

)

Net loss attributable to Stem common stockholders, diluted

$

(582,270

)

 

$

(40,011

)

 

$

(654,577

)

 

$

(25,656

)

 

 

 

 

 

 

 

 

Weighted-average shares used in computing net (loss) income per share to common stockholders, basic

 

162,158,936

 

 

 

155,619,179

 

 

 

160,169,536

 

 

 

155,294,475

 

Weighted-average shares used in computing net loss per share to common stockholders, diluted

 

162,158,936

 

 

 

155,804,953

 

 

 

160,169,536

 

 

 

155,294,475

 

 

STEM, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)

 

Six Months Ended June 30,

 

2024

 

2023

OPERATING ACTIVITIES

 

 

 

Net loss

$

(654,577

)

 

$

(25,656

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization expense

 

22,217

 

 

 

22,376

 

Non-cash interest expense, including interest expenses associated with debt issuance costs

 

984

 

 

 

1,586

 

Stock-based compensation

 

15,184

 

 

 

17,122

 

Change in fair value of derivative liability

 

(1,477

)

 

 

2,576

 

Non-cash lease expense

 

1,533

 

 

 

1,406

 

Accretion of asset retirement obligations

 

118

 

 

 

120

 

Impairment loss of energy storage systems

 

102

 

 

 

2,069

 

Impairment loss of project assets

 

390

 

 

 

122

 

Impairment loss of right-of-use assets

 

2,096

 

 

 

—

 

Impairment of goodwill

 

547,152

 

 

 

—

 

Net accretion of discount on investments

 

(29

)

 

 

(1,300

)

Income tax benefit from release of valuation allowance

 

—

 

 

 

(335

)

Provision for accounts receivable allowance

 

(1,462

)

 

 

1,734

 

Net loss on investments

 

—

 

 

 

1,561

 

Gain on extinguishment of debt, net

 

—

 

 

 

(59,121

)

Other

 

(138

)

 

 

(680

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

97,815

 

 

 

(72,187

)

Inventory

 

(6,548

)

 

 

(137,149

)

Deferred costs with suppliers

 

430

 

 

 

28,759

 

Other assets

 

719

 

 

 

(17,816

)

Contract origination costs, net

 

(683

)

 

 

(2,256

)

Project assets

 

(10,796

)

 

 

(2,834

)

Accounts payable

 

(14,923

)

 

 

19,049

 

Accrued expenses and other liabilities

 

(13,339

)

 

 

(35,087

)

Deferred revenue

 

4,270

 

 

 

56,043

 

Lease liabilities

 

(1,545

)

 

 

(1,341

)

Net cash used in operating activities

 

(12,507

)

 

 

(201,239

)

INVESTING ACTIVITIES

 

 

 

Acquisitions, net of cash acquired

 

—

 

 

 

(1,847

)

Purchase of available-for-sale investments

 

—

 

 

 

(58,034

)

Proceeds from maturities of available-for-sale investments

 

8,250

 

 

 

84,750

 

Proceeds from sales of available-for-sale investments

 

—

 

 

 

73,917

 

Purchase of energy storage systems

 

—

 

 

 

(2,640

)

Capital expenditures on internally-developed software

 

(6,608

)

 

 

(7,388

)

Purchase of property and equipment

 

(177

)

 

 

(289

)

Net cash provided by investing activities

 

1,465

 

 

 

88,469

 

FINANCING ACTIVITIES

 

 

 

Proceeds from exercise of stock options and warrants

 

—

 

 

 

229

 

Repayment of financing obligations

 

(4,185

)

 

 

(2,587

)

Proceeds from issuance of convertible notes, net of issuance costs of $0 and $7,601 for the six months ended June 30, 2024 and 2023, respectively

 

—

 

 

 

232,399

 

Repayment of convertible notes

 

—

 

 

 

(99,754

)

Purchase of capped call options

 

—

 

 

 

(27,840

)

Redemption of investment from non-controlling interests, net

 

—

 

 

 

(67

)

Repayment of notes payable

 

—

 

 

 

(2,101

)

Net cash (used in) provided by financing activities

 

(4,185

)

 

 

100,279

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

187

 

 

 

(7

)

Net increase in cash, cash equivalents and restricted cash

 

(15,040

)

 

 

(12,498

)

Cash, cash equivalents and restricted cash, beginning of year

 

106,475

 

 

 

87,903

 

Cash, cash equivalents and restricted cash, end of period

$

91,435

 

 

$

75,405

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH WITHIN THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE:

 

 

 

Cash and cash equivalents

$

89,649

 

 

$

75,405

 

Restricted cash included in other noncurrent assets

 

1,786

 

 

 

—

 

Total cash, cash equivalents, and restricted cash

$

91,435

 

 

$

75,405

 

STEM, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

The following table provides a reconciliation of adjusted EBITDA to net (loss) income:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2024

 

2023

 

2024

 

2023

 

(in thousands)

 

(in thousands)

Net (loss) income

$

(582,270

)

 

$

19,122

 

 

$

(654,577

)

 

$

(25,656

)

Adjusted to exclude the following:

 

 

 

 

 

 

 

Depreciation and amortization (1)

 

13,651

 

 

 

12,609

 

 

 

24,805

 

 

 

24,567

 

Interest expense, net

 

4,631

 

 

 

3,903

 

 

 

9,338

 

 

 

5,680

 

Gain on extinguishment of debt, net

 

—

 

 

 

(59,121

)

 

 

—

 

 

 

(59,121

)

Stock-based compensation

 

6,810

 

 

 

9,920

 

 

 

15,184

 

 

 

17,122

 

Revenue constraint (2)

 

—

 

 

 

—

 

 

 

—

 

 

 

10,200

 

Revenue reduction, net (3)

 

—

 

 

 

—

 

 

 

33,128

 

 

 

—

 

Excess supplier costs (4)

 

 

 

 

 

1,012

 

 

 

—

 

Change in fair value of derivative liability

 

(1,477

)

 

 

2,576

 

 

 

(1,477

)

 

 

2,576

 

Impairment of goodwill

 

547,152

 

 

 

—

 

 

 

547,152

 

 

 

—

 

Provision for income taxes

 

62

 

 

 

491

 

 

 

215

 

 

 

400

 

Other expenses (5)

 

125

 

 

 

1,021

 

 

 

1,665

 

 

 

1,021

 

Adjusted EBITDA

$

(11,316

)

 

$

(9,479

)

 

$

(23,555

)

 

$

(23,211

)

Adjusted EBITDA, as used in the Company's full year 2024 guidance, is a non-GAAP financial measure that excludes or has otherwise been adjusted for items impacting comparability. The Company is unable to reconcile projected adjusted EBITDA to net income (loss), its most directly comparable forward-looking GAAP financial measure, without unreasonable effort, because the Company is unable to predict with a reasonable degree of certainty its change in stock-based compensation expense, depreciation and amortization expense, revenue constraint and other items that may affect net loss. The unavailable information could have a significant effect on the Company’s full year 2024 GAAP financial results. (1) Depreciation and amortization includes depreciation and amortization expense, impairment loss of energy storage systems, impairment loss of project assets, and impairment loss of right-of-use assets. (2) Refer to the discussion of revenue constraint in the definition of non-GAAP gross profit provided above. (3) Refer to the discussion of reduction in revenue in the definition of non-GAAP gross profit provided above. (4) Refer to the discussion of excess supplier costs in the definition of non-GAAP gross profit provided above. (5) Adjusted EBITDA for the six months ended June 30, 2024 reflects other expenses of $1.7 million. For the six months ended June 30, 2024, other expenses include $0.6 million of other non-recurring expenses, and $1.1 million of expenses related to restructuring costs to pursue greater efficiency and to realign our business and strategic priorities. Restructuring expenses consisted of employee severance and other exit costs.

The following table provides a reconciliation of non-GAAP gross profit and margin to GAAP gross profit (loss) and margin ($ in millions):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2024

 

2023

 

2024

 

2023

Revenue

$

34.0

 

 

$

93.0

 

 

$

59.5

 

 

$

160.4

 

Cost of revenue

 

(24.6

)

 

 

(81.1

)

 

 

(74.3

)

 

 

(147.5

)

GAAP gross profit (loss)

 

9.4

 

 

 

11.9

 

 

 

(14.8

)

 

 

12.9

 

GAAP gross margin (%)

 

28

%

 

 

13

%

 

 

(25

)%

 

 

8

%

 

 

 

 

 

 

 

 

Non-GAAP Gross Profit

 

 

 

 

 

 

 

GAAP Revenue

$

34.0

 

 

$

93.0

 

 

$

59.5

 

 

$

160.4

 

Add: Revenue constraint (1)

 

—

 

 

 

—

 

 

 

—

 

 

 

10.2

 

Add: Revenue reduction, net (2)

 

—

 

 

 

—

 

 

 

33.1

 

 

 

—

 

Subtotal

 

34.0

 

 

 

93.0

 

 

 

92.6

 

 

 

170.6

 

Less: Cost of revenue

 

(24.6

)

 

 

(81.1

)

 

 

(74.3

)

 

 

(147.5

)

Add: Amortization of capitalized software & developed technology

 

4.0

 

 

 

3.3

 

 

 

7.9

 

 

 

6.3

 

Add: Impairments

 

0.1

 

 

 

1.2

 

 

 

0.1

 

 

 

2.1

 

Add: Excess supplier costs (3)

 

 

 

 

 

1.0

 

 

 

—

 

Non-GAAP gross profit

$

13.5

 

 

$

16.4

 

 

$

27.3

 

 

$

31.5

 

Non-GAAP gross margin (%)

 

40

%

 

 

18

%

 

 

30

%

 

 

18

%

 

Non-GAAP gross margin as used in the Company's full year 2024 guidance, is a non-GAAP financial measure that excludes or has otherwise been adjusted for items impacting comparability. The Company is unable to reconcile projected non-GAAP gross margin to GAAP gross margin, its most directly comparable forward-looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty its change in amortization of capitalized software, impairments, and other items that may affect GAAP gross margin. The unavailable information could have a significant effect on the Company’s full year 2024 GAAP financial results.

(1) Refer to the discussion of revenue constraint in the definition of non-GAAP profit provided above.

(2) Refer to the discussion of reduction in revenue in the definition of non-GAAP profit provided above.

(3) Refer to the discussion of excess supplier costs in the definition of non-GAAP profit provided above.

Key Definitions:

Item

Definition

Bookings

Total value of executed customer agreements, as of the end of the relevant period (e.g. quarterly bookings or annual bookings)

• Customer contracts are typically executed 6-24 months ahead of installation
• Bookings amount typically includes: 1. Hardware revenue, which is typically recognized at delivery of system to customer, 2. Services revenue, which represents total nominal software and services contract value recognized ratably over the contract period,
• Market participation revenue is excluded from booking value

Contracted Backlog

Total value of bookings in dollars, as of a specific date

• Backlog increases as new contracts are executed (bookings)
• Backlog decreases as integrated storage systems are delivered and recognized as revenue

Contracted Assets Under Management (“AUM”)

Total GWh of storage systems in operation or under contract

Solar Monitoring AUM

Total GW of solar systems in operation or under contract

Contracted Annual Recurring Revenue (CARR)

Annual run rate for all executed software services contracts, including contracts signed in the applicable period for systems that are not yet commissioned or operating

Project Services

Professional services and revenue tied to Development Company investments

Operating Cash Flow

Net cash provided by (used in) operating activities. Does not represent the change in balance sheet cash which will be further impacted by investing and financing activities

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240803751054/en/

Stem Investor Contacts Ted Durbin, Stem Marc Silverberg, ICR IR@stem.com

Stem Media Contacts Suraya Akbarzad, Stem press@stem.com