STEM Stem Inc

New Strategy Implementation in Progress

Increased ARR by more than $3M in 3Q, Representing +7% QoQ Growth

Revising Full Year 2024 Guidance for Several Key Metrics

Third Quarter 2024 Financial and Operating Highlights

Financial Highlights

• Revenue of $29.3 million, down from $133.7 million in 3Q23. Reflects $5.6 million and $37.4 million reductions in revenue, respectively, due to revised negotiated valuations of assets under certain hardware price guarantees entered into in 2022 and 2023. Lower revenue in the quarter also reflects reduced battery hardware sales, partially offset by growth in software and services revenue1
• GAAP gross profit of $6.2 million, up from $(20.3) million in 3Q23
• Non-GAAP gross profit of $16.2 million, down from $21.4 million in 3Q23, reflecting lower battery hardware revenue
• GAAP gross margin of 21%, up from (15)% in 3Q23
• Non-GAAP gross margin of 46%, up from 12% in 3Q23, reflecting a higher percentage of software and services revenue
• Net loss of $148.3 million versus net loss of $77.1 million in 3Q23, which includes $104.1 million of bad debt expense associated with impairment of accounts receivable related to customer contracts that provide a parent company guarantee1
• Adjusted EBITDA of $(3.5) million versus $(0.9) million in 3Q23
• Operating cash flow of $(9.4) million versus $(4.0) million in 3Q23
• Ended 3Q24 with $75.4 million in cash and cash equivalents, versus $89.6 million at the end of 2Q24

Operating Highlights

• Bookings of $29.1 million, versus $676.4 million in 3Q23, driven primarily by lower battery hardware resale bookings
• Contracted backlog of $1.5 billion, down 17% from the end of 3Q23, and down 2% from the end of 2Q24
• Contracted storage assets under management (“AUM”) of 6.0 gigawatt hours (“GWh”), up 20% from the end of 3Q23 and up 3% from the end of 2Q24
• Solar monitoring AUM of 28.5 gigawatts (“GW”), up 8% from the end of 3Q23 and up 6% from the end of 2Q24
• Contracted annual recurring revenue (“CARR”) of $92.3 million, up 5% from the end of 3Q23, and up 2% from the end of 2Q24

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 nine months ended September 30, 2024.

“We reported another strong quarter of growth in Annual Recurring Revenue, driven by continued adoption of our industry-leading software,” said David Buzby, Interim Chief Executive Officer of Stem. “Revenue was down significantly due to lower hardware revenue in the quarter. We have begun to implement our new strategy that we announced in early October, which we expect to drive more predictable, scalable growth in software and services revenue and improved profitability in the long-term.”

“Sequential growth in software and services revenue drove strong GAAP gross margins of 21%, and record non-GAAP gross margins of 46% in the third quarter,” said Doran Hole, Chief Financial Officer and Executive Vice President. “Revenue was negatively impacted by a $5.6 million adjustment tied to an updated valuation of certain hardware contract guarantees that we issued in 2022 and early 2023. Our bad debt expense increased sequentially by $104.1 million in the quarter, due to an impairment of accounts receivables related to certain customer contracts that provide a parent company guarantee. As a result, our net income was negatively impacted by $104.1 million. With the adjustments made this quarter, we have reduced the value of all relevant assets subject to parent company guarantees to zero on our balance sheet, and do not expect further material negative impact on our financial statements as a result of these guarantees.”

“We are adjusting our full year 2024 guidance for several key metrics to account for our latest financial results, ongoing implementation of our new strategy and continued expectation of project delays, which continue to negatively impact our results including revenue, bookings and cash flow,” said Mr. Hole. “We are also taking actions to right-size our operating costs to conserve cash and align with our new strategy. We are confident that the changes we are making will position the Company to drive faster, more predictable growth in high-margin revenue streams, and improved profitability in the long-term.”

____________________

1 See the section below entitled “Some Factors Affecting our Business and Operations.” Adjusted EBITDA and non-GAAP gross profit and margin percentage for the quarter have been adjusted to exclude the impact of the $5.6 million revenue reduction. In addition, adjusted EBITDA for the quarter has been adjusted to exclude the impact of the $104.1 million of bad debt expense. Further details are provided below in the section entitled “Definitions of Non-GAAP Financial Measures.”

Key Financial Results and Operating Metrics

(in $ millions unless otherwise noted):

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Key Financial Results(1)

 

 

 

 

 

 

 

Revenue

$

29.3

 

 

$

133.7

 

 

$

88.8

 

 

$

294.1

 

GAAP Gross Profit (Loss)

$

6.2

 

 

$

(20.3

)

 

$

(8.6

)

 

$

(7.4

)

GAAP Gross Margin (%)

 

21

%

 

 

(15

)%

 

 

(10

)%

 

 

(3

)%

Non-GAAP Gross Profit*

$

16.2

 

 

$

21.4

 

 

$

43.5

 

 

$

52.9

 

Non-GAAP Gross Margin (%)*

 

46

%

 

 

12

%

 

 

34

%

 

 

15

%

Net Loss

$

(148.3

)

 

$

(77.1

)

 

$

(802.9

)

 

$

(102.7

)

Adjusted EBITDA*

$

(3.5

)

 

$

(0.9

)

 

$

(27.0

)

 

$

(24.1

)

 

 

 

 

 

 

 

 

Key Operating Metrics

 

 

 

 

 

 

 

Bookings

$

29.1

 

 

$

676.4

 

 

$

78.3

 

 

$

1,276.3

 

Contracted Backlog**

$

1,547.4

 

 

$

1,836.6

 

 

$

1,547.4

 

 

$

1,836.6

 

Contracted Storage AUM (in GWh)**

 

6.0

 

 

 

5.0

 

 

 

6.0

 

 

 

5.0

 

Solar Monitoring AUM (in GW)**

 

28.5

 

 

 

26.3

 

 

 

28.5

 

 

 

26.3

 

CARR**

$

92.3

 

 

$

87.5

 

 

$

92.3

 

 

$

87.5

 

(1) Revenue, gross profit (loss), and net loss were negatively impacted by a $5.6 million reduction in revenue as discussed below for the three months ended September 30, 2024 and a $37.4 million reduction in revenue as discussed above for the three months ended September 30, 2023. Net income was negatively impacted by a $104.1 million bad debt expense as discussed above.

*Non-GAAP financial measures. Adjusted EBITDA and non-GAAP gross profit and margin have been adjusted to exclude the impact of the reduction in revenue in the quarter, and adjusted EBITDA has been adjusted to exclude the impact of impairment of accounts receivable related to contracts that provide parent company guarantees, as discussed below. 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.

Third Quarter 2024 Financial and Operating Results

Financial Results

Revenue decreased 78% year-over-year to $29.3 million, versus $133.7 million in the third quarter of 2023. Reported revenue reflects a $5.6 million reduction in the quarter, and a $37.4 million reduction in the third quarter of 2023, in both cases due to updated valuations of certain contract guarantees for hardware revenue recorded in 2022 and 2023. The year-over-year lower revenue reflects significantly reduced battery hardware sales, partially offset by strong growth in software and services revenue.

GAAP gross profit (loss) was $6.2 million, or 21%, versus $(20.3) million, or (15)%, in the third quarter of 2023. The year-over-year increase in GAAP gross profit ($) and GAAP gross margin (%) was primarily driven by a higher mix of software and services revenue in the quarter, and a smaller reduction related to certain contract guarantees ($5.6 million) in the quarter, versus a similar revenue reduction in third quarter 2023 ($37.4 million).

Non-GAAP gross profit was $16.2 million, or 46%, versus $21.4 million, or 12%, in the third quarter of 2023. The year-over-year decrease in non-GAAP gross profit ($) was largely due to lower storage hardware revenue. The year-over-year increase in Non-GAAP gross margin (%) was primarily driven by a much higher contribution from high margin software and services revenue in the quarter.

Net loss was $148.3 million versus third quarter 2023 net loss of $77.1 million. The year-over-year change was primarily driven by $104.1 million of bad debt expense associated with impairment of receivables related to customer contracts that provide a parent company guarantee, as well as lower revenues in the quarter.

Adjusted EBITDA was $(3.5) million compared to $(0.9) million in the third quarter of 2023, primarily due to lower gross profit, partially offset by lower operating costs.

The Company ended the third quarter of 2024 with $75.4 million in cash and cash equivalents, as compared to $89.6 million in cash and cash equivalents at the end of the second quarter 2024.

Operating Results

Contracted backlog was $1.55 billion at the end of the third quarter of 2024, compared to $1.58 billion as of the end of the second quarter of 2024, representing a 2% sequential decrease. The slight decrease in contracted backlog in the quarter was driven by the conversion of backlog to revenue and low bookings in the quarter.

Bookings were $29.1 million in the third quarter of 2024 versus $676.4 million in the third quarter of 2023. Bookings remain highly variable due to the Company’s previous expansion into large front-of-the-meter (FTM) storage projects and the recent strategic shift towards higher-margin software and services versus hardware sales.

Contracted storage AUM increased 3% sequentially to 6.0 GWh for the third quarter of 2024. Solar monitoring AUM increased 6% sequentially to 28.5 GW for the third quarter of 2024.

CARR increased 2% to $92.3 million at the end of the third quarter of 2024 versus $90.1 million at the end of the second quarter of 2024.

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

End of 2Q24

$

1,578.5

 

Add:

 

Bookings

 

29.1

 

Less:

 

Hardware revenue

 

(13.8

)

   

Software/services activations

 

(43.2

)

   

Amendments/Cancellations

 

(3.2

)

End of 3Q24

$

1,547.4

 

Strategy Review Outcome

On October 1, 2024, the Company announced the outcome of its previously announced review of its corporate strategy. The Company expects its new strategic priorities will drive more predictable recurring revenue at significantly higher gross margins than the Company has previously realized and will enable more scalable growth. The new strategy is driven by four key strategic priorities: (1) shift to software and services-centric business to drive predictable, recurring, high-margin revenue, (2) expand and emphasize energy services as a competitive differentiator and enable more predictable revenue, (3) deliver enhanced AI-enabled software and edge device capabilities, and (4) provide hardware procurement advisory services, rather than procure hardware as the primary go-to-market approach. The Company will continue to provide hardware procurement, but only under certain strict profitability and working capital guidelines.

Recent Business Updates

On September 16, 2024, the Company announced that John Carrington stepped down as Chief Executive Officer and as a member of the Board of Directors of the Company (the “Board”), effective immediately. The Board has engaged an executive search firm to conduct a search, which includes internal and external candidates, for a permanent CEO. David Buzby, Executive Chair of the Board, was appointed interim CEO. Mr. Buzby will continue to serve as Executive Chair of the Board.

On October 23, 2024, the Company announced the appointment of Albert Hofeldt, PhD as Stem’s Chief Technology Officer (CTO), effective immediately. Dr. Hofeldt will lead Stem’s efforts to deliver enhanced AI-enabled software and edge device capabilities as part of the company’s recently announced software and services-centric strategy.

Outlook

The Company is updating its full year 2024 guidance ranges to account for the Company’s recent financial results, ongoing implementation of its new strategy and continued expectation of project delays, which continue to negatively impact results, as follows ($ millions, unless otherwise noted):

 

Previous

Updated

Revenue

$200 - $270

$135 - $155

 

 

 

Non-GAAP Gross Margin (%)

25% - 30%

32% - 36%

 

 

 

Adjusted EBITDA

($30) - ($20)

($45) - ($30)

 

 

 

Bookings

$600 - $1,100

$100 - $500

 

 

 

CARR (year-end)

$100 - $110

$90 - $100

 

 

 

Operating Cash Flow

Greater than $15

($30) - $0

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

3QA

4QE

Revenue

$25M

$34M

$29M

$45M-$65M

Some Factors Affecting our Business and Operations

As previously disclosed, the Company entered into certain contractual guarantees in 2022 and 2023 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. As previously disclosed, the Company recorded a net revenue reduction of $37.4 million in hardware revenue during the three months ended September 30, 2023, a net revenue reduction of $38.7 million during the three months ended March 31, 2024 due to market conditions, and a net revenue reduction of $5.6 million during the three months ended September 30, 2024 due to revised negotiated valuations of assets under certain hardware price guarantees entered into in 2022 and 2023. Such reductions in revenue are related to deliveries that occurred prior to 2023. Additionally, the Company recorded a $104.1 million bad debt expense during the three months ended September 30, 2024, as a result of an impairment of accounts receivable related to customer contracts that provide a parent company guarantee. 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 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 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 loss attributable to Stem before depreciation and amortization, including amortization of internally developed software, interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including revenue constraint, reduction in revenue, excess supplier costs, change in fair value of derivative liability, impairment of goodwill, contract termination payment, restructuring costs, impairment of accounts receivable related to customer contracts that provide parent company guarantees, 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.

Additionally, as a result of impairment of accounts receivables related to contracts that provided for a parent company guarantee, the Company recorded a bad debt expense of $104.1 million. 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 Wednesday, October 30, 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 (844) 825-9789, or for international callers, (412) 317-5180 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 10192999. The replay will be available until Saturday, November 30, 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 (NYSE: STEM) is a global leader in AI-enabled software and services that enable its customers to plan, deploy, and operate clean energy assets. The company offers a complete set of solutions that transform how solar and energy storage projects are developed, built, and operated, including an integrated suite of software and edge products, and full lifecycle services from a team of leading experts. More than 16,000 global customers rely on Stem to maximize the value of their clean energy projects and portfolios. Learn more at 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 and strategy; our expectations regarding future estimates of variable consideration in connection with guarantees of certain customer contracts, and the resulting effects on revenue and net income; our ability to secure sufficient and timely inventory from suppliers; our ability to meet contracted customer demand; our ability to manage manufacturing or delivery delays; 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; 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 armed conflicts between Russia and Ukraine and in the Gaza Strip and nearby areas; the expected benefits of the Inflation Reduction Act of 2022 on our business; and our future results of operations, including revenue, 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 successfully execute on our new software and services-centric strategy; 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, and instability in financial institutions; the direct and indirect effects of widespread health emergencies on our workforce, operations, financial results and cash flows; geopolitical instability, such as the armed conflicts between Russia and Ukraine and in 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 execute on our ongoing management transition and 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; our inability to regain and maintain compliance with New York Stock Exchange listing 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)

 

 

September 30, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

75,364

 

 

$

105,375

 

Short-term investments

 

—

 

 

 

8,219

 

Accounts receivable, net of allowances of $2,341 and $4,904 as of September 30, 2024 and December 31, 2023, respectively

 

92,659

 

 

 

302,848

 

Inventory

 

33,950

 

 

 

26,665

 

Deferred costs with suppliers

 

15,237

 

 

 

20,555

 

Other current assets

 

10,320

 

 

 

9,303

 

Total current assets

 

227,530

 

 

 

472,965

 

Energy storage systems, net

 

63,663

 

 

 

74,418

 

Contract origination costs, net

 

9,746

 

 

 

11,119

 

Goodwill

 

—

 

 

 

547,205

 

Intangible assets, net

 

148,183

 

 

 

157,146

 

Operating lease right-of-use assets

 

12,065

 

 

 

12,255

 

Other noncurrent assets

 

76,648

 

 

 

81,869

 

Total assets

$

537,835

 

 

$

1,356,977

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

47,363

 

 

$

78,277

 

Accrued liabilities

 

57,648

 

 

 

76,873

 

Accrued payroll

 

10,265

 

 

 

14,372

 

Financing obligation, current portion

 

15,037

 

 

 

14,835

 

Deferred revenue, current portion

 

70,766

 

 

 

53,997

 

Other current liabilities

 

5,905

 

 

 

12,726

 

Total current liabilities

 

206,984

 

 

 

251,080

 

Deferred revenue, noncurrent

 

86,799

 

 

 

88,650

 

Asset retirement obligation

 

4,150

 

 

 

4,052

 

Convertible notes, noncurrent

 

525,345

 

 

 

523,633

 

Financing obligation, noncurrent

 

44,662

 

 

 

52,010

 

Lease liabilities, noncurrent

 

12,807

 

 

 

10,455

 

Other liabilities

 

643

 

 

 

416

 

Total liabilities

 

881,390

 

 

 

930,296

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

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

 

—

 

 

 

—

 

Common stock, $0.0001 par value; 500,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 162,714,738 and 155,932,880 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

 

16

 

 

 

16

 

Additional paid-in capital

 

1,230,957

 

 

 

1,198,716

 

Accumulated other comprehensive income (loss)

 

302

 

 

 

(42

)

Accumulated deficit

 

(1,575,371

)

 

 

(772,494

)

Total Stem’s stockholders’ equity (deficit)

 

(344,096

)

 

 

426,196

 

Non-controlling interests

 

541

 

 

 

485

 

Total stockholders’ equity (deficit)

 

(343,555

)

 

 

426,681

 

Total liabilities and stockholders’ equity (deficit)

$

537,835

 

 

$

1,356,977

 

 

STEM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share amounts)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenue

 

 

 

 

 

 

 

Services and other revenue

$

22,143

 

 

$

16,597

 

 

$

52,086

 

 

$

47,630

 

Hardware revenue

 

7,148

 

 

 

117,143

 

 

 

36,673

 

 

 

246,461

 

Total revenue

 

29,291

 

 

 

133,740

 

 

 

88,759

 

 

 

294,091

 

Cost of revenue

 

 

 

 

 

 

 

Cost of services and other revenue

 

15,687

 

 

 

13,684

 

 

 

36,626

 

 

 

36,944

 

Cost of hardware revenue

 

7,408

 

 

 

140,347

 

 

 

60,753

 

 

 

264,573

 

Total cost of revenue

 

23,095

 

 

 

154,031

 

 

 

97,379

 

 

 

301,517

 

Gross profit (loss)

 

6,196

 

 

 

(20,291

)

 

 

(8,620

)

 

 

(7,426

)

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

8,216

 

 

 

11,605

 

 

 

30,286

 

 

 

37,691

 

Research and development

 

11,086

 

 

 

14,420

 

 

 

40,503

 

 

 

42,020

 

General and administrative

 

27,212

 

 

 

21,955

 

 

 

61,618

 

 

 

58,656

 

Impairment of parent company guarantees

 

104,134

 

 

 

—

 

 

 

104,134

 

 

 

—

 

Impairment of goodwill

 

—

 

 

 

—

 

 

 

547,152

 

 

 

—

 

Total operating expenses

 

150,648

 

 

 

47,980

 

 

 

783,693

 

 

 

138,367

 

Loss from operations

 

(144,452

)

 

 

(68,271

)

 

 

(792,313

)

 

 

(145,793

)

Other (expense) income, net:

 

 

 

 

 

 

 

Interest expense

 

(4,512

)

 

 

(4,405

)

 

 

(13,850

)

 

 

(10,085

)

Gain on extinguishment of debt, net

 

—

 

 

 

—

 

 

 

—

 

 

 

59,121

 

Change in fair value of derivative liability

 

—

 

 

 

(5,155

)

 

 

1,477

 

 

 

(7,731

)

Other income, net

 

793

 

 

 

713

 

 

 

2,153

 

 

 

2,114

 

Total other (expense) income, net

 

(3,719

)

 

 

(8,847

)

 

 

(10,220

)

 

 

43,419

 

Loss before (provision for) benefit from income taxes

 

(148,171

)

 

 

(77,118

)

 

 

(802,533

)

 

 

(102,374

)

(Provision for) benefit from income taxes

 

(129

)

 

 

46

 

 

 

(344

)

 

 

(354

)

Net loss

$

(148,300

)

 

$

(77,072

)

 

$

(802,877

)

 

$

(102,728

)

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

$

(0.91

)

 

$

(0.49

)

 

$

(4.99

)

 

$

(0.66

)

 

 

 

 

 

 

 

 

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

 

162,633,996

 

 

 

155,829,348

 

 

 

160,997,019

 

 

 

155,474,725

 

 

STEM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

Nine Months Ended

September 30,

 

 

2024

 

 

 

2023

 

OPERATING ACTIVITIES

 

 

 

Net loss

$

(802,877

)

 

$

(102,728

)

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

 

 

 

Depreciation and amortization expense

 

33,227

 

 

 

33,593

 

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

 

1,565

 

 

 

1,969

 

Stock-based compensation

 

21,716

 

 

 

28,320

 

Change in fair value of derivative liability

 

(1,477

)

 

 

7,731

 

Non-cash lease expense

 

2,251

 

 

 

2,162

 

Accretion of asset retirement obligations

 

177

 

 

 

178

 

Impairment loss of energy storage systems

 

357

 

 

 

2,347

 

Impairment loss of project assets

 

641

 

 

 

158

 

Impairment loss of right-of-use assets

 

2,096

 

 

 

—

 

Impairment of parent company guarantees

104,134

—

 

Impairment of goodwill

 

547,152

 

 

 

—

 

Net accretion of discount on investments

 

(29

)

 

 

(1,672

)

Income tax benefit from release of valuation allowance

 

—

 

 

 

(335

)

(Recovery of) provision for credit losses on accounts receivable

 

(3,229

)

 

 

1,754

 

Net loss on investments

 

—

 

 

 

1,561

 

Gain on extinguishment of debt, net

 

—

 

 

 

(59,121

)

Other

 

(157

)

 

 

(831

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

106,920

 

 

 

(67,029

)

Inventory

 

(7,285

)

 

 

(57,282

)

Deferred costs with suppliers

 

5,318

 

 

 

30,579

 

Other assets

 

7,129

 

 

 

(17,947

)

Contract origination costs, net

 

(927

)

 

 

(4,184

)

Project assets

 

(7,382

)

 

 

(2,827

)

Accounts payable

 

(30,675

)

 

 

1,771

 

Accrued expenses and other liabilities

 

(19,935

)

 

 

(28,910

)

Deferred revenue

 

21,531

 

 

 

27,630

 

Lease liabilities

 

(2,181

)

 

 

(2,135

)

Net cash used in operating activities

 

(21,940

)

 

 

(205,248

)

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

 

 

 

119,650

 

Proceeds from sales of available-for-sale investments

 

—

 

 

 

73,917

 

Purchase of energy storage systems

 

—

 

 

 

(2,912

)

Capital expenditures on internally-developed software

 

(8,868

)

 

 

(10,123

)

Purchase of property and equipment

 

(228

)

 

 

(395

)

Net cash (used in) provided by investing activities

 

(846

)

 

 

120,256

 

FINANCING ACTIVITIES

 

 

 

Proceeds from exercise of stock options and warrants

 

—

 

 

 

257

 

Repayment of financing obligations

 

(6,998

)

 

 

(7,766

)

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

 

—

 

 

 

232,399

 

Repayment of convertible notes

 

—

 

 

 

(99,754

)

Purchase of capped call options

 

—

 

 

 

(27,840

)

Investment from (redemption of) non-controlling interests, net

 

56

 

 

 

(56

)

Repayment of notes payable

 

—

 

 

 

(2,101

)

Net cash (used in) provided by financing activities

 

(6,942

)

 

 

95,139

 

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

 

403

 

 

 

114

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(29,325

)

 

 

10,261

 

Cash, cash equivalents and restricted cash, beginning of year

 

106,475

 

 

 

87,903

 

Cash, cash equivalents and restricted cash, end of period

$

77,150

 

 

$

98,164

 

 

 

 

 

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

$

75,364

 

 

$

97,064

 

Restricted cash included in other noncurrent assets

 

1,786

 

 

 

1,100

 

Total cash, cash equivalents, and restricted cash

$

77,150

 

 

$

98,164

 

 

STEM, INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

 

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

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

(in thousands)

 

(in thousands)

Net loss

$

(148,300

)

 

$

(77,072

)

 

$

(802,877

)

 

$

(102,728

)

Adjusted to exclude the following:

 

 

 

 

 

 

 

Depreciation and amortization (1)

 

11,516

 

 

 

11,531

 

 

 

36,321

 

 

 

36,098

 

Interest expense

 

4,512

 

 

 

4,405

 

 

 

13,850

 

 

 

10,085

 

Gain on extinguishment of debt, net

 

—

 

 

 

—

 

 

 

—

 

 

 

(59,121

)

Stock-based compensation

 

6,532

 

 

 

11,198

 

 

 

21,716

 

 

 

28,320

 

Revenue constraint (2)

 

—

 

 

 

—

 

 

 

—

 

 

 

10,200

 

Revenue reduction, net (3)

 

5,525

 

 

 

37,377

 

 

 

38,653

 

 

 

37,377

 

Excess supplier costs (4)

 

—

 

 

 

—

 

 

 

1,012

 

 

 

—

 

Change in fair value of derivative liability

 

—

 

 

 

5,155

 

 

 

(1,477

)

 

 

7,731

 

Impairment of goodwill

 

—

 

 

 

—

 

 

 

547,152

 

 

 

—

 

Contract termination payment (5)

 

10,000

 

 

 

—

 

 

 

10,000

 

 

 

—

 

Impairment and accounts receivable write-off (6)

 

104,134

 

 

 

—

 

 

 

104,134

 

 

 

—

 

Provision for (benefit from) income taxes

 

129

 

 

 

(46

)

 

 

344

 

 

 

354

 

Other expenses (6)

 

2,460

 

 

 

6,591

 

 

 

4,125

 

 

 

7,612

 

Adjusted EBITDA

$

(3,492

)

 

$

(861

)

 

$

(27,047

)

 

$

(24,072

)

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) Contract termination payment to a vendor for the delivery of hardware.

(6) See Note 3 — “Impairment and Accounts Receivable Write-Off” in the notes to the unaudited condensed consolidated financial statements in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

(7) Adjusted EBITDA for the three and nine months ended September 30, 2024 reflects other expenses of $2.5 million and $4.1 million, respectively. For the three months ended September 30, 2024, other expenses includes $1.2 million for advisory services relating to strategy and $1.3 million in connection with separation agreements for certain of the Company’s former executive officers. For the nine months ended September 30, 2024, other expenses are comprised of $1.2 million for advisory services relating to strategy, $1.3 million in connection with separation agreements for certain of the Company’s former executive officers, $0.5 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 September 30,

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenue

$

29.3

 

 

$

133.7

 

 

$

88.8

 

 

$

294.1

 

Cost of revenue

 

(23.1

)

 

 

(154.0

)

 

 

(97.4

)

 

 

(301.5

)

GAAP gross profit (loss)

 

6.2

 

 

 

(20.3

)

 

 

(8.6

)

 

 

(7.4

)

GAAP gross margin (%)

 

21

%

 

 

(15

)%

 

 

(10

)%

 

 

(3

)%

 

 

 

 

 

 

 

 

Non-GAAP Gross Profit

 

 

 

 

 

 

 

GAAP Revenue

$

29.3

 

 

$

133.7

 

 

$

88.8

 

 

$

294.1

 

Add: Revenue constraint (1)

 

—

 

 

 

—

 

 

 

—

 

 

 

10.2

 

Add: Revenue reduction, net (2)

 

5.6

 

 

 

37.4

 

 

 

38.7

 

 

 

37.4

 

Subtotal

 

34.9

 

 

 

171.1

 

 

 

127.5

 

 

 

341.7

 

Less: Cost of revenue

 

(23.1

)

 

 

(154.0

)

 

 

(97.4

)

 

 

(301.5

)

Add: Amortization of capitalized software & developed technology

 

4.1

 

 

 

3.5

 

 

 

12.0

 

 

 

9.8

 

Add: Impairments

 

0.3

 

 

 

0.8

 

 

 

0.4

 

 

 

2.9

 

Add: Excess supplier costs (3)

 

 

 

 

 

1.0

 

 

 

—

 

Non-GAAP gross profit

$

16.2

 

 

$

21.4

 

 

$

43.5

 

 

$

52.9

 

Non-GAAP gross margin (%)

 

46

%

 

 

12

%

 

 

34

%

 

 

15

%

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

 

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:

Bookings

  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

 

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

Contracted Backlog

●

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/20241028760199/en/

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

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