Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stem Inc (STEM, Financial) achieved a record non-GAAP gross margin of 24% in Q1 2024, indicating strong profitability in its operations.
- Operating cash flow was roughly breakeven this quarter, showing a significant improvement of $35 million over the same quarter last year.
- The company successfully launched a new software-only product offering, enhancing its product portfolio and market competitiveness.
- Stem Inc (STEM) reported a 25% increase in contracted annual recurring revenue (CAAR) compared to Q1 2023, demonstrating growth in recurring revenue streams.
- The company is confident in achieving its full-year 2024 financial targets, including $1.5 billion to $2 billion in bookings and more than $50 million in operating cash flow.
Negative Points
- Revenue for Q1 2024 was $25 million, down 62% compared to Q1 2023, primarily due to a $33 million adjustment related to legacy contract guarantees.
- GAAP gross profit was negative $24 million in Q1 2024, significantly impacted by the revenue adjustment.
- Adjusted EBITDA was negative $12.2 million, although it showed a slight improvement from negative $13.7 million in the same quarter last year.
- The company experienced variability in bookings, with only $24 million recorded in Q1 2024, attributed to the focus on larger scale projects which have more variable timing.
- Stem Inc (STEM) is still managing the impacts of legacy contract guarantees and has noted potential future impairments related to these contracts.
Q & A Highlights
Q: Can you discuss the confidence in hitting the revenue targets given the interconnection delays and potential project slips?
A: William Bush, CFO of Stem Inc, expressed confidence in meeting the revenue goals despite potential project shifts. He highlighted the ability to manage project timelines effectively and focus on positive EBITDA and cash flow generation, which were strong in the quarter.
Q: Are permitting and interconnection challenges worsening, and how is this impacting the business?
A: William Bush noted that while there are slowdowns, particularly in C&I projects, Stem Inc is shifting focus to municipal and public power markets, which have different interconnection dynamics, helping mitigate these challenges.
Q: Could you elaborate on your sales strategy and differentiation in the utility-scale storage market?
A: Prakesh Patel, Chief Strategy Officer, emphasized Stem's competitive advantage through superior project economics delivered by their software, aiding customers in achieving better returns and navigating project development challenges more effectively.
Q: What are the mechanics behind the $32 million non-cash charge related to revenue adjustments?
A: William Bush clarified that the adjustment was a reduction in accounts receivable and revenue, reflecting changes in market conditions and project valuations.
Q: Can you provide insights into the backlog cleansing effort? Are there more adjustments expected?
A: William Bush explained that the effort focused on removing low-margin or strategically misaligned projects to optimize resource allocation towards more profitable opportunities. He confirmed that this specific cleansing effort is complete.
Q: How sustainable are the current software gross margins, which have shown improvement?
A: William Bush attributed the improvement in software gross margins to newer, more effective software contracts and a favorable mix shift towards solar services, expressing confidence in the sustainability of these margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
