Release Date: March 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stem Inc (STEM, Financial) has a strong and loyal customer base of 16,000 Solar and Storage customers, indicating a solid market presence.
- The PowerTrack software generates high growth margins, with 70% to 80% gross margin, and has significant growth opportunities both domestically and internationally.
- The company is focusing on reducing its cost structure, expecting more than 20% additional cost savings in 2025.
- Stem Inc (STEM) is leveraging emerging technologies like AI to enhance its software development and product offerings.
- The company has secured major customer deals, such as Summit Ridge Energy and Neovolt, which standardize on PowerTrack, indicating strong market acceptance.
Negative Points
- Stem Inc (STEM) reported a significant year-over-year decline in total revenue due to reduced hardware sales.
- GAAP gross margin was down sequentially due to a one-time impairment of deferred services related to OEM warranty services.
- Adjusted EBITDA and operating cash flow declined year-over-year due to lower gross profit dollars from reduced battery hardware sales.
- The company recorded one-time adjustments to current assets, totaling approximately $38.7 million, related to AR reserves, inventory impairment, and hardware deposit forfeitures.
- Stem Inc (STEM) received a notice from the NYSE for non-compliance with listing standards due to its average share price falling below $1.
Q & A Highlights
Q: Can you comment on the PowerBidder offering and its role in your broader strategy led by PowerTrack?
A: PowerBidder Pro is part of our software strategy pivot. Currently, we have one customer using it actively, and we are evaluating additional use cases and searching for new customers.
Q: What factors led to the elimination of delayed projects from the backlog?
A: The delays were due to developers facing increased costs and challenges with interconnection and permitting. We took a conservative step to clean up the backlog by removing stale bookings.
Q: How should we view the $35 million battery hardware resale for this year? Will it phase out as the new strategy takes over?
A: The hardware resale is opportunistic and not the focus of our long-term strategy. We may continue to see some hardware sales, but they are not a priority as we shift towards recurring software and services revenues.
Q: Can you explain the difference between the new metrics for bookings and contracted backlog?
A: The new metrics focus on fully-executed purchase orders. Contracted backlog includes hardware and one-time services, while CARR includes recurring software and services revenue.
Q: How do you plan to achieve operational cost reductions in 2025?
A: We aim to eliminate inefficiencies, reduce software development and cloud computing costs, and focus on growth centered around PowerTrack and other software applications.
Q: How does PowerTrack compete with software offerings from tracker companies?
A: PowerTrack is not in direct competition with tracker companies, which focus on front-of-the-meter solutions. Our strength lies in behind-the-meter applications, and we see growth in front-of-the-meter sectors as well.
Q: What are your expectations for seasonality in 2025 regarding revenue and EBITDA?
A: Software and services revenue is expected to be fairly consistent, with some back-half seasonality. Hardware sales are anticipated to be more back-end loaded, possibly in Q4.
Q: How should we think about the scale required for significant EBITDA growth?
A: Growth in software comes with a different scaling model, focusing on building differentiated IP and deploying it into various markets. We will incur costs in sales and support but not in manufacturing the software itself.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
