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Gain: $29 million, a sharp year-over-year decline due to lower revenue from hardware resale.
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GAAP gross margin: 21%.
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Non-GAAP gross margin: 46%, reflecting a greater contribution from high-margin software and services revenue.
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ARR increase: More than $3 million spread across solar and storage assets.
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Software revenue growth: 10% quarterly and 19% annually.
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Services revenue: Record $22 million, up 33% year over year.
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Disadvantage: Down slightly with relatively low bookings of $29 million.
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Storage AUM Growth: Increased by approximately 200 megawatt hours.
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Solar AUM Growth: Increased by approximately 1.6 gigawatts.
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Revised 2024 Earnings Guidance: Reduced from $135 million to $155 million.
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Booking prediction: Reduced from $100 million to $500 million.
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Reduction of operating costs: The run rate cash OpEx is expected to decline by around 15% by the end of the year.
Release date: October 30, 2024
For the full earnings call transcript, please refer to the full earnings call transcript.
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Stem Inc (NYSE:STEM) has completed a comprehensive strategy review that has resulted in a refined business model focused on sustainable and predictable revenues.
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The company is shifting its focus to software and services, which is expected to lead to higher gross margins and profitability.
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Stem Inc (NYSE:STEM) reported strong non-GAAP gross margin of 46%, reflecting a greater contribution from high-margin software and services revenue.
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The company has introduced new leadership with deep industry experience, which is expected to drive innovation and achieve strategic goals.
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Stem Inc (NYSE:STEM) successfully increased its annual recurring revenue (ARR) by more than $3 million in the third quarter, indicating strong commercial momentum.
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Stem Inc (NYSE:STEM) reported a sharp decline in revenue to $29 million, mainly due to lower revenue from hardware resale.
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The unpredictability of project timelines for utility-scale storage hardware has resulted in significantly lower-than-expected bookings and revenue.
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The company lowered its full-year revenue guidance to a range of $135 million to $155 million, due to challenges in storage hardware resale revenue.
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Stem Inc (NYSE:STEM) has recorded a more than $100 million impairment charge on receivables due to warranties on hardware contracts, impacting its financial statements.
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The order backlog has fallen slightly since the second quarter and the company recorded relatively low bookings of $29 million.
Q: What feedback are you receiving from customers on the recent strategic and management changes at Stem Inc? A: David Buzby, independent chairman of the board, stated that customer response was generally positive. Customers view storage hardware as a commodity available from multiple sources, and the new strategy assures them of Stem’s focus on software improvements. This focus is on improving products and optimizing customer assets.
Q: What improvements do customers require in the software products? A: Michael Carlson, Chief Operating Officer, cited three key areas of focus: improved user information flow, predictive capabilities using AI, and automated alert and resolution processes. These improvements are intended to optimize storage and provide financial modeling.
Q: Will the modular ESS solution continue to be deployed as Stem moves into purchasing advisory services? A: Michael Carlson confirmed that the modular edge device, part of the PowerCore EMS solution, will remain a key part of the strategy. Doran Hole, Chief Financial Officer, clarified that while edge devices are critical, the focus will shift from large-scale resale of OEM battery hardware.
Q: Will future bookings focus mainly on software, given the new strategy? A: Doran Hole explained that future bookings will include both hardware and software. While the focus is on software, hardware resale will continue if it meets profitability and cash flow criteria. The wide spread in booking forecasts reflects this dual approach.
Q: Why is there a shift from 15 to 20 year contracts to 3 to 5 year contracts? A: Michael Carlson explained that the shift is due to the focus on software, where industry standard SaaS agreements tend to be shorter. The longer contracts were tied to OEM hardware warranties, which are now being separated from software agreements.
For the full earnings call transcript, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
