Stem, Inc. (NYSE:STEM), a global leader in AI-driven clean energy solutions and services, has reported its financial results for the first quarter of 2024, showcasing its continued progress in executing its strategic priorities.

Financials

The company's revenue for the first quarter of 2024 was $25.5 million, down 62% from the same period in 2023. This decrease was primarily driven by a $33.1 million non-cash adjustment related to legacy hardware price guarantee contracts, which the company has since discontinued. Despite this one-time impact, Stem remains confident in its ability to achieve its full-year revenue guidance.

Stem's annual revenue for the fiscal year 2023 was $461.5 million, while its annual net income was -$140.4 million. The company's annual operating cash flow was -$207.4 million, and its annual free cash flow was -$225.6 million.

In the first quarter of 2024, Stem achieved a record non-GAAP gross margin of 24%, up from 19% in the same period last year. This improvement was driven by a higher mix of software and services revenue, as well as more favorable supply costs. The company's GAAP gross profit, however, was negative $24.2 million, primarily due to the impact of the revenue adjustment.

Stem's adjusted EBITDA for the first quarter of 2024 was a negative $12.2 million, compared to a negative $13.7 million in the same period last year. The company's operating cash flow for the quarter was roughly breakeven, a significant improvement of $35 million year-over-year.

Geographical Revenue Breakdown

Geographically, Stem's revenue is primarily generated in the United States, which accounted for $24.3 million, or 95%, of total revenue in the first quarter of 2024. The remaining $1.2 million, or 5%, was generated in the rest of the world.

Revenue Breakdown by Segment

In terms of revenue breakdown, Stem's services and other revenue was $14.8 million, while hardware revenue was $10.6 million in the first quarter of 2024. This represents a 1% increase in services and other revenue and an 80% decrease in hardware revenue compared to the same period in 2023.

The decrease in hardware revenue was largely due to the $33.1 million non-cash adjustment related to the legacy hardware price guarantee contracts. Excluding this adjustment, Stem's hardware revenue would have been $43.7 million, a decrease of 17% year-over-year.

Bookings and Contracted Annual Recurring Revenue

Stem's bookings for the first quarter of 2024 were $23.8 million, down from $36.4 million in the same period last year. The company attributes this decrease to the lumpiness and variability inherent in its larger-scale front-of-the-meter storage projects, which have seen a tripling in average project size over the past two years. However, Stem remains confident in achieving its full-year bookings target of $1.5 billion to $2 billion, citing a substantial number of projects in advanced stages of negotiation or expected to close in the near term.

Contracted annual recurring revenue (CARR) was $89.3 million at the end of the first quarter of 2024, down from $91.0 million at the end of the fourth quarter of 2023. This decrease was due to a proactive effort to upgrade the profitability profile of Stem's backlog, resulting in the cancellation of approximately $3.5 million in annual contract revenue.

Assets Under Management

Stem's energy storage assets under management (AUM) grew 5% sequentially to 5.0 GWh, while its solar AUM decreased by 2% to 26.9 GW. The company attributes the solar AUM decrease to the backlog review and optimization process.

Outlook

Looking ahead, Stem has reaffirmed its full-year 2024 guidance, including revenue, adjusted EBITDA, and operating cash flow. The company expects revenue to be in the range of $400 million to $450 million, adjusted EBITDA to be between $5 million and $20 million, and operating cash flow to exceed $50 million.

Liquidity

Stem's balance sheet remains strong, with $112.8 million in cash and cash equivalents as of March 31, 2024. The company's working capital, defined as current assets less current liabilities, was $168.9 million, providing ample liquidity to support its growth initiatives.

Recent Developments

In addition to its financial performance, Stem has made several strategic moves during the quarter, including the announcement of its next-generation PowerTrack Asset Performance Management suite. This software-only solution is designed to centralize and streamline the management of storage, solar, and hybrid energy asset portfolios, helping customers optimize the commercial and technical performance of their clean energy assets.

Furthermore, Stem has made changes to its leadership team, with the retirement of Chief Technology Officer Larsh Johnson and the appointment of Albert Hofeldt as the new SVP of Technology. The company has also welcomed Gerard Cunningham to its Board of Directors, bringing extensive experience in the technology, software services, and AI sectors.

Conclusion

Overall, Stem's first quarter of 2024 results demonstrate the company's continued progress in executing its strategic priorities, despite the one-time impact of the legacy hardware price guarantee contracts. The company's focus on software and services revenue, as well as its efforts to optimize its backlog and improve operating efficiency, position it well to achieve its full-year financial targets and further solidify its position as a leader in the AI-driven clean energy solutions market.