8-K: Stem Inc. Achieves Positive Adjusted EBITDA in Q4 2023, Forecasts Strong 2024

Stem, Inc. reports positive adjusted EBITDA in the fourth quarter of 2023 and second half of 2023, and projects at least $50 million in operating cash flow for 2024.

Summary

• Stem, Inc. announced its financial results for the fourth quarter and full year 2023, achieving positive adjusted EBITDA in Q4 and the second half of the year.
• The company reported Q4 2023 revenue of $167.4 million, an 8% increase compared to Q4 2022, and full year 2023 revenue of $461.5 million, a 27% increase year-over-year.
• GAAP gross margin for Q4 2023 was 7%, down from 8% in Q4 2022, while non-GAAP gross margin was 13%, up from 11% in the same period.
• The company's net loss for Q4 2023 was $37.7 million, compared to a net loss of $35.3 million in Q4 2022.
• Adjusted EBITDA for Q4 2023 was $4.6 million, a significant improvement from $(9.5) million in Q4 2022.
• For the full year 2023, the net loss was $140.4 million, compared to a net loss of $124.1 million in 2022, and adjusted EBITDA was $(19.5) million, compared to $(46.0) million in 2022.
• Bookings for Q4 2023 were $256.1 million, down from $457.5 million in Q4 2022, but full year 2023 bookings reached $1.53 billion, up from $1.06 billion in 2022.
• The contracted backlog at the end of Q4 2023 was $1.9 billion, nearly double the $969.0 million at the end of Q4 2022.
• Contracted storage assets under management (AUM) reached 5.5 gigawatt hours (GWh) at the end of Q4 2023, up from 3.1 GWh at the end of 2022.
• The company forecasts adjusted EBITDA between $5 million and $20 million and operating cash flow of at least $50 million for the full year 2024, with no equity issuance planned.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with the achievement of positive adjusted EBITDA and strong growth in key metrics. The company's guidance for 2024 is also encouraging. However, there are some concerns about the net loss and the decrease in Q4 bookings.

Positives

• Stem achieved positive adjusted EBITDA in the fourth quarter and second half of 2023.
• The company's revenue increased by 27% for the full year 2023.
• Non-GAAP gross margin improved to 15% for the full year 2023.
• The contracted backlog nearly doubled year-over-year, reaching $1.9 billion.
• Stem secured a significant contract for its new PowerBidder Pro software with Mercuria Energy Trading.
• The company forecasts positive adjusted EBITDA and strong operating cash flow for 2024 without needing to issue equity.
• Stem's contracted storage AUM and CARR showed substantial growth year-over-year.

Negatives

• GAAP gross margin decreased to 1% for the full year 2023.
• The company experienced a net loss of $140.4 million for the full year 2023.
• Bookings in Q4 2023 decreased by 44% compared to Q4 2022.
• The company's cash balance decreased sequentially from $125.4 million to $113.6 million.

Risks

• The company is subject to risks from the evolving macroeconomic, geopolitical, and business environment, including inflation, interest rates, and potential economic slowdowns.
• Supply chain disruptions and manufacturing or delivery delays could impact the company's ability to meet customer demand.
• The company faces risks related to the development and performance of its energy storage systems and software-enabled services.
• There is a risk that the company may not be able to retain or upgrade current customers, further penetrate existing markets, or expand into new markets.
• The company's financial results could be adversely affected by political, economic, business, and competitive factors.

Future Outlook

Stem forecasts adjusted EBITDA between $5 million and $20 million and operating cash flow of at least $50 million for the full year 2024, with no equity issuance planned. They also expect strong growth in revenue, bookings, CARR and AUM.

Management Comments

• John Carrington, Chief Executive Officer of Stem, stated that the company reached its commitment to deliver positive adjusted EBITDA in the second half of 2023.
• He also mentioned that the company is in a strong position to generate positive operating cash flow driven by its software technology leadership.
• Management is focused on extending technology leadership, building software services revenue, and achieving profitable growth in 2024.

Industry Context

This announcement highlights Stem's progress in the clean energy sector, particularly in energy storage and AI-driven software solutions. The company's focus on recurring revenue and software services aligns with industry trends towards more sustainable and predictable business models. The contract with Mercuria demonstrates the growing demand for advanced energy trading solutions.

Comparison to Industry Standards

• Stem's achievement of positive adjusted EBITDA in Q4 2023 is a significant milestone, as many companies in the renewable energy sector struggle with profitability.
• The 99% year-over-year increase in contracted backlog indicates strong demand for Stem's solutions, which is a positive sign compared to competitors in the energy storage space.
• The company's focus on software and recurring revenue is similar to companies like SunPower and Enphase Energy, which are also transitioning towards more service-based models.
• Stem's contracted storage AUM of 5.5 GWh is competitive with other energy storage providers, but the company needs to continue to grow this metric to maintain its leadership position.
• The ERCOT benchmarking analysis showing Athena outperforming competitors by an average of 28% in revenue attainment is a strong indicator of the platform's effectiveness, which is a key differentiator compared to other energy management solutions.

Stakeholder Impact

• Shareholders will likely react positively to the achievement of positive adjusted EBITDA and the strong 2024 outlook.
• Employees may be encouraged by the company's growth and positive financial performance.
• Customers will benefit from the company's innovative solutions and services.
• Suppliers may see increased demand for their products and services.
• Creditors may view the company as a lower risk due to its improved financial performance.

Next Steps

• Stem will continue to focus on extending its technology leadership position.
• The company will focus on building software services revenue.
• Stem will aim for profitable growth in 2024.
• The company will continue to diversify its supply chain and integrate additional energy technologies.

Key Dates

Keywords

Energy Storage, Renewable Energy, AI, Software, Adjusted EBITDA, Operating Cash Flow, Backlog, AUM, CARR, PowerBidder Pro