Stem Announces First Quarter 2022 Financial Results
May 05 2022 - 04:05PM
Quarterly revenue 29% above high end of guidance range
Reaffirm full-year 2022 guidance
AlsoEnergy commercial synergies on track for 2022 bookings
Expect minimal impact from AD/CVD inquiry in solar industry
First Quarter 2022 Financial and Operating Highlights
Financial Highlights
Revenue of $41.1 million, up from $15.4 million (+166%) in Q1 2021
GAAP Gross Margin of 9% versus (1)% in Q1 2021
Non-GAAP Gross Margin of 16% versus 13% in Q1 2021
Net Loss of $(22.5) million versus $(82.6) million in Q1 2021
Adjusted EBITDA of $(12.8) million versus $(3.2) million in Q1 2021
Ended Q1 2022 with $352 million in cash, cash equivalents, and short-term investments
Operating Highlights
12-month Pipeline of $5.2 billion, up from $4.0 billion (+30%) at the end of Q4 2021
Bookings of $151 million, up from $51 million (+196%) in Q1 2021
Record contracted backlog of $565 million, up from $221 million (+156%) at the end of Q1 2021
Record contracted storage assets under management (AUM) of 1.8 gigawatt hours (GWh) up from 1.6 GWh (+13%) at the end of Q4 2021
Solar monitoring AUM of 32.4 gigawatts (GW)
Contracted Annual Recurring Revenue (CARR) of $51.5 million, up from $24.1 million (114%) at the end of Q4 2021
Stem (the "Company") (NYSE: STEM), a global leader in artificial intelligence (AI)-driven energy software and services, announced today its financial results for the three months ended March 31, 2022. Reported results in this press release reflect AlsoEnergy’s operations for the period from February 1, 2022 through March 31, 2022.
John Carrington, Chief Executive Officer of Stem, commented, “We are pleased to report a strong first quarter, with robust growth in revenue, backlog, pipeline, AUM, and CARR, all driven by our market-leading software platforms. Revenue for the quarter was above the high end of our guidance range, and we reaffirm our full-year 2022 guidance for all of our key financial and operational metrics.
Our contracted backlog grew 156% as compared to the period ended March 31, 2021, driven by $151 million in bookings, which nearly tripled versus first quarter 2021. That is the second-highest bookings performance in Company history after the fourth quarter 2021, underscoring our accelerating momentum.
We are also pleased with the increase in CARR to $51.5 million, reflecting our long-term focus on high-margin software and services revenue. As our AUM expands in both storage and solar monitoring, our AI-driven software can deliver improved economic optimization and asset management solutions to our renewable energy customers. We believe Stem’s differentiated software solutions, coupled with our customer-focused employees and strong balance sheet, will drive multi-year growth in high margin recurring software and services revenues, as evidenced by our 16% non-GAAP gross margin this quarter. The integration of AlsoEnergy is proceeding on track as we combine the commercial and technical strengths into one company focused on providing differentiated solutions for our customers. As we continue to drive additional customer value, we have been able to implement price increases for our solar asset performance software in the quarter, reflecting our unique capabilities in the market.
A recently announced U.S. Department of Commerce inquiry into anti-dumping and countervailing duties on solar modules has caused uncertainty for solar developers. Our diversity of customers and markets, including growing momentum in standalone storage and BTM solar projects, provides greater certainty into our near-term revenues. As of late April 2022, we estimate that recurring revenue and contracted standalone storage projects represent more than 85% of our remaining projected 2022 total revenue at the midpoint of guidance. Moreover, we believe the majority of our solar + storage customers have procured sufficient panel supply to execute their projects. As a result, we expect minimal impact from the inquiry on our 2022 revenue.
Supply chain constraints, permitting and interconnection delays, and potential tariffs have caused recent headwinds in the industry, but we continue to manage these risks and believe we are well-positioned to navigate these issues.”
First Quarter 2022 Financial and Operating Results
Financial Results
First quarter 2022 revenue increased 166% to $41.1 million, versus $15.4 million in the first quarter of 2021. Higher hardware revenue from Front-of-the-Meter (FTM) and Behind-the-Meter (BTM) partnership agreements drove a majority of the increase realized during the quarter, in addition to $9.6 million of revenue from the partial-quarter inclusion of AlsoEnergy.
First quarter 2022 GAAP Gross Margin was $3.6 million, or 9%, versus $(0.1) million, or (1)% in the first quarter of 2021. The year-over-year increase in GAAP Gross Margin resulted primarily from higher sales and additional higher-margin services revenues, including AlsoEnergy.
Beginning in first quarter 2022, management no longer reclassifies certain costs of goods sold to operating expenses, including communication and cloud service expenditures, in its calculation of Non-GAAP Gross Margin. First quarter 2021 Non-GAAP Gross Margin has been recalculated consistent with this treatment. The non-GAAP reconciliation table below includes important updates to these calculations for comparability.
First quarter 2022 Non-GAAP Gross Margin was $6.4 million, or 16% versus $2.0 million, or 13% in the first quarter of 2021. The year-over-year increase in Non-GAAP Gross Margin resulted from higher revenues. In percentage terms, the year-over-year increase in Non-GAAP Gross Margin resulted from a higher mix of software services, inclusive of AlsoEnergy, partially offset by lower hardware margins.
First quarter 2022 Net Loss was $(22.5) million versus first quarter 2021 Net Loss of $(82.6) million. The improvement was primarily driven by non-cash revaluation of warrants tied to changes in the value of the underlying common stock reported in the first quarter 2021. In June and September 2021 Stem redeemed all outstanding private and public warrants, respectively, resulting in a more streamlined capital structure and less quarter-to-quarter variability in the Company’s Net Income (Loss).
First quarter 2022 Adjusted EBITDA was $(12.8) million compared to $(3.2) million in the first quarter of 2021. Lower Adjusted EBITDA results were primarily driven by higher operating expenses resulting from increased personnel costs, continued investment in our growth initiatives, and costs associated with public reporting requirements.
The Company ended the first quarter of 2022 with $352 million in cash, cash equivalents, and short-term investments, consisting of $175 million in cash and cash equivalents and $177 million in short-term investments. The sequential decrease from $921 million in cash, cash equivalents, and short-term investments at the end of the fourth quarter 2021 was primarily the result of closing the AlsoEnergy acquisition, which included cash consideration of $533 million in cash (net of cash acquired), and strategic purchases of energy storage systems.
Operating Results
The Company’s 12-month forward pipeline was $5.2 billion at the end of the first quarter 2022 compared to $4.0 billion at the end of the fourth quarter 2021, representing 30% sequential growth. The increase in the 12-month forward pipeline was driven by increased FTM project opportunities, including significant expansions into new markets and continued growth in Stem’s partner channels.
Contracted Backlog was $565 million at the end of the first quarter of 2022 compared to $449 million as of the end of the fourth quarter 2021, representing a 26% sequential increase. The increase in Contracted Backlog resulted from bookings in the quarter of $151 million and contribution from the backlog associated with AlsoEnergy, partially offset by revenue recognition, contract cancellations, and amendments during the quarter. Bookings of $151 million in the first quarter 2022 grew 196% year-over-year from $51 million in first quarter 2021.
Contracted storage AUM increased 64% year-over-year and 12% sequentially to 1.8 GWh, driven by new contracts. Solar monitoring AUM ended the first quarter of 2022 at 32.4 GW.
CARR increased to $51.5 million as of the end of the first quarter of 2022, up from $24.1 million as of the end of the fourth quarter 2021, a 114% sequential increase, largely driven by the acquisition of AlsoEnergy.
The Company expects to continue to diversify its supply chain, adopt alternative technologies, and deploy its balance sheet to meet the expected significant growth in customer demand. COVID-19, potential import tariffs, and general macroeconomic conditions, including the ongoing conflict between Russia and Ukraine, continue to impact and cause uncertainty in the supply chain and project timelines, and the Company has been affected by inflation in the costs of equipment. The Company is actively working to mitigate these impacts on its financial and operational results, although there is no guarantee that we will be successful.
Outlook
The Company reaffirms FY2022 financial and operational guidance as follows ($ millions, unless otherwise noted):
Revenue
$350 - $425
Non-GAAP Gross Margin (%)*
15% - 20%
Adjusted EBITDA*
$(60) - $(20)
Bookings
$650 - $750
CARR (year-end)
$60 - $80
Stem’s 2022 guidance includes the operations of AlsoEnergy after February 1, 2022.
Stem will hold a conference call to discuss this earnings press release and business outlook on Thursday, May 5, 2022 beginning at 5:00 p.m. Eastern Time. The conference call and accompanying slides may be accessed via a live webcast on a listen-only basis on the Events & Presentations page of the Investor Relations section of the Company’s website at https://investors.stem.com/events-and-presentations. The call can also be accessed live over the telephone by dialing (844) 200-6205, or for international callers, (833) 950-0062 and using access code 015694. A replay of the conference call will be available shortly after the call and can be accessed by dialing (866) 813-9403 or for international callers by dialing +44 204 525 0658. The passcode for the replay is 676295. An archive of the webcast will be available on the Company’s website at https://investors.stem.com/overview for 12 months after the call.
Use of Non-GAAP Financial Measures
In addition to financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), this earnings release contains the following non-GAAP financial measures: Adjusted EBITDA and non-GAAP gross margin. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP. For reconciliation of Adjusted EBITDA and non-GAAP gross margin to their most comparable GAAP measures, see the section below entitled, “Reconciliations of non-GAAP Financial Measures.”
We use these non-GAAP financial measures for financial and operational decision-making and to evaluate our operating performance and prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our operating performance, such as stock-based compensation and other non-cash charges, as well as discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results, to the extent that competitors define these metrics in the same manner that we do. We believe these non-GAAP financial measures are useful to investors both because they (1) allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) are used by our institutional investors and the analyst community to help them analyze the health of our business.
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