Stem (ticker: STEM) reported $39.8 million in sales and gross profits of $5.8 million for the quarter. Wall Street was looking for about $36 million in sales and $3.6 million in gross profit.
The company affirmed its full-year sales guidance of $147 million. That implies fourth-quarter sales of about $72 million. Wall Street is at about $75 million. Still, total sales of $112 million in the second half of 2021 is about $2 million more than analysts have forecast.
A sales and earnings "beat" is good news. The company reported a few other noteworthy items beyond top- and bottom-line figures. The company's pipeline of new business hit $2.4 billion, up 41% from the $1.7 billion reported at the of the second quarter. Pipeline isn't an official accounting metric. It's more like sales leads, but is an indication of the demand for backup battery applications.
Stem's customers are utility and commercial businesses looking to either make renewable-power-generation assets to store energy generated by sunlight or wind, or looking to cut their electricity bill by going to backup power when prices are high. Stem also sells the software required to managed the power systems.
Stem customers now have installed about 1.4 gigawatt hours of battery storage, up from 1 gigawatt hour a year ago. The bigger the installed base, the more software and software upgrades Stem can sell.
Things looks solid. But cash burn was a little larger than investors might have hoped for. Stem burned through roughly $28 million in the quarter. The company burned through about $50 million in the first half of 2021.
"That's driven by -- shocker -- supply-chain issues," CEO John Carrington tells Barron's. But spending more was a choice. Carrington put a little more cash to work, locking up things like battery supply to help avoid price inflation. Stem has contracted its battery needs through the third quarter of next year and is working no on the fourth quarter of 2022.
Battery prices are going up, but down the road, Carrington doesn't see the need to invest in battery capacity. There will be enough batteries to be had, according to the CEO. He is focused on higher-margin software sales and less interested in making an extra margin on batteries.
Most of the company's roughly $600 million in cash on the balance sheet is earmarked for things such as M&A instead of building manufacturing capacity.
Barron's recently wrote positively about Stem, believing its software, combined with rising demand for stationary backup power applications, would drive its stock price higher. Since the article appeared in August, as of Tuesday's closing price, Stem stock is down about 2%. The S&P 500 and Dow Jones Industrial Average are up about 5% and 3% respectively over the same span.
