Stem, Inc. · NYSE:STEM
Stem — Investor Presentation (March 2024)
53 slides from Stem's investor presentation, March 2024
Slide 1: Investor Presentation March 2024
March 2024 Investor Presentation
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward-Looking Statements This presentation, as well as other statements we make, contains “forward-looking statements” within the meaning of the federal securities laws, which include any statements that are not historical facts. Such statements often contain words s
Slide 3: Today's Presenters and Agenda
Today’s Presenters Agenda • Company Update • Industry Outlook • 4Q & FY 2023 Financial and John Carrington Bill Bush CEO and Director Chief Financial Officer Operating Results and Outlook • Appendix Prakesh Patel Ted Durbin Chief Strategy Officer Vice President, Investor Relations © 2024 Stem, Inc.
Slide 4: 2024 Guiding Principles
2024 Guiding Principles Grow free cash flow by leveraging our software leadership Focus on Cash Flow Generation • Generate free cash flow to fund operations • Reduce working capital intensity Execution on Commitments • Do not issue equity ✓ Achieved positive adjusted EBITDA in 2H23 Build software se
Slide 5: Fourth Quarter 2023 Results & Highlights
Fourth Quarter 2023 Results & Highlights Key adjusted EBITDA positive milestone achieved, strong software momentum to begin 2024 Continued Q4 Momentum* Q4 Highlights Revenue Contracted Annual Recurring Revenue $167M +25% QoQ / +8% YoY $91M +4% QoQ / +39% YoY Positive Adj. EBITDA in 2H23 ~800 MWh of
Slide 6: 2024 Guidance
2024 Guidance 2024E: 1Q24E 2Q24E 3Q24E 4Q24E Revenue $600M - $700M 8% 10% 32% 50% 15–20% Non-GAAP Gross Margin % of annual revenue 2024E: 2024E: Bookings Adjusted EBITDA $1.5B - $2.0B $5M - $20M 2024E: 2024E: CARR Operating Cash Flow $115M - $130M >$50M See Appendix for definitions and reconciliatio
Slide 7: Creating Value with Software, Services & Hardware
Creating Value with Software, Services & Hardware Expect to grow recurring software and services cash flows driven by superior technology Software Services Hardware Turnkey BESS Modular ESS Project configuration & deployment Recurring SaaS revenue Ongoing reporting and other Integrated BESS from Mod
Slide 8: Strong Initial Demand for PowerBidder Pro
Strong Initial Demand for PowerBidder Pro Software-only solution for wholesale market forecasting and bid optimization Mercuria Selects PowerBidder Pro PowerBidder Pro Selected by CCAs ● Marquee customer in energy trading ● Portfolio of software-only awards with community choice aggregators ● First
Slide 9: Athena Delivers Best-in-Class Performance in ERCOT
Athena Delivers Best-in-Class Performance in ERCOT Stem outperforms competitors by +28% on average in ERCOT internal simulation Stem Outperforms Competitors by 28% on Average AVG: 225 +42% +30% +90% +5% (4)% +7% 28% Key Athena Takeaways 175 ● Optimization captured 75% of the theoretical maximum reve
Slide 10: AI Technology Leadership
AI Technology Leadership Customer proof points and industry recognition drive pricing power Best Predictive Analytics Platform AI Breakthrough, June 2023 #1 in Innovation in 2023 Top Product of Energy Asset “Athena’s footprint and the myriad data points that constantly hone its machine Product of th
Slide 11: Industry Outlook
Industry Outlook © 2024 Stem, Inc. 11
Slide 12: Continued Macro Tailwinds
Continued Macro Tailwinds Highlight solar growth Powertrack picture Strong underlying demand for renewables Robust Demand Environment ● Energy storage and solar remains in demand catalyzed by sustainability initiatives, IRA, decreasing equipment prices and improving project economics ● Solar back to
Slide 13: Munis and Co-ops Represent an Attractive Market
Munis and Co-ops Represent an Attractive Market Direct Pay Provision provides enhanced economics for customers ● Direct Pay Provision in the IRA driving demand amongst municipalities, community choice aggregators (CCAs) and cooperatives ● Tax-exempt and government entities can receive a payment equa
Slide 14: Interconnection and Permitting
Interconnection and Permitting FERC, Congress taking steps to improve interconnection and permitting queues FERC Order No. 2023, Congressional debt limit deal provide pathways to improvement ● FERC Order 2023: Prioritizes readiness through withdrawal penalties, site control, and deposits; requires c
Slide 15: 4Q & FY 2023 Financial and Operating Results and 2024 Outlook
4Q & FY 2023 Financial and Operating Results and 2024 Outlook © 2024 Stem, Inc. 15
Slide 16: 4Q23 Financial Metrics
4Q23 Financial Metrics Revenue, GM, Adj. EBITDA, & Operating Cash Flow Improved financial metrics in 4Q23 $ millions unless otherwise noted Revenue GAAP & Non-GAAP • Revenue +25% QoQ Gross Margin % 8% • Solar +27% YoY, outperforming the C&I market $167 $156 11% 13% growth 8% 7% • Achieved positive a
Slide 17: 4Q23 Operating Metrics
4Q23 Operating Metrics CARR, Backlog, and AUM CARR, Backlog and AUM Growth $ millions unless otherwise noted CARR Backlog • CARR +39% YoY, focused on ARR conversion $1,929 $1,837 5% • Backlog +99% YoY 4% $88 $91 • Storage AUM +77% YoY, strong demand environment • Solar AUM +10% YoY 3Q23 4Q23 3Q23 4Q
Slide 18: FY23 Financial Metrics
FY23 Financial Metrics Revenue, Gross Margin, Adjusted EBITDA Revenue, Gross Margin, Adjusted Revenue Adjusted EBITDA EBITDA 27% $462 • Revenue +27% YoY due to growing customer $363 +$27M momentum and standardization on Athena ($19.5) platform across storage and solar ($46.0) FY22 FY23 FY22 FY23 • N
Slide 19: 2024 Guidance
2024 Guidance 2024E: 1Q24E 2Q24E 3Q24E 4Q24E Revenue $600M - $700M 8% 10% 32% 50% 15–20% Non-GAAP Gross Margin % of annual revenue 2024E: 2024E: Bookings Adjusted EBITDA $1.5B - $2.0B $5M - $20M 2024E: 2024E: CARR Operating Cash Flow $115M - $130M >$50M See Appendix for definitions and reconciliatio
Slide 20: 2024 Guidance Commentary
2024 Guidance Commentary Metric Range Comments GAAP Revenue $600M - $700M • Potential upside from large FTM deals in pipeline • Mix of hardware and software / services drives variability Non-GAAP Gross Margin 15-20% • Assumes conservative pace of activating non-operational CARR • Modular ESS booking
Slide 21: Focus on Accelerating Annual Recurring Revenue
Focus on Accelerating Annual Recurring Revenue Targeting converting CARR to ARR within 2-12 months from hardware delivery CARR represents substantial unrealized earnings power ● Significant gross profit unlocked as systems are commissioned Non- Operating o Converting an additional ~50% of 2023 CARR
Slide 22: Improving Operating Leverage
Doing more with less… Improving Operating Leverage Achieving long-term OpEx goal ahead of schedule Headcount (5%) 2024 Target Cash OpEx of 10-20% of Revenue 2022 2023 52% ~2100 bps …increased hiring in low-cost geographies ~700 bps Average Wage Expense 31% 24% (31%) 16% 2021 2022 2023 2022 2023 Note
Slide 23: Driving to Operational Excellence
Driving to Operational Excellence Enhancing profitability across the business $ in millions unless otherwise noted. CARR Revenue $600 - $700 $650 37% CAGR $115 - $130 $123 34% CAGR Expect nearly 2x CARR growth over two $462 $91 years – continued focus on conversion of $363 $65 CARR to ARR Expect pos
Slide 24: Key Takeaways
Key Takeaways Expect to generate positive operating cash flow in 2024 Solid 2023 Execution • Achieved positive adjusted EBITDA in 2H2023 • Within guidance range for Non-GAAP Gross Margin, Bookings, and CARR 2024 is inflection point for building long-term, profitable growth • Expect to Generate Free
Slide 25: About Stem
About Stem Stem (NYSE: STEM) provides clean energy solutions and services designed to maximize the economic, environmental, and resiliency value of energy assets and portfolios. Stem’s leading AI-driven enterprise software platform, Athena® enables organizations to deploy and unlock value from clean
Slide 26: Appendix A
Appendix A © 2024 Stem, Inc. 26
Slide 27: Revenue Build
Revenue Build Total Revenue Storage Solar Revenue Revenue Storage Solar Total Deliveries (kWh) Storage Solar Services and Services and (x) Project Hardware Hardware Hardware Other Other ASP ($/kWh) = Total Hardware 5%-15% GM 40% GM Revenues Software Project Software Project Services Services Service
Slide 28: Storage Revenue Conversion Timelines
Storage Revenue Conversion Timelines BTM Project Timeline FTM Project Timeline Software Software BTM FTM Turned On Turned On Booking Software revenue recognized Booking Software revenue recognized Included in operating AUM Included in operating AUM Month 0 +10 months +2-6 months Month 0 +18 months +
Slide 29: Financial and Operating Metrics
Financial and Operating Metrics Three Months Ended Twelve Months Ended $ millions unless otherwise noted December 31, December 31, 2023 2022 2023 2022 Revenue $167.4 $155.5 $461.5 $363.0 GAAP (Loss) Gross Profit 11.0 12.6 3.6 33.1 GAAP Gross Margin % 7% 8% 1% 9% Non-GAAP Gross Profit 22.2 17.0 75.1
Slide 30: Supplemental Revenue Detail
Supplemental Revenue Detail Solar - Supplemental Revenue Detail $ millions Three Months Ended Twelve Months Ended December 31, December 31, 2023 2022 2023 2022 Solar Hardware Revenue $11.0 $9.9 $38.9 $31.1 Solar Services and Other Revenue 9.4 7.7 34.6 26.8 Total Solar Revenue $20.4 $17.6 $73.5 $57.9
Slide 31: Reconciliation of GAAP and Non-GAAP Gross Profit
Reconciliation of GAAP and Non-GAAP Gross Profit Three Months Ended Twelve Months Ended $ millions unless otherwise noted December 31, December 31, 2023 2022 2023 2022 Revenue $167.4 $155.5 $461.5 $363.0 Cost of Revenue (156.4) (142.9) (457.9) (329.9) GAAP Gross Profit 11.0 12.6 3.6 33.1 GAAP Gross
Slide 32: Reconciliation of Net Loss to Adjusted EBITDA
Reconciliation of Net Loss to Adjusted EBITDA Three Months Ended Twelve Months Ended December 31, December 31, Adjusted EBITDA, as used in the Company's full year 2024 guidance, is a non-GAAP financial measure that $ thousands 2023 2022 2023 2022 excludes or has otherwise been adjusted for items imp
Slide 33: Reconciliation of GAAP Operating Expense to Cash Operating Expense
Reconciliation of GAAP Operating Expense to Cash Operating Expense Three Months Ended Twelve Months Ended $ millions March 31, June 30, September 30, December 31, December 31, December 31, 2023 2023 2023 2023 2022 2023 GAAP Operating Expense $43.6 $46.7 $48.0 $44.6 $164.2 $182.9 Less: Non-cash adjus
Slide 34: Upcoming events
Upcoming events March 18, 2024 36th Annual ROTH Conference March 19, 2024 Piper Sandler 24th Annual Energy Conference March 26, 2024 Wells Fargo 2024 Clean Energy Symposium May 2024 First Quarter Earnings Call © 2024 Stem, Inc. 34
Slide 35: Definitions
Definitions Item Definition Total value of executed customer agreements, as of the end of the relevant period (e.g. quarterly bookings or annual bookings) • Customer contracts are typically executed 6-24 months ahead of installation • The Booking amount typically includes: Bookings 1. Hardware reven
Slide 36: Glossary
Glossary • ASP – Average selling price • IPP – Independent power producer • ROC – Remote operations center • AUM – Assets under management • IRA – Inflation Reduction Act • RTO – Regional transmission organization • BESS – Battery energy storage system • IRP – Integrated resource plan • SW – Softwar
Slide 37: Appendix B: Stem Overview
Appendix B Stem Overview © 2024 Stem, Inc. 37
Slide 38: The Journey to Today
The Journey to Today Industry leadership, innovation, and execution First to market C&I storage to the Fortune 500 First California ISO wholesale market participation Largest Virtual Power Plant provider in North America Largest fleet of FTM storage in ISO-New England #1 solar asset performance mana
Slide 39: Athena AI Platform Built on Years of Data + Experience
Stem’s Athena AI Platform is Built on Over 10 Years of ATHENA CUMULATIVE RUNTIME HOURS 40M Data + Experience 30M 5.0 GWh 20M contracted 900+ sites & 10M ~1 GWh 400+ sites & contracted 100 MWh in 100+ operation 0M sites in operation 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Gen 1 Gen 2 Gen 3
Slide 40: Industry Leading Solutions for BTM and FTM Markets
Industry Leading Solutions for BTM and FTM Markets Behind-the-Meter “BTM” 2,500 Representative Customers Discharging when prices are high 2,000 Commercial and Industrial Services 1,500 • Reducing consumer energy bills 1,000 10% - 30% kW 500 • Electric vehicle offerings 0 Charging when prices low • C
Slide 41: Stem Offers More Value with BTM & FTM Services
Stem Offers More Value with BTM & FTM Services Athena’s clean energy solutions provide ITC & Energy services to multiple PV Self- Arbitrage Spin / Consump- (EA) markets and asset types. Backup tion (ITC) Non-Spin Reserve Power Frequency ibl ot Demand Regulation po ice n e Charge Stem’s Reduction Vol
Slide 42: Athena AI Simplifies Operations
Athena AI Simplifies Operations Predict Increased Machine learning forecasts the near term Yield and multi-day future Settle Analyze data to monitor value and Dispatch Optimize support billing and Economic Automated controls Solves millions of settlements operate assets complex equations to Optimiza
Slide 43: Athena Learns and Adapts, Automatically and Continuously
Athena Learns and Adapts, Automatically and Continuously Unparalleled data management and complex co-optimization capabilities Updates multi-day forecasts, running millions of Automated forecast model selection scenarios to create market bids and operating plans adapts to changing conditions Every S
Slide 44: PowerTrack is the Industry Standard for Solar Asset Performance Management
PowerTrack is the Industry Standard for Solar Asset Performance Management Asset Performance 13 of the top 15 Management US C&I Asset Owners standardized on PowerTrack Integrated edge-to-cloud solution that simplifies clean energy management Monitoring and control offering reduces operating costs by
Slide 45: Our Services Deliver Value Across the Entire Clean Energy Project Lifecycle
Professional Services Our Services Deliver Value Across the Entire Clean Energy Project Lifecycle Advisory Services Deployment Services Managed Services Solution Provisioning and Market & Program Remote Operations Engineering Commissioning Revenue Services Center System design and review Support fie
Slide 46: Improving Access to Large Scale Solar + Storage
Improving Access to Large Scale Solar + Storage Modular ESS enhances customer flexibility while driving better Stem margins and cash flows Initiative Customer benefits Stem benefits • Develop universal “unit controller” edge • Enables supplier optionality to • Increases penetration into large solar
Slide 47: Appendix C: Market Outlook
Appendix C Market Outlook © 2024 Stem, Inc. 47
Slide 48: Resurgent Behind-the-Meter Storage Market Outlook
Resurgent Behind-the-Meter Storage Market Outlook Leading market share and technology differentiation Key Metrics BTM US Energy Storage Market Outlook • Customers include community, commercial and industrial 3,000 • Typically 10-year software contract 2,411 • Average system of 2MWh and $1M HW+SW boo
Slide 49: Strong Front-of-the-Meter Storage Market Outlook
Strong Front-of-the-Meter Storage Market Outlook Proven track record in driving higher revenue and project returns Key Metrics FTM US Energy Storage Market Outlook • Customers include Utilities, IPPs, and Renewable Asset Owners • ~25% of total FTM bookings are software-only by 2025 50,000 46,833 20%
Slide 50: Solar Asset Performance Management Market Outlook
Solar Asset Performance Management Market Outlook #1 in the industry and positioned to move upstream into large portfolios integrated with storage Key Metrics US Solar PV Market Outlook • AlsoEnergy PowerTrack reduces operating costs and enhances Utility Scale C&I (BTM) project revenues for solar pr
Slide 51: Battery Prices Continue to Decline
Battery Prices Continue to Decline Lower battery system prices should increase demand US Grid-Scale Storage System Costs 2022–2032(1) Storage System Cost Components $400 $380 $360 Expect US battery prices to Balance $340 continue decline of System 23% $320 US$ / kWh $300 Cell $280 49% EPC $260 20% $
Slide 52: Domestic Battery Manufacturing Plants
Domestic Battery Manufacturing Plants California California Michigan Michigan New New York York Operational Construction Planned Tesla LG ES LG ES-GM Imperium3 1 Fremont 17 Holland 19 Lansing 28 Endicott 10 GWh* 25 GWh 2025,50 GWh 2030,38 GWh Statevolt Our next Ford-CATL 2 Imperial Valley 18 energy
Slide 53: Slide 53