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SI

STEM, INC. (STEM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $55.8M, down 67% YoY due to sharply reduced battery hardware sales; GAAP gross margin fell to (4)%, while non-GAAP gross margin improved to 36% as mix shifted toward software/services .
  • Net loss was $51.1M; adjusted EBITDA was $4.2M; cash and cash equivalents ended at $56.3M versus $75.4M in Q3, reflecting working capital pressures and onetime adjustments .
  • Management introduced FY 2025 guidance: revenue $125–$175M, non-GAAP GM 30–40%, adjusted EBITDA $(10)M to $5M, operating cash flow $0–$15M, year-end ARR $55–$65M (~15% growth) and a pivot to high-margin software, edge devices and services with up to $35M hardware resale .
  • Key catalysts: software-centric pivot (PowerTrack wins with Summit Ridge 514 MW and Neovolt 484 MW), backlog “clean-up” to improve predictability, >20% planned cash OpEx reductions, and reverse split proposal to regain NYSE compliance .

What Went Well and What Went Wrong

What Went Well

  • PowerTrack traction and margins: “We earn 70% to 80% gross margin on the PowerTrack software…50% on professional services…30% to 40% on edge devices,” underscoring the pivot to high-margin recurring revenue .
  • New wins supporting pivot: Summit Ridge standardized PowerTrack across 200 sites (514 MW) and Neovolt standardized on 484 MW in Hungary, expanding international utility-scale presence .
  • Non-GAAP gross margin improved YoY to 36% (from 13%), reflecting mix shift toward software/services and exclusion of legacy guarantee impacts .

What Went Wrong

  • Revenue fell 67% YoY to $55.8M on reduced battery hardware sales; GAAP gross margin turned negative (4)%, including a onetime impairment to deferred services tied to OEM warranty .
  • Contracted backlog declined 25% sequentially to $1.17B after repricing OEM hardware and removing delayed projects; CARR fell to $86.0M (−7% q/q) due to proactive backlog adjustment .
  • FY 2024 had substantial charges: $104.1M bad debt from receivables tied to parent guarantees and $547.2M goodwill impairment, weighing on full-year net loss of $854.0M .

Financial Results

Sequential Comparison (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$34.0 $29.3 $55.8
GAAP Gross Margin (%)28% 21% (4)%
Non-GAAP Gross Margin (%)40% 46% 36%
Net Loss ($USD Millions)$(582.3) $(148.3) $(51.1)
Adjusted EBITDA ($USD Millions)$(11.3) $(3.5) $4.2
Cash & Equivalents ($USD Millions, period-end)$89.6 $75.4 $56.3

YoY Comparison (Q4)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$167.4 $55.8
GAAP Gross Margin (%)7% (4)%
Non-GAAP Gross Margin (%)13% 36%
Net Loss ($USD Millions)$(37.7) $(51.1)
Adjusted EBITDA ($USD Millions)$4.6 $4.2

Segment Breakdown (available periods)

Segment RevenueQ2 2024Q3 2024FY 2024
Services & Other ($USD Millions)$15.1 $22.1 $67.8
Hardware ($USD Millions)$18.9 $117.1 $76.8
Total ($USD Millions)$34.0 $133.7 $144.6

KPIs and Operating Metrics (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Bookings ($USD Millions)$25.4 $29.1 $357.6
Contracted Backlog ($USD Millions)$1,578.5 $1,547.4 $1,168.1
Storage AUM (GWh)5.8 6.0 5.6
Solar Monitoring AUM (GW)26.9 28.5 29.9
CARR ($USD Millions)$90.1 $92.3 $86.0

Notes on estimates

  • Wall Street consensus for Q4 2024 EPS and revenue via S&P Global was unavailable due to API request limits; we attempted retrieval but hit the daily cap, so estimate comparisons are excluded from tables. (Attempted S&P Global retrieval; limit exceeded)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2024$567–$667 $200–$270 (Aug) → $135–$155 (Oct) Lowered (twice)
Non-GAAP Gross Margin (%)FY 202415–20% 25–30% (Aug) → 32–36% (Oct) Raised
Adjusted EBITDA ($USD Millions)FY 2024$5–$20 $(30)–$(20) (Aug) → $(45)–$(30) (Oct) Lowered
Bookings ($USD Millions)FY 2024$1,500–$2,000 $600–$1,100 (Aug) → $100–$500 (Oct) Lowered
Year-end CARR ($USD Millions)FY 2024$115–$130 $100–$110 (Aug) → $90–$100 (Oct) Lowered
Operating Cash Flow ($USD Millions)FY 2024>$50 >$15 (Aug) → $(30)–$0 (Oct) Lowered
Revenue ($USD Millions)FY 2025—$125–$175 Introduced
Software/Edge/Services ($USD Millions)FY 2025—$120–$140 Introduced
Battery Hardware Resale ($USD Millions)FY 2025—Up to $35 Introduced
Non-GAAP Gross Margin (%)FY 2025—30–40% Introduced
Adjusted EBITDA ($USD Millions)FY 2025—$(10)–$5 Introduced
Operating Cash Flow ($USD Millions)FY 2025—$0–$15 Introduced
Year-end ARR ($USD Millions)FY 2025—$55–$65 (~15% growth) Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Software pivot (PowerTrack)Emphasis on higher-margin software; gross margin improvement; strategy review underway Strategy outcome announced Oct 1 to shift to software/services CEO reiterates software-centric plan; highlights 70–80% GM on PowerTrack and faster booking-to-revenue cycles Strengthening
Backlog and metric definitionsBacklog $1.58B; delays from IRA/USDA; variability in bookings Backlog $1.55B; strategic clean-up to remove stale items Backlog $1.17B; proactive backlog adjustment; redefining backlog as PO-issued for hardware/pro services; segregating ARR/CARR Increasing rigor/predictability
Hardware guarantees and charges$33M revenue reduction in Q1 noted; will not issue new guarantees $5.6M reduction; $104.1M bad debt impairment; balances reduced to zero Full-year $38.7M reduction; reiterates no new guarantees; expects no further material impact Legacy impact winding down
International utility-scaleBuilding presence; AEPCO/United Power projects (US) —Neovolt 484 MW in Hungary; Eastern Europe foothold Expanding EMEA
Cost structure / OpExWorking capital reduction; positive OCF expected Rightsizing OpEx; cash conservation Target >20% cash OpEx reduction; OCF $0–$15M guidance Accelerating cost discipline
Listing compliance—NYSE notice of non-compliance; strategy changes Board-approved reverse split range subject to shareholder vote Moving to remedy

Management Commentary

  • CEO: “Our vision to build the leading clean energy software company is compelling…The strategy we set in motion during the fourth quarter of 2024 is designed to drive sustained, scalable growth in recurring software and services revenue.”
  • CFO: “We expect to reduce run rate cash OpEx by more than 20% during 2025 relative to our 2024 exit rate…we expect operating cash flows to improve in 2025, including some working capital releases related to OEM hardware.”
  • CEO on product economics: “We earn 70% to 80% gross margin on the PowerTrack software…50% on our professional services…30% to 40% on PowerTrack edge devices.”
  • CFO on backlog metrics: “We are redefining backlog as all contracted hardware and professional services revenues where we have a fully executed purchase order…Software managed services revenue will be captured in CARR and ARR.”

Q&A Highlights

  • Backlog “scrub” and definition change: Management removed stale/delayed projects and will report backlog only with fully executed POs; recurring software will be tracked in ARR/CARR to improve predictability .
  • Hardware resale strategy: Opportunistic, attached to software/services, low margin (5–10% GM), and heavily back-end weighted in FY25; not a long-term strategic focus .
  • Storage operating AUM vs revenue: A onetime reduction tied to SPE deals impacted Q4 software revenue despite AUM growth .
  • Liquidity: ~$56M cash deemed sufficient for FY25 plan; expects working capital releases and tighter cost control to support operations .
  • Competitive positioning: PowerTrack aims at behind-the-meter leadership and targeted front-of-the-meter 20–100 MW range; differentiation via holistic edge-to-cloud solution .

Estimates Context

  • We attempted to pull S&P Global Wall Street consensus for Q4 2024 EPS and revenue (and recent periods) but hit the daily SPGI request limit; therefore, estimate comparisons are unavailable in this recap. As a result, we cannot quantify beats/misses vs consensus for Q4 2024. (Attempted S&P Global retrieval; limit exceeded)

Key Takeaways for Investors

  • The pivot to software/services is visible in non-GAAP margin expansion (36% in Q4) despite revenue compression; expect margins to remain supported by high-margin PowerTrack and services .
  • FY25 guidance prioritizes profitability and cash generation over hardware volume: $120–$140M software/edge/services, up to $35M hardware re-sale, non-GAAP GM 30–40%, adjusted EBITDA $(10)–$5M, OCF $0–$15M .
  • Backlog resets and new reporting (PO-issued backlog; ARR/CARR segregation) should improve forecasting quality and reduce “phantom” backlog risk; monitor Q1 2025 disclosures for metric transitions .
  • Liquidity runway depends on executing cost cuts (>20% cash OpEx reduction) and converting working capital; track quarterly OCF and cash balance to validate guidance .
  • International utility-scale and U.S. commercial wins (Neovolt 484 MW; Summit Ridge 514 MW) support ARR growth and software-led expansion; watch EMEA pipeline conversion .
  • Legacy guarantee and receivable issues have been addressed; company does not expect further material negative impact—risk has declined but watch for any residual effects .
  • Corporate actions (reverse stock split authorization) target NYSE compliance and could influence investor perception and trading dynamics near implementation .

Appendix: Additional Context

  • Q4 2024 backlog bridge (select items): Amendments/cancellations of $(665.6)M and $(31.2)M software/services decreased backlog; bookings added $357.6M; backlog ended at $1,168.1M .
  • Full-year 2024 charges: $104.1M bad debt (parent guarantees) and $547.2M goodwill impairment drove net loss; company reiterates no new guarantees since June 2023 .
  • Conference call logistics and replay details were provided; Summit Ridge/Neovolt press releases corroborate the software momentum .