Stem(US:STEM)2023-08-04 00:09Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $93 million, representing a 39% increase compared to $67 million in Q2 2022, exceeding the midpoint of guidance [5][41] - Net income was $19 million, a significant improvement from a net loss of $32 million in the same quarter last year, primarily due to a one-time $59 million gain on debt extinguishment [15] - Adjusted EBITDA was a negative $9 million for Q2 2023, an improvement from a negative $11 million in the same quarter last year, with expectations to achieve positive adjusted EBITDA in the second half of 2023 [122] Business Line Data and Key Metrics Changes - High-margin services revenue grew 31% year-over-year and 11% sequentially, contributing $16 million, which accounted for 17% of total revenue for the quarter [5][13] - Software revenue increased by 10% sequentially, driven by storage software growth and improving solar growth [7] - Bookings increased by 5% year-over-year to $236 million, with larger deal sizes noted in the front-of-the-meter market segment [6] Market Data and Key Metrics Changes - Backlog increased by 88% year-over-year and 10% sequentially to $1.4 billion, driven by strong customer demand [17] - The company reported a 39% year-over-year increase in solar backlog, indicating solid growth in services revenue and assets under management (AUM) [9] - AUM for storage grew from 3.5 gigawatt hours in Q1 2023 to 3.8 gigawatt hours in Q2 2023, a 9% increase [46] Company Strategy and Development Direction - The company is focused on converting backlog to revenue and achieving EBITDA positive in the second half of 2023, with a strong emphasis on operational efficiency and cost discipline [18][45] - The integration of generative AI tools into software development is expected to enhance productivity and accelerate the product roadmap [11][121] - The company aims to expand its presence in the cooperative and municipal utility market, as demonstrated by a significant project win with Ameresco [36][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive adjusted EBITDA in the second half of 2023, supported by strong end-market demand and a solid pipeline of projects [19][25] - The company is closely monitoring supply chain dynamics and expects to benefit from hardware cost deflation trends in 2024 [27][29] - Management highlighted ongoing challenges with interconnections, particularly in markets like New York and Texas, which could impact project timelines [73][114] Other Important Information - The company received the Top Product of the Year award, recognizing its differentiated economics and sustainability benefits [10] - The company is leveraging advancements in AI to enhance asset management capabilities and improve software development efficiencies [11][12] Q&A Session Summary Question: What is the product roadmap for Athena and generative AI? - Management indicated that the digital assistant is a key use case for generative AI, with potential for further applications in the future [50][51] Question: Why is guidance unchanged despite solid revenue growth? - Management explained that the guidance remains conservative due to the wide range and potential delays in project execution [52] Question: What is the timeline for achieving positive adjusted EBITDA? - Management is optimistic about achieving this in Q3 or Q4, citing strong commercial demand and operational improvements [53] Question: How is the company approaching international markets? - Management stated that while the U.S. remains the primary focus, they are monitoring opportunities in Europe, particularly following a significant win in Hungary [59] Question: What are the key markets showing strength in bookings? - Management highlighted strong performance in New England, Texas, and California for storage, and continued strength in solar across the U.S. and Europe [60][61] Question: What is the outlook for software-only contract awards? - Management expects an increase in software-only contracts as the market matures and customers seek more modular solutions [88] Question: How will working capital trend into 2024? - Management anticipates a more favorable working capital situation in 2024, with expectations of increased cash collections in the second half of 2023 [95][111]