Stem(STEM)2025-03-05 00:52Financial Data and Key Metrics Changes - Total revenue decreased significantly year-over-year due to reduced hardware sales, while software revenue increased by 6% year-over-year driven by strong performance from PowerTrack and increased storage software activations [22][24] - GAAP gross margin decreased sequentially due to a one-time impairment of deferred services, while non-GAAP gross margin was down sequentially but up year-over-year [23] - Adjusted EBITDA and operating cash flow declined year-over-year due to lower gross profit from reduced battery hardware sales [24][29] Business Line Data and Key Metrics Changes - PowerTrack has gained traction among larger customers, with 13 of the top 16 commercial and industrial solar asset owners in the U.S. standardizing on it [14] - The company expects continued strong growth in software and edge device sales in 2025, with gross margins on PowerTrack software ranging from 70% to 80% [15][26] - Operating Annual Recurring Revenue (ARR) was up 3% versus the third quarter and up 19% year-over-year, driven by storage activations and steady PowerTrack growth [25] Market Data and Key Metrics Changes - The company anticipates battery hardware resale revenue to be heavily weighted towards the back end of 2025, with gross margins in the 5% to 10% range [27] - The company is focusing on international opportunities with PowerTrack, particularly in untapped markets [14] Company Strategy and Development Direction - The company is pivoting to a software-centric strategy, emphasizing the importance of software in driving revenue growth and profitability [8][13] - Key priorities include growing software revenue, reducing cost structure, and revamping software development processes [13][18] - The company plans to redefine metrics such as backlog and ARR to provide better visibility into revenue sources [31][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges recent disappointing financial results but is taking concrete steps to improve them [12] - The CEO expressed confidence in the company's foundation to build a successful software business and highlighted the importance of customer value [8][36] - The company expects operating cash flows to improve in 2025, aided by working capital releases related to OEM hardware [24][29] Other Important Information - The company received a notice from the New York Stock Exchange regarding non-compliance with listing standards and is considering a reverse stock split [34] - The company ended the year with approximately 58 million in cash [24] Q&A Session Summary Question: Can you comment on the Power Better offering and its fit within the broader strategy? - The CEO mentioned that Power Biotech Pro is part of the software strategy pivot and is currently being evaluated for additional use cases [39] Question: What are the reasons for the delays in some projects in the backlog? - Management indicated that delays were due to increased development costs associated with interconnection and permitting, leading to a conservative approach in cleaning up the backlog [42] Question: Is the 35 million battery hardware resale expected to be a steady state or will it phase out? - Management clarified that hardware sales will be opportunistic and not the focus of the business moving forward [44][47] Question: Can you explain the difference between the new metrics for contracted backlog and bookings? - Management explained that the new metrics focus on fully executed purchase orders, providing clearer visibility into future revenue sources [50][52] Question: Why didn't the significant growth in storage operating AUM correspond with an increase in software revenue? - A one-time reduction in fourth-quarter software revenue associated with SPE deals was cited as the reason for the disparity [58] Question: What is the minimum cash required to proceed with the 2025 plan before considering external financing? - Management indicated that the current cash balance is sufficient to support operations without immediate external financing [62][64] Question: How do you expect to bridge the gap between 2024 and 2025 in terms of operating costs? - Management highlighted operational cost savings and the elimination of inefficiencies as key drivers for reducing costs [82][84] Question: How should investors think about the growth required to achieve significant EBITDA? - The CEO emphasized that growth for software comes with a different scaling model, focusing on building differentiated IP and deploying it into various markets [106][108]