Stem, Inc.

Good afternoon and welcome to the STEM Inc. Third Quarter Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ted Durbin. Please go ahead.

Thank you, operator. This is Ted Durbin, head of investor relations at STEM, and we welcome you to our third quarter earnings call. Before we begin, please note that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. We therefore refer you to our latest SEC filings. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter earnings release, which is on their investor relations portion of our website, found at www.stem.com. John Carrington, our CEO, Lars Johnson, CTO, and Bill Bush, CFO, will start the call today with prepared remarks. Prakash Patel, Chief Strategy Officer, will also be available for the question and answer portion of the call. And now I'll turn the call over to John.

Thanks, Ted. Today we reported record financial and operating results across all of our key metrics. Record revenues of $40 million, up 4x from the same quarter last year. Record pipeline of $2.4 billion, up 41% since the second quarter. Record contracted backlog of $312 million, up 25% since the second quarter. record assets under management of 1.4 gigawatt hours, up 40% year over year, and $576 million in cash at the end of the quarter. Our momentum continues to accelerate as customers demand our proprietary Athena software-driven smart storage solutions. We are reiterating our guidance for full year 2021 revenue and adjusted EBITDA. On today's call, I want to focus on three things that differentiate us in the market. Number one, our software. Number two, our customer focus. And number three, our financial position. First, starting with software, let me be completely clear about our vision. It is to expand our position as the leading energy intelligence software provider. We have purposefully built our organization to drive the deepest, most robust artificial intelligence platform in the industry. Lars will discuss our software differentiation in more detail later in the call. Second, on customers, we provide significant value to customers over a contracted period of up to 20 years, both through our AI software and our operational services. And third, our financial profile benefits from strong and growing gross margins, driven by our software and customer focus. The Athena platform drove 8% gap gross margin and 15% non-gap gross margin this quarter. And Athena will continue to drive our margin expansion. Bill will provide further financial detail later in the call. Before I turn it over to Lars and Bill, let me focus on the second leg of STEM differentiation, our customer focus. Specifically, I will start with STEM's go-to-market strategy, which leverages our direct sales force, channel partners, and our strategic investors to maximize reach across multiple markets. We have had great success with our channel partners in particular, who know our products and capabilities and know have completed training at STEM University, our education platform. We continue to expand the breadth and depth of our customer relationships. Our breadth expanded sharply as we nearly tripled the number of active STEM partners versus the same quarter last year. And our depth also increased as our average project size has doubled in the last year. This diversification results in limited customer concentration. We do not expect any one customer will represent more than 10% of our revenue this year versus some of our competitors who are highly dependent on a small number of customers to generate revenue. This broad customer base continues to inform our Athena AI platform in different customer segments, use cases, and geographies, which enhances our software's competitive mode. In the front of meter or FTM market segment, we continue to gain share. which contributed to the significant increase in our pipeline this quarter. Additionally, our behind-the-meter, or BTM, customers continue to grow, and our repeat customer metrics are up quarter over quarter and year over year. In fact, nearly 50% of our bookings this quarter came from existing customers. Partners continue to be a source of domestic and international growth, which led to the announcement of our expansion to Chile with our partner and investor, COPEC, one of the largest public companies in South America. We expect additional wins from this partnership both in Chile and the broader South American markets. Moving to some of our key metrics driven by our customer success, our 12-month pipeline grew by 41% in only 90 days, from $1.7 billion at the end of the second quarter to a record $2.4 billion at the end of September. We achieved this stellar growth across both FTM and BTM segments and across multiple geographies. Drilling down in geographies beyond South America, we've seen tremendous growth of opportunities in the Texas market, which now is the second largest market in our pipeline and was the source of significant bookings this quarter. We're helping customers garner exceptional economics for storage as the build-out in wind and solar has increased market volatility, which has led to strong merchant revenue opportunities. We expect our demonstrated success in generating merchant revenues in ISO New England to translate into multiple markets across the country, and Texas is a foreshadow of things to come. Now, moving to our customer contracted results. For the first time in company history, we exceeded $100 million in bookings for a single quarter. The $104 million was more than double our bookings in the second quarter of this year, and nearly triple the bookings in the third quarter of last year. Again, the Texas market represented a large portion of our bookings, and we are optimistic this will continue for several quarters to come. I'm encouraged by our strong commercial prospects in the fourth quarter of this year and beyond. Like last year, you should expect back-half-weighted seasonality to our bookings, similar to our revenue. I would like to make some comments related to customer centricity and lifetime support. This is a core value of STEM and we believe highly differentiated. We commit to maximize the lifetime value and performance of asset operations in excess of 20 years. A core strength is centered around our AI-driven software, but also extends across our operations group. We add value for customers in several ways. Our deployments team supports logistics, engineering, and interconnection for dozens of projects at a time. Our network team implements communications and uses a terabyte of data to automatically monitor asset performance and safety. And our programs team provides monthly performance reporting and troubleshooting in the rare case an asset underperforms. This team also oversees fleet performance, which includes 22,000 grid calls from multiple utilities and ISOs year-to-date. Unlike some of our competitors, we do not manufacture or install batteries, so we are agnostic as to the hardware manufacturer or installation contractor. We work hand-in-hand with dozens of EPCs and utilities to ensure these projects are installed on time and on budget. Our goal is to align with our customer use case, installation timing, and geography, providing maximum flexibility and better project economics. Our developer partners also know that we will not compete with them for future projects, enabling a more collaborative and enduring relationship. We have purpose built an organization designed to satisfy our customers over the life of their assets. These are seasoned teams with deep power market operating experience, and we continue to automate more and more processes to keep our costs low as we scale up our assets under management. Again, this ongoing support is differentiated for many of our competitors who often provide a one-time installation with limited follow-up services or ongoing software-driven asset management. Bottom line, we believe we provide extraordinary customer service, which drives higher gross margins and strong customer satisfaction and loyalty. Today, nearly half of our business comes from repeat customers. With that, let me turn the call over to Lars Johnson, our chief technology officer, who will discuss our differentiated software offering.