Stem, Inc.

Thank you for standing by. This is the conference operator. Welcome to the STEM, Inc. First Quarter 2023 conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Ted Durbin, Vice President, Investor Relations. Please go ahead.

Thank you, operator. This is Ted Durbin, Head of Investor Relations at STEM. Welcome to our first quarter 2023 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 10Q and our other 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 earnings release. We will be using a slide presentation today. Our earnings release and presentation are on the investor relations portion of our website at www.stem.com. John Carrington, our CEO, and Bill Bush, CFO, will start the call today with prepared remarks. Mike Carlson, Chief Operating Officer, and Prakash Patel, Chief Strategy Officer, will also be available for the question and answer portion of the call. Now I'll turn the call over to John.

Thank you, Ted, and thank you all for joining us on the call today. Beginning with slide three in the agenda for the discussion today, I'll review our first quarter 2023 results and highlights, followed by an overview of our commercial execution and recent business updates. I'll then review our continued technology leadership and Athena execution. And following my remarks, I'll turn the call over to Bill Bush, who will discuss our financial results in more detail and speak to our recent convertible note offering. Now let's turn to slide four. Today we reported strong first quarter results, including revenue of $67 million, up 63% versus first quarter 2022, which was above the high end of our guidance range. We reported another all-time record and contracted backlog now over $1.2 billion. Bookings were up 141% year over year at $364 million. Our core services revenue grew 14% sequentially and contracted annual recurring revenue, or CAR, is up 10% since the fourth quarter of 2022. And lastly, our non-GAAP gross margin was 19% in line with our full year guidance. We see these strong metrics as indicators of demand for our differentiated solutions and services. Looking to the right side of the page, I'm excited to announce that Wood Mackenzie recognized STEM as the largest storage virtual power plant operator in North America. We're also continuing to see momentum in the EV charging space, including a recent project with Cisco. Bottom line, we are reaffirming our full year guidance, which includes revenue growth of 65% at the midpoint and reaching EBITDA positive in the second half of this year. Accelerating services growth will be the key factor that helps us achieve our goals this year and for years to come. Moving to slide five and our continued commercial execution. I'm happy to report that we're seeing growth in services revenue in both the solar and storage aspects of the business. Storage services revenue increased 22% sequentially, and solar services revenue was up 7% sequentially. Both figures exclude project services. This is a new disclosure, which helps isolate the software in our revenue stack. Project services revenue tends to be more variable and tied to project timing. We reported another new record for contracted backlog, which was up 120% year over year, driven by strong first quarter 2023 bookings. We expect bookings growth to continue through the year as customers are increasingly standardizing on the Athena platform. We are currently pursuing several significant software-only and professional services deals that we expect may close later this year. If executed, These deals will have several benefits for the company. First, they will generate higher margin software and services revenue. Second, they will provide revenue sooner rather than waiting for system commissioning. And third, because there will be very little hardware involved, our growth in software and services will not tie up cash on our balance sheet. CAR grew 10% sequentially and is up 39% year over year. This is another demonstration of the differentiation and strength of our software offering. Turning to page six, on the solar side of the business, we've seen some evidence of improvement in supply chain issues, labor shortages, and related regulatory actions. We are seeing improvements in 2023 and expect an upturn in 2024 as these issues work towards a resolution. Our solar services revenue increased 4% since the fourth quarter of 2022, and our backlog is up 58% year over year, showing that we have turned a corner after many setbacks the industry faced in 2022. Solar AUM returned to growth this quarter, another sign of recovery in the sector. We are beginning to capture the cross-sell opportunities we have previously discussed from our legacy solar customers, and we are extending the solar offerings into STEM's distributed channel relationships. On the storage side, we continue to progress our high margin e-mobility offering. We recently announced an exciting project with food distributor Cisco, where we will integrate our Athena software into their Riverside EV hub. As Cisco noted, Athena is one of the key technologies integrating the charging infrastructure to optimize onsite energy assets. including solar and energy storage. This is also our first joint deployment with InCharge, a partnership we announced 3Q 2022. We continue to see strong growth in our core FTM markets. Developers are standardizing their projects on the Athena platform because of the differentiated economics we offer our customers. We will discuss the impact of our software on the success of these projects in subsequent slides. Now turning to slide seven, Supply chain is steadily improving. On the storage front, we have contracted hardware into 2024. We have begun to slow the growth of our purchasing activity as we position the business in line with long-term storage hardware revenue growth of 25 to 35%. We continue to target 65 to 85% growth of our services in 2023 and future years. This is consistent with what we presented at our investor and analyst day in September 2022. Our modular ESS solution, which is targeted for our largest partner projects, will lead to the company being less reliant on contracting significant hardware supply. These customers are asking for sourcing flexibility, reduced working capital usage, and it enables us to drive additional software and services. Bill and I were in China meeting with the largest OEMs for nearly two weeks in March and plan on adding multiple Tier 1 hardware vendors. As I mentioned on the previous slide, solar supply chain is improving. There has been solid installation growth amongst our solar BTM customers. Our FTM customers are still facing some supply chain constraints, which has caused revenue conversion in that segment to lag. but we are seeing strong bookings here as conditions are expected to improve. Turning to slide eight in our technology leadership, continued strong performance across markets. In ISO New England, we cleared 72% more megawatts in the most recent auction for forward capacity versus the prior auction. The auction cleared at $2.59 per kilowatt month across the region and expect to clear even more capacity in the next auction. Athena continues to control leading market share of grid energy storage in that region, and this capacity will support the transition to clean energy for decades to come. In California, site events were up 110% year over year, and demand response calls were up 250% year over year. We are providing more support for the grid every year. Importantly, we saw no degradation in performance despite this increased call activity. Internally, we continue to innovate and adapt Athena with the mission of being at the leading edge of development. We are leveraging AI-assisted coding to increase productivity and look forward to discussing the impact of these initiatives in subsequent quarters. We are also investing in improving our day-ahead power forecasting capabilities to generate more value for our customers. Our AI-driven software benefits from a growing data advantage as well. We run approximately 8,000 simulations per month, which means Athena gets smarter and more accurate with real-world assets that drives better results for our customers. Lastly, Athena continues to be independently validated as the industry leader, most recently by Wood Mackenzie, which recognized STEM as the largest virtual power plant operator in North America. Wood Mackenzie's VPP market report highlights STEM's 2.5 gigawatt hours of contracted storage assets under management across 14 different grid territories and the most among VPP operators. Athena is at the heart of STEM's VPPs and provides granular, actionable energy asset insights coupled with automated intelligent dispatch capabilities that help maximize the value of renewable energy assets. Our record-setting and expanding storage software offerings are a testament to the value that STEM's premier technology and services deliver to our customers. And now I'll turn the call over to Bill Bush, our Chief Financial Officer on our financial and operating results.