Stem, Inc.

Thank you for standing by. This is the conference operator. Welcome to the STEM third quarter 2023 earnings conference call. As a reminder, all participants are in listen only mode. 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 one 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 Mr. Ted Durbin, Head of Investor Relations for STEM. Please go ahead.

Thank you, operator. This is Ted Durbin, Head of Investor Relations at STEM. Welcome to our third 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 the slide presentation today. Our earnings release and presentation are on the investor relations section 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, COO, and Prakash Patel, Chief Strategy Officer, will also be available for the question and answer portion of the call. And now I will turn the call over to John.

Thank you, Chad. Good afternoon and thank you all for joining us today. Beginning with slide three, our agenda will cover five items. Our third quarter results, technology leadership, and product announcements, and our commercial traction. Bill will then discuss our financial results. Now let's turn to slide four, on our third quarter 2023 results and highlights. In the third quarter, we recorded $134 million in revenue, up 34% versus third quarter 2022. Revenue this quarter was negatively impacted by non-recurring adjustments that Bill will discuss later in the call. We set a record for bookings of $676 million. The 3x bookings growth performance drove our contracted annual recurring revenue, or CAR, up 43% versus the third quarter of 2022, and up 17% sequentially. Adjusted EBITDA came in near break-even at negative $900,000 versus negative $13 million in the same quarter last year. Adjusted EBITDA reflects an adjustment to exclude an exceptional reduction in revenue. With strong revenue growth, solid margins, and continued cost control, our path to profitability continues to improve. We continue to expect achievement of positive adjusted EBITDA in the second half of this year, a goal we committed to during our Investor and Analyst Day in 2022. Today we announce an exciting new agreement with SB Energy. We will offer software and services for up to 10 gigawatt hours of storage deployments across North America. This partnership underscores our focus on growing service revenue. At the core of our value proposition to gigawatt-scale developers like SB Energy is our AI-driven technology, Athena, which continues to receive third-party recognition for its differentiation and value. Finally, we're announcing that we expect to achieve full year adjusted EBITDA positive in 2024 without the need to issue additional equity. This is a key milestone as we move to free cash flow generation and we'll outline more specifics in our full year earnings call in February. Please turn to slide five. In Q3 2023, we far exceeded our guidance for contracted bookings, coming in nearly 2x our guidance and the highest quarter in company history at $676 million. The booking strength was largely driven by our entry into the bulk power system scale of the front-of-the-meter storage business this year, particularly in the municipal and cooperative customer segments. Industry analysts expect U.S. public power and co-ops will represent over 20% of future storage deployments, and we are well positioned to serve this market. Our solar backlog also grew significantly, up 41% year over year. For both businesses, we are driving consistent strong gross margins, a testament to the differentiation of our solutions. We saw a 32% increase in storage AUM this quarter to five gigawatt hours. We have nearly doubled our storage AUM in the past year, a remarkable achievement by the team and another measurable differentiation of the STEM solution. Solar AUM also had the third consecutive quarter of healthy growth with new customer additions more than offsetting the roll off of some of our legacy low margin contracts. This execution resulted in strong car growth, up nearly $13 million in a single quarter. Additionally, we are raising our car guidance for this year. In-market demand remains very strong. Falling equipment prices for both solar and storage are improving project economics for our partners. The recent clarity on some key tax incentives also remains a major tailwind for the industry. we have seen several industry analysts come out on a key debate in our sector regarding the impact of higher interest rates. And from our perspective, we can confirm their assessment that project returns are generally higher despite the increase in interest rates. We sent data from Level 10 Energy. PPA price tracker validates 100% plus increase in power purchase agreement prices from 2020 through 2023. Demand continues to be robust, and the focus by developers and asset owners is on finding ways to accelerate project timelines. Our successful project track record, paired with our industry-leading software and services, is particularly well-suited for this market environment. As a reminder, we do not have any direct interest rate exposure by virtue of our fixed rate debt, which have maturities into 2028 and 2030. Please turn to slide six, highlighting our technology leadership. We are pleased to be recognized once again by a third party for our technology leadership, earning the Sustainability Product of the Year Award from the Business Intelligence Group. These awards highlight products designed to help companies improve their sustainability objectives. On the commercial side, our technology solutions continue to resonate with customers in multiple markets. In New York, specifically the Bronx, we helped Nine Dot Energy bring the first energy storage system into service. We are co-optimizing multiple value streams for our customers in New York and building on the coincident peak prediction expertise we developed for other markets. This is another example of our ability to rapidly scale Athena at low incremental costs as we enter new markets. Between Nine Dot and some of our other partners, we expect to have over 700 megawatt hours under Athena control in the New York market over the coming years. Additionally, Athena is supporting Nine Dot Energy with customers including Starbucks, who is the anchor subscriber to the Pelham Gardens project, monetizing sustainable energy credits in New York. The system is operational and currently generating energy credits. In our solar asset performance management offering, we introduced a new application, Event Manager, which helps our customers resolve downtime issues on their assets. In the last year alone, we have onboarded over one gigawatt of assets to Event Manager. In ERCOT, our data science team has been refining their forecasting and optimization algorithms, including what we believe is one of the leading day-ahead and real-time price forecasting engines in the markets. Based on our modeling, we believe PowerBidder can offer a 10% to 40% uplift in revenue for assets in Texas versus competitive offerings in that market. Please turn to slide seven. With the launch of PowerBidder Pro, we are introducing a new software tool for energy professionals to manage their clean energy assets. The product targets asset owners, traders, and power purchase agreement off-takers, a segment of customers we believe are underserved by current offerings in the market. PowerBidder Pro empowers these customers with active asset control. Our customers can take charge of bespoke trading strategies, tailored risk management tools, and use our forecasts or input their own market forecasts. We have seen strong initial customer interest for this offering with multiple gigawatt hours in the pipeline. Moving to slide eight, today we're excited to announce a significant technology and commercial alliance with SoftBank Energy. This partnership is an example of our focus on growing high margin software and service revenue. Under the terms of the agreement, we will offer our modular ESF solution and related software services to SB Energy across their 10 gigawatt hour plus project development pipeline in North America. SB Energy is one of the leading utility scale renewable developers, and we are proud to partner with them to advance their vision of generating 24-7 renewable energy at gigawatt scale. In addition, we are collaborating to integrate our industry-leading Athena AI into the SBE digital platform. This will include the development of additional applications such as control and optimization of long-duration energy storage. Importantly, we view this partnership as a template for additional engagement with asset owners, project developers, and energy trading firms to drive a programmatic approach for growing high-margin service revenue. On to slide nine. As we highlighted last quarter, the municipal utility and electrical cooperative segment represents an attractive market for STEM. In particular, these entities are very focused on enhancing the reliability of their power networks and are seeking to drive decarbonization and greater engagement with their members and in customers. In late 2022, We leveraged our winning playbook of investing early in an attractive market where we can drive differentiation through our unique software and service capabilities. We accomplished this by onboarding key stakeholders in the muni and co-op market with preferential access to STEM's deep supply chain relationships. Bill will discuss the financial details of these arrangements, but at a high level, this engagement has resulted in nearly a billion dollars of contracted bookings in the last 12 months, with our position in the market going from zero to over 15% market share based on expected deployments in 2024. U.S. public power and co-op market is expected to represent over 20% of all future energy storage deployments and is forecast to represent the fastest growing segment of the FTM market through the end of this decade. We expect to continue our leading momentum in this exciting segment with engagement on multiple gigawatts of bulk power system projects. Stay tuned to more wins here. And now I'll turn the call over to Bill.