Stem, Inc.

Good afternoon, everyone, and welcome to the STEM Inc. Third Quarter 2024 Results Conference Call. All participants will be in a 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 and then one. To withdraw your questions, you may press star and two. Please also note that today's event is being recorded. At this time, I'd like to turn the floor over to Ted Durbin, Head of Investor Relations. Sir, please go ahead.

Thank you, Operator. This is Ted Durbin, Head of Investor Relations at STEM. Welcome to our third quarter 2024 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 section of our website at www.STEM.com. David Guthrie, our interim CEO, and Doran Hull, CFO and EVP, will start the call today with prepared remarks And Mike Carlson, our COO, will be available for the question and answer portion of the call. And now I'll turn the call over to David.

Thanks, Ted. Good afternoon and thank you all for joining us today. Starting on slide three with our agenda, we will spend a good portion of our time discussing the results of our strategy review. Dorn will then go through our third quarter results and updated 2024 guidance. And I will wrap up with some key takeaways. Turning to slide four, as Ted mentioned, our board of directors appointed me as interim CEO about six weeks ago. I also serve as the executive chair of the board. I was one of the early investors in STEM and have been on the board since 2010, witnessing the evolution of STEM and the maturation of the clean energy industry. I'm well acquainted with the company's mission, strategy, and management team, and it's been a pleasure working more closely with everyone over the past six weeks. STEM is a community of driven individuals focused on the success of our customers. It's been a busy few months since our last earnings call, and these last several months have been transformational for STEM. Over the last 90 days, we completed a comprehensive strategy review and announced several senior leadership changes. Looking forward, we are implementing cost-cutting measures to right-size our business operations to align with our new strategy. This review was a collaborative effort between the board software strategy working group and the management team. This process resulted in an updated and refined business model to drive towards sustainable and predictable revenues, profitability, and scalable expansion. Please turn to slide five. Our new strategy focuses on four key initiatives. First, refining our product and go-to-market approach to be centered around software and services. Second, expanding and emphasizing consultative energy services as opposed to hardware resale as our entry point into project-based customer relationships. creating predictable revenue and gross profit that is less dependent on project timing or completion. Third, enhancing our commitment to innovation by leveraging AI to expand and improve our software products value to our customers as well as enhancing edge device capabilities. And fourth, changing our approach to battery hardware. This means offering hardware procurement as a service and sometimes directly procuring it for our customers, but only when it meets strictly defined criteria. As we implement these strategic initiatives, we remain committed to our defined path forward while allowing for necessary adjustments along the way. This year, the unpredictability of project timelines for utility-scale storage hardware persisted. prompting a strategic shift to reduce our reliance on this revenue stream. These timeline challenges resulted in significantly lower than expected bookings, revenue, and accounts receivable collections. We expect our refined strategy to accelerate the growth of more predictable revenue from software and services. Through our consultative energy services offering, we aim to generate revenue earlier in the project lifecycle. independent of potential interconnection or permitting delays, positioning services as a gateway for software sales. By emphasizing our software and services offerings, we believe that we also have a clear path to gross margin expansion and profitability. Finally, by updating our approach to battery hardware, we expect to see improvements in the company's work and capital management. To execute our refined strategy, we have a team of talented leaders. I'd like to highlight two of them, Matt Tappen and Jake Berlin, both seasoned professionals with deep industry experience. Matt, who joined us at STEM three years ago, has been leading our software business for the past 18 months and will continue to do so. He brings a robust background in strategy and corporate development with a focus on the energy transition. Meanwhile, Jake Berlin, the current leader of energy services, has nearly two decades of experience in the energy sector, developing and delivering service solutions for a wide range of clients. Both Matt and Jake are reporting to Doran Hull, our new executive vice president and chief financial officer, who joined STEM in early September. Doran has more than 25 years of global finance and management experience, providing leadership and strategy and operational efficiency in the growing clean technology industry. He most recently served as Executive Vice President and Chief Financial Officer of Amoresco, a customer of STEM, where he led the company's financial strategy and capital management. He was also responsible for the company's SaaS and consulting-focused business units, as well as overseeing its off-grid solar business. Doran has deep financial and business experience, strong strategic acumen, and proven leadership success. Mike Carlson, our COO for the last two years, will continue to focus on delivering products and services to our customers on time and on budget. Albert Pohlfeldt, our recently announced CTO, who has also been with STEM for over two years, will focus on our AI-enabled software product development With such an experienced team of leaders, we are confident in our ability to drive innovation and achieve our strategic goals, ensuring success and growth for our organization.