STEM, Inc. — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report. STEM provides AI-enabled energy storage hardware, software and services, including its Athena platform and solar monitoring software.
Financial and operating performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $461.5 million | $363.0 million |
| GAAP gross profit / margin | $3.7 million / 1% | $33.1 million / 9% |
| Non-GAAP gross profit / margin | $75.1 million / 15% | $47.3 million / 13% |
| Net loss | $140.4 million | $124.1 million |
| Adjusted EBITDA | $(19.5) million | $(46.0) million |
| Cash used in operating activities | $207.4 million | $106.0 million |
- Revenue rose 27%, led by hardware revenue, up 28% to $399.0 million; services and other revenue increased 20% to $62.5 million.
- Cost of revenue grew 39%, faster than revenue. GAAP gross profit fell 89% to $3.7 million, while operating loss increased to $179.3 million from $131.1 million.
- The $59.1 million net gain on extinguishment of debt materially offset the operating loss in reported results. Net loss nevertheless widened by $16.4 million.
- Year-end cash and cash equivalents were $105.4 million, with $8.2 million of short-term investments; working capital was $221.9 million. Accounts receivable totaled $302.8 million, including $190.2 million unbilled.
- Convertible notes had $537.0 million aggregate principal outstanding at year-end: $297.0 million of 2028 notes and $240.0 million of 2030 notes. Financing obligations totaled $66.8 million, including $14.8 million current.
- Bookings increased to $1.53 billion from $1.06 billion; contracted backlog to $1.93 billion from $969.0 million; storage under management or contract to 5.5 GWh from 3.1 GWh; and solar monitoring assets to 27.5 GW from 25.0 GW. CARR was $91.0 million, versus $65.3 million.
Material changes and unusual items
- Hardware revenue growth was accompanied by weaker reported gross economics, partly reflecting a $35.1 million revenue reduction for customer hardware-value guarantees. The reduction related to 2022 and 2023 deliveries; management said it does not intend to offer new guarantees and does not expect remaining exposures to be material.
- In the first quarter, STEM recognized a $10.2 million revenue constraint on certain lithium-carbonate-indexed hardware orders. Final settlement was expected in the first quarter of 2024, with consideration projected to be at least approximately $34 million, subject to market conditions.
- Fourth-quarter supplier production delays led to $2.7 million of excess hardware costs and $4.8 million of customer liquidated damages.
- Operating cash outflow increased substantially, driven in part by working-capital needs, including higher receivables and inventory. The company raised $232.4 million net from 2030 convertible notes and used $99.8 million to retire $163.0 million principal of 2028 notes.
- A $5.0 million sales-tax accrual for prior-period obligations was recorded in 2023 as an out-of-period adjustment; management concluded it was immaterial to 2023 and the affected prior periods.
Outlook, risks and contingencies
- Management said available cash, short-term investments and expected receivable collections should fund capital and liquidity requirements for at least 12 months after the financial statements were issued. It also expects GAAP net losses through at least 2024; no quantified 2024 revenue or earnings guidance is provided in the filing.
- Results are seasonal: 65% of 2023 revenue was recognized in the third and fourth quarters. Hardware delivery timing, installation, permitting and interconnection can delay revenue.
- Key risks include customer and supplier concentration, collection and realization of large unbilled receivables, hardware cost and availability, project delays, customer guarantees, and dependence on incentives and supportive energy-market rules.
- The company reported ongoing legal proceedings and two putative securities class actions filed in 2023. Management stated that a material loss from currently pending proceedings was remote and that it did not believe pending matters would materially affect the consolidated financial statements.
- Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. The audit identified partnership-arrangement revenue recognition and goodwill impairment as critical audit matters; no goodwill impairment was recorded.
Important facts for investors to verify
- Whether the $302.8 million receivables balance, including substantial unbilled amounts and customer concentration, converts to cash on the anticipated schedule.
- Whether gross margins improve as hardware costs, guarantee-related adjustments and supplier-delay costs evolve; compare GAAP results with management’s adjusted measures and exclusions.
- Whether bookings and backlog convert into binding purchase orders, timely installations, recognized revenue and cash; some partnership bookings may be cancellable before purchase orders.
- Cash runway and financing needs against $207.4 million of 2023 operating cash use, ongoing losses and convertible-note obligations.
- Final settlement of lithium-indexed orders, remaining customer guarantees, and developments in the securities litigation and sales-tax matter.