STEM, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; it does not provide a standalone Q4 income statement. Comparisons below are to FY 2021 unless noted.
Business context
Stem provides battery energy storage hardware, software-enabled optimization through its Athena platform, and solar asset monitoring through PowerTrack. Its customers and projects span behind-the-meter and front-of-the-meter markets. The February 1, 2022 acquisition of AlsoEnergy added solar monitoring and control capabilities and materially expanded the business.
Financial performance and liquidity
| Metric | FY 2022 / Dec. 31, 2022 | FY 2021 / Dec. 31, 2021 |
|---|---|---|
| Revenue | $363.0 million | $127.4 million |
| GAAP gross profit (margin) | $33.1 million (9%) | $1.3 million (1%) |
| Non-GAAP gross profit (margin) | $47.3 million (13%) | $11.2 million (9%) |
| Operating loss | $131.1 million | $83.1 million |
| Net loss | $124.1 million; $0.81 per share | $101.2 million; $0.96 per share |
| Adjusted EBITDA | $(46.0) million | $(30.3) million |
| Cash used in operating activities | $106.0 million | $101.3 million |
- Revenue rose 185%, driven principally by higher front-of-the-meter partnership hardware sales and inclusion of AlsoEnergy results from its acquisition date.
- Operating expenses increased 95% to $164.2 million, reflecting higher personnel and public-company costs and AlsoEnergy-related amortization and expenses.
- Cash and cash equivalents were $87.9 million, and short-term investments were $162.1 million, totaling $250.0 million. The comparable total at December 31, 2021 was $920.8 million. Management said liquidity was sufficient for at least 12 months from the filing date.
- Net working capital was $265.8 million. Accounts receivable rose to $223.2 million from $61.7 million, including $151.3 million of unbilled receivables.
- Convertible notes had $460.0 million principal and a $447.9 million carrying value; they bear 0.50% interest and mature in 2028. Financing obligations totaled $79.6 million, including $15.7 million current; notes payable totaled $1.8 million.
- FY 2022 investing cash outflow was $544.4 million, chiefly the $533.0 million cash cost of the AlsoEnergy acquisition, net of cash acquired. Financing cash outflow was $9.3 million.
Material changes and operating metrics
- AlsoEnergy was acquired for approximately $652.0 million: $543.1 million cash, net of a working-capital adjustment, and $108.9 million in stock. The acquisition added $545.0 million of goodwill and $152.1 million of identifiable intangible assets.
- Bookings were $1.057 billion and contracted backlog was $969.0 million at year-end, versus $416.5 million and $449.0 million, respectively, a year earlier. Contracted storage under management was 2.5 GWh, versus 1.6 GWh; solar monitoring assets under management were 25 GW. These are company-defined operating metrics, not GAAP measures.
- One customer represented approximately 46% of FY 2022 revenue; another represented 10%. Customer concentration and collection performance are material to results.
- The company recorded a $15.2 million income tax benefit, primarily from a partial release of a deferred-tax-asset valuation allowance associated with the AlsoEnergy acquisition. It continued to maintain a full valuation allowance on U.S. federal and state deferred tax assets.
Outlook, risks, and unusual items
- Management expected GAAP net losses to continue through at least 2023 and anticipated increased sales and marketing, research and development, and general and administrative spending. No quantified FY 2023 revenue or earnings guidance is provided in the supplied filing text.
- Management cited supply shortages and delivery delays for batteries, inverters, enclosures, and related components, alongside inflation, labor and freight costs, geopolitical disruption, and extended installation timelines. These may delay deployments and revenue recognition.
- Other key risks include customer and supplier concentration, customer cancellations or payment delays, dependence on government incentives and electricity economics, competition, system performance and safety, and execution and integration risks from acquisitions and DevCo joint ventures.
- Bookings and backlog do not assure revenue: some partnership bookings are cancellable before binding purchase orders, and project installation timing can be lengthy. The company said it would stop reporting its 12-month pipeline beginning in Q1 2023.
- The filing reports no pending legal proceeding or loss contingency expected to have a material adverse effect; management considered the probability of a material loss from currently pending proceedings remote.
- Management concluded disclosure controls and internal control over financial reporting were effective at year-end and said previously identified material weaknesses had been remediated. AlsoEnergy was excluded from management’s ICFR assessment while integration work continued; it represented 16% of FY 2022 revenue and 3% of year-end assets. The auditor issued an unqualified opinion on the financial statements and ICFR, with that acquisition-related scope limitation disclosed.
Investor verification priorities
- Assess whether revenue growth and improved gross margins persist, particularly after separating hardware sales from recurring software and services.
- Review customer concentration, receivable aging and collectability, including the large increase in unbilled receivables and the $3.9 million allowance for receivables.
- Test the conversion, timing, cancellation exposure, and expected margins of bookings and contracted backlog against actual installations and revenue.
- Monitor operating cash burn, cash and investment balances, acquisition-related spending, and funding needs relative to management’s 12-month liquidity statement.
- Review the 2028 convertible-note terms and potential dilution, financing-obligation repayments, and the company’s ability to fund operations while loss-making.
- Track AlsoEnergy integration and goodwill/intangible-asset valuation assumptions, as well as completion of its internal-control integration.
- Evaluate supplier availability, installation delays, customer incentives, and the realized benefits of the Inflation Reduction Act.