A close look at STEM, Inc (STEM)

Stem, Inc (STEM) is a small $1.8B green energy company combining SaaS and hardware sales (think Gillette razor and blades). 
The company which has shown excellent growth since its SPAC listing in December 2020.  Stem delivers and operates smart battery 
storage solutions. The Company is focused on providing smart energy storage and energy management software and also offers clean 
energy intelligence and optimization. Stem's energy software platform, Athena, is an artificial intelligence (AI)-powered 
analytics platform that enables customers to optimize energy use by automatically switching between battery power, onsite 
generation and grid power. Stem has over 950 storage systems across the U.S. and $449 million in contracted backlog-more than Tesla, 
a competitor on the storage side but a partner with Stem on the AI side. Its current mix of revenue is 60% hardware on which its 
margin is only 10-30% and 40% software which throws off 80% margin.  The hardware sales are primarily batteries which it acquires 
from a number of suppliers.  This is the Gillette razors and blades.  The big money is in the recurring sale of blades 
(or subscription software).
STEM recently acquired AlsoEnergy, which has the industry 
leading SaaS platform with their PowerTrack software that monitors and controls 
33 gigawatts of solar assets in over 50 countries. The companies’ customers 
overlap only 30% and include Amazon, Google, Walmart, UPS, Cargill. The deal 
closed in February this year and its results are not included in STEM’S most 
recent earnings.
A look at AlsoEnergy’s numbers reveals $57M LTM total revenue, 
CAGR of 23%1, $23M ARR, 99% gross revenue retention rate. As mentioned 
earlier, STEM alone now has $449M in contracted software backlog. Its 
contracts run from 10 to 20 years.  STEM has just started to use a metric 
like Annual Recuring Revenue, which it calls “Contracted Annual Recurring 
Revenue” (CARR).  In its March 2022 investor presentation, it estimates 2022 CARR
to be $60-$80M. What I find engaging about the combined companies is that 
by 2030 alone, just battery storage capacity alone globally is going to 
increase 25-fold. That primarily due to the shrinking cost of batteries 
and alternative energy costs. The long-term estimates are that by 2050 
$1.2 TRILLION is going to be spent to deploy integrated storage.
Here are the numbers for the two companies.  You’ll immediately spot that 
gross margin for STEM is abysmal.  This will improve with the addition of 
AlsoEnergy, which has 60% gross margin; nevertheless, since AlsoEnergy’s 
revenue is only 45% of STEM’s, the resulting gross margin will be much 
less than most companies we follow; perhaps in the 25% range.
For full 2022, the company projects a near tripling of revenue to $425M, 
but this includes AlsoEnergy which has a lower growth rate.  Based on the 
fact that AlsoEnergy’s revenue growth rate is 23% and its total revenue 
for 2021 is $57M, I estimate the proforma 2022 STEM revenue to be $355M 
or a 235% yoy increase or more than triple 2021 TTM revenue.
For an in-depth, glowing review of STEM’s prospects, you might want 
check out Motley Fool’s December 2021 presentation (audio and transcript) at [https://www.fool.com/investing/2021/12/01/stem-inc-and-the-f...](https://www.fool.com/investing/2021/12/01/stem-inc-and-the-future-of-battery-storage/)

**STEM**
	              Q4	Q3	Q2	Q1'21	Q4	Q3	Q2	TTM																							
Revenue	              52.8	39.8	19.3	15	18.6	9.2	4.4	127																				
seq chg	              33%	106%	29%	-19%	102%	109%																																	
yoy chg	              184%	333%	339%																																				
Gross Mar	      -1.6	3.1	-0.1	-0.2	0.9	-1.7	-1.7	1.2																															
Gross Mar %	      -3.0%	7.8%	-0.5%	-1.3%	4.8%	-18.5%	-38.6%	4.0%																															
Non-Gaap Gross Mar.    3.3	5.8	2.1	2.8	2.5	0.7	0.2																																
NG Gross Mar %	       6%	15%	11%	19%	13%	8%	5%																																
Bookings	      216.9	104	45	50.6	43	37	38																																
seq chg	              109%	131%	-11%	17%	17%	-3%																																	
Contracted Backlog	449	312	250	221	184																																		
seq chg	                44%	25%	13%	20%																																			
																																				
**AlsoEnergy**																																							
Revenue LTM	57
yoy chg	        23%																																						
Gross Mar %     60%
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Some questions:

They have 1.6 GWh under management, what does that become with the acquisition of Also_energy?
Will it be substantially more, like 33 GWh? Did this current report include them?

Something to keep an eye on. Maybe look at this in their next earnings report.

Do you like their management? Are they world class?

Will they be able to outcompete Tesla long term?

Also:

Why not buy Tesla to play battery storage? growing at 50% Y/Y. Profitable

They will have some of the best battery tech in the world. Look at tesla’s targets from their battery day. Very ambitious. Tesla also has the capital and positive free-cash flow to spend on these goals.

Tesla had “4.0GWh of Total Energy storage deployments in 2021”, and they are planning to make a dedicated megapack factory to meet demand. They are supply constrained currently.

https://electrek.co/2021/10/08/tesla-megafactory-aims-40-gwh…

Tesla battery day:
https://www.youtube.com/watch?v=l6T9xIeZTds&t=3016s

Another important thing to remembers is that you have plenty of time to buy them if they are a generational company. Look at buying Amazon in 2005, or look at when the SAP 500 bough prominent tech companies like Apple, MSFT, Amazon, Google. Time is on your side if you are investing for the long term.

Long Tesla. No position in STEM.

2 Likes

Stem, Inc (STEM) is a small $1.8B green energy company combining SaaS and hardware sales (think Gillette razor and blades).
The company which has shown excellent growth since its SPAC listing in December 2020. Stem delivers and operates smart battery
storage solutions. The Company is focused on providing smart energy storage and energy management software and also offers clean
energy intelligence and optimization. Stem’s energy software platform, Athena, is an artificial intelligence (AI)-powered
analytics platform that enables customers to optimize energy use by automatically switching between battery power, onsite generation and grid power. Stem has over 950 storage systems across the U.S. and $449 million in contracted backlog-more than Tesla, a competitor on the storage side but a partner with Stem on the AI side. Its current mix of revenue is 60% hardware on which its margin is only 10-30% and 40% software which throws off 80% margin. The hardware sales are primarily batteries which it acquires from a number of suppliers. This is the Gillette razors and blades. The big money is in the recurring sale of blades (or subscription software).

STEM recently acquired AlsoEnergy, which has the industry leading SaaS platform with their PowerTrack software that monitors and controls 33 gigawatts of solar assets in over 50 countries. The companies’ customers overlap only 30% and include Amazon, Google, Walmart, UPS, Cargill. The deal closed in February this year and its results are not included in STEM’S most
recent earnings.

A look at AlsoEnergy’s numbers reveals $57M LTM total revenue, CAGR of 23%1, $23M ARR, 99% gross revenue retention rate. As mentioned earlier, STEM alone now has $449M in contracted software backlog. Its contracts run from 10 to 20 years. STEM has just started to use a metric like Annual Recuring Revenue, which it calls “Contracted Annual Recurring Revenue” (CARR). In its March 2022 investor presentation, it estimates 2022 CARR to be $60-$80M. What I find engaging about the combined companies is that by 2030 alone, just battery storage capacity alone globally is going to increase 25-fold. That is primarily due to the shrinking cost of batteries and alternative energy costs. The long-term estimates are that by 2050 $1.2 TRILLION is going to be spent to deploy integrated storage.

Here are the numbers for the two companies. You’ll immediately spot that gross margin for STEM is abysmal. This will improve with the addition of AlsoEnergy, which has 60% gross margin; nevertheless, since AlsoEnergy’s revenue is only 45% of STEM’s, the resulting gross margin will be much less than most companies we follow; perhaps in the 25% range.

For full 2022, the company projects a near tripling of revenue to $425M, but this includes AlsoEnergy which has a lower growth rate. Based on the fact that AlsoEnergy’s revenue growth rate is 23% and its total revenue for 2021 is $57M, I estimate the proforma 2022 STEM revenue to be $355M or a 235% yoy increase or more than triple 2021 TTM revenue. For an in-depth, glowing review of STEM’s prospects, you might want check out Motley Fool’s December 2021 presentation (audio and transcript) at
https://www.fool.com/investing/2021/12/01/stem-inc-and-the-f……
Q4
STEM
Q4 Q3 Q2 Q1’21 Q4 Q3 Q2 TTM

Revenue 52.8 39.8 19.3 15 18.6 9.2 4.4 127
seq chg 33% 106% 29% -19% 102% 109%
yoy chg 184% 333% 339%
Gross Mar -1.6 3.1 -0.1 -0.2 0.9 -1.7 -1.7 1.2
Gross Mar % -3.0% 7.8% -0.5% -1.3% 4.8% -18.5% -38.6% 4.0%
Non-Gaap Gross Mar. 3.3 5.8 2.1 2.8 2.5 0.7 0.2
NG Gross Mar % 6% 15% 11% 19% 13% 8% 5%
Bookings 216.9 104 45 50.6 43 37 38
seq chg 109% 131% -11% 17% 17% -3%
Contracted Backlog 449 312 250 221 184
seq chg 44% 25% 13% 20%

AlsoEnergy
Revenue LTM 57
yoy chg 23%
Gross Mar % 60%

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