STEM update

I first purchased STEM on March 28, 2022. With the approximate 40% share price increase since that date, it has far outperformed my “true” SaaS portfolio of CRWD (-18%), SNOW (-19%), DDOG (-39%), and NET (-49%). Its increase is due to its well-received earnings report on August 4th and the passage of the Inflation Reduction Act.
For those not familiar with STEM, you may want to visit my post # 84013 (https://discussion.fool.com/revision-to-stem-post-35082964.aspx). Basically it’s a company in the green energy field focused on providing smart energy storage (batteries from outside suppliers) and energy management software. After the initial sale of storage batteries, it enters into contracts for up to 20 years for its Athena and other software systems to optimize battery use.
The weakness of STEM is its gross margins. These have improved somewhat with the acquisition of AlsoEnergy; but are still abysmally low. STEM hopes to greatly improve margins as its software becomes a bigger part of its revenue after the initial hardware sale. Software provides an 80% margin but presently constitutes only 19% of revenue according to the earnings call transcript.

        
                Q2	Q1'23	 Q4	Q3	Q2	Q1'22   Q4  																					
Revenue	        67	41	 53	39.8	19.3	15      19																					
Seq	        63%    -22%	 32%	158%	25%    -17%   102%															
YoY	        247%   167%	184%	333%	250%																									
Organic	        53      41	 53	39.8	19.3	15.4  18.6														
Seq Organic     29%    -22%	 33%	106%	25%																									
YOY Organic    175%																													
																														
Gross Mar        7.7	 5.8   -1.6	3.1	-0.1	-0.2																
Gr Mar %	11.5%	-3.9%	5.9%	-0.3%	-1.0%	5.8%																							
YoY chg	        653%																													
NG Gross Mar %	17%	16%	9%	6%	8%	13%															
Bookings        226	151	216.9	104	45	50.6															
Seq	        50%	-30%	108.56%	106%   -11%	18%															
Contracted      727	565	449	312	250     221
Backlog																							
Seq	        29%	26%	42%	41%	13%	20%																								
YoY		156%	144%																											
Contracted 	58	 52	24
Annl Recur Rev																								
Seq	         13%																													
YoY		113.7%																												
Cash	        335	352	921

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Due to “column shift” when editing, there was an error in my previous post about gross margins. The correct figures follow.


                 Q2	Q1'23	 Q4	Q3	Q2	Q1'22   Q4      Q3
Gross Mar        7.7	3.6	-1.6	3.1	-0.1	-0.2	0.9	-1.7																																															
Gr Mar %	11.5%	8.8%	-3.0%	7.8%	-0.5%	-1.3%	4.8%	-18.5%	

As you can see, margins are improving for STEM; but another important statistic is cash burn rate.

            -6.6	-26.0	9.6    -69.0	-40.0	-1.8

After its purchase of AlsoEnergy, Stem has approximately $335M in cash and short-term investments. While burn rate has slowed, there is some danger that Stem may have to incur more debt or issue more share if it wishes to keep afloat or create another merger.

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