Stem, Inc. (STEM) Bundle
Understanding Stem, Inc. (STEM) Revenue Streams
Understanding Stem, Inc.’s Revenue Streams
The revenue analysis for Stem, Inc. reveals significant changes in revenue streams over the past year, particularly in hardware and service revenues.
Breakdown of Primary Revenue Sources
Stem, Inc. generates revenue from two main sources: hardware and services. The revenue breakdown for the nine months ended September 30, 2024, compared to the same period in 2023, is as follows:
| Revenue Source | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Change ($ in thousands) | Percentage Change |
|---|---|---|---|---|
| Services and Other Revenue | $52,086 | $47,630 | $4,456 | 9% |
| Hardware Revenue | $36,673 | $246,461 | ($209,788) | (85%) |
| Total Revenue | $88,759 | $294,091 | ($205,332) | (70%) |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for Stem, Inc. shows a stark contrast between its hardware and services segments. The overall revenue decreased by 70% for the nine months ended September 30, 2024, compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
In 2024, hardware revenue accounted for approximately 41.4% of total revenue, down from 83.8% in 2023, while services and other revenue increased to 58.6%, up from 16.2% in 2023.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams are primarily attributed to a $209.8 million decrease in hardware revenue, largely due to project-related interconnection and financing delays as well as variable consideration adjustments. Conversely, services and other revenue saw an increase of $4.5 million, driven by growth in solar subscription services from existing and new customers.
For the three months ended September 30, 2024, the revenue figures were:
| Revenue Source | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Change ($ in thousands) | Percentage Change |
|---|---|---|---|---|
| Services and Other Revenue | $22,143 | $16,597 | $5,546 | 33% |
| Hardware Revenue | $7,148 | $117,143 | ($109,995) | (94%) |
| Total Revenue | $29,291 | $133,740 | ($104,449) | (78%) |
A Deep Dive into Stem, Inc. (STEM) Profitability
A Deep Dive into Stem, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Total Revenue | $29.3 million | $133.7 million | $88.8 million | $294.1 million |
| Gross Profit (Loss) | $6.2 million | $(20.3) million | $(8.6) million | $(7.4) million |
| Operating Loss | $(144.5) million | $(68.3) million | $(792.3) million | $(145.8) million |
| Net Loss | $(148.3) million | $(77.1) million | $(802.9) million | $(102.7) million |
| Gross Margin (%) | 21% | (15%) | (10%) | (3%) |
| Operating Margin (%) | (493%) | (51%) | (893%) | (49%) |
| Net Margin (%) | (506%) | (58%) | (904%) | (35%) |
Trends in Profitability Over Time
For the three months ended September 30, 2024, the total revenue decreased by 78% compared to the same period in 2023, primarily due to a significant drop in hardware revenue. The gross profit margin improved to 21% from a negative margin of (15%) in Q3 2023, indicating a positive shift in service revenue performance despite the overall revenue decline. The operating loss for Q3 2024 was $(144.5) million, a deterioration from $(68.3) million in Q3 2023, reflecting increased operational costs.
Comparison of Profitability Ratios with Industry Averages
As of Q3 2024, the company's gross margin of 21% is below the industry average of approximately 30-40% for similar technology and software companies. The net margin of (506%) also falls significantly short of the industry benchmark of 10-20% for profitable firms.
Analysis of Operational Efficiency
Operational efficiency remains a challenge, as evidenced by the substantial increase in total operating expenses to $150.6 million in Q3 2024, compared to $48.0 million in Q3 2023. This surge was driven by a one-time impairment charge of $104.1 million related to parent company guarantees and goodwill impairment of $547.2 million during the nine months ended September 30, 2024.
Cost management strategies have been implemented, with sales and marketing expenses decreasing by 29% and research and development expenses declining by 23% in Q3 2024 compared to Q3 2023. However, general and administrative expenses increased by 24% due to higher professional service costs.
Debt vs. Equity: How Stem, Inc. (STEM) Finances Its Growth
Debt vs. Equity: How Stem, Inc. Finances Its Growth
As of September 30, 2024, Stem, Inc. reported a total long-term debt of $240.0 million stemming from its 2030 Convertible Notes, which carry an interest rate of 4.25% per year and will mature on April 1, 2030. The net carrying amount of these notes, after accounting for unamortized debt issuance costs, was $233.8 million. Additionally, the company had a financing obligation of $59.7 million as of the same date, with $15.0 million classified as a current liability.
Short-term debt levels are not explicitly stated, but the company maintains a working capital of $20.5 million. The company’s total liabilities amounted to $537.8 million, while total stockholders' equity was reported as $(343.6 million), indicating a significant accumulated deficit of $1.575 billion.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Stem, Inc. can be calculated as follows:
| Total Debt | Total Equity | Debt-to-Equity Ratio |
|---|---|---|
| $240.0 million | $(343.6 million) | Not applicable (as equity is negative) |
This indicates that the company’s debt levels far exceed its equity, a situation often seen in companies that are in growth mode or undergoing significant operational changes. The industry average for debt-to-equity ratios varies, but companies in the renewable energy sector typically maintain ratios below 1.0. Therefore, Stem, Inc.’s current situation suggests a higher risk profile compared to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In 2023, Stem, Inc. issued $240 million in 2030 Convertible Notes, using approximately $99.8 million of the net proceeds to repurchase $163 million of its 2028 Convertible Notes. The company also entered into capped call transactions with a cost of $27.8 million related to these notes. As of September 30, 2024, the company’s credit ratings were not explicitly mentioned in the data, but the issuance of convertible debt indicates a reliance on equity-like financing due to the inherent conversion feature.
Balancing Between Debt Financing and Equity Funding
Stem, Inc. has primarily relied on equity financing, as evidenced by its significant $1.230 billion in additional paid-in capital. The company’s strategy appears to favor convertible debt as a means of raising capital while mitigating immediate dilution of equity. The total outstanding potentially dilutive shares, which include convertible notes and stock options, amounted to 66.9 million as of September 30, 2024.
In summary, Stem, Inc. utilizes a combination of debt and equity financing strategies to support its growth initiatives, although it currently faces challenges associated with a high debt load relative to its equity position.
Assessing Stem, Inc. (STEM) Liquidity
Assessing Liquidity
As of September 30, 2024, the liquidity position of the company is characterized by the following metrics:
- Cash and Cash Equivalents: $75.4 million
- Net Accounts Receivable: $92.7 million
- Working Capital: $20.5 million
The current ratio, calculated as current assets divided by current liabilities, indicates the company's ability to cover short-term obligations. The current liabilities as of September 30, 2024, are $206.98 million, leading to a current ratio of:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $227.53 million | $206.98 million | 1.10 |
The quick ratio, which excludes inventory from current assets, is also a critical measure of liquidity. The inventory as of September 30, 2024, is $33.95 million, resulting in a quick ratio of:
| Current Assets (excluding inventory) | Current Liabilities | Quick Ratio |
|---|---|---|
| $193.58 million | $206.98 million | 0.93 |
Analysis of Working Capital Trends
The working capital position has shown an increase from previous periods, with a working capital of $20.5 million as of September 30, 2024, compared to previous values of:
| Date | Working Capital |
|---|---|
| June 30, 2024 | $13.5 million |
| December 31, 2023 | $45.5 million |
This trend indicates a slight recovery in liquidity but still reflects challenges in managing current liabilities effectively.
Cash Flow Statements Overview
The cash flow statement reveals significant insights into the company's liquidity through its operating, investing, and financing activities:
| Activity | Cash Flow (in thousands) |
|---|---|
| Operating Activities | $(21,940) |
| Investing Activities | $(846) |
| Financing Activities | $(6,942) |
For the nine months ended September 30, 2024, the total cash used in operating activities is $21.9 million, reflecting the impact of a net loss of $802.9 million, and a substantial adjustment for non-cash items totaling $708.4 million, which includes:
- Depreciation and amortization: $33.2 million
- Stock-based compensation: $21.7 million
- Impairment of goodwill: $547.2 million
Potential Liquidity Concerns or Strengths
Despite having cash reserves of $75.4 million, the company faces significant liquidity risks due to:
- A net loss of $802.9 million for the nine months ending September 30, 2024.
- Negative cash flow from operating activities of $21.9 million.
- Potential for increased working capital needs as the company transitions to a new business strategy.
However, the company's ability to maintain a working capital of $20.5 million, alongside substantial accounts receivable of $92.7 million, provides a buffer against immediate liquidity pressures.
Is Stem, Inc. (STEM) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company involves assessing key financial ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) to determine whether the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
As of the latest financial data, the company reported a net loss per share of $0.91 for the third quarter of 2024. The trailing twelve months (TTM) earnings per share (EPS) is calculated by adjusting the net loss over the last four quarters. With a stock price of approximately $5.00 as of recent trading, the P/E ratio is not applicable as the company is currently operating at a loss.
Price-to-Book (P/B) Ratio
The book value per share is derived from the total stockholders' equity, which stands at ($344.1 million) as of September 30, 2024. With 162.7 million shares outstanding, the book value per share is approximately ($2.12). Therefore, the P/B ratio is also not applicable due to negative book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we consider the enterprise value, which is calculated as market capitalization plus debt minus cash. The company has total liabilities of $881.9 million and cash and cash equivalents of $75.4 million. Assuming a market capitalization of approximately $813.5 million (based on the stock price), the enterprise value is $1.72 billion. The EBITDA for the trailing twelve months is ($792.3 million). Therefore, the EV/EBITDA ratio is not calculable due to negative EBITDA.
Stock Price Trends
The stock price has experienced significant volatility over the past 12 months, starting at approximately $7.50 a year ago and dropping to around $5.00. This represents a decline of approximately 33.3% over the period.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, and thus the dividend yield is 0%. There are no payout ratios applicable as there are no earnings to distribute to shareholders.
Analyst Consensus on Stock Valuation
According to recent analyst ratings, the consensus is a hold with various analysts suggesting that the stock is fairly valued given the current financial outlook and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | N/A |
| EV/EBITDA Ratio | N/A |
| Stock Price (Current) | $5.00 |
| Stock Price (12 Months Ago) | $7.50 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Stem, Inc. (STEM)
Key Risks Facing Stem, Inc.
Stem, Inc. faces a myriad of internal and external risks that significantly impact its financial health. These risks can be categorized into operational, financial, and strategic domains, influenced by factors such as industry competition, regulatory changes, and market conditions.
Industry Competition
The energy storage and software solutions market is highly competitive, with numerous players vying for market share. This competition can lead to price wars and reduced margins. For the three months ended September 30, 2024, the company reported a total revenue of $29.3 million, down from $133.7 million in the same period of the previous year, reflecting a decrease of 78%.
Regulatory Changes
Changes in regulations related to energy storage and renewable energy can pose risks. Compliance with evolving standards may require significant investment. As of September 30, 2024, the company’s accumulated deficit stood at $1.575 billion.
Market Conditions
Fluctuations in market demand for energy storage systems can affect revenue streams. The revenue from hardware decreased by $110 million primarily due to project-related interconnection and financing delays.
Operational Risks
Operational challenges include managing supply chain constraints and ensuring product delivery. The company reported an impairment loss of $547.2 million related to goodwill. Furthermore, the total operating expenses for the three months ended September 30, 2024, were $150.6 million, significantly higher than the prior year.
Financial Risks
The company’s financial health is under pressure due to ongoing net losses. For the nine months ended September 30, 2024, the net loss was $802.9 million, compared to $102.7 million for the same period in 2023. This trend raises concerns over liquidity, with cash and cash equivalents dropping to $75.4 million.
Strategic Risks
Recently announced strategic shifts towards AI-enabled software and services could disrupt existing revenue streams. The shift is expected to require significant investments, and any failure in execution could adversely impact financial performance.
Mitigation Strategies
To address these risks, the company has outlined several strategies:
- Moderating expenses in sales and marketing, research and development, and general administration.
- Maintaining a focus on improving cash flow and securing additional funding sources as needed.
- Enhancing supplier relationships to mitigate supply chain risks.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition leading to price reductions | Revenue decreased by 78% year-over-year |
| Regulatory Changes | Potential compliance costs associated with new regulations | Accumulated deficit of $1.575 billion |
| Market Conditions | Demand fluctuations for energy storage systems | Hardware revenue decline of $110 million |
| Operational Risks | Impairments and delivery challenges | Impairment loss of $547.2 million |
| Financial Risks | Ongoing net losses impacting liquidity | Net loss of $802.9 million for nine months |
| Strategic Risks | Shifts in business strategy affecting revenue | Increased operational expenses of $150.6 million |
Future Growth Prospects for Stem, Inc. (STEM)
Future Growth Prospects for Stem, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including:
- Product Innovations: The shift towards AI-enabled software and services is expected to enhance operational efficiencies and customer engagement.
- Market Expansions: The company aims to penetrate new geographic markets, particularly in utility-scale projects, thereby broadening its customer base.
- Acquisitions: Potential acquisitions of complementary technology firms could enhance technological capabilities and market reach.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the nine months ended September 30, 2024, was $88.8 million, a significant decrease from $294.1 million for the same period in 2023, reflecting a decline in hardware sales due to project delays and reduced demand.
Analysts project a gradual recovery in revenue as the company transitions to its new strategy. Future earnings estimates suggest a potential revenue increase to approximately $150 million in 2025, assuming successful implementation of strategic initiatives.
Strategic Initiatives or Partnerships
The company has announced a renewed focus on:
- Software and Services: A strategic pivot to enhance software offerings, particularly in energy optimization and AI capabilities.
- Partnerships: Collaborations with utility companies and technology providers to leverage combined strengths and resources.
Competitive Advantages
Stem, Inc. possesses several competitive advantages that position it for growth:
- Established Market Presence: As a leader in energy storage solutions, the company has a strong brand reputation and customer loyalty.
- Technological Expertise: The focus on AI and innovative energy solutions enables the company to offer superior products and services compared to competitors.
- Strong Customer Relationships: Long-term contracts and partnerships with major clients provide a steady revenue stream and opportunities for upselling.
Financial Overview and Key Metrics
| Metric | 2024 (9 Months) | 2023 (9 Months) | Growth Rate |
|---|---|---|---|
| Total Revenue | $88.8 million | $294.1 million | -70% |
| Net Loss | $802.9 million | $102.7 million | -682% |
| Cash and Cash Equivalents | $75.4 million | $105.4 million | -29% |
| Accumulated Deficit | $1,575.4 million | $772.5 million | -104% |
As of September 30, 2024, the company had cash and cash equivalents of $75.4 million, providing a buffer for operational expenses.
In conclusion, the company's strategic initiatives, focus on innovation, and market expansion plans are expected to drive future growth despite current financial challenges.
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Article updated on 8 Nov 2024
Resources:
- Stem, Inc. (STEM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Stem, Inc. (STEM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Stem, Inc. (STEM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.