Smart energy storage company Stem reported a net loss of $72.3 million for the first quarter of 2024, up 61% from the net loss of $44.8 million last year, as extended project timelines and declining battery prices hurt its bottom line.

Total revenue for the quarter also fell by 62%, from $67.4 million in the prior year quarter to $25.5 million. The revenue decline was primarily driven by a $33 million non-cash reduction due to changes in estimates related to legacy hardware pricing guarantees issued to certain customers in 2022 and early 2023.

The reduction was triggered by extended project interconnection timelines in key markets and falling lithium-ion battery prices due to increased supply. “We are not issuing guarantees like that anymore,” said Bill Bush, CFO of the company, during a post-earnings conference call with analysts.

Late last year, prices of lithium-ion battery packs dropped by 14% to a record low of $139/kWh due to falling raw material and component prices.

Meanwhile, contracted annual recurring revenue increased 25% year-over-year to $89.3 million, driven by a “proactive effort to upgrade the backlog to focus on the most profitable opportunities,” CEO John Carrington said during the earnings call.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss narrowed slightly to $12.2 million from $13.7 million last year, benefiting from gross margin expansion and continued cost discipline despite the lower revenue base.

Non-GAAP gross margin improved by five percentage points to 24%, helped by a higher software and services revenue mix.

“We set a quarterly record for non-GAAP gross margin, and adjusted EBITDA improved year-over-year despite lower revenue, highlighting our focus on operating efficiency and cost management,” said Carrington.

The contracted backlog stood at $1.64 billion as of March 31, 2024, up 33% from the prior year but down 16% sequentially after the energy storage provider canceled around $257 million in lower-margin contracts.

“We think that we’re going to replace the backlog with projects which are more favorable for the business than those that went away,” said Bush.

Bookings in the quarter were $23.8 million, down 93% year-over-year, largely impacted by large-scale front-of-the-meter storage projects.

Solar monitoring assets under management (AUM) were 26.9 GW at quarter end, up 5% year-over-year. Contracted storage AUM in the same period rose 65% to 5.8 GW.

Stem announced the launch of its next-generation PowerTrack Asset Performance Management software suite to drive additional high-margin software revenue.

The company had reported its first-ever positive quarterly EBITDA in the previous quarter on higher sales.