Smart energy storage company Stem reported a net income of $19.1 million during the second quarter (Q2) of 2023, showing a significant year-over-year (YoY) improvement of 159.6% from a loss of $32 million.

The YoY improvement was mainly attributed to a one-time gain of $59 million resulting from the cancellation of a portion of the company’s 2028 Convertible Notes in Q2 of 2023, which led to the extinguishment of debt.

The company’s revenue stood at $93 million, a 39% YoY increase from $66.9 million.

The driver of the revenue increase was higher hardware revenue resulting from partnerships in both Front-of-the-Meter and Behind-the-Meter sectors.

Additionally, the solar asset performance management business, AlsoEnergy, contributed $18.6 million to the overall revenue growth.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at a loss of $9.5 million, but it improved by 14.4% YoY from a loss of $11.1 million. The change in adjusted EBITDA was primarily driven by higher gross profit and continued focus on managing operating expenses.

Operational Highlights

In Q2 2022, bookings amounted to $225.7 million, which increased by 5% YoY to reach $236.4 million.

The contracted backlog at the end of Q2 was $726.6 million, which was a growth of 88% YoY to take the cumulative figure to a record high of $1.36 billion.

The record contracted storage assets under management increased by 9% to become 3.8 GWh at the end of Q2 2023.

Contracted annual recurring revenue saw significant growth as well. At the end of Q2 2022, it was $57.6 million, which increased by 30% YoY to become $74.9 million by the end of Q2 2023.

Additionally, it showed a 5% QoQ increase from $71.5 million in Q1 2023.

1H 2023

In the first half (1H) of 2023, the company showcased a financial turnaround, recording a 52.8% YoY improvement in the net loss, recorded at $25.7 million from the previous $54.5 million.

Stem achieved revenue figures of $160.4 million, a 48.5% YoY increase.

The company’s EBITDA also demonstrated a positive trend, with a marginal 3% YoY improvement, reaching a loss of $23.2 million from $23.9 million.

The company’s financial results also reflected its growing differentiation in the market, characterized by a 10% quarterly growth in software services revenue for the fifth consecutive quarter.

The company said this differentiation can be attributed to its technology leadership, advanced AI and machine learning capabilities, and innovative approach, all of which contributed to delivering customer value and environmental benefit.

Additionally, the company is achieving commercial momentum, securing a 313 MWh battery storage system award from Ameresco to be operational in 2024. Moreover, their solar asset performance business is rebounding, exemplified by a 304 MW project award in Hungary.

John Carrington, Chief Executive Officer of Stem, said, “Given our strong performance in the first half of the year and visibility from our backlog, we reaffirm our full-year 2023 guidance across all of our key metrics and our continued expectation that we will achieve positive adjusted EBITDA in the second half of 2023.”

Stem’s revenue increased 63% year-over-year (YoY) to $67 million in the first quarter (Q1) of the financial year (FY) 2023, driven by higher hardware revenue from Front-of-the-Meter and Behind-the-Meter partnership agreements.

According to a recent report by Wood Mackenzie, the energy storage market in the U.S., including grid-scale, residential and community, commercial, and industrial segments, experienced a 26% decline in Q1 of 2023 compared to the previous quarter, adding a total of 2,145 MWh.