Stem, Inc. (STEM) Q4 2022 Earnings Call Transcript

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Stem, Inc. (NYSE:STEM) Q4 2022 Results Conference Call February 16, 2023 5:00 PM ET

Company Participants

Ted Durbin - Head of Investor Relations

John Carrington - Chief Executive Officer

Bill Bush - Chief Financial Officer

Michael Carlson - Chief Operating Officer

Prakesh Patel - Chief Strategy Officer

Conference Call Participants

Brian Lee - Goldman Sachs

Maheep Mandloi - Credit Suisse

Julien Dumoulin-Smith - Bank of America

Thomas Boyes - Cowen

David Peters - Wolf Research

Joseph Osha - Guggenheim Partners

Biju Perincheril - Susquehanna

Justin Clare - Roth Capital Partners

Abhi Sinha - Northland Financial


Welcome to nan Stem, Inc. Fourth Quarter 2022 Earnings Conference Call. As a reminder, each participants are successful a listen-only mode and nan convention is being recorded. After nan presentation, location will beryllium an opportunity to inquire questions. [Operator Instructions]

I would now for illustration to move nan telephone complete to your host, Ted Durbin, Head of Investor Relations. Please spell ahead.

Ted Durbin

Thank you, Operator. This is Ted Durbin, Head of Investor Relations astatine Stem, and we invited you to our 4th fourth and afloat twelvemonth 2022 net call. Before we begin, please statement that immoderate of nan statements we will beryllium making coming are forward-looking. These matters impact risks and uncertainties that could origin our results to disagree materially from those projected successful these statements. We truthful mention you to our latest 10-K and our different SEC filings.

Our comments coming besides see non-GAAP financial measures. Additional specifications and reconciliations to nan astir straight comparable GAAP financial measures tin beryllium recovered successful our net release. We will beryllium utilizing a descent position today. Our net merchandise and position are connected nan Investor Relations information of our website astatine

John Carrington, our CEO, and Bill Bush, CFO, will commencement nan telephone coming pinch prepared remarks. Michael Carlson, Chief Operating Officer and Prakesh Patel, Chief Strategy Officer, will besides beryllium disposable for nan question-and-answer information of nan call.

And now, I will move nan telephone complete to John.

John Carrington

Thank you, Ted. Ladies and gentlemen, convey you for joining america connected nan telephone today.

Starting pinch Slide 3 and nan schedule for nan chat today, I will reappraisal our 4th fourth 2022 results and highlights. Followed by an overview of our commercialized execution and supply an update connected nan proviso chain. I will past reappraisal our beardown operating results, and caller offerings that show our exertion leadership. Following my remarks, I'll move nan telephone complete to Bill Bush, our Chief Financial Officer, who will talk our financial results successful much item and supply 2023 guidance.

Turning to Slide 4. Today, we reported coagulated 4th fourth results, including grounds gross of $156 million, which was 3x higher than nan aforesaid 4th past year. We besides reported grounds bookings of $458 cardinal which was 2x higher than nan aforesaid 4th past year. Our gross and bookings successful nan 4th fourth unsocial were higher than successful nan full twelvemonth of 2021, which is simply a singular accomplishment complete a short play of time.

We achieved these results contempt a turbulent situation passim 2022, including proviso concatenation volatility, interconnection and permitting delays costs inflation, and star import declines from nan AD/CVD and UFLPA restrictions. Our diversified business exemplary crossed aggregate products and geographies thief nan Company navigate these headwinds. As we previewed successful our interim update successful early January, gross came successful wrong nan guidance scope and our bookings were good up of guidance that we had already raised successful nan mediate of 2022.

In fact, if you spell backmost to our 4Q '21 net call, our bookings ended 50% higher than our original afloat twelvemonth guidance. The bookings momentum is simply a testament to our package and services solutions that are differentiated successful nan marketplace. We are besides capitalizing connected nan tremendous macro tailwinds successful this industry. We grew our Contracted Annual Recurring Revenue aliases CARR different 7% quarter-over-quarter to $65 cardinal successful nan scope of our guidance that was besides raised by $5 cardinal during our 2Q net call.

Focusing connected nan correct broadside of nan page, we continued our momentum successful eMobility pinch an breathtaking strategical business pinch ChargePoint. I'll talk much of this opportunity later successful nan call. We proceed to thrust operating leverage, arsenic we ramp headcount astatine a slower complaint than our gross growth. We are implementing exertion and processes to power costs and leveraging our infrastructure successful India to turn headcount successful little costs regions. We are besides staying up of nan proviso chain, pinch capacity contracted done Q1 2024.

Before we move connected from this slide, I would for illustration to make a mates comments astir our afloat twelvemonth results. We faced respective headwinds during nan 4th and passim nan year. We were negatively impacted by COVID related shutdowns successful nan 4th fourth successful China. To reside this risk, we are undertaking a strategy to diversify and deepen our relationships pinch artillery OEMs. In addition, we are leveraging our exertion activity to present an offering that provides elasticity for our customers successful strategy design, and tin thief to mitigate disruptions astatine immoderate 1 supplier.

On nan star front, arsenic antecedently discussed, we were negatively impacted by nan deficiency of sheet shipments that resulted from nan anti-dumping and weaker forced labour restrictions. Software services gross was negatively impacted by interconnection and permitting delays. Bill will talk nan aggregate pathways we person to proceed increasing gross margin.

Finally, we efficaciously managed expenses passim 2022 coming successful connected scheme to our guidance for adjusted EBITDA. In ample part, because we were prudent successful our hiring and are seeing nan use of our strategy to grow headcount successful little costs geographies, I've charged our guidance squad and our world statement pinch reaching affirmative adjusted EBITDA successful nan 2nd half of this year, and we will not waiver connected that cardinal objective.

Moving to Slide 5, and our continued commercialized execution. As you tin spot successful nan floor plan successful nan precocious right, we had beardown services gross maturation successful nan 4th quarter, up 17% versus nan 3rd quarter, which itself was up 9% versus nan 2nd quarter. As you know, this is nan highest separator information of our business, and we are focused connected driving these revenues higher successful 2023 and beyond. I mentioned our beardown bookings quarter, which exceeded afloat twelvemonth 2021 bookings.

Additionally, complete two-thirds of our afloat twelvemonth bookings came from caller customers. We expect bookings momentum to proceed pinch nan tailwinds we are seeing successful nan industry. As you tin spot successful nan little correct chart, WoodMacKenzie is now calling for a 46% summation successful star and retention buildout successful nan U.S. chiefly arsenic a consequence of nan Inflation Reduction Act. We deliberation that nan semipermanent visibility provided by IRA will thrust beardown maturation for years to come.

We are pleased to commencement our first only package task successful ISO New England this 4th and expect to do much package only deals going forward. We proceed to make beardown recurring revenues from our existing customers arsenic they are consenting to salary for nan incremental further worth we're creating for them.

Finally, we person revamped our income compensation scheme to favour separator complete revenue. We expect continued beardown growth, but will attraction connected nan highest separator information of nan worth concatenation wherever our differentiated solutions astir resonate.

Turning to Slide 6 and an update connected nan proviso chain. On nan retention side, we person now afloat contracted proviso done nan first 4th of 2024, and we are opportunistically adding proviso connected nan spot market. The choppiness successful nan electrical conveyance market, on pinch immoderate task delays, appears to person released immoderate excess capacity that is coming into nan stationary retention market. We will proceed to execute backmost to backmost contracts that fastener successful our customer request arsenic we adhd further proviso commitments.

On nan commodities front, we are cautiously optimistic that immoderate of nan caller value declines will hold, which couldn't beryllium task economics for customers and summation our addressable market. For example, lithium carbonate prices are down astir 20% from their highest successful November, which is starting to travel into nan wide power retention strategy price. As you know, value increases aliases decreases our complete walk done for Stem, but we are encouraged to spot these little prices and successful storage.

We proceed to advancement our portion controller aliases modular power retention strategy scheme that we discussed successful our past net call. This offering will alteration customers to operation and lucifer various hardware combinations pinch an expertise to switch batteries and inverters yet decoupling our customers from immoderate of nan proviso concatenation volatility that we person seen successful caller years. Importantly, we will still support power of nan separator hardware solution. Customers and partners are very excited astir this offering and we expect to instal our first aviator modular ESS adjacent month.

Please move to Slide 7, wherever we will talk our exertion leadership. We performed good successful 2022 connected nan exertion and operations front. Overall, we knowledgeable a 33% successful grid calls crossed nan fleet without impacting customer measure simplification expectations. Athena now has 31 cardinal runtime hours crossed aggregate markets, usage cases and hardware devices. Our instrumentality learning algorithm continues to amended arsenic it is exposed to much information successful much markets, which extends our competitory mode. We proceed to support our customers and nan grid successful respective halfway markets.

In California, we saw a 20x summation successful grid calls during December and January tied to nan atmospheric stream upwind patterns on pinch nan utmost precocious state prices successful Southern California. Southern California Edison called connected nan STEM web almost continuously arsenic we provided complete 60 megawatts per time for those months. Our virtual powerfulness works delivered nan balanced of respective state peaking powerfulness plants and became a captious capacity action for utilities and grid operators.

Athena besides continued to transcend our commitments, 8% supra baseline for nan Key SGIP Incentive Program. In ISO New England, we continued our exceptional capacity pinch nan fleet generating 76% much gross than forecasted. We had a 94% accuracy successful predicting coincident peaks, which will beryllium an important differentiator successful nan PGM marketplace that I will talk successful a moment, and we bid complete 200 megawatt hours into nan guardant capacity marketplace auction this spring, that will return effect successful 2026.

Finally, successful ERCOT, our first sites will statesman trading successful nan wholesale marketplace successful 2023. We announced successful December our first 4 projects pinch Rex Storage Holdings, a associated task betwixt Regis Energy Partners and independent developer and Excelsior Energy Capital, a starring finance fund. Rex has made a important equity committedness to ERCOT storage, which could money dozens of caller projects.

Let's move to Slide 8 successful our caller business pinch ChargePoint. ChargePoint is simply a starring electrical conveyance charging infrastructure company, which has followed a akin way of invention and marketplace activity arsenic Stem. Founded successful 2007, ChargePoint has grown to complete 200,000 ports nether guidance focused connected charging some individual and fleet vehicles. Our business will attraction connected nan confluence of fleet electrification, and nan grid. Stem will supply battery, hardware and package to coordinate onsite request pinch nan grid, ChargePoint will supply nan charging solutions.

Together, we tin thief accelerate electrical conveyance adoption, enhanced customer economics, accrued grid resiliency, and trim greenhouse state emissions. Collectively, we will leverage nan $5 cardinal of backing incentives from nan National Electric Vehicle Infrastructure Program aliases NEVI that went into effect successful 4th fourth 2022. We estimate nan NEVI programme could offset up to 80% of task costs were available. And further, we estimate nan IRA will supply different $9 cardinal of incentives and taxation credits successful nan markets we're focused, driving further benefits for our customers.

In total, we expect E-mobility to comprise astir half of our down nan metre aliases BTM income successful 3 years. We person already booked respective EV charging deals, and nan ChargePoint announcement will thief jumpstart our advancement successful this breathtaking marketplace on pinch our antecedently announced partnerships pinch ENGIE and ABB.

Next, please move to Slide 9 successful our introduction into nan PJM marketplace for power storage. PJM is nan largest competitory powerfulness marketplace successful nan world astatine astir 150 gigawatts, which is 3x larger than nan California grid. It spans 12 states positive DC, and nan mean business customer load is almost 8x larger than successful California. We've started trading our retention solutions successful PJM for respective reasons. One, rising transmission charges, you tin spot complete nan past 9 years, transmission charges person much than doubled for astir of nan awesome zones.

This is raising electrical bills for commercialized and business customers driving them to renewable power sources for illustration star and progressively storage. Secondly, caller authorities inducement programs are expanding nan returns connected storage. And finally, nan IRA, successful particular, nan retention ITC, which is unfastened galore caller markets to retrofit retention onto existing star installations. Our instal guidelines from AlsoEnergy gives america a important advantage successful this regard.

We deliberation PJM is an perfect marketplace description opportunity arsenic customers will use from Athena's expertise to co-optimize aggregate analyzable worth streams. In addition, we person a beardown way grounds of predicting coincident peaks successful different markets and that will beryllium a cardinal worth thrust PJM arsenic well. This is simply a differentiated offering that is accessible pinch our best-in-class AI capabilities. Because of nan further worth we will adhd for customers, we expect to complaint up to 50% higher fees for Athena.

Thank you. And now I will move nan telephone complete to Bill Bush, our Chief Financial Officer.

Bill Bush

Thank you, John. Starting connected Page 11 pinch our results for nan 4th fourth and afloat twelvemonth 2022. Please callback that, we closed nan AlsoEnergy transaction connected February 01, 2022, which will effect nan comparability to past year's results.

As John mentioned, we reported grounds gross of $156 million, which was 194% summation versus nan $53 cardinal successful nan 4th fourth of 2021 and much than we recorded successful each of 2021. Most of nan maturation came from nan retention hardware income connected FTM partner projects and astir $18 cardinal from nan PowerTrack platform. We besides recognized astir $16 cardinal of precocious separator package and services revenue, representing 10% of full gross for nan quarter. Full twelvemonth 2022 gross was $363 million, an summation of 186% complete 2021. For nan quarter, our GAAP gross separator was $13 cardinal aliases affirmative 8% up from a antagonistic 3% successful nan aforesaid 4th past year. For nan afloat year, GAAP gross separator accrued from $1 cardinal to $33 million.

Turning to Slide 12. Fourth 4th non-GAAP gross separator was $17 cardinal up from $3 cardinal successful nan 4th fourth from past year, owed to higher revenues. On a percent basis, non-GAAP gross separator was 11% successful nan quarter, up from 5% past year. Our margins benefited from a greater stock of precocious separator package and services revenue. For nan afloat twelvemonth 2022, non-GAAP gross separator came successful astatine 13%, up from 9% past year. We came up short of our 15% to 20% non-GAAP gross separator guidance, driven by a higher operation of hardware than we expected.

Our retention and package revenues besides accrued much slow than we expected, owed to nan continued permitting and interconnection delays that our partners experienced. While nan star broadside of our business underperformed from a gross standpoint successful 2022 pinch comparatively level gross versus 2021, nan business continues to make precocious gross margins ending nan twelvemonth astatine 60% and is well-positioned to return advantage of nan expected snapback successful nan star industry. Our star backlog accrued 42% connected a year-over-year basis, giving actual grounds of a rebound successful our star results.

Net nonaccomplishment was $35 cardinal versus $34 cardinal successful nan aforesaid 4th past year. And lastly, adjusted EBITDA was a antagonistic $10 cardinal successful 4th fourth versus a antagonistic $12 cardinal successful nan aforesaid 4th past year. Adjusted EBITDA improved arsenic we proceed to thrust operating leverage successful our business.

For nan afloat year, adjusted EBITDA was a antagonistic $46 cardinal versus a antagonistic $30 cardinal successful 2021. Our adjusted EBITDA results were wrong our guidance scope of antagonistic $20 cardinal to antagonistic $60 million. So contempt weaker than expected gross margins, we were capable to meet our EBITDA guidance and that's owed to costs controls. In particular, erstwhile we saw nan slowdown successful nan star business statesman to create successful nan spring, we managed nan gait of our hiring.

We will proceed to return nan aforesaid blimpish attack this year, to guarantee we execute our extremity of achieving our EBITDA affirmative successful nan 2nd half of nan year. Fourth 4th bookings were $458 cardinal up much than 2x versus bookings successful nan aforesaid 4th past twelvemonth and a caller quarterly record. This was nan highest bookings 4th successful nan Company's history and nan $1.1 cardinal of bookings for nan afloat twelvemonth is up 153% from 2021.

Moving from our financial results to our operating metrics connected Slide 13. Our backlog much than doubled twelvemonth complete twelvemonth from $449 cardinal successful nan 4th fourth to $969 cardinal successful nan 4th fourth of 2022. The backlog accrued astir 19% connected a sequential ground from nan 3rd 4th of 2022, nan largest driver of nan backlog summation was nan $458 cardinal of caller bookings successful nan 4th offset by gross recognized arsenic good arsenic $137 cardinal statement cancellation that we disclosed successful early January. The astir $1 cardinal of backlog gives america bully visibility into 2023 and 2024 revenue.

We besides nary longer study nan 12 period pipeline is simply a cardinal metric successful 2023, nan business is matured to nan constituent wherever we judge backlog is simply a much important parameter of our commercialized outlook and does not person nan volatility of nan pipeline metric. Pipeline was sequentially level successful nan 4th quarter, mostly owed to nan beardown conversion of pipelining, nan bookings during nan quarter. Our contracted AUM connected nan retention broadside of our business grew from 1.6 gigawatt hours successful nan 4th fourth of 2021 to 2.5 gigawatt hours successful nan 4th fourth of 2022. That's a 56% twelvemonth complete twelvemonth summation driven by our beardown commercialized momentum.

Our operating AUM connected nan star plus capacity monitoring broadside of our business ended this 4th astatine 25 gigawatts, comparatively level to nan 3rd quarter. Customer additions were mostly offset by churn, including connected nan rotation down of nan bequest level that we discussed past quarter. We expect coagulated maturation successful star AUM successful 2023 arsenic nan manufacture recovers. Contracted yearly recurring gross aliases CARR ended nan 4th astatine $65 million, up 7% sequentially. We are pleased we are capable to turn CARR during nan 4th contempt nan statement cancellation.

Again, successful testament to our commercialized occurrence and package differentiation, we ended nan 4th pinch $250 cardinal successful rate connected nan equilibrium sheet. We will proceed to deploy our rate to money operational investments, including securing retention hardware for our customers. These costs will travel backmost to nan Company successful nan shape of work fees, hardware margin, and a agelong word recurring package fee. We will stay prudent successful our usage of rate wrong consequence limits established by guidance and overseen by our committee of directors.

Turning to Slide 14, successful our 2023 guidance. Starting pinch revenue, we expect to admit betwixt $550 cardinal and $650 cardinal successful of gross successful 2023. To nan right, you tin spot nan seasonality we expect for gross during nan year, akin to anterior years. It is backmost halfway weighted driven by nan timing of nan transportation of batteries. We expect much ratable increasing work gross passim nan year. We expect non-GAAP gross separator of 15% to 20% versus nan 13% we reported successful 2022. This betterment reflects a higher operation of package and services revenue, including from nan star broadside of nan business.

On bookings, we expect to statement betwixt $1.4 cardinal and $1.6 cardinal this year, representing a 40% positive maturation twelvemonth complete year. With our EBITDA attraction successful mind, we person revamped our income compensation scheme to attraction connected separator arsenic good arsenic revenue. We will attraction connected nan highest separator of opportunities wherever we tin thrust differentiated economics for our customers and for Stem.

We expect adjusted EBITDA successful nan scope of antagonistic $35 to antagonistic $5 cardinal versus antagonistic $46 cardinal successful 2022. This betterment is driven by higher margins and a continued attraction connected improving our operating disbursal leverage. More importantly, we expect EBITDA affirmative successful nan 2nd half of 2023. And past lastly, we are introducing CARR guidance. We're expecting to exit 2023 astatine a tally complaint of betwixt $80 cardinal and $90 million. This is nan usability of our bookings growth, including immoderate package only deals we are pursuing successful halfway markets.

I would for illustration to supply immoderate discourse into immoderate cardinal uncertainties we considered successful processing our guidance. Storage proviso concatenation constraints impacted our Q4 results pinch manufacturing logistics delays astatine 1 of our cardinal suppliers, delaying transportation of merchandise against our contracted backlogs. To mitigate this situation, we person pursued some commercialized and exertion driven solutions, including onboarding further suppliers and building home proviso relationships.

A betterment successful nan star proviso concatenation is captious to nan accomplishment of our gross separator targets. We are seeing greenish shoots pinch a gait of sheet deliveries accelerating crossed apical tier developers and customers, and this should stabilize nan publication from ultra-energy. Our backlog for star APM was up 42% exiting Q4 2022, truthful we are cautiously optimistic. On gross separator description , we person aggregate shots connected goal, which I will talk connected nan adjacent slide.

On Slide 15, we expect meaningful accretion and gross separator for 2023 arsenic a consequence of respective factors and cardinal initiatives. By aligning nan compensation of our income squad connected gross separator achievement, we've seen a marketplace betterment successful nan gross separator wrong our backlog arsenic we exited 2022. In addition, our CEO, Mike Carlson, is focused connected accelerating nan gait of strategy commissioning done nan rigor and attraction he is bringing and pushing interconnection and permitting processes successful business pinch our customers.

We expect to astir double our operating assets nether guidance successful 2023, and this will lend precocious gross separator package services arsenic our package statement position statesman upon commissioning. We expect to betterment successful nan star plus capacity business driven by a return to maturation successful nan star industry. You tin spot from nan chart connected nan left, astir star manufacture expect that nan effect of nan UFLPA connected sheet deliveries to beryllium resolved successful nan first half of this year.

In agelong term, we were rolling retired respective work offerings targeting enhanced monetization of activities. We've already been providing our customers arsenic we person built a activity position successful nan maturation of nan industry. This includes task modeling, task design, and plus guidance offerings tied to nan preamble of our modular ESS strategy, which we expect to statesman to present successful nan first half of 2023.

Additionally, we expanded our squad of power marketplace experts past 4th arsenic we rotation retired services for wholesale power forecasting and programme guidance for nan FTM market. We'll update you connected nan advancement and uptake of these offerings successful nan coming quarters. Bottom line, we will negociate nan business prudently to reside risks successful our scheme and proceed to thrust to EBITDA affirmative successful nan 2nd half of nan year.

With that, fto maine move nan telephone backmost to John for immoderate closing remarks.

John Carrington

Thanks, Bill. On page 16, to wrap up, we are committed to achieving EBITDA affirmative successful nan 2nd half 2023. Our financial advancement is supported by nan very beardown request we are seeing from customers arsenic they look rising power costs and arsenic nan afloat effect of nan ostentation simplification enactment fuels marketplace growth.

We closed 2022 pinch 1.1 cardinal successful bookings, representing 153% summation from nan anterior year. Our exertion squad is best-in-class driving caller marketplace description and enhancing gross margins. We launched our offerings into PJM, nan largest competitory world powerfulness market, and are enhancing nan economics of sites successful CAISO pinch Athena's unmatched co-optimization and wholesale power trading capabilities.

In addition, we proceed to make inroads into nan fast-growing electrical conveyance marketplace pinch nan business we announced pinch ChargePoint. All these activities group america up to thrust double-digit yearly package services maturation and alteration nan Company to execute important maturation successful adjusted EBITDA.

Finally, I want to admit our divers world squad for nan outstanding capacity and looking guardant to gathering nan commitments we person outlined today. We person world people employees, products and customers.

With that, let's unfastened nan statement for questions, please.

Question-And-Answer Session


Thank you. [Operator Instructions] First mobility comes from Brian Lee of Goldman Sachs. Please spell ahead.

Brian Lee

Hey, guys. Good afternoon. Thanks for taking nan questions. First 1 connected nan guidance for revenue, I mean, fixed nan backlog position here, I'm conscionable benignant of funny what's your presumption astir backlog conversion? I would person thought you would beryllium successful position to do higher than benignant of nan gross guidance present of $600 cardinal astatine nan midpoint. So are you seeing backlog converting much slowly? Or is location thing pinch respect to operation that's possibly not turning complete arsenic quickly arsenic we would person thought, conscionable fixed nan wide header number seemed to beryllium bigger and gave you much sum than benignant of nan gross guidance you are providing here? And past I had a follow-up connected nan margins.

Bill Bush

Perfect. Hey, Brian, acknowledgment for nan question. So, yes, and I think, successful position of nan backmost plug, it is converting slower. I deliberation we person talked astir this successful nan past, arsenic we are taking connected larger and larger projects. Those thin to beryllium -- they thin to beryllium FTM, first. Then second, they thin to beryllium multiyear installations. And truthful we saw overmuch speedy -- erstwhile nan products were smaller, we saw a overmuch quicker conversion, overmuch for illustration say, astatine nan extremity of 2021, we had $400 cardinal positive $450 cardinal successful backlog. We person $363 cardinal successful gross this year. So beautiful speedy conversion successful general. But this twelvemonth and I deliberation going into early years, we're conscionable going to request to build much pipeline because nan projects are longer. And truthful from that standpoint, I would say, extension, but still beautiful important maturation connected a year-over-year ground for revenue.

John Carrington

I deliberation nan different point I'd adhd Brian and acknowledgment for nan mobility is, we do still person immoderate opportunity to person bookings into this year, truthful present successful nan first quarter. So support that successful mind.

Brian Lee

Okay. Yes, conscionable connected nan margins, I cognize '22, it sounded for illustration you evidently had immoderate rumor that effect to do connected nan gross margins. You are efficaciously starting '23 present pinch nan aforesaid adjusted gross separator guidance what you had going into '22, but it seems for illustration immoderate of nan headwinds from past twelvemonth person started to dissipate. So is location immoderate conservatism baked into here? Or is location immoderate level of separator leverage that you are not seeing that you would person expected? Because my knowing is, you've sewage possibly a small spot much BTM coming backmost into nan mix, proviso concatenation is better. And I cognize -- kudos connected nan operating leverage broadside of things. But conscionable wondering what are immoderate of nan levers astir gross separator leverage that we could look to present successful '23 because based connected nan header guidance, it doesn't look for illustration you are baking successful a ton?

Bill Bush

I deliberation -- truthful successful position of nan margins, I deliberation 1 is, I deliberation we request to beryllium somewhat conservative, because nan star portion of our business has a batch of separator leverage into it. And though we are seeing immoderate greenish shoots travel out. I mean, you tin spot that successful position of nan year. We had 8% work maturation successful nan 4th fourth sequentially. We person sewage really bully summation successful backlog, 42% year-over-year. We want to make judge that those numbers are really there. And because of nan -- that's a 60% gross separator business successful general, if that doesn't materialize though, we expect that overmuch for illustration successful '22, that'll person a antagonistic effect connected america for 2023.

So astir apt is immoderate conservatism. So I deliberation there's, to immoderate extent, you tin ever summation nan numbers difficult to return them down. And truthful I deliberation what we'll beryllium doing arsenic we rotation into 2023 is proceed to show nan star portion of our business very carefully. But I deliberation nan different point to see arsenic good is that nan hardware broadside of nan retention portion of nan business continues to beryllium nether pressure. I mean, that is decidedly going to -- arsenic we move up successful position of task size, nan margins connected those hardware sales, which unluckily comes earlier nan package is going to effect nan wide gross margin. So, we benignant of went done and tried to appropriately enactment forecast what nan operation of those 2 things would be. And I deliberation nan eventual reply is going to dangle a batch connected what nan operation turns retired to really be.


The adjacent mobility comes from Maheep Mandloi of Credit Suisse. Please spell ahead.

Maheep Mandloi

Thanks for nan questions and conscionable pursuing complete nan erstwhile mobility from Brian connected margins. It feels for illustration there's astir apt for illustration a displacement of nan EBITDA profitability from aft Q2 to now nan 2nd half of '23. Just wanted to understand is location thing successful nan seasonality which could beryllium causing that and any, immoderate different levels connected nan EBITDA profitability here? We admit it. Thanks.

John Carrington

Maheep, no, we're not coming disconnected nan 2nd half EBITDA affirmative successful immoderate way. So I'm not judge wherever you sewage that indication. So that's not nan case.

Maheep Mandloi

Now I'll follow-up later connected that. And conscionable looking astatine nan guidance and assuming for nan backlog and bookings, assuming 60% of wherever nan hardware present that benignant of implies revenues successful 24 could beryllium astir 900 cardinal aliases astir apt much than that. Does that mathematics make consciousness aliases is that besides benignant of impacted by each nan delays aliases nan extended gross nickname you benignant of talked astir successful nan erstwhile question?

Bill Bush

So acknowledgment for nan mobility Maheep. I deliberation first of course, we're not fixed '24 guidance conscionable rather yet. But I would mention you to nan information that we gave successful nan LRP. So from that we do expect to spot '24 gross turn astatine those rates and nan midpoint connected hardware was of people 30% and services would beryllium 75%. So I deliberation from that standpoint, we do expect to spot growth. And past I deliberation 1 of nan places that you saw that successful this past 4th fourth is simply a 17% sequential maturation successful services.

So, I mean, ultimately, nan way to EBITDA is going to beryllium paved done services, and we're seeing a batch of very affirmative momentum from that standpoint. Two quarters successful a row, 9% successful nan 3rd quarter, 17% successful this 4th of work growth. So we're really excited astir that. That's going to beryllium wherever nan gross separator dollars travel from. And truthful I deliberation that'll beryllium thing to, to support successful mind arsenic we spell on, not conscionable nan large people of what nan gross is, but besides what nan gross separator dollars shingle retired to be.

Maheep Mandloi

And is nan divided of hardware versus package and bookings and backlog 60:40, is that changing for 24? Sorry, '23?

Bill Bush

No, we don't expect that to change. I mean, what will alteration though to beryllium clear is we'll person much package only deals successful 2023 successful nan backlog. So you'll spot much deals that are that's peculiarly existent connected nan largest deals. So, 1 of nan things that we tried to set for -- successful nan bookings number successful full was nan truth that we expected to person package only deals this year. So -- and that of course, only represents, you telephone it 40% of nan full economical worth of nan system. So nan bookings maturation is going to beryllium slower connected a nominal ground arsenic a consequence of that, but nan KWH aliases nan megawatt hours is going to proceed to turn astatine a very speedy rate.


The adjacent mobility comes from Julien Dumoulin-Smith of Bank of America. Please spell ahead.

Julien Dumoulin-Smith

It's bully to chat pinch you guys here. So pinch respect to nan services, nan pro service and nan dev serve, tin you guys talk a small spot astir nan maturation of nan services business and specifically really you're search and possibly immoderate of nan information points we're going to spot materialize present arsenic signs aliases roadworthy posts to cognize that you're scaling here. I cognize that there've been immoderate different discreet issues present arsenic we're alluding to connected nan gross separator mix. But I conscionable want to specifically get backmost astatine immoderate of these -- nan services side.

John Carrington

Hey, acknowledgment Julien for nan question. So, I mean, I deliberation nan astir evident is going to beryllium what's going connected astatine nan apical there, truthful that's that 17% sequential growth, and I deliberation that's nan benignant those are benignant of beryllium nan high-level motion station that you and nan different folks should beryllium looking for is -- what are we capable to do successful position of full work revenue, conscionable successful general. And so, I think, that's wherever we've made a batch of progress. Mike Carlson, who's present pinch us, of people coming is starring nan pro service broadside of nan business.

And so, I think, we expect to spot rather a spot of advancement from that standpoint we picked disconnected that inaugural connected nan retention broadside of nan business. This past August, this star portion of nan business has been doing that for immoderate play of time. And to nan grade that we're capable to acquisition nan maturation that a batch of nan analysts are expecting, i.e. a 100% year-over-year maturation successful solar, we're going to do a overmuch better. We did spot a small spot of that successful nan 4th fourth pinch nan star portion of nan business. It did turn 8%, which was a bully accomplishment, peculiarly given1% diminution successful nan 3rd quarter. So, I deliberation those are going to beryllium nan evident points that you should beryllium looking for arsenic we spell on.

You want to adhd thing Prakesh?

Prakesh Patel

Yes. Hey Julien, this is Prakesh. Two points I would make. When Bill was discussing nan gross separator accretion strategy, nan semipermanent scheme and John references arsenic well. Next period we'll beryllium installing our first modular ESS that comes pinch services attached to it. That we expect a batch much of that portion controller type business to motorboat services and task modeling, task creation and plus management. And past separately, we expanded our squad that advises customers connected forecasting for wholesale power markets. And truthful some of those you should commencement to spot either conscionable arsenic Bill mentioned, maturation and services statement point aliases property releases astir these customer wins and engagements.

Julien Dumoulin-Smith

Got it. And past pinch respect to PLM, conscionable quickly, if I tin obviously, they person disproportionate interconnection issues. How are you reasoning astir nan assurance successful nan backlog translating, fixed immoderate of nan timeline issues arsenic it pertains to benignant of starring into nan PJM. I admit nan separator comments astir PJM, which is immoderate of nan interconnect and hold issues that we've seen there. How does that fresh pinch a, your backlog and operation location and b, really you consequence adjust, if you will?

Prakesh Patel

Yes. Right now, this is Prakesh again. Right now, I'd opportunity nan superior attraction successful nan PJM marketplace is down nan meter, wherever there's a templatized attack for interconnection approvals. We're not chasing very ample highly engineered beforehand of nan metre deal. So, that's 1 strategy. And we're leveraging developers and EPC firms that firm Fortune 500 accounts we're targeting person worked pinch for rather immoderate clip successful deploying their star projects. So it's a different conception of nan marketplace and we person seen a faster pace. But -- and past conscionable discourse astir your mobility connected nan backlog, it's still early days. So we conscionable launched it during nan year. So we don't person a important constituent successful nan backlog, conscionable yet to consequence weight it.


The adjacent mobility comes from Thomas Boyes of Cowen. Please spell ahead. Please spell ahead.

Thomas Boyes

Thanks for taking my questions. Maybe nan first one, I'm conscionable wondering if your sourcing strategy has changed astatine each station IRA. Have you held backmost connected sourcing thing possibly beyond 1Q 2024 successful your societal information home accumulation arsenic it comes online? And past possibly arsenic a follow-up there, what do you deliberation it's reasonable presume for U.S. batteries, rather frankly, beryllium disposable to precocious 2024 aliases 2025?

John Carrington

Yes. So thanks, Thomas. I'd opportunity a mates of things. We person contracted proviso for 2023 and making advancement connected 2024. As we person talked successful erstwhile calls, we proceed to make opportunistic spot marketplace purchases. And I deliberation that served america well. We will proceed to do that. I deliberation our suppliers know, location is simply a alteration successful 1 of their customers, I judge we are 1 of nan first calls. And connected nan U.S. contented piece, look, we are still a important customer of Tesla's.

And we will proceed to activity intimately pinch them. They person been a semipermanent partner for america really since by 2013 aliases so, 2012. And arsenic acold arsenic caller capacity coming online, I deliberation specifically related to IRA, I'd say, 24 months possibly a small longer till we spot immoderate of that. And we are not really engaging conscionable yet connected that attraction because we conscionable -- we don't person that benignant of visibility coming connected our bookings. So we will astir apt commencement that successful nan summer, I would guess, arsenic we get much clarity connected who's coming in. You want to adhd anything, Bill?

Bill Bush

Yes. So I would conscionable to put a finer constituent connected John's comments. So we are afloat booked successful position of contracted proviso done nan first 4th of 2024. You shouldn't publication that to maine that we haven't contracted thing beyond that into 2024. I mean, we've talked astir that connected anterior calls wherever we're getting -- we're going further out. And I would make nan favoritism betwixt being contracted and really having nan merchandise connected nan ground. We deliberation from a moving superior standpoint, it's astir apt amended for america to do immoderate contracting.

So I deliberation that. But for sure, we're talking pinch nan folks that person made announcements astir nan home proviso broadside of things. But of course, it's early days for them, right? I mean location is nary that we're alert of astatine slightest cipher is surgery crushed connected a works yet from a artillery perspective. Lot of conversations astir panels, inverters, batteries, et cetera, and we're monitoring that. Our proviso concatenation squad is monitoring that very closely. And to nan grade that 1 of those groups is capable to nutrient merchandise present successful nan U.S.

I mean, it's a really absorbing property from nan standpoint, home contented and really it useful wrong nan IRA. So it's thing we are very intimately monitoring. But for '23, nan superior U.S. supplier for america is going to beryllium Tesla. And past we are going to beryllium buying worldly from Korea and of people Japan and China arsenic well. So nary existent changes successful nan strategy, different than nan truth that evidently nan IRA makes america benignant of commencement to talk to immoderate of nan folks that we would not needfully person been speaking pinch before, because they didn't person plans and spots that were absorbing to us.

Thomas Boyes

Great. And admit nan colour there. Maybe conscionable arsenic my follow-up. Just wanted to check-in connected nan transverse trading opportunities pinch AlsoEnergy. Could you conscionable springiness america an update location and past possibly talk astir your attack and benignant of parsing done those 40,000 positive C&I sites? And $6 cardinal is still a bully number to deliberation astir aliases is that alteration each aft nan benignant of nan pruning efforts?

Prakesh Patel

This is Prakesh. Yes, that 6 cardinal is simply a bully estimate. We person made immoderate progress. We've analyzed upwards of 600 sites successful a granular item and person started nan customer conversations. One statistic I would constituent retired astir a 3rd of our bookings successful nan BTM conception past twelvemonth came from that transverse sell. So we're seeing early momentum location already.


The adjacent mobility comes from David Peters of Wolf Research. Please spell ahead.

David Peters

So conscionable arsenic it relates to nan separator profile, tin you possibly supply benignant of a unsmooth divided of what guidance assumes for AlsoEnergy gross versus bequest artillery hardware and software, conscionable to nan grade UFLPA issues linger beyond possibly expectations.

John Carrington

So arsenic you tin spot from nan various pieces, from nan standpoint of AlsoEnergy for 2022 for america connected a consolidated basis, they did astir 58 cardinal aliases truthful successful revenue. They did much than that. Of course, successful 2022, we conscionable didn't consolidate January. We expect to spot beardown maturation there. You look astatine immoderate of nan Wood Mac information they're presenting a 100 percent growth. I don't, and I would opportunity I don't deliberation we're going to spot a 100 percent gross maturation successful nan Company, but we do expect to spot important maturation from that portion of nan business.

I mean, if you look astatine astir of nan publically disposable information astir solar, we should spot anyplace from 20% to 40% maturation successful that business. And truthful a batch of it is going to beryllium really quickly does UFLPA, really quickly does nan anti-dumping rules of those travel back? I mean, there's been immoderate chatter amongst various congressmen that you've astir apt seen that they're going to rotation backmost nan activity that Biden had done, and that evidently if that happens, that'll evidently person a antagonistic impact.

So nan worldly that we're going to beryllium monitoring very carefully, were like, arsenic I mentioned before, I mean our backlog is up 42% connected a twelvemonth complete twelvemonth basis. And so, arsenic we look astatine -- and this is -- and truthful I'll make a reasonably ample favoritism betwixt backlog connected nan star portion of nan business and backlog connected nan retention portion of nan business, nan star backlog turns into gross beautiful quickly six months aliases little and galore of it is for illustration 3 to 4 months. And truthful it's capable to churn beautiful quickly. So we consciousness for illustration if those projects are capable to move guardant successful nan measurement that we've nan measurement that we're seeing from our partners and what we're proceeding we're beautiful optimistic that we're going to person a really bully twelvemonth connected nan star broadside of nan business.

We really is -- it's positioned to threat back. I mean, I deliberation we've talked astir that moreover arsenic early arsenic past summertime erstwhile we were seeing immoderate of nan early slowdowns arsenic a consequence of nan anti-dumping. And benignant of really harken backmost to nan 2016, 2017 clip play erstwhile star really benignant of took it benignant of a head, a reliable play arsenic well, and past threat backmost really beardown successful nan adjacent period. So we'll person to see, which is why successful portion why I deliberation we're a small spot blimpish successful position of nan gross margins and immoderate of nan gross maturation is that we want to really person that move into, gross and gross separator arsenic opposed to conscionable having bully feelings astir what's going happen.

Prakesh Patel

Yes. I'd adhd a mates speedy points to arsenic well, David, number one, nan RFQ that we've seen twelvemonth to day are up to X versus 2022, truthful it feels beardown coming retired of nan gate. And I'd besides item that arsenic we talked successful nan past net telephone their star plus capacity guidance business exceeded marketplace maturation past year. And we expect much nan aforesaid this year.

David Peters

Thanks. That's helpful. I admit each that color. Just my travel up past is conscionable wondering if you tin supply a consciousness of wherever things guidelines coming pinch interconnection requests, timing broadly, conscionable trying to spot if it'd beryllium imaginable to benignant of parse retired wherever nan CARR metric could beryllium for 2023, if that bottleneck were to easiness immoderate and benignant of conscionable what you assume, I guess, for ’23?

John Carrington

Prakesh, you want to start, possibly Mike to jump in?

Prakesh Patel

Yes. I'd say, truthful acold we're seeing position halfway astir interconnect conversion of delivered hardware. We person undertaken, and I'll manus it to Mike Carlson, our COO to talk astir immoderate of nan initiatives, but we are taking a very rigorous attack to driving that faster and that was benignant of what prompted Bill to mention, we're looking to double our operating AUM this year. Mike?

Michael Carlson

Yes. Dave, this is Mike Carlson. What we're doing, it's benignant of a two-pronged attack 1 very point related to getting these assets into nan section and evidently interconnects a large portion of it, but internally we've put a batch more, I conjecture you'd telephone it rigor astir task guidance arsenic these assets are secured by america and past getting into nan section for our developer owners and past turning that aforesaid attraction of task guidance to our partners.

So, they are alert of and leveraging each opportunity they tin move that guardant pinch nan interconnect advancement if that's what's holding them up. And what we want to make judge is arsenic we get done that backlog aliases that bottleneck of interconnect that we fundamentally don't person immoderate nonstop power over, but we've sewage nan expertise and knowledge of really to move done it arsenic quickly arsenic possible. We don't suffer immoderate different clip to moving these assets into nan section and getting them commissioned and online. So that really nan attraction we expect, we won't decidedly lick nan problem, but we'll amended connected nan capacity of it arsenic we spell forward.


The adjacent mobility comes from Joseph Osha of Guggenheim Partners. Please spell ahead.

Joseph Osha

Kind of pursuing connected nan erstwhile question, you each person talked a batch astir projects that are retired location connected nan steward broadside that show up successful your contracted AUM that, that aren't interconnected and they're not generating gross and we've benignant of gotten nan consciousness that location would beryllium astatine immoderate constituent a bully benignant of measurement up arsenic those things came online and started to make work gross for you. So my mobility is arsenic follows, could you quantify really possibly successful gigawatt hours, really galore projects are successful this contracted retention AUM you have, that aren't interconnected, and springiness maine immoderate consciousness arsenic to really overmuch of that mightiness negociate to make it into cognition successful 2023? And past I person a travel up.

Bill Bush

Yes. So, Joe, acknowledgment for nan question. Appreciate that. At this point, we don't break retired nan specifics of that, truthful it's difficult for maine to springiness you nonstop numbers, but I deliberation 1 constituent you tin decidedly return into relationship is that we do expect operating AUM to double this year. And so, connected nan retention broadside of nan business, and I deliberation that is simply a awesome parameter that arsenic you said, I deliberation location is simply a spot of a backlog of projects which we're able. We judge that we're going to beryllium capable to move on.

And I deliberation that, arsenic we look astatine nan future, and I deliberation Mike talked a batch astir this already, is really we're going to do that? How are we going to velocity up nan conversion from a woody erstwhile it gets from a booking to instrumentality delivered to nan strategy really being operational, and I deliberation that, because that's really, arsenic we each know, that's erstwhile nan package kicks in, that's wherever -- and that's nan highest gross separator portion of nan business. And truthful for us, it's a immense focus, making judge that process is happening arsenic quickly arsenic possible.

Joseph Osha

Okay. And person you shared what nan existent operating AUM number is?

Bill Bush

We person not.

Joseph Osha

Okay. But conscionable to travel connected that then, if you're up standing AUM is doubling and you are bringing further projects, you are executing connected further projects and it's I deliberation reasonable, if you look astatine your CARR and what nan annualized tally complaint of your work gross is correct now. I conjecture I'll inquire nan mobility nan measurement a batch of different group person asked it, why is this work gross number not going up a batch more? Why is it not doubling?

Bill Bush

It is increasing astatine 75% rate. So I deliberation that's beautiful important growth, past erstwhile you look at...

Joseph Osha

Not to belabor it, but you put a CARR extremity of your 2023 CARR metric of immoderate it is, say, 80 to 90 and you are astatine 65 currently. So I conjecture I'm trying to understand why that CARR number, which is simply a reasonable bogey for nan annualized package services tally rate. Why that's not going up much fixed what you're saying astir adding to nan operating base?

Bill Bush

So, CARR wouldn't summation arsenic a consequence of operating assets first. So I deliberation that's an important distinction. CARR is simply a contracted amount. So CARR is going to summation based connected nan magnitude of package connected opportunity that is attached connected an yearly ground to a peculiar contract. The package number that we admit arsenic gross successful nan business is tied to nan operating assets. And truthful that's wherever I'd say, like, erstwhile you look astatine nan maturation rates that we've had truthful far, put 9% successful nan 3rd quarter, 17% successful nan 4th quarter, that's wherever you are seeing nan existent operating assets being capable to make existent gross and past gross margin. So CARR is an parameter of what will happen, not what has happened. And truthful erstwhile I say, hey, operating assets are going to double, that intends that we are going to person a faster conversion of CARR into ARR. And what we person had. So that's nan favoritism that I would make.

Joseph Osha

Okay. I'll return it offline, but I deliberation that $64,000 dollars mobility present is what is nan package and services tally complaint going to beryllium by nan extremity of adjacent year?

Bill Bush

I deliberation I would say, nan measurement I would reply that is simply a 75% maturation complaint connected what we person presently reported. So that's nan number that we person talked about. It's for illustration nan services are going to turn astatine a compound complaint crossed nan 3 twelvemonth clip play astatine 75%. So if you look astatine what nan services number was for 2022, we expect that number to turn astatine 75% successful 2023.


The adjacent mobility comes from Biju Perincheril of Susquehanna. Please spell ahead.

Biju Perincheril

Hi. Thanks for taking my question. So I conjecture my mobility was besides related to CARR and benignant of -- erstwhile I benignant of look astatine comparison your CARR to plus nether management, it's been beautiful unchangeable done past year. But erstwhile I look astatine nan guidance, it seems for illustration location is simply a measurement down successful that really overmuch of AUM is translating into CARR. I guess, is that related to task sites? Or is location thing going connected nan package attached ratio?

John Carrington

It's not nan -- everything we waste has each hardware has a 100 package attachment. Really, nan move that's happening, and Bill mentioned this successful his discussion, is we're trading and winning overmuch larger beforehand of nan metre deals. And immoderate of those are expanding beyond 20 years successful term. And truthful erstwhile you spot nan mean magnitude of nan package position expand, that's bringing down nan per twelvemonth CARR conversion.

Biju Perincheril

And then, I deliberation connected nan past telephone you benignant of mentioned the, you are starting to spot nan BTM operation travel up a bit, I think, successful your pipeline. So tin you springiness america benignant of an update wherever you guidelines now? Where nan caller bookings are you, are you still benignant of group astatine for nan bookings successful that 90:10 ratio aliases has that moved?

Bill Bush

Yes, we really person Viju, and acknowledgment for nan questions. So 1 of nan -- surely 1 of nan things that we've seen is that larger FDM aliases our expertise to triumph larger FDM deals. So what that tends to do successful position of nan bookings. And past of people nan backlog is it weights it heavy towards FTM projects. So we are perfectly expanding the, some nan percent and absolute values of nan BTM broadside of our business. But, it's a smaller part. It's conscionable those are conscionable smaller projects.

By their very nature, they're not going to turn successful size astir arsenic accelerated arsenic nan FTM projects. And truthful I deliberation 1 of nan things -- 1 of nan benefits of nan integration of AlsoEnergy and STEM has been -- I'll telephone it refocus connected BTM. And I deliberation are going to proceed to put successful that area. It's wherever clip sewage started years ago, and I deliberation it's a marketplace which we tin do very well, and it has amended arsenic a competitor to FTM, it has amended separator attributes to it. Not needfully nan aforesaid term. The position of nan FTM deals are longer, but nan margins some connected hardware and package are a spot better.

And it's also, wrong nan discourse of our classifications, each nan EV businesses successful BTM. And truthful that, we've talked beautiful consistently astir nan expertise because we're delivering customers much worth that we'll beryllium capable to thrust higher, package connect rates and existent dollars. So we're really excited astir nan BTM aliases down nan metre side. I deliberation it's going to beryllium a bully maturation area for us, but it's ever going to conscionable because of nan absolute size of nan projects, it's ever going to get a spot swamped by what we're doing connected FTM.

John Carrington

It's surely much incoming, than we've had successful nan past because you station IRA successful particular, nan corporates, I deliberation we've discussed this successful nan past, is we're seeing Fortune 100s coming to america asking to look astatine 200 sites crossed nan country. And we're trying to operationalize that process to alteration that.


The adjacent mobility comes from Justin Clare of Roth Capital Partners. Please spell ahead.

Justin Clare

So first 1 here, conscionable wanted to ask, if you could springiness america a consciousness for really overmuch of your gross for Q4 was nan 80% gross separator package income and really that was divided betwixt your artillery package and your star monitoring software? And past looking into 2023, are you expecting that 80% separator package gross to thrust nan immense mostly of your services growth? Or is location a meaningful publication from nan 1x benignant of services sales?

Bill Bush

So, acknowledgment for nan question. I think, nan first constituent I would mention is that each of nan caller additions successful package successful position of gross are astatine nan precocious gross separator rate. So that's a 100% what's going connected there. And mostly, that's because of nan measurement we shifted our exemplary from a system finance exemplary to a consecutive bargain sell. We did that now a mates years ago.

So, everything complete nan past three, 4 years has been that's added into nan services statement has been nan precocious separator software. So from that --we don't -- past your different mobility what's nan breakout? We person not done that yet. Likely we will successful nan future, but astatine this constituent we're not breaking retired those individual components.

And AlsoEnergy, of course, and you tin spot from what they from nan tables that are successful nan backmost of nan PowerPoint deck, which posted, you tin spot benignant of what nan package and hardware constituent of that business is, which we deliberation is what makes it peculiarly absorbing successful what's driving that 60% positive separator crossed that business.

Justin Clare

Okay, great. Thanks. And past conscionable 1 much contracted retention AUM is up I deliberation it was astir 4% sequentially successful Q4, but you had very beardown bookings successful nan quarter. So conscionable wondering if you could amended thief america understand why nan contracted AUM didn't move upward much significantly. Did you spot immoderate meaningful customer cancellations of artillery retention package contracts, aliases was location whitethorn beryllium a higher operation of star monitoring bookings? Any further colour will beryllium helpful, convey you.

Bill Bush

Sure. And again, truthful we had a -- truthful we did $400 cardinal and $460 cardinal successful booking successful nan quarter. Unfortunately, we had a called rounded $140 cardinal cancellation. So that decidedly tamped down nan maturation successful that peculiar metric.


The adjacent mobility comes from Abhi Sinha of Northland Financial. Please spell ahead.

Abhi Sinha

Just trying to understand nan PGM market. It's absorbing that you get into that. So maybe, you tin conscionable springiness immoderate thought connected what percent of 2023 gross comes from that. I'm trying to understand. What it takes for you to break nan caller marketplace and successful a caller area. So possibly you tin supply immoderate color, for illustration really that marketplace you expect to unfold successful 2023, '24, '25, thing for illustration that.

Bill Bush

Yes, I can, I'll start, Prakesh, if you want to jump in. So first of all, 1 of nan things that we did a fewer years agone is aligned pinch transmission partners done distribution. And that gives america a very absorbing footprint crossed nan country. So, arsenic we look astatine caller markets, we person distributors and partners successful those areas already. So that benignant of CAC interest that you would person is eliminated done that. The different pieces, our package level done Athena is highly translatable into caller markets very quickly.

So we judge we person nan correct exertion offering for nan market. We judge we person nan commercialized unit to spell successful and execute successful that market. And I conscionable deliberation that our expertise pinch Athena to co optimize successful a assortment of analyzable worth streams, arsenic we've proven retired successful galore markets, is highly applicable successful PJM. And certainly, our coincident highest way grounds has been very good, if you look astatine immoderate markets for illustration Ontario.

So conscionable immoderate of our past experiences, we judge we tin execute successful that marketplace very effectively. And erstwhile you look astatine nan size of that marketplace being truthful overmuch larger than California and our execution present successful California has been very strong, marketplace starring marketplace stock complete nan past fewer years, and past you look astatine immoderate of nan higher costs from a transmission standpoint, it's a really compelling opportunity early for nan Company.

Prakesh Patel

I would conscionable add, this is Prakash that, we are optimistic astir this marketplace and worth that we tin create for our firm customers successful that geographies is tremendous. We are tempering our expectations astir what gets installed successful 2023 conscionable fixed immoderate of nan interconnection timeline that you spot successful PJM. It's not precisely nan lawsuit successful down nan meter, but we wanted to beryllium blimpish there, but surely seeing important liking successful nan pipeline and early bookings arsenic well.

Abhi Sinha

Got it. Sure. So conscionable 1 much arsenic a follow-up. As we spot much hardware I mean, hardware portion of business proceed to get a small spot much struggling portion of it. So arsenic you make move towards much of nan package part, truthful really do we look astatine nan trajectory present arsenic nan business transitions much and much toward nan package only, I guess? I mean, erstwhile do we see nan business to beryllium package only and what nan trajectory looks like?

John Carrington

I'm not -- I didn't wholly understand your question. But if I understood right, you are asking what's going to beryllium nan semipermanent distribution of hardware and package connected contracts? Is that fair?

Abhi Sinha

No, I was reasoning for illustration much arsenic nan business heads connected accelerated guardant fewer years, is it not for illustration much and much towards getting much package only business? And are we heading towards that, if that's nan case?

Bill Bush

Yes. We deliberation package and services is decidedly going to beryllium a bigger portion of nan business. I mean -- and I deliberation that is, arsenic we person discussed for illustration arsenic we move up nan size chart successful position of really large of size projects that we are moving on, it's little and little apt that will proviso nan hardware, which is each astir nan task that Mike is starring connected nan portion controller, nan unified strategy that we are moving connected and are going to vessel present this quarter.

So I deliberation longer-term, it's going to make consciousness for companies to astir apt do procurement for themselves connected nan batteries, nan larger projects. The smaller ones, we deliberation that won't beryllium nan case. But that's why I said earlier on, erstwhile I talked astir nan bookings maturation connected an absolute basis, $1.1 cardinal successful 2022, evidently a slower maturation complaint successful 2023 erstwhile comparing those 2 clip periods.

And I deliberation complete time, you are going to spot much and more. I mean, it's an breathtaking portion of nan marketplace for us. It's a overmuch much superior light, which we've ever talked about. It would beryllium easier from a moving superior standpoint if we're not taking each of that artillery aliases nan economical worth onto our equilibrium sheet. So it's decidedly thing that you should expect to spot increasing arsenic nan business matures.

Abhi Sinha

Maybe we tin presume that '25 aliases '26 would that beryllium our software-only business aliases that's excessively aggressive?

Bill Bush

I deliberation we are still going to beryllium trading hardware. I don't want anybody to perceive that commentary and deliberation like, oh, they are not going to beryllium trading immoderate hardware. I deliberation we are not going to beryllium trading hardware connected nan very largest projects. So make a favoritism betwixt those 2 things is location is going past year, we recorded complete $300 cardinal successful hardware sales. I don't deliberation that number is going to spell to zero anytime soon.

And pinch nan forecast that we person fixed for 2023, you are looking astatine a number northbound of $500 cardinal successful position of hardware sales. So it's decidedly not a business, which we deliberation is going to spell to zero. It's conscionable going to go, I deliberation it's going to mature and that nan larger projects pinch a much pinch a developer that what I would telephone would beryllium afloat integrated, that has procurement capabilities. We're not going to beryllium buying hardware for them. But for galore of these different partners that we're moving pinch today, we will be.

John Carrington

I would adhd that nan magnitude of our developers standardizing connected Athena is growing. So I deliberation moreover if they do that, we proceed to spot them having a request for software. So nan Athena platform's ideal, and I echo Bill's comment, we are seeing galore much package only deals building successful nan pipeline pinch our commercialized team. And so, I'm bullish connected that beforehand arsenic well.


This concludes nan question-and-answer session. I would for illustration to move nan convention backmost complete to John Carrington for immoderate closing remarks.

John Carrington

Sure. I want to convey everyone for joining america connected our 4th fourth and afloat twelvemonth 2022 guidance net call. We look guardant to speaking pinch you during our 1Q call.

And again, convey you each for joining.


This concludes today's convention call. You whitethorn disconnect your lines. Thank you for participating, and person a pleasant day.

Editor: Naga

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