STEM INC

Previous wording

Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about financial and performance targets and other forecasts or expectations regarding, or dependent on, our business outlook; our expectations regarding future estimates of variable consideration in connection with guarantees in certain customer contracts, and the resulting effects on revenue; our ability to secure sufficient and timely inventory from suppliers; our ability to meet contracted customer demand; our ability to manage manufacturing or delivery delays; our ability to manage our supply chain and distribution channels; our joint ventures, partnerships and other alliances; forecasts or expectations regarding energy transition and global climate change; reduction of greenhouse gas (“GHG”) emissions; the integration and optimization of energy resources; our business strategies and those of our customers; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the effects of natural disasters and other events beyond our control; the direct or indirect effects on our business of macroeconomic factors and geopolitical instability, such as the armed conflicts between Russia and Ukraine and in the Gaza Strip and nearby areas; the expected benefits of the Inflation Reduction Act of 2022 on our business; and our future results of operations, including revenue and adjusted EBITDA.

Current wording

Forward-looking statements address matters that are, to varying degrees, uncertain, such as statements about financial and performance targets and other forecasts or expectations regarding, or dependent on, our business outlook and strategy; our expectations regarding future estimates of variable consideration in connection with guarantees in certain customer contracts, and the resulting effects on revenue; our ability to secure sufficient and timely inventory from suppliers; our ability to meet contracted customer demand; our ability to manage manufacturing or delivery delays; our ability to manage our supply chain and distribution channels; our joint ventures, partnerships and other alliances; forecasts or expectations regarding energy transition and global climate change; reduction of greenhouse gas (“GHG”) emissions; the integration and optimization of energy resources; our business strategies and those of our customers; our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the effects of natural disasters and other events beyond our control; the direct or indirect effects on our business of macroeconomic factors and geopolitical instability, such as the armed conflicts between Russia and Ukraine and in the Gaza Strip and nearby areas; the expected benefits of the Inflation Reduction Act of 2022 on our business; and our future results of operations, including revenue, adjusted EBITDA, and the other metrics presented herein.

Previous wording

Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including but not limited to our inability to secure sufficient and timely inventory from our suppliers, as well as contracted quantities of equipment; our inability to meet contracted customer demand; supply chain interruptions and manufacturing or delivery delays; disruptions in sales, production, service or other business activities; general macroeconomic and business conditions in key regions of the world, including inflationary pressures, general economic slowdown or a recession, rising interest rates, changes in monetary policy, and instability in financial institutions; the direct and indirect effects of widespread health emergencies on our workforce, operations, financial results and cash flows; geopolitical instability, such as the armed conflicts between Russia and Ukraine and in the Gaza Strip and nearby areas; the results of operations and financial condition of our customers and suppliers; pricing pressures; severe weather and seasonal factors; our inability to continue to grow and manage our growth effectively; our inability to attract and retain qualified employees and key personnel; our inability to comply with, and the effect on our business of, evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability, and evolving labor standards; risks relating to the development and performance of our energy storage systems and software-enabled services; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the risk that our business, financial condition and results of operations may be adversely affected by other political, economic, business and competitive factors; and other risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-Kfor the fiscal year ended December 31, 2023, and in our other filings with the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, our actual results or outcomes, or the timing of these results or outcomes, may vary materially from those reflected in our forward-looking statements. Forward-looking statements and other statements in this Report regarding our environmental, social, and other sustainability plans and goals are not an indication that these statements are necessarily material to investors or required to be disclosed in our filings with the SEC. In addition, historical, current, and forward-looking environmental, social, and sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that …

Excerpt shortened here; the source contains the full paragraph.

Current wording

Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including but not limited to our inability to execute on, and achieve the expected benefits from, our operational and strategic initiatives; our inability to successfully execute on our new software and services-centric strategy; our inability to secure sufficient and timely inventory from our suppliers, as well as contracted quantities of equipment; our inability to meet contracted customer demand; supply chain interruptions and manufacturing or delivery delays; disruptions in sales, production, service or other business activities; general macroeconomic and business conditions in key regions of the world, including inflationary pressures, general economic slowdown or a recession, rising interest rates, changes in monetary policy, and instability in financial institutions; the direct and indirect effects of widespread health emergencies on our workforce, operations, financial results and cash flows; geopolitical instability, such as the armed conflicts between Russia and Ukraine and in the Gaza Strip and nearby areas; the results of operations and financial condition of our customers and suppliers; pricing pressures; severe weather and seasonal factors; our inability to continue to grow and manage our growth effectively; our inability to execute on our ongoing management transition and to attract and retain qualified employees and key personnel; our inability to comply with, and the effect on our business of, evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability, and evolving labor standards; our inability to regain and maintain compliance with New York Stock Exchange listing standards; risks relating to the development and performance of our energy storage systems and software-enabled services; our inability to retain or upgrade current customers, further penetrate existing markets or expand into new markets; the risk that our business, financial condition and results of operations may be adversely affected by other political, economic, business and competitive factors; and other risks and uncertainties discussed in Part II. Item 1A. “Risk Factors” in this Report, in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and in our other filings with the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of any such development changes), or should our underlying assumptions prove incorrect, our actual results or outcomes, or the timing of these results or outcomes, may vary materially from those reflected in our forward-looking statements. Forward-looking statements and other statements in this Report regarding our environmental, social, and other sustainability plans and goals are no…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion and analysis should also be read together with our audited consolidated financial statements and related notes, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results or Operations” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. You should carefully read the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” herein to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Current wording

You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion and analysis should also be read together with our audited consolidated financial statements and related notes, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results or Operations” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. You should carefully read the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk

Previous wording

Our mission is to maximize the economic, environmental, and resiliency value of renewable energy assets through our leading artificial intelligence (“AI”) platform. In order to fulfill our mission, we provide our customers, which include energy traders, asset owners, independent power producers, community choice aggregators, offtakers, renewable project developers, EPCs, O&M providers, electric cooperatives, utilities, load-serving entities, and grid operators, with (i) energy storage hardware, sourced from leading, global battery OEMs, that we deliver through our partners, including developers, distributors and EPC firms, (ii) edge hardware to aid in the collection of site data and the real-time operation and control of the site plus other optional equipment, and (iii) an ongoing software platform, Athena®, and services to operate and manage the performance of standalone energy storage, integrated solar plus storage systems, and solar assets. In addition, in all of the markets where we help manage our customers’ clean energy assets, we have agreements to use the Athena platform to participate in such markets and to share the revenue from such market participation.

Current wording

In order to fulfill our mission, we provide our customers, which include energy traders, asset owners, independent power producers, community choice aggregators, offtakers, renewable project developers, EPCs, operations & maintenance providers, electric cooperatives, utilities, load-serving entities, and grid operators, with (i) an integrated suite of software and edge products, and (ii) full-lifecycle energy services from a team of leading experts.

Previous wording

We operate in two key areas within the energy landscape: Behind-the-Meter (“BTM”) and Front-of-the-Meter (“FTM”). An energy system’s position in relation to a customer’s electric meter determines whether it is designated a BTM or FTM system. BTM systems provide power that can be used on-site without interacting with the electric grid and passing through an electric meter. FTM, grid-connected systems provide power to off-site locations and must pass through an electric meter prior to reaching an end-user.

Current wording

We have historically operated in two key areas within the energy landscape: Behind-the-Meter (“BTM”) and Front-of-the-Meter (“FTM”). An energy system’s position in relation to a customer’s electric meter determines whether it is designated a BTM or FTM system. BTM systems provide power that can be used on-site without interacting with the electric grid and passing through an electric meter. FTM, grid-connected systems provide power to off-site locations and must pass through an electric meter prior to reaching an end-user.

Previous wording

For BTM customers, Athena mitigates customer energy costs through services such as time-of-use and demand charge management optimization and by aggregating the dispatch of energy through a network of virtual power plants. Our software is designed to reduce C&I customer energy bills, increase their energy yield, and help our customers facilitate the achievement of their corporate environmental, social, and corporate governance (“ESG”) and carbon reduction objectives. Through PowerTrack, our software maximizes solar energy output and minimizes asset downtime.

Current wording

For BTM customers, we help mitigate customer energy costs through services such as time-of-use and demand charge management optimization and by aggregating the dispatch of energy through a network of virtual power plants. Our software and services are designed to enable our customers to reduce C&I energy bills, increase energy yield, and facilitate the achievement of corporate environmental, social, and corporate governance (“ESG”) and carbon reduction objectives.

Previous wording

For FTM customers, our software decreases risk for project developers, asset owners, independent power producers and investors by adapting to dynamic energy market conditions in connection with the deployment of electricity and improving the value of energy assets over the course of their FTM system’s lifetime.

Current wording

For FTM customers, our software and services help decrease risk by adapting to dynamic energy market conditions in connection with the deployment of electricity and improving the value of energy assets over the course of their FTM system’s lifetime.

Previous wording

Since our inception in 2009, we have engaged in developing and marketing software-enabled services, raising capital, and recruiting personnel. We have incurred net operating losses and negative cash flows from operations each year since our inception. We have financed our operations primarily through cash flows from customers, proceeds from the Merger, convertible senior notes, and issuance of convertible preferred stock.

Current wording

We have incurred net operating losses and negative cash flows from operations each year since our inception. We have financed our operations primarily through cash flows from customers, proceeds from the Merger, convertible senior notes, and issuance of convertible preferred stock.

Previous wording

Our total revenue decreased from $92.9 million for the three months ended June 30, 2023 to $34.0 million for the three months ended June 30, 2024. We incurred net losses of $582.3 million for the three months ended June 30, 2024 and generated net income of $19.1 million for the three months ended June 30, 2023. Our total revenue decreased from $160.4 million for the six months ended June 30, 2023 to $59.5 million for the six months ended June 30, 2024. For the six months ended June 30, 2024 and 2023, we incurred net losses of $654.6 million and $25.7 million, respectively. As of June 30, 2024, we had an accumulated deficit of $1,427.1 million.

Current wording

Our total revenue decreased from $133.7 million for the three months ended September 30, 2023 to $29.3 million for the three months ended September 30, 2024. We incurred net losses of $148.3 million for the three months ended September 30, 2024 and incurred net losses of $77.1 million for the three months ended September 30, 2023. Our total revenue decreased from $294.1 million for the nine months ended September 30, 2023 to $88.8 million for the nine months ended September 30, 2024. For the nine months ended September 30, 2024 and 2023, we incurred net losses of $802.9 million and $102.7 million, respectively. As of September 30, 2024, we had an accumulated deficit of $1,575.4 million.

Previous wording

We expect that our sales and marketing, research and development, regulatory and other expenses will continue to increase as we expand our marketing efforts to increase sales of our solutions, expand existing relationships with our customers, and obtain regulatory clearances or approvals for future product enhancements. In addition, we expect our general and administrative costs and expenses to increase due to the additional costs associated with scaling our business operations as well as being a public company, including legal, accounting, insurance, exchange listing and SEC compliance, investor relations and other costs and expenses.

Current wording

We expect to continue to exercise discipline and moderate expenses associated with sales and marketing, research and development, regulatory and related functions. In addition, we expect to continue to manage and reduce our general and administrative expenses associated with scaling our business operations and being a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.

Previous wording

Prior to July 2023, we agreed in certain customer contracts, to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described above under Note 3 —Revenue, of the Notes to the unaudited condensed consolidated financial statements in this Report. We account for such contractual terms and guarantees as variable consideration at each measurement date. We update our estimates of variable consideration each quarter, including changes in estimates related to such guarantees, for facts or circumstances that have changed from the time of the initial estimate. As a result, the Company recorded a net revenue reduction of $33.1 million in hardware revenue during the six months ended June 30, 2024. The overall reduction in revenue was related to deliveries that occurred prior to the current fiscal year.

Current wording

Prior to July 2023, we agreed in certain customer contracts, to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described above under Note 3 —Revenue, of the Notes to the unaudited condensed consolidated financial statements in this Report. We account for such contractual terms and guarantees as variable consideration at each measurement date. We update our estimates of variable consideration each quarter, including changes in estimates related to such guarantees, for facts or circumstances that have changed from the time of the initial estimate. As a result, the Company recorded a net revenue reduction of $38.7 million in hardware revenue during the nine months ended September 30, 2024. The overall reduction in revenue was related to deliveries that occurred prior to the current fiscal year.

Previous wording

Because we have not included these parent company guarantees in our contracts since July 2023, and because we do not intend to provide guarantees in customer contracts going forward, we believe that excluding the effect of the $33.1 million net reduction in revenue from adjusted EBITDA and non-GAAP gross profit enhances the comparability to these metrics in prior periods.

Current wording

Because we have not included these parent company guarantees in our contracts since July 2023, and because we do not intend to provide guarantees in customer contracts going forward, we believe that excluding the effect of the $38.7 million net reduction in revenue from adjusted EBITDA and non-GAAP gross profit enhances the comparability to these metrics in prior periods.

Previous wording

We calculate adjusted EBITDA as net (loss) income attributable to us before depreciation and amortization, including amortization of internally developed software, net interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including the gain on extinguishment of debt, net, revenue constraint, reduction in revenue, excess supplier costs, change in fair value of derivative liability, impairment of goodwill, restructuring costs and income tax provision or benefit.

Current wording

We calculate adjusted EBITDA as net loss attributable to us before depreciation and amortization, including amortization of internally developed software, interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including revenue constraint, reduction in revenue, excess supplier costs, change in fair value of derivative liability, impairment of goodwill, contract termination payment, restructuring costs and income tax provision or benefit.

Previous wording

The following table provides a reconciliation of adjusted EBITDA to net (loss) income (in thousands):

Current wording

The following table provides a reconciliation of adjusted EBITDA to net loss (in thousands):

Previous wording

(5) Adjusted EBITDA for the six months ended June 30, 2024 reflects the exclusion of other expenses of $1.7 million. For the six months ended June 30, 2024, other expenses are comprised of $0.6 million of other non-recurring expenses, and $1.1 million for expenses related to restructuring costs to pursue greater efficiency and to realign our business and strategic priorities. Restructuring expenses consisted of employee severance and other exit costs.

Current wording

(7) Adjusted EBITDA for the three and nine months ended September 30, 2024 reflects other expenses of $2.5 million and $4.1 million, respectively. For the three months ended September 30, 2024, other expenses includes $1.2 million for advisory services relating to strategy and $1.3 million in connection with separation agreements for certain of the Company’s former executive officers. For the nine months ended September 30, 2024, other expenses are comprised of $1.2 million for advisory services relating to strategy, $1.3 million in connection with separation agreements for certain of the Company’s former executive officers, $0.5 million of other non-recurring expenses, and $1.1 million for expenses related to restructuring costs to pursue greater efficiency and to realign our business and strategic priorities. Restructuring expenses consisted of employee severance and other exit costs.

Previous wording

We generate services and other revenue and hardware revenue. Services and other revenue is mainly generated through arrangements with host customers to provide energy optimization services using our proprietary software platform coupled with a dedicated energy storage system owned and controlled by us throughout the term of the contract. Fees charged to customers for energy optimization services generally consist of recurring fixed monthly payments throughout the term of the contract and in some arrangements, an installation and/or upfront fee component. We may also receive incentives from utility companies in relation to the sale of our services. Services and other revenue also includes the sale of project assets. We separately generate services revenue through partnership arrangements by providing energy optimization services after the developer completes the installation of the project.

Current wording

We generate services and other revenue and hardware revenue. Services and other revenue is generated through (i) energy optimization software and (ii) asset management software (iii) the sale of project assets and advisory services. . Software fees charged to customers generally consist of recurring fixed monthly payments throughout the term of the contract and in some arrangements, an installation and/or upfront fee component. We may also receive incentives from utility companies in relation to the sale of our services.

Previous wording

We generate hardware revenue through partnership arrangements consisting of sales of energy storage system to solar plus storage project developers. Performance obligations are satisfied when the energy storage system along with all ancillary hardware components are delivered. The milestone payments received before the delivery of hardware are treated as deferred revenue. In certain customer contracts, we agreed to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described below under Note 3 —Revenue, of the Notes to the unaudited condensed consolidated financial statements in this Report.

Current wording

We generate hardware revenue through (i) sales of OEM energy storage systems and (ii) edge hardware devices. Performance obligations are satisfied when the energy storage system and edge hardware device along with all ancillary hardware components are delivered. The milestone payments received before the delivery of hardware are treated as deferred revenue. In certain customer contracts, we agreed to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described below under Note 3 —Revenue, of the Notes to the unaudited condensed consolidated financial statements in this Report.

Previous wording

Interest expense, net consists primarily of interest on our outstanding borrowings under our outstanding notes payable, convertible senior notes, and financing obligations and accretion on our asset retirement obligations.

Current wording

Interest expense consists primarily of interest on our outstanding borrowings under our outstanding notes payable, convertible senior notes, and financing obligations and accretion on our asset retirement obligations.

Previous wording

Revenue decreased by $58.9 million, or 63%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily driven by a $57.7 million decrease in hardware revenue primarily from a decrease in demand for hardware systems due to extensions of certain project-related timelines including interconnection and financing related delays. Services and other revenue also decreased by $1.3 million primarily due to prior year decommissioning of systems.

Current wording

Revenue decreased by $104.4 million, or 78%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was primarily driven by a $110.0 million decrease in hardware revenue resulting largely from a decrease in demand for hardware systems due to certain project-related interconnection and financing delays. This decrease was partially offset by an increase in services and other revenue of $5.5 million primarily due to an increase in solar services subscriptions from existing and new customers.

Previous wording

Cost of revenue decreased by $56.5 million, or 70%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily driven by a decrease in cost of hardware revenue of $55.7 million due to the decrease in demand for systems and a reduction in cost of materials as a result of improved lithium prices. Cost of services and other revenue also decreased by $0.8 million, primarily due to lower solar cloud service costs.

Current wording

Cost of revenue decreased by $130.9 million, or 85%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was primarily driven by a decrease in cost of hardware revenue of $132.9 million due to a change in the mix of hardware and service offerings. The decrease was partially offset by an increase in cost of services and other revenue of $2.0 million, primarily due to higher solar cloud service costs.

Previous wording

Sales and marketing expense decreased by $2.7 million, or 20%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily due to a decrease of $1.1 million in personnel related expenses mainly from a decrease in sales commissions and a decrease of $1.6 million in professional services and office-related expenses.

Current wording

Sales and marketing expense decreased by $3.4 million, or 29%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was primarily due to a decrease of $2.3 million in personnel related expenses mainly due to a decrease in stock-based compensation expense and sales commissions, and a decrease of $1.1 million in professional services and office-related expenses.

Previous wording

General and administrative expense decreased by $3.1 million, or 16%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The decrease was primarily driven by a decrease of $2.8 million in personnel costs driven by lower stock-based compensation expense and a decrease of $0.3 million in office-related costs.

Current wording

Research and development expense decreased by $3.3 million, or 23%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was primarily due to a decrease of $0.5 million in professional services and other expenses and a decrease of $2.8 million in personnel related expenses as a result of lower headcount.

Previous wording

Interest expense increased by $0.7 million, or 19%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was primarily driven by the accretion of the discount on short-term investments of $0.8 million, partially offset by a decrease of $0.1 million in interest on financing obligations.

Current wording

Interest expense increased by $0.1 million, or 2%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase was primarily driven by the accretion of the discount on short-term investments of $0.4 million, partially offset by a decrease of $0.3 million in interest on financing obligations.

Previous wording

During the three months ended June 30, 2024, we realized gains of $1.5 million relatingto the settlement ofour derivative liability related to customers contracts, as compared to unrealized losses of $2.6 million during the three months ended June 30, 2023 due to the change in the price per ton of lithium carbonate.

Current wording

Unrealized losses relating to our derivative liability increased by $5.2 million during the three months ended September 30, 2023 due to the change in the price per ton of lithium carbonate.

Previous wording

Other income, net decreased by $1.0 million, or 57% for the three months ended June 30, 2024, as compared to three months ended June 30, 2023 primarily due to a decrease of $0.5 million in accrued interest income from investments and a decrease of $0.5 million in gains on sales of assets.

Current wording

Other income, net increased by $0.1 million, or 11% for the three months ended September 30, 2024, as compared to three months ended September 30, 2023 primarily due to an increase of $0.1 million in accrued interest income from investments.

Previous wording

During thethree months ended June 30, 2024, we recorded a provision for income taxes of $62 thousand primarily as a result of foreign and state income tax expense. During the three months ended June 30, 2023, we recorded aprovision for income taxes of$0.5 million as a result of income tax expense from the gain on extinguishment of 2028 Convertible Notes during the second quarter of 2023.

Current wording

During thethree months ended September 30, 2024, we recorded a provision for income taxes of $0.1 million primarily as a result of foreign and state income tax expense. During the three months ended September 30, 2023, we recorded abenefit from income taxes of$46 thousand primarily as a result of income tax expense from the gain on extinguishment of debt related to the 2028 Convertible Notes during the second quarter of 2023.

Previous wording

Results of Operations for the Six Months Ended June 30, 2024 and 2023

Current wording

Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Previous wording

Revenue decreased by $100.9 million, or 63%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was driven by a $99.8 million decrease in hardware revenue primarily due to variable consideration adjustments of $33.1 million related to parent company guarantees as discussed in Note 3 — Revenue, and a $66.7 million decrease primarily the result of a decrease in demand for hardware systems and extensions of certain project-related timelines. Services and other revenue decreased by $1.1 million primarily due to a decrease in solar subscription services revenue from existing and new customers.

Current wording

Revenue decreased by $205.3 million, or 70%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was driven by a $209.8 million decrease in hardware revenue primarily due to variable consideration adjustments of $38.7 million related to parent company guarantees as discussed in Note 3 — Revenue, and a $171.1 million decrease, resulting largely from a decrease in demand for hardware systems due to certain project-related interconnection and financing delays. The decrease was partially offset by an increase in services and other revenue of $4.5 million primarily due to an increase in solar subscription services revenue from existing and new customers.

Previous wording

Cost of revenue decreased by$73.2 million, or 50%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was primarily driven by a decrease in cost of hardware revenue of $70.9 million due to a reduction in cost of materials as a result of improved lithium prices and a change in the mix of hardware and service offerings. Cost of services and other revenue also decreased by $2.3 million primarily due to providing services at reduced costs.

Current wording

Cost of revenue decreased by$204.1 million, or 68%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was primarily driven by a decrease in cost of hardware revenue of $203.8 million due to a change in the mix of hardware and service offerings. Cost of services and other revenue also decreased by $0.3 million primarily due to providing services at reduced costs.

Previous wording

Sales and marketing expense decreased by$4.0 million, or 15%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was due to a decrease of$2.9 million in professional services, mainly from a decrease in advisory services, and office-related expenses as a result of marketing related subscription cancellations, and a decrease of$1.1 million in personnel related expenses due to a decrease in headcount.

Current wording

Sales and marketing expense decreased by$7.4 million, or 20%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The decrease was driven by a decrease of$4.1 million in professional services, resulting from reductions in advisory services, and office-related expenses as a result of marketing related subscription cancellations, and a decrease of$3.3 million in personnel related expenses due to a decrease in headcount.

Previous wording

General and administrative expense decreased by$2.3 million, or 6%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The decrease was primarily driven by a decrease of $1.2 million in personnel related expenses drive by a decrease in stock-based compensation expense and a decrease of $1.1 million in office-related expenses.

Current wording

General and administrative expense increased by$3.0 million, or 5%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The increase was primarily driven by a one-time contract termination payment of $10.0 million, an increase of $4.1 million in professional services and other expenses, and an increase of $2.0 million in office-related expenses, partially offset by a decrease of $2.5 million in personnel related expenses driven by lower stock-based compensation expense, and a decrease of $5.6 million in business taxes related to state sales tax liabilities.

Previous wording

During the three months ended June 30, 2024, we recorded an impairment of goodwill of $547.2 million as the carrying amount of the reporting unit exceeded its fair value.

Current wording

During the nine months ended September 30, 2024, we recorded an impairment of goodwill of $547.2 million as the carrying amount of the reporting unit exceeded its fair value.

Previous wording

Interest expense, net increased by$3.7 million, or 64%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase was primarily driven by an increase of$2.5 million in interest on our convertible notes, and the accretion of the discount on short-term investments of$1.5 million, partially offset by a decrease of$0.3 million in interest on financing obligations.

Current wording

Interest expense, net increased by$3.8 million, or 37%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The increase was primarily driven by an increase of$2.5 million in interest on our convertible notes, and the accretion of the discount on short-term investments of$1.9 million, partially offset by a decrease of$0.6 million in interest on financing obligations.

Previous wording

During the three months ended June 30, 2023, we recorded a $59.4 million gain on extinguishment of debt driven by a $99.8 million payment to extinguish approximately $163.0 million aggregate principal amount of our 2028 Convertible Notes. The gain was partially offset by a $0.3 million loss on extinguishment of debt from repayment of our 2021 Credit Agreement.

Current wording

During the nine months ended September 30, 2023, we recorded a $59.4 million gain on extinguishment of debt driven by a $99.8 million payment to extinguish approximately $163.0 million aggregate principal amount of our 2028 Convertible Notes. The gain was partially offset by a $0.3 million loss on extinguishment of debt from the repayment of our 2021 Credit Agreement.

Previous wording

During thesix months ended June 30, 2024, we realized gains of $1.5 million relating to the settlement of our derivative liability related to customers contracts, as compared to unrealized losses of $2.6 million during thesix months ended June 30, 2023 due to the change in the price per ton of lithium carbonate.

Current wording

During thenine months ended September 30, 2024, we realized gains of $1.5 million relating to the settlement of our derivative liability related to customers contracts, as compared to unrealized losses of $7.7 million during thenine months ended September 30, 2023 due to the change in the price per ton of lithium carbonate.

Previous wording

Other income, net of$1.4 millionfor the six months ended June 30, 2024, was consistent with the six months ended June 30, 2023.

Current wording

Other income, net of$2.2 millionfor the nine months ended September 30, 2024, was consistent with the nine months ended September 30, 2023.

Previous wording

During thesix months ended June 30, 2024, we recorded a provision for income taxes of $0.2 million primarily as a result of state income tax expense. During the six months ended June 30, 2023, we recorded a$0.4 million provision for income taxes primarily as a result of foreign and state income tax expense from the gain on extinguishment of 2028 Convertible Notes during the second quarter of 2023, which was offset by a partial release of our deferred tax asset valuation due to an acquisition during the first quarter of 2023.

Current wording

During thenine months ended September 30, 2024, we recorded a provision for income taxes of $0.3 million primarily as a result of state income tax expense. During the nine months ended September 30, 2023, we recorded a$0.4 million provision for income taxes primarily as a result of foreign and state income tax expense from the gain on extinguishment of debt related to our 2028 Convertible Notes during the second quarter of 2023, which was offset by a partial release of our deferred tax asset valuation due to an acquisition during the first quarter of 2023.

Previous wording

As of June 30, 2024, our principal sources of liquidity were cash and cash equivalents of $89.6 million, which were held for working capital purposes and for investment growth opportunities. As of June 30, 2024, we had net accounts receivable of $206.4 million and our working capital, which we define as current assets less current liabilities, was $143.3 million. We believe that our cash position is sufficient to meet our capital and liquidity requirements for at least the next 12 months.

Current wording

As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents of $75.4 million, which were held for working capital purposes and for investment growth opportunities. As of September 30, 2024, we had net accounts receivable of $92.7 million and our working capital, which we define as current assets less current liabilities, was $20.5 million. We believe that our cash position is sufficient to meet our capital and liquidity requirements for at least the next 12 months.

Previous wording

Our business prospects are subject to risks, expenses, and uncertainties frequently encountered by companies in the early stages of commercial operations. The attainment of profitable operations is dependent upon future events, including obtaining adequate financing to complete our development activities, obtaining adequate supplier relationships, building our customer base, successfully executing our business and marketing strategy and hiring appropriate personnel. Failure to generate sufficient revenues, achieve planned gross margins and operating profitability, control operating costs, or secure additional funding may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results, and financial condition.

Current wording

Our business is subject to risks, expenses, and uncertainties frequently encountered by companies in the early stages of commercial operations. The attainment of profitable operations is dependent upon future events, including successfully implementing our new business strategy, hiring and retaining our key executives and personnel with the requisite experience to develop our software and AI-based solutions, obtaining adequate financing to complete our development activities, developing an adequate network of suppliers, and building our customer base. Failure to successfully implement our new business strategy, generate sufficient revenues from our software and services offerings, achieve planned gross margins and operating profitability, control operating costs, or secure additional funding may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results, and financial condition.

Previous wording

Our long-term liquidity requirements are linked primarily to the continued extension of the Athena platform and supporting applications, including Athena PowerTrack and the use of our balance sheet to improve the terms and conditions associated with the purchase of energy storage systems from our hardware vendors. While we have plans to potentially expand our geographical footprint beyond our current partnerships and enter into joint ventures, those are not required initiatives to achieve our plans.

Current wording

Our long-term liquidity requirements are linked primarily to the expansion of our software and services offerings in connection with the implementation of our new business strategy. of the Athena platform and supporting applications, including Athena PowerTrack and the use of our balance sheet to improve the terms and conditions associated with the purchase of energy storage systems from our hardware vendors. While we have plans to potentially expand our geographical footprint beyond our current partnerships and enter into joint ventures, those are not required initiatives to achieve our plans.