Stem provides the following response to the recent short seller report issued by Blue Orca Capital, which has disclosed that it “stand[s] to realize significant gains” if the Company’s stock price declines.

The report, issued on January 11, 2023 which Blue Orca itself describes as a “short-biased opinion piece…not statements of fact,” contains factual inaccuracies, mischaracterizations and faulty assumptions. While Stem will not rebut every inaccuracy in the report, we stand by our disclosures, and believe it is important to set the record straight on the following key points:

Development Capital. As of December 31, 2022, the total amount of capital that we have advanced to long-term renewable energy projects (“DevCo projects”) was $12 million. Importantly, none of these DevCo project expenditures are loans, and Stem extends capital to development partners for approved development expenses, not for their unrestricted discretionary use.

Most of Stem’s hardware purchases are made back-to-back with customer payments aligning with supplier payment milestones. As we have repeatedly disclosed in our SEC filings, we make cash advances to hardware suppliers from time to time on behalf of renewable project development partners to accelerate project construction timelines given long lead times to secure hardware. We disclose, in our SEC filings, the use of our balance sheet to drive higher-margin software and services revenue via DevCo projects.

As publicly disclosed in our January 5, 2023 investor webcast and presentation, we canceled a booking of approximately $135 million in the fourth quarter of 2022. This cancellation was attributable solely to DevCo projects with Available Power. We have not recorded any revenue from any Available Power projects and there are no additional projects in the backlog with this former partner. Despite this cancellation, we expect to report a contracted backlog of approximately $1 billion as of December 31, 2022. We have successfully redeployed the hardware previously allocated to the Available Power projects to higher-margin opportunities.

Software Revenues. Our Host Customer agreements represented approximately $20 million of our total Services revenue in full-year 2021. These agreements represent ongoing software services where we optimize energy storage systems on behalf of our customers. These contracts are financed by third parties and are not classified as leases. Rather, these contracts are classified as services revenue in accordance with FASB ASU 2014-09 Topic 606, Revenue from Contracts with Customers (“ASC 606”).

We generated $36 million of services revenue through third quarter 2022, a 141% increase versus the nine months ended September 30, 2021, and our services revenue in third quarter 2022 grew 9% sequentially versus the second quarter of 2022.

We believe Contracted Annual Recurring Revenue (CARR) is a good proxy for the long-term value of the differentiated technology that we provide our customers. All additions to CARR represent contracted, high-margin software services. As previously disclosed, CARR was $61 million at the end of the third quarter 2022.