How Stem is leading the way in AI-driven clean energy storage

Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland speak with Stem Inc. CEO John Carrington about the company’s public trading debut and outlook.

Video Transcript

JULIE HYMAN: Renewable energy, of course, squarely at the center of the president's plan in terms of climate change, ameliorating or arresting our march towards it. And we were talking to a company now that is trying to do its part and make some money while doing it in that area. It's called Stem. The CEO John Carrington joining us now, after just completing a deal to go public through a SPAC deal with Star Peak Energy Transition.

John, thanks for being here. First of all, I got to ask you to break down what it is exactly that you do. I went through your investor presentation. I know it talks a lot about energy storage and sort of smart energy storage. Effectively, it's a battery company, yes, and sort of services around battery. What are the applications? And what exactly do you guys do?

JOHN CARRINGTON: Sure, and thank you very much for having me on. So what we do is we provide our customers with a clean energy storage solution that helps our customers save money on energy. They also help reduce carbon and also provide more grid resiliency.

But all of this is operated and orchestrated by our artificial intelligence software platform that we call Athena. So we are not a battery company. We're really a software company. And that AI technology that we've created helps drive the savings in the use cases that vary by market for our customers. And our customers include commercial industrials and Fortune 500. It's the likes of Amazon, Walmart, Home Depot, Alphabet, and Facebook.

And then on the other side of the equation, we have these renewable developers and asset owners. And this group will use the Athena platform and our storage system to help drive additional returns to their projects. So we are certainly not a battery company. We procure battery hardware from the tier one OEMs. We're really about the software platform Athena that we put on top of all those systems.

BRIAN SOZZI: So, John, you're working with a lot of the big tech companies. What are the big tech companies coming to you for? What do they need you for?

JOHN CARRINGTON: So there's a few things, right? Number one, they are looking to save money on their energy bills. And we provide up to 30% savings on that front. The other thing they want to do is provide an ESG narrative. Every corporate comes to us saying, how can we be a better grid citizen? How can we participate in markets? And we enable that with Athena.

So what we'll do is we will contract with one of our Fortune 500 customers. We will put these systems into their locations. And it will automatically interact with the market. It will predict what the building's going to be doing and the use case that we have for that market. And we'll extract as much value as we can. They, in turn, are saving money. And they can tell their shareholders that they're being a better grid citizen. And actually, they can generate revenue from our systems based upon the way we contract our systems with them.

BRIAN SOZZI: And how competitive, if there is one-- how competitive is the battle with Tesla's powerwall system?

JOHN CARRINGTON: Well, you know, we're only in the CNI and, you know, project developer side. So that's primarily a residential play. We're not in that market today. In fact, Tesla's a very good supplier to us. So we don't run into them at the residential side.

JULIE HYMAN: And so, as always, because you went public through a SPAC, you guys get to make some predictions, right, about how your revenue is going to grow. You know, what-- I am curious. Going public in this fashion, what kind of pressure do you feel to deliver on some of those predictions? You know, for 2021, you guys are looking for $147 million. But you're looking for it to grow into over $1 billion over the next five years.

JOHN CARRINGTON: Yeah, so, you know, a couple of things on that front. First of all, I don't feel any more pressure being public than private. We had a habit of making our numbers and our commitments to our shareholders. But I would say that the growth in 2021, we feel very good about. We reaffirmed that in January. In fact, through the third quarter of last year, we had 80% of the bookings required for our 2021 revenue numbers. So we were pretty much locked already through the third quarter.

The fourth quarter was obviously good, and then into the first quarter, continued to be activity that we'll put into 2021. So while the numbers are big, and as you've outlined, the growth in the market's massive. You know, we have a $1.2 trillion market. This is growing at 25x over the next 10 years. That's according to Wood Mac, Wood Mackenzie, so a third party source. McKinsey and others have forecasted similar growth rate.

And so we're also taking a pretty conservative approach on our share position in those new and growing markets, whereas in California, which is the largest storage market today, we have a 75% market share. We are larger than our next four competitors combined. So we've really haircut that. We feel like the numbers are conservative in our model. And we believe we'll attain those. And in fact, you know, that billion dollar mark is certainly out there. And I'm well aware of it. And we're excited to continue to execute.

And look, this balance sheet changes everything. Part of the reason we couldn't grow as quickly as we'd like to is the balance sheet. When you talk to renewable developers, these are 20 and 25-year deals. And we're a venture company with 12 to 18 months of cash runway that, you know, we just didn't align. Now we have eliminated that concern. So we have a great balance sheet to go address that $1.2 trillion market. And we couldn't be happier with the partners we have to help us go do that.

JULIE HYMAN: Well, we'll keep in touch as you continue on your path there. John Carrington, the CEO of Stem. Thanks, John.