Q4 2024 Stem Inc Earnings Call

Greetings and welcome to the semi fourth quarter 'twenty 'twenty four results conference call. At this time, all participants are in a listen only mode.

Operator: Greetings and welcome to the STEM Inc. fourth quarter 2024 results conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star 1 on your telephone keypad. We ask that you please ask one question and one follow up to return to the queue. As a reminder, this conference is being recorded.

If anyone should require operator assistance. Please press star zero on your telephone keypad.

A question and answer session will follow the formal presentation.

The question queue at any time by pressing star one on your telephone keypad. We ask you. Please ask one question and one follow up to return to the queue.

As a reminder, this conference is being recorded.

Ted Durbin: It's now my pleasure to turn it over to your host, Ted Durbin, Head of Investor Relations. Ted, please go ahead. Thank you, Operator.

Ted Durbin: Now my pleasure to turn the floor to your host Ted Durbin.

Mr Relations.

Ted Durbin: Please go ahead.

Speaker Change: Thank you operator this is Ted Durbin head of Investor Relations at stem welcome to our fourth quarter and full year 2024 earnings call.

Ted Durbin: This is Ted Durbin, Head of Investor Relations at Stem. Welcome to our fourth quarter and full year 2024 earnings call. Before we begin, please note that some of the statements we will be making today are forward looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. We therefore refer you to our latest 10-K filing and other SEC filings and the supplemental materials which can be found on our website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found on our earnings release, which is on our website.

Speaker Change: Before we begin please note that some of the statements we'll be making today are forward looking these matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements.

Speaker Change: Therefore refer you to our latest 10-K filing and other SEC filings and supplemental materials, which can be found on our website.

Speaker Change: Our comments today also include non-GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our earnings release, which is on our website.

Arun Narayanan: Arun Narayanan, CEO, and Doran Hull, CFO and EVP will start the call today with prepared remarks and then we will take your questions. And now I'll turn the call over to Arun. Thanks, Ted. Good afternoon, and thank you all for joining us today. I'm excited to join Stem at a critical juncture for the company and the industry. It is a pleasure to speak with you all today on my first earnings call since joining. In my first five weeks as CEO, I spent time with our customers, partners and employees. Even in this short period, I'm convinced that we have the foundation to build a truly great software company.

Speaker Change: I ruined maryanne CEO enduring whole CFO and EVP will start the call today with prepared remarks, and then we will take your questions and now I'll turn the call over to Iran.

Speaker Change: Thanks, Doug Good afternoon, and thank you all for joining us today.

Speaker Change: I'm excited to join stand at a critical juncture for the company and the industry.

Speaker Change: It is a pleasure to speak with you all today on my first earnings call since joining Stan.

Speaker Change: In my first five weeks as CEO I've spent time with our customers partners and employees.

Speaker Change: Even in this short period I'm convinced that we have the foundation to build a truly great software company.

Arun Narayanan: I'm honored the board chose me to lead the company into its next chapter. As part of the diligence process that I undertook before I joined the company, I evaluated the overall financial potential of the company and also the underlying ingredients. Talent, technology, and vision to make my decision. Looking at the company's competitive positioning. and the broader industry's outlook, it's clear to me that the software-centric strategy announced in the fall of 2024 is the right plan for the company's future financial success and growth. I see strong offerings from Stem. clear market needs. and the opportunity to leverage emerging technologies like AI to address real customer challenges.

Speaker Change: Honored the board chose me to lead the company into its next chapter.

Speaker Change: As part of the diligence process that I undertook before I joined the company I evaluated the overall financial potential of the company and also the underlying ingredients.

Speaker Change: Talent technology and vision to make my decision.

Speaker Change: Looking at the company's competitive positioning.

Speaker Change: And the broader industry outlook, it's clear to me that the software centric strategy announced in the fall of 'twenty 'twenty four is the right plan for the company's future financial success and growth.

Speaker Change: Yeah.

Speaker Change: I see strong offerings from Stan.

Speaker Change: Clear market need.

Speaker Change: And the opportunity to leverage emerging technologies like AI to address customer challenges.

Arun Narayanan: That's laying the foundation for our path to profitability. Over the course of my career, I have built and grown digital businesses across multiple industries around the world. The common thread throughout my experience has been launching innovative software products, harnessing data analytics to improve workflows and customer productivity, and leading complex, high-impact change management initiatives driven by technology adoption. At the core of my experience is an understanding of the key drivers of a software business and the broader ecosystem of B2B software. Driving revenue growth, securing major customer deals. and sustaining profitability have been key achievements. I also have a strong understanding of the foundational technologies needed to build software at scale and modernizing our own software development process.

Speaker Change: That's laying the foundation for our path to profitability.

Speaker Change: Over the course of my career I have built and grown digital businesses across multiple industries around the world.

Speaker Change: The common thread talk my experience has been launching innovative software products.

Speaker Change: Thing data analytics to improve workflows and customer productivity.

Speaker Change: And leading complex high impact change management initiatives driven by technology adoption.

Speaker Change: At the core of my experience is an understanding of the key drivers of our software business and the broader ecosystem of <unk> software.

Speaker Change: Driving revenue growth securing major customer deal.

Speaker Change: And sustaining profitability have been key achievements.

Speaker Change: I also have a strong understanding of the foundational technologies needed to build software at scale and modernizing our own software development processes.

Speaker Change: Innovating and introducing <unk>.

Arun Narayanan: Innovating and introducing Digital solutions to traditional capital-intensive industries is hard. And so a lot of my experience is also centered around change management. I believe software is mission critical for virtually every industry, including renewables. But it means embracing a new way of doing things. Software also needs to be combined with human expertise and an intense focus on the customer value proposition. Which brings me back to STEM. I see opportunities for us in every direction. I'll highlight a few. First, customers. We have a strong, loyal base of 16,000 solar and storage customers and at the same time, that market is continuing to grow.

Speaker Change: Digital solutions to traditional capital intensive industries is hot.

Speaker Change: And so a lot of my experience is also centered around change management.

Speaker Change: I believe software is mission critical for virtually every industry, including renewables.

Speaker Change: But it means embracing a new way of doing things.

Speaker Change: Software also needs to be combined with human expertise and an intense focus on our customer value proposition.

Speaker Change: Which brings me back to Stan.

Speaker Change: I see opportunities for us in every direction I'll highlight a few.

Speaker Change: First.

Speaker Change: Customers.

Speaker Change: We have a strong loyal base of 16000 solar and storage customers and at the same time that market is continuing to grow.

Speaker Change: Second.

Arun Narayanan: second product. Most importantly, Powertrack, which has the trifecta of a solid domestic market share, generates high growth margins and has growth opportunities both domestically and internationally. And the third opportunity is people. We bring deep subject matter expertise to every engagement. Despite our strengths, I fully recognize and acknowledge the challenges we face. Our financial results in the recent quarters have been disappointing, and we are taking concrete steps to improve those results.

Speaker Change: Products.

Speaker Change: Most importantly power track, which has the trifecta of a solid domestic market share generates high gross margin and it has growth opportunities both domestically and internationally.

Speaker Change: The third opportunity is people, we bring deep subject matter expertise to every engagement.

Speaker Change: Despite our sense I fully recognize and acknowledge the challenges we face our financial results in the recent quarters have been disappointing and we are taking concrete steps to improve those results.

Arun Narayanan: This has been a key focal point for me, and in my initial few weeks, I've identified three priorities. Number one, we will grow our software revenue with renewed focus on Powertrack. Number two, we will reduce our cost structure. And thirdly, we will revamp our software development. First, as I have spent more time with customers and our team, I'm particularly impressed with Powertrack. Thirteen of the top 16 commercial and industrial solar asset owners in the U.S. have standardized on Powertrack. And today we announced that Summit Ridge Energy has standardized on Powertrack across its fleet of 200 solar sites, totaling 514 megawatts.

Speaker Change: This has been a key focal point for me and in my initial few weeks I've identified three priorities.

Speaker Change: Number one we will grow our software revenue with renewed focus on power track.

Speaker Change: Number two we will reduce our cost structure.

And thirdly, we will rebound or software development.

Speaker Change: But I Gotta have spent more time with customers and our team I'm, particularly impressed with pilot track 13 of the top 16 commercial and industrial solar asset owners in the U S have standardized on Polytrack.

Speaker Change: And today, we announced that summit Ridge energy has standardized on power tracking across its fleet of 200 solar sites totaling 514 megawatts I'm also especially excited about our international opportunities with power track, where we see significant growth potential and largely untapped market.

Arun Narayanan: I'm also especially excited about our international opportunities with Powertrack, where we see significant growth potential in largely untapped market cap. In January, we announced that Neovolt, one of the largest acid owners in Hungary, will standardize on Powertrack for a 484 megawatt solar portfolio. We earn 70% to 80% gross margin on the Powertrack software and a high margin on associated offerings, such as 50% gross margin on our professional services tied to Powertrack installation and commissioning, and 30% to 40% on Powertrack Edge devices. This is a high margin business with large and growing annual recurring revenue. It's also a relatively short cycle.

Speaker Change: In January we announced that Neil what one of the largest ACA donuts in Hungary will standardize on power track for a 484 megawatt solar portfolio.

Speaker Change: We 70% to 80% gross margin on the powertrain software and a high margin on associated offerings, such as 50% gross margin on a professional services tied to pilot track installation and commissioning and 30% to 40% on power track edge devices.

Speaker Change: This is a high margin business with large and growing annual recurring revenue.

Speaker Change: It's also relatively short cycle.

Arun Narayanan: Unlike our legacy managed services for storage, the time between a booking and software revenue is often less than six months. And you can see this reflected in our 2025 guidance, where we expect continued strong growth in our software and edge device sales this year. Second, on cost savings. From an operational perspective, we expect additional cost savings of more than 20% in 2025, above and beyond the 15% reduction that we discussed on the third quarter call. I believe that we will achieve these savings through a combination of factors, including Eliminating Operational Inefficiencies. Streamlining our corporate structure, and lastly, empowering our management teams with control over and responsibility for operational decisions.

Speaker Change: Unlike our legacy managed services for storage the time between a booking and software revenue is often less than six months.

Speaker Change: And you can see this reflected in our 2025 guidance, where we expect continued strong growth in our software and edge device sales this year.

Speaker Change: Second on cost savings.

From an operational perspective, we expect additional cost savings of more than 20% in 2025.

Speaker Change: And beyond the 15% reduction that we discussed on the third quarter call.

Speaker Change: I believe that we will achieve these savings through a combination of factors, including.

Speaker Change: Eliminating operational inefficiencies.

Speaker Change: Lining our corporate structure, and lastly, empowering our management teams with control over and responsibility for operational decisions.

Speaker Change: Huh.

Arun Narayanan: Third, on our software products and roadmap, we will do the following, revamp our software development, refine the product roadmaps, and increase the use of AI in our software development and in our products. We expect these changes will have limited or no impact on our customers.

Speaker Change: Our software products and roadmap, we will do the following revamp our software development refine the product roadmap and increase the use of AI in our software development and in our products.

Speaker Change: We expect these changes will have limited or no impact on our customers.

Speaker Change: Before turning things over to Darren for a detailed discussion of our financials and outlook I want to emphasize the strong partnership we've already built.

Arun Narayanan: Before turning things over to Doran for a detailed discussion of our financials and outlook, I want to emphasize the strong partnership we've already built.

Doran Hull: Doran will be a key leader in driving our transformation into a high-growth, profitable software company.

Speaker Change: And it will be a key leader in driving our transformation into a high growth profitable software company.

Doran Hull: With that, let me turn the call over to Doris. Thank you, Arun. On behalf of the STEM team, we're excited to have you on board.

Darren: With that let me turn the call over to Darren.

Darren: Thank you rune.

Speaker Change: On behalf of the stem team. We're excited to have you on board.

Doran Hull: Today I'll cover three key items, our fourth quarter and full year 2024 results, 2025 guidance, and then updates to our operating and financial measures. Starting with the fourth quarter, results were largely in line with the expectations we outlined during our Q3. We continue to expect battery hardware resales to decline over time as we focus on driving recurring software and services revenues. Total revenue was down significantly year-over-year due to reduced hardware sales, but software revenue was up 6% year-over-year, driven by continued strong performance from Powertrack and increased storage software activation. As Arun mentioned, we are seeing success for Powertrack among larger customers and internationally.

Speaker Change: Today I'll cover three key items, our fourth quarter and full year 2024 results 2025 guidance and then updates to our operating and financial metrics.

Speaker Change: Starting with the fourth quarter results were largely in line with the expectations, we outlined during our Q3 call.

Speaker Change: We continue to expect battery hardware resales to decline overtime as we focus on driving recurring software and services revenues.

Speaker Change: Total revenue was down significantly year over year due to reduced hardware sales, but software revenue was up 6% year over year, driven by continued strong performance from power track and increased storage software Activations.

Speaker Change: As Arun mentioned, we are seeing success for power track among larger customers and internationally.

Doran Hull: Gap gross margin was down sequentially due to a one-time impairment of deferred services related to OEM warranty services that hit total services cost of goods sold. Non-GAAP gross margin was down sequentially in the fourth quarter, but up year over year. In general, our gross margins are influenced by the mix of battery resale revenue and software and services revenue. Adjusted EBITDA and operating cash flow declined on a year-over-year basis due to lower gross profit dollars from reduced battery hardware sales. On liquidity, we ended the year with approximately $58 million of cash. As I'll discuss shortly with guidance, we expect operating cash flows to improve in 2025, including some working capital releases related to OEM hardware that we have already seen hit in the first quarter.

Speaker Change: Gross margin was down sequentially due to a one time impairment of deferred services related to OEM warranty services that hit total services cost of goods sold.

Speaker Change: non-GAAP gross margin was down sequentially in the fourth quarter, but up year over year.

Speaker Change: In general our gross margins are influenced by the mix of battery resale revenue and software and services revenue.

Speaker Change: Adjusted EBITDA and operating cash flow declined on a year over year basis due to lower gross profit dollars from reduced battery hardware sales.

Speaker Change: On liquidity, we ended the year with approximately $58 million of cash.

Speaker Change: As I'll discuss shortly with guidance, we expect operating cash flows to improve in 2025, including some working capital releases related to OEM hardware that we have already seen hit in the first quarter.

Speaker Change: This quarter, we recorded some onetime adjustments to our current assets approximately $38 $7 million in the aggregate related to a our reserves impairment of inventory and hardware deposit forfeitures with certain suppliers.

Doran Hull: This quarter, we recorded some one-time adjustments to our current assets. Approximately $38.7 million in the aggregate related to AR reserves, impairment of inventory, and hardware deposit forfeitures with certain suppliers.

Doran Hull: Turning now to our operating metrics, contracted backlog. Carr, and Contracted Storage AUM were down sequentially as we adjusted our backlog to reflect repricing of OEM hardware and the elimination of delayed projects. Operating ARR was up 3% versus the third quarter and up 19% year-over-year, driven by storage activations and steady powertrack performance.

Speaker Change: Turning now to our operating metrics contracted backlog.

Speaker Change: Car and contracted storage a U N were down sequentially as we adjusted our backlog to reflect repricing of OEM hardware and the elimination of delayed projects.

Speaker Change: Operating <unk> was up 3% versus the third quarter and up 19% year over year, driven by storage Activations and steady power track growth.

Speaker Change: Now moving to our 2025 guidance.

Doran Hull: Now moving to our 2025 guidance. Starting with revenue, we expect to recognize between $125 million and $175 million, of which approximately $120 and $140 million is expected to come from high margin software, edge device, and services revenue. We expect up to $35 million of the remaining balance to be driven by battery hardware resale. In general, software, edge device, and services revenue is expected to be roughly routable over the balance of the year with some slight back-end seasonality. I understand that many analyst models were anticipating significantly higher battery resale revenue. We're taking a prudent approach to this portion of the business given our strategy shift and some of the policy and funding uncertainties in the market.

Speaker Change: Starting with revenue, we expect to recognize between $125 million and $175 million of which approximately 120 and $140 million is expected to come from high margin software edge device and services revenue.

Speaker Change: We expect up to $35 million of the remaining balance to be driven by battery hardware resales.

Speaker Change: In general software edge device and services revenue is expected to be roughly ratable over the balance of the year with some slight back end seasonality.

Speaker Change: I understand that many analysts models, we're anticipating significantly higher battery resale revenue.

Speaker Change: Taking a prudent approach to this portion of the business given our strategy shift and some of the policy and funding uncertainties in the market.

Doran Hull: We expect battery resale revenue to be heavily weighted toward the back end of the year with gross margins in the 5 to 10 percent range. We expect non-GAAP gross margins of 30 to 40 percent, roughly in line with our gross margins in 2024. Higher battery hardware resale revenue would cause our gross margin percentage to trend lower, although we would benefit from more gross profit dollars. We expect adjusted EBITDA of negative $10 million to positive $5 million. and operating cash flow of $0 to $15 million. As Arun mentioned, we expect to reduce run rate cash OPEX by more than 20% during 2025, relative to our 2024 exit rate, to achieve these targets.

Speaker Change: We expect battery resale revenue to be heavily weighted towards the back end of the year with gross margins in the 5% to 10% range.

Speaker Change: We expect non-GAAP gross margins of 30% to 40% roughly in line with our gross margins in 2024.

Speaker Change: Higher battery hardware resale revenue would cause our gross margin percentage to trend lower although we would benefit from more gross profit dollars.

Speaker Change: We expect adjusted EBITDA of negative $10 million to positive $5 million.

Speaker Change: And operating cash flow of zero to $15 million as Arun mentioned, we expect to reduce run rate cash opex by more than 20% during 2025 relative to our 2024 exit rate to achieve these targets.

Speaker Change: As I mentioned during.

Doran Hull: As I mentioned, During the first quarter, we expect working capital releases related to OEM hardware to also drive an improvement in operating cash.

Speaker Change: During the first quarter, we expect working capital releases related to OEM hardware to also drive an improvement in operating cash flow.

Speaker Change: For the first time, we are providing guidance on operating a R. R. Our revised strategy is built on driving recurring and predictable software and services revenues and we see a R. R. As a key metric for tracking our progress which is also in line with other publicly traded software focused businesses.

Doran Hull: For the first time, we are providing guidance on operating ARR. Our revised strategy is built on driving recurring and predictable software and services revenues, and we see ARR as a key metric for tracking our progress. which is also in line with other publicly traded software focused businesses. With that in mind, we expect 15% ARR growth at the midpoint from year-end 2024 to year-end 2025, with a range of $55 million to $65 million.

Speaker Change: With that in mind, we expect 15% a or our growth at the midpoint from year end 2024 to year end 2025, with a range of $55 million to $65 million.

Doran Hull: As we continue to evolve our business in line with our new strategy, we are rolling out new and redefined metrics that we believe will help stakeholders better understand and forecast our results. Commencing with the first quarter 2025 earnings call, we will be making several adjustments which are outlined in detail in our supplemental material. Key among those are changes to reported backlog, CAR, and ARR and storage operating AUM. We are redefining backlog as all contracted hardware and professional services revenues where we have a fully executed purchase order from a customer. Backlog will exclude software and software-related managed services.

As we continue to evolve our business in line with our new strategy, we are rolling out new and redefine metrics that we believe will help stakeholders better understand and forecast our results.

Speaker Change: Commencing with the first quarter 2025 earnings call, we will be making several adjustments which are outlined in detail in our supplemental materials.

Speaker Change: Key among those are changes to reported backlog.

Speaker Change: Car and a R R in storage operating.

Speaker Change: Sure.

Speaker Change: We are redefining backlog as all contracted hardware and professional services revenues, where we have a fully executed purchase order from a customer.

Speaker Change: Backlog will exclude software and software related managed services.

Doran Hull: That revenue will be captured in CAR and ARR. We plan to disclose a consolidated ARR, which will include a breakdown of solar and storage. Much like backlog, CARR includes ARR and future revenues where we have a fully executed purchase order from a customer. Finally, we will begin disclosing storage operating AUM. Our storage software revenue generally commences when a system is activated. So this metric gives you better visibility into our revenue generating AUM.

Speaker Change: That revenue will be captured in car and a R. R. We plan to disclose or consolidated a R. R, which will include a breakdown of solar and storage.

Speaker Change: Like backlog car includes a R R and future revenues, where we have a fully executed purchase order from a customer.

Speaker Change: Finally, we will begin disclosing storage operating.

Speaker Change: Our storage software revenue generally commences when a system is activated so this metric gives you better visibility into our revenue generating a U N.

Doran Hull: Finally, as you know, we received a notice from the New York Stock Exchange in August 2024 that we were out of compliance with listing standards due to our average share price falling below $1 over a 30-day trading period. As we explained in our earnings press release, our Board of Directors has approved, subject to a stockholder vote, a potential range on a reverse stock split which would bring us back into compliance with NYSE listing standards.

Speaker Change: Finally, as you know we received a notice from the New York Stock Exchange in August 2024 that we were out of compliance with listing standards due to our average share price falling below one dollar over a 30 day trading period.

As we explained in our earnings press release, our board of Directors has approved subject to a stockholder vote a potential range on a reverse stock split which would bring us back into compliance with NYSE listing standards.

Arun Narayanan: Now we'll pass it back to Arun for closing remarks. In closing, I want to thank the Stem employees for their continued strong execution to support our customers. I remain bullish on the strength of Powertrack's growth and associated margins. I also believe that we can effectively manage our cost structure. The strength of our offering ultimately depends on our people, and I believe we have some of the best in the business.

Speaker Change: Now I will pass it back to our room for closing remarks.

Speaker Change: In closing I want to thank the stem employees for their continued strong execution to support our customers.

Speaker Change: I remain bullish on the strength of powered trucks growth and associated margins. I also believe that we can effectively manage our cost structure.

Speaker Change: The strength of our offering ultimately depends on our people and I believe we have some of the best in the business.

Operator: With that, operator, let's open the line for questions, please. Certainly. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. And as a reminder, please ask one question, one follow-up, then return to the queue. Once again, that's star 1 to be placed in the question queue, and star 2 if you'd like to remove your question from the queue. One moment, please, while we pull for questions.

Speaker Change: With that operator, let's open the line for questions. Please.

Speaker Change: Certainly it would all be conducting a question answer session.

Speaker Change: If you'd like to be placed in the question queue. Please press star one on your telephone keypad. As a reminder, please ask one question. One follow up then return to the queue. Once again Thats star one to be placed in the question queue and it starts to pick up.

Speaker Change: A question from the queue well most pleased probably poll for questions.

Thomas Boyes: Our first question is coming from Thomas Boyes from TD County. Your line is now live. Appreciate you taking the questions.

Thomas Boyes: My first question is coming from Thomas Boyes from TD calendar. Your line is now.

Speaker Change: Life.

Thomas Boyes: I appreciate you taking the questions maybe just first one for me. It was just around our power better which wasn't in your prepared remarks I was just kind of wondering if you could comment on that offering and maybe how you think that product fits into your overall broader strategy. That's our track.

Arun Narayanan: Maybe just first one for me was just around Powerbidder, which wasn't in your prepared remarks, and I was just kind of wondering if you could comment on that offering and maybe how you think that product fits into your overall broader strategy that's led with Powertrack. Okay, thank you very much for your question. Look, the software strategy pivot that we announced in the previous quarter obviously has us looking at a variety of technologies that we that we would build to address different market needs. PowerBit.co is part of that offering. And currently we have one customer looking and using it actively.

Okay. Thank you very much for your question look the software strategy pivot that we announced in the previous quarter, obviously has us looking at a variety of technologies back to me.

Thomas Boyes: That'd be with build to address different market needs.

Thomas Boyes: As part of that offering and currently we have one customer looking and using it.

Thomas Boyes: <unk>.

Arun Narayanan: We are evaluating additional use cases and we continue to search for new customers.

Thomas Boyes: Evaluating additional use cases, and we continue to search for new customers as well.

Thomas Boyes: Got it that's helpful. And then maybe could you just walk us through for the elimination of some of the delayed projects.

Arun Narayanan: And then maybe, could you just walk us through, for the elimination of some of the delayed projects that was in the backlog, you know, what are the reasons for those projects being delayed? Is it just continued, you know, challenges around those projects getting interconnection or the developers there not being able to secure transformers or just cost overages from EPC wage increases? What was kind of the impact there?

Thomas Boyes: What were the reasons for those projects being delayed it's just continued.

Thomas Boyes: Challenges around those projects getting interconnection or.

Thomas Boyes: The developers, there and not being able to procure transformers or just cost overages from UPC.

Thomas Boyes: Increases what was kind of the.

Thomas Boyes: Impact there.

Arun Narayanan: I appreciate you answer the question before I actually have a chance to answer the question. The truth is, it is a little bit of a kitchen sink. We haven't seen any new factors kind of enter into the equation, but this was a process whereby, you know, we felt like a number of these bookings were feeling stale. Developers were having, you know, continued delays, facing increased development costs associated with delays in interconnection and permitting, etc. And we taking the conservative step to clean that up.

Speaker Change: Well I appreciate you answered the question before I actually have a chance to answer the question.

Truth is it is a little bit of a kitchen sink we haven't seen any new factors kind of enter into the equation, but this was a process whereby we felt like a number of these bookings where we're feeling scale the.

Speaker Change: The developers were having.

Speaker Change: Continued delays facing increased development costs associated with delays in interconnection and permitting etcetera and we are.

Speaker Change: Taking the conservative step to clean that up.

Speaker Change: Got it and if I could sneak one more in just for the battery hardware resale.

Arun Narayanan: Got it.

Arun Narayanan: And if I could just sneak one more in, just for the battery hardware resale, you know, for $35 million for this year, do we think of that more of like a steady state ongoing as something that's just always kind of on offer? Or, you know, in 2026 or something, does that eventually just move to zero and kind of phases out as the new strategy takes over? So in looking at And when we start talking about backlog with POs issued, you know, what we're doing with hardware is we are going to pivot to this opportunistic, it meets all the financial criteria, particular situation where we can carry through software services, revenue, and attach that to hardware deals.

Speaker Change: 35 million for this year do we think about it more like a steady state ongoing it's something that's just always kind of an offer or.

Speaker Change: In 2026 or something does that eventually just move to zero and kind of phases out as the new strategy takes over.

Speaker Change: Okay.

Speaker Change: So.

Speaker Change: And looking at.

Speaker Change: And when we start talking about backlog with P. O is issued.

Speaker Change: What we're doing with hardware is we are going to pivot to this opportunistic it meets all the financial criteria.

Speaker Change: Particular situation, where we can carry through software services revenue and attach that to hardware deals and we may continue to see some element of hardware going forward. However.

Arun Narayanan: And we may continue to see some element of hardware going forward. However, it is certainly, you know, not the focus that it was. So I wouldn't necessarily place a run rate on it in the sense that, you know, we're giving kind of this almost zero to $35 million for 2025. We'll give similar indications if we see numbers that are gonna be very different from that in the same cadence as we did for 2025. Keep in mind that the margin there is relatively low. You know, our focus here is on profitability. Those are opportunistic chances to increase gross profit dollars and bring cash in the door.

Speaker Change: It is a it is <unk>.

Speaker Change: Suddenly you know not not focus that it was so I wouldn't necessarily play some run rate on it.

Speaker Change: In the sense that we.

Speaker Change: We're giving kind of this almost zero to $35 million for 2025.

Speaker Change: Al will give similar indications if we see numbers that are going to be a very different from that and in the same cadence as we did for 2025.

Speaker Change: Excellent I appreciate it.

Speaker Change: Keep in mind keep in mind that keep in mind that the margin. There is relatively low you know our focus here is on profitability those are opportunistic.

Speaker Change: Chances to increase gross profit dollars and bring cash in the door.

Arun Narayanan: They don't represent, you know, kind of the long-term strategy of the business to build recurring software and services revenue.

Speaker Change: They they don't represent.

Speaker Change: You know kind of a long term strategy of the business to build recurring software and services revenues.

Arun Narayanan: Understood. Got it. Thank you.

Speaker Change: Got it.

Speaker Change: Yes.

Speaker Change: Thank you next question is coming from Justin Clare from real time can you why there's not a lot.

Justin Clare: Next question is coming from Justin Clare from Raw Time KM. Your line is now live. Hey, thanks for the time here. So I wanted to start out just with the new metrics. And so I'm looking at slide nine here, where you have the bookings 38 million, contracted backlog 21 million. And I wonder if you just help us understand a little bit more of the difference between, you know, if we look at slide 13, we see 358 million of bookings, contracted backlog of 1.2 billion. So is the difference that, you know, the new metrics represent fully executed purchase orders, and that's the gap?

Justin Clare: Hi, Thanks for the time here so.

Justin Clare: So I wanted to start out just with the new metrics and so I'm looking at slide nine here, where you have the bookings 38 million contracted backlog of $21 million and wondering if you can just help us understand a little bit more of the difference between if we look at slide 13, we see $358 million of bookings Contra.

Justin Clare: Backlog of $1 2 billion. So is the difference that's the.

Justin Clare: New metrics represent fully executed purchase orders and that's the gap Oh, maybe just help us.

Doran Hull: Maybe just help us, you know, walk through the difference here. Yeah, I think we did go through the exercise of reducing the backlog under the old definitions, even through some of the contracts that were somewhat stale. But when we look to the new metric, it is really focusing in on that fully executed purchase order criteria for purposes of treating something as a booking or going into the backlog. Again, the backlog, the contracted metric are intended to give you full visibility on all of our revenue sources that are coming into the company in the future. And therefore, you'll see contracted backlog containing anything related to hardware and anything related to kind of one-time non-recurring services.

Justin Clare: Walk through the difference there.

Justin Clare: Yeah, I think you know we did go through the exercise of reducing the backlog under the old definitions even through some of the some of the contracts that were.

Justin Clare: We're somewhat stale, but when we look to the new metric. It is really focusing in on that fully executed purchase order criteria for purposes of treating something as a booking or going into the backlog.

Justin Clare: Again the <unk>.

Justin Clare: Backlog of contracted backlog metric combined with the car metric are intended to give you full visibility on all of our revenue sources that are coming into the company in the future and therefore, you'll see contracted backlog containing anything related to hardware.

Justin Clare: And anything related to kind of one time nonrecurring services, whereas car will contain everything related to recurring software and services.

Doran Hull: whereas Carr will contain everything related to recurring software and services. I see. So the contracted backlog, the $21 million, does not include recurring revenue in there for software. Is that right? That's correct. That's absolutely correct. We're segregating that between Carr and contracted backlog. Same rule. In order to be included, we have to have an executed PO from a customer. Okay, got it.

Justin Clare: So the contracted backlog that $21 million does not include recurring revenue and therefore software is that does that right. That's correct. That's absolutely correct. We're segregating that between car and contracted backlog same rule in order to be included we have to have an exit.

Justin Clare: <unk> P O from a customer.

Justin Clare: Okay got it and then just one more.

Doran Hull: And then just one more, looking at the same slide nine, the storage operating AUM going from 800 megawatt hours to 1.8 gigawatt hours, you know, through the course of 2024, some pretty significant growth there. We didn't see a corresponding jump in the software revenue associated with storage. Wondering if you could just help us understand why we didn't see that increase. Oh, sorry. I think we had a one-time kind of reduction in fourth quarter. Software Revenue associated with the SPE deals that probably caused that disparity. I think that's probably the best way to answer that question.

Justin Clare: Looking at the same slide nine the storage operating AUM going from 800 megawatt hours to one eight gigawatt hours through the course of 2020 for some pretty significant growth there, we didnt see a corresponding jump in the software.

Justin Clare: Revenue associated with storage wondering if you could just help us understand why why we didn't see that that increase.

Justin Clare: Yeah.

Justin Clare: Yeah.

Justin Clare: Oh, sorry.

Justin Clare: Okay.

Justin Clare: I think we had a one time kind of rich.

Justin Clare: The reduction in fourth quarter.

Justin Clare: Software revenue associated with when the SPE deals that probably caused that disparity.

Justin Clare: Think that's probably the best way to answer that question.

Justin Clare: Okay I appreciate it I'll pass it on.

Doran Hull: Okay. I appreciate it.

Justin Clare: I'll pass it on.

Justin Clare: Thanks, Justin. Thank you.

Joseph: Thanks Joseph.

Joseph: Yeah.

Speaker Change: Thank you next question is coming from Amit second factor sorry from BMO capital markets. Your line is now live.

Amit Thakkar: Next question is coming from Amit Thakkar from BMO Capital Markets. Your line is now live. Hi, good afternoon. Just two questions for me. You know, the cash in equivalence of $56 million. I was just wondering if you can kind of level set us on kind of what's the minimum amount of cash, you guys can kind of kind of go forward with the 2025 plan before you have to think about an external finance So the The cash balance at the end of the year, you know, I think as we've put forth in the guidance that we expect operating cash flow to be, you know, kind of somewhere between zero and 15 million for the year, I mean, what that means is that cash balance is sufficient to keep us going.

Speaker Change: Hi, good afternoon.

Speaker Change: Just two questions for me.

Speaker Change: The cash and equivalents of $56 million.

Speaker Change: I was just wondering if you could kind of level set us on kind of whats the minimum amount of cash you guys can kind of kind of go forward with the 2025 plan.

Speaker Change: Before you have to think about external financing.

Speaker Change: So the.

Speaker Change: The cash balance at the end of the year I think as we've put forth in the guidance that we expect the operating cash flow to be kind of somewhere between zero and $15 million for the year I mean, what what that means is that that cash balance is sufficient to keep us going we're not facing any.

Doran Hull: We're not facing any huge cyclicality associated with that. And I think as I mentioned in my comments, you know, we've already seen some releases on working capital that was tied up in some of the OEM hardware deals. So we feel comfortable with where we're sitting.

Speaker Change: Huge cyclicality associated with that and I think as I mentioned in my comments, we've already seen some releases on.

Speaker Change: Working capital that was tied up in some of the OEM hardware.

Speaker Change: Deals. So we feel we feel comfortable with with where we're sitting and wondering if I can add to that I think in line with that just to make sure that we continue to be operationally.

Doran Hull: And, Dorian, if I can add to that, I think in line with that, just to make sure that we continue to be operationally diligent on costs, I think reduces our sort of squeeze and keeps us running with that cash flow. Okay, understood. And then, not to belabor this point, but I just... Going back to slide five and the change in the backlog, you know, I think at the end of your strategic review and sometime in November, the backlog was one point six billion dollars. And here's. $2 billion.

Speaker Change: Diligent on costs I think reduces.

Speaker Change: Hello, squeeze and keeps us running with that cash margin.

Speaker Change: Okay understood and then.

Speaker Change: Not to belabor this point, but I can just squeeze.

Speaker Change: Going back to slide five and the change in the backlog.

Speaker Change: You know I think at the end of your strategic review in sometime in November and the backlog was $1 6 billion.

Speaker Change: Yes.

Speaker Change: $2 billion I appreciate some of the commentary earlier and some of the verbiage here, but like what was the backlog not scrubbed as part of the strategic review I guess trying to understand.

Doran Hull: I appreciate some of the commentary earlier and some of the verbiage here, but like, was the backlog not scrubbed as part of the strategic review? I guess trying to understand, has the kind of the operating conditions continued to change amongst the kind of a segment of developers that you target? Um, I'm going to. I'm going to stick with the sort of, so post-strategic review, we did do some significant additional scrubbing of the backlog, and that was kind of where I was commenting on some of the deals that we decided to just kind of pull. You know, when you think about our funnel of business, you know, that business isn't necessarily going away, it's just simply that we didn't feel confident in keeping it in the backlog.

Speaker Change: Has the kind of be I'm operating.

Speaker Change: Conditions continue to change.

Speaker Change: Amongst the kind of a segment of.

Speaker Change: The developers that you target.

Speaker Change: I'm Gonna.

Speaker Change: I'm going to stick with the sort of so post strategic review, we did do some some some significant additional scrubbing of the backlog and that was kind of where I was commenting on.

Speaker Change: Some of the some of the deals that we decided to just kind of pull.

Speaker Change: You know when you think about our funnel of business you know that that business isn't necessarily going away. It's just simply that we didnt feel confident in keeping it in the backlog and then the next step was actually removing a number of projects that are continue to be under <unk>.

Doran Hull: And then the next step was actually removing a number of projects that continue to be under discussion, but the PO issuance is pending, and we made the definitive change to the definition of backlog as POs issued, which meant removing those as well from the backlog. Those two things in combination would probably be the biggest items to bridge what was the old backlog to what is the new backlog. And I think going forward, my expectation is to be able to provide you with a more predictable number using that PO issued, you know, fully executed PO metric.

Speaker Change: <unk>, but the P O issuance is pending.

Speaker Change: And we made the definitive change to the definition of backlog as pose issued which meant removing those as well from the backlog those two things in combination would probably be the biggest items to bridge what was the old backlog to what is the new backlog.

Speaker Change: And I think going forward my expectation is to be able to provide you with a more predictable number using that issued P. A.

Speaker Change: Fully executed metric.

Speaker Change: So I'm sorry, just I'm sorry, if this is a silly question, but all of the the updated backlog figure for year end 2024. It can we surmise that all of that has tls issued against it.

Doran Hull: So I'm sorry, I'm sorry, this is a silly question, but of the updated backlog figure for year-end 2024, can we surmise that all of that has POs issued against it? Bear with me one second. The updated backlog for the 1.0, you're talking about the 20 million, the 21 million, or are you talking about the 1.2 billion on slide five? The $1.2 billion does not have... That is the backlog under the old definition, not the new definition. So of that, we've got 21 million with POs issues. Got it. Thank you.

Speaker Change: Bear with me one second the updated backlog for the one thing that.

Speaker Change: You're talking about the 20 million 21 million or are you talking about them.

Speaker Change: The $1 2 billion on slide five.

Speaker Change: The $1 2 billion does not have.

Speaker Change: That's a good number.

Speaker Change: Yeah.

Speaker Change: That is that is the backlog under the old definition.

Speaker Change: Got it.

Speaker Change: So all of that I think you've got $21 million with Tito's issue.

Speaker Change: Got it thank you understood.

Speaker Change: Mhm.

Speaker Change: Thank you. Your next question is coming from doing this how long from Wolfe Research. Your line is now live.

Dylan Masado: Next question is coming from Dylan Masado from Wolf Researcher, line is now live.

Speaker Change: Hey, good afternoon, everyone and welcome Erin Hi, just wanted to kind of go back to the 20th twenty-five outlook. So when I kind of take a step back and I look at the revenue and the adjusted gross margin specifically.

Doran Hull: Hey, good afternoon, everyone. And welcome Arun. I just want to kind of go back to to the 2025 outlook. So when I kind of take a step back, and I look at the revenue and the adjusted gross margin specifically, it like kind of winds up pretty similar, similarly to 2024 actual. So I guess if you're kind of bridging between 2024 and 2025, would you say those kind of operating cost reductions are the big driver of the Delta? And can you just kind of give us an idea of, you know, specifically. where can you kind of find some of those savings?

Speaker Change: They like kind of winds up.

Speaker Change: Pretty similar similarly to 2024 actual so I guess, if you kind of bridging between 'twenty 'twenty four and 'twenty 'twenty five would you say those kind of operating cost reductions are the big driver of the Delta in can you just kind of give us an idea of you know specifically.

Speaker Change: Where can you kind of find some of those savings.

Speaker Change: Yeah, I can talk to it a little bit.

Doran Hull: Yeah, I can talk to it a little bit. One thing that you referred to is the operational cost savings and trying to make sure that we eliminate some of the inefficiencies that might exist. For example, some of the software applications might be duplicated, or some of the tools that we might be using are quite expensive, but we also want to try to bring some of the other costs down in our software development production and in run time, cloud computing costs, for example. So these type of operational efficiencies will help us on the one hand, but on the other hand, we continue to be quite focused on growth, and this is a growth story centered around Powertrack and other software applications that we're working on.

Speaker Change: No.

Speaker Change: One thing is that.

Speaker Change: You referred to is the operational cost savings and trying to make sure that we eliminate some of the inefficiencies that might exist.

Speaker Change: For example, some of the software applications might be duplicated or some of the tools that we might be using a quite expensive.

But we also want to try to bring some of the other costs down and as I said are in production.

Speaker Change: And run time cloud computing cost for example, so these type of operational efficiencies will help us.

Speaker Change: On the one hand, but on the other hand, we continue to be quite focused on growth and this is a growth story centered around power track and other software applications that behind us.

Doran Hull: So, that's a combination of the two things that we're trying to achieve.

Speaker Change: So that's the combination of the two things that we're trying to achieve.

Speaker Change: Okay. Thank you and then as a follow up apologies if I missed this but can.

Doran Hull: Okay, thank you. And then as a follow up, apologies if I missed this, but can you just kind of speak to what your expectations are for seasonality for 2025 in terms of both revenue and EBITDA? So the software and services is fairly routable with a little bit of back half seasonality to it. The hardware piece, the up to 35 million, you should expect that. toward the back half of the year, you know, possibly even Q4. Okay, thanks.

Speaker Change: Can you just kind of speak to what your expectations are for seasonality for 2020 five in terms of both revenue and EBITDA.

Speaker Change: So the software and services is fairly ratable with a little bit of back half seasonality to it.

Speaker Change: The hardware piece the up $35 million you you should expect that to be.

Speaker Change: Towards the back half of the year.

Speaker Change: Possibly even in Q4.

Speaker Change: Okay. Thanks, I'll take the rest of my questions offline.

Dylan Masado: I'll take the rest of my questions offline. Thanks.

Speaker Change: Thanks.

Speaker Change: Thank you. Your next question is coming from Joseph Osha from Guggenheim Partners. Your line is now live.

Joseph Osha: Thank you. Next question is coming from Joseph Osha from Guggenheim Partners. Your line is now live. Hi, thanks for taking my question. I'm trying to understand competitively how I should think about Powertrack and how it's positioned relative to the software offerings from the tracker companies in particular because they talk a lot about at least some of the functionality you're talking about here.

Joseph Osha: Oh, hi, Thanks for taking my question I'm trying to understand competitive we how I should think about powered track and how it's positioned relative to the software offerings from the tracker companies and in particular, because they they talk a lot about at least some of the functionality we're talking about here. So it's powered tractor.

Doran Hull: So is Powertrack directly competitive with the offerings from Array and Next Tracker or should I think of it as more complimentary? Thank you. Hey, Joe. It's Doran. I'll take a first stab at that. The tracker companies are largely focused on front-of-the-meter. That's kind of step one, right? And optimization of tracking software is, I believe, it's going to be case-by-case, but we do not believe our front-of-the-meter edge device and software solutions are in direct competition with what the tracker companies are doing necessarily. The large market share that we have, as you know, is in the behind-the-meter sector.

Speaker Change: Correct, we competitive withdraw.

With the offerings from array and next tracker or should I think of it as more complementary. Thank you.

Speaker Change: Hey, Joe It's Darren I'll take a take a first stab at that the the tracker companies are largely focused on front of the meter that's kind of step one right and optimization of tracking software is I believe it's going to be case by case.

Speaker Change: But we do not believe our front of the meter edge device and software solutions are in direct competition with what the tracker companies are doing necessarily the large market share that we have as you know is in the behind the meter sector.

Doran Hull: And so, as we see the front of the meter as a growth engine for Powertrack and the related edge devices, I think that we're likely to see that expansion kind of irrespective of whether we're going after fixed tilt or tracker type of applications. As you know, the trackers aren't on every utility scale application, especially when you look in Europe. And so, you know, I think it's going to be, you know, circumstantial in some instances, but broadly speaking, I think what we're offering is to a bigger market than what the tracker software is trying to go after.

And so we as we see the front of the meter as a growth engine for power track and the related edge devices. I think that will we're likely to see that expansion kind of irrespective of whether we're going after fixed tilt or tracker type of applications as you know the trackers.

Speaker Change: On every utility scale applications, especially when you look in Europe.

Speaker Change: And so you know.

Speaker Change: I think it's going to be.

Circumstantial in some instances, but broadly speaking I think what we're offering.

Speaker Change: As to a bigger market than what the tracker.

Speaker Change: <unk> is trying to go after.

Doran Hull: And maybe just add to that, just to supplement the intention of your question, though, which is the differentiation in the competitive space, the ability for power tracks to sort of solve the problem holistically. getting the data from the edge devices, the data connection needed to make the edge devices come online and the ability to do analysis as well as making sure that the software works as expected. That whole life cycle is very unique and that is a significant differentiation for Powertrack.

Brian: And maybe just talk to that Brian.

Brian: Just to supplement our intention of your question, though which is the.

Brian: <unk> in the competitive space the ability for power track to sort of solve the problem holistically.

Brian: Getting the data from the edge devices, the data collection needed to make the edge devices come online and the ability to do analysis as well as making sure that the software works as expected.

Brian: That whole lifecycle is very unique and that is a significant differentiation for powertrain.

Brian: Yes.

Doran Hull: So should I, just to amplify that a bit, you know, obviously behind the meter is behind the meter, but when I think about front of the meter, I should think about. Power Track perhaps hitting more like commercial scale systems or this is something you're going to go try to sell to, you know, kind of 200 megawatt solar farms or what? I think our sector for the low-hanging fruit for us on the front of the meter, Joe, is going to be the kind of anywhere from, call it, 20 to 100, not the 200 or 500. Okay, thank you very much.

Brian: So should I just to amplify that a bit.

Brian: Obviously behind the meter is behind the meter but when.

Brian: When I think about front of the meter I should think about.

Brian: Howard track, perhaps sitting more like commercial scale systems or this is something you're you're gonna go try to sell to you know kind of 200 megawatt solar farms are.

Brian: What.

Brian: I think our sector for the low hanging fruit for us on the front of the meter Joe is going to be the kind of anywhere from call. It 20 to 100, not the 200 or 500.

Brian: Okay. Thank you very much.

Joseph Osha: Thanks, Joe. Thank you.

Speaker Change: Thanks, Joe.

Speaker Change: Thank you. Your next question is coming from Kashi Harrison from Piper Sandler Your line is now live.

Kashi Harrison: Next question is coming from Kashi Harrison from Piper Sandler. Your line is now live. Good afternoon, and thanks for taking my question. So, you know, maybe first one for me is on the 2025 guidance. If I'm looking at this correctly, I think, you know, just gross profit less EBITDA looks like cash op-ex is about $55 million. But, you know, if I look at page slide 14, 4Q cash op-ex is $36 million. So that, you know, implies a pretty big drop from what you were doing in 4Q to what you're expecting in 2025.

Speaker Change: Okay.

Speaker Change: Good afternoon, and thanks for taking my question.

So yeah.

Speaker Change: Maybe maybe first one for me is on the 20 to 25 guidance if I'm looking at this correctly I think you know just gross profit less EBITDA. It looks like cash Opex was about 55 million, but you know if I look at page Slide 14, <unk> cash Opex was 36 million.

Speaker Change: So that implies a pretty big drop from what you were doing in for Q2, what you're expecting on spending 25. So can you maybe just help us reconcile how to bridge the gap and then and maybe how to think about the cadence of Opex over the course of.

Doran Hull: So can you maybe just help us reconcile how to bridge the gap and then and maybe how to think about the cadence of op-ex over the course of 2025? So first. I think that in 2024, there's certainly some non-cash OPEX to consider when you move to 2025, I would say that with an overall expectation of decrease. As we continue through the year, we'll see our run rate continue to go down versus perhaps what we might see in Q1. As we've talked about the moves that we're going to make in order to increase operational efficiencies, you know, those will continue to roll out internally here over the course of the year, so you would see naturally the run rate drop over time.

Speaker Change: 2025.

Speaker Change: So first.

Speaker Change: So we think that in 2024, there's certainly some noncash.

Opex to consider when you move to 2025, I would say that.

Speaker Change: With an overall expectation of decrease.

Speaker Change: As we continue through the year, we'll see our run rate continue to go down.

Speaker Change: First is perhaps what we might see in Q1.

Speaker Change: As we've talked about.

Speaker Change: The moves that we're going to make in order to increase operational efficiencies those will continue to rollout internally here over the course of the year. So you would see naturally the run rate drop over time.

Speaker Change: Got it Okay, and then maybe maybe a follow up.

Kashi Harrison: Got it. Okay.

Doran Hull: And then maybe a follow-up. In terms of scale, you have 1.8 gigawatt-hours here on the storage side and gigawatt on the solar side. I guess, how do we think about the ability of this company to grow? Because certainly at these levels, you're EBITDA neutral. But to get to $100 million of EBITDA, for example, how do we think about the level of scale that's required here and then the go-to-market associated with that? Look, you're asking questions a little bit out in the future, but it's going back to the software strategy or the software centric strategy that was announced last quarter.

Speaker Change: In terms of in terms of scale.

Speaker Change: You you have one eight gigawatt hours here on the storage side.

Speaker Change: You know gigawatt on the solar side.

Speaker Change: I guess, how how do we think about the ability of this company to to to grow because certainly at these levels you're EBITDA neutral.

Speaker Change: To get to.

Speaker Change: Like a $100 million of EBITDA for <unk> for example, how do we think about the the level of scale. That's required here and then the go to market associated with that.

Speaker Change: Look I mean, you're asking questions a little bit out in the future, but it's going back to the software strategy or the software centric strategy that was announced last quarter.

Doran Hull: The growth for software comes with a different type of scaling. It's not linear, and the ability for us to use the investment to build differentiated IP and then deploy it into different markets comes with standard established models that you are already familiar with. We will incur costs in sales. We'll incur costs in support, but not in manufacturing the software. We do have reliance on edge boxes, so that'll complete the overall supply chain that we would need to scale, but I mean, it's a great question, and to get to that point, it'll be amazing, and that's the journey that we're on.

Speaker Change: The growth for software comes with a different type of scaling it is not linear and the ability for us to use the investment to build differentiated IP and then deploy it into different markets comes with standard established models that you are already familiar with we will incur cost and in sales will incur costs in support but no.

Speaker Change: In manufacturing the software itself.

Speaker Change: We do have the lines on edge boxes, so that will complete the overall supply chain that we would need to.

Speaker Change: The scale, but I mean.

Speaker Change: It's a great question and as we look at that point it will be amazing and that's the that's the journey that Bureau.

Doran Hull: And I think that, Kashi, we will have to continue to communicate about the growth of the business in the front of the meter versus behind the meter, because obviously ASPs and the amount of revenue per, you know, per megawatt is a little bit different when you look at those sectors. And that's, you know, a growth engine we expect to continue to try to push on the power track side, especially as well as new products is out into that, you know, the European market, the front of the meter market. And so we'll, you know, continue to keep our eyes on those metrics as operating AUM.

Speaker Change: And I think that Kashi.

Speaker Change: We will have to continue to communicate about the growth of the business in the front of the meter versus behind the meter because obviously, a asps and the amount of revenue per.

Speaker Change: Per megawatt is a little bit different when you look at those sectors and that's a growth engine. We expect to continue to try to push on the power truck side, especially as well as new products.

Speaker Change: Out into that the European market the the.

Speaker Change: Front of the meter market and so we will.

To keep our eyes on those metrics.

As operating AUM, but again one of the reasons why we're focused on operating a U M is because that's kind of really where the revenue comes.

Doran Hull: But again, one of the reasons why we're focused on operating AUM is because that's kind of really where the revenue. Got it.

Speaker Change: Got it thank you.

Operator: Thank you. We've reached the end of our question and answer session. And ladies and gentlemen, that does conclude today's teleconference webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

Speaker Change: Yeah.

Speaker Change: Thanks, guys.

Speaker Change: We've reached end of our question and answer session.

Speaker Change: That does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day.

Speaker Change: Thank you for your participation today.

Speaker Change: Yeah.