Welcome to the Stem, Inc. Fourth Quarter 2022 Earnings Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the call over to your host, Ted Durbin, Head of Investor Relations. Please go ahead.

Thank you, Operator. This is Ted Durbin, Head of Investor Relations at Stem, and we welcome you to our fourth quarter and full year 2022 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 and our other SEC filings. 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. We will be using a slide presentation today. Our earnings release and presentation are on the Investor Relations portion of our website at www.stem.com. John Carrington, our CEO, and Bill Bush, CFO, will start the call today with prepared remarks. Michael Carlson, Chief Operating Officer and Prakesh Patel, Chief Strategy Officer, will also be available for the question-and-answer portion of the call. And now, I will turn the call over to John.

Thank you, Ted. Ladies and gentlemen, thank you for joining us on the call today. Starting with Slide 3 and the agenda for the discussion today, I will review our fourth quarter 2022 results and highlights. Followed by an overview of our commercial execution and provide an update on the supply chain. I will then review our strong operating results, and new offerings that demonstrate our technology leadership. Following my remarks, I'll turn the call over to Bill Bush, our Chief Financial Officer, who will discuss our financial results in more detail and provide 2023 guidance. Turning to Slide 4. Today, we reported solid fourth quarter results, including record revenue of $156 million, which was three times higher than the same quarter last year. We also reported record bookings of $458 million, which was two times higher than the same quarter last year. Our revenue and bookings in the fourth quarter alone were higher than in the entire year of 2021, which is a remarkable achievement over a short period of time. We achieved these results despite a turbulent environment throughout 2022, including supply chain volatility, interconnection and permitting delays, cost inflation, and solar import declines from the AD/CVD and UFLPA restrictions. Our diversified business model across multiple products and geographies helped the Company navigate these headwinds. As we previewed in our interim update in early January, revenue came in within the guidance range and our bookings were well ahead of guidance that we had already raised in the middle of 2022. In fact, if you go back to our 4Q '21 earnings call, our bookings ended 50% higher than our original full-year guidance. The bookings momentum is a testament to our software and services solutions that are differentiated in the marketplace. We are also capitalizing on the tremendous macro tailwinds in this industry. We grew our Contracted Annual Recurring Revenue or CARR another 7% quarter-over-quarter to $65 million in the range of our guidance that was also raised by $5 million during our 2Q earnings call. Focusing on the right side of the page, we continued our momentum in eMobility with an exciting strategic partnership with ChargePoint. I'll discuss more of this opportunity later in the call. We continue to drive operating leverage, as we ramp headcount at a slower rate than our revenue growth. We are implementing technology and processes to control costs and leveraging our infrastructure in India to grow headcount in lower-cost regions. We are also staying ahead of the supply chain, with capacity contracted through Q1 2024. Before we move on from this slide, I would like to make a couple comments about our full-year results. We faced several headwinds during the quarter and throughout the year. We were negatively impacted by COVID-related shutdowns in the fourth quarter in China. To address this risk, we are undertaking a strategy to diversify and deepen our relationships with battery OEMs. In addition, we are leveraging our technology leadership to introduce an offering that provides flexibility for our customers in system design, and can help to mitigate disruptions at any one supplier. On the solar front, as previously discussed, we were negatively impacted by the lack of panel shipments that resulted from the anti-dumping and weaker forced labor restrictions. Software services revenue was negatively impacted by interconnection and permitting delays. Bill will discuss the multiple pathways we have to continue growing gross margin. Finally, we effectively managed expenses throughout 2022, coming in on plan to our guidance for adjusted EBITDA. In large part because we were prudent in our hiring and are seeing the benefit of our strategy to expand headcount in lower-cost geographies, I've charged our management team and our global organization with reaching positive adjusted EBITDA in the second half of this year, and we will not waver on that key objective. Moving to Slide 5, and our continued commercial execution. As you can see in the chart in the upper right, we had strong services revenue growth in the fourth quarter, up 17% versus the third quarter, which itself was up 9% versus the second quarter. As you know, this is the highest margin portion of our business and we are focused on driving these revenues higher in 2023 and beyond. I mentioned our strong bookings quarter, which exceeded full year 2021 bookings. Additionally, over two-thirds of our full year bookings came from new customers. We expect bookings momentum to continue with the tailwinds we are seeing in the industry. As you can see in the lower right chart, WoodMacKenzie is now calling for a 46% increase in solar and storage buildout in the U.S. primarily as a result of the Inflation Reduction Act. We think that the long-term visibility provided by IRA will drive strong growth for years to come. We are pleased to start our first only software project in ISO New England this quarter and expect to do more software-only deals going forward. We continue to generate strong recurring revenues from our existing customers as they are willing to pay for the additional incremental value we're creating for them. Finally, we have revamped our sales compensation plan to favor margin over revenue. We expect continued strong growth, but will focus on the highest margin portion of the value chain where our differentiated solutions most resonate. Turning to Slide 6 and an update on the supply chain. On the storage side, we have now fully contracted supply through the first quarter of 2024, and we are opportunistically adding supply on the spot market. The choppiness in the electric vehicle market, along with some project delays, appears to have released some excess capacity that is coming into the stationary storage market. We will continue to execute back-to-back contracts that lock in our customer demand as we add additional supply commitments. On the commodities front, we are cautiously optimistic that some of the recent price declines will hold, which could improve project economics for customers and increase our addressable market. For example, lithium carbonate prices are down around 20% from their peak in November, which is starting to flow into the overall energy storage system price. As you know, price increases or decreases are complete pass-throughs for Stem, but we are encouraged to see these lower prices in storage. We continue to progress our unit controller or modular energy storage system strategy that we discussed in our last earnings call. This offering will enable customers to mix and match various hardware combinations with an ability to swap batteries and inverters, ultimately decoupling our customers from some of the supply chain volatility that we have seen in recent years. Importantly, we will still maintain control of the edge hardware solution. Customers and partners are very excited about this offering and we expect to install our first pilot modular ESS next month. Please turn to Slide 7, where we will discuss our technology leadership. We performed well in 2022 on the technology and operations front. Overall, we experienced a 33% increase in grid calls across the fleet without impacting customer bill reduction expectations. Athena now has 31 million runtime hours across multiple markets, use cases, and hardware devices. Our machine learning algorithm continues to improve as it is exposed to more data in more markets, which extends our competitive moat. We continue to support our customers and the grid in several core markets. In California, we saw a 20x increase in grid calls during December and January tied to the atmospheric river weather patterns, along with the extreme high gas prices in Southern California. Southern California Edison called on the STEM network almost continuously as we provided over 60 megawatts per day for those months. Our virtual power plant delivered the equivalent of several gas peaking power plants and became a vital capacity option for utilities and grid operators. Athena also continued to exceed our commitments, 8% above baseline for the Key SGIP Incentive Program. In ISO New England, we continued our exceptional performance with the fleet generating 76% more revenue than forecasted. We had a 94% accuracy in predicting coincident peaks, which will be an important differentiator in the PGM market that I will discuss in a moment, and we bid over 200 megawatt hours into the forward capacity market auction this spring that will take effect in 2026. Finally, in ERCOT, our first sites will begin trading in the wholesale market in 2023. We announced in December our first four projects with Rex Storage Holdings, a joint venture between Regis Energy Partners and independent developer Excelsior Energy Capital, a leading investment fund. Rex has made a substantial equity commitment to ERCOT storage, which could fund dozens of new projects. Let's move to Slide 8 in our new partnership with ChargePoint. ChargePoint is a leading electric vehicle charging infrastructure company, which has followed a similar path of innovation and market leadership as Stem. Founded in 2007, ChargePoint has grown to over 200,000 ports under management focused on charging both personal and fleet vehicles. Our partnership will focus on the confluence of fleet electrification and the grid. Stem will provide battery, hardware and software to coordinate onsite demand with the grid, ChargePoint will provide the charging solutions. Together, we can help accelerate electric vehicle adoption, enhance customer economics, increase grid resiliency, and reduce greenhouse gas emissions. Collectively, we will leverage the $5 billion of funding incentives from the National Electric Vehicle Infrastructure Program or NEVI that went into effect in the fourth quarter of 2022. We estimate the NEVI program could offset up to 80% of project costs where available. Further, we estimate the IRA will provide another $9 billion of incentives and tax credits in the markets we're focused on, driving additional benefits for our customers. In total, we expect eMobility to comprise around half of our behind-the-meter or BTM sales in three years. We have already booked several EV charging deals, and the ChargePoint announcement will help jumpstart our progress in this exciting market along with our previously announced partnerships with ENGIE and ABB. Next, please turn to Slide 9 in our entry into the PJM market for energy storage. PJM is the largest competitive power market in the world at around 150 gigawatts, which is three times larger than the California grid. It spans 12 states plus DC, and the average industrial customer load is almost eight times larger than in California. We've started selling our storage solutions in PJM for several reasons. Rising transmission charges, you can see over the last nine years, transmission charges have more than doubled for most of the major zones. This is raising electric bills for commercial and industrial customers driving them to renewable energy sources like solar and increasingly storage. Secondly, new state incentive programs are increasing the returns on storage. Finally, the IRA, in particular, the storage ITC, which is opening many new markets to retrofit storage onto existing solar installations. Our install base from AlsoEnergy gives us a significant advantage in this regard. We think PJM is an ideal market expansion opportunity as customers will benefit from Athena's ability to co-optimize multiple complex value streams. In addition, we have a strong track record of predicting coincident peaks in other markets and that will be a key value driver in PJM as well. This is a differentiated offering that is accessible with our best-in-class AI capabilities. Because of the additional value we will add for customers, we expect to charge up to 50% higher fees for Athena. Thank you. And now I will turn the call over to Bill Bush, our Chief Financial Officer.

Thank you, John. Starting on Page 11 with our results for the fourth quarter and full year 2022. Please recall that we closed the AlsoEnergy transaction on February 1, 2022, which will impact the comparability to last year's results. As John mentioned, we reported record revenue of $156 million, which was a 194% increase versus the $53 million in the fourth quarter of 2021 and more than we recorded in all of 2021. Most of the growth came from the storage hardware sales on FTM partner projects and about $18 million from the PowerTrack platform. We also recognized approximately $16 million of high margin software and services revenue, representing 10% of total revenue for the quarter. Full year 2022 revenue was $363 million, an increase of 186% over 2021. For the quarter, our GAAP gross margin was $13 million or positive 8%, up from a negative 3% in the same quarter last year. For the full year, GAAP gross margin increased from $1 million to $33 million. Turning to Slide 12. Fourth quarter non-GAAP gross margin was $17 million, up from $3 million in the fourth quarter last year, due to higher revenues. On a percentage basis, non-GAAP gross margin was 11% in the quarter, up from 5% last year. Our margins benefited from a greater share of high margin software and services revenue. For the full year 2022, non-GAAP gross margin came in at 13%, up from 9% last year. We came up short of our 15% to 20% non-GAAP gross margin guidance, driven by a higher mix of hardware than we expected. Our storage and software revenues also increased more slowly than we expected, due to the continued permitting and interconnection delays that our partners experienced. While the solar side of our business underperformed from a revenue standpoint in 2022 with relatively flat revenue versus 2021, the business continues to generate high gross margins ending the year at 60% and is well-positioned to take advantage of the expected snapback in the solar industry. Our solar backlog increased 42% on a year-over-year basis, giving concrete evidence of a rebound in our solar results. Net loss was $35 million versus $34 million in the same quarter last year. Lastly, adjusted EBITDA was a negative $10 million in the fourth quarter versus a negative $12 million in the same quarter last year. Adjusted EBITDA improved as we continue to drive operating leverage in our business. For the full year, adjusted EBITDA was a negative $46 million versus a negative $30 million in 2021. Our adjusted EBITDA results were within our guidance range of negative $20 million to negative $60 million. So despite weaker-than-expected gross margins, we were able to meet our EBITDA guidance, and that's due to cost controls. In particular, when we saw the slowdown in the solar business begin to develop in the spring, we managed the pace of our hiring. We will continue to take the same conservative approach this year to ensure we achieve our goal of achieving our EBITDA positive in the second half of the year. Fourth quarter bookings were $458 million, up more than two times versus bookings in the same quarter last year and a new quarterly record. This was the highest bookings quarter in the Company's history and the $1.1 billion of bookings for the full year is up 153% from 2021. Moving from our financial results to our operating metrics on Slide 13. Our backlog more than doubled year over year from $449 million in the fourth quarter to $969 million in the fourth quarter of 2022. The backlog increased approximately 19% on a sequential basis from the third quarter of 2022, with the largest driver of the backlog increase being the $458 million of new bookings in the quarter, offset by revenue recognized as well as a $137 million contract cancellation that we disclosed in early January. The nearly $1 billion of backlog gives us good visibility into 2023 and 2024 revenue. We also no longer report the 12-month pipeline as a key metric in 2023, since the business has matured to the point where we believe backlog is a more important indicator of our commercial outlook and does not have the volatility of the pipeline metric. Pipeline was sequentially flat in the fourth quarter, mostly due to the strong conversion of pipeline into bookings during the quarter. Our contracted AUM on the storage side of our business grew from 1.6 gigawatt hours in the fourth quarter of 2021 to 2.5 gigawatt hours in the fourth quarter of 2022. That's a 56% year-over-year increase driven by our strong commercial momentum. Our operating AUM on the solar asset performance monitoring side of the business ended this quarter at 25 gigawatts, relatively flat to the third quarter. Customer additions were largely offset by churn, including on the spin-down of the legacy platform that we discussed last quarter. We expect solid growth in solar AUM in 2023 as the industry recovers. Contracted annual recurring revenue or CARR ended the quarter at $65 million, up 7% sequentially. We are pleased we are able to grow CARR during the quarter despite the contract cancellation. Again, in testament to our commercial success and software differentiation, we ended the quarter with $250 million in cash on the balance sheet. We will continue to deploy our cash to fund operational investments, including securing storage hardware for our customers. These funds will come back to the Company in the form of service fees, hardware margin, and a long-term recurring software fee. We will remain prudent in our use of cash within risk limits established by management and overseen by our board of directors. Turning to Slide 14, in our 2023 guidance. Starting with revenue, we expect to recognize between $550 million and $650 million in revenue in 2023. To the right, you can see the seasonality we expect for revenue during the year, similar to prior years. It is back half weighted driven by the timing of the delivery of batteries. We expect more ratable growing service revenue throughout the year. We expect non-GAAP gross margin of 15% to 20% versus the 13% we reported in 2022. This improvement reflects a higher mix of software and services revenue, including from the solar side of the business. On bookings, we expect to contract between $1.4 billion and $1.6 billion this year, representing a 40% plus growth year over year. With our EBITDA focus in mind, we have revamped our sales compensation plan to focus on margin as well as revenue. We will focus on the highest margin opportunities where we can drive differentiated economics for our customers and for Stem. We expect adjusted EBITDA in the range of negative $35 to negative $5 million versus negative $46 million in 2022. This improvement is driven by higher margins and a continued focus on improving our operating expense leverage. More importantly, we expect EBITDA positive in the second half of 2023. Lastly, we are introducing CARR guidance. We're expecting to exit 2023 at a run rate of between $80 million and $90 million. This is a function of our bookings growth, including some software-only deals we are pursuing in core markets. I would like to provide some context into some key uncertainties we considered in developing our guidance. Storage supply chain constraints impacted our Q4 results with manufacturing logistics delays at one of our key suppliers delaying delivery of product against our contracted backlogs. To mitigate this situation, we have pursued both commercial and technology-driven solutions, including onboarding additional suppliers and building domestic supply relationships. A recovery in the solar supply chain is critical to the achievement of our gross margin targets. We are seeing green shoots with the pace of panel deliveries accelerating across top-tier developers and customers, and this should stabilize the contribution from ultra-energy. Our backlog for solar APM was up 42% exiting Q4 2022, so we are cautiously optimistic. On gross margin expansion, we have multiple shots on goal, which I will discuss on the next slide. On Slide 15, we expect meaningful accretion in gross margin for 2023 as a result of several factors and key initiatives. By aligning the compensation of our sales team on gross margin achievement, we've seen a market improvement in the gross margin within our backlog as we exited 2022. Additionally, our CEO, Mike Carlson, is focused on accelerating the pace of system commissioning through the rigor and focus he is bringing and pushing interconnection and permitting processes in partnership with our customers. We expect to roughly double our operating assets under management in 2023, and this will contribute to high gross margin software services as our software contract terms begin upon commissioning. We expect a recovery in the solar asset performance business driven by a return to growth in the solar industry. You can see from the graph on the left, most solar industry expects that the impact of the UFLPA on panel deliveries to be resolved in the first half of this year. In the long term, we were rolling out several service offerings targeting enhanced monetization of activities we've already been providing our customers as we have built a leadership position in the growth of the industry. This includes project modeling, project design, and asset management offerings tied to the introduction of our modular ESS strategy, which we expect to begin to deliver in the first half of 2023. Additionally, we expanded our team of energy market experts last quarter as we roll out services for wholesale energy forecasting and program management for the FTM market. We'll update you on the progress and uptake of these offerings in the coming quarters. Bottom line, we will manage the business prudently to address risks in our plan and continue to drive towards EBITDA positive in the second half of the year. With that, let me turn the call back to John for some closing remarks.

Thanks, Bill. On page 16, to wrap up, we are committed to achieving EBITDA positive in the second half of 2023. Our financial progress is supported by the very strong demand we are seeing from customers as they face rising energy costs and as the full impact of the Inflation Reduction Act fuels market growth. We closed 2022 with $1.1 billion in bookings, representing a 153% increase from the prior year. Our technology team is best-in-class and is driving new market expansion and enhancing gross margins. We launched our offerings into PJM, the largest competitive global power market, and are enhancing the economics of sites in CAISO with Athena's unmatched co-optimization and wholesale energy trading capabilities. In addition, we continue to make inroads into the fast-growing electric vehicle market with the partnership we announced with ChargePoint. All these activities set us up to drive double-digit annual software services growth and enable the Company to achieve significant growth in adjusted EBITDA. Finally, I want to recognize our diverse global team for the outstanding performance and I look forward to meeting the commitments we have outlined today. We have world-class employees, products, and customers. With that, let's open the line for questions, please.

Thank you. First question comes from Brian Lee of Goldman Sachs. Please go ahead.

Hey, guys. Good afternoon. Thanks for taking the questions. First one on the guidance for revenue, I mean, given the backlog position here, I'm just curious what's your assumption around backlog conversion? I would have thought you would be in a position to do higher than the revenue guidance here of $600 million at the midpoint. So, are you seeing backlog converting more slowly? Or is there something with respect to mix that's maybe not turning over as quickly as we would have thought, just given the overall headline number seemed to be bigger and gave you more coverage than sort of the revenue guidance you are providing here? And then I had a follow-up on the margins.

Perfect. Hey, Brian, thanks for the question. So, yes, and I think, in terms of the backlog, it is converting slower. I think we have talked about this in the past, as we are taking on larger and larger projects. Those tend to be FTM, first. Then second, they tend to be multiyear installations. And so we saw much quicker conversion when the projects were smaller. We saw a much quicker conversion, much like, say, at the end of 2021, we had $400 million plus $450 million in backlog. We have $363 million in revenue this year. So a pretty quick conversion in general. But this year and I think going into future years, we're just going to need to build more pipeline because the projects are longer. So from that standpoint, I would say there's an extension, but still pretty significant growth on a year-over-year basis for revenue.

I think the other thing I'd add, Brian, and thanks for the question, is we do still have some opportunity to convert bookings into this year, so here in the first quarter. So keep that in mind.

In terms of margins, we need to adopt a cautious approach since the solar segment of our business has substantial margin potential. While we are beginning to notice some positive indicators, such as an 8% service growth in the fourth quarter compared to the previous quarter, we also see a significant increase in backlog at 42% year over year. It's crucial to ensure those figures are accurate. Typically, this segment has a 60% gross margin, but if we don’t see this materializing, we anticipate a negative impact on our results for 2023, similar to what we experienced in 2022. Therefore, we are approaching with some conservatism. It is generally easier to adjust numbers upward than downward. Moving into 2023, we will carefully monitor the solar aspect of our operations. Additionally, the hardware side of the storage business remains under pressure, impacting margins as we scale project sizes, since hardware sales occur prior to software sales and will affect the overall gross margin. We have tried to accurately forecast the mix of these two parts of the business, but the final outcome will largely depend on how that mix unfolds.

Thanks for the questions and just following up on the previous question from Brian on margins. It feels like there's probably a shift of the EBITDA profitability from after Q2 to now the second half of '23. Just wanted to understand if there's anything in the seasonality that could be causing that and any other levels on the EBITDA profitability here? We appreciate it. Thanks.

Maheep, no, we're not coming off the second half EBITDA positive in any way. So I'm not sure where you got that indication. So that's not the case.

So thanks for the question, Maheep. I think first, of course, we're not giving '24 guidance just quite yet. But I would refer you to the data that we gave in the LRP. So from that we do expect to see '24 revenue grow at those rates and the midpoint on hardware was, of course, 30% and services would be 75%. So I think from that standpoint, we do expect to see growth. And then I think one of the places that you saw that in this last fourth quarter is a 17% sequential growth in services. So, I mean, ultimately, the path to EBITDA is going to be paved through services, and we're seeing a lot of very positive momentum from that standpoint. Two quarters in a row, 9% in the third quarter, 17% in the fourth quarter of service growth. So we're really excited about that. That's going to be where the gross margin dollars come from. So I think that'll be something to keep in mind as we go on, not just the big print of what the revenue is, but also what the gross margin dollars shake out to be.

Is the split of hardware versus software in bookings and backlog 60:40, is that changing for '24? Sorry, '23?

No, we don't expect that to change. However, what will change is that we will have more software-only deals in the backlog for 2023, particularly among the largest deals. We made adjustments to the total bookings number based on our expectation of having more software-only deals this year, which represent about 40% of the total economic value of the system. As a result, the bookings growth will be slower in nominal terms, but the KWH or megawatt hours will continue to grow at a very rapid pace.

It's nice to chat with you. Regarding the services, particularly pro serve and dev serve, could you discuss the growth of the services business and how you're tracking this? Additionally, what data points should we look for as indicators of your scaling? I understand there have been some discrete issues affecting the gross margin mix, but I'd like to focus on the services side.

Thank you for the question, Julien. The most notable aspect is the 17% sequential growth, which serves as a key indicator for total service revenue. We’ve made significant progress in this area. Mike Carlson, who is here with us today, leads the professional services side of the business, and we anticipate considerable advancement in that area as we initiated our storage initiative last August. The solar segment has also been performing well for some time. If we achieve the expected 100% year-over-year growth in solar, our performance will improve significantly. We saw a glimpse of this in the fourth quarter with an 8% growth in the solar business, especially notable given the 1% decline in the third quarter. These are the key points to monitor moving forward.

Yes. Hey Julien, this is Prakesh. Two points I would make. When Bill was discussing the gross margin accretion strategy, the long-term plan and John references as well. Next month we'll be installing our first modular ESS that comes with services attached to it. That we expect a lot more of that unit controller type business to launch services and project modeling, project design and asset management. And then separately, we expanded our team that advises customers on forecasting for wholesale energy markets. So both of those you should start to see either just as Bill mentioned, growth in services line item or press releases around these customer wins and engagements.

Just trying to understand the PGM market. It's interesting that you get into that. So maybe, you can just give some idea of what percentage of 2023 revenue comes from that. I'm trying to understand what it takes for you to break the new market in a new area. So maybe you can provide some color, like how that market you expect to unfold in 2023, '24, '25, something like that.

Yes, I can, I'll start, Prakesh, if you want to jump in. So first of all, one of the things that we did a few years ago is aligned with channel partners through distribution. That gives us a very interesting footprint across the country. As we look at new markets, we have distributors and partners in those areas already. So that kind of customer acquisition cost concern that you would have is eliminated through that. The other pieces, our software platform through Athena is highly translatable into new markets very quickly. So we believe we have the right technology offering for the market. We believe we have the commercial force to go in and execute in that market. Our ability with Athena to co-optimize in a variety of complex value streams, as we've proven out in many markets, is highly applicable in PJM. Certainly, our coincident peak track record has been very good, if you look at some markets like Ontario. So just some of our past experiences, we believe we can execute in that market very effectively.

I would just add, this is Prakash that we are optimistic about this market and value that we can create for our corporate customers in that geography is tremendous. We are tempering our expectations around what gets installed in 2023, just given some of the interconnection timelines that you see in PJM. It's not exactly the case in behind the meter, but we wanted to be conservative there, but certainly seeing significant interest in the pipeline and early bookings as well.

Hi. Thank you for taking my question. My question relates to CARR. When I compare your CARR to assets under management, I've noticed it has remained quite stable throughout last year. However, the guidance seems to indicate a decrease in the amount of AUM translating into CARR. Is this change related to project sites, or are there any issues with the software attachment ratio?

It's not everything we sell includes hardware with a significant software attachment. The dynamic we're experiencing, which Bill mentioned in his discussion, is that we're securing much larger front-of-the-meter deals. Some of these contracts are extending beyond 20 years. As the average duration of the software terms increases, it results in a lower annual CARR conversion.

So just as it relates to the margin profile, can you maybe provide kind of a rough split of what guidance assumes for AlsoEnergy revenue versus legacy battery hardware and software, just to the extent UFLPA issues linger beyond maybe expectations.

As you can see from the various pieces, from the standpoint of AlsoEnergy for 2022 for us on a consolidated basis, they did about $58 million or so in revenue. They did more than that, of course, in 2022, we just didn't consolidate January. We expect to see strong growth there. You look at any of the Wood Mac data they're presenting a hundred percent growth. I don't, and I would say I don't think we're going to see a hundred percent revenue growth in the Company, but we do expect to see significant growth from that part of the business. I mean, if you look at most of the publicly available data around solar, we should see anywhere from 20% to 40% growth in that business.

At this point, we don't provide the specifics, so I can't give you exact numbers, but you can definitely consider that we expect operating AUM to double this year. That is a strong indicator that we have a backlog of projects we are able to activate. As we all know, that's where the software plays a crucial role and it's the highest gross margin part of the business. Therefore, it's a major focus for us to ensure that this process happens as quickly as possible.

Okay. And have you shared what the actual operating AUM number is?

We have not.

As we see more hardware, I mean, hardware part of the business continue to get a little bit more struggling part of it. As you make a move towards more of the software part, how do we look at the trajectory here as the business transitions more and more toward the software only, I guess? I mean, when do we consider the business to be software only and what the trajectory looks like?

Yes. We think software and services are definitely going to be a bigger part of the business. And I think that is, as we have discussed, as we move up the size graph in terms of how big of size projects that we are working on, it's less and less likely that we will supply the hardware; that's all around the project that Mike is leading on the unit controller, the unified system that we are working on and are going to ship here this quarter. So I think longer-term, it's going to make sense for companies to probably do procurement for themselves on the batteries, the larger projects. The smaller ones, we think that won't be the case. But that's why I said earlier on, when I talked about the bookings growth on an absolute basis, $1.1 billion in 2022, obviously a slower growth rate in 2023 when comparing those two time periods.

I would add that the amount of our developers standardizing on Athena is growing. So I think even if they do that, we continue to see them having a need for software. So the Athena platform's ideal, and I echo Bill's comment, we are seeing many more software-only deals building in the pipeline with our commercial team. So, I'm bullish on that front as well.

This concludes the question-and-answer session. I would like to turn the conference back over to John Carrington for any closing remarks.

Sure. I want to thank everyone for joining us on our fourth quarter and full year 2022 guidance earnings call. We look forward to speaking with you during our 1Q call. And again, thank you all for joining.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.