Q2 2023 earnings conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and. I would now like to turn the conference over to Mr. Ted Durbin, Head of Investor Relations for Stem. Please go ahead. Thank you, operator. This is Ted Durbin, Head of Investor Relations at Stem. Welcome to our second quarter 2023 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 Form 10-Q and our other SEC filings, please. We will be using a slide presentation today. Our earnings release and presentation are on the Investor Relations section of our website at www.stem.com. We'll start the call today with prepared remarks. Mike Carlson, COO, Prakesh Patel, Chief Strategy Officer, and Larsh Johnson, CTO, will also be available for the question and answer portion of the call. Now I'll turn the call over to John. Thank you, Ted. Good afternoon, and thank you all for joining us today. Beginning with slide three, we will cover six items today to include our second quarter results, commercial traction, business updates highlighting our continued execution, and technology advancements that I'm excited to share with everyone. Bill Bush, our Chief Financial Officer, will discuss our financial results and highlights. The Stem team delivered another strong quarter with revenue of $93 million, up 39% versus the second quarter 2022, which was above the midpoint of our guidance range. Our higher-margin services revenue grew 31% year-over-year and 11% sequentially. Contracted Annual Recurring Revenue, or CARR, was up 5% versus the first quarter of 2023. Lastly, our GAAP gross margin was 13% and our non-GAAP gross margin was 18%, in line with our full-year guidance. We are reaffirming full-year 2023 guidance, including our continued expectation of achieving EBITDA-positive in the second half of this year. Bookings increased by 5% year-over-year to $236 million. We are seeing much larger deal sizes as we expand our presence in the front-of-the-meter market segment. In fact, our average project size has roughly doubled over the last year. A great example of our execution in FTM was the Ameresco award we announced today and will cover later in the discussion. One knock-on effect of our success in growing larger quarter. As a result, some deals slipped past the quarter close, and our bookings in Q2 fell short of our target. The momentum in recent contract executions and the pipeline for second half gives us confidence to reaffirm our full-year bookings target of $1.4 billion to $1.6 billion. The overall demand environment is very strong, and we continue to see opportunities to close significant deals in the second half of this year. Finally, our AI-driven technology, driven by an accelerating rate of systems commissioning, strong solar revenue growth, and increased market participation revenue. Demand remains very strong for our solutions as customers and partners have better visibility into their project economics now that the IRS has clarified some key provisions in the Inflation Reduction Act. Moving to s lide six. We're proud to announce today that we were recently awarded a significant standalone energy storage project with Ameresco, one of the fastest-growing electric cooperatives in the U.S. The 313 MWh installation will help their customer balance power needs while integrating renewable resources to create a more resilient and responsive power system. Our scope of work includes energy storage, hardware, professional services, and a 20-year Athena contract. I'll also note that this project follows on the heels of a separate deployment with Ameresco and Holy Cross Energy in Colorado. That one recently won a top project award with Environment+Energy Leader. This is another example of our history of execution and a significant contribution from repeat business to our bookings momentum. We believe the Ameresco project demonstrates two key trends. First, in particular, the direct pay provisions in the IRA and the recent IRS guidelines are accelerating engagement and interest by several co-ops and munis in deploying energy storage. We expect upside to our initial software offering as the customer expands its wholesale market trading activities. This is a dynamic we've seen in other markets, where we've added services and value for customers over time. On the solar side of the business, we're seeing continued strength, with a 39% year-over-year increase in backlog, in addition to solid growth in services revenue and AUM. While the utility-scale portion of the business continued to combat supply chain and labor challenges in the first half of 2023, we remain focused on this high-growth segment of the market and providing more innovative products and services. A solid proof point is the recently announced 304-megawatt win in Hungary, a direct output of our focus on this key segment. Turning to slide seven, regarding our AI technology leadership. The technology team continues to make exciting progress and receive global recognition. In June, our Athena platform was recognized as the winner of Best Predictive Analytics Platform in the sixth annual AI Breakthrough Awards, a program that honors excellence and innovation in multiple AI and machine learning categories. We were incredibly proud to have Athena recognized as a leading innovative software solution, driving the clean energy transition. In July, STEM received the Top Product of the Year award in the Environment+Energy Leader Awards program, an organization that commends excellence in products delivering significant energy and environmental benefits. These awards recognize what our customers experience as differentiated economics and sustainability benefits based on industry-leading predictive analytics, trained on years of experience operating solar, storage, BTM and FTM assets in multiple markets and utility jurisdictions. Moreover, these awards clearly highlight the fact that we have built one of the leading clean energy intelligence platforms in the industry, as recognized by subject matter experts in the artificial intelligence and software space. Please turn to slide eight on our utilization of new AI tools into our processes. There's been a lot of buzz around new and exciting developments in AI, and the fact is, many AI technologies are not new, and certainly not new to Stem. These technologies and capabilities have been a foundation of our software and our approach since the company's inception. That said, our software engineering team is leveraging the latest advancements in generative AI tools, are integrating advances in AI to enhance our asset management capabilities and enable significant efficiencies in software code development. This is yet another example of our leadership in bringing artificial intelligence tools to the energy sector. Earlier this year, our software developers started integrating generative AI tools into their workflow, and as a result, our developers have seen up to a 50% improvement in their coding productivity. Today, we're rolling out this approach across our dev teams and evaluating additional applications for these powerful tools to accelerate our product roadmap. Looking forward, Stem engineers are building a pilot Athena chatbot that leverages our extensive knowledge base to offer asset operators powerful and flexible prompt-based tools that enable improved asset performance, as well as an early efficient identification of operational incidents. These tools will enable operators to accelerate root cause analysis, initiate corrective actions, and optimize performance. Athena's Asset Performance and Optimization is anchored in best-in-class availability, paired with unmatched economic outcomes. Generative AI promises to unlock new trading insights for business analysts and energy traders, creating further distance between us and other competitive offerings in the market. With our coding productivity gains from leveraging AI tools, we anticipate generative and predictive AI to help customers access Stem subject matter expertise at scale. Growing our professional services offerings is a key area of our focus. Our teams are engaging with several customers to execute on this strategy. Now I'll turn the call over to Bill. Thanks, John. Starting on page 10 with our results for the second quarter of 2023. As John highlighted, we reported revenue of $93 million, which was a 39% increase versus the $67 million we generated in the second quarter of 2022. Revenue grew 48% for the six months ended June 30th, reflecting the consistent momentum of the business. The second quarter revenue performance was also above the midpoint of our guidance. While most of the revenue growth this quarter came from additional storage sales, we also realized significant growth of $5 million in solar sales, representing a 32% year-over-year growth. We also recognized $16 million of high margin services revenue, representing 17% of total revenue for the quarter and a sequential increase of 11%, continuing our momentum in this important part of the business. Our GAAP gross profit was $12 million, and GAAP gross margin percentage was 13%, up from 12% in the same quarter last year. non-GAAP gross margin was $16 million, up from $11 million, a 45% increase in the second quarter last year due to higher sales and improved margins. On a percentage basis, non-GAAP gross margin was 18% in the quarter, up from 17% last year due to higher services gross margins. We continue to execute on our initiatives to achieve greater operating leverage and drive down our cash OpEx as a percentage of revenue. We expect cash OpEx as a percentage of revenue to be less than 25% for the full-year 2023, as we continue to access lower cost geographies and focus on cost discipline. We continue to scale for growth with our. with a focus on system enhancements to allow for increased productivity and tighter integration across our worldwide workforce. Since the acquisition of AlsoEnergy, we've increased our headcount in India by 50%, providing significant operating leverage. Net income was $19 million, versus a net loss of $32 million in the same quarter last year. The year-over-year change was primarily driven by a one-time $59 million gain on the extinguishment of debt due to the repurchase of a portion of the company's 2028 convertible notes in the second quarter of 2023. Adjusted EBITDA was a negative $9 million for the second quarter, versus a negative $11 million in the same quarter last year, as we remain on track for our full-year adjusted EBITDA guidance, including our continued expectation to achieve positive adjusted EBITDA in the second half of 2023. Cash exiting the second quarter of 2023 was $138 million, down from $206 million in the prior quarter. The sequential changes in cash was driven by outflows of approximately $102 million for purchases of battery hardware that will soon convert to revenue upon deployment during a very active delivery cycle, primarily expected in the second half of 2023. We continue to closely monitor and manage our receivables, which increased this quarter. We expect our receivables balance to normalize in the coming quarters. These outflows were partially offset by approximately $105 million of net proceeds from the net deleveraging green convertible senior notes, offering completed in April of 2023. Together, these factors led to a net reduction in cash of approximately $68 million. Based on our current forecast, we expect to exit the year with no less than $150 million of cash and cash equivalents. This forecasted increase in cash throughout the second half of the year is driven by higher adjusted EBITDA, planned collections and accounts receivables, and in continuing operating leverage. We are seeing improved pricing and payment terms with our supply chain partners and expect the utilization of cash to further decline as we continue these negotiations for supply in 2024 and beyond. Turning now to slide 11 for a look at our operating metrics. Backlog increased 88% year-over-year and increased 10% on a sequential basis to $1.4 billion. The largest driver of the backlog increase was a $236 million of bookings in the quarter. End market customer demand remains strong, and we are confident in our ability to continue to deliver strong results. Our AUM on the storage side of the business grew from 3.5 GWh at Q1 2023 to 3.8 GWh in the Q2 of the same year. That's a nine, driven by our strong commercial momentum. Our operating AUM on the solar asset performance monitoring side of the business ended the quarter at 26 GW, up 400 MW, or approximately 2%. The solar industry, in particular, the supply chain, is beginning to recover, and the increase in AUM is evidence of this momentum. I also want to highlight that we've been successful at migrating customers from our legacy applications onto our core PowerTrack platform. Turning now to slide 12 and our 2023 guidance. As John mentioned earlier, we are reaffirming our guidance for the full-year 2023. We are focused on converting backlog to revenue, continuing to improve our operating leverage while reducing working capital usage. We have organized the company to achieve our goal of achieving or reaching EBITDA-positive in the second half, believe that the continued execution by our teams and the strength in customer demand will support that goal. With that, let me turn the call back to John for some closing remarks. Thanks, Bill. Wrapping up on slide 13 with our key takeaways. We closed the second quarter and first half of 2023 with strong execution and financial performance. Revenue was above the midpoint of guidance, with robust momentum across the following four bullets on the slide: strong end market demand, with several large projects executed and in our pipeline; double-digit quarterly growth in services revenue, with a significant project services and software-only deals in the pipeline; continued recognition by third parties of our best-in-class Athena AI capabilities; and high confidence in the cadence of cash inflows, exiting the year with a strong balance sheet and positive EBITDA expected in the second half of 2023. In summary, we reaffirm our full-year 2023 guidance. With that, I want to thank our key stakeholders, our customers, our channel partners, our suppliers, and shareholders. When I reflect about how far we've come, it's all about the global team at Stem. A big thank you for the continued execution and commitment to our success. We have a lot to be excited about for the balance of the year and continuing to execute on our mission and values. Now, let's open the line for questions, please. We will now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from James West with Evercore ISI. Please go ahead. Hey, good afternoon, everyone. Hey, James. John, I'm curious, you, you went through a little detail here on the, you know, the, the roadmap for Athena and leveraging, you know, Generative AI, which, you know, we see a lot of companies doing, but you guys are kind of first here and then in the storage, or the area. The software area of storage. Could you maybe elaborate on that product roadmap that you highlighted? Are these new applications? Are they enhancements to additional applications? Kind of what's the, what's the framework, and how are you thinking about that, that roadmap? Yeah. Hi, this is Larsh Johnson. Let me, let me take a stab at that. Sure. Generative AI is actually going to be a terrific complement to the products that we currently offer and leveraging the experience we have with predictive analytics. What you see in the generative case is often that sort of that bot function that helps the human operator, that helps the human administrator of a system to understand defects or performance questions, analyze issues, and that sort of thing. As mentioned, we also see that helping the trading operators who are using the predictive analytics and our automated bidding and trading capabilities to optimize market performance and so forth. This digital assistant, if you will, is the best use case that we see today for Generative AI. I think there are probably going to be many more, but that's certainly where we're focused today. Okay, that's very helpful. Thanks, Larsh Johnson. Then maybe, one for Bill Bush. With the guidance kind of unchanged, despite a pretty solid or above guidance, at least for revenue in the second quarter, is this just a matter of the guidance is pretty wide, and you're being conservative here, or did things slip into the next year? Is there anything to be aware of, with the guidance stay the same? Thanks for the question, James. I think that we're in a good position. I mean, I think which, which is what we said in the past, first two quarters are the lighter from a revenue standpoint quarters. You know, we've still got quite a bit of ways to go for the year. I think we feel pretty comfortable. You know, the midpoint is $600 million on the revenue side, and we feel quite comfortable with that number. Okay. Understood. Thanks, guys. Thank you. The next question comes from Brian Lee with Goldman Sachs. Please go ahead. Hey, guys. Good afternoon. Thanks for taking the questions. Kudos on the solid execution here. I guess first question, I'd have is just around the timeline for reaching positive on adjusted EBITDA. I know that's been a big focus of the team here throughout this year and into the second half of the year. Didn't know if you had, at this point in the year, better visibility around, you know, tracking to that in 3Q or 4Q, or just any general updates around the progress toward that target? Thanks, Brian, for the question. This is Bill. As we've mentioned, you know, a couple of times, you know, on this call, I mean, we're very comfortable with the guidance in terms of achieving the EBITDA-positive in the second half. I, I would say I think we're on a good track for that in terms of a lot of things that we've done generally, you know, with the business, where, you know, we, you know, we've talked about, you know, the increase in headcount in India, so really a lot of cost control and cost maintenance. We've done a lot of work in terms of the, the underlying, say, really the, the systems of the business, such that we can be as productive as possible. There's been a lot of work done, you know, just in terms of making sure that our processes are in the best possible position. We're fortunate in that the commercial side of the business is doing really well. There's just a lot of really solid end-market demand for the company. That certainly was, you know, shown in the bookings of last year, almost $1.1 billion in bookings for the full year. At the midpoint this year, we're saying $1.5 billion, and that's, of course, you know, reflective of some of the additional software-only contracts that we're going to do. We think that we're in a great position. The second half is the much bigger part of the year. 75% of the revenue, you know, comes from that, that time. So, you know, when we look at where we are from a cost standpoint, and we look at what we're, you know, what we're expecting from a revenue standpoint, we're very confident that we can meet that goal. Yeah, and I'd add, Brian, we've got, I think, very solid visibility into the existing bookings that are scheduled for delivery in the second half. You know, the hardware is secure, it's ready for delivery, and the cadence on that's weekly withh, Mike Carlson leading the process with, the deployment team. Yeah, we feel, we feel good about the second half, guidance, and obviously we affirmed it, so. Okay, great. I appreciate that color. You know, maybe since John, you did bring it up, this has become a bigger and bigger theme across the renewables tech landscape this year. You know, reversal of last year, where everyone was talking about inflation and shortages, now we're talking about, you know, what do you have in inventory? When can you take advantage of hardware cost deflation and the like? So I know you guys have hardware pretty much secured through next year, if I recall. What's the opportunity here as you look into the supply chain to start benefiting from hardware cost deflation trends on the battery side? When could that start showing up in your numbers, and how does that kind of manifest? Would that be the ability to, you know, to just drive higher volumes, or are you going to be able to maybe get some margin capture on the hardware side? Just how are you thinking about it and maybe the timeframe for that? Yeah, you know, I'd say a couple of things on that. As, as we mentioned in the previous call, we spent a fair amount of time in China with a variety of different suppliers, and I think we, with our modular ESS strategy, will enable us to be maybe more competitive on, on that front. We certainly know the working capital will come down as well, Brian, so we like that equation. I'd say that, you know, the deflation piece, it, it depends on your delivery timeline. You see a little of that right now. Lithium's kind of bouncing around, but, at an aggregate, our view is we want to make sure we're the highest quality suppliers that can prove low cost roadmap, and we feel like we're working with some very good suppliers. We do think we'll see improvement of terms than we, than what we had in the past. I think that would probably reconcile more into 2024 than it would maybe in the second half of the year. We are getting a few different spot deals coming in, so you could see some of that this year still. Okay, appreciate that. It does sound like in 2024 you can start to benefit from some of that, even in the, even in the first half of the year? We'll see. I mean, I, I just think that we're, you know, we have a good line of sight of what we need hardware now for the second half. Next year, we're starting to have more and more of those discussions. I don't want to commit that you're gonna see a significant deflation and a margin flip next year. We'll talk about that in the first quarter, you know, as we see it today, we, we do feel like next year could be, and the years following, could be more compelling from, you know, the, the, the terms that we've had to this point. Hey, Brian, this is Bill. One thing I also wanted to mention, too, you mentioned, or you said it in your question, that we've been fully contracted out through 2024. We actually are not fully contracted through 2024. To the extent that you see a near-term price reduction, we'd be able to take advantage of that. Yeah. As you know, the second half of the year is where we're buying and buying and placing most of our batteries, so it's an opportunity for us to capture, to the extent that price decreases do come through, be able to capture some of that for ourselves and our customers. Okay, that's great. I appreciate that additional color. I'll pass it on. Thanks, guys. Thanks, Brian. Thank you. The next question comes from Thomas Boyes with TD Cowen. Please go ahead. Thanks, thanks for taking the questions. Maybe first, you know, I, I know your, your focus for storage is, is US-based, but I, I wanted to talk about the approach maybe internationally, given the large solar award in, in Hungary. Now, are you targeting other countries in, in Europe specifically, you know, given the, the Net-Zero Industry Act? Yeah, Thomas, thanks for the question. Couple things on that front. We, we've said it times in the past, maybe the best international market will be the US as it stands because of the Inflation Reduction Act. We are closely monitoring Europe. We do have a team there, that led this Hungary win, out of Berlin, so we're well positioned, I think, as that unfolds. We're not opposed to going international, but we just feel like really the US is our primary focus, particularly the second half. Obviously, we'll update our plans on the international expansion going to next year. We do have a decent-sized team that are very, very deep, particularly around the solar side, and we're coming up to speed on the, on the storage side. We're monitoring it, and if there's an opportunity, we'll go wherever the best opportunities are, and we just got to see how that that unfolds. Great. Appreciate it. Then, as my follow-up, you know, could you just talk about maybe the composition of the bookings for this quarter? Were there specific markets that had shown strength, that you could highlight? Yeah. Hey, Thomas, this is Bill. I think there's a couple of space spots that continue to be strong areas for us, and I would kind of coming east to west, and this is on the storage side, and I'll talk about solar in a second after that. Certainly, the New England area, New York, Massachusetts, Maine, those are areas that have really done quite well for us in here in the past. Of course, Texas is a major market that we're very involved in. We're starting to see some activity in the Midwest, in Illinois and some other places in that, in that area, and then, of course, California. Those are the major for us, those are the major storage markets, and even as I say that, one of the biggest bookings that we had this, this quarter was in Colorado. you know, I think that, that we're pretty happy with the way solar, or excuse me, storage, in general, is spreading across the country, and I think we'll be the beneficiary of that, having been able to move, you know, demonstrated movement across a large number of geographies. On the solar side, we continue to see a lot of strength across the US and even into some of the international markets, with a particular focus on Europe. The Hungary booking or the Hungary sale is a, is a good- is good evidence of that, I think that we're gonna continue to do well there. Maybe if I could, just squeak one more in there, just 'cause you had mentioned. Yeah. M assachusetts. I know that you've had some pretty impressive market share growth there for the past 18 months. Can you maybe talk to us what's about driving that specifically? Yeah, most, I mean, most simplistically, the Mass SMART program is driving that. The, you know, the Commonwealth of Massachusetts passed that program now, call it two years ago, maybe a bit more, and that market continues to be really strong. In the same way, I think New York is reflective of that as well, where there's a program that was put forth, and it was accepted by the legislature, and you're starting to see significant activity by companies, you know, like, you know, a good example is of that is Nine Dot, which is one of our, you know, significant customers, very focused on installing, you know, battery storage systems in urban areas with a focus on New York City. I think you're just gonna continue to see a lot of deployments across markets like that, that need to have energy at the point where it's being used as, you know, distributed energy resources or DERs. I think you're gonna see more and more of that as we go. Perfect. Thanks again. Mm-hmm. The next question comes from Sean Milligan with Janney. Please go ahead. Hey, guys. good quarter. I, I was hoping that you could talk a little bit about the outlook for software-only contract awards over the back half of the year. Obviously, when you look at the 2025 guidance that is out there, you know, you'd expect an uptick in software-only awards, and you mentioned it when you brought up the $1.5 billion bookings number, Bill, but just trying to get an understanding of how you think that evolves for you here over the next kind of six months? Thanks for the question. And I'll, I'll let Mike jump in on this as well, 'cause it's kind of in his area. I, I think that one of the things that we're going to see, and this kind of rolls out of that modular ESS solution, you're gonna see more software-only contracts that we sign. A lot of that is because as we move up the size curve, and we've talked about this in the past, many of our customers already have, you know, say, DC block relationships, and so we are less involved in the purchase of that equipment than maybe we had been in the past. I think that's a reflection of the maturation of the market in general, and so I think you're gonna see more and more of that. I think it goes well into our controls background, very similar to what we do on the solar side of our business, where, you know, nobody's really calling us, asking us to procure panels for them, as an example, or inverters. I think it's the melding of the two businesses. I don't know, Mike, if there's any. No, I, I agree, and I think the other thing is we've, you know, been, you know, launched this July 1, some of the software and services only. We're getting a lot of feedback from the market, both greenfield and brownfield, that are looking to either retrofit what's already out there for an optimized performance, or, as Bill said, they're, they're starting to, you know, put the supply chain into various, you know, subcategories and buy vertically focused solutions. This gives us the opportunity to make sure we're, you know, maintaining where the market goes. We've got that opportunity on both sides, and we're positive on the initial. You know, we've been just 30 days into it, but the initial responses from some of the discussions have been good. Great, thanks. Then, John, you mentioned market participation revenue during the quarter. Obviously, I know it doesn't seem like it was overly meaningful, but I think that that's upside to kind of the long-term guidance that you've given, right? I was hoping you could talk a little bit about maybe percentage of assets or something that are participating in markets where you're seeing upside from that revenue stream, and then maybe what the outlook is for that, you know, moving forward? Yeah, you know, we don't really break it out specifically. I will say the outlook, I think, will continue to be strong. It is interesting, you're seeing more grid operators, utilities, others, that want to pull from these assets. I think it's just kind of a, a learning curve. You know, it's not a material portion of the software revenue, although it is very strong gross margins, you know, 80%+. We're excited about it. We'll continue to update everyone on the calls on how we're doing there. I would say that I think the general fact that it's being utilized more is very positive, and it's what we expected the assets to be used for, you know, all the way back when we did our roadshow. It's good to see it, getting some traction. I mean, one more, if I can sneak it in, but, you guys kind of gave an expectation for cash at the end of the year. That obviously follows a, a, you know, couple of robust quarters in terms of revenue in Q3 and Q4. I was hoping you could kind of refresh us on how maybe working capital should trend throughout a year. Like, looking into the first half of next year, do you start to see the benefit of those, you know, Q3, Q4 revenue in terms of, you know, flowing through the working capital lines? Just trying to get a sense of like. Yeah. Yeah. Absolutely. I mean. Thank you. Yeah, we've been building receivables here for a little bit. I mean, You know, they grew again this quarter. We would expect to start seeing the benefit of, of those sales, you know, really over the next six to nine months. That's how we feel pretty confident, 'cause more typically, the cycle has been that we would be collecting cash in the first half and spending it. This year, I think what we're gonna, you know, flip that a little bit, and we're gonna collect more cash in the second half than maybe where we had before, which gives us the ability to still build receivables while maintaining the cash balance. I think we're, we're feeling pretty confident about, about that. We're looking very closely to our customers in terms of the, you know, the, the payment cycles, and we feel good that that, that number, you know, that we can meet that number and, and potentially even beat it. Great. Thank you, everyone. Mm-hmm. The next question comes from Julian Dumoulin-Smith with Bank of America. Please go ahead. Hey, good afternoon, guys. This is Cameron Lockridge actually on for Julian. Look, I wanted to just go back to the question that was just asked, actually, just about working capital and how we should think about it at the start of 2024. I mean, presumably, you know, just given the revenue ramp that's implied by your guidance, your long-term guidance, we should probably see an even bigger uptick in just working capital investment in the front half of 2024. Just kind of maybe walk me through or walk us through how, how you're thinking about that. You know, again, like if, if inventories are up, you know, $150 million-ish, $140 million-ish this year in the first half, should we think about it as, something larger than that in the first half of 2024? No, we definitely would not expect to see that. I mean, I think one of the things that. I should have said thanks for the question, too. One of the things I think that, you know, we've talked about, and this is where the modular ESS comes in, is that the terms and conditions under which those sales will be made will be very different than what the traditional business has been. We're kind of morphing the way capital will be used in the business so that it's more efficient, and that we know effectively we'll need less cash to run the business going forward. We're, you know, which is why we started that initiative. It's why, you know, in part, it's why it's quite popular with some of our customers. When you look at the numbers, you know, we've said that, you know, we expect hardware, which is the primary user of working capital, to grow at a 30% rate, which means that for 2024, hardware is probably gonna have a slower rate of growth than it did in this year. Across the three-year span, you know, this year we're gonna grow hardware. If you, you know, just look at the numbers, we're gonna grow hardware by quite a bit. I mean, last year, you know, we were a little bit over $300 million, and we're gonna do around $500 million this year. You're gonna see call it a 60 odd% growth in hardware sales. We don't expect that for next year. That, you know, say, that slowing rate of growth will do two things: One, I think it'll allow us to take advantage of better hardware margins and sell, you know, relatively less hardware to do it. I think when we think about the working capital side of the business, we would expect, you know, we would not expect the kind of numbers that you're talking about in terms of inventory growth. As a result, you know, we should be able to maintain, you know, our cash balances into 2024. Got it. That's helpful. Thank you very much. For sure. Then just flipping over to software and thinking about margins there and margin progression, can you just kind of walk us through, you know, broad strokes, how the software versus services margins look today, you know, on a relative basis to each other, and how you expect that to trend in the back half into 2024? Straight software margins today are 80% plus, and they've been that way for quite some time. The services margins, yeah, trend lower than that. They're in more in the 40%-50% range, depending on whether you're talking solar or storage. Still, obviously, you know, quite good margins. You know, I think you can see the sequential growth that we've had in both the solar and storage services over the last few quarters. We continue to, to book more and deliver more value there for our customers, but we don't see, you know, margin decline or decrease in any of those, in any of those aspects. We're quite confident that we're gonna continue to, to increase the amount of services and software that we're able to sell to our clients. That's, of course, one of the main drivers of our ability to achieve EBITDA-positive, is continuing to increase the amount of services that we do at any point in time. Perfect. All right, guys. Thank you. That's all for me. I'll turn it back. Absolutely. Thank you. Thank you. Once again, if you have a question, please press star, then one. The next question comes from Kashy Harrison with Piper Sandler. Please go ahead. Hey, everyone. Thanks for taking the questions. This is Luke on for Kashi. As far as the software service revenues, it looks like the year-over-year growth, you know, dropped down to about 30% compared to 47% in the first quarter. Wondering if there's any sort of interconnection issues that could potentially be going on here and how we should be thinking about that in the back half of the year? Yeah, interconnection continues to be a problem, Luke. I mean, I think that, yeah, I think you see that in a couple different aspects of the business. Certainly one, you know, on the project side of the business where, you know, we've invested some capital in getting projects into NTP. We've seen some slowdowns there, I think that's been particularly true in markets like New York and Texas, where we've seen just, you know, in general, slowdowns. I think, I think one of the things we've consistently said, which is, you know, is that interconnections haven't gotten better, but they haven't gotten much worse. I think probably in New York, they did get a little bit slower, so that's definitely gonna have an impact on us over time. You know, there was a new rule that was passed in New York, and there have been, you know, a couple of situations there that, you know, are giving some of the regulators pause. As a result of that, you know, I think, time frames are gonna be impacted by that. I would say in large part, I mean, for us, we're gonna continue to be able to increase the, the, you know, the total amount of services and software that we sell in at any point in time. you know, I think, you know, I've been, I've been in renewables now for almost 15 years, and I was chuckling with a colleague the other day, complaining about interconnections and thinking, you know, that's been the same problem for the last 15 years. You know, I think one of the things is, it's certainly impacting is the success of renewables being installed in any particular geography at any time. You know, that's something that we continue to work and are, you know, with our various partners on the regulatory side, folks that are working with the local agencies to, to do what they can to improve, the, the, you know, the tariffs associated with interconnection. It's definitely an issue, has been for a long time, and probably will continue to be. Okay. thanks for that. That's helpful. On, on the hardware gross margin side, I know you said, you know, you're kind of looking to do less of that, but you also mentioned projects are getting bigger. How, how should we think about the push and pull between larger FTM projects, but also, you know, trying to be less involved with the FTM projects? Yeah, that's really where the modular ESS comes in. That's, that's exactly the push point right there, is as the systems get larger, more than likely we will not be supplying the DC blocks to those projects. in that those developer partners are what we would call, you know, basically fully integrated, and that they have sourcing mechanisms and sourcing relationships. What we're going to be doing is selling controls, selling software, and potentially selling inverters and less DC blocks. Okay. thanks. I will pass it on. Perfect. Thanks for the time. The next question comes from Kailash with Northland Securities. Please go ahead. Well, hey, guys, good quarter. Just wanted to speak a little bit about the PJM market and, how are you guys seeing that playing out in 2024 and 2025? Hi, this is Prakash. you know, the PJM market is one where we're focused on the BTM or solutions for the commercial industrial segment. there's strong demand there, given the fact that energy prices have ticked up. There's been higher, generally a greater focus by corporates around driving energy efficiency. there's good demand there, but it's not a major component of our overall pipeline or bookings mix at the moment. Sure. Just as a follow-up, since you spoke about distributed energy resources, I was just wondering if Stem's products are OpenADR certified, is that relevant for you? Yeah, very much so. We have a number of OpenADR connections with our utility partners that are part of our VPP operations. Very often, this summer, during some of these heat waves, we've been using OpenADR signals from utilities to dispatch the virtual power plants that we operate with storage for a number of different utilities around the country. Sure. That's, that's helpful. Thanks. This concludes the question and answer session. I would like to turn the conference back over to John Carrington for any closing remarks. Please go ahead. I want to thank everyone again for joining us on our second quarter 2023 earnings call, and we look forward to speaking with you during our third quarter earnings call. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.