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No. of Recommendations: 4
A 5% gross margin on 75% of revenue is a crappy business model. :(


Depends. Think razor/razor blade.

Now, there is the reality of quarterly reporting and then there is the business model described in the investor presentations.

BUT, the results plus the model show an interesting picture. Quarterly results show that RPO is ten times the current year's revenue. 37% of that 10x is due to be recognized more than 5 years in the future. The investor presentation claims 80% gross margin for software and for "market participation" revenue. It also claims/predicts 10% to 30% gross margin for hardware sales (how many grains of salt would you like to put on that--your taste may vary). So this becomes a cost of acquiring customer issue. They do of course have sales and marketing expenses, but you could categorize the hardware revenue a gross margin producing sales activity.

But give them 5% margin on 10%, and 70% on 90%, I think that would be 68% GM on the life of the current year's revenue stream (discount for present value????) But it is a complicated picture with host customers (minor % of revenue) where Company retains ownership of the storage system, and partnership customers where ownership is transferred to a customer or a customer's customer. ??? And there is FTM revenue (Front of the Meter) and BTM revenue (Behind the Meter). See slide 10 of the presentation. I think the ownership transfer model is for electric utilities or renewable energy producers.

This could go into the too hard pile and there is a lot of "determined" revenue in the RPO (i.e., the Company has determined what this RPO is and it is reviewed at least quarterly).

But the model itself isn't necessarily crappy. Might be brilliant. Devil is in the details and the accuracy of the "determined" and the stickiness of the contracts and the cube root of the adjusted solar/natural gas Schrodinger coefficient.

KC, who has not added to the watch position.
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