This may affect STEM's ability to innovate, which is not good, due to this highly competitive industry. STEM: Declining R&D Expense Ratio (Source: Data from Seeking Alpha. However, upon crunching up the numbers further, we can see that there is some slowness on its R&D spending. With these improving metrics, I believe STEM has the ability to experience a positive turnaround in the next few years. STEM: Improving Total Operating Expense Ratio (Source: Data from Seeking Alpha. This snowballed into its improving total operating expense ratio, as shown in the image below. This may improve further, thanks again to its AlsoEnergy acquisition, where management expects continued efficiency with a 15% to 20% Non-GAAP gross margin in FY22, better than the 11% recorded in FY21 and the 10% recorded in FY20. On the other hand, STEM has positive gross margins both on a GAAP and Non-GAAP basis of 12% and 17%, respectively, improving on a year over year basis. This $14 million addition from AlsoEnergy is actually good however, upon further investigation, this is quite short from its $15.6 million normalized quarterly level, where AlsoEnergy recorded an annual revenue of $62.56 million in December 2021. Most of the growth came from the storage hardware sales on FTM and BTM partner projects and about $14 million from the addition of AlsoEnergy. The quarterly revenue performance surpassed the Q4 2021 performance of $53 million or an increase of 26%. According to the management, it remains elevated on its Q4 2021 performance, as quoted below. In fact, the company ended the quarter with $66.9 million, up from $41.1 million in Q1 2022 and $19.3 million recorded in Q2 2021.
According to the management, they ranked number one for solar and storage monitoring and control and expect a significant boost on integration, which promotes cross-selling opportunities. Going forward, STEM is enjoying a positive synergy with its AlsoEnergy acquisition. Even though this is a third-party estimate, it would be nice to hear the management's thoughts on the company's financial outlook in the long run. Its TAM is forecasted to grow by between 20% to 300%, according to market research firms Wood Mackenzie and BNEF. The Inflation Reduction Act Law has been a good catalyst for STEM. I believe waiting for a possible correction will make the risk/reward better than entering at these levels. Additionally, STEM is a bit pricey as of this writing with a P/S ratio of 12.71x compared to its peers' average of 6.77x.
Looking forward, its adjusted EBITDA outlook still remains on a declining trend, which makes this stock a bit risky with today's uncertainties. Although there is some improvement, especially looking at its gross margin, it is not enough to translate to positive operating income.
I believe the company still has a few years to prove itself profitable. In its Q2 2022, STEM showed a positive bottom line of $27.1 million, a better performance than its peers, but this is due to a non-recurring gain incurred in Q3 2021. ( NYSE: STEM ), as one of the leading companies that provides intelligent energy storage networks, is well positioned to benefit in this growing energy storage market. In fact, analysts believe that the US will outpace its emission reduction target by 2030. However, the recently enacted Inflation Reduction Act, which promotes investments in clean energy, provided a positive catalyst for the overall clean energy industry. The world is moving towards a more sustainable future, but the transition seems challenged by the pandemic and ongoing inflationary pressures.
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