Stem, Inc. Q1 FY2025 earnings call

• Established four business units (Software, Professional Services, Managed Services, OEM Hardware) with full P&L responsibility. • Implemented a 27% reduction in force, expected to save $30 million annually ($24M in 2025), preserving software focus. • Software revenue growth: Solar ARR up 10% QoQ, 24% YOY; storage ARR up 4% QoQ, 31% YOY. • Achieved record GAAP gross margin 32%, non-GAAP 46%, and first positive operating cash flow. • Focused on software development: Emphasized PowerTrack, paused PowerBidder Pro and APM, integrated AI in software roadmap. • Organizational changes aim to enable better decision-making, ROI tracking, and capital deployment towards high-growth opportunities.

Total revenue was up 27% year-over-year. Software revenue was up 17% versus Q1 2024. GAAP gross margin was a record 32% and non-GAAP gross margin was 46%, close to an all-time high. Operating cash flow was $9 million, the first positive operating cash flow. Cash balance at quarter-end was $59 million. The business units (Software, Professional Services, Managed Services, OEM Hardware) have full P&L responsibility, but external reporting segments may differ.

• Reaffirmed 2025 financial guidance. • Cost savings from 27% layoff expected to be $30 million annually, with $24M realized in 2025, exceeding initial 20% target. • Solid cash position provides runway for business plans. • Plan to enhance financial transparency via segment reporting, with business units having full P&L responsibility.

• Macroenvironment uncertainty: Evolving economic and regulatory policies affecting clean energy. • Tariff exposure: Some offerings like edge computing devices face tariffs, mostly passed to customers; OEM hardware resales may be affected, with efforts to negotiate tariff absorption or diversify suppliers.

Q: How is the bookings environment and tariffs affecting storage bookings?

A: OEM hardware sales are not a significant component. Had dialogues with OEM providers, but no discernible slowdown in deployments. Can pass tariff impacts to customers.

Q: On Brownfield opportunities, specific geographies or size?

A: Broad-based, connected to geographies where managed service platform operates; more volume in megawatt hours/gigawatt hours makes managed services more profitable.

Q: Clarify cost reductions and 2025 guidance?

A: 27% layoff expected to save $30M annually, $24M in 2025, exceeding initial 20% target. Hone margins and expenses by business unit with four units.

Q: Nature of PowerBidder Pro deemphasis?

A: Focus on software strategy, investing in growth potential; PowerBidder Pro had low ASP, ARR still increasing despite removal.