Stem, Inc. Q2 FY2025 earnings call

• Reported record software revenue and positive adjusted EBITDA for Q2 2025.
• Refinanced debt and strengthened balance sheet.
• Executed strategic reduction in force, reducing cash OpEx by nearly 40% year-over-year.
• Launched new software offerings: PowerTrack EMS (expanding into storage and utility scale solar) and PowerTrack Sage (AI-enabled chat-like experience for greater interactivity).
• Storage segment saw momentum with brownfield deals and managed services delivering strategic advantages.
• Professional services expanded with new engagements and enhanced offerings in energy market education, policy navigation, etc.

Total revenue for Q2 2025 was $38.4 million, up 13% year-over-year. Total ARR grew 3% sequentially and 22% year-over-year to $59 million. Solar software grew 20% year-over-year. Storage software and managed service revenue grew 53% year-over-year. Software offerings, particularly PowerTrack, are key, with PowerTrack continuing to be the industry standard for C&I solar asset monitoring. Storage strategic focus is on software and services, with brownfield deals picking up momentum. Professional services expanded with new consulting engagements, including the Green River Energy Center project with rPlus Energies.

• Reiterated full-year 2025 guidance, tracking towards the high end of metrics for all except operating cash flow, which is tracking towards the lower end of the range.
• Expect to generate positive cash from operations in the second half of 2025 and reiterated operating cash flow guidance of between $0 and $15 million for full year 2025.
• Aim to achieve up to $35 million in hardware sales as stated in supplements.

• Headwinds from tariffs and policy uncertainty.
• Fluctuations in working capital due to timing with customers and vendors.
• Macro environment challenges that could impact business, though the diversified software-centric model and international expansion strategy are seen as mitigating factors.

Q: How should we think about hardware sales moving forward, including battery resale revenue and booking of battery hardware sales?

A: Reaffirmed guidance of up to $35 million in hardware sales, but pivoted to software and services-centric strategy with positive software outcomes and associated gross margins.

Q: Anticipation of mix shift in revenue, especially from C&I solar to utility scale solar?

A: PowerTrack EMS is key for entering utility scale solar, which involves solar assets with storage. PowerTrack EMS allows expansion into storage and hybrid assets, and the product is being launched to tap into that market.

Q: Expectations for OpEx decline through the end of the year and run rate into 2026?

A: Cash OpEx went down to over $18.3 million this quarter compared to $29 million year-over-year. Continued effort to reduce cash OpEx with non-personnel related savings, expecting further reduction in the second half.

Q: Color on recent debt deal and its importance?

A: Exchanged about $350 million of aggregate principal debt into $155 million of debt, reducing outstanding debt by ~$200 million and pushing out debt maturity, significantly strengthening the balance sheet with reasonable covenants.

Q: Reconciliation of cash position with end-of-year guidance?

A: Operating cash flow was negative $21 million due to working capital outflows and one-time payments. Working capital is expected to stabilize with the focus on software and move away from OEM battery business, expecting to generate cash flow in the second half.