Stem, Inc. Q3 FY2025 earnings call

• Strategic realignment continues to deliver positive results, with third quarter revenue up 31% YOY and ARR growing 17% YOY.
• Achieved second consecutive quarter of positive adjusted EBITDA and positive operating cash flow.
• Unified corporate identity under the Stem brand and streamlined product portfolio within the PowerTrack suite.
• Launched PowerTrack EMS for hybrid and stand-alone storage projects, which unlocked new markets and received strong customer reception.
• Advanced strategic priorities for 2025, including driving software and services revenue growth, revamping software development, and reducing cost structure with concrete results in Q3.
• PowerTrack Sage, an AI-powered assistant, on track for limited beta release in December 2025 and broadly available in 2026.
• Managed services revenue had strong recurring base revenue growth of 14% YOY and 4% sequentially.
• Consultative professional services offering continues to drive repeat business and cross-selling.

In Q3 2025, Stem reported revenue of $38 million, up 31% year-over-year. ARR grew 17% year-over-year to $60 million. PowerTrack software revenue increased 10% year-over-year with ARR expanding 19% year-over-year. Managed services revenue was down year-over-year due to onetime overperformance in the prior year. Battery hardware resale brought in $4 million this quarter. GAAP gross margins were 35% and non-GAAP gross margins were 47%. Software and services revenue growth was evident, with the platform managing nearly 34 gigawatts of solar assets.

• Revised revenue guidance to $135 million to $160 million from prior $125 million to $175 million, with software and service revenue range $125 million to $140 million and lower battery hardware resale expectations up to $20 million.
• Raised gross margin guidance to 40% to 50%.
• Adjusted EBITDA guidance revised to between negative $5 million and positive $5 million.
• Operating cash flow guidance adjusted to between negative $5 million and positive $5 million.
• Year-end ARR forecast remains $55 million to $65 million.

• Policy uncertainty remains a macro headwind, but the diversified software-centric model and international strategy aim to mitigate impact.

Q: Justin Clare asked about guidance update, whether outlook moderated.

A: Arun Narayanan said guidance ranges tightened, mainly due to deemphasized OEM hardware resale business, but still tracking toward midpoint/high end of ranges.

Q: Justin Clare inquired about Q4 gross margin compression.

A: Brian Musfeldt said compression in Q4 is due to mix shift with higher edge hardware deliveries at slightly lower margin.

Q: Jon Windham asked about customer feedback and path to net income positive.

A: Arun Narayanan said momentum in customer engagements is maintained, and more guidance on income statement progression will be provided in future calls.

Q: Thomas Roche asked about benefit from hyperscaler data center build-out and OpEx run rate.

A: Arun Narayanan said Stem watches data center market for renewable energy plays, and Brian Musfeldt said cash OpEx is managed with ongoing savings efforts after large cuts in prior quarters.