Stem, Inc. Q4 FY2025 earnings call

Arun noted 2025 was a transformative year reshaping STEM into a software-centric organization. 2026 priorities: 1. Driving operational leverage - continue integrating AI to drive productivity, focus on cost reductions, cash conservation and working capital management. 2. Strengthening core business - focus on core platform excellence for PowerTrack, maintain market-leading position in domestic CNI solar market, pursue brownfield strategy and adjacent offerings, scale managed services for energy storage. 3. Building for growth in 2027 and beyond - expand utility scale footprint domestically and internationally, leverage Powertrack EMS in utility-scale space, explore AI services and data center opportunities.

In 2025, full-year revenue grew 8% year over year to $156 million. Revenue from software, services, and edge hardware grew 25% year over year to $141 million, accounting for over 55% of total revenue. Year-end ARR grew 16% year over year to $61 million. Gross margins were substantially expanded, operating expenses were considerably reduced. Achieved three consecutive quarters of positive adjusted EBITDA and first full-year positive adjusted EBITDA of $7 million. Also achieved positive operating cash flow. Throughout the year, deepened and expanded PowerTrack platform, added 6 gigawatts of solar assets to total 36 gigawatts under management, and added $7 million in PowerTrack ARR to reach $41 million. Launched two new products in 2025. Fourth quarter utility scale bookings increased 10% sequentially, nearly all from international solar projects. Managed service revenue was up 51% year over year in fourth quarter with a new brownfield agreement.

2026 total revenue expected in the range of $140 to $190 million, with $130 to $150 million from high margin software, services, and edge hardware. Non-GAAP gross margins expected 40% to 50%. Adjusted EBITDA expected 10 to 15 million. Operating cash flow expected 0 to 10 million. ARR expected 65 to 70 million, representing approximately 10% growth at the midpoint.

Not explicitly discussed in detail

Q: Regarding the launch of Powertrack EMS, when can we expect bookings to increase and what about the sales cycle and lead times?

A: Arun said Powertrack EMS was launched in September 2025. It's for utility-scale projects which have a longer lifecycle, taking time to build business, pipeline, engage with customers, and go through project commissioning to revenue recognition.

Q: Would Powertrack EMS have a recurring revenue stream?

A: Depends on components. Hardware recognized immediately upon delivery, service component follows commissioning lifecycle.

Q: What's driving the increase in battery resale revenue to $40 million in 2026?

A: STEM is a trusted advisor, helps customers meaningfully without using up balance sheet, so pursues such opportunities.

Q: How to think about the evolution of gross margins for software, services, and edge hardware in 2026?

A: Brian said guidance is 40% to 50% gross margins, software revenue is high (over 70% in 2025), and expected to drive mix up with improved software revenue.