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DATE

Wednesday, Mar. 4, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Arun Narayanan
  • Chief Financial Officer — Brian Musfeldt
  • Operator

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TAKEAWAYS

  • Total Revenue -- $156,000,000, representing 8% year-over-year growth.
  • Software, Services, and Edge Hardware Revenue -- $141,000,000, up 25% year over year, with more than 55% of total revenue from these sources.
  • Battery Hardware Resale Revenue -- $15,000,000 for the year, reflecting the strategic shift away from low-margin sales.
  • Annual Recurring Revenue (ARR) -- $61,000,000 at year-end, increasing 16% year over year and 1% sequentially; PowerTrack contributed $41,000,000 in ARR after adding $7,000,000.
  • GAAP Gross Margin -- 38% for the full year, a company record.
  • Non-GAAP Gross Margin -- 46% for the full year, also a record, driven by improved revenue mix and margin expansion.
  • Adjusted EBITDA -- $7,000,000, delivering the company’s first full-year positive result, and achieving three consecutive profitable quarters.
  • Operating Cash Flow -- Positive $7,000,000 for the full year, representing the company’s first positive result and driven partly by DevCo asset sales and working capital movement.
  • Year-End Cash Balance -- $49,000,000, an increase from $43,000,000 at prior quarter-end.
  • Fourth Quarter Software Revenue -- PowerTrack software revenue up 14% year over year; edge hardware revenue up 21% year over year.
  • Fourth Quarter Managed Service Revenue -- Increased 51% year over year due to both recurring and one-time performance-based revenue.
  • Fourth Quarter Project and Professional Services Revenue -- Higher year over year, driven by roughly $11,000,000 of one-time DevCo revenue; excluding DevCo, the line grew 27% year over year.
  • Fourth Quarter Bookings -- $33,000,000, slightly higher sequentially due to stronger software and services activity, offset by lower battery hardware bookings.
  • Contracted Backlog -- $21,000,000, down 4% sequentially; excluding battery hardware, backlog rose 23% year over year.
  • Cancellation Impact -- A managed service customer cancellation reduced contracted annual revenue (CAR) by $3,000,000, ARR by $1,000,000, and 0.1 gigawatt-hours.
  • PowerTrack Platform Expansion -- 6 gigawatts of solar assets were added, with 36 gigawatts managed in total at year-end.
  • Product Launches -- PowerTrack EMS and PowerTrack Sage launched; Sage entered beta in Q4 with more than 80 customers and will be broadly available by March-end.
  • International Engagement -- Announced a 100 megawatt-hour deal in Germany with Everyday, further expanding international presence and reinforcing PowerTrack EMS’s international utility-scale application.
  • Fourth Quarter Utility-Scale Bookings -- Rose 10% sequentially, with nearly all new bookings from international solar projects.
  • Full Year Cash Operating Expenses -- Down 41% from 2024, and fourth quarter cash OpEx declined 50% year over year, instilling permanent cost structure efficiency.
  • 2026 Revenue Guidance -- $140,000,000 to $190,000,000, with $130,000,000 to $150,000,000 expected from software, services, and edge hardware and up to $40,000,000 from battery hardware resales.
  • 2026 Non-GAAP Gross Margin Guidance -- 40%-50%, with higher battery hardware sales pushing margins to the lower end of the range.
  • 2026 Adjusted EBITDA Guidance -- $10,000,000 to $15,000,000, reflecting about 85% growth at midpoint compared to 2025.
  • 2026 Operating Cash Flow Guidance -- $0 to $10,000,000, indicating continued positive cash generation.
  • 2026 ARR Guidance -- $65,000,000 to $70,000,000, suggesting approximately 10% growth at the midpoint.
  • Strategic Priorities for 2026 -- Focus on operational leverage, strengthening the core business, and laying groundwork for accelerated growth in 2027 and beyond.
  • DevCo Asset Disengagement -- All DevCo project assets now sold or written off with no further investment planned.
  • Brownfield Managed Services Win -- Secured a new brownfield agreement in Q4 to operate storage for a Southern California utility, underscoring market traction.

SUMMARY

Stem (STEM 3.81%) stated that software and services now account for a majority of revenue, demonstrating a successful shift to a software-centric business. Management introduced the PowerTrack EMS and PowerTrack Sage products, reinforcing their expansion in international utility-scale markets and their AI-focused strategy, with PowerTrack Sage scheduled for broad release by the end of March. The company provided guidance anticipating continued top-line growth, expanded gross margins, further reductions in operating expenses, and sequential improvement in adjusted EBITDA and cash flow. Management identified three priorities for 2026: operational leverage, strengthening the core business, and developing the foundation for future scale, and explicitly indicated a deliberate drawdown from DevCo asset involvement. Investments in international presence and new products, as well as a new German contract and operational wins in brownfield services, could position the firm for higher recurring revenue and global expansion in 2027.

  • Management committed to "become the operating system for clean energy projects" and outlined a vision for Stem to hold a "market leadership position in clean energy intelligence."
  • Nearly all Q4 utility-scale bookings originated from international solar projects, signaling accelerating demand outside the U.S.
  • Significant reductions in both cash operating expenses and battery hardware resales align with the firm's margin expansion and disciplined cost strategy.
  • Management cited a "solid liquidity position" with $49,000,000 in cash, supporting planned 2026 investments and international expansion initiatives.

INDUSTRY GLOSSARY

  • PowerTrack EMS: Utility-scale energy management system software launched by Stem for hybrid solar-plus-storage and standalone storage site control.
  • PowerTrack Sage: AI-powered assistant integrated into Stem’s PowerTrack platform for enhanced automation, analytics, and user workflow functionality.
  • DevCo: Development Company project assets formerly held and sold by Stem and no longer part of its growth or investment strategy.
  • Brownfield: Strategy of providing managed services to existing, previously constructed energy storage assets, as opposed to new build-outs ("greenfield" projects).
  • ARR (Annual Recurring Revenue): The value of the recurring contractually committed software and services revenue expected on an annualized basis.
  • CAR (Contracted Annual Revenue): The sum of contractually agreed recurring revenues recognized annually by Stem across its service offerings.

Full Conference Call Transcript

Arun Narayanan: Thank you, Erin. Good afternoon, everyone, and thank you all for joining us today. I am pleased to be speaking with you one year after assuming the role of CEO, and I could not be more proud of what the Stem, Inc. team has accomplished over the past twelve months: best-in-class execution, unwavering commitment to our customers and each other, and disciplined financial performance. 2025 was a transformative year that, methodically yet decisively, reshaped Stem, Inc. into a software-centric, operationally disciplined organization. Every commitment we made, and the proof of our strategic transformation, is in the results. Today, I will take you through a look back on our fourth quarter and full year accomplishments.

After that, I will walk you through our 2026 priorities and show you how we are determined to become the operating system for clean energy projects. And finally, I will give you a preview of guidance for the year ahead. Brian will follow with the detailed financial results and our complete 2026 outlook. In 2025, we delivered on guidance across every metric. Full year 2025 revenue grew 8% year over year to $156,000,000, with over 55% of that revenue coming from software and services, evidencing our successful and ongoing transformation. Software, services, and edge hardware revenue grew by 25% year over year to $141,000,000. Year-end ARR grew 16% year over year to $61,000,000.

In 2025, we substantially expanded gross margins and considerably reduced our operating expenses. We achieved three consecutive quarters of positive adjusted EBITDA, resulting in our first ever full year positive adjusted EBITDA of $7,000,000. We also achieved positive operating cash flow for full year 2025, another first and major accomplishment in the company's history. Throughout the year, we continued to deepen and expand our PowerTrack platform, delivering meaningful improvements in platform stability, performance, and customer experience. We added 6 gigawatts of solar assets to a total of 36 gigawatts under management, and added $7,000,000 in PowerTrack ARR to reach $41,000,000. In 2025, we accelerated our R&D efforts, leveraged AI tools, and rebuilt our product roadmaps.

We successfully launched two new products last year. Both products, PowerTrack EMS and PowerTrack Sage, have resonated well with our customers, and we are encouraged by the early traction. We launched PowerTrack EMS in September 2025, and it is a premier solution for scale projects. This morning, we announced a new engagement with Everyday, a German clean energy developer and EPC. This 100 megawatt-hour deal further expands Stem, Inc.'s presence in Germany and reinforces PowerTrack EMS's role as the control backbone for sophisticated utility-scale storage deployments across Europe and other international markets. Commercial operations for those deployments are expected to commence in 2026.

Expansion into the utility-scale market, both domestically and internationally, gained meaningful traction in the fourth quarter, with utility-scale bookings increasing 10% sequentially. Notably, nearly all fourth quarter utility-scale bookings were driven by international solar projects, underscoring growing demand in global markets. I talked with you about PowerTrack Sage, our AI-powered assistant, in previous calls, and I continue to be excited about it. We deployed PowerTrack Sage in the fourth quarter to more than 80 customers for a beta trial, and the feedback has been overwhelmingly positive. PowerTrack Sage will be generally available at the end of this month.

At launch, we will deploy a light version across the entire PowerTrack customer base, embedding AI-assisted capabilities into the core platform from day one and accelerating adoption at scale. This universal rollout ensures immediate value realization while positioning AI as a foundational component of the PowerTrack experience. For customers seeking deeper automation, advanced analytics, and expanded workflow functionality, we will soon offer premium tiers at incremental cost, creating a clear pathway for upselling, monetization, and long-term platform expansion. Finally, our managed services business delivered solid fourth quarter performance, highlighted by a new brownfield agreement. Under this deal, we will operate and optimize a four-site energy storage portfolio for a Southern California utility.

Our services include real-time asset monitoring, enrollment and dispatch into California demand response programs, performance reporting to optimize site dispatches, energy cost savings, and more. It is a solid proof point for our differentiated managed services capabilities and validation of our brownfield strategy. Overall, the result of 2025 is this: Stem, Inc. has established a stable, increasingly profitable, software-centric business model. 2026 is about operational leverage and building for scale. So let's dive in. As we enter the new year with strong fourth quarter momentum, we are focused on three new priorities. Priority number one, driving operational leverage. Priority number two, continuing to strengthen our core business.

And priority number three, building the foundation for accelerated growth in 2027 and beyond. Now let's dive deeper into each of these in turn. First, driving operational leverage. We have built a sustainable business model, and in 2026, we intend to demonstrate the leverage it creates. Our software-centric model delivers predictable, high-margin revenue, and cost discipline is now embedded in the culture of the company. In 2026, we will continue integrating AI across the organization to drive productivity improvements, and we will maintain our relentless focus on cost reductions, cash conservation, and working capital management. Second, strengthening our core business. We remain focused on driving core platform excellence for PowerTrack in 2026.

The platform maintains its market-leading position in commercial and industrial solar monitoring in the U.S. This year, we will deliver further platform stability, scalability, and simplified, intelligent UI updates that drive customer value and retention. The domestic C&I solar market, where we already hold significant share, offers moderate growth in 2026. But this is a stable, high-retention base that continues to generate recurring revenue. Additionally, we are targeting a brownfield strategy to further increase our market share, as well as a range of other adjacent offerings. Our other core business, managed services for energy storage, continues to be a differentiated offering that sets Stem, Inc. apart from competitors.

Our brownfield strategy remains a key focus, as does actively pursuing greenfield opportunities. We are scaling in existing domestic markets, leading with our proof of performance, and winning with our differentiated offerings. And finally, to priority number three, building for growth in 2027 and beyond. Outside of our core C&I solar and storage businesses, we are focused on expanding our utility-scale footprint domestically and internationally. We are targeting key markets across Europe, leveraging local support infrastructure that we have built and continue to invest in. Both the domestic and international utility-scale storage and solar markets are growing, and we are well positioned to capture rising demand and take share.

PowerTrack EMS helps us differentiate in the utility-scale space by providing a solution for hybrid solar-plus-storage sites and also standalone BESS sites, which are increasingly common in the utility-scale market. We expect meaningful revenue conversion of PowerTrack EMS bookings to begin in 2026 and 2027. While we are bringing PowerTrack EMS to market this year, we are also exploring other ways in which our team's expertise and our technology can deliver value. First, as part of our suite of professional services offerings, we are developing AI services that leverage our domain expertise and operational knowledge to help customers identify, prioritize, and deploy the current iteration of generative AI solutions in a way that generates real economic outcomes.

These offerings are distinct from PowerTrack Sage, and they are focused on helping customers unlock value across their broader operations. And our second area of opportunity is with data centers. More and more, we are seeing data centers adopting renewable as a power source. We believe Stem, Inc. has the foundational technology and deep expertise in both solar and storage to be a meaningful player in this market. I am encouraged by these options. We see a natural extension of our existing capabilities driving our entrance into the space, and I look forward to updating you all on our progress in the coming quarters.

2026 is an optimization year, focused on margin expansion and operating leverage, while we continue to invest selectively in the capabilities that will drive scale in 2027 and beyond. I want to be deliberate about that framing because it shapes how you should think about our trajectory. PowerTrack EMS was launched in late 2025. It accelerates through 2026 and meaningfully scales in 2027 and beyond. Our utility-scale team is building meaningfully in 2026, and this foundation will drive us towards taking share in 2027 and beyond.

We believe that the market positions we are strengthening on business, on technology, our AI integration improving stability and scalability; on markets, international expansion and utility-scale here and abroad; on products and offerings, a comprehensive suite from solar monitoring to storage optimization; on operations, building operating leverage and driving operational excellence. Expanding the value chain of our offerings today sets up the foundation for future growth. This is important to note because it ties into our core software-centric vision for Stem, Inc. We are determined to become the system for new energy projects across solar, storage, and hybrid assets, and in different market segments and geographies.

Before turning it over to Brian, let me introduce the key themes of our 2026 guidance. We are entering the year with a strong foundation from our 2025 execution and believe we are well positioned to execute on our commitments. We expect our software-centric strategy to drive moderate top-line revenue growth, strong gross margins, and significant adjusted EBITDA expansion, supported by continued software momentum, our expanding product suite, and the operational leverage we have built into the business. Brian will provide a more detailed look at our 2026 guidance and also dive deeper into our fourth quarter and full year 2025 financial results. With that, let me pass over the call to him.

Brian Musfeldt: Thanks, Arun, and hello, everyone. Let's walk through the results. For the full year 2025, we were in line or above all of the financial expectations we outlined on our third quarter call. We exceeded our profitability guidance, demonstrating the dedication to operational discipline that runs through this organization. For the full year 2025, total revenue was $156,000,000, up 8% year over year. Most importantly, revenue from software, services, and edge hardware, the core of our software-centric model, was up 25% year over year to $141,000,000. Battery hardware resale was $15,000,000 for the year, consistent with our strategic deemphasis of lower-margin business. This shift in revenue mix is precisely what we committed to delivering.

It is reflected in our improved gross margin performance this year. Turning now to the fourth quarter. PowerTrack software revenue continued its strong performance, growing 14% year over year, and edge hardware revenue grew an impressive 21% year over year. Managed service revenue was up 51% year over year, driven in part by one-time performance-based revenue where we exceeded asset operational targets. Battery resale revenue was down from $27,000,000 to less than $1,000,000 year over year, as expected. Project and professional services revenue increased significantly year over year, driven by approximately $11,000,000 of one-time DevCo revenue recognized in the fourth quarter. Excluding DevCo, fourth quarter project and professional services revenue was up 27% year over year.

I also want to note that as of the end of the year, we have sold or written off all of the project assets associated with DevCo from our financial statements, and we do not intend to make any further investments in DevCo assets moving forward. Now let's take a look at gross margins. For the full year 2025, we achieved record GAAP gross margins of 38% and record non-GAAP gross margins of 46%, driven by decreased battery hardware sales, a favorable software and service revenue mix, and improved edge hardware margins. Fourth quarter GAAP gross margins were 49%, and non-GAAP gross margins were 45%, continuing our strong results.

You can again find the detailed revenue and margin breakdowns we introduced last quarter in our supplemental materials on our IR website. Full year 2025 cash operating expenses were down 41% from 2024, and fourth quarter cash operating expenses were down an impressive 50% year over year. We are building sustainability into our cost structure—not temporary reductions, but permanent structural efficiency—while simultaneously developing new products and entering new markets. That combination is the foundation of our operating leverage thesis moving forward into 2026 and beyond.

The improved margins and significantly reduced OpEx in 2025 drove positive adjusted EBITDA of approximately $7,000,000 for the year, above the high end of our guidance range, and representing the first year of positive annual adjusted EBITDA in Stem, Inc.'s history. We achieved three consecutive quarters of positive adjusted EBITDA this year, with the fourth quarter coming in at $5,000,000, a 30% improvement from 2024. The improvement was primarily driven by improved gross profits and reductions in operating expenses, with modest additional benefit related to the final sales of the DevCo project asset. Full year operating cash flow was $7,000,000, slightly above the high end of our revised guidance.

The fourth quarter benefited from the sale of our DevCo project assets and other favorable working capital movements. We ended the fourth quarter and full year 2025 with $49,000,000 in cash, up from $43,000,000 at the end of the third quarter. This is a solid liquidity position that supports our 2026 plans. And now turning to our operating metrics. Fourth quarter bookings were $33,000,000, up slightly from last quarter due to increased software and service bookings, offset by decreased battery hardware bookings. Contracted backlog was $21,000,000, down 4% from $22,000,000 last quarter due to decreased battery hardware bookings.

Our end-of-year 2025 backlog is 2% higher than it was at the end of 2024, and excluding battery hardware is 23% higher than prior year. CAR decreased $3,000,000 sequentially to $67,000,000 due to lower managed services bookings and the cancellation of a managed service customer agreement. This customer cancellation, driven by adjacent non-scalable product requests outside of our roadmap, impacted CAR by $3,000,000, ARR by $1,000,000, and 0.1 gigawatt-hours. Despite this cancellation, total company ARR grew 1% sequentially and 16% year over year to $61,000,000, supported by increased PowerTrack software bookings. Turning now to our full year 2026 guidance. We are encouraged by the strong momentum we carried throughout 2025 and that we bring forward into 2026.

We expect that performance to accelerate as we advance throughout the year. For revenue, we expect total revenue in the range of $140,000,000 to $190,000,000. Within that range, we expect $130,000,000 to $150,000,000 to come from high-margin software, services, and edge hardware revenue—our core business. We expect the remaining balance of up to $40,000,000 to be driven by battery hardware resales, which remain opportunistic and are not a strategic priority. We expect non-GAAP gross margins of 40% to 50%, broadly in line with our 2025 performance. Higher battery hardware resales would cause gross margin percentage to trend toward the lower end of that range.

We expect adjusted EBITDA of $10,000,000 to $15,000,000, representing approximately 85% growth at the midpoint versus full year 2025, driven by revenue growth, operating expense discipline, and increased operating leverage. We expect operating cash flow of $0 to $10,000,000, reflecting stable cash generation from operations for the year. And finally, we expect ARR of $65,000,000 to $70,000,000, representing approximately 10% growth at the midpoint, continuing the momentum from 2025. I am extremely proud of what the team has accomplished in 2025, and we are continuing to build a strong foundation into 2026 that sets us up for accelerated growth in 2027 and beyond. And I will now pass the call back over to Arun for closing remarks.

Arun Narayanan: Thank you, Brian. As I reflect on 2025, I am struck by the scope of what our team accomplished. We delivered a business transformation, executed a financial turnaround, completed two new product launches, and demonstrated a clear strategic path forward. We said we would do it, and we did it. As I look ahead through the remainder of 2026 and beyond, I am confident. We have three clear strategic priorities to guide us in 2026. We have an ambitious but achievable adjusted EBITDA target and multiple growth drivers that de-risk execution. And last but certainly not least, we have a team with a proven track record of executing.

Our long-term vision is to build a scalable, profitable software and services company that holds a market leadership position in clean energy intelligence. Stem, Inc. is uniquely positioned to capitalize on the ongoing clean energy transformation with a market-leading platform, a growing product suite, and an expanding global footprint. To our customers, we are grateful for your continued partnership and trust. To our investors, we appreciate your support through this transformation and your confidence in our vision. To our team, your execution through a challenging transformational year reflects your talent, your resilience, and your dedication. Thank you. With that, I will ask the operator to open the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and the number one on your telephone keypad. You may press star and the number two if you would like to remove your question from the queue. Our first question comes from Justin Clare with ROTH. You may proceed with your question.

Justin Clare: Hi. Thanks for taking our questions here. Wanted to start off on the PowerTrack EMS launch. So you mentioned that you could see an acceleration for PowerTrack EMS in 2026, but more meaningful scale in 2027. So just wondering how we should think about the timing of bookings for the product. Could we see an increase as early as Q1 or Q2? Or is that more of a second-half dynamic? And then just wondering if you could talk through the typical sales cycle and lead times for the EMS deployments.

Arun Narayanan: Captain, thank you for your question. This is Arun. It is good to hear from you again. PowerTrack EMS was launched in September 2025. And the reason we are so excited about it is it is the first time we are able to address a solar and storage solution and address a customer's need completely. If you think about even the press release that we put out today, we are able to work with newer customers in international markets as well as customers domestically as well. And the main sort of aspect of these solutions are geared towards utility-scale projects.

Inherently, these are a longer life cycle, and this means that we need time to build the business, build the pipeline, engage with the customer, and make sure that the solution is a good fit, and then work with the customer through the commissioning of the project all the way to revenue recognition. So it does take some time, and we are working on that today.

Justin Clare: Okay. And then I guess, curious, would you anticipate the revenue recurring revenue stream, but maybe you could also help us understand that.

Arun Narayanan: Yes. So this depends on the components. Right? So think about a project that we deploy. It would have hardware, software, as well as service components. And the mix of these three components would be the totality of the contract that we are executing. Depending on the component we are talking about, the revenue recognition would follow specific timelines. So maybe hardware is immediately upon delivery, but the service component would need to run through the commissioning life cycle. So if you look at the Everyday press release that we announced today, we are encouraged by the feedback that we are getting from our customers. That is a 100 megawatt-hour project that we have deployed.

And just connecting back to the remarks that we made earlier, we are looking at 2026 as a way to build the foundation and then see 2027 as the point at which we are able to scale the revenue.

Justin Clare: I see. Got it. Got it. Okay. And then just on the 2026 guidance, it does look like the battery resale revenue up to $40,000,000. That is a fairly meaningful increase potentially from the 2025 storage resale revenue of $15,000,000. So just wondering if you could speak to what is driving the increase there considering your shifting emphasis toward software and services? Are you still seeing demand from customers where they prefer you to do the procurement?

Arun Narayanan: I would characterize them as a trusted adviser. We have really good relationships with our customer, and the ability for our technical expertise in the organization to assist customers through that journey is very valuable to our customers. So we have deemphasized the OEM hardware resale component of the business. But when we see opportunities to help customers meaningfully, and it does not use up our balance sheet, we do pursue it. And this is how we see the year develop, and that is how we are guiding to it.

Justin Clare: Got it. Okay. And then just one more on margins. Wondering if you could give us a sense for how you see the gross margins evolving for software, services, and edge hardware in 2026 relative to 2025? It looks like you could potentially have a higher mix of battery hardware resale, which is lower margin, but overall for the year, it looks like margins could be flat year over year. So it implies there could be an expansion in the software margins. So just checking, is that the right interpretation? And how should we think about it?

Brian Musfeldt: Yes. Hey, Justin. This is Brian. Yes, we have guided you to 40% to 50% for the year. That is obviously out of a mix of revenue—software, services, and hardware. We do break out for you now in our slide deck the kind of detail by each revenue line. You can look at that in the appendix for that. But, yes, I think you see that this year, software was over 70% or just north of 70%. I think you can look at that from a mix perspective, and based on our guidance and what we are looking at for improved software revenue, we will drive that mix up a bit.

Justin Clare: Gotcha. Okay. I appreciate it. Thank you.

Operator: As a reminder, if you would like to ask a question, please press star and the number one on your telephone keypad. We will take another moment to poll for any questions. There are no further questions at this time. This concludes our question and answer session. I would like to turn the call back over to Arun for closing comments.

Arun Narayanan: I want to thank everyone for joining our fourth quarter and full year earnings call, and we look forward to speaking with you next during our first quarter 2026 earnings call this spring. Thanks, everyone.

Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.