STEM — Stem, Inc.

Stem, Inc. Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics:

• Revenue: $38 million, up 31% year-over-year.
• Annual Recurring Revenue (ARR): Grew 17% year-over-year to $60 million.
• Adjusted EBITDA: Positive for the second consecutive quarter at $2 million.
• Operating Cash Flow: Positive at $11 million, a $21 million improvement year-over-year.
• Gross Margins: GAAP gross margins at 35%, non-GAAP at 47%.
• Bookings: $30 million, slightly down from the previous quarter, with a contracted backlog of $22 million.

2. Strategic Updates and Business Highlights:

• Transformation Progress: One year into a strategic realignment, the company reports operational stability and reduced volatility.
• Product Launch: Introduced PowerTrack EMS, enhancing offerings for hybrid and stand-alone storage projects, which has received strong customer interest.
• Software and Services Growth: PowerTrack software revenue increased 11% year-over-year, with 100 software improvements implemented in the last 90 days.
• International Expansion: Focused on entering European markets and leveraging existing teams in Berlin and Japan.
• Cost Management: Operating expenses remained flat sequentially, with a significant year-over-year reduction of 47%.

3. Forward Guidance and Outlook:

• Refined Guidance: Revenue guidance tightened to $135 million to $160 million for FY 2025, with software and services revenue expected to be between $125 million and $140 million.
• Gross Margin Expectations: Raised to 40% to 50%, though slight compression is anticipated in Q4 due to higher edge hardware sales.
• Adjusted EBITDA Guidance: Revised to between negative $5 million and positive $5 million.
• ARR Forecast: Consistent at $55 million to $65 million, indicating a solid recurring revenue base.

4. Bad News, Challenges, or Points of Concern:

• Deemphasized Hardware Sales: Lower expectations for battery hardware resale, now projected at up to $20 million, impacting overall revenue potential.
• Macro Headwinds: Ongoing policy uncertainty could affect business performance, although the diversified software-centric model aims to mitigate risks.
• Bookings Decline: A slight decrease in bookings compared to the previous quarter, attributed to the deemphasis on lower-margin hardware sales.

5. Notable Q&A Insights:

• Customer Demand: Management reported stable engagement levels with customers despite industry uncertainties, indicating continued interest in new products like PowerTrack EMS.
• Gross Margin Compression: Expected in Q4 primarily due to a mix shift towards lower-margin edge hardware sales.
• Long-Term Profitability Goals: Management emphasized a focus on achieving operating and net income positivity in the future, with a commitment to transparency in communicating progress to investors.
• Potential in Data Center Market: Discussions are ongoing regarding targeting hyperscaler data center customers as the market shifts towards renewable energy solutions.

Overall, Stem, Inc. is demonstrating strong growth and operational improvements while navigating challenges in the market. The strategic focus on software and services is yielding positive results, although there are concerns regarding hardware sales and macroeconomic factors.