STEM Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

Full Year 2025 Revenue: $156 million, up 8% year-over-year.
Software and Services Revenue: Grew 25% year-over-year to $141 million, constituting over 55% of total revenue.
Annual Recurring Revenue (ARR): Increased 16% year-over-year to $61 million.
Adjusted EBITDA: First-ever positive adjusted EBITDA of $7 million for the year, with Q4 adjusted EBITDA at $5 million, a 30% increase from Q4 2024.
Operating Cash Flow: Positive cash flow of $7 million for the year.
Gross Margins: Full year GAAP gross margins at 38%, non-GAAP at 46%. Q4 GAAP gross margins were 49%.
Cash Position: Ended 2025 with $49 million in cash, up from $43 million at the end of Q3.

2. Strategic Updates and Business Highlights

Transitioned to a software-centric business model, focusing on operational discipline and customer commitment.
Launched two new products: PowerTrack EMS and PowerTrack Sage, both received positive customer feedback.
Expanded PowerTrack platform, adding 6 gigawatts of solar assets, totaling 36 gigawatts under management.
Significant growth in managed services, with a new agreement to operate a 4-site energy storage portfolio for a utility in Southern California.
Increased international presence, particularly in Europe, with a new engagement with Everyray for a 100-megawatt hour project.

3. Forward Guidance and Outlook

2026 Revenue Guidance: Expected between $140 million to $190 million, with $130 million to $150 million from high-margin software, services, and edge hardware.
Adjusted EBITDA Guidance: Projected at $10 million to $15 million, indicating approximately 85% growth at the midpoint compared to 2025.
Gross Margins: Expected to remain between 40% to 50%, contingent on the mix of revenue sources.
ARR Growth: Anticipated to reach $65 million to $70 million, reflecting about 10% growth.

4. Bad News, Challenges, or Points of Concern

Customer Cancellation: A managed service customer cancellation impacted CARR by $3 million and ARR by $1 million.
Declining Backlog: Contracted backlog decreased by 4% from the previous quarter due to reduced battery hardware bookings.
Battery Hardware Resale: While expected to increase to up to $40 million in 2026, this segment is lower-margin and not a strategic focus, indicating potential volatility in profitability.

5. Notable Q&A Insights

PowerTrack EMS Sales Cycle: Arun Narayanan indicated that utility-scale projects have longer sales cycles, and revenue recognition will depend on project commissioning timelines.
Battery Resale Demand: The company will pursue battery hardware resale opportunities selectively, emphasizing its role as a trusted advisor rather than a primary hardware seller.
Margin Expectations: Brian Musfeldt confirmed expectations for improved software margins in 2026, despite a potential increase in lower-margin battery hardware sales.

Overall, Stem demonstrated a successful transformation in 2025, achieving financial milestones and launching new products while navigating challenges related to customer retention and market dynamics. The outlook for 2026 appears cautiously optimistic with a focus on operational leverage and growth.

STEM — Stem, Inc.

Q4 2025 Earnings Call Summary