STEM, Inc. Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Total Revenue: $34 million, down 12% year-over-year from $38 million, primarily due to a decline in battery hardware resale revenue.

Adjusted EBITDA: $6 million, up 63% from $4 million in Q2 2025, marking the fifth consecutive quarter of positive adjusted EBITDA.

Non-GAAP Gross Margin: Reached a record 55%, up from 49% in Q2 2025, driven by a favorable revenue mix towards software and services.

Operating Cash Flow: Positive at $0.3 million, a significant improvement from negative $21 million in Q2 2025 and negative $8 million in Q1 2026.

Bookings: $37 million, up 39% sequentially from Q1 2026 and up 7% year-over-year.

Contracted Backlog: Increased to $27 million, up 18% from Q1 2026.

Cash Position: Ended the quarter with $38.4 million in cash and cash equivalents.

2Strategic Updates and Business Highlights

Software-Centric Transformation: Continued focus on operational leverage with record non-GAAP gross margins and sustainable operating expenses.

PowerTrack Platform: Added approximately 0.8 gigawatts of solar assets under management, contributing to a 3% sequential growth in PowerTrack Annual Recurring Revenue (ARR).

New Market Entries: Successfully entered Latin America with the Granja Solar Project in Chile and expanded into Hungary with new hybridization projects.

Product Enhancements: Released updates to PowerTrack, including improved user experience features and continued integration of acquired technologies like raicoon.

Industry Recognition: PowerTrack EMS won The smarter E AWARD 2026 for innovation in integrated energy management.

3Forward Guidance and Outlook

Full Year 2026 Guidance: Reaffirmed total revenue guidance of $140 million to $190 million, with software, services, and edge hardware expected between $130 million and $150 million.

Adjusted EBITDA: Expected to remain between $10 million and $15 million, trending towards the high end of the range.

Operating Cash Flow: Projected to range from $0 to $10 million for the full year.

ARR: Anticipated year-end ARR of $65 million to $70 million.

4Bad News, Challenges, or Points of Concern

Revenue Decline: Total revenue decreased year-over-year, primarily due to a significant drop in battery hardware resale revenue ($300,000 in Q2 2026 vs. $5 million in Q2 2025).

Potential Margin Compression: Expected increase in battery hardware resale revenue in the second half may lead to a decline in overall gross margins, as these sales typically carry lower margins.

Market and Policy Risks: Concerns raised regarding potential impacts from U.S. policy changes affecting solar projects, though management stated no immediate impacts were observed.

5Notable Q&A Insights

Edge Hardware Growth: The increase in edge hardware revenue (up 22% year-over-year) is attributed to the nature of utility-scale projects, which require more edge hardware.

Guidance Clarification: Management indicated that the anticipated decline in EBITDA and gross margin in the second half is primarily due to the timing of battery hardware resale revenue rather than underlying business weakness.

Hybrid Project Economics: While specific contract economics were not disclosed, hybrid deployments are expected to generate additional ARR and profitability through multiple software contracts and services.

International Expansion Focus: Management expressed optimism about growth opportunities in Latin America and Europe, emphasizing the adaptability of PowerTrack EMS to various markets. Overall, STEM, Inc. demonstrated solid operational improvements and strategic advancements in Q2 2026, despite facing revenue declines in specific areas. The company remains focused on leveraging its software capabilities and expanding its market presence as it moves into the second half of the year.