Stem : First Quarter 2025 Presentation

Published: 2025-04-29 19:34:15 ET STEM

April 29, 2025

Early benefits of software-focused strategy evidenced in 1Q25 results

1Q25 Results

Revenue Annual Recurring

$33M Revenue

+27% YoY $57M

+8% QoQ / +26% YoY

GAAP/Non-GAAP

Gross Margin

32% / 46%

+127 p.p. / +22 p.p. YoY

Adjusted EBITDA Operating Cash

$(5)M Flow

+$8M YoY $9M

+$9M YoY

Latest Updates

Implemented targeted workforce Achieved strong gross margins and first-reductions in April, driving $30M in ever quarter of positive operating cash annualized cost savings flow, reflecting early benefits of software-

focused strategy

Increased ARR by ~$4M QoQ and Strengthened Board of Directors with the

$12M YoY to $57M appointment of software and finance veterans Vasudevan Guruswamy and Krishna Shivram

Reaffirming 2025 guidance and our commitment to driving profitability

See Appendix for definitions.

Business Units - Benefits & Rationale

Creating four distinct business units to optimize operations and drive growth

Software Products

Aligning services with market demands and customer needs

Professional

Services

Strengthening profitability and revenue stability

Enhancing focus on high-margin software and services

Managed Services

Diversifying revenue streams through complementary offerings

OEM

Hardware

Strengthening customer relationships through end-to-end solutions

Improving operational efficiency with dedicated leadership

Optimizing operations and driving growth

Our Four Internal Business Units

Software Products

Differentiated IP + Recurring Revenue

Leading with PowerTrack's edge

devices, software, and

services

Driving growth into adjacent segments and international markets

Software critical to profitability and growth, funding strategic initiatives and sustaining high

margins

Professional Services

Bespoke Advisory + High Margin

Specialized advisory and consulting services with custom client engagements

Focus on planning, design, and deployment of energy storage assets

Positioning Stem as a trusted expert, thought-leader, and partner

Managed Services

End-to-end Operations + LT Recurring Revenue

End-to-end asset monitoring, analytics, operations, and optimization for distributed energy assets

Service-oriented model leveraging deep domain expertise enabled by technology

OEM Hardware

Battery Resale + Selective Engagement

Proprietary hardware solutions (e.g., battery systems)

Driving sales in other segments by offering a single provider and integrated solution

Reallocating resources to differentiated software, services, and consulting offerings

EBITDA, and Operating Cash Flow

$ millions, unless otherwise noted

Revenue*

+27%

$33

$25

1Q24 1Q25

Adjusted EBITDA*

($4.6)

($12.2)

+$8M

1Q24 1Q25

GAAP & Non-GAAP

Gross Margin %*

32%

24%

(95%)

46%

(20%)

1Q24 1Q25

Operating Cash Flow

$8.5

+$9M

($0.6)

1Q24 1Q25

Solar revenue remains strong, up 21% YoY

Software revenue up 17% YoY

Non-GAAP gross margin up due to increased software revenue and improved hardware terms

GAAP gross margin improvement driven by higher mix of software and services revenue and the absence of the $33M reduction in revenue related to parent company guarantees

Improved EBITDA YoY driven by higher revenue and gross profit

Operating cash flow up $9M YoY

Generated $2M in cash and cash equivalents growing balance to $59M at end of 1Q25

See Appendix for definitions and reconciliation of non-GAAP financial measures to most directly comparable GAAP measures.

* Revenue and gross margin were negatively impacted by a $33.1 million reduction in revenue as previously discussed for the three months ended March 31, 2024, and by excess supplier costs and resulting liquidated damages, as discussed in the 1Q25 earnings press release.

1Q 2025 Operating Metrics

$ millions, unless otherwise noted

Bookings

Contracted Backlog

$20.9 +21%

$25.3

$64.5

+7%

$69.0

CARR

$37.6

(8)%

$34.5

4Q24 1Q25

$19.7

$19.0

$33.8

$37.2

$52.8

ARR

29.9

+8%

32.4

+8%

$56.9

AUM - Storage (GWh)

AUM - Solar (GW)

1.8

(11)%

1.6

4Q24 1Q25

See Appendix for definitions.

4Q24 1Q25

Bookings, Backlog, CARR, ARR and AUM

CARR and ARR growth demonstrate success in driving software-focused strategy

Bookings down slightly QoQ due to seasonality

Storage AUM down QoQ due to removal of PowerBidder Pro contracts

Operating metrics reflect revised

definitions versus prior periods

Reaffirming 2025 Guidance

$ millions, unless otherwise noted

Low

High

Total Revenue

$125

$175

Software, edge hardware, & services

$120

$140

Battery hardware resale

Up to $35

Non-GAAP gross margin %

30%-40%

Adjusted EBITDA

$(10)

Operating cash flow

$15

Year-end ARR

$55

$65

Note: Sub-revenue items do not add to total revenue due to ranges and rounding.

See Appendix for definitions and reconciliation of non-GAAP financial measures to most directly comparable GAAP measures.

About Stem

Stem (NYSE: STEM) is a global leader in AI-enabled software and services that enable its customers to plan, deploy, and operate clean energy assets.

Stem offers a complete set of solutions that transform how solar and energy storage projects are developed, built, and operated, including an integrated suite of software and edge products, and full lifecycle services from a team of leading experts. More than 16,000 global customers rely on Stem to maximize the value of their clean energy projects and portfolios.

For more information, visit https://www.stem.com

Supplemental Revenue Detail

Three Months Ended March 31,

2025 2024

$ millions unless otherwise noted

Solar software 8.8 7.8

Edge hardware 10.3 8.0

Subtotal $19.1 $15.8

Storage software & recurring managed services 7.0 5.7

Project and professional services 1.8 1.4

Subtotal $8.8 $7.1

Battery hardware resale 4.5 2.6

Total Revenue $32.5 $25.5

Key Financial and Operating Metrics

$ millions unless otherwise noted

2024

2025

Three Months Ended March 31,

Key Financial Results(1)

Revenue

$32.5

$25.5

GAAP Gross Profit (Loss)

10.5

(24.2)

GAAP Gross Margin (%)

32%

(95)%

Non-GAAP Gross Profit*

14.8

13.8

Non-GAAP Gross Margin (%)*

46%

24%

Net Loss

(25.0)

(72.3)

Adjusted EBITDA*

(4.6)

(12.2)

Key Operating Metrics

Bookings(2) $34.5 --

Contracted Backlog(3)** $25.3 --Storage Operating AUM (GWh)(4)** 1.6 0.8

Solar Operating AUM (GW)(5)** 32.4 26.9

CARR(6)** $69.0 --

ARR(7)** $56.9 $45.1

As previously disclosed, revenue, gross profit (loss), and net loss were negatively impacted by a $33.1 million reduction in revenue for the three months ended March 31, 2024, and by excess supplier costs and resulting liquidated damages, as discussed In the earnings press release.

Redefined versus prior periods. Beginning with our Q1 2025 Quarterly Report on Form 10-Q, the Company is redefining "Bookings" as the total value of executed purchase orders. Previously this metric included all relevant executed contracts, regardless of whether or not a related purchase order had been executed.

Redefined versus prior periods. Beginning with our Q1 2025 Quarterly Report on Form 10-Q, the Company is redefining "Contracted Backlog" as the total value of hardware and non-recurring services bookings with executed purchase orders in dollars, as of a specific date. Previously, this metric included the total contract value of hardware, software and services contracts recognized ratably over the contract period, regardless of whether or not a related purchase order had been executed.

New metric, introduced in our Q1 2025 Quarterly Report on Form 10-Q. Represents total GWh of energy storage systems in operation. Contracted storage AUM from prior periods has been replaced with this metric.

Total GW of solar systems in operation.

Contracted Annual Recurring Revenue ("CARR"): Redefined versus prior periods. Beginning with our Q1 2025 Quarterly Report on Form 10-Q, the Company is redefining CARR as the annualized value from Stem customer subscription contracts with executed purchase orders signed in the period for systems that are not yet operating and all operating Stem customer subscription contracts, including solar software, storage software & recurring managed services, and some recurring professional services contracts. Previously, this metric included the annualized value from all executed Stem customer subscription contracts, regardless of whether or not a related purchase order had been executed.

Annual Recurring Revenue ("ARR"): New metric, introduced in our Q1 2025 Quarterly Report. Annualized value from operating customer subscription contracts, including solar software, storage software & recurring managed services, and any recurring professional services contracts.

*Non-GAAP financial measures. Adjusted EBITDA and non-GAAP gross profit and margin, both for the three months ended March 31, 2024 were adjusted to exclude the impact of the previously disclosed reductions in revenue, excess supplier costs and resulting liquidated damages, as discussed in our earnings press release. See the section titled "Use of Non-GAAP Financial Measures" for details and the section titled "Reconciliations of Non-GAAP Financial Measures" for reconciliations in our earnings press release.

**At period end.

Reconciliation of GAAP Operating Expense to Cash Operating Expense

$ millions unless otherwise noted

Three Months Ended March 31,

2025

2024

GAAP Operating Expense

$31.7

$43.8

Less: Non-cash adjustments

Depreciation and Amortization

(3.5)

(4.0)

Stock Compensation

(4.3)

(8.4)

Other adjustments

(0.8)

1.0

Cash Operating Expense

$23.1

$32.4

Revenue

$32.5

$25.5*

Cash Operating Expense as % of Revenue

71%

127%

* 1Q24 revenue was negatively impacted by the $33 million reduction in revenue for guarantees issued related to hardware delivered in 2022 and 2023.

Reconciliation of GAAP and Non-GAAP Gross Margin

$ millions unless otherwise noted

Three Months Ended March 31,

2025 2024

Revenue

$32.5

$25.5

Cost of revenue

(22.0)

(49.7)

GAAP gross (loss) profit

10.5

(24.2)

GAAP gross margin (%)

32%

(95)%

Non-GAAP Gross Profit

GAAP Revenue

$32.5

$25.5

Add: Revenue reduction, net(1)

33.1

Subtotal

$32.5

$58.6

Less: Cost of revenue

(22.0)

(49.7)

Add: Amortization of capitalized software & developed technology

4.3

3.9

Add: Excess supplier costs(2)

1.0

Non-GAAP gross profit $14.8 $13.8

Non-GAAP gross margin (%) 46% 24%

Non-GAAP gross margin as used in the Company's full year 2025 guidance, is a non-GAAP financial measure that excludes or has otherwise been adjusted for items impacting comparability. The Company is unable to reconcile projected non-GAAP gross margin to GAAP gross margin, its most directly comparable forward-looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty its change in amortization of capita lized software, impairments, and other items that may affect GAAP gross margin. The unavailable information could have a significant effect on the Company's full year 2025 GAAP financial results.

Refer to the discussion of reduction in revenue in "Definitions of Non-GAAP Financial Measures" in the earnings press release.

Refer to the discussion of excess supplier costs and liquidated damages in "Definitions of Non-GAAP Financial Measures" in the earnings press release.

Reconciliation of Net Loss to Adjusted EBITDA

Three Months Ended March 31,

2025

2024

$ thousands

Net loss

$(25,000)

$(72,307)

Adjusted to exclude the following:

Depreciation and amortization(1)

11,695

11,154

Interest expense

4,290

4,707

Stock-based compensation

4,317

8,374

Revenue reduction, net(2)

33,128

Excess supplier costs and resulting liquidated damages(2)

1,012

Provision for income taxes

153

Other expenses(3)

1,540

Adjusted EBITDA

$(4,627)

$(12,239)

Adjusted EBITDA, as used in the Company's full year 2025 guidance, is a non-GAAP financial measure that excludes or has otherwise been adjusted for items impacting comparability. The Company is unable to reconcile projected adjusted EBITDA to net income (loss), its most directly comparable forward-looking GAAP financial measure, without unreasonable effort, because the Company is unable to predict with a reasonable degree of certainty its change in stock-based compensation expense, depreciation and amortization expense, and other items that may affect net loss. The unavailable information could have a significant effect on the Company's full year 2025 GAAP financial results.

Depreciation and amortization includes depreciation and amortization expense, impairment loss of energy storage systems, impairment loss of project assets, and impairment loss of right-of-use assets.

Refer to the discussion of revenue reduction, excess supplier costs, and liquidated damages in "Definitions of Non-GAAP Financial Measures" in the Company's 1Q 2025 earnings press release.

Adjusted EBITDA for the three months ended March 31, 2024 reflects other expenses of $1.5 million, comprised of $1.1 million for expenses related to restructuring costs to pursue greater efficiency and to realign our business and strategic priorities, and $0.4 million of other non-recurring expenses.

Definitions

Item Definition

Bookings

Total value of executed customer purchase orders, as of the end of the relevant period (e.g. quarterly bookings or annual bookings). Customer purchase orders are typically executed 6 months ahead of installation. The booking amount includes (1) hardware revenue, which is typically recognized at delivery of the energy storage hardware and/or edge device to the customer, and (2) services revenue, which represents total nominal software and services contract value recognized ratably over the contract period.

Contracted Backlog Total value of hardware and non-recurring services bookings with executed purchase orders in dollars, as reflected on a specific date. Backlog increases as new purchase orders are executed (bookings) and decreases as hardware is delivered and recognized as revenue and as services are provided.

Contracted Annual Recurring Revenue ("CARR")

Annual Recurring Revenue ("ARR")

Storage Operating Assets Under Management ("AUM")

Annualized value from Stem customer subscription contracts with executed purchase orders signed in the period for systems that are not yet operating and all operating Stem customer subscription contracts, including solar software, storage software & recurring managed services, and some recurring professional services contracts.

Annualized value from operating customer subscription contracts, including solar software, storage software & recurring managed services, and any recurring professional services contracts.

Total GWh of storage systems in operation.

Solar Operating AUM Total GW of solar systems in operation.

Hardware Revenue Includes battery hardware resale sales and edge device hardware sales which is recognized at delivery to the customer.

Battery Hardware Resale Revenue

Sales of energy storage systems through partnership arrangements. Purchase orders are (performance obligations) are satisfied when the energy storage system along with all ancillary hardware components are delivered to the customer.

Edge Device Hardware Sales of edge device hardware to aid in the collection of site data and the real-time operation and control of a site.

Services and other revenue Includes solar software revenue, storage software & recurring managed services revenue, and project services revenue.

Solar software revenue Recurring SaaS revenue for software related to solar assets.

Storage software & recurring

managed services revenue

Includes (1) recurring SaaS revenue for software related to storage assets, (2) recurring revenue related to storage portfolios managed by Stem, and (3) Host Customer recurring and merchant revenues.

Project services revenue Professional services revenue and revenue tied to Development Company investments.

Operating Cash Flow Net cash provided by (used in) operating activities. Does not represent the change in balance sheet cash which will be furthe r impacted by investing and financing activities.

Disclaimer

Stem Inc. published this content on April 29, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 29, 2025 at 23:25 UTC.