STEM — Stem, Inc.

STEM Inc. Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Total Revenue: $29 million, down 11% year-over-year from $32 million in Q1 2025, primarily due to the absence of battery hardware resales.
• Core Revenue: Increased 4% year-over-year, driven by software, services, and edge hardware.
• PowerTrack Software Revenue: Grew 16% year-over-year, indicating strong performance in commercial and industrial solar monitoring.
• Adjusted EBITDA: $2 million, marking the fourth consecutive quarter of positive adjusted EBITDA and the first positive Q1 performance in company history.
• Non-GAAP Gross Margin: 52%, up from 46% in Q1 2025, reflecting a favorable revenue mix and structural cost improvements.
• Operating Cash Flow: Negative $8 million, attributed to working capital timing and interest payments, with expectations for improvement as the year progresses.
• Bookings: $27 million, down from $33 million in Q4 2025, with utility scale bookings more than doubling quarter-over-quarter.

2. Strategic Updates and Business Highlights

• Operational Leverage: Continued focus on maintaining structural efficiency and cost management, with cash operating expenses down 30% year-over-year.
• PowerTrack Platform: Key updates include the launch of PowerTrack Sage, an AI assistant for enhanced data interpretation, and the acquisition of raicoon, which adds automated fault detection capabilities.
• Managed Services Revenue: Approximately $7 million, with high customer satisfaction and performance exceeding targets.
• Utility Scale Expansion: Significant growth in utility scale bookings, with a strong pipeline and new deals across various geographies.

3. Forward Guidance and Outlook

• Full Year 2026 Guidance: Reaffirmed total revenue of $140 million to $190 million, with software, services, and edge hardware expected to contribute $130 million to $150 million and battery hardware resales up to $40 million.
• Adjusted EBITDA: Expected in the range of $10 million to $15 million.
• Operating Cash Flow: Guidance remains at $0 to $10 million, with confidence in achieving positive cash flow as working capital needs decrease.

4. Bad News, Challenges, or Points of Concern

• Revenue Decline: The year-over-year revenue drop is concerning, primarily due to the lack of battery hardware resales, which are expected to be weighted towards the second half of 2026.
• Managed Services ARR Decline: Down 4% sequentially, impacted by a battery supplier bankruptcy affecting contract renewals.
• Seasonality: Q1 is typically the weakest quarter, and while improvements are expected, the reliance on seasonal patterns could pose risks.

5. Notable Q&A Insights

• Utility Scale Bookings: Driven by PowerTrack EMS, which provides unified controls and visibility, with notable projects in Germany and Hungary.
• PowerTrack ARR Growth: Expected to ramp up throughout the year, primarily from commercial and industrial customers, despite moderate sequential growth in Q1.
• Margin Improvements: Continued focus on supply chain optimization and pricing strategies to enhance margins as AUM increases.
• AI Integration: AI tools are being effectively utilized both in product offerings and internally, enhancing customer engagement and operational efficiency.

Overall, STEM Inc. demonstrated solid operational execution in Q1 2026, with positive adjusted EBITDA and strategic advancements in its core offerings, despite facing challenges related to revenue declines and seasonal impacts. The company remains optimistic about its growth trajectory and operational efficiencies moving forward.