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STEM, INC. (STEM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered margin expansion and positive operating cash flow, with revenue up 27% year over year to $32.5M, GAAP gross margin 32%, non-GAAP gross margin 46%, and operating cash flow of $8.5M .
  • Results came in ahead of Wall Street on revenue and EBITDA; revenue beat consensus by ~8% ($32.5M vs $30.1M*), and adjusted EBITDA outperformed (actual $(4.6)M vs $(7.8)M*) — reflecting the shift toward higher-margin software/services and edge devices .
  • Management reaffirmed full-year 2025 guidance across all metrics (revenue $125–$175M; non-GAAP GM 30–40%; adjusted EBITDA $(10)M to $5M; operating cash flow $0–$15M; year-end ARR $55–$65M), underscoring confidence despite tariff/macro uncertainty .
  • Structural actions (four business units, 27% workforce reduction) target ~$30M annualized cash cost savings ($24M in 2025), paving the way for sequential profitability improvement through the year .

What Went Well and What Went Wrong

What Went Well

  • High-margin mix drove a record GAAP gross margin (32%) and near-record non-GAAP gross margin (46%); CFO: “significant margin expansion versus prior year evidences the value of our refined strategy” .
  • First quarter of positive operating cash flow in company history ($8.5M), validating the refined business model and cost discipline .
  • Software momentum: solar ARR up 10% QoQ and 24% YoY; storage ARR up 4% QoQ and 31% YoY; CEO: “PowerTrack is a market leader…we are seeing momentum in utility-scale with nearly triple bookings YoY” .

What Went Wrong

  • Bookings softened sequentially ($34.5M vs $37.6M in Q4), reflecting seasonality and ongoing deemphasis of OEM battery resales .
  • Storage operating AUM declined 11% QoQ to 1.6 GWh due to removal of PowerBidder Pro contracts (low ASP); management paused further development of PowerBidder Pro/APM to focus investment on PowerTrack .
  • Continued net losses (Q1 net loss $25.0M) and negative adjusted EBITDA ($(4.6)M), though improved YoY; investors remain focused on execution of cost reductions and segment transparency .

Financial Results

Headline Quarterly Progression

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$29.3 $55.8 $32.5
GAAP Gross Margin (%)21% (4)% 32%
Non-GAAP Gross Margin (%)46% 36% 46%
Adjusted EBITDA ($USD Millions)$(3.5) $4.2 $(4.6)
Net Loss ($USD Millions)$(148.3) $(51.1) $(25.0)
Net Loss per Share ($USD)$(0.91) N/A$(0.15)
Operating Cash Flow ($USD Millions)$(9.4) N/A$8.5

Segment/Revenue Mix

Revenue ComponentQ3 2024Q1 2025
Services & Other ($USD Millions)$22.1 $17.7
Hardware ($USD Millions)$7.1 $14.8
Total Revenue ($USD Millions)$29.3 $32.5

KPIs and Operating Metrics

KPIQ3 2024Q4 2024Q1 2025
Bookings ($USD Millions)$29.1 $357.6 $34.5
Contracted Backlog ($USD Millions)$1,547.4 $1,168.1 $25.3
Storage AUM (GWh)6.0 5.6 1.6
Solar AUM (GW)28.5 29.9 32.4
CARR ($USD Millions)$92.3 $86.0 $69.0
ARR ($USD Millions)N/AN/A$56.9

Note: Q1 2025 redefined Bookings, Contracted Backlog, CARR, and introduced ARR/Storage Operating AUM; Q3/Q4 metrics reflect prior definitions .

Q1 2025 vs S&P Global Consensus

MetricConsensus Estimate*Actual
Revenue ($USD Millions)$30.1*$32.5
EBITDA ($USD Millions)$(7.8)*$(10.6)
Primary EPS ($USD)$(3.70)*$(3.00)*

Values marked with * retrieved from S&P Global. Note: “Primary EPS” may differ from GAAP diluted EPS; company reported GAAP net loss per share of $(0.15) .

Guidance Changes

MetricPeriodPrevious Guidance (as of Q4 2024)Current Guidance (Q1 2025)Change
Revenue ($M)FY 2025$125 – $175 $125 – $175 Maintained
Software, Edge HW & Services ($M)FY 2025$120 – $140 $120 – $140 Maintained
Battery Hardware Resale ($M)FY 2025Up to $35 Up to $35 Maintained
Non-GAAP Gross Margin (%)FY 202530% – 40% 30% – 40% Maintained
Adjusted EBITDA ($M)FY 2025$(10) – $5 $(10) – $5 Maintained
Operating Cash Flow ($M)FY 2025$0 – $15 $0 – $15 Maintained
Year-End ARR ($M)FY 2025$55 – $65 $55 – $65 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/software initiatives (PowerTrack, EMS)Strategy shift to software/services; CTO appointed to lead AI-enabled software Focus on PowerTrack leadership; developing PowerTrack EMS; AI integration to boost developer productivity Strengthening focus and execution
Supply chain/tariffs/macroMacro headwinds; backlog repricing; impairments and guarantees cleanup Software/services largely exempt; limited tariff exposure at edge devices; pass-through approach; negotiate/ diversify OEM storage resales Manageable impact, prudent pass-through
Product performancePowerTrack adoption; Hungary 484 MW utility-scale addition Solar ARR +10% QoQ; storage ARR +4% QoQ; Summit Ridge fleet standardized on PowerTrack (514 MW) Ongoing commercial traction
Regional trendsInternational expansion highlighted (Eastern Europe/Hungary) Investing to grow international software deployments Expanding footprint
Regulatory/NYSE complianceReverse split proposed to regain NYSE compliance Seeking shareholder approval 1-for-10 to 1-for-20 reverse split Execution phase (approved subsequently)
R&D executionEmphasis on AI-enabled edge/software Pause PowerBidder Pro/APM; concentrate resources on PowerTrack; EMS roadmap Portfolio focus and prioritization
Organizational/cost actionsPrepare for OpEx reduction in 2025; guidance introduced Four business units; 27% RIF; ~$30M annual cash savings ($24M in 2025) Cost-down driving improved profitability cadence

Management Commentary

  • CEO on strategic shift: “We have transformed our operating model by establishing 4 distinct business units…software; professional services; managed services; and OEM hardware” .
  • CEO on software growth: “PowerTrack is a market leader…solar ARR was up 10% sequentially and up 24% year-over-year…momentum in utility scale with nearly triple the bookings” .
  • CFO on margins/cash: “We generated a record GAAP gross margin of 32% and our non-GAAP gross margin of 46%…We generated $9 million of operating cash flow…first quarter of positive operating cash flow” .
  • CEO on portfolio focus: “We have made the difficult decision to pause on further development of…PowerBidder Pro and Asset Performance Management…emphasizes AI integration across our product suite” .
  • CFO on guidance/discipline: “We’re pleased to reaffirm across all metrics…we expect to pass through any tariff related impacts while preserving target margins” .

Q&A Highlights

  • Tariffs and bookings: Hardware volatility monitored, but OEM battery sales are a smaller component; software/services largely tariff-exempt; pass-through approach for edge devices; active dialogues with domestic and Chinese OEMs .
  • Brownfield managed services: Pursuing opportunities in geographies where Stem already operates; scaling volume improves profitability; nothing specific to announce yet .
  • PowerBidder Pro removal from AUM: Low ASP contracts removed; ARR continued to increase despite removals; resources refocused on PowerTrack .
  • Cost reductions vs guidance: Actual dollar savings in high-30% range vs prior 20% target; headcount reduction 27%; supports adjusted EBITDA and cash flow targets .
  • Margin drivers: Less OEM hardware, higher software/edge mix; Q1 non-GAAP GM above annual range due to mix; maintaining conservatism for macro variables .

Estimates Context

  • Q1 2025 revenue beat: $32.5M actual vs $30.1M consensus* — bold revenue beat driven by software/services strength and edge devices mix .
  • Q1 2025 EBITDA: $(10.6)M actual vs $(7.8)M consensus* — overall EBITDA was more negative than consensus, but adjusted EBITDA improved YoY (actual $(4.6)M) as operating costs fell .
  • Q1 2025 Primary EPS (S&P): Actual $(3.00)* vs $(3.70)* consensus — better than expected on S&P’s Primary EPS basis; note GAAP diluted EPS reported by company was $(0.15) .

Values marked with * retrieved from S&P Global.

MetricQ3 2024 ActualQ4 2024 ActualQ1 2025 ActualFY 2025 Consensus*
Revenue ($USD Millions)$29.3 $55.8 $32.5 $151.8*
Adjusted EBITDA ($USD Millions)$(3.5) $4.2 $(4.6) $0.8*
Primary EPS ($USD)$(3.522)*$(1.11)*$(3.00)*$9.23*

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Mix shift is working: sustained gross margin gains and positive operating cash flow validate the software/services-led model; watch for continued pass-through of tariffs and reduced reliance on OEM resales .
  • Execution on cost-out should support sequential profitability: four BUs and 27% RIF drive ~$30M cash savings; expect margin and EBITDA trajectory to improve through 2025 .
  • Commercial momentum in solar software (PowerTrack) with utility-scale and international expansion (e.g., Summit Ridge 514 MW; Hungary portfolio) reinforces ARR growth targets .
  • KPIs reset: new definitions (Bookings, Backlog, CARR, ARR) reduce headline backlog but improve comparability to revenue conversion; focus on ARR/CARR sequential trends .
  • Guidance intact across all metrics despite macro noise; near-term trading should key off mix/margins and cash flow cadence; medium-term thesis hinges on scaling recurring software and segment reporting clarity .
  • Risk watch: tariff evolution, macro/regulatory (IRA), NYSE compliance steps (reverse split) — management plans pass-through/delivery discipline and expects limited impact on targeted margins .

Sources

  • Q1 2025 8-K 2.02 and earnings release: margins, cash flow, KPIs, guidance .
  • Q1 2025 earnings call transcript: strategy, cost actions, tariffs, ARR commentary, Q&A .
  • Prior quarters: Q4 2024 results; Q3 2024 results and strategy shift .
  • Additional press releases: PowerTrack standardization (Summit Ridge), board appointments .

Values retrieved from S&P Global where marked with *.