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SI

STEM, INC. (STEM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue of $38.4M grew 13% YoY, with GAAP gross margin at 33% and non-GAAP gross margin at 49%; adjusted EBITDA turned positive at $3.8M as the mix shifted to higher-margin software and services .
  • Consensus revenue estimate was $32.5M*, implying a clear beat; consensus EPS was -$2.99*, while reported GAAP diluted EPS was -$1.79, a better-than-expected outcome given cost reductions and mix shift (note EPS definitional differences and reverse split effects) .
  • Net income of $202.5M reflected a one-time $220.0M gain on extinguishment of debt from a June notes exchange that reduced outstanding debt by ~$195M and extended maturities, materially strengthening the balance sheet .
  • Full-year 2025 guidance was reaffirmed across all metrics; management said the company is tracking toward the high end of ranges for most metrics, and toward the low end for operating cash flow .
  • Product catalysts: launching PowerTrack EMS and announcing PowerTrack Sage (AI-driven chat-like interface), with international and utility-scale expansion, supporting a software-centric strategy and margin resilience despite tariff/policy headwinds .

What Went Well and What Went Wrong

What Went Well

  • Record software revenue and margin expansion: GAAP gross margin improved to 33% and non-GAAP gross margin to 49%, driven by higher contribution from software/services .
  • Positive adjusted EBITDA of $3.8M vs $(11.3)M in 2Q24, reflecting lower OpEx and mix improvements .
  • Balance sheet strengthening: “We were able to capture a discount of close to $200,000,000 through our debt exchange… reducing our overall debt burden” (CEO) and “retired $195,000,000 of debt… extending debt maturities” (CFO) .

What Went Wrong

  • Operating cash flow was -$21.3M in Q2, primarily due to working capital outflows and ~$6M one-time payments related to a workforce reduction; management expects positive operating cash flow in 2H25 .
  • Tariff/policy uncertainty persists, with management reiterating macro headwinds and regulatory complexity as ongoing risks .
  • Sequential bookings were flat at $34.3M and backlog growth modest (+6%), reflecting typical seasonality and a disciplined de-emphasis of capital-intensive battery resale .

Financial Results

Consolidated performance versus prior periods

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$34.0 $32.5 $38.4
GAAP Gross Margin (%)28% 32% 33%
Non-GAAP Gross Margin (%)40% 46% 49%
Adjusted EBITDA ($USD Millions)$(11.3) $(4.6) $3.8
Net Income ($USD Millions)$(582.3) $(25.0) $202.5
Diluted EPS ($USD)$(71.81) $(0.15) $(1.79)

Note: Q1 2025 EPS reflects pre–reverse split share count (1-for-20 split on June 23, 2025); Q2 2025 EPS reflects post-split shares .

Q2 2025 actuals versus S&P Global consensus

MetricConsensusActual
Revenue ($USD Millions)$32.47*$38.37
Primary EPS ($USD)$(2.99)*$(1.79)

Consensus values marked with * retrieved from S&P Global.

Q2 2025 revenue breakdown

CategoryQ2 2025 ($USD Millions)
Solar software$9.52
Edge hardware$12.09
Project and professional services$2.33
Storage software & managed services$9.00
Battery hardware resale$5.43
Total revenue$38.37

Operating KPIs

KPIQ2 2024Q1 2025Q2 2025
Bookings ($USD Millions)—$34.5 $34.3
Contracted Backlog ($USD Millions)—$25.3 $26.8
Storage Operating AUM (GWh)1.2 1.6 1.7
Solar Operating AUM (GW)26.9 32.4 32.7
CARR ($USD Millions)—$69.0 $69.2
ARR ($USD Millions)$48.1 $56.9 $58.5

Note: Bookings/backlog/CARR definitions were revised beginning Q1 2025; some prior period amounts excluded under new definitions -.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$125–$175 $125–$175 Maintained
Software, edge hardware & services ($USD Millions)FY 2025$120–$140 $120–$140 Maintained
Battery hardware resale ($USD Millions)FY 2025Up to $35 Up to $35 Maintained
Non-GAAP Gross Margin (%)FY 202530%–40% 30%–40% Maintained
Adjusted EBITDA ($USD Millions)FY 2025$(10)–$5 $(10)–$5 Maintained
Operating Cash Flow ($USD Millions)FY 2025$0–$15 $0–$15 Maintained
Year-end ARR ($USD Millions)FY 2025$55–$65 $55–$65 Maintained

Management reiterated tracking toward the high end for most metrics and toward the low end for operating cash flow .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/software initiativesStrategy to drive scalable recurring software; PowerTrack international wins (Hungary) -Launching PowerTrack EMS; announcing PowerTrack Sage (LLM-like interface) -Expanding product roadmap; deeper AI integration
Supply chain/tariffs/macroIRA/administration changes; import tariffs; macro uncertainty Headwinds continue; diversified, software-centric model seen as resilient; U.S. C&I solar demand outlook solid Resilience via mix shift and services
Product/segment performanceQ4 weakness in hardware; focus on software/services Record software revenue; storage managed services up; EMS enables utility-scale entry Mix shift toward higher-margin lines
Regional trendsEastern Europe 484 MW PowerTrack win (Hungary) Camino Solar project in California; Norbut Solar Farms standardizing on PowerTrack (NYISO) U.S. C&I strength; ongoing international
OpEx/cost actionsPlanned reductions and restructuring 35% personnel cost reduction; cash OpEx down ~39% YoY; additional non-personnel savings targeted -OpEx declining; operating leverage improving
Regulatory/legalPolicy uncertainty; PCGs revenue reductions in prior periods No remaining PCGs; no expected future impact; OBBB and tariff risks monitored Legacy risks resolved; monitoring ongoing

Management Commentary

  • CEO: “We delivered record software revenue and positive adjusted EBITDA… we also refinanced our debt and significantly strengthened our balance sheet… Despite tariff and policy headwinds, our diversified software‑centric model… position us to navigate the landscape effectively.”
  • CEO on products: “We plan to launch external segment reporting… I am pleased to announce… PowerTrack EMS… and PowerTrack Sage… a chat-like experience allowing for greater interactivity” -.
  • CFO: “GAAP gross margins of 33% and a record non-GAAP gross margin of 49%… targeted workforce reduction… annualized savings of over $27,000,000 or ~35% of personnel expenses… operating cash flow negative due to working capital and one-time payments, but we expect positive cash from operations in the second half” .
  • CFO on debt exchange: “Retired $195,000,000 of debt at a meaningful discount while extending debt maturities… materially strengthening our balance sheet” .

Q&A Highlights

  • Hardware strategy: Management reaffirmed de-emphasis of battery hardware resale (up to $35M FY guidance) and pivot to software/services; bookings continue but focus is software-led growth .
  • Utility-scale and storage: PowerTrack EMS integrates solar and storage control, enabling utility-scale participation; managed services and Athena underpin storage value proposition .
  • OpEx trajectory: Cash OpEx expected to continue declining as non-personnel savings are implemented; Q2 cash OpEx ~$18.3M vs ~$29M YoY .
  • Working capital and cash: Q2 OCF -$21M driven by AR increase and AP paydowns plus ~$5.9M one-time RIF payments; management expects stabilized working capital and positive OCF in 2H25 .

Estimates Context

  • Revenue: Actual $38.37M vs consensus $32.47M* — a clear beat driven by higher software/services mix and cost actions ; consensus from S&P Global*.
  • EPS: GAAP diluted EPS -$1.79 vs consensus Primary EPS -$2.99* — better than expected; note definitional differences (Primary vs diluted) and reverse split impacts which can affect comparability*.
  • Implications: Consensus likely to revise upward for revenue and margins as mix shift persists; operating cash flow cadence may remain conservative pending 2H execution .

Consensus values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Clear top-line and margin beat versus consensus with positive adjusted EBITDA; software/services mix is driving structural gross margin expansion .
  • Balance sheet materially de-risked via ~$195M debt reduction and maturity extension to 2030; one-time extinguishment gain flowed through GAAP net income .
  • Guidance reaffirmed; management indicates tracking toward the high end for most metrics and low end for operating cash flow — watch 2H collections and OpEx execution -.
  • Product roadmap (PowerTrack EMS and Sage) expands addressable market into utility-scale and enhances AI capabilities — potential medium-term ARR tailwinds -.
  • Operating KPIs show steady sequential progress: backlog +6% QoQ, ARR +3% QoQ, storage/solar AUM up; bookings seasonally flat .
  • Macro risks (tariffs/policy) persist, but the software-centric model and services exposure mitigate hardware sensitivity; no remaining PCGs expected to impact results .
  • Near-term trading lens: Strong beat and balance sheet relief provide catalysts; focus into Q3/Q4 on OCF inflection, segment reporting rollout, and EMS commercialization timelines -.

Additional Q2-relevant press releases:

  • Notes exchange and new first-lien notes due 2030 (debt reduction, liquidity flexibility) .
  • Camino Solar project deployment (Avangrid) and Norbut Solar Farms standardizing on PowerTrack — execution and pipeline credibility in U.S. utility/C&I .