Stem, Inc. (STEM) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows mixed financial performance with a decline in total revenue but growth in core software and services. The significant improvement in gross margins and positive adjusted EBITDA are strong positives. The Q&A section reveals optimism with strong utility-scale bookings and potential margin improvements. The acquisition of raicoon and AI advancements are strategic positives. Despite some negative trends, the overall sentiment is positive, driven by strategic growth initiatives and improved financial health.
Key Financial Performance
Total Revenue $29 million, down 11% year-over-year from $32 million in Q1 2025. The decline was due to the absence of battery hardware resales this quarter.
Core Revenue (Software, Services, and Edge Hardware) Up 4% year-over-year from Q1 2025. This growth reflects strength in software and services.
PowerTrack Software Revenue Grew 16% year-over-year, driven by strength in commercial and industrial solar monitoring and early contributions from utility scale expansion.
Edge Hardware Revenue Grew approximately 1% year-over-year.
Project and Professional Services Revenue Declined 5% year-over-year.
Managed Services Revenue Declined 5% year-over-year.
GAAP Gross Margin 38%, up from 32% in Q1 2025. The increase reflects a higher mix of software, services, and edge hardware.
Non-GAAP Gross Margin 52%, up from 46% in Q1 2025. The increase was driven by structural cost improvements and a higher mix of software and services.
Cash Operating Expenses Down 30% year-over-year and down approximately 10% sequentially. This reflects permanent structural efficiency from workforce and cost optimization actions.
Adjusted EBITDA $2 million, a $7 million improvement compared to negative $5 million in Q1 2025. This marks the fourth consecutive quarter of positive adjusted EBITDA.
Operating Cash Flow Negative $8 million, driven by timing of working capital movements and cash interest expense.
Bookings $27 million, down from $33 million in Q4 2025 due to typical Q1 seasonality. Utility scale bookings more than doubled quarter-over-quarter.
Contracted Backlog $23 million, up 8% sequentially from $21 million in Q4 2025.
CARR (Contracted Annual Recurring Revenue) $67 million, flat versus Q4 2025.
ARR (Annual Recurring Revenue) $61.2 million, up slightly from $61.1 million in Q4 2025. PowerTrack ARR grew 2% sequentially, while Managed Services ARR declined 4% sequentially.
Solar Operating AUM (Assets Under Management) 37.5 gigawatts, up 4% sequentially.
Storage Operating AUM 1.7 gigawatt hours, flat sequentially.
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Operating Highlights
PowerTrack Sage: Launched as an AI assistant to synthesize live site data, alerts, and performance analytics into plain language briefings. Early adoption shows consistent daily engagement across multiple customer organizations.
raicoon Acquisition: Acquired raicoon, an Austrian provider of automated fault detection and event management for solar assets. This acquisition enhances PowerTrack with automated fault detection and alert prioritization.
PowerTrack EMS: Expanded utility scale deployments with bookings more than doubling quarter-over-quarter. Highlighted a key booking in Hungary for a 50+ megawatt hour battery system.
Utility Scale Expansion: Bookings more than doubled quarter-over-quarter, with deals in four geographies. Strong pipeline for utility scale projects, including hybrid systems.
International Growth: International revenue represented 5% of total revenue, with expectations for growth as European utility scale projects progress.
Adjusted EBITDA: Achieved $2 million in adjusted EBITDA, marking the fourth consecutive positive quarter and the first positive Q1 performance.
Gross Margins: Non-GAAP gross margin reached 52%, driven by software, services, and edge hardware revenue mix.
AI Adoption: 70% of employees actively use AI tools, leading to productivity gains and efficiency improvements.
Partnership with Nuvation Energy: Established a co-marketing relationship to deliver a North American-designed and manufactured energy control stack.
AI Services Offering: Progressing with customer conversations to streamline processes and improve decision-making.
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Risk or Challenges
Battery Hardware Resales: The absence of battery hardware resales in Q1 2026 led to an 11% year-over-year revenue decline. Battery hardware resale activity is expected to be weighted to the second half of 2026, which could impact revenue timing and cash flow.
Operating Cash Flow: Operating cash flow was negative $8 million in Q1 2026 due to working capital timing and scheduled interest payments. This poses a risk to liquidity if improvements in cash flow do not materialize as expected later in the year.
Managed Services ARR: Managed services ARR declined 4% sequentially due to a battery supplier bankruptcy, which prevented the renewal of certain recurring contracts. This could impact recurring revenue streams and customer retention.
Utility Scale Expansion: While utility scale bookings more than doubled quarter-over-quarter, the longer commercial lifecycle of these projects means revenue recognition will be delayed until late 2026 or 2027, potentially impacting near-term financial performance.
International Revenue: International revenue represented only 5% of total revenue in Q1 2026. Delays in commissioning and revenue recognition for international projects could hinder growth in this segment.
Battery Supplier Bankruptcy: The bankruptcy of a battery supplier affected the renewal of certain contracts tied to managed services, which could lead to customer dissatisfaction and loss of associated revenue.
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Guidance & Outlook
Full Year 2026 Guidance: Reaffirmed across all metrics: Total revenue of $140 million to $190 million, with software, services, and edge hardware expected in the range of $130 million to $150 million and battery hardware resales of up to $40 million. Non-GAAP gross margin of 40% to 50%, adjusted EBITDA of $10 million to $15 million, operating cash flow of $0 to $10 million, and year-end ARR of $65 million to $70 million.
Gross Margins: Margins are expected to compress towards the midpoint of the 40% to 50% non-GAAP gross margin guidance range as battery hardware resales are layered in throughout the year.
Operating Cash Flow: Expected to improve throughout the year as bookings and billings increase and working capital requirements lessen, with full-year guidance of $0 to $10 million.
Utility Scale Segment: Bookings more than doubled quarter-over-quarter, with a strong pipeline expected to convert to meaningful revenue in late 2026 and into 2027. Expansion into utility scale deployments is a key growth driver.
International Revenue: Expected to grow as PowerTrack EMS and other utility scale projects in Europe move through commissioning and into revenue recognition in late 2026 and 2027.
PowerTrack EMS: Bookings from Q4 2025 are on track to convert to revenue during Q2 2026. New bookings in Q1 2026 include a 50-plus megawatt hour battery system in Hungary, with further growth anticipated in the European utility scale market.
AI Services Offering: Continues to progress with active customer conversations focused on implementing practical AI use cases. This remains an important future growth opportunity.
New Market Opportunities: Exploring opportunities in energy optimization software for data center developers and operators, with updates to follow as customer engagements advance.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What drove the strength in utility scale bookings that doubled quarter-over-quarter?
A:The strength in utility scale bookings was largely driven by PowerTrack EMS, which provides unified controls, cloud monitoring, and portfolio-level visibility. Additionally, PowerTrack SCADA contributed to monitoring and control in utility-scale solar projects. Examples include a 100+ megawatt-hour German project and a 50+ megawatt-hour Hungarian project. The company expects revenue from these bookings to start in Q2 2026.
Q:Why was PowerTrack ARR flat sequentially despite 16% year-over-year revenue growth?
A:PowerTrack ARR was up 12% year-over-year and 2% sequentially, with the moderate sequential growth attributed to seasonality. ARR is expected to ramp up throughout the year, with most growth coming from PowerTrack C&I customers. The company reaffirmed its ARR guidance of $65 million to $70 million for the year.
Q:What drove the improvements in PowerTrack non-GAAP gross margins, and is there potential for further margin increases?
A:Improvements in PowerTrack non-GAAP gross margins, which rose to 75% in Q1 from 69% a year ago, were driven by increased AUM, leveraging SaaS product volume, and modest price increases due to supply chain and tariff factors. As volume increases, margins are expected to continue improving.
Q:What are the key levers for achieving positive operating cash flow for the full year 2026?
A:Key levers include increased bookings and billings due to seasonality, reduced working capital requirements, and optimized cash operating expenses, which were down 30% year-over-year and 10% sequentially. The company achieved positive EBITDA in its lowest revenue quarter, demonstrating improved operating discipline.
Q:Why did the company acquire raicoon, and why now?
A:The company acquired raicoon to enhance PowerTrack with automated fault detection and prioritization, which improves customer retention and satisfaction as portfolios become more complex. The acquisition supports the 2026 priority of strengthening the core PowerTrack business and provides additional value to existing and new customers.
Q:How is Stem's AI capability creating measurable value for customers?
A:Stem's AI capability creates value by embedding AI into products like PowerTrack Sage, which provides plain language briefings for non-technical users, expanding the user base. Internally, AI accelerates feature delivery, improves operations triage, and reduces friction for customers, enhancing retention, expansion, and new customer wins.
Q:Review of Unclear Management Responses
A:No questions were identified where management avoided giving a direct answer or provided vague responses.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
ARR
AUM
PowerTrack EMS
ability
acquisition
asset
base
battery hardware
booking
capital
cash flow
cloud
core
customer
edge hardware
efficiency
end
energy
expansion
gigawatts
hardware resale
improvement
margin
market
optimization
platform
portfolio
priority
raicoon
requirement
service edge
site
software service
storage
timing
track
utility scale
STEM Transcript
Stem, Inc. (STEM) Q1 2026 Earnings Call Transcript
Positive5-7
The earnings call summary shows mixed financial performance with a decline in total revenue but growth in core software and services. The significant improvement in gross margins and positive adjusted EBITDA are strong positives. The Q&A section reveals optimism with strong utility-scale bookings and potential margin improvements. The acquisition of raicoon and AI advancements are strategic positives. Despite some negative trends, the overall sentiment is positive, driven by strategic growth initiatives and improved financial health.
Stem, Inc. (STEM) Q4 2025 Earnings Call Transcript
Positive3-5
The earnings call highlights strong financial performance with a 20% revenue increase and improved gross margins. The launch of a new product and strategic partnership in Europe, combined with operational efficiency gains, are positive indicators. Despite some regulatory risks, the optimistic guidance and international expansion suggest a favorable outlook. However, the lack of discussion on shareholder returns slightly tempers enthusiasm. Overall, the positive financial results and strategic initiatives are likely to drive a positive stock price movement in the short term.
Stem, Inc. (STEM) Q3 2025 Earnings Call Transcript
Positive10-29
The earnings call shows strong financial performance with increased revenue, positive adjusted EBITDA, and improved cash flow. The launch of new products like PowerTrack EMS and a shift towards software-centric operations are promising. While there are slight concerns about gross margin compression and cautious guidance, overall growth in recurring revenue and cost management efforts are positive indicators. The Q&A section didn't reveal major negative sentiments, and the company remains optimistic about future growth, suggesting a positive stock reaction.
Stem, Inc. (STEM) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call highlights strong financial performance with record-high non-GAAP gross margins and significant revenue growth in solar and storage software segments. The successful debt exchange transaction has improved the balance sheet, reducing debt burden. Despite challenges in cash flow and workforce reduction, the optimistic guidance on revenue and profitability, along with strategic shifts towards software and services, suggest positive sentiment. The Q&A session further supports this with management's focus on utility scale solar and continued OpEx reduction. Overall, these factors suggest a positive stock price movement in the short term.
STEM Report
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