Stem, Inc. Q1 2026 Earnings Call Summary

Strategic Performance and Operational Context

• Achieved the first positive adjusted EBITDA in a first fiscal quarter in company history, driven by a high-margin revenue mix and a leaner cost structure.

• Non-GAAP gross margins reached a record 52% due to the absence of battery hardware resales and a focus on core software, services, and edge hardware.

• Operational leverage is being sustained through permanent structural efficiencies, including a 30% year-over-year reduction in cash operating expenses.

• Internal AI adoption has reached nearly 70% of the employee base, accelerating software feature delivery and improving operational triage productivity.

• The acquisition of raicoon serves as a strategic 'buy vs. build' move to integrate automated fault detection and event management into the PowerTrack platform.

• Utility scale bookings more than doubled quarter-over-quarter, signaling a successful pivot toward larger, more complex energy storage and hybrid projects.

Outlook and Strategic Initiatives

• Reaffirmed full-year 2026 guidance, assuming revenue will be weighted toward the second half as construction projects ramp up seasonally.

• Expect non-GAAP gross margins to compress toward the 40% to 50% range as lower-margin battery hardware resales are opportunistically layered in.

• Operating cash flow is projected to turn positive for the full year as working capital requirements lessen and billings increase in later quarters.

• PowerTrack EMS bookings from late 2025 are on track to convert to revenue starting in the second quarter of 2026.

• International revenue is expected to grow beyond the current 5% of total revenue as European utility scale projects move through commissioning and into revenue recognition in late 2026 and 2027.

Risk Factors and Structural Adjustments

• Managed services ARR saw a 4% sequential decline due to a battery supplier bankruptcy that prevented the renewal of specific warranty management contracts.

• Negative $8 million operating cash flow in Q1 was attributed to expected working capital timing and scheduled interest payments rather than underlying business performance.

• The company is navigating tightening regulatory requirements, such as FEOC, through a new co-marketing partnership for North American-manufactured hardware.

Q&A Highlights

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Drivers of utility scale booking momentum and product traction

• Growth is primarily driven by PowerTrack EMS, which offers unified controls and portfolio visibility for hybrid and standalone storage projects.

• Management highlighted a 50-plus megawatt hour hybridization project in Hungary as a key example of existing solar customers expanding into storage.