Stem, Inc. ((STEM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Stem, Inc. painted a picture of cautious optimism. The company showcased positive momentum in its software revenue and strategic financial restructuring, highlighted by a significant reduction in debt and positive adjusted EBITDA. However, challenges such as negative operating cash flow and a strategic reduction in workforce were also acknowledged. Despite these hurdles, Stem, Inc. appears well-positioned for future growth.
Record Software Revenue and Positive Adjusted EBITDA
Stem, Inc. reported a record software revenue and achieved a positive adjusted EBITDA of $4 million for the quarter. This marks a substantial $15 million improvement compared to the previous year, signaling strong financial performance and operational efficiency.
Total Revenue Growth
The company experienced a 13% year-over-year increase in total revenue, reaching $38.4 million for Q2 2025. This growth underscores the company’s ability to expand its market presence and capture new opportunities.
Annual Recurring Revenue (ARR) Increase
Annual recurring revenue saw a 3% sequential and 22% year-over-year growth, climbing to $59 million. This increase reflects the company’s successful efforts in building a robust recurring revenue base.
Introduction of New Software Offerings
Stem, Inc. announced the launch of AI-enabled PowerTrack EMS and PowerTrack Sage. These new software offerings are expected to expand the company’s market reach and enhance customer experience, positioning Stem as a leader in innovative energy solutions.
Debt Reduction and Refinancing
A strategic debt exchange transaction was completed, reducing the company’s debt by $195 million and extending maturities to 2030. This move significantly strengthens Stem’s financial structure and provides greater financial flexibility.
Strong Gross Margins
The company achieved GAAP gross margins of 33% and a record non-GAAP gross margin of 49%. These strong margins highlight Stem’s operational efficiency and ability to generate value from its core business activities.
Reduction in Force
In a bid to streamline operations, Stem implemented a strategic reduction in force, cutting personnel costs by approximately 35%. This decision reflects the company’s focus on cost management and operational efficiency.
Negative Operating Cash Flow
Despite the positive developments, Stem reported a negative operating cash flow of $21 million for the quarter, with cash on hand decreasing to $41 million. This remains a challenge that the company needs to address moving forward.
Challenges in Hardware Business
The company is shifting its focus away from the capital-intensive OEM battery resale business, with hardware sales expected to be limited to up to $35 million. This strategic shift indicates a move towards more sustainable and profitable business segments.
Forward-Looking Guidance
Looking ahead, Stem, Inc. reiterated its full-year 2025 guidance, expecting to meet the high end for all metrics except operating cash flow, which is projected at the lower end of the range. The company remains committed to maintaining its growth trajectory while addressing operational challenges.
In conclusion, Stem, Inc.’s earnings call highlighted a mix of positive achievements and ongoing challenges. The company’s strategic initiatives in software revenue growth and debt reduction are commendable, yet the negative operating cash flow and workforce reduction present areas that require attention. Overall, Stem is on a promising path, with a focus on innovation and financial stability.