Stem, Inc.

Greetings and welcome to the STEM Inc. First Quarter 2025 Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce Ted Durbin, Head of Investor Relations. Please go ahead.

Thank you, Operator. This is Ted Durbin, Head of Investor Relations at STEM. Welcome to our first quarter 2025 earnings call. Before we begin, please note that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. We therefore refer you to our latest 10-Q, 10-K, and other SEC filings, including the supplemental materials, which can be found on our website. Our comments today also include non-GAAP financial measures, Additional details and reconciliations to the most directly comparable gaps in initial measures can be found in our earnings release, which is on our website. Arun Narayanan, CEO, and Doran Hull, CFO and EVP, will start the call today with prepared remarks, and then we will take your questions. And now I will turn the call over to Arun.

Thanks, Ted. Hello, everyone, and thank you all for joining us today. We made significant progress advancing our strategic priorities in the first quarter, with early success evident in our results. But before diving into these results and our outlook, I want to highlight important changes we have recently implemented in how we structure our business internally. Since becoming CEO, a key priority has been implementing organizational adjustments to realize our strategic shift. We have transformed our operating model by establishing four distinct business units that clearly define how we organize and run our business. Our four business units are software, professional services, managed services, and OEM hardware. Each unit will have full P&L responsibility and accountability for their financial performance, including EBITDA and cash flow metrics. This new structure represents an intentional shift in how we manage our business, and we believe it will deliver multiple strategic benefits. It empowers our leaders to make efficient, market-responsive decisions about resource allocation and investment priorities. The new structure also enables more precise tracking of return on investment across our portfolio, allowing us to optimize capital deployment towards our highest growth opportunities. Additional details about these business units are available in our supplemental materials on the IR website. I'd like to once again emphasize that while these business units guide our internal operations, they may differ from external reporting segments. We look forward to sharing more about these changes and their impact in the coming quarters. Directly related to these changes in how we organize and run our business, on April 9th, we announced a targeted 27% reduction in force that we expect to result in $30 million of annual cash cost savings, including an expected $24 million cash benefit in 2025. These reductions were thoughtful and consistent with our software-focused strategy and will preserve our ability to grow software revenue. To that end, we maintain the full strength of our power track team, which is central to our near-term growth strategy. Our changes also preserve our ability to honor commitments to customers across all business areas. This restructuring was a critical step for us to execute on our three key priorities, which I laid out on our fourth quarter earnings call in early March. First, to grow our software revenue with a renewed focus on power track. Second, to reduce our cost structure and drive profitability. And third, to revamp our software development. I'm pleased to say that we have made definite progress on all three priorities. Let's begin with an update on our refined strategy that is focused on growing software revenue. As I mentioned earlier this year, one of the key factors that drew me to STEM was Powertrack's distinctive position and strong reputation in the market. Powertrack is a market leader in the commercial and industrial or C&I segment of solar asset monitoring software. During the first quarter, solar annual recurring revenue, or ARR, was up 10% sequentially and up 24% year over year. These results clearly demonstrate the tangible success we are having in growing our business to provide more scalable recurring and profitable revenue streams. We are continuing to invest in Powertrack to be able to serve smaller utility scale customers which to us generally means in the range of 20 to 100 megawatts. Utility scale deployments are much larger than CNI, and our market share in this segment is modest, presenting significant growth opportunities. We are seeing momentum in utility scale, with nearly triple the bookings in the first quarter compared to the same period last year. We are also investing to grow our software deployment presence in international markets. Managed services, including our storage software Athena, also performed well in the first quarter. We drove storage ARR higher by 4% sequentially and 31% over the same period last year. Our software continues to deliver substantial value and ROI to our customers who continue to face challenges in maximizing the value of their energy storage assets. Our strategic focus for storage is centered on software and services, particularly for brownfield opportunities that enable faster revenue conversion. Additionally, we are experiencing growing momentum in our professional services offering. Our team of industry experts has established themselves as trusted advisors and thought leaders in the clean energy sector. We are excited about this offering because these professional service engagements can in turn drive downstream business development opportunity for our software solutions. Now a discussion of our second focus area, cost savings and profitability. During the first quarter of 2025, we reached several significant profitability milestones. We delivered strong growth margins driven by robust growth across our high margin software, services, and edge device offerings. Additionally, we generated positive quarterly cash flow from operations for the first time in our history. We believe this validates both our refined business model and strategic execution. Importantly, our first quarter results do not reflect the financial benefit we expect to realize from the organizational changes and cost savings we recently implemented. we expect to see improving profitability as we move through the year. Lastly, let's discuss our third priority, our software development revamp. We are focused on protecting and expanding Powertrack success in the CNI market through continuous product refinement, investment in differentiating product capabilities, and responding to customer feedback. We continue to develop our Powertrack EMS software with the goal of entering new markets, such as when projects deploy standalone storage or co-located solar and storage installations. We are excited to soon bring to market software that brings the asset monitoring capabilities we have mastered in solar to both storage and hybrid assets. As part of our portfolio review, we have made the difficult decision to pause on further development of two products, PowerBedder Pro and Asset Performance Management, or APM. Looking forward, our refined software roadmap emphasizes AI integration across our development process and product suite, positioning us to accelerate the delivery of innovative solutions to our customers. As mentioned in the previous call, we are aiming to bring a step change to developer productivity by using generative AI methods in our lifecycle and we will have updates in future earnings calls. I would also like to address the current macro environment. While the clean energy sector faces uncertainty due to evolving economic and regulatory policies, we are maintaining our upward momentum. Today, our booking space and pipeline development remain robust across our core offerings. Our software and service offerings are largely exempt from the current types of tariffs being considered. Some of our offerings, such as power track compatible edge computing devices, will face a limited tariff exposure. These generally pass through to our customers. On the OEM storage resales business, which forms a smaller portion of revenue, we will work with our suppliers and customers to negotiate tariff absorption or diversify to domestic suppliers. With all this in mind, we are pleased to reiterate our full year 2025 financial guidance across all metrics. Lastly, I want to welcome both Vasudevan Guruswamy and Krishna Shivram, who have joined our board recently. They both bring significant energy industry, financial, and technology expertise to the board, and I am glad to have them with us. With that, let me turn the call over to Doran.