Stem, Inc.

Greetings and welcome to the STEM Incorporated First Quarter 2026 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Erin Reed, Head of Investor Relations. Thank you. You may begin.

Thank you, Operator. Welcome to STEM's First Quarter 2026 Earnings Call. This is Erin Reed, Head of Investor Relations. Before we begin, please note that some of the statements we will be making today are forward-looking. These statements involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. For more information, we refer you to our latest 10Q, 10K, other SEC filings, and supplemental presentation, which can be found on our Investor Relations website. Our comments today also include non-GAAP financial measures. Additional details and the reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter 2026 earnings release and supplemental materials, which are available on the company's investor relations website. Arun Narayanan, CEO, and Brian Musfelt, CFO, will start the call today with prepared remarks, and then we will conduct a question and answer session. And now, I'll turn the call over to Arun.

Thank you, Erin. Good afternoon, everyone, and thank you all for joining us today. When I spoke with you last during our fourth quarter and full year 2025 earnings call, I framed 2025 as a transformative year and 2026 as the year to demonstrate what that transformation was designed to deliver. One quarter in, I'm encouraged by the progress we're making. Our results are moving in the right direction and we remain on track against the commitments we've set. Q1 is historically the lightest revenue quarter for us and our industry, and yet this quarter we delivered our fourth consecutive quarter of positive adjusted EBITDA. In fact, this was our first ever positive adjusted EBITDA in a first fiscal quarter, supported by strong growth margins and continued growth in core software, services, and edge hardware revenue. This reflects a cost structure and a margin profile that are now increasingly durable. We remain on track across all 2026 financial and operating targets, and we are reaffirming full year guidance across all metrics today. Now turning to an update on our three key priorities for 2026. Our first priority is to drive operational leverage and ensure that the structural improvements we made in 2025 are sustainable and continue over time. Growth margins for the first quarter were, again, very strong. With no battery hardware resales in the quarter, our revenue mix was entirely software, services, and edge hardware, which drove non-GAAP growth margin to 52%. As we opportunistically layer in battery hardware through the balance of the year, we expect margins to naturally compress towards the midpoint of our 40 to 50% non-GAAP growth margin guidance range. Importantly, the underlying software and services margin engine remains strong. On the operating expense side, we continue to maintain what we have characterized as permanent structural efficiency. Cash operating expenses were down significantly year over year and down sequentially versus the fourth quarter of 2025. We remain focused on resourcefulness and driving further efficiency wherever we can while continuing to invest deliberately in the areas that drive longer-term growth. One area where we are seeing meaningful efficiency gains is in AI adoption. Today, nearly 70% of our employee base is actively using AI tools in their weekly workflows with tangible productivity benefits to our customers. Within our development team specifically, AI is accelerating feature delivery and improving triage and operations. These productivity gains are real. and they are helping us do more with a leaner organization. As a result of our strong execution, as well as these achievements and advancements, we delivered $2 million in adjusted EBITDA, our fourth consecutive positive quarter, and our first ever positive first quarter performance. This clearly evidences the operating leverage embedded in this business, and we expect it to expand as we move through the year. Operating cash flow was negative $8 million for the first quarter. This reflects expected Q1 working capital timing and scheduled interest payments. As bookings and billings increase and working capital requirements lessen throughout the year, we expect improvements in operating cash flow and remain confident in our full year guidance range of $0 to $10 million. Now moving on to our second priority, strengthening the core PowerTrak platform. PowerTrak is a critical digital infrastructure platform which enables our customers to go from data to insight to action. PowerTrak generates data at the customer sites with our edge hardware and sends that data to the cloud and ultimately to our power track software platform, enabling our customers to make meaningful decisions about their portfolios and optimize their assets. We added approximately 1.5 gigawatts of solar assets under management in the first quarter, bringing total solar AUM to 37.5 gigawatts, and we drove 2% growth in power track ARR. We are committed to maintaining and extending our market-leading position in commercial and industrial solar asset monitoring, while extending into additional customer segments. And we continue to invest in the platform's stability, performance, and feature depth to achieve these goals. A key part of that investment strategy is a disciplined build-or-buy analysis. Our acquisition of Rikoon, which we announced on April 28, is a direct and strategic move towards building out that platform capability and improving the actionability from insights in data. RIKUN is an Austrian provider of automated spot detection and event management for solar assets. This is a targeted high impact acquisition. a natural capability extension to our platform that we believe has immediate value across our wide customer base. RightPoints technology provides enhancements to power track through automated fault detection and alert prioritization. As our customer base scales and portfolios grow more complex, the ability to surface and triage performance issues faster is increasingly important for our customers to drive meaningful actions at scale. We expect Rikoon's technology will drive customers to do even more work with Powertrack, further establishing our product as the platform of choice for solar asset managers. What's more, this is a small, focused, tuck-in acquisition that we executed opportunistically and will integrate quickly. We look forward to sharing more on the benefits of this acquisition as product integration progresses. Another way in which we make data more accessible for our customers is with Powertrack Sage. Powertrack Sage is now live and available in Powertrack to our broader customer base. The AI Assistant synthesizes live site data alerts and performance analytics into plain language briefings, giving operators, performance engineers, and asset managers the ability to detect, diagnose, and resolve issues faster. The early adoption signals are very exciting. We are seeing consistent daily engagement across multiple customer organizations with integration into their daily workflows. In the future, as more heterogeneous data appears in Powertrack, the capabilities of Powertrack Sage will become more meaningful to our customers. Turning now to managed services. Our managed services business provides software-enabled full lifecycle energy storage services covering design, procurement, commissioning, and the ongoing operation and optimization of energy storage systems typically under five to 20-year contract terms. Managed services brought in approximately $7 million in revenue during the first quarter. Customer satisfaction remains high, and our optimization service continues to exceed the performance targets we have set with our customers. Shifting now to our final strategic priority. building the foundation for accelerated growth in 2027 and beyond, which includes expanding into utility scale deployments, advancing our international footprint, and unlocking new market opportunities. I'm particularly excited about bookings momentum we are seeing in the utility scale segment. Bookings more than doubled quarter over quarter and our pipeline in this segment is the strongest we have ever seen. We book new deals in four different geographies and across various asset types, including standalone storage, solar, and new build hybrid. While PowerTag EMS is valuable across our portfolio, including CNI, it is also a key offering for us to drive expansion in the utility scale space both internationally and domestically. It differentiates us by providing customers with unified controls, cloud monitoring, and portfolio-level visibility. PowerTrack EMS also helps customers extend the value of existing solar assets by adding storage with minimal disruption. PowerTrack EMS has a longer commercial lifecycle than our core CMI business, because of the utility scale in market since it requires more time for commissioning. And we expect these bookings to convert to meaningful revenue in late 2026 and into 2027. Our first part-time EMS bookings from Q4 2025 are developing well and are on track to convert to revenue during the second quarter of 2026. One key Powertrack EMS booking from Q1 I'd like to highlight is with a longstanding Powertrack solar monitoring customer operating two utility-scale sites exceeding 50 megawatts in Hungary. This customer made the decision to hybridize their portfolio and selected Powertrack EMS to manage a new 50-plus megawatt-hour battery system. This is precisely the expansion dynamic we anticipated when we built PowerTrack EMS, an existing customer deepening their relationship with STEM as their assets evolve. It validates both the platform's ability to grow with our customers and the increasing prevalence of hybridization in the European utility scale market. Just last week, we further strengthened PowerTrack EMS with a co-marketing relationship with Nuvation Energy, a North American provider of battery management and energy control solutions. Together, we will market a cell-to-cloud best and hybrid control stack that is exclusively North American designed and manufactured. This collaboration will allow us to deliver real value to our customers as regulatory requirements, including FEOC, tighten. Further, this agreement proves we are on our way to building a robust ecosystem of commercial and product partnerships to extend our reach. On the international front, we continue to build out our European presence anchored by our Berlin office. International revenue represented approximately 5% of total revenue in the first quarter And we expect that proportion to grow as PowerTrack EMS and other utility-scale projects in Europe move through commissioning and into revenue recognition in late 2026 and in 2027. Beyond our core growth drivers, I'd like to briefly update you on the two new offerings we introduced during our Q4 call. Our AI services offering continues to progress with active customer conversations focused on helping organizations identify and implement practical AI use cases that streamline internal processes, improve decision making, and unlock operational efficiency. In parallel, we are exploring how our core strengths in energy optimization software and deep energy market expertise can support data center developers and operators as they navigate rising power costs, grid constraints, and resilience requirements. Both remain important future growth opportunities, and we will share more substantive updates as customer engagements and market validations advance. To close, I want to reinforce our confidence in the rest of the year ahead. Q1 came in as expected. Strong margins, positive adjusted EBITDA, and solid progress on all three priorities. As I stated earlier, we are reaffirming our full year 2026 guidance across all metrics, and I'm confident in our team's ability to execute. With that, I'll turn the call over to Brian.