STEM

Greetings, welcome to the Stem, Inc. fourth quarter 2026 results conference call. 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 Form 10-Q, Form 10-K, 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 Musfeldt, CFO, will start the call today with prepared remarks, then we will conduct a question and answer session. 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 gross 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. Gross 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 gross 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%-50% non-GAAP gross 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. 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-$10 million. Moving on to our second priority: strengthening the core PowerTrack platform.

PowerTrack is a critical digital infrastructure platform which enables our customers to go from data to insight to action. PowerTrack generates data at the customer sites with our Edge hardware and sends that data to the cloud and ultimately to our PowerTrack software platform, enabling our customers to make meaningful decisions about their portfolios and optimize their assets. We added approximately 1.5 GW of solar assets under management in the first quarter, bringing total solar AUM to 37.5 GW, and we drove 2% growth in PowerTrack 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 raicoon, which we announced on April 28th, is a direct and strategic move towards building out that platform capability and improving the actionability from insights in data. raicoon is an Austrian provider of automated fault 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. raicoon's technology provides enhancements to PowerTrack 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 raicoon'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 integrations 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 booked new deals in four different geographies and across various asset types, including standalone storage, solar, and new build hybrid. While PowerTrack EMS is valuable across our portfolio, including C&I, 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 life cycle than our core C&I business because of the utility scale end 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 PowerTrack 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 long-standing PowerTrack solar monitoring customer operating two utility scale sites exceeding 50 MW in Hungary. This customer made the decision to hybridize their portfolio and selected PowerTrack EMS to manage a new 50-plus MWh 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 BESS 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. 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.

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. I'm confident in our team's ability to execute. With that, I'll turn the call over to Brian.

Thanks, Arun, and good afternoon, everyone. Let's walk through the results. As Arun noted, Q1 is historically the lightest revenue quarter for the company, driven by the natural sales cycle of construction projects, which typically begin to ramp into summer and through the end of the year. Total revenue for the first quarter was $29 million, down 11% year-over-year from $32 million in the first quarter of 2025. The year-over-year decline was entirely attributable to the absence of battery hardware resales this quarter and our expectation that battery hardware resale activity will be weighted to the second half of 2026. Core revenue from software, services, and edge hardware was up 4% from the first quarter of 2025. Within that, I want to highlight a few components.

PowerTrack software revenue grew 16% year-over-year, reflecting continued strength in our commercial and industrial solar monitoring business and early contributions from utility scale expansion. This is the highest margin recurring revenue in our portfolio, and its growth rate is a meaningful indicator of the health of our core business. Edge hardware revenue grew approximately 1% year-over-year. Project and professional services revenue declined 5% year-over-year, and managed service revenue was down 5% year-over-year. First quarter GAAP gross margin was 38%, compared to 32% in the first quarter of 2025. Non-GAAP gross margin was a record 52%, compared to 46% in the first quarter of 2025.

The significant margin expansion reflects the increasing mix of software, services, and edge hardware in our revenue base, combined with the structural cost improvements we made in 2025. As battery hardware resale volumes pick up in the second half of the year, non-GAAP gross margin percentage will trend toward the middle of our 40%-50% full year guidance range, but the underlying software and service margins remain strong. Cash operating expenses were down 30% year-over-year and down approximately 10% sequentially. The workforce and cost optimization actions we completed in 2025 and continue to implement into 2026 have become permanent structural efficiency, and the first quarter confirms that characterization. Adjusted EBITDA was $2 million, a $7 million improvement compared to a negative $5 million in the first quarter of 2025.

This marks our 4th consecutive quarter of positive adjusted EBITDA and our 1st ever positive adjusted EBITDA in the 1st quarter, which has historically been our most challenging quarter for profitability, given seasonal revenue patterns. This is strong evidence of the operating leverage that is now entrenched in this business. We ended the 1st quarter with $37 million in cash and cash equivalents. Operating cash flow was negative $8 million in the quarter, driven primarily by the timing of working capital movements and cash interest expense. I want to be clear about the working capital dynamics. The Q1 outflow reflects timing, not a change in the underlying cash generation of the business.

As bookings and billings increase and working capital requirements lessen throughout the year, we expect improvement in our cash position and remain on track to achieve our full year operating cash flow guidance of $0-$10 million. Turning now to our operating metrics. Bookings were $27 million in the first quarter, compared to $33 million in the fourth quarter of 2025. The sequential decline is typical for first quarter seasonality. All bookings this quarter came from core software, services, and edge hardware. As Arun noted, utility scale bookings more than doubled quarter-over-quarter, which is one of the key drivers of our long-term growth objectives. While we did not have any battery hardware bookings this quarter, we continue to expect up to $40 million in opportunistic battery hardware sales this year.

The battery supply is accessible and can be delivered to customers within 90 days. Contracted backlog was $23 million at the end of the first quarter, up 8% sequentially from $21 million at the end of the fourth quarter of 2025. CARR was $67 million, flat versus the end of the fourth quarter. ARR was $61.2 million, up slightly from $61.1 million at the end of the fourth quarter. Within that, PowerTrack ARR grew 2% sequentially and Managed Services ARR declined 4% sequentially. Managed Services ARR declined modestly, reflecting the impact of a battery supplier bankruptcy, which prevented the renewal of certain recurring warranty management and other services contracts tied to that supplier's systems.

Importantly, we continue to provide optimization and other core managed services to the owners of those assets, and associated AUM remains on our platform. Solar operating AUM grew 4% sequentially to 37.5 GW, and storage operating AUM was flat sequentially at 1.7 GW hours. Now turning to guidance. As Arun mentioned, we are reaffirming our full year 2026 guidance across all metrics. Total revenue of $140 million-$190 million, with software, services, and edge hardware expected in the range of $130 million-$150 million, and battery hardware resales of up to $40 million, which as I mentioned, we expect to be weighted to the second half of the year.

Non-GAAP gross margins of 40%-50%, with the range driven by the timing and volume of battery hardware resales. Adjusted EBITDA of $10 million-$15 million, operating cash flow of $0-$10 million, year-end ARR of $65 million-$70 million. I will now pass the call back over to Arun for closing remarks.

Thank you, Brian. I'd like to leave you all with THREE key takeaways from this quarter. First, the transformation we undertook in 2025 is delivering results. We achieved positive adjusted EBITDA in our historically weakest quarter with record high software margins and a cost structure that is both lean and durable. This is not a one-time achievement. It's the foundation we're building on. Second, our core business is strong and growing. PowerTrack software revenue grew 16% year-over-year. Our new products, PowerTrack EMS and PowerTrack Sage, are gaining real traction with customers. The raicoon acquisition demonstrates our disciplined approach to extending our platform capabilities where it matters most. Third, we are making tangible progress on the growth initiatives that will drive through 2027 and beyond. Utility scale bookings more than doubled quarter-over-quarter.

Our international footprint is expanding, and our partnership with Nuvation positions us to capitalize on the growing demand for secure, domestically sourced energy infrastructure. We said 2026 would be the year to demonstrate what our transformation was designed to deliver. 1 quarter in, we are doing exactly that. We have the right strategy, the right team, and the right momentum. We are executing with discipline, investing with purpose, and we remain confident in achieving all our full year commitments. I want to thank our customers for their continued partnership, our team for their exceptional execution, and all of you for your support and engagement. With that, I will ask the operator to open the line for questions.

Thank you. We will now conduct a question and answer session. One moment while we pull for our first question. The first question comes from Justin Clare with ROTH Capital. Please proceed.

Hey, good afternoon. Thanks for taking our questions here. Wanted to just start out on bookings. You had mentioned utility scale bookings had doubled quarter-over-quarter. Just wondering if you could speak to what drove the strength there. Is that new customer wins? Is it expansion with existing customers? Are you seeing larger project sizes? And then also, just where are you seeing the most traction with utility scale customers in your portfolio? Which products or services are you seeing the most uptake for?

Justin, it's good to hear from you. This is Arun. It's largely driven, I would say, by PowerTrack EMS. PowerTrack EMS is the key differentiator that allows us to provide our customers in the utility scale space with solutions. It brings unified controls, cloud monitoring, as well as portfolio-level visibility to our customers. I think this is what's extending their ability to engage with us beyond solar projects into these utility scale projects. Also, one more thing. We have PowerTrack SCADA, which is another product that we offer for monitoring and control in utility scale solar projects as well. We have a team based in Berlin. The team is working very hard, they have done a great job in doubling bookings. There are two maybe examples I can cite. In the last quarter, we spoke about Enery, which was a German customer.

That was a 100-plus megawatt-hour project. In the prepared remarks, we referred to a Hungarian project that went through hybridization that was a 50-plus megawatt-hour deal as well. Overall, I think we remain confident that this conversion continues. The first EMS bookings from the Q4 2025 cycle, we expect to start seeing that as revenue starting in Q2 of 2026. We remain very optimistic on this, Justin.

Okay. Got it. Appreciate that. Just wanted to ask on PowerTrack. We did see pretty good growth, I think 16% year-over-year revenue growth for that. Though we did see the ARR was flat sequentially. Just wondering how we should think about the cadence of ARR growth as we move through the balance of the year here, given your target of $65 million-$70 million at the end of the year. Just what are the drivers that could potentially enable you to get to the higher end of that target?

Yeah, Justin, I can answer that as well. PowerTrack ARR was up 12% year-over-year, 2% sequentially. This moderate sequential growth in PowerTrack ARR is just due to seasonality. We expect ARR to ramp up throughout the remainder of the year, the majority of our ARR growth, as usual, will come from PowerTrack C&I customers. There will be some PowerTrack EMS and utility scale deployments in the ARR, it won't be a significant portion of ARR this year. We're very focused, we continue to drive ARR across our business over the long term. As I said earlier, we're pleased to reaffirm our guidance of $65 million-$70 million for ARR.

Got it. Okay. Great. And then just one more, wanted to ask on the margins here. We just see the PowerTrack, non-GAAP gross margins, they continued to move higher in Q1. I think you're at 75% versus 69% a year ago, 71% in Q4. Just wondering if you'd just speak to the improvements that we've seen there, what's been the biggest driver, and then how we should think about the margin profile as you continue to scale that business. Is there further potential for margins to move higher?

Yeah, thanks, Justin. This is Brian. I'll take that one. Yeah, I mean, we are always reviewing the supply chain and the macro environment for our PowerTrack products. You know, you're seeing good growth in a couple ways. One, you know, our AUM is increasing, that is a kind of traditional SaaS product that, you know, gains leverage as we get more volume, which is always great, that's going to improve margin. Also you do see us, you know, as we watch the environment and the supply chain this last year, we have been able to increase pricing, modestly where we've needed to kind of, you know, between tariffs and other things that have kind of driven that environment. You know, as the volume increases, you'll continue to see margins push up on that space.

You know, we're always watching for places where we can increase pricing or need to increase pricing on our customers, and that's what's going to drive that kind of to keep improving.

Okay. Got it. Appreciate it. Thank you.

Thank you. This concludes the equity research questions. I'd like to turn the floor over to Erin for retail investor questions at this time.

Thank you, operator. We have a few questions here. Firstly, relating to cash flow. With 2026 operating cash flow guided from $0-$10 million, what are the key levers that give you confidence that Stem can reach positive operating cash flow for the full year 2026?

Yeah. I'll grab This is Brian again. I'll grab that one. You know, as Arun stated in the call, Q1's negative operating cash flow was really driven by a combination of, you know, expected higher working capital requirements in Q1 and it being our traditionally lowest kind of billings and revenue quarter. You know, when you look forward, we expect that you know, bookings and billings will increase with our seasonality when you look at this business and how it operates. We also expect reduced working capital requirements through the rest of the year. The combination of that will allow us to build cash going into the second half of the year. I think it's important to note, you know, cash operating expenses have really been optimized to the business and the size today.

I think you can see that in the evidence when you, when you see that, you know, cash operating expenses were down 30% year-over-year and another 10% sequentially. You know, with that, we were able to achieve positive EBITDA in our lowest revenue quarter for the first time, which is great. I think, you know, you're just fundamentally seeing that we need significantly less cash to run this business with the new operating discipline that we have in place. I think that's what really gives us the confidence to reiterate our guidance on all our metrics this year.

Thanks, Brian. The next question is on the recent acquisition of raicoon. Why did you acquire raicoon, and why now?

I'll take this. This is Arun. Well, very excited that raicoon is joining Stem, and I want to take this opportunity to welcome all of the raicoon employees to Stem. raicoon's technology provides significant enhancements to PowerTrack through automated fault detection and alert prioritization. What this means is, as our customer base scales and portfolios grow more complex, the ability to surface and triage performance issues faster is increasingly becoming very important to customer retention and satisfaction. This acquisition directly supports our 2026 priority of strengthening our core PowerTrack business. We saw an opportunity to bring in a proven, already deployed technology rather than build it from scratch. This brings additional value to our existing customer base, as well as it's a differentiator as we try to acquire new customers. We're very pleased that raicoon is joining us.

Thanks. This will be the last question, and it is related to AI. Where is Stem's AI capability creating measurable value for customers today, and how does that translate into retention, expansion, or new customer wins?

I'll take this. Look, I'm always excited about AI, and I would say that our ability to bring AI to life and to bring value to our customers maybe can be thought of in two different ways. The first way is how we embed AI into our products. AI is baked into PowerTrack as PowerTrack Sage, and this AI assistant provides customers with more fluency to interpret their site data. It expands PowerTrack users beyond the technical users that we have, and it does so by providing plain language briefings to non-technical users. Secondly, we also impact customer value by using AI internally, especially if you think about our development team. Their usage of the AI tools, it allows them to accelerate feature delivery. It improves triage in our operations. It allows us to roll out updates more quickly.

Ultimately, what this means is we reduce friction for our customers.

Thanks, Arun. This concludes the retail investor questions. Turning back to you now for closing remarks.

I wanna thank everyone for joining our first quarter earnings call, and we look forward to speaking with you next during our second quarter 2026 earnings call this summer. Thanks, everyone.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

Greetings. Welcome to Stem's Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Erin Reed, Head of Investor Relations. Thank you. You may begin.

Thank you, operator. This is Erin Reed, Head of Investor Relations at Stem. We welcome you to our fourth quarter and full year 2025 earnings call. 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. We, therefore, refer you to our latest 10-K and other SEC filings and supplemental materials, which can be found on our IR website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter and full year 2025 earnings release, which is on our website. Arun Narayanan, CEO; and Brian Musfeldt, CFO, will start the call today with prepared remarks, and then we will take your questions. With that, I will turn the call over to Arun.

Thank you, Erin. Good afternoon, everyone, and thank you all for joining us today. I am pleased to be speaking with you 1 year after assuming the role of CEO, and I could not be more proud of what the Stem team has accomplished over the past 12 months, best-in-class execution, unwavering commitment to our customers and each other and disciplined financial performance. 2025 was a transformative year that methodically, yet decisively reshaped Stem into a software-centric operationally disciplined organization. Every commitment we made and the proof of our strategic transformation is in the results. Today, I will take you through a look back on our fourth quarter and full year accomplishments. After that, I will walk you through our 2026 priorities and show you how we are determined to become the operating system for clean energy projects. And finally, I will give you a preview of guidance for the year ahead. Brian will follow with the detailed financial results and our complete 2026 outlook. In 2025, we delivered on guidance across every metric. Full year 2025 revenue grew 8% year-over-year to $156 million with over 55% of that revenue coming from software and services, evidencing our successful and ongoing transformation. Software, services and edge hardware revenue grew by 25% year-over-year to $141 million. Year-end ARR grew 16% year-over-year to $61 million. In 2025, we substantially expanded gross margins and considerably reduced our operating expenses. We achieved 3 consecutive quarters of positive adjusted EBITDA, resulting in our first ever full year positive adjusted EBITDA of $7 million. We also achieved positive operating cash flow for full year 2025, another first and major accomplishment in the company's history. Throughout the year, we continued to deepen and expand our PowerTrack platform, delivering meaningful improvements in platform stability, performance and customer experience. We added 6 gigawatts of solar assets to a total of 36 gigawatts under management and added $7 million in PowerTrack ARR to reach $41 million. In 2025, we accelerated our R&D efforts, leveraged AI tools and rebuilt our product road maps. We successfully launched 2 new products last year. Both products, PowerTrack EMS and PowerTrack Sage, have resonated well with our customers, and we are encouraged by the early traction. We launched PowerTrack EMS in September 2025, and it is a premier solution for utility-scale projects. This morning, we announced a new engagement with Everyray, a German clean energy developer and EPC. This 100-megawatt hour deal further expands Stem's presence in Germany and reinforces PowerTrack EMS' role as the control backbone for sophisticated utility-scale storage deployments across Europe and other international markets. Commercial operations for those deployments are expected to commence in the summer of 2026. Our expansion into the utility-scale market, both domestically and internationally, gained meaningful traction in the fourth quarter with utility-scale bookings increasing 10% sequentially. Notably, nearly all fourth quarter utility-scale bookings were driven by international solar projects, underscoring growing demand in global markets. I talked with you about PowerTrack Sage, our AI-powered assistant in previous calls, and I continue to be excited about it. We deployed PowerTrack Sage in the fourth quarter to more than 80 customers for a beta trial and the feedback has been overwhelmingly positive. PowerTrack Sage will be generally available at the end of this month. At launch, we will deploy a light version across the entire PowerTrack customer base, embedding AI-assisted capabilities into the core platform from day 1 and accelerating adoption at scale. This universal rollout ensures immediate value realization while positioning AI as a foundational component of the PowerTrack experience. For customers seeking deeper automation, advanced analytics and expanded workflow functionality, we will soon offer premium tiers at incremental cost, creating a clear pathway for upselling, monetization and long-term platform expansion. Finally, our managed services business delivered solid fourth quarter performance, highlighted by a new brownfield agreement. Under this deal, we will operate and optimize a 4-site energy storage portfolio for a Southern California utility. Our services include real-time asset monitoring, enrollment and dispatch into California demand response programs, performance reporting to optimize site dispatches and energy cost savings and more. This is a solid proof point for our differentiated managed services capabilities and validation of our brownfield strategy. Overall, the result of 2025 is this. Stem has established a stable, increasingly profitable, software-centric business model. 2025 was about transformation and achieving stability. 2026 is about operational leverage and building for scale. So let's dive in. As we enter the new year with strong fourth quarter momentum, we are focused on 3 new priorities: Priority #1: Driving operational leverage; Priority # 2: Continuing to strengthen our core business; and, Priority #3, building the foundation for accelerated growth in 2027 and beyond. Now let's dive deeper into each of these in turn. First, driving operational leverage. We have built a sustainable business model. And in 2026, we intend to demonstrate the leverage it creates. Our software-centric model delivers predictable, high-margin revenue and cost discipline is now embedded in the culture of this company. In 2026, we will continue integrating AI across the organization to drive productivity improvements, and we will maintain our relentless focus on cost reductions, cash conservation and working capital management. Second, strengthening our core business. We remain focused on driving core platform excellence for PowerTrack in 2026. The platform maintains its market-leading position in commercial and industrial solar monitoring in the U.S. This year, we will deliver further platform stability, scalability and simplified intelligent UI updates that drive customer value and retention. The domestic C&I solar market, where we already hold significant share, offers moderate growth in 2026, but this is a stable, high retention base that continues to generate recurring revenue. Additionally, we are targeting a brownfield strategy to further increase our market share as well as a range of other adjacent offerings. Our other core business, managed services for energy storage, continues to be a differentiated offering that sets Stem apart from competitors. Our brownfield strategy remains a key focus as does actively pursuing greenfield opportunities. We are scaling in existing domestic markets, leading with our proof of performance and winning with our differentiated offerings. And finally, to priority #3, building for growth in 2027 and beyond. Outside of our core C&I solar and storage businesses, we are focused on expanding our utility-scale footprint domestically and internationally. We are targeting key markets across Europe, leveraging local support infrastructure that we have built and continue to invest in. Both the domestic and international utility-scale storage and solar markets are growing, and we are well positioned to capture rising demand and take share. Power EMS helps us differentiate in the utility-scale space by providing a solution for hybrid solar plus storage sites and also stand-alone BESS sites, which are increasingly common in the utility-scale market. We expect meaningful revenue conversion of PowerTrack EMS bookings to begin at the end of 2026 and the beginning of 2027. While we are bringing PowerTrack EMS to market this year, we are also exploring other ways in which our team's expertise and our technology can deliver value in the clean energy space. This year, we are starting with 2 areas of emerging opportunity. First, as part of our suite of professional services offerings, we are developing AI services that leverage our domain expertise and operational knowledge to help customers identify, prioritize and deploy the current iteration of generative AI solutions in a way that generates real economic outcomes. These offerings are distinct from PowerTrack Sage, and they are focused on helping customers unlock value across their broader operations. And our second area of opportunity is with data centers. More and more, we are seeing data centers adopting renewables as a power source. We believe Stem has the foundational technology and deep expertise in both solar and storage to be a meaningful player in this market. I am encouraged by these options. We see a natural extension of our existing capabilities driving our entrance into the space, and I look forward to updating you all on our progress in the coming quarters. 2026 is an optimization year, focused on margin expansion and operating leverage while we continue to invest selectively in the capabilities that will drive scale in 2027 and beyond. I want to be deliberate about that framing because it shapes how you should think about our trajectory. PowerTrack EMS was launched in late 2025. It accelerates through the end of 2026 and meaningfully scales in 2027 and beyond. Our utility-scale team is building meaningfully in 2026, and this foundation will drive us towards taking share in 2027 and beyond. We believe that the market positions we are strengthening today will pay dividends for years to come. The building blocks we are putting in place span every dimension of the business. On technology: our AI integration, improving stability and scalability. On markets: international expansion and utility-scale expansion here and abroad. On products and offerings: a comprehensive suite from solar monitoring to storage optimization. On operations: building operating leverage and driving operational excellence. Expanding the value chain of our offerings today sets up the foundation for future growth. This is important to note because it ties into our core software-centric vision for Stem. We are determined to become the operating system for new energy projects across solar, storage and hybrid assets and in different market segments and geographies. Before turning it over to Brian, let me introduce the key themes of our 2026 guidance. We are entering the year with a strong foundation from our 2025 execution and believe we are well positioned to execute on our commitments. We expect our software-centric strategy to drive moderate top line revenue growth, strong gross margins and significant adjusted EBITDA expansion, supported by continued software momentum, our expanding product suite and the operational leverage we have built into the business. Brian will provide a more detailed look at our 2026 guidance and also dive deeper into our fourth quarter and full year 2025 financial results. With that, let me pass over the call to him.

Thanks, Arun, and hello, everyone. Let's walk through the results. For the full year 2025, we were in line or above all of the financial expectations we outlined on our third quarter call. We exceeded our profitability guidance, demonstrating the dedication to operational discipline that runs through this organization. For the full year of 2025, total revenue was $156 million, up 8% year-over-year. Most importantly, revenue from software, services and edge hardware, the core of our software-centric model, was up 25% year-over-year to $141 million. Battery hardware resale was $15 million for the year, consistent with our strategic deemphasis of lower-margin business. This shift in revenue mix is precisely what we committed to delivering, and it is reflected in our improved gross margin performance this year. Turning now to the fourth quarter. PowerTrack software revenue continued its strong performance, growing 14% year-over-year and edge hardware revenue grew an impressive 21% year-over-year. Managed service revenue was up 51% year-over-year, driven in part by onetime performance-based revenue, where we exceeded asset operational targets. Battery resale revenue was down from $27 million to less than $1 million year-over-year as expected. Project and professional services revenue increased significantly year-over-year, driven by approximately $11 million of onetime DevCo revenue recognized in the fourth quarter. Excluding DevCo, fourth quarter project and professional services revenue was up 27% year-over-year. I also want to note that as of the end of the year, we have sold or written off all of the project assets associated with DevCo from our financial statements, and we do not intend to make any further investments in DevCo assets moving forward. Now let's take a look at gross margins. For the full year 2025, we achieved record GAAP gross margins of 38% and record non-GAAP gross margins of 46%, driven by decreased battery hardware sales, a favorable software and service revenue mix and improved edge hardware margins. Fourth quarter GAAP gross margins were 49% and non-GAAP gross margins were 45%, continuing our strong results. You can again find the detailed revenue and margin breakdowns we introduced last quarter in our supplemental materials on our IR website. Full year 2025 cash operating expenses were down 41% from 2024, and fourth quarter cash operating expenses were down an impressive 50% year-over-year. We are building sustainability into our cost structure, not temporary reductions, but permanent structural efficiency while simultaneously developing new products and entering new markets. That combination is the foundation of our operating leverage thesis moving forward into 2026 and beyond. The improved margins and significantly reduced OpEx in 2025 drove positive adjusted EBITDA of approximately $7 million for the year, above the high end of our guidance range and representing the first year of positive annual adjusted EBITDA in Stem's history. We achieved 3 consecutive quarters of positive adjusted EBITDA this year, with the fourth quarter coming in at $5 million, a 30% improvement from fourth quarter of 2024. The improvement was primarily driven by improved gross profits and reductions in operating expenses with modest additional benefit related to the final sales of the DevCo project assets. Full year operating cash flow was $7 million, slightly above the high end of our revised guidance. The fourth quarter benefited from the sale of our DevCo project assets and other favorable working capital movements. We ended the fourth quarter and full year 2025 with $49 million in cash, up from $43 million at the end of the third quarter. This is a solid liquidity position that supports our '26 plans. And now turning to our operating metrics. Fourth quarter bookings were $33 million, up slightly from last quarter due to increased software and service bookings, offset by decreased battery hardware bookings. Contracted backlog was $21 million, down 4% from $22 million last quarter due to decreased battery hardware bookings. Our end of year 2025 backlog is 2% higher than it was at the end of 2024 and excluding battery hardware, is 23% higher than prior year. CARR decreased $3 million sequentially to $67 million due to lower managed services bookings and the cancellation of a managed service customer agreement. This customer cancellation driven by adjacent nonscalable product requests outside of our road map, impacted CARR by $3 million, ARR by $1 million and AUM by 0.1 gigawatt hours. Despite this cancellation, total company ARR grew 1% sequentially and 16% year-over-year to $61 million, supported by increased PowerTrack software bookings. Turning now to our full year 2026 guidance. We are encouraged by the strong momentum we carried throughout 2025 and that we bring forward into 2026. We expect that performance to accelerate as we advance throughout the year. For revenue, we expect total revenue in the range of $140 million to $190 million. Within that range, we expect $130 million to $150 million to come from high-margin software, services and edge hardware revenue, our core business. We expect the remaining balance of up to $40 million to be driven by battery hardware resales, which remain opportunistic and are not a strategic priority. We expect non-GAAP gross margins of 40% to 50%, broadly in line with our 2025 performance. Higher battery hardware resales would cause gross margin percentage to trend toward the lower end of that range. We expect adjusted EBITDA of $10 million to $15 million, representing approximately 85% growth at the midpoint versus full year 2025, driven by revenue growth, operating expense discipline and increased operating leverage. We expect operating cash flow of $0 to $10 million, reflecting stable cash generation from operations for the year. And finally, we expect ARR of $65 million to $70 million, representing approximately 10% growth at the midpoint, continuing the momentum from 2025. I'm extremely proud of what the team has accomplished in 2025, and we are continuing to build a strong foundation into 2026 that sets us up for accelerated growth in 2027 and beyond. And I will now pass the call back over to Arun for closing remarks.

Thank you, Brian. As I reflect on 2025, I am struck by the scope of what our team accomplished. We delivered a business transformation, executed a financial turnaround, completed 2 new product launches and demonstrated a clear strategic path forward. We said we would do it, and we did it. As I look ahead through the remainder of 2026 and beyond, I am confident. We have 3 clear strategic priorities to guide us in 2026. We have an ambitious but achievable adjusted EBITDA target and multiple growth drivers that derisk execution. And last but certainly not least, we have a team with a proven track record of executing. Our long-term vision is to build a scalable, profitable software and services company that holds a market leadership position in clean energy intelligence. Stem is uniquely positioned to capitalize on the ongoing clean energy transformation with a market-leading platform, a growing product suite and an expanding global footprint. To our customers, we are grateful for your continued partnership and trust. To our investors, we appreciate your support through this transformation and your confidence in our vision. To our team, your execution through a challenging transformational year reflects your talent, your resilience and your dedication. Thank you. With that, I will ask the operator to open the line for questions.

[Operator Instructions] Our first question comes from Justin Clare with ROTH.

I wanted to start off on the PowerTrack EMS launch. So you mentioned that you could see an acceleration for PowerTrack EMS in 2026, but more meaningful scale in 2027. So just wondering how we should think about the timing of bookings for the product. Could we see an increase as early as Q1 or Q2? Or is that more of a second half dynamic? And then just wondering if you could talk through the typical sales cycle and lead times for the EMS deployments.

Justin, thank you for your question This is Arun. Good to hear from you again. PowerTrack EMS was launched in September 2025. And the reason we are so excited about it is it is the first time we are able to address a solar and storage solution and address a customer's need completely. If you think about even the press release that we put out today, we are able to work with newer customers in international markets as well as customers domestically as well. And the main sort of aspect of these solutions are geared towards utility-scale projects. Inherently, they are a longer life cycle, and this means that we need to give time to build the business, build the pipeline, engage with the customer and make sure that the solution is a good fit and then work with the customer through the commissioning of the project all the way to revenue recognition. So it does take some time, and we are working on that today.

Okay. And then I guess curious, would you anticipate the revenue [Audio Gap] recurring revenue stream, but maybe you could help us understand that.

Yes. So it depends on the components, right? So think about a project that we deploy, it would have hardware, software as well as service components and the mix of these 3 components would be the totality of the contracts that we are executing. Depending on the component we're talking about, the revenue recognition would follow specific time line. So maybe hardware is recognized immediately upon delivery, but the service component would need to run through the commissioning life cycle. So that -- if you look at the Everyray press release that we announced today, we are encouraged by the feedback that we're getting from our customers. That's a 100-megawatt hour project that we have deployed. And just connecting back to the remarks that we made earlier, we are looking at 2026 as a way to build the foundation and then see 2027 as the point at which we're able to scale the revenue.

I see. Got it. Got it. Okay. And then just on the 2026 guidance, it does look like the battery resale revenue up to $40 million. That's a fairly meaningful increase potentially from the 2025 storage resale revenue of $15 million. So just wondering if you could speak to what's driving the increase there, considering you are shifting emphasis toward software and services, are you still seeing demand from customers where they prefer you to do the procurement?

I would characterize Stem as a trusted adviser. We have really good relationships with our customer and the ability for our technical expertise in the organization to assist customers through that journey is very valuable to our customers. So we have deemphasized the OEM hardware resale component of the business. But when we see opportunities to help customers meaningfully and it doesn't use up our balance sheet, we do pursue it. And this is how we see the year develop, and that's how we are guiding to it.

Got it. Okay. And then just one more on margins. Wondering if you could give us a sense for how you see the gross margins evolving for software, services and edge hardware in '26 relative to '25. It looks like you could potentially have a higher mix of battery hardware resale, which is lower margin. But overall for the year, it looks like margins could be flat year-over-year. So it implies there could be an expansion in the software margins. So just checking, is that the right interpretation and how we should think about it?

Justin, this is Brian. Yes, I mean, we've guided you to 40% to 50% for the year. And that is obviously at a mix of kind of revenue, software services and hardware. We do break out for you now in our slide deck the kind of detail by each revenue kind of line. You can look at that in the appendix for that. But yes, I think you see that this year, software was over 70% or just north of 70%. So I think you can look at that from a mix perspective and based on our guidance and what we're looking at for improved software revenue will drive that mix up a bit.

[Operator Instructions] There are no further questions at this time. This concludes our question-and-answer session. I'd like to turn the call back over to Arun for closing comments.

I want to thank everyone for joining our fourth quarter and full year earnings call, and we look forward to speaking with you next during our first quarter 2026 earnings call this spring. Thanks, everyone.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.