Stem(STEM) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period ended June 30, 2025 Condensed Consolidated Balance Sheets The balance sheets show a decrease in total assets and liabilities, resulting in a reduced stockholders' deficit as of June 30, 2025 Balance Sheet Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $379,216 | $437,359 | | Total Liabilities | $592,695 | $835,192 | | Total Stockholders' Deficit | $(213,479) | $(397,833) | - The company's total assets decreased by approximately $58.1 million from December 31, 2024, to June 30, 2025, while total liabilities decreased by approximately $242.5 million, leading to a significant reduction in the stockholders' deficit[10] Condensed Consolidated Statements of Operations The company shifted from a significant net loss to a substantial net income, driven by revenue growth and a gain on debt extinguishment Statement of Operations Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $38,374 | $33,999 | $70,886 | $59,468 | | Gross Profit (Loss) | $12,800 | $9,375 | $23,338 | $(14,816) | | Loss from Operations | $(13,343) | $(579,848) | $(34,491) | $(647,861) | | Net Income (Loss) | $202,531 | $(582,270) | $177,531 | $(654,577) | | Basic EPS | $24.31 | $(71.81) | $21.48 | $(81.74) | | Diluted EPS | $(1.79) | $(71.81) | $(4.54) | $(81.74) | - The company reported a significant net income of $202.5 million for the three months ended June 30, 2025, a substantial improvement from a net loss of $582.3 million in the prior-year period, primarily due to a $220.0 million gain on extinguishment of debt and the absence of a $547.2 million goodwill impairment recorded in Q2 2024[12][219][221] - Total revenue increased by 13% for the three months ended June 30, 2025, and by 19% for the six months ended June 30, 2025, driven by growth in solar software, edge hardware, project and professional services, and storage software & managed services, partially offset by a strategic reduction in battery hardware resale[12][214][226] Condensed Consolidated Statements of Comprehensive Income (Loss) The statements reflect a significant improvement in total comprehensive income, primarily mirroring the reported net income Comprehensive Income (Loss) Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) | $202,531 | $(582,270) | $177,531 | $(654,577) | | Foreign currency translation adjustment | $82 | $(60) | $272 | $133 | | Total Other Comprehensive Income (Loss) | $202,613 | $(582,330) | $177,803 | $(654,441) | Condensed Consolidated Statements of Stockholders' (Deficit) Equity Stockholders' deficit improved significantly due to net income, alongside impacts from stock-based compensation and a reverse stock split - Total stockholders' deficit improved significantly from $(397.8) million as of January 1, 2025, to $(213.5) million as of June 30, 2025, primarily driven by net income of $202.5 million during the period[17] - The company issued common stock upon release of restricted stock units and recognized stock-based compensation, contributing to additional paid-in capital[17] - A 1-for-20 reverse stock split was effected on June 23, 2025, retroactively adjusting share and per share amounts[17][31] Condensed Consolidated Statements of Cash Flows Cash flows show stable operating cash usage, increased investing outflows, and a positive shift in financing activities Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(12,742) | $(12,507) | | Net cash (used in) provided by investing activities | $(4,674) | $1,465 | | Net cash provided by (used in) financing activities | $1,682 | $(4,185) | | Net decrease in cash, cash equivalents and restricted cash | $(15,509) | $(15,040) | | Cash, cash equivalents and restricted cash, end of period | $42,576 | $91,435 | - Net cash used in operating activities remained relatively stable year-over-year, at $(12.7) million for the six months ended June 30, 2025[19][257][258] - Investing activities shifted from a net cash inflow of $1.5 million in 2024 to a net cash outflow of $4.7 million in 2025, primarily due to capital expenditures on internally-developed software[19][259][260] - Financing activities generated $1.7 million in cash in 2025, a positive change from a $4.2 million outflow in 2024, mainly due to proceeds from the issuance of senior secured notes[19][261] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of accounting policies, revenue recognition, debt, and other key financial statement components 1. BUSINESS The company is a leader in AI-driven clean energy solutions and has sufficient liquidity for the next 12 months despite historical losses - Stem, Inc. is a global leader in AI-driven software and services for planning, deploying, and operating clean energy assets, offering integrated software (PowerTrack™) and full-lifecycle energy services[22][23] - As of June 30, 2025, the company had $40.8 million in cash and cash equivalents and an accumulated deficit of $1,449.0 million, with negative working capital of $12.8 million; management believes current liquidity is sufficient for the next 12 months[25] - Future profitability depends on executing its software and services-oriented strategy, successful delivery of AI-enabled capabilities, customer acquisition/retention, and maintaining NYSE listing standards[26] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details key accounting policies, including a recent reverse stock split, consolidation of VIEs, and customer concentration - On June 23, 2025, Stem effected a 1-for-20 reverse stock split, reducing outstanding common stock shares from 167.2 million to 8.4 million and authorized shares from 500 million to 250 million[31] - The company consolidates Variable Interest Entities (VIEs), such as DevCo JVs, where it is deemed the primary beneficiary, having power to direct activities and absorb significant losses or receive benefits[34][35] DevCo JVs | DevCo JVs (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Total Assets | $17,862 | $17,989 | | Total Liabilities | $256 | $1,398 | - Stem operates as a single operating segment, focusing on innovative technology services for energy distribution and consumption[41] Accounts Receivable Allowance | Accounts Receivable Allowance (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------- | :------------ | :---------------- | | Balance as of beginning of period | $9,794 | $5,953 | | Provision for expected credit losses | $1,547 | $3,978 | | Write-offs, recoveries and other charges | $(5,088) | $(137) | | Balance as of end of period | $6,253 | $9,794 | Significant Customers | Significant Customers | Accounts Receivable (June 30, 2025) | Revenue (Q2 2025) | | :-------------------- | :---------------------------------- | :---------------- | | Customer A | 25% | * | | Customer D | 10% | 14% | 3. REVENUE Revenue grew due to strong performance in software and services, offsetting a strategic decline in battery hardware resale Revenue by Stream | Revenue Stream (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Solar software | $9,521 | $7,905 | $18,375 | $15,697 | | Edge hardware | $12,086 | $11,134 | $22,349 | $19,182 | | Project and professional services | $2,330 | $1,323 | $4,146 | $2,683 | | Storage software & managed services | $9,003 | $5,875 | $16,054 | $11,563 | | Battery hardware resale | $5,434 | $7,762 | $9,962 | $10,343 | | Total revenue | $38,374 | $33,999 | $70,886 | $59,468 | - Total revenue increased by 13% for Q2 2025 and 19% for YTD 2025, driven by strong growth in solar software (20% Q2 YoY), project and professional services (76% Q2 YoY), and storage software & managed services (53% Q2 YoY)[68][214][226] - Battery hardware resale revenue decreased by 30% in Q2 2025, reflecting the company's strategic shift away from this business line[68][214] - As of June 30, 2025, remaining performance obligations totaled $397.4 million, with approximately 18% expected to be recognized in the next 12 months[69] - The company recorded a net revenue reduction of $33.1 million in hardware revenue during the six months ended June 30, 2024, related to Parent Company Guarantees (PCGs), which are no longer outstanding and are not expected to impact future financial results[73][74] 4. FAIR VALUE MEASUREMENTS The company details the fair value hierarchy for its financial instruments, including cash equivalents, warrants, and convertible notes Financial Instruments at Fair Value | Financial Instruments at Fair Value (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------------- | :------------ | :---------------- | | Cash equivalents (Money market fund) | $17,766 | $37,108 | | Warrant liabilities (Level 3) | $1,899 | $0 | | 2028 Convertible Notes (Level 2) | $16,600 | $77,300 | | 2030 Convertible Notes (Level 2) | $29,300 | $65,400 | - Warrant liabilities are classified as Level 3 due to significant unobservable inputs in their valuation, using the Black-Scholes-Merton model[79][82] 5. INTANGIBLE ASSETS, NET The composition and amortization of intangible assets, including developed technology and customer relationships, are presented Intangible Assets Summary | Intangible Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Developed technology | $32,618 | $32,618 | | Trade name | $11,300 | $11,300 | | Customer relationships | $106,800 | $106,800 | | Internally developed software | $86,724 | $81,314 | | Total intangible assets, net | $135,158 | $143,912 | - Amortization expense for intangible assets was $14.2 million for the six months ended June 30, 2025, up from $13.3 million in the prior-year period[87] 6. ENERGY STORAGE SYSTEMS, NET This note outlines the carrying value, depreciation, and impairment of the company's energy storage systems Energy Storage Systems Summary | Energy Storage Systems (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Energy storage systems placed into service | $134,993 | $137,616 | | Less: accumulated depreciation | $(85,759) | $(81,305) | | Energy storage systems not yet placed into service | $1,728 | $2,509 | | Total energy storage systems, net | $50,962 | $58,820 | - Depreciation expense for energy storage systems was $6.3 million for the six months ended June 30, 2025, slightly down from $6.5 million in the prior-year period[88] - Impairment expense for energy storage systems increased significantly to $1.4 million for the six months ended June 30, 2025, compared to $0.1 million in the prior-year period[89] 7. DEBT The company executed a major debt exchange, issuing new senior secured notes and recognizing a significant gain on extinguishment - On June 30, 2025, Stem issued $155.4 million in 2030 Senior Secured Notes through a privately negotiated exchange, extinguishing approximately $228.8 million of 2028 Convertible Notes and $121.3 million of 2030 Convertible Notes[95][108][116] - This exchange resulted in a $220.0 million gain on debt extinguishment, recorded in other income (expenses), net[117] Debt Summary | Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | 2028 Convertible Notes (Net Carrying Amount) | $67,162 | $291,824 | | 2030 Convertible Notes (Net Carrying Amount) | $116,023 | $234,099 | | 2030 Senior Secured Notes (Net Carrying Amount) | $126,709 | — | - The 2030 Senior Secured Notes bear interest at 12.0% (PIK) or 11.0% (cash) and are secured by a first priority lien on substantially all company assets[118][120] 8. WARRANTS New private placement warrants were issued in connection with the debt exchange and are classified as a liability - In connection with the debt exchange, Stem issued 439,919 2030 Private Placement Warrants, each allowing the holder to purchase one common stock share at an exercise price of $30.00[122] - These warrants are classified as liability and initially recorded at fair value of $1.9 million, subject to remeasurement each reporting period[117][125] 9. STOCK-BASED COMPENSATION Stock-based compensation expense decreased significantly due to lower headcount and reduced personnel-related costs Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales and marketing | $228 | $1,244 | $399 | $2,358 | | Research and development | $105 | $2,585 | $1,859 | $4,116 | | General and administrative | $1,062 | $2,981 | $3,454 | $8,710 | | Total stock-based compensation expense | $1,395 | $6,810 | $5,712 | $15,184 | - Total stock-based compensation expense decreased significantly by 79% for Q2 2025 and 62% for YTD 2025, reflecting lower headcount and reduced personnel-related expenses[132][216][217][218][229][230][231] - As of June 30, 2025, unrecognized stock-based compensation expense for stock options was $1.4 million (over 1.1 years) and for RSUs was $9.1 million (over 1.2 years)[127][131] 10. NET INCOME (LOSS) PER SHARE The calculation of basic and diluted EPS is detailed, showing a diluted loss despite basic income due to specific adjustments EPS Summary | EPS (per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $24.31 | $(71.81) | $21.48 | $(81.74) | | Diluted EPS | $(1.79) | $(71.81) | $(4.54) | $(81.74) | - The calculation of diluted EPS for periods with net income includes adjustments for the gain on extinguishment of debt, resulting in a diluted net loss per share despite basic net income[136] Potentially Dilutive Shares Excluded | Potentially Dilutive Shares Excluded (in thousands) | June 30, 2025 | June 30, 2024 | | :------------------------------------------------ | :------------ | :------------ | | Outstanding 2028 Convertible Notes | 116,620 | 507,859 | | Outstanding 2030 Convertible Notes | 832,620 | 1,683,679 | | Outstanding stock options | 241,773 | 475,922 | | Outstanding RSUs | 655,845 | 623,877 | | Outstanding private placement warrants | 439,919 | — | | Total | 2,286,904 | 3,291,464 | 11. INCOME TAXES The effective tax rate remains low due to a valuation allowance, and the company is assessing the impact of new tax legislation Income Tax Summary | Income Tax (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $(475) | $(62) | $(533) | $(215) | | Effective tax rate | 0.23% | (0.01)% | 0.30% | (0.03)% | - The effective tax rate for Q2 2025 was 0.23%, lower than the statutory federal rate due to the exclusion of cancellation of debt income (CODI) and a valuation allowance on U.S. deferred tax assets[139] - The 'One Big Beautiful Bill Act' (OBBB) was signed into law on July 4, 2025, introducing changes to clean energy tax credits and other tax provisions; the company is evaluating its impact, but does not expect material changes to Q3 2025 tax expense due to the valuation allowance[140][167][168] 12. SEGMENT INFORMATION The company operates and reports as a single operating segment - The company operates as a single operating segment, with the Chief Executive Officer reviewing financial information on a consolidated basis for decision-making and performance evaluation[41][141] 13. COMMITMENTS AND CONTINGENCIES Management considers the risk of material loss from legal proceedings remote and has accrued for a specific sales tax liability - Management believes the probability of a material loss from currently pending legal proceedings is remote[144] - The company accrued a $5.6 million probable sales tax liability in 2023, primarily for California, related to uncharged sales tax from 2018-2022, with the examination ongoing[146] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, its strategic shift to AI-enabled services, key business trends, and overall liquidity Overview The company is focusing on AI-enabled clean energy solutions and has undertaken a workforce reduction to drive profitable growth - Stem's mission is to help customers plan, deploy, and operate clean energy assets using AI-enabled software and services, focusing on solar and storage markets[152][153][154] - The company has historically incurred net operating losses and negative cash flows but reported net income of $177.5 million for the six months ended June 30, 2025, a significant improvement from a $654.6 million net loss in the prior year[156][157] - A workforce reduction of approximately 27% was announced on April 9, 2025, as part of a strategy to prioritize software investments, reduce operating costs, and drive profitable growth[158] Key Factors, Trends and Uncertainties Affecting our Business The company's new strategy, cash position, NYSE compliance, new legislation, and supplier concentration are key business factors - The company's new strategy focuses on AI-enabled software and services, involving operational changes, reduced battery resale revenue, and increased restructuring costs, which may impact financial targets[159] - Cash reserves of $40.8 million as of June 30, 2025, are critical for executing the new strategy; insufficient cash flow or inability to secure additional capital could adversely affect the business[160] - A 1-for-20 reverse stock split was implemented on June 23, 2025, to regain compliance with NYSE listing standards, which was successful[163][164][166] - The 'One Big Beautiful Bill Act' (OBBB) enacted in July 2025 introduces changes to clean energy tax credits (e.g., Section 25D expiration, Section 48E timing, FEOC provisions), which the company is evaluating for potential impacts[167][169][170][171] - The company faces risks from customer concentration, reliance on a small number of suppliers for energy storage systems, and exposure from existing DevCo Joint Ventures[161][176][177] Non-GAAP Financial Measures The company uses non-GAAP measures like adjusted EBITDA and non-GAAP gross profit to supplement its GAAP financial results - Stem uses non-GAAP financial measures, including adjusted EBITDA and non-GAAP gross profit and margin, to evaluate operating performance and liquidity, excluding non-cash and infrequent discrete cash charges[183][184] Non-GAAP Gross Profit Reconciliation | Non-GAAP Gross Profit (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP gross profit (loss) | $12.8 | $9.4 | $23.3 | $(14.8) | | Non-GAAP gross profit | $18.7 | $13.5 | $33.5 | $27.3 | | Non-GAAP gross margin (%) | 49% | 40% | 47% | 30% | Adjusted EBITDA Reconciliation | Adjusted EBITDA (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $202,531 | $(582,270) | $177,531 | $(654,577) | | Adjusted EBITDA | $3,817 | $(11,316) | $(810) | $(23,555) | - Adjusted EBITDA significantly improved to $3.8 million for Q2 2025 from $(11.3) million in Q2 2024, and to $(0.8) million for YTD 2025 from $(23.6) million in YTD 2024, reflecting the gain on debt extinguishment and reduced operating expenses[191] Financial Results and Key Metrics Key metrics show growth in recurring revenue and assets under management, alongside newly defined booking and backlog metrics Key Operating Metrics | Key Operating Metrics | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Bookings (Q2) | $34.3M | — | | Bookings (YTD) | $68.8M | — | | Contracted backlog | $26.8M | — | | Storage operating AUM (GWh) | 1.7 | 1.2 | | Solar operating AUM (GW) | 32.7 | 26.9 | | CARR | $69.2M | — | | ARR | $58.5M | $48.1M | - Bookings and Contracted Backlog metrics were redefined in Q1 2025 to reflect executed purchase orders, thus prior period comparisons are not available[194][195] - Annual Recurring Revenue (ARR) increased by 21.6% to $58.5 million as of June 30, 2025, from $48.1 million as of June 30, 2024, indicating growth in recurring subscription contracts[193][198] - Storage operating Assets Under Management (AUM) grew to 1.7 GWh from 1.2 GWh, and Solar operating AUM increased to 32.7 GW from 26.9 GW year-over-year[193][196] Components of Our Results of Operations This section breaks down the key components of revenue, cost of revenue, operating expenses, and other income/expense - Revenue is generated from services (energy optimization software, asset management software, advisory services, project asset sales) and hardware (OEM energy storage systems, edge hardware devices)[200][201] - Cost of revenue includes costs for servicing subscription customers (personnel, cloud, software amortization, depreciation of owned systems) and hardware costs (production, shipping, delivery, inventory impairment)[202][203] - Operating expenses comprise sales and marketing, research and development, general and administrative, and impairment of goodwill, with expectations for sales and marketing to increase and G&A to decrease as the company scales[205][206][207][208] - Other income (expense), net, includes interest expense, gain on extinguishment of debt, change in fair value of derivative liability, and other income/losses from equity investments and foreign exchange[209][210][211][212] Results of Operations for the Three Months Ended June 30, 2025 and 2024 The second quarter saw revenue growth, a significant reduction in operating expenses, and a shift to net income from a net loss Q2 2025 vs Q2 2024 Operations | Metric (in thousands) | Q2 2025 | Q2 2024 | $ Change | % Change | | :-------------------- | :------ | :------ | :------- | :------- | | Total Revenue | $38,374 | $33,999 | $4,375 | 13% | | Gross profit (loss) | $12,800 | $9,375 | $3,425 | 37% | | Total operating expenses | $26,143 | $589,223 | $(563,080) | (96)% | | Loss from operations | $(13,343) | $(579,848) | $566,505 | (98)% | | Total other income (expense), net | $216,349 | $(2,360) | $218,709 | (9,267)% | | Net income (loss) | $202,531 | $(582,270) | $784,801 | (135)% | - Revenue growth was primarily driven by solar software (+20%), edge hardware (+9%), project and professional services (+76%), and storage software & managed services (+53%), partially offset by a 30% decrease in battery hardware resale[214] - Operating expenses decreased by 96% due to the absence of a $547.2 million goodwill impairment in Q2 2025 and reductions in sales and marketing (-34%), R&D (-35%), and G&A (-44%) expenses, mainly from lower headcount and professional services[213][216][217][218][219] - A $220.0 million gain on extinguishment of debt significantly contributed to the positive net income in Q2 2025[221] Results of Operations for the Six Months Ended June 30, 2025 and 2024 Year-to-date results show strong revenue growth, improved gross profit, and a substantial decrease in operating loss YTD 2025 vs YTD 2024 Operations | Metric (in thousands) | YTD 2025 | YTD 2024 | $ Change | % Change | | :-------------------- | :------- | :------- | :------- | :------- | | Total Revenue | $70,886 | $59,468 | $11,418 | 19% | | Gross profit (loss) | $23,338 | $(14,816) | $38,154 | (258)% | | Total operating expenses | $57,829 | $633,045 | $(575,216) | (91)% | | Loss from operations | $(34,491) | $(647,861) | $613,370 | (95)% | | Total other income (expense), net | $212,555 | $(6,501) | $219,056 | (3,370)% | | Net income (loss) | $177,531 | $(654,577) | $832,108 | (127)% | - Year-to-date revenue increased by 19%, driven by growth across all software and services segments, with solar software up 17%, edge hardware up 17%, project and professional services up 55%, and storage software & managed services up 39%[226] - Cost of revenue decreased by 36% year-over-year, primarily due to a $31.5 million reduction in battery resale activities, partially offset by increased cloud infrastructure and personnel costs for services[227][228] - Operating expenses decreased by 91% year-over-year, largely due to the absence of the $547.2 million goodwill impairment recorded in 2024, alongside significant reductions in sales and marketing (-36%), R&D (-28%), and G&A (-35%) expenses[225][229][230][231][232] Liquidity and Capital Resources The company believes its current cash is sufficient for the next year despite a working capital deficit and cash usage in operations - As of June 30, 2025, Stem had $40.8 million in cash and cash equivalents and a working capital deficit of $12.8 million, but believes its cash position is sufficient for the next 12 months[239] - The company's new business strategy, which includes reducing battery resales and investing in software, has led to reduced revenue and increased costs, potentially constraining its ability to make necessary investments if cash flow does not improve[240] - Net cash used in operating activities was $(12.7) million for the six months ended June 30, 2025, while net cash provided by financing activities was $1.7 million, primarily from senior secured notes issuance[256][257][261] - The company is not a party to any material off-balance sheet arrangements[263] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Stem is not required to provide disclosures about market risk - Stem, Inc. is a smaller reporting company and is not required to provide disclosures about market risk[267] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective and no material changes to internal controls occurred - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[270] - No material changes in internal control over financial reporting occurred during the second quarter of 2025[271] - Management acknowledges the inherent limitations of internal control systems, which can provide only reasonable, not absolute, assurance against errors and fraud[272] Part II. Other Information Item 1. Legal Proceedings The company refers to Note 13, stating that the risk of material loss from legal proceedings is considered remote - Legal proceedings information is detailed in Note 13, where management assesses the probability of a material loss as remote[144][274] Item 1A. Risk Factors No material changes to risk factors are reported, except for the removal of the NYSE listing compliance risk - No material changes to risk factors from the 2024 Annual Report on Form 10-K, except for the removal of the risk factor concerning NYSE listing compliance[275] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales or repurchases of equity securities occurred during the quarter, aside from previously disclosed events - No unregistered sales of equity securities occurred during Q2 2025, other than those disclosed in the June 30, 2025 Form 8-K[276] - There were no purchases of equity securities by the issuer or affiliated purchasers[277] Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities - No defaults upon senior securities were reported[278] Item 4. Mine Safety Disclosures This disclosure requirement is not applicable to the company - Mine Safety Disclosures are not applicable to the company[279] Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 trading plans during the quarter - No Section 16 officer or director adopted or terminated any Rule 10b5-1 trading plan or non-Rule 10b5-1 trading arrangement during Q2 2025[280] Item 6. Exhibits This section lists all exhibits filed with the report, including key agreements, plans, and certifications - The exhibit index includes organizational documents, debt agreements (Indenture, Senior Secured Notes), warrant agreements, the 2024 Equity Incentive Plan, and CEO/CFO certifications[282]