Stem(US:STEM)2025-10-29 22:00Financial Data and Key Metrics Changes - The company reported third quarter revenue of $38 million, up 31% year over year, with ARR growing 17% year over year to $60 million [3][18] - Achieved positive adjusted EBITDA for the second consecutive quarter and generated positive operating cash flow [3][13] - GAAP gross margins were 35% and non-GAAP gross margins were 47%, reflecting an increasing mix of higher margin software and services [19] Business Line Data and Key Metrics Changes - PowerTrack software revenue grew 11% year over year, while Edge Hardware revenue increased 18% year over year [18] - Managed services revenue decreased year over year due to one-time overperformance in the previous year [18][12] - Recurring base revenue for managed services grew 14% year over year and 4% sequentially [12] Market Data and Key Metrics Changes - The company launched PowerTrack EMS, which is expected to expand the total addressable market by targeting utility-scale and international hybrid projects [6][8] - Bookings were $30 million, down slightly from the previous quarter, primarily due to timing of bookings from battery hardware resales [22] Company Strategy and Development Direction - The company is focused on driving software and services revenue growth, revamping software development, and reducing cost structure [5][12] - International expansion is a key component of the corporate strategy, with efforts to penetrate European markets and leverage existing teams in Berlin and Japan [16][17] - The strategic transformation has unified the corporate identity under the STEM brand and streamlined the product portfolio [4] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the business and the ability to meet guidance expectations despite macro headwinds [16] - The company is well-positioned to benefit from projected international load growth and is optimistic about the demand for its products [16][17] - Management noted that customer engagement levels remain strong despite industry uncertainties [36] Other Important Information - The company has refined its full-year 2025 guidance, tightening ranges and raising the low end for software, edge hardware, and services revenue [15][23] - Operating cash flow turned positive at $11 million, a $21 million improvement compared to the same quarter last year [21] Q&A Session Summary Question: Guidance update and outlook - Management clarified that they are still tracking towards the midpoint or high end of all ranges, with the main difference being the de-emphasized hardware resale business [28][29] Question: Gross margin expectations - Management indicated that Q4 may see slight compression in gross margins due to a mix shift with higher sales of battery hardware, but expects to continue improving margins in the long term [30][31] Question: Demand for PowerTrack EMS - Management expressed enthusiasm about PowerTrack EMS and its potential to open new markets, particularly in small utility-scale sites [32] Question: Customer demand and industry outlook - Management reported maintaining momentum in customer engagement and noted that conversations with customers remain unchanged despite industry challenges [36] Question: Path to profitability - Management acknowledged the importance of demonstrating a path to operating income and net income positivity, with more guidance expected in future calls [38][40] Question: Opportunities in hyperscaler data centers - Management is monitoring the data center market for potential shifts towards renewable energy solutions and is open to exploring opportunities in that space [48] Question: Operating expenses outlook - Management indicated that the current cash operating expense trend is a good indication of future performance, with ongoing efforts to manage costs effectively [49][50]