ITEM 1. BUSINESS
Our New Strategy
In October 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software and services offerings. This transition will entail significant operational changes, including reduction of what has historically been the source of most of our revenue (battery hardware resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. These changes are expected to result in reduced revenue, restructuring-related costs and short-term disruptions in our operations, which may negatively affect our ability to effectively scale our software and services offerings and achieve our financial and operational targets. Failure to successfully and timely implement our new strategy may have a material adverse effect on our business, financial condition, and results of operations. See “We may not be able to successfully implement our recently announced new strategy.” in Part I. Item 1A. “Risk Factors” in this Report for additional information about some risks related to our new strategy.
Overview
Stem, Inc., a Delaware corporation (“Stem,” the “Company,” “we,” “us,” or “our”), is a global leader in artificial intelligence (“AI”)-driven software and services that enable its customers to plan, deploy, and operate clean energy assets. We offer a comprehensive suite of solutions that are designed to transform how solar and energy storage projects are developed, built, and operated, including (i) an integrated suite of software and edge hardware products, and (ii) full-lifecycle energy services from a team of industry experts. More than 16,000 global customers rely on Stem to maximize the value of their clean energy projects and portfolios.
Since our inception in 2009, we have engaged in developing and marketing AI-enabled software and services, raising capital, recruiting personnel, and growing our annual recurring revenue. As the energy landscape has changed in recent years, we have increasingly focused on larger, utility-scale projects, supporting asset owners, developers, utilities, operators, and traders. Over the last 15 years, we have grown into one of the most experienced clean energy software providers in the world, achieving milestones such as deploying software with multiple Fortune 500 companies, operating the largest virtual power plant in California, and becoming the de facto standard for commercial and industrial solar asset management software.
We operate in two key areas within the renewable energy landscape: solar and storage. In solar, we serve project developers, asset owners and engineering, procurement and construction firms (EPCs) by selling them solar edge devices and monitoring and control software, as well as professional services related to the design and commissioning of the same.
In storage, we serve project developers, asset owners, EPCs, and distributors by selling them software-enabled forecasting and optimization managed services that minimize spending on utility bills, or maximize revenue from energy market participation. In some cases, we also resell battery OEM hardware to our customers for a fee.
Some customers own both solar and storage assets, and use our full software capabilities and services across both asset classes.
Our suite of software applications is enabled by our AI platform, Athena®. Each application helps customers maximize the value of their energy assets. Our asset performance management (APM) application, PowerTrack™ APM, provides a unified solution that empowers asset owners and operators to efficiently monitor and control complex storage, solar, and hybrid portfolios for optimal performance. Our Energy Management System (EMS) application, PowerCore™ EMS, is a technology-agnostic, edge-to-cloud integration solution for monitoring, managing, and controlling energy storage and hybrid systems for maximum performance and reliability. Our energy storage optimization application, PowerBidder™ Pro, combines Athena’s wholesale market bidding engine with a web interface, allowing users to choose between automated and user-defined trading strategies. To complement our software applications, we manufacture commercial- and utility-scale edge hardware solutions. These edge devices function across solar and storage products from multiple original equipment manufacturer (“OEM”). As of December 31, 2024, Athena had accumulated more than 43 million runtime hours, with more than 500,000 industrial Internet of Things (“IoT”) devices under management, across more than 178,500 sites in 57 countries.
We also deliver software-enabled managed services to our customers through the Athena AI platform. We believe that the network created by our growing customer base increases grid resilience and reliability through the real-time balancing of market-based supply and demand signals. Additionally, our solutions are designed to support renewable energy generation by helping to alleviate grid intermittency issues, thereby reducing customer dependence on traditional, fossil fuel-based power generation resources.
To help our customers achieve long-term performance and profitability goals for their energy projects, we also provide advisory services spanning development and engineering, procurement and integration, and performance and operation services. In the early stages of project planning, our experts help lay a solid foundation for our customers’ solar and storage
projects by guiding the design and ensuring informed decision-making. During the building stage, we provide guidance for hardware procurement and integration for timely deployment. After assets are operational, we enable optimal economic and technical returns with managed energy services such as trading and bidding strategies, wholesale market participation, performance reporting, system warranties, and more.
History
We were originally known as Star Peak Energy Transition Corp. (“STPK”), which was a special purpose acquisition company that completed its public offering on August 20, 2020. On April 28, 2021 (the “Closing Date”), we consummated a business combination (the “Merger”) pursuant to an Agreement and Plan of Merger by and among STPK, STPK Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of STPK (“Merger Sub”), and Stem, Inc., a Delaware corporation (“Legacy Stem”). The Merger was effected on the Closing Date through the merger of the Merger Sub with and into Legacy Stem, with Legacy Stem surviving as a wholly-owned subsidiary of the Company. Legacy Stem was a private company and is considered the Company’s accounting predecessor.
On April 3, 2023, we issued $240.0 million aggregate principal amount of 4.25% Green Convertible Senior Notes due 2030 (the “2030 Convertible Notes”) in a private placement offering to qualified institutional buyers (the “2023 Initial Purchasers”) pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2030 Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 4.25% per year, payable in cash semi-annually in arrears in April and October of each year, beginning in October 1, 2023. The notes will mature on April 1, 2030, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon conversion, we may choose to pay or deliver cash, shares of common stock or a combination of cash and shares of common stock. The notes are redeemable for cash at our option at any time given certain conditions.
Our net proceeds from this offering were approximately $232.4 million, after deducting for $7.6 million of debt issuance costs primarily consisting of underwriters, advisory, legal, and accounting fees. On April 3, 2023, we used approximately $99.8 million of the net proceeds to purchase and surrender for cancellation approximately $163.0 million aggregate principal amount of our 0.50% Green Convertible Notes due 2028 (the “2028 Convertible Notes”).
On March 29, 2023 and March 31, 2023, in connection with the pricing of the 2030 Convertible Notes, and on April 3, 2023, in connection with the exercise in full by the 2023 Initial Purchasers of their option to purchase additional notes, we entered into Capped Calls (the “2030 Capped Calls”) with certain counterparties. We used $27.8 million of the net proceeds from the 2030 Convertible Notes to pay the cost of the 2030 Capped Calls.
Competitive Strengths
Our competitive strengths include the following:
•Exceptional AI and Renewable Energy Expertise: We have a seasoned leadership team with a demonstrated track record of execution and extensive experience in software, distributed energy expertise focused on AI, technology development, new market commercialization, renewable project development and utility / grid program operations.
•Significant Benefits from Scale: We believe we operate one of the largest global distributed clean energy networks, with nearly 30 Gigawatts (“GW”) of solar assets under management and more than 5 Gigawatt-hours (“GWh”) of contracted energy storage assets under management. This large network generates a significant amount of operational data which drives enhanced software performance.
•Proven software capabilities: Our core asset management software, PowerTrack, provides a flexible and comprehensive interface that allows customers to monitor and control individual solar assets and portfolios. Our energy storage software is able to co-optimize multiple energy market revenue streams. Both tools function across a diverse fleet of hardware throughout multiple geographies and energy markets.
•Subject Matter Expertise: Our goal is to provide a seamless customer experience from commercial proposal to installation to ongoing operations. Our advisory services span development and engineering, procurement and integration, and performance and operations. Our employees have deep industry and technical expertise, which enables us to provide a full suite of monitoring, control, optimization, scheduling, and reporting functionality for our customers.
•Leading Strategic Partnerships: We have numerous partnerships with a diverse set of industry leaders to reduce execution risk and increase speed to market in certain geographies. In 2024, we partnered with Ameresco for a 313 MWh, multiple-site project where we provided battery storage hardware, system design support, and Athena® software that will minimize costs and maximize efficiency. More recently, we announced a 484 megawatt (“MW”)
solar deployment for Neovolt, one of the largest renewable asset owners in Hungary, who will standardize its asset management on PowerTrack.
Research and Development
We have invested significant amounts of time and expense in the development of our software. The ability to maintain our leadership position depends in part on our ongoing research and development activities. Our software development, data science, and product professionals are responsible for the design, development, integration, and testing of our software products. We focus our efforts on developing our software to improve our algorithms, augment value with new revenue streams and localize our capabilities based on geography and regulatory considerations.
Intellectual Property
Intellectual property is a key differentiator for our business, and we seek protection whenever possible for the intellectual property that we own and control, including but not limited to patents, proprietary information, trade secrets and software tools and applications. We rely upon a combination of patent, copyright, trade secret and trademark laws, as well as employee and third-party non-disclosure agreements and other contractual restrictions to establish and protect our proprietary rights.
We have developed a significant patent portfolio to protect elements of our proprietary technology. As of December 31, 2024, we had more than 80 patents across storage and solar asset performance.
Our intellectual property encompasses a diverse mix of patents with respect to our proprietary systems and software. These patents relate to the following broad categories:
•power electronics, including the basic interaction of batteries with the power grid where such electronics convert direct current (DC) battery power to alternating current (AC) compatible grid power;
•analytics and control, including use cases and decisions into the operation of an energy storage system and the coordination of providing economic or operational value to a customer;
•networked operations and grid services that involve the aggregation and operation of a group of energy storage systems to provide value to a utility or grid operator; and
•monitoring and control of solar photo-voltaic power assets along with fault detection, performance analytics and solar generation forecasting.
“Athena®” is a registered-trademark, and Athena’s trademarked applications include “Analyzer™,” “Supervisor™,” “Explorer™,” and “PowerBidder™.” The services relating to these trademarks include, but are not limited to, energy optimization services, software as a service for energy optimization services and energy storage charge and discharge.
We routinely review our development efforts to assess the existence and patentability of our intellectual property. We pursue the registration of our domain names and trademarks and service marks in the U.S. In an effort to protect our brand, as of December 31, 2024, we had nine registered trademarks in the U.S.
Competition
The clean energy industry is highly competitive, and new regulatory requirements for carbon emissions, technological advances, the lower cost of renewable energy, the decrease in battery and solar panel costs, improving battery technology and shifting customer demands are causing the industry to evolve and expand. We believe that the principal competitive factors in the clean energy market include, but are not limited to:
•safety, reliability and quality;
•product performance and uptime;
•historical track record and references for customer satisfaction;
•experience in proving bankability for multiple stakeholders;
•technological innovation;
•comprehensive solution from a single provider;
•upfront and ongoing costs of software and services;
•ease of integration and clarity of value proposition; and
•seamless edge hardware, software, and service offerings.
There is rising demand for solutions that enable the deployment and operation of clean electric power assets with high availability and performance. Additionally, the transition to renewable energy sources and distributed energy infrastructure has increased the complexity and variability of power generation and end-customer electricity demand. This industry transformation has created an opportunity for an increased role for clean energy software and services like ours. We believe that these trends will drive C&I customers, utilities, independent power producers and project developers to grow their use of and investment in clean energy systems.
Our key competitors include energy monitoring and optimization software providers, energy storage and edge device OEMs, hardware integration providers, renewable project developers, EPC firms, and consulting firms. In storage, our competitors are typically focused on the development and marketing of single-purpose built solutions with captive hardware offerings, while our AI-powered software is hardware agnostic, and benefits from operational data across a multitude of hardware types, geographies, utilities, and grid operator service areas. In solar, our competitors provide monolithic software and edge devices, whereas PowerTrack™ and our edge devices provide customers with a flexible solution that meets their individual project needs.
We believe we are well-positioned to compete successfully in the market for software and software-enabled services. We are among the leaders in global distributed solar and energy storage assets under management, supported by proven technology, focused customer service, strong strategic partnerships and a seasoned leadership team with a track record of success.
Government Regulation and Compliance
There are varying policy frameworks across the U.S. and abroad designed to support and accelerate customer adoption of clean and reliable distributed generation technologies. These policy initiatives come in the form of tax incentives, cash grants, performance incentives and electric tariffs.
Our AI-powered platform manages energy assets operating worldwide, with various policy frameworks across each energy market. Several U.S. states have utility procurement programs, energy system decarbonization goals and/or renewable portfolio standards for which our technology is eligible, including California, Connecticut, Hawaii, Illinois, Massachusetts, Maryland, Michigan, New Jersey, New York and Texas. Additionally, these energy assets often qualify for tax or financial incentives and, following passage of the United States Inflation Reduction Act of 2022 (the “IRA”), provisions such as the storage investment tax credit (ITC) and solar production tax credit (PTC), among others, provide additional federal incentives. However, the availability, value, or implementation of federal incentives could also change with political conditions including those related to Congress or the presidency.
Federal, state and local government statutes and regulations concerning electricity heavily influence the demand for our products and services even though we are not regulated as a utility. These statutes and regulations often relate to electricity pricing, net metering, incentives, taxation, competition with utilities and the interconnection of customer-owned electricity generation. In the U.S., governments, often acting through state utility or public service commissions, change and adopt different rates for commercial customers on a regular basis. These changes can have a positive or negative effect on our ability to deliver cost savings or revenue generation for our customers.
Several states have mandates or policies designed to encourage energy storage adoption. For example, California offers a cash rebate for storage installations through the Self Generation Incentive Program and Massachusetts and New York offer performance-based financial incentives for storage. Storage installations also are supported in some states by state public utility commission policies that require utilities to consider alternatives such as storage before they can build new generation. In February 2018, the Federal Energy Regulatory Commission (“FERC”) issued Order 841, directing regional transmission operators and independent system operators to remove barriers to the participation of storage in wholesale electricity markets and to establish rules to help ensure storage resources are compensated for the services they provide. In September 2020, the FERC issued Order 2222, opening up U.S. wholesale energy markets to aggregations of distributed energy resources like rooftop solar, BTM batteries, and electric vehicles. FERC Order 2222 is currently in the implementation stage.
Solar and energy storage systems require interconnection agreements from the applicable local electric utilities in order to connect to the grid and operate. In almost all cases, interconnection agreements are standard form agreements that have been pre-approved by the local public utility commission or another regulatory body with jurisdiction over interconnection agreements. As such, no additional regulatory approvals are typically required once interconnection agreements are signed. For wholesale transmission, energy storage systems require interconnection agreements with transmission providers. The pace of
wholesale interconnection is often a source of delay for project implementation, although FERC is requiring process improvements through Order 2023, which is an ongoing proceeding.
Our operations are subject to stringent and complex federal, state, and local laws and regulations governing the occupational health and safety of our employees and wage regulations. For example, we are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”), as amended, and comparable state laws that protect and regulate employee health and safety.
There are government regulations pertaining to battery safety, transportation of batteries, tariffs, and disposal of hazardous materials. We and our suppliers, as applicable, are required to comply with these regulations in order to sell our batteries into the market. The license and sale of our batteries and technology abroad is likely to be subject to export controls in the future.
Each installation must be designed, constructed, and operated in compliance with applicable federal, state, and local regulations, codes, standards, guidelines, policies, and laws. To install and operate energy storage systems on our platform, we, our customers or our partners are required to obtain applicable permits and approvals from various authorities with jurisdiction over energy storage systems and interconnection.
Human Capital Resources
Building a Future Together
At Stem, our success is driven by our people. We believe in creating an environment where talent thrives, innovation flourishes, and collaboration fuels progress. As a leader in the solar and storage industry, we are committed to investing in our workforce, seeking to ensure that our employees have the opportunity to grow, contribute, and make a meaningful impact.
Our culture is built on a foundation of inclusion, continuous learning, and shared success. From career development and well-being initiatives to competitive compensation and benefits, we prioritize the needs of our employees so they can focus on shaping a sustainable and brighter future.
Human Capital
As of December 31, 2024, we had 569 employees, of whom 344 were based in the United States and 225 were in international locations.
We believe that our future success depends in part on our continued ability to hire, motivate and retain qualified employees in any operating environment.
Talent Development
At Stem, we prioritize talent development through structured and ongoing initiatives designed to support employee growth and success. Our approach includes quarterly talent mechanisms, mid-year check-ins, and annual performance reviews, ensuring continuous feedback and professional development opportunities. We emphasize goal tracking to align individual and company objectives while providing career progression materials to support employees in mapping out their long-term growth within the organization. These efforts reflect our commitment to building a high-performing team and enabling our employees to reach their full potential.
Professional Development: Growing Together
We foster a culture of continuous learning and growth. Our employees have access to a wide range of learning opportunities, from hands-on experience to formal training programs. We support ongoing professional development through structured training, leadership development initiatives, and skill-building workshops.
To further empower our workforce, we encourage participation in continuing education programs through approved institutions and online learning platforms such as Udemy, STEM University, New Hire Training, and the STEM Learning Series. These resources are designed to strengthen both technical expertise and leadership capabilities, equipping our teams for long-term success.
Employee Sentiment & Feedback
We believe that listening to our employees is essential to creating a thriving workplace. We actively seek and value employee feedback through multiple channels to enhance communication, drive engagement, and continuously improve our work environment.
To support this, we launched “Your Voice” our employee sentiment portal, designed to capture valuable insights and facilitate open dialogue across the organization. The results are shared with managers and employees and are used to develop meaningful action plans that drive positive change.
To further strengthen our culture, we introduced the Cultural Scorecard, which measures employee engagement trends and provides managers with key insights to proactively address concerns and enhance the employee experience. These tools are essential in helping us evolve, innovate, and create a workplace where every employee feels heard, valued, and empowered.
Inclusion & Belonging
We are committed to an inclusive culture and team environment that promotes equal employment opportunities, as well as equality, cultural awareness and respect. We do so by implementing policies, benefits, training, recruiting and recognition practices to support our colleagues. For example, we provide a monthly global culture coalition cadence to address our mission of “bringing a community of employees together to improve the work experience through innovative, creative, and fun culture initiatives.” In the spirit of our core values, we are “One Team” and succeed through collaboration when we respect, acknowledge and celebrate each other’s differences. We are committed to building the best workplace in our communities and the broader industry.
Available Information
Our website is www.stem.com. We use our Investor Relations website, at https://investors.stem.com, as a routine channel for distribution of important information, including news releases, analyst presentations, and financial information. We make available free of charge, though our Investor Relations website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers, and amendments to each of those reports, as soon as reasonably practicable after such documents are filed with or furnished to the SEC. Alternatively, you may access these reports at the SEC’s website at www.sec.gov. Copies are also available, without charge, from Stem Investor Relations, 4 Embarcadero Ctr., Suite 710, San Francisco, California, 94111. Unless expressly noted, the information on our website or any other website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered part of this Report or any other filing that we make with the SEC.
Information About Our Executive Officers
The following table sets forth, as of January 31, 2025, the names and ages of our executive officers, including all offices and positions held by each for the past five years.
Name Age Current Position and Five-Year Business Experience
Arun Narayanan 50 Chief Executive Officer, since January 2025; Chief Executive Officer at RES Digital Solutions, a division of RES (a global independent renewable energy company), from April 2024 to January 2025; Chief Digital Officer at RES from August 2023 to March 2024 and; Chief Data Officer of Anglo American plc (a global mining company) from January 2018 to June 2023.
Doran Hole 56 Chief Financial Officer, since September 2024; Chief Financial Officer and Executive Vice President of Ameresco, Inc. (a renewable energy asset developer, owner and operator) from July 2019 to August 2024.
Saul R. Laureles 59 Chief Legal Officer and Corporate Secretary, since May 2021; Director, Corporate Legal Affairs and Assistant Corporate Secretary at Schlumberger Limited (a global energy technology company), from May 2007 to May 2021.
Mike Carlson 61 Chief Operating Officer, since September 2022; Vice President of Koch Engineered Solutions (an equipment technology and services company) from August 2020 to September 2022; President of Digital Grid North America at Siemens Industries, Inc. (a technology company) from July 2014 to March 2019.
Kim Homenock 51 Chief People Officer, since March 2022; Director, Devices Software & Services HR for Amazon (a technology company) from May 2021 to March 2022; Director, NA Transportation HR from January 2018 to May 2021.
Albert Hofeldt 55 Chief Technology Officer, since November 2024; EVP Technology, from March 2024 to November 2024, and SVP Technology, from July 2022 to March 2024.
Matthew Tappin 37 President, Software, since September 2024; President of Asset Management Division, March 2023 to September 2024; Vice President, Corporate Development, from May 2021 to March 2023; Corporate Development, New Energies at Shell (an energy company), from August 2019 to May 2021.