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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following management’s discussion and analysis of our financial condition and results of operations (“MD&A”) in conjunction with our consolidated financial statements and the related notes included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Report. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results and the timing of certain events could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Report, particularly in Part I, Item 1A, “Risk Factors.”

This MD&A generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K filed with the SEC on March 5, 2025.

The Merger

The information regarding the Merger set forth in the first paragraph of Part 1, Item 1, “Business — History” above is incorporated herein by reference. For financial reporting purposes, Legacy Stem is treated as the accounting acquirer.

Overview

Stem is reimagining technology to drive the energy transition. We help asset owners, operators and stakeholders benefit from the full value of their energy portfolio by enabling the intelligent development, deployment and operation of clean energy assets. Our integrated software suite, PowerTrack, provides asset monitoring software and solutions, supported by professional and managed services, under one consolidated set of solutions. Our solutions and services are designed to provide customers with the information they need clearly and accurately and help harness raw data to inform actionable insight. With global projects managed in 55 countries, customers have relied on Stem for nearly 20 years to help maximize the value of their clean energy projects.

PowerTrack is our integrated suite of software and solutions for solar, storage and hybrid assets. Within the PowerTrack product suite we offer PowerTrack Software, PowerTrack Energy Management System, PowerTrack Supervisory Control and Data Acquisition (“SCADA”), PowerTrack Power Plant Controller (“PPC”), PowerTrack Logger, and PowerTrack Optimizer.

Our PowerTrack Software for solar monitoring and analytics enables the standardization of energy portfolios on one hardware agnostic application. We offer commercial- and utility-scale edge hardware solutions, which are original equipment manufacturer (“OEM”)-agnostic devices that are used to connect customers’ solar and storage assets to our software applications in a unified view. We offer project services to our PowerTrack customers to assist with designing and commissioning of solutions. We offer Managed Services, which are full lifecycle, storage services covering the design, procurement, commissioning, operation and optimization of energy storage and hybrid systems, enabled by our PowerTrack Optimizer software, to our customers. We also offer a comprehensive suite of Professional Services to support solar and storage projects through every stage of the project lifecycle, providing our customers with the expertise needed to navigate the complexity and scale of clean energy portfolios. We serve project developers, asset owners, engineering, procurement and construction firms (EPCs) and distributors.

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. Over the last 15 years, we have been an industry leader in clean energy software and solutions.

Each year since our inception, we have incurred net operating losses and negative cash flows from operations. We have financed our operations primarily through cash flows from customers and the issuance of convertible senior notes.

Our total revenue increased from $144.6 million for the year ended December 31, 2024 to $156.3 million for the year ended December 31, 2025. For the years ended December 31, 2025 and 2024, we generatednet income of $137.8 million and incurred anet loss of $854.0 million, respectively. As of December 31, 2025, we had an accumulated deficit of $1,488.7 million.

On April 9, 2025, we announced an approximately 27% reduction of our global workforce, as part of our broader efforts to prioritize investments in software, reduce operating costs, increase efficiency, drive profitable growth and increase stockholder value. For the year ended December 31, 2025, we incurred $6.1 million in restructuring costs related to the reduction of our global workforce. We expect to continue to exercise discipline and moderate expenses associated with sales and marketing, research and development, regulatory and related functions. In addition, we expect to continue to manage and reduce our general and administrative expenses associated with scaling our business operations, including legal, audit, additional insurance expenses, investor relations activities and other administrative and professional services.

Key Factors, Trends and Uncertainties Affecting our Business

We believe that our performance and future success depend on several factors, some of which present significant opportunities for us, and some of which pose risks and challenges, including but not limited to:

Our Strategy

In 2024, we announced a new business strategy that reflects a renewed focus on developing and marketing our AI-enabled software, edge and services offerings. This transition has entailed significant operational changes during calendar years 2024 and 2025, including reduction of what had historically been the source of most of our revenue (battery resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. These changes have resulted in reduced revenue, increased restructuring-related costs, reduced operating expenses, 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 achieve the anticipated benefits of our strategy may have a material adverse effect on our business, financial condition, and results of operations. See “Our strategy may not achieve anticipated benefits.” in Part I. Item 1A. “Risk Factors” in this Report for additional information about some risks related to our strategy.

Cash Reserves

The execution of our new business strategy has required, and is expected to continue to require, investment in our software, our employees and infrastructure. As of December 31, 2025, we had cash and cash equivalents of $48.9 million (as compared to $43.1 million as of September 30, 2025 and $56.3 million as of December 31, 2024), while our operating expenses for the year ended December 31, 2025 were $115.6 million. If our cash flow from operations does not improve as expected, or if we are unable to secure additional sources of capital if or when the need arises, we may be constrained in our ability to make the investments required to continue execution of our new strategy.

Customer Concentration

We have historically depended on a small number of significant customers for our sales, and a small number of customers have historically accounted for a material portion of our revenue. Although we continue to diversify our customer base, we may continue to derive a significant portion of our revenue from a small number of customers. Loss of a significant customer, the inability to close (or a delay in closing) a significant contract at any time, or a significant reduction in pricing or order volume from a significant customer, have (in the case of contractual delays) resulted in material reductions in revenue and other adverse effects in certain quarters, and may do so in the future.

Reverse Stock Split

On August 28, 2024, we received formal notice from the New York Stock Exchange (the “NYSE”) that we were not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of our shares of common stock had fallen below $1.00 per share over a period of 30 consecutive trading days.

At the Company’s 2025 Annual Meeting of Stockholders, our stockholders approved a reverse stock split of our common stock, par value $0.0001 per share. After such stockholder approval, our Board of Directors implemented the reverse stock split at a ratio of 1-for-20 and a reduction in the total number of authorized shares of common stock from 500.0 million shares to 250.0 million shares on June 23, 2025 (the “Effective Time”).

At the Effective Time, every 20 shares of common stock outstanding was combined, automatically and without any action on the part of the Company or its stockholders, into one new share of common stock. No fractional shares of common stock were issued as a result of the reverse stock split. In lieu of any fractional shares to which a stockholder of record was otherwise entitled, the Company paid cash to the applicable stockholder. The common stock began trading on a split-adjusted basis at the open of trading on June 23, 2025.

Adjustments proportionate to the 1-for-20 split ratio were made to the number of shares of Common Stock available for issuance under the Company’s equity incentive plans; the number of shares issuable, and the applicable exercise prices under the Company’s outstanding equity awards under such plans and any outstanding warrants; the conversion rates of outstanding convertible notes, in accordance with the related indentures; the strike prices of existing capped call options; the number of shares authorized for issuance pursuant to the convertible notes and capped call options; the shares reserved for issuance under any equity plan, outstanding equity award, convertible notes, capped call options or otherwise, and as otherwise described in the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 23, 2025.

Following the Effective Time, we regained compliance with the requirement of Section 802.01C, as our share price promptly exceeded $1.00 per share, and remained above that level for the following 30 trading days.

All share and per share amounts, exercise prices, conversion rates and conversion prices presented herein that relate to dates, or were established, prior to the reverse stock split have been adjusted retroactively to reflect these changes.

One Big Beautiful Bill Act of 2025

In July 2025, the OBBB was enacted, which introduced material changes to clean energy tax credit programs that are significant to our business and may affect our financial condition, results of operations and future prospects. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. The OBBB did not result in any material changes to tax expense or cash tax for 2025, primarily as a result of the valuation allowance we have on our deferred tax assets.

The OBBB scales back the Investment Tax Credit (the “ITC”) available under Section 25D of the Internal Revenue Code (the “Code”) for residential solar and storage systems purchased through cash or loans. Under the OBBB, the Section 25D credit expired on December 31, 2025. In addition, the OBBB imposes new timing requirements for eligibility under Section 48E of the Code, which governs ITCs for leased solar and storage systems. Previously under the IRA, Section 48E credits were available through 2032 or such later period when the U.S. power sector emitted 75% less carbon emissions than 2022 levels. Under the OBBB, these credits will no longer be available for solar-only projects placed in service after December 31, 2027, unless construction begins on or before July 4, 2026, pursuant to a grandfathering rule. Projects that qualify under this rule must still meet continuity requirements to remain eligible. Energy storage projects are not subject to this placed-in-service deadline; however, the ITC for storage systems will begin to phase down in 2034 - decreasing to 75% in 2034, 50% in 2035 and phasing out entirely by 2036.

The OBBB also amends the domestic content bonus credit rules for Section 48E projects. Projects commencing construction after June 16, 2025 and before January 1, 2026 must meet a 45% domestic cost threshold. If construction begins in

2026, the project’s domestic cost threshold is 50%, and if construction begins after 2026, the project’s domestic cost threshold is 55%.

Additionally, the OBBB introduces new compliance requirements under the Foreign Entity of Concern (“FEOC”) provisions for both Section 48E and the Advanced Manufacturing Production Tax Credit (“AMPTC”) under Section 45X. These provisions limit “material assistance” from FEOCs in projects otherwise eligible for tax credits under Section 48E and Section 45X and establish an escalating threshold of non-FEOC content that must be met by solar and storage projects beginning construction in 2026 and by manufactured components produced beginning in 2026.

On July 7, 2025, the President issued an Executive Order directing the Secretary of the Treasury to issue updated guidance on the “beginning of construction” requirements applicable to Section 48E projects under the OBBB and also to implement the FEOC restrictions set forth in the OBBB. On August 15, 2025, the Treasury Department released Notice 2025-42, which modifies the rules for determining when construction begins for purposes of qualifying for the Section 48E credits. The guidance eliminates the longstanding 5 percent safe harbor for solar projects larger than 1.5 megawatts (AC), effective for projects that begin construction on or after September 2, 2025. Projects that began construction prior to that date continue to be governed by prior IRS guidance. The 5 percent safe harbor remains available for solar facilities of 1.5 MW or smaller. Under the new rules, the physical work test is now the sole method for establishing that construction has begun for affected solar projects larger than 1.5 MW and for all wind projects. The test requires that “physical work of a significant nature” be performed, without regard to cost, and may include certain on-site and off-site activities but excludes preliminary activities such as planning, permitting, and financing. We are currently evaluating the full impact of this legislation on our consolidated financial statements.

The OBBB makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted, which is the date the legislation is signed into law. The OBBB did not have a material impact on our financial statements for 2025, but we continue to evaluate the potential future impact of the OBBB on our financial statements.

Parent Company Guarantees

Prior to July 2023, we agreed in certain customer contracts, to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described below under Note 3 — Revenue, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. We accounted for such contractual terms and guarantees as variable consideration at each measurement date. As a result, the Company recorded a net revenue reduction of$38.7 million in hardware revenue during the year ended December 31, 2024. The overall reduction in revenue was related to deliveries that occurred prior to 2024.

There are no remaining parent company guarantees (“PCGs”) outstanding, and the Company expects no future impact on its financial results as a result of PCGs.

Because we have not included these parent company guarantees in our contracts since July 2023, and because we do not intend to provide guarantees in customer contracts going forward, we believe that excluding the effect of the $38.7 million net reduction in revenue for the year ended December 31, 2024, from adjusted EBITDA and non-GAAP gross profit enhances the comparability to these metrics in prior periods.

Impairment and Accounts Receivable Write-Off

For those contracts where the customers invoked PCG protection pursuant to the applicable contract, we have worked actively to remarket the remaining systems subject to PCG with a wide variety of potential customers, as more fully described below under Note 3 — Revenue, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Given the uncertainty of collection from the original customers of due and unpaid amounts in those cases where we believe we have enforceable rights of recovery, we believe the likelihood for collection of the accounts receivable outstanding relating to hardware subject to these PCG’s is no longer probable. Accordingly, we wrote-off the remaining receivables of $104.1 million during the year ended December 31, 2024. As of June 30, 2025, the Company had entered into an arrangement to recover $3.5 million of the receivables previously written off. As of December 31, 2025, the Company has recovered the full balance of $3.5 million. We are pursuing all potential remedies with respect to its enforceable rights under applicable contracts.

Seasonality

Our results of operations have typically fluctuated due to seasonal trends, which we expect to recur in future periods. Historically, we have recognized most of our revenue in the third and fourth fiscal quarters of each year due to various factors, including the requirement by our customers to reach target commercial operation dates for their renewable energy projects as well as tax equity and financing considerations. For instance, our revenue recognized in the third and fourth quarters of the fiscal year ended December 31, 2025 accounted for 55% of the total revenue recognized in the fiscal year ended December 31, 2025. The seasonality of our results of operations may be mitigated as our software and services offerings begin to comprise a greater percentage of our total revenue.

DevCo Joint Ventures

We, through an indirect wholly-owned development subsidiary, entered into strategic joint ventures with qualified third parties to develop select energy storage generation projects (“DevCo Projects”), as more fully described below under Note 2 —Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. We have not made an investment in any DevCo Project since 2024, and we are not making further investments in these DevCo Projects. As of December 31, 2025 we have sold, or written off, all project assets associated with the DevCo Projects.

Increase in Deployment of Renewables

Deployment of intermittent resources has accelerated over the last decade, and today, wind and solar have become a low cost energy source. We expect the cost of generating renewable energy to continue to decline and deployments of energy storage systems to increase. As renewable energy sources of energy production are expected to represent a larger proportion of energy generation, grid instability rises due to their intermittency, which can be addressed by energy storage solutions.

Competition

Our key competitors include energy monitoring and optimization software providers, energy storage and edge device OEMs and hardware integration providers. Our PowerTrack software is hardware agnostic and benefits from operational data across a multitude of hardware types, geographies, utilities and grid operator service areas. 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.

Existing competitors may expand their product offerings and sales strategies, and new competitors may enter the market. Furthermore, our competitors include other types of software providers and some hardware manufacturers that offer software solutions. If our market share declines due to increased competition, our revenue and ability to generate profits in the future may be adversely affected.

Government Regulation and Compliance

Although we are not regulated as a utility, the market for our products and services is heavily influenced by federal, state, and local government statutes and regulations concerning electricity. These statutes and regulations affect electricity pricing, net metering, incentives, taxation, competition with utilities, and the interconnection of customer-owned electricity generation. In the United States and internationally, governments regularly modify these statutes and regulations and acting through state utility or public service commissions, regularly change and adopt different rates for commercial customers. These changes can positively or negatively affect our ability to deliver cost savings to customers.

Non-GAAP Financial Measures

In addition to financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we use adjusted EBITDA and non-GAAP gross profit and margin, which are non-GAAP financial measures, for financial and operational decision making and as a means to evaluate our operating performance and prospects, develop internal budgets and financial goals, and to facilitate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our operating performance, such as stock-based compensation and other non-cash charges, as well as discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP

financial measures are useful to investors both because they (1) allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) are used by our institutional investors and the analyst community to help them analyze the health of our business. Adjusted EBITDA and non-GAAP gross profit and margin should be considered in addition to, not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP.

Non-GAAP Gross Profit and Margin

We define non-GAAP gross profit as gross profit excluding amortization of capitalized software, impairments related to decommissioning of end-of-life systems, impairments related to DevCo project assets and other write-offs, excess supplier costs, and reduction in revenue. We define non-GAAP gross margin as non-GAAP gross profit as a percentage of revenue.

During 2024, we incurred costs of $1.0 million above initially agreed prices on the acquisition of certain hardware systems from one of our suppliers, which resulted from production delays by such supplier. Because we had not previously incurred costs above initially agreed prices with a hardware supplier, we excluded this item from adjusted EBITDA and non-GAAP gross profit to better facilitate comparisons of our underlying operating performance across periods.

The following table provides a reconciliation of gross profit (loss) and margin (GAAP) to non-GAAP gross profit and margin (in millions, except for percentages):

Years Ended December 31,

GAAP gross profit (loss) $ 60.0 $ (11.1)

GAAP gross margin (%) 38 % (8) %

Non-GAAP Gross Profit

Add: Revenue reduction, net (1) — 38.7

Less: Other revenue adjustments (2) (0.5) —

Less: Cost of revenue (96.3) (155.7)

Add: Amortization of capitalized software & developed technology 17.6 16.2

Add: Impairments and other write-offs (4.8) 18.9

Add: Excess supplier costs (3) — 1.0

Non-GAAP gross profit $ 72.3 $ 63.7

Non-GAAP gross margin (%) 46 % 35 %

(1) Refer to the discussion of reduction in revenue in “— Parent Company Guarantees” above.

(2) Other revenue adjustments refer to terminations and modifications of significant contracts with customers prior to their scheduled termination dates.

(3) Refer to the discussion of excess supplier costs in “— Non-GAAP Gross Profit and Margin” above.

Adjusted EBITDA

As discussed above, we believe that adjusted EBITDA is useful for investors to use in comparing our financial performance with the performance of other companies. Nonetheless, the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude when calculating adjusted EBITDA.

We calculate adjusted EBITDA as net income (loss) attributable to us before depreciation and amortization, including amortization of internally developed software, interest expense, further adjusted to exclude stock-based compensation and other income and expense items, including the gain on extinguishment of debt, reduction in revenue, other revenue adjustments, excess supplier costs, change in fair value of derivative liability, change in fair value of warrant liability, impairment of goodwill, contract termination payment, (expected recovery of) impairment and accounts receivable write-off, impairment of inventory and other deferred costs, impairment of deferred costs with suppliers, impairment of DevCo project assets, and income tax provision or benefit.

The following table provides a reconciliation of adjusted EBITDA to net income (loss) (in thousands):

Years Ended December 31,

(in thousands)

Adjusted to exclude the following:

Gain on extinguishment of debt (220,047) —

Revenue reduction, net (2) — 38,653

Other revenue adjustments (3) (453) —

Excess supplier costs (4) — 1,012

Change in fair value of derivative liability — (1,477)

Change in fair value of warrant liability 3,222 —

Impairment of goodwill — 547,152

Contract termination payment (5) — 10,000

(Recovery of) impairment and accounts receivable write-off (6) (3,500) 104,134

(Recovery) impairment of inventory and other deferred costs (7) (13,220) 18,059

Impairment of deferred costs with suppliers (8) — 13,409

Impairment of DevCo project assets (9) 6,390 —

Provision for income taxes 536 332

(1) Depreciation and amortization includes depreciation and amortization expense, impairment loss of energy storage systems, impairment loss of project assets, and impairment loss of right-of-use assets.

(2) Refer to the discussion of reduction in revenue in “— Parent Company Guarantees” above.

(3) Other revenue adjustments refer to terminations and modifications of significant contracts with customers prior to their scheduled termination dates.

(4) Refer to the discussion of excess supplier costs “— Non-GAAP Gross Profit and Margin” above.

(5) Contract termination payments and hardware deposit forfeitures with certain suppliers.

(6) Refer to the discussion of write-offs relating to parent company guarantee related arrangements in “— Impairment and Accounts Receivable Write-Off” above.

(7) Recovery of inventory for the year ended December 31, 2025 represents changes to cost of goods due to terminations of significant contracts with customers prior to their scheduled termination dates. For the year ended December 31, 2024, impairment of inventory and other deferred costs represents charges to cost of goods to reduce the value of certain inventory items and deferred assets to their net realizable value.

(8) Deposit forfeitures with certain hardware suppliers.

(9) Impairment of DevCo project assets represent the excess of cost of goods over the sales transaction price for certain DevCo projects sold during the period.

(10) Adjusted EBITDA for the year ended December 31, 2025 reflects the exclusion of other expenses of $13.2 million. Other expenses are comprised of $6.1 million for expenses related to restructuring costs to pursue greater efficiency and to realign our business and strategic priorities, an accounts receivable write-off of $5.9 million, $0.9 million for one-time costs associated with a loss on disposal and abandonment of property, plant and equipment, and $0.3 million of other non-recurring expenses. Adjusted EBITDA for the year ended December 31, 2024 reflects the exclusion of other expenses of $14.3 million. Other expenses are comprised of an accounts receivable write-off of $7.3 million, $3.7 million for expenses related to restructuring costs, $1.2 million for advisory services relating to strategy, $1.5 millionin connection with separation agreements for certain of the Company’s former executive officers, and $0.6 million of other non-recurring expenses. Restructuring expenses consisted of employee severance and other exit costs.

Financial Results and Key Metrics

The following table presents our financial results and our key metrics (in millions, except for percentages and unless otherwise noted):

Years Ended December 31,

(in millions)

Key Financial Metrics

GAAP gross profit (loss) $ 60.0 $ (11.1)

GAAP gross margin (%) 38 % (8) %

Non-GAAP gross profit $ 72.3 $ 63.7

Non-GAAP gross margin (%) 46 % 35 %

Adjusted EBITDA $ 6.7 $ (22.8)

Key Operating Metrics

Contracted backlog* (2) $ 21.3 $ 20.9

Solar operating AUM (in GW)* (5) 36.1 29.9

Storage operating AUM (in GWh)* (6) 1.7 1.8

* at period end

(5) Total GW of solar systems in operation.

Bookings

Due to the long-term nature of our contracts, bookings are a key metric that allows us to understand and evaluate the growth of our Company and our estimated future revenue related to customer contracts for our energy optimization services, sales of energy storage systems, asset monitoring software, edge devices, and project and professional service engagements. Bookings represent the total value of executed customer purchase orders. Customer purchase orders are typically executed three to six months ahead of hardware installation. The booking amount includes (1) hardware revenue, which is typically recognized at delivery of the energy storage system and/or edge device to the customer, and (2) services revenue, which represents the total nominal software and services contract value which will be recognized ratably over the contract period.

Components of Our Results of Operations

Revenue

We generate services and other revenue and hardware revenue. Services and other revenue is generated through (i) energy optimization software, (ii) asset management software, and (iii) advisory services and (iv) the sale of project assets. Software fees charged to customers generally consist of recurring fixed monthly payments throughout the term of the contract and in some arrangements, an installation and/or upfront fee component. We may also receive incentives from utility companies in relation to the sale of our services.

We generate hardware revenue through (i) edge hardware devices and (ii) sales of OEM energy storage systems. Performance obligations are satisfied when the energy storage system and edge hardware device along with all ancillary hardware components are delivered. The milestone payments received before the delivery of hardware are treated as deferred revenue. In certain customer contracts, we agreed to provide a guarantee that the value of purchased hardware will not decline for a certain period of time, as more fully described below under Note 3 — Revenue, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Cost of Revenue

Cost of services and other revenue primarily includes costs to service our storage and solar subscription customers. It includes expenses related to providing support to our customers and cloud-related costs, such as hosting costs. These costs primarily consist of personnel-related expenses of our services and customer support personnel, amortization of capitalized internal-use software development, and public cloud and cellular infrastructure costs. Cost of services and other revenue also includes depreciation of the cost of energy storage systems we own under long-term customer contracts, which includes capitalized fulfillment costs, such as installation services, permitting and other related costs. Additionally, cost of services and other revenue may include the costs for the development and constructions of project assets or any impairment of inventory and energy storage systems, along with system maintenance costs associated with the ongoing services provided to customers.

Cost of hardware revenue generally includes the cost to produce edge hardware and the battery hardware purchased from a manufacturer, shipping, delivery, and other costs required to fulfill our obligation to deliver the edge hardware and energy storage systems to the customer location. Cost of hardware revenue may also include any impairment of energy storage systems held in our inventory for sale to our customer. Cost of hardware revenue related to the sale of energy storage systems is recognized when the delivery of the product is completed.

Gross Profit (Loss)

Our gross profit (loss) fluctuates significantly from quarter to quarter. Gross profit (loss), calculated as revenue less costs of revenue, has been, and will continue to be, affected by various factors, including fluctuations in the amount and mix of revenue and the amount and timing of investments to expand our customer base. Over the long term, we hope to increase both our gross profit in absolute dollars and gross margin as a percentage of revenue through enhanced operational efficiency and economies of scale.

Operating Expenses

Sales and Marketing

Sales and marketing expense consists of payroll and other related personnel costs, including salaries, stock-based compensation, commissions, bonuses, employee benefits, and travel for our sales and marketing personnel. In addition, sales and marketing expense includes trade show costs, amortization of intangibles and other expenses. We expect our sales and marketing expense to increase in future periods to support the overall growth in our business.

Research and Development

Research and development expense consists primarily of payroll and other related personnel costs for engineers and third parties engaged in the design and development of products, third-party software and technologies, including salaries, bonuses and stock-based compensation expense, project material costs, services and depreciation. Our research and development expenses support our investments in optimization, accuracy and reliability of our platform and other technology improvements to support and drive efficiency in our operations. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments.

General and Administrative

General and administrative expense consists of payroll and other related personnel costs, including salaries, stock-based compensation, employee benefits and expenses for executive management, legal, finance, human resources and other costs. In addition, general and administrative expense includes fees for professional services and occupancy costs. We expect to continue to manage and reduce our general and administrative expense associated with scaling our business operations and being a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.

Impairment of Parent Company Guarantees

Account balances deemed to be uncollectible are charged to bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote.

Impairment of Goodwill

Impairment of goodwill represents impairment charges as a result of the carrying amount being greater than the fair value.

Other Income (Expense), Net

Interest Expense

Interest expense, net consists primarily of interest on our outstanding borrowings under our outstanding convertible senior notes, senior secured notes, financing obligations, and accretion on our asset retirement obligations.

Gain on Extinguishment of Debt

Gain on extinguishment of debt represents the proportional carrying value of the exchanged 2028 Convertible Notes and 2030 Convertible Notes, reduced by the collective fair value of the 2030 Senior Secured Notes and the fair value of the 2030 Private Placement Warrants, offset by cash received.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability is related to the revaluation of derivative feature within a revenue contract, whereby final settlement is indexed to the price per ton of lithium carbonate.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability is related to the revaluation at each reporting date of our private placement warrants issued in connection with our senior secured notes.

Other Income, Net

Other income, net consists primarily of income from equity investments and foreign exchange gains or losses.

Results of Operations

Results of Operations for the Years Ended December 31, 2025 and 2024

Year Ended December 31, $ Change % Change

(In thousands, except percentages)

Revenue

Cost of revenue

Operating expenses

Impairment of parent company guarantees — 104,134 (104,134) *

Other income (expense), net

Change in fair value of derivative liability — 1,477 (1,477) *

Change in fair value of warrant liability (3,222) — (3,222) *

*Percentage is not meaningful

Revenue

Total revenue increased by $11.7 million, or 8%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The change was primarily driven by an increase in services and other revenue of $19.9 million compared to the year ended December 31, 2024, primarily due to an increase in solar services subscriptions from existing and new customers. The increase was partially offset by a $8.2 million decrease in hardware revenue that is primarily the result of a decrease in battery hardware resales being offset by increased edge hardware and service offerings as the company continues to strategically de-emphasize battery hardware resales and pursue more selective opportunities.

Cost of Revenue

Cost of revenue decreased by $59.3 million, or 38%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily driven by a decrease in cost of hardware revenue of $59.6 million due to a reduction in low margin battery hardware resales as the company continues to strategically de-emphasize this business line and pursue more selective opportunities. Cost of services and other revenue increased $0.3 million.

Operating Expenses

Sales and Marketing

Sales and marketing expense decreased by $9.0 million, or 24%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to a decrease of $7.5 million in personnel costs as a result of a decrease in headcount, and a decrease of $1.6 million of professional services, resulting from reductions in advisory services, marketing related subscription cancellations and office-related expenses.

Research and Development

Research and development expense decreased by $16.0 million, or 31%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to a decrease of $11.4 million in personnel costs as a result of lower headcount, and a decrease of $4.6 million in professional services and other expenses.

General and Administrative

General and administrative expense decreased by $36.4 million, or 41%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily driven by one-time prior year charges, including a one-time contract termination payment of $10.0 million, an impairment of deferred costs with suppliers of $13.4 million, along with reductions in current year expenses, including a decrease of $6.3 million in personnel costs as a result of a decrease in headcount, a decrease of $4.2 million in office-related expenses, a decrease of $1.9 million of bad debt expense, a decrease of $0.6 million of professional services and other expenses, and a decrease of $0.1 million in business taxes related to state sales tax liabilities.

Impairment of parent company guarantees

During the year ended December 31, 2024, we recorded credit losses of $104.1 million primarily due to a write-off of receivables related to certain customer contracts, which provided a parent company guarantee, that were deemed to be uncollectible.

Impairment of Goodwill

During the year ended December 31, 2024, we recorded an impairment of goodwill of $547.2 million as the carrying amount of the reporting unit exceeded its fair value.

Other Income (Expense), Net

Interest Expense

Interest expense increased by $5.6 million, or 31%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily driven by an increase of $11.0 million on our 2030 Senior Secured Notes, and the accretion of discount on short-term investments of $0.1 million, partially offset by a decrease of $3.9 million in interest on our 2028 and 2030 Convertible Notes and a decrease of $1.8 million in interest on financing obligations.

Gain on Extinguishment of Debt, Net

During the year ended December 31, 2025, we recorded a $220.0 million gain on extinguishment of debt driven by the $155.4 million issuance of our 2030 Senior Secured Notes, 2030 Private Placement Warrants, and cash proceeds, which extinguished approximately $228.8 millionaggregate principal amount of our 2028 Convertible Notes and approximately $121.3 million aggregate principal amount of our 2030 Convertible Notes.

Change in Fair Value of Derivative Liability

During the year ended December 31, 2024, we realized gains of $1.5 million relating to the settlement of our derivative liability related to customers contracts.

Change in Fair Value of Warrant Liability

During the year ended December 31, 2025, we recorded an increase of $3.2 million relating to our private placement warrant liability.

Other Income, Net

Other income, net decreased by $1.5 million, or 58%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The net decrease was primarily due to a decrease of $1.5 million in interest income from money market funds.

Provision for Income Taxes

During the year ended December 31, 2025, we recorded a provision for income taxes of $0.5 million primarily due to foreign and state income tax expense. During the year ended December 31, 2024, we recorded a provision for income taxes of $0.3 million primarily as a result of foreign and state income tax expense.

Liquidity and Capital Resources

Sources of Liquidity

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities. To meet our payment service obligations, we must have sufficient liquid assets and be able to move funds on a timely basis. Significant factors in the management of liquidity are funds generated from operations, levels of accounts receivable and accounts payable and capital expenditures.

As of December 31, 2025, our principal sources of liquidity were cash and cash equivalents of $48.9 million, which were held for working capital purposes and for investment growth opportunities. As of December 31, 2025, we had net accounts receivable of $38.4 million and our working capital (deficit), which we define as current assets less current liabilities, was $(10.5) million. We believe that our cash position is sufficient to meet our capital and liquidity requirements for at least the next 12 months.

Our attainment of profitable operations is dependent upon future events, including continued implementation of our business strategy, hiring and retaining our key executives and personnel with the requisite experience to develop our software and AI-based solutions, controlling our operating costs and building our customer base. Failure to achieve the intended benefits of our business strategy, generate sufficient revenues from our software and services offerings, achieve planned gross margins and operating profitability, control operating costs, or secure additional funding may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results, and financial condition. The execution of our new strategy has required significant operational changes, including reduction of what has historically been the source of most of our revenue (battery resales), adjustments to the way we develop and market our products and services, and realignment of our business processes. These changes have resulted in reduced revenue, increased costs and short-term disruptions in our operations, which have negatively impacted our financial condition in the near term. Furthermore, our cash reserves may constrain our ability to make the investments required to execute our new strategy or may otherwise not be sufficient to fund operations. If our cash flow from operations does not improve as quickly as expected, or if we are unable to secure additional sources of capital if or when the need arises, it may have a material adverse effect on our business, financial condition, and results of operations.

In the future, we may be required to obtain additional equity or debt financing in order to support our continued capital expenditures and operations, which may not be available on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our business, growth and results of operations.

Our long-term liquidity requirements are linked primarily to the expansion of our software and services offerings and our related business strategy, as well as the continued extension of PowerTrackTM and other software applications. While we have plans to potentially expand our geographical footprint beyond our current partnerships and enter into joint ventures, those are not required initiatives to achieve our plans.

Financing Obligations

We have entered into arrangements wherein we finance the cost of energy storage systems via special purpose entities (“SPEs”) we establish with outside investors. These SPEs are not consolidated into our financial statements, but are accounted for as equity method investments. The investors provide us upfront payments through the SPEs. Under these arrangements, the payment by the SPE to us is accounted for as a borrowing by recording the proceeds received as a financing obligation. The financing obligation is repaid with the future customer payments and incentives received. A portion of the amounts paid to the SPE is allocated to interest expense using the effective interest rate method. Furthermore, we continue to account for the revenues from customer arrangements and incentives and all associated costs despite such systems being legally sold to the SPEs due to our significant continuing involvement in the operations of the energy storage systems. The total financing obligation as of December 31, 2025 was $43.4 million, of which $13.8 million was classified as a current liability.

2028 Green Convertible Senior Notes

On November 22, 2021, we sold to Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC and Barclays Capital Inc, as initial purchasers (the “2021 Initial Purchasers”), and the 2021 Initial Purchasers purchased from us, $460.0 million aggregate principal amount of our 0.50% Green Convertible Notes due 2028 (the “2028 Convertible Notes”), pursuant to a purchase agreement dated as of November 17, 2021, by and between us and the 2021 Initial Purchasers. Our net proceeds from this offering were approximately $445.7 million, after deducting the 2021 Initial Purchasers’ discounts and commissions and the estimated offering expenses payable by us. The 2028 Convertible Notes will accrue interest payable semi-annually in arrears and will mature on December 1, 2028, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. Upon conversion, we may choose to pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock. The 2028 Convertible Notes are redeemable for cash at our option at any time given certain conditions. Refer to Note 11 —Debt, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional details regarding this transaction.

On November 17, 2021, in connection with the pricing of the 2028 Convertible Notes, and on November 19, 2021, in connection with the exercise in full by the 2021 Initial Purchasers of their option to purchase additional 2028 Convertible Notes, we entered into capped call transactions with certain of the 2021 Initial Purchasers of the 2028 Convertible Notes to minimize the potential dilution to our common stockholders upon conversion of the 2028 Convertible Notes. We used approximately $66.7 million of the net proceeds from the 2028 Convertible Notes to pay the cost of the capped call transactions described above. We intend to allocate an amount equivalent to the net proceeds from this offering to finance or refinance, in whole or in part, existing or new eligible green expenditures of Stem, including investments related to creating a more resilient clean energy system, optimized software capabilities for energy systems, and reducing waste through operations.

On April 3, 2023, we used approximately $99.8 million of the net proceeds from the issuance of the 4.25% Green Convertible Senior Notes due 2030 (“2030 Convertible Notes”) to purchase and surrender for cancellation approximately $163.0 million in aggregate principal amount of our 2028 Convertible Notes. See Note 11 —Debt, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional details regarding this transaction.

On June 30, 2025, we exchanged approximately $228.8 millionaggregate principal amount of the Company’s 2028 Convertible Notes and approximately $121.3 million aggregate principal amount of the Company’s 2030 Convertible Notes, for a portion of the Senior Secured PIK Toggle Notes due 2030 (the “2030 Senior Secured Notes”), which resulted in a $220.0 million gain on debt extinguishment.See Note 11 —Debt,in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional details regarding this transaction.

We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding 2028 Convertible Notes through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

2030 Convertible Notes

On April 3, 2023, we issued $240.0 million aggregate principal amount of our 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 2030 Convertible 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 2030 Convertible Notes are redeemable for cash at our option at any time given certain conditions. See Note 11 —Debt, of the Notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional details regarding this transaction.

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. 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 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 2030 Convertible 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.

On June 30, 2025, we exchanged approximately $121.3 million aggregate principal amount of the Company’s 2030 Convertible Notes, for a portion of the Senior Secured PIK Toggle Notes due 2030 (the “2030 Senior Secured Notes”), which resulted in a $220.0 million gain on debt extinguishment.See Note 11 —Debt,in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional details regarding this transaction.

We or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding 2030 Convertible Notes through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

2030 Senior Secured Notes

On June 30, 2025, the Company issued $155.4 million aggregate principal amount of its 2030 Senior Secured Notes to holders of the Company’s 2028 Convertible Notes and the Company’s 2030 Convertible Notes in a privately negotiated exchange (the “Exchange”) pursuant to Rule 144A under the Securities Act of 1933, as amended.

The transaction included an exchange of approximately (i) $228.8 million principal amount of the 2028 Convertible Notes and (ii) $121.3 million principal amount of the 2030 Convertible Notes, less amounts in lieu of fractional notes, for the 2030 Senior Secured Notes, warrants to purchase 439,919 shares of common stock (the “2030 Private Placement Warrants”), (iii) $10.0 million of cash proceeds, and accrued and unpaid interest on the exchanged 2028 Convertible Notes and 2030 Convertible Notes. The exchange resulted in a $220.0 million gain on debt extinguishment recorded within other income (expenses), net in the unaudited consolidated statements of operations. The gain on debt extinguishment represented the proportional carrying value of the exchanged 2028 Convertible Notes and 2030 Convertible Notes, which in aggregate was $343.9 million, reduced by the collective fair value of the 2030 Senior Secured Notes of $132.0 million and the fair value of the 2030 Private Placement Warrants of $1.9 million, offset by cash received. The fair value of the 2030 Senior Secured Notes was estimated using a Black Derman-Toy lattice model with a yield of approximately 14.6%, synthetic credit rating for the Company, volatility of 32%, and the risk free rate of 3.79% for the expected term associated with the 2030 secured notes. The fair value of the 2030 Private Placement Warrants was estimated using the Black-Scholes-Merton model based on the Company’s closing strike price on the date of extinguishment of $6.23, volatility of 118.6%, and the risk free rate of 3.79% for the expected term associated with the 2030 secured notes. The Company accrued $5.2 million in debt issuance costs primarily consisting of financial advisory, legal, and accounting fees. See 2028 Convertible Notes and 2030 Convertible Notesabove for further details on the impacts of the debt extinguishment.

At the Company’s election for any interest period, the 2030 Senior Secured Notes bear interest at a rate of (i) 12.00% per year, if interest is paid in kind, subject to a maximum amount of interest able to be paid in kind, and (ii) 11.00% per year if interest is paid in cash. In each case, interest is payable semi-annually in arrears in January and July of each year, beginning on January 1, 2026. The 2030 Senior Secured Notes will mature on December 30, 2030 unless redeemed in accordance with their terms prior to such date.

The 2030 Senior Secured Notes will be redeemable, in whole or in part, for cash at the Company’s option at any time, and from time to time, at the following redemption prices: on or after the date of issuance to December 31, 2027, at 105.00% of the principal amount of the notes being redeemed, including interest paid in kind, if any, plus accrued and unpaid interest; from January 1, 2028 to December 31, 2028, at 102.50% of the principal amount of the notes being redeemed, including interest paid in kind, if any, plus accrued and unpaid interest; and on or after January 1, 2029, at 100.00% of the principal amount of the notes being redeemed, including interest paid in kind, if any, plus accrued and unpaid interest.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Year Ended December 31,

Net cash provided by (used in) operating activities $ 6,861 $ (36,650)

Net cash used in investing activities (6,602) (3,517)

Net cash used in financing activities (7,563) (8,438)

Net decrease in cash, cash equivalents and restricted cash $ (7,384) $ (48,389)

Operating Activities

During the year ended December 31, 2025, net cash provided by operating activities was $6.9 million, primarily due to our net income of $137.8 million, adjusted for non-cash charges of $161.3 million and a net cash inflow of $30.4 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of a gain on debt extinguishment of $220.0 million, write-off of accrued expenses and other liabilities of $38.3 million, partially offset by depreciation and amortization of $44.9 million, non-cash interest expense of $1.5 million related to debt issuance costs, stock-based compensation expense of $10.2 million, a change in fair value of warrant liability of $3.2 million, non-cash lease expense of $2.7 million, impairment of energy storage systems of $2.0 million, loss on disposal of property and equipment of $0.8 million, impairment loss of project assets of $1.7 million, impairment of right-of-use assets of $1.4 million, impairment of other assets of $25.1 million, provision for accounts receivable allowance of $3.0 million, and other non-cash items of $0.5 million. The net cash inflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $17.7 million, a decrease in inventory of $6.3 million, a decrease in deferred costs with suppliers of $0.5 million, a decrease in other assets of $9.4 million, and a decrease in project assets of $14.8 million, partially offset by a decrease in deferred revenue of $0.3 million, an increase in contract origination costs of $1.5 million, a decrease in accounts payable of $19.9 million, an increase in accrued expenses of $7.4 million, and a decrease in lease liabilities, net of $4.2 million.

During the year ended December 31, 2024, net cash used in operating activities was $36.7 million, primarily due to our net loss of $854.0 million, adjusted for non-cash charges of $757.6 million and net cash inflow of $59.8 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of $45.0 million, non-cash interest expense of $2.1 million related to debt issuance costs, stock-based compensation expense of $18.5 million, non-cash lease expense of $3.0 million, impairment of inventory of $14.7 million, impairment of deferred costs with suppliers of $13.4 million, impairment of energy storage systems of $0.8 million, impairment loss of project assets of $0.9 million, impairment of right-of-use assets of $2.1 million, impairment and accounts receivable write-off of $104.1 million, impairment of goodwill of $547.2 million, impairment of deferred services $3.4 million, provision for accounts receivable allowance of $4.0 million, partially offset by change in fair value of derivative liability of $1.5 million. The net cash inflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $133.1 million, a decrease in inventory of $2.8 million, a decrease in deferred costs with suppliers of $6.5 million, a decrease in other assets of $6.5 million, partially offset by an increase in contract origination costs of $2.1 million, an increase in project assets of $8.9 million, a decrease in accrued expenses and other liabilities of $20.3 million, a decrease in accounts payable of $48.1 million, a decrease in lease liabilities, net of $2.8 million, and a decrease in deferred revenue of $6.9 million.

Investing Activities

During the year ended December 31, 2025, net cash used in investing activities was $6.6 million, consisting of $6.6 million in capital expenditures on internally-developed software.

During the year ended December 31, 2024, net cash used in investing activities was $3.5 million, primarily consisting of $0.3 million used for the purchase of energy systems, $11.3 million in capital expenditures on internally-developed software, and $0.2 million used for the purchase of property and equipment, partially offset by $8.3 million in net proceeds of available-for-sale investments.

Financing Activities

During the year ended December 31, 2025, net cash used in financing activities was $7.6 million, primarily consisting of the repayment of financing obligations of $12.2 million and a redemption of non-controlling interest of $0.2 million, partially offset by net proceeds from the issuance of senior secured notes of $4.8 million.

During the year ended December 31, 2024, net cash used in financing activities was $8.4 million, primarily consisting of repayment of financing obligations of $8.5 million, partially offset by an investment from non-controlling interest of $0.1 million.

Contractual Obligations and Commitments

The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments. Changes in our business needs, cancellation provisions and changes in interest rates, as well as action by third parties and other factors, may cause these estimates to change. Therefore, our actual payments in future periods may vary from those presented in the table below. We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities.

The following table summarizes our contractual obligations and commitments as of December 31, 2025 (in thousands).

Less than More than

Total 1 Year 1-3 Years 3-5 Years 5 Years

See Note 6 —Leases and Note 11 —Debt, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for more details.

We do not consider our financing obligations as contractual obligations, as our repayments of such obligations are required only to the extent payments are collected in relation to the operation of the underlying energy storage systems. The obligation is nonrecourse and there are no contractual commitments to pay specific amounts at any point in time throughout the life of the obligation.

We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, or unconsolidated variable interest entities that either have, or would reasonably be expected to have, a current or future material effect on our consolidated financial statements.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements. Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates.

Our critical accounting policies are those that materially affect our consolidated financial statements and involve difficult, subjective or complex judgments by management. A thorough understanding of these critical accounting policies is essential when reviewing our consolidated financial statements. We believe that the critical accounting policies listed below involve the most difficult management decisions because they require the use of significant estimates and assumptions as described above.

Our significant accounting policies are described in Note 2 —Summary of Significant Accounting Policies, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements:

Revenue Recognition

We generate revenue through host customer arrangements, partnership arrangements, and sales of project assets. We apply judgment during the identification of a contract to determine the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer.

For contracts that contain multiple performance obligations, we allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price, or SSP for each performance obligation. We use

judgment in determining the SSP for our products and services. We typically assess the SSP for our products and services on an annual basis or when facts and circumstances change. To determine SSP, we maximize the use of observable standalone sales and observable data, where available. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include other observable inputs or use the expected cost-plus margin approach to estimate the price we would charge if the products and services were sold separately. The expected cost-plus margin approach is currently used to determine SSP for each distinct performance obligation for sale of hardware.

In some cases, the total transaction price is determined based on the total consideration specified in the contract, including variable consideration in the form of a performance guaranty payment that represents potential amounts payable to customers. The expected value method is generally used when estimating variable consideration, which typically reduces the total transaction price due to the nature of the performance obligations to which the variable consideration relates. These estimates reflect our historical experience and current contractual requirements which cap the maximum amount that may be paid. The expected value method requires judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each performance obligation. Depending on the facts and circumstances, a change in variable consideration estimate will either be accounted for at the contract level or using the portfolio method.

Impairment of Long-Lived Assets

Long-lived assets, including energy storage systems, and intangible assets with finite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors that we analyze in determining whether an impairment in our long-lived assets exists include determining if a significant decrease in the market price of a long-lived asset is present; a significant adverse change in the extent to which a long-lived asset is being used in its physical condition; legal proceedings or factors; significant business climate changes; accumulations of costs in significant excess of the amounts expected; a current-period operating or cash flow loss coupled with historical negative cash flows or expected future negative cash flows; and current expectations that more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its estimated useful life.

When an impairment indicator is present, we determine if the carrying value of the asset is recoverable by comparing it to its expected undiscounted future cash flows. If the asset group is not recoverable, the impairment loss is calculated as the excess of the carrying value over the fair value. Key estimates in the undiscounted cash flow model include management’s estimate of the projected revenues and operating margins. If fair value is used to determine an impairment loss, an additional key assumption is the selection of a weighted-average cost of capital to discount cash flows. We recorded impairment charges for energy storage systems amounting to $2.0 million during the year ended December 31, 2025. We recorded $1.7 million in project asset impairments during the year ended December 31, 2025.

Fair Value Measurements - 2030 Senior Secured Notes

The Company’s 2030 Senior Secured Notes, issued in June 2025, represent a significant component of our long-term debt. The fair value measurement of these notes is a critical accounting estimate due to the complexity of the instrument, the lack of an active market, and the significant management judgment required in the valuation process.

The 2030 Senior Secured Notes are not publicly traded and do not have readily observable market prices. As a result, we estimate their fair value using an option pricing model, specifically a Black Derman-Toy lattice model. The valuation incorporates both observable and unobservable inputs, and is classified as a Level 3 measurement in the fair value hierarchy. Key inputs and assumptions used in the valuation include yield, synthetic credit rating for the Company, volatility, and risk-free rate. Refer to Note 11 — Debt , in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Recent Accounting Pronouncements

Information with respect to recent accounting pronouncements may be found in Note 2 —Summary of Significant Accounting Policies, in the accompanying notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

STEM, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2025 and 2024, and for Years Ended December 31, 2025, 2024 and 2023

Page

Index to Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 59

Financial Statements:

Consolidated Balance Sheets 61

Consolidated Statements of Operations 62

Consolidated Statements of Comprehensive Income (Loss) 63

Consolidated Statements of Stockholders’ Equity (Deficit) 64

Consolidated Statements of Cash Flows 65

Notes to Consolidated Financial Statements 67

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Stem, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Stem, Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 4, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Fair Value Measurements – 2030 Senior Secured Notes – Refer to Note 11 to the financial statements

Critical Audit Matter Description

On June 30, 2025, the Company issued $155.4 million of 2030 Senior Secured Notes to the holders of its 2028 Convertible Notes and 2030 Convertible Notes in a privately negotiated exchange pursuant to Rule 144A under the Securities Act of 1933, as amended. The transaction included an exchange of approximately (i) $228.8 million principal amount of the existing 2028 Convertible Notes and (ii) $121.3 million principal amount of the 2030 Convertible Notes less amounts in lieu of fractional notes, for the 2030 Senior Secured Notes, warrants to purchase 439,919 shares of common stock (the “2030 Private Placement Warrants”), (iii) $10.0 million of cash proceeds, and accrued and unpaid interest on the exchanged 2028 Convertible Notes and 2030 Convertible Notes. The exchange resulted in a $220.0 million gain on debt extinguishment which represents the proportional carrying value of the exchanged 2028 Convertible Notes and 2030 Convertible Notes, which in aggregate was $343.9 million, reduced by the collective fair value of the 2030 Senior Secured Notes of $132.0 million and the fair value of the 2030 Private Placement Warrants of $1.9 million, offset by cash received. The fair value of the 2030 Senior Secured Notes was estimated using the Black Derman-Toy lattice model. The Black Derman-Toy lattice inputs used to value the 2030 Senior Secured Notes includes synthetic credit rating of the Company, yield, and volatility.

We identified the fair value measurements of the 2030 Senior Secured Notes as a critical audit matter due to the significant level of management judgment required in selection of the valuation model and the inputs management used in the Black Derman-Toy lattice model, including selection of synthetic credit rating, yield, and volatility. This required a high degree of

auditor judgment and an increased extent of effort, including the need to involve our fair value specialists who possess significant quantitative and modeling expertise, when performing audit procedures to evaluate the appropriateness of the model and management’s inputs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to testing the fair value of the 2030 Senior Secured Notes included the following, among others:

•We read the relevant debt agreements and other supporting documents to test the source information underlying the fair value measurements of the 2030 Senior Secured Notes and the mathematical accuracy of management’s calculations.

•We tested the effectiveness of controls over the estimation process supporting the fair value estimates of the 2030 Senior Secured Notes, including management’s controls over the selection of the valuation model, synthetic credit rating, yield, and volatility used.

•With the assistance of fair value specialists, we evaluated the reasonableness of the valuation model and the inputs including selection of synthetic credit rating, yield, and volatility used to determine the fair value of the 2030 Senior Secured Notes.

•With the assistance of fair value specialists, we developed an independent estimate of the fair value of the 2030 Senior Secured Notes and compared our estimate of fair value to management’s estimate.

•We evaluated the sufficiency of the disclosures related to the fair value measurements of the 2030 Senior Secured Notes in the financial statements.

/s/DELOITTE & TOUCHE LLP

San Francisco, California

March 4, 2026

We have served as the Company’s auditor since 2018.

STEM, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

ASSETS

Current assets:

Contract origination costs, net 7,466 9,681

Operating lease right-of-use assets 9,571 12,574

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Financing obligation, current portion 13,792 16,521

Senior secured notes, noncurrent 128,796 —

Warrant liabilities 5,121 —

Commitments and contingencies (Note 19)

Stockholders’ deficit:

Accumulated other comprehensive income 41 76

Non-controlling interests 383 541

Total liabilities and stockholders’ deficit $ 308,887 $ 437,359

The accompanying notes are an integral part of these consolidated financial statements.

STEM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

Years Ended December 31,

Revenue

Cost of revenue

Operating expenses

Impairment of parent company guarantees — 104,134 —

Impairment of goodwill — 547,152 —

Other income (expense), net

Change in fair value of derivative liability — 1,477 (7,731)

Change in fair value of warrant liability (3,222) — —

Numerator used to compute net income (loss) per share:

The accompanying notes are an integral part of these consolidated financial statements.

STEM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Years Ended December 31,

Other comprehensive income (loss):

Unrealized gain on available-for-sale securities — 3 1,676

Foreign currency translation adjustment (35) 115 (46)

The accompanying notes are an integral part of these consolidated financial statements.

STEM, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

Shares Amount

Stock option exercises, net of statutory tax withholdings 6,277 — 276 — — — 276

Purchase of capped call options (Note 11) — — (27,840) — — — (27,840)

Unrealized gain on available-for-sale securities — — — 1,676 — — 1,676

Foreign currency translation adjustments — — — (46) — — (46)

Redemption of non-controlling interests — — — — — (56) (56)

Unrealized gain on available-for-sale securities — — — 3 — — 3

Foreign currency translation adjustments — — — 115 — — 115

Contribution from non-controlling interests — — — — — 56 56

Foreign currency translation adjustments — — — (35) — — (35)

Adjustment due to reverse stock split (Note 2) (90) (16) 16 — — — —

Redemption of non-controlling interests — — — — — (158) (158)

The accompanying notes are an integral part of these consolidated financial statements.

STEM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31,

OPERATING ACTIVITIES

Change in fair value of derivative liability — (1,477) 7,731

Change in fair value of warrant liability 3,222 — —

Accretion of asset retirement obligations 237 236 234

Impairment of inventory — 14,673 —

Impairment of deferred costs with suppliers — 13,409 —

Loss on disposal of property and equipment 842 — —

Impairment of right-of-use assets 1,357 2,096 —

Impairment of parent company guarantees — 104,134 —

Impairment of goodwill — 547,152 —

Impairment of deferred services — 3,386 —

Impairment of other assets 25,088 — —

Write-off of accrued expenses and other liabilities (38,318) — —

Net accretion of discount on investments — (29) (1,755)

Income tax benefit from release of valuation allowance — — (335)

Provision for credit losses on accounts receivable 3,046 3,978 1,447

Net loss on investments — — 1,561

Changes in operating assets and liabilities:

Net cash provided by (used in) operating activities 6,861 (36,650) (207,377)

INVESTING ACTIVITIES

Acquisitions, net of cash acquired — — (1,847)

Purchase of available-for-sale investments — — (60,002)

Proceeds from maturities of available-for-sale investments — 8,250 141,810

Proceeds from sales of available-for-sale investments — — 73,917

Purchase of energy storage systems — (275) (2,634)

Capital expenditures on internally-developed software (6,602) (11,275) (14,097)

Distribution from equity method investment — — 85

Purchase of property and equipment — (217) (1,505)

Net cash (used in) provided by investing activities (6,602) (3,517) 135,727

The accompanying notes are an integral part of these consolidated financial statements.

FINANCING ACTIVITIES

Proceeds from exercise of stock options — — 276

Repayment of convertible notes — — (99,754)

Purchase of capped call options — — (27,840)

(Redemption of) investment from non-controlling interests (158) 56 (56)

Repayment of notes payable — — (2,101)

Net cash (used in) provided by financing activities (7,563) (8,438) 90,238

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

NON-CASH INVESTING AND FINANCING ACTIVITIES

Change in asset retirement costs and asset retirement obligation $ 91 $ 85 $ 443

Debt issued in exchange for extinguishment of existing notes $ 121,954 $ — $ —

Debt retired in exchange for issuance of new notes $ 343,901 $ — $ —

Warrants issued in connection with debt exchange $ 1,899 $ — $ —

Restricted cash included in other noncurrent assets 1,786 1,786 1,100

The accompanying notes are an integral part of these consolidated financial statements.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

Description of the Business

Stem, Inc., together with its consolidated subsidiaries (“Stem,” the “Company,” “we,” “us,” or “our”) is a global leader reimagining technology to support the energy transition. We help asset owners, operators, and stakeholders benefit from the full value of their energy portfolio by enabling the intelligent development, deployment and operation of clean energy assets.

The PowerTrack Software for solar monitoring and analytics enables the standardization of energy portfolios on one hardware agnostic application. Our commercial- and utility-scale edge hardware solutions are original equipment manufacturer (“OEM”)-agnostic devices that are used to connect customers’ solar and storage assets to our software applications in a unified view. Our Managed Services are full lifecycle, storage services covering the design, procurement, commissioning, operation and optimization of energy storage and hybrid systems, enabled by our PowerTrack Optimizer software. Our comprehensive suite of Professional Services supports solar and storage projects through every stage of the project lifecycle, offering the expertise needed to navigate complexity and scale clean energy portfolios.

Stem, Inc. was incorporated on March 16, 2009 in the State of Delaware and is headquartered in Houston, Texas.

Liquidity

The accompanying consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form 10-K and Regulation S-X, assuming the Company will continue as a going concern. As of December 31, 2025, the Company had cash and cash equivalents of $48.9 million, an accumulated deficit of $1,488.7 million and negative working capital, which we define as current assets less current liabilities, of $10.5 million, with $13.8 million of financing obligations coming due within the next 12 months. During the year ended December 31, 2025, the Company recognized net income of $137.8 million and had positive cash flows from operating activities of $6.9 million. The Company believes that its cash position, as well as expected collections from accounts receivable, is sufficient to meet capital and liquidity requirements for at least the next 12 months.

The Company’s business prospects are subject to risks, expenses, and uncertainties, including those discussed in Part I. Item 1A. “Risk Factors” of this Report. The attainment of profitable operations is dependent upon future events, including continued execution of our software and services-oriented strategy, the successful delivery of AI-enabled software and edge device capabilities to our customers, securing new customers and maintaining current ones, and motivating, hiring and retaining appropriate personnel. Failure to generate sufficient revenues, achieve planned gross margins and operating profitability, control operating costs, or secure additional funding as required may require us to modify, delay or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results and financial condition.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company's consolidated financial statements have been prepared in accordance with GAAP.

On June 23, 2025, we effected a 1-for-20 reverse stock split, which reduced the number of our shares of common stock outstanding on that date from 167,169,140 shares to 8,358,370 shares. The number of authorized shares of our common stock has been reduced from 500.0 million shares to 250.0 million shares and the number of authorized shares of preferred stock remained unchanged at 1.0 million shares. The number of shares of common stock issuable upon settlement of outstanding restricted stock units and exercise of options was reduced proportionately as a result of the reverse stock split. Additionally, the exercise price of all outstanding options, the number of shares of common stock issuable upon the exercise of all outstanding options, and the number of shares reserved for future issuance pursuant to our equity incentive plans were all adjusted proportionately as a result of the reverse stock split. All share and per share amounts, exercise prices, conversion rates and conversion prices presented herein that relate to dates, or were established, prior to the reverse stock split have been adjusted retroactively to reflect these changes.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and consolidated variable interest entities (“VIEs”). The Company presents non-controlling interests within the equity section of its consolidated balance sheets, and the amount of consolidated net income (loss) that is attributable to the Company and the non-controlling interest in its consolidated statements of operations. All intercompany balances and transactions have been eliminated in consolidation.

Variable Interest Entities

The Company has in some instances formed special purpose entities (“SPEs”), some of which are VIEs, with its investors in the ordinary course of business to facilitate the funding and monetization of its energy storage systems. A legal entity is considered a VIE if it has either a total equity investment that is insufficient to finance its operations without additional subordinated financial support or whose equity holders lack the characteristics of a controlling financial interest. The Company’s variable interests arise from contractual, ownership, or other monetary interests in the entity. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests.

The Company consolidates a VIE if it is deemed to be the primary beneficiary. The Company determines it is the primary beneficiary if it has the power to direct the activities that most significantly impact the VIEs’ economic performance and has the obligation to absorb losses or has the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it is the primary beneficiary.

Beginning in January 2022, the Company entered into strategic joint ventures through indirect wholly-owned development subsidiaries of the Company (“DevCo JVs”) with the purpose of originating potential battery storage facility projects in specific locations and conducting early-stage planning and development activities. The Company determined that the DevCo JVs are VIEs, as they lack sufficient equity to finance their activities without additional financial support. The Company determined that it has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or receive benefits from the VIE that could potentially be significant. Accordingly, the Company has determined that it is the primary beneficiary of the DevCo JVs, and as a result, the DevCo JVs’ operating results, assets and liabilities are consolidated by the Company, with third party minority owners’ share presented as noncontrolling interest. The Company applied the hypothetical liquidation at book value method in allocating recorded net income (loss) to each owner based on the change in the reporting period, of the amount of net assets of the entity to which each owner would be entitled to under the governing contracts in a liquidation scenario.

The following table summarizes the carrying values of the assets and liabilities of the DevCo JVs that are consolidated by the Company as of December 31, 2025 and 2024 (in thousands):

Assets

Cash and cash equivalents $ 560 $ 1,556

Accounts receivable 3,820 —

Other current assets — 18

Other noncurrent assets — 16,415

Liabilities

Other current liabilities — 114

The Company did not make any material capital investment contributions during the year ended December 31, 2025 and 2024. We are not making further investments in these DevCo JVs, and as of December 31, 2025 we have sold, or written off, all project assets associated with the DevCo JVs. The net loss from the DevCo JVs was $6.8 million during the year ended December 31, 2025 and was immaterial during the year ended December 31, 2024. The net income from the DevCo JVs was $1.4 million during the year ended December 31, 2023.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity Method Investments

The Company has ownership interests in SPEs which it does not control. Where the Company holds an interest in these SPEs of greater than 20% and has the ability to exercise significant influence, the Company uses the equity method to account for its investments in these SPEs. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions. Such proportionate share of earnings or losses is included within other expenses, net in the consolidated statements of operations. The Company considers whether its equity method investments are impaired when events or circumstances suggest that the carrying amount may not be recoverable. An impairment charge is recognized in the consolidated statements of operations for a decline in value that is determined to be other-than-temporary. In determining if and when a decline in the fair value of these investments below their carrying value is other-than-temporary, the Company evaluates the market condition, trends of earnings and cash flows and other key measures of performance and recognizes such loss which is deemed to be other-than-temporary. No such losses have been recognized during the years ended December 31, 2025, 2024, and 2023.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, depreciable life of energy storage systems; estimates of transaction price with variable consideration; the amortization of acquired intangibles; the amortization of financing obligations; deferred commissions and contract fulfillment costs; the valuation of energy storage systems, finite-lived intangible assets, internally developed software, and asset retirement obligations; the fair value of debt instruments, equity-based instruments, derivative liability, and warrant liability; accruals related to sales tax liabilities; and the impairment of goodwill.

Segment Information

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, management has determined that the Company operates as one operating segment that is focused exclusively on innovative technology services that transform the way energy is distributed and consumed. Net assets outside of the U.S. were less than 10% of total net assets as of December 31, 2025 and 2024.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity date of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained at financial institutions. The Company maintains all cash in a highly liquid form to meet current obligations.

Restricted Cash

Restricted cash is included within Other noncurrent assets in the accompanying consolidated balance sheets and is primarily related to cash restricted for customs and duties.

Accounts Receivable, Net

Accounts Receivable are stated at amounts estimated by management to be equal to their net realizable values. Accounts receivable also includes unbilled accounts receivable, which is composed of milestone development activities of noncancellable purchase orders and monthly energy optimization services provided and recognized but not yet invoiced as of the end of the reporting period. The allowance for credit losses is the Company's best estimate of the amount of expected credit losses. The expectation of collectability is based on the Company's review of credit profiles of customers, contractual terms and conditions, current economic trends, and historical payment experience. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and an allowance is recorded accordingly. The allowance for credit losses balance was $3.9 million and $9.8 million, of which the current portion was $3.9 million and $9.5 million as of December 31, 2025 and 2024, respectively.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the changes in the current expected credit losses during the years ended December 31, 2025, 2024, and 2023 (in thousands):

Year Ended December 31,

Write-offs, recoveries and other charges against allowance (8,947) (137) (232)

Concentrations of Credit Risk and Other Uncertainties

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. The Company’s cash balances are primarily invested in money market funds or on deposit at high credit quality financial institutions in the U.S. The Company’s cash and cash equivalents are held at financial institutions where account balances may at times exceed federally insured limits. Management believes the Company is not exposed to significant credit risk due to the financial strength of the depository institution in which the cash is held. The Company has no financial instruments with off-balance sheet risk of loss.

At times, the Company may be subject to a concentration of credit risk in relation to certain customers due to the purchase of large energy storage systems made by such customers. The Company routinely assesses the creditworthiness of its customers. During the year ended December 31, 2024, the Company wrote off $104.1 million of billed and unbilled accounts receivables that were deemed to be uncollectible (See Note 3 —Revenue). The Company did not experience any material losses related to receivables from individual customers, or groups of customers during the year ended December 31, 2025. The Company does not require collateral. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable.

The net book value of unbilled receivables, current are $2.7 million and $7.8 million as of December 31, 2025 and 2024, respectively. Unbilled receivables, current are included in accounts receivable, net. The net book value of unbilled receivables, noncurrent are $0.1 million and $5.9 million as of December 31, 2025 and 2024, respectively. Unbilled receivables, noncurrent are included in other noncurrent assets.

Significant Customers

A significant customer represents 10% or more of the Company’s total revenue or accounts receivable, net balance at each reporting date.For each significant customer, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable are as follows:

Accounts Receivable Revenue

December 31, Year Ended December 31,

Customers:

Customer B 10 % * * * *

Customer C * 20 % * * 21 %

Customer D * * * * 26 %

*Total less than 10% for the respective period

There are inherent risks whenever a large percentage of total revenue is concentrated in a limited number of customers. Should a significant customer terminate or fail to renew its contracts with us, in whole or in part, for any reason, or experience significant financial or operating difficulties, it could have a material adverse effect on our financial condition and results of operations. In general, a customer that makes up a significant portion of revenues in one period, may not make up a significant portion in subsequent periods.

Prepaid warranty

Prepaid warranties are cash advances to suppliers for warranties on batteries. Such prepayments are amortized over five to fifteen years, based on the warranty period, starting when the battery becomes operational.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventory

Inventory consists of batteries, hardware and equipment either in-process at the Company’s OEM suppliers or as a finished product at the Company’s warehouse, which are sold and delivered directly to customers under the Company’s partnership arrangements as individual assets or assembled systems. Battery inventory is stated at lower of cost or net realizable value with cost being determined by the specific identification method. Solar hardware and equipment cost is determined by the first-in, first-out (FIFO) method. The Company periodically reviews its inventory for potentially slow-moving or obsolete items and writes down specific items in inventory to net realizable value based on its assessment of market conditions.

Energy Storage Systems, Net

The Company sells energy optimization services to host customers through the use of energy storage systems installed at customer locations. The Company determined that it does not transfer control of these energy storage systems to the customer, which are operated and controlled via the Company’s proprietary software platform; therefore, these energy storage systems do not qualify as a leased asset. The energy storage systems are stated at cost, less accumulated depreciation and impairment (as applicable).

Energy storage systems, net is comprised of equipment costs, which include components such as batteries, inverters, and other electrical equipment, and associated design, installation, and interconnection costs required to begin providing the energy optimization services to customers.

Depreciation of the energy storage systems is a component of cost of revenues within the consolidated statements of operations and is calculated using the straight-line method over the estimated useful lives of the energy storage systems, or 10 years, once the respective energy storage systems have been installed and interconnected to the power grid, the Company has received permission to operate, and the Company has begun to provide energy optimization services to the customer (i.e., energy storage system is live). Repairs and maintenance costs are expensed as incurred. Impairment charges related to energy storage system that were determined to no longer be recoverable totaled $2.0 million, $0.8 million and $4.7 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Project Assets

Project assets primarily consist of costs related to battery backup projects in various stages of development that are capitalized prior to the completion of the sale of the projects, including projects that may have begun commercial operation and are actively marketed and intended to be sold. These project related costs include costs for development and construction of a system. Development costs may include legal, consulting, permitting, transmission upgrade, interconnection, and other similar costs. The Company would typically classify project assets as noncurrent due to the nature of projects (as long-lived assets) and the time required to complete all activities to develop, construct, and sell projects, which is typically longer than 12 months. Once the Company enters into a definitive sales agreement, the Company will classify project assets as current until the sale is completed and the revenue on the sale has been recognized. The Company presents all sales and expenditures related to the development and construction of project assets, whether fully or partially owned, as a component of cash flows from operating activities.

The Company reviews project assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. It considers a project commercially viable or recoverable if it is anticipated to be sold for a profit once it is either fully developed or fully constructed. It considers a partially developed or partially constructed project commercially viable or recoverable if the anticipated selling price is higher than the carrying value of the related project assets. The Company examines a number of factors to determine if the project is expected to be recoverable, including whether there are any changes in environmental, permitting, market pricing, regulatory, or other conditions that may impact the project. Such changes could cause the costs of the project to increase or the selling price of the project to decrease. If a project is not considered recoverable, the Company impairs the respective project assets and adjust the carrying value to the estimated fair value, with the resulting impairment recorded within “general and administrative” expense in the consolidated statements of operations. The Company recognized $1.7 million, $0.9 million and $0.2 million in project asset impairments for the years ended December 31, 2025, 2024 and 2023, respectively.

Contract Origination Costs, Net

Contract origination costs, net is stated at gross contract origination costs less accumulated amortization. Contract origination costs consists of sales commissions earned by the Company’s sales team, as well as related payroll taxes and other relevant fringe benefits that are direct, incremental, and recoverable costs of obtaining a contract with a customer. As a result, these amounts have been capitalized on the consolidated balance sheets. The Company deferred incremental costs of obtaining a contract of $1.5 million and $2.1 million during the years ended December 31, 2025 and 2024, respectively.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract origination costs are amortized over the expected period of benefit of 10 years. The period of benefit is estimated by considering factors such as the timing of fulfillment of performance obligations, historical customer attrition rates, the useful life of the Company’s technology, and the impact of competition in its industry. Amortization of contract costs were $3.4 million, $3.4 million and $6.3 million for the years ended December 31, 2025, 2024, and 2023, respectively, and are included in sales and marketing expense in the accompanying consolidated statements of operations.No impairment losses related to the contract origination costs that were determined to no longer be recoverable during the year were recorded during the years ended December 31, 2025, 2024, and 2023 .

Business Combinations

The Company accounts for business acquisitions under ASC 805, Business Combinations. The total purchase consideration for an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities assumed at the acquisition date. Costs that are directly attributable to the acquisition are expensed as incurred. Identifiable assets (including intangible assets), liabilities assumed (including contingent liabilities) and noncontrolling interests in an acquisition are measured initially at their fair values at the acquisition date. The Company recognizes goodwill if the fair value of the total purchase consideration and any noncontrolling interests is in excess of the net fair value of the identifiable assets acquired and the liabilities assumed. The Company recognizes a bargain purchase gain within other income (expense), net, on the consolidated statement of operations if the net fair value of the identifiable assets acquired and the liabilities assumed is in excess of the fair value of the total purchase consideration and any noncontrolling interests. The Company includes the results of operations of the acquired business in the consolidated financial statements beginning on the acquisition date.

Goodwill

Goodwill amounts are not amortized, but rather tested for impairment at least annually or more often if circumstances indicate that the carrying value may not be recoverable. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The Company has one reporting unit and as a result, goodwill has been assigned to the single reporting unit. In connection with the preparation of the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024, the Company considered the decline in the Company’s stock price, market capitalization, and recent financial performance to be a triggering event for its single reporting unit and therefore completed a test for impairment of goodwill for the reporting unit as of June 30, 2024. The Company tested goodwill for impairment using a Step 1 quantitative test and compared the reporting unit’s fair value to its carrying value. An impairment is recorded for any excess carrying value above the reporting unit’s fair value, not to exceed the amount of goodwill. The Company estimates fair value of its reporting unit using a discounted cash flow model, commonly referred to as the income approach. The income approach uses a reporting unit’s projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate to the Company’s reporting unit. The discounted cash flow model uses management’s best estimates of economic and market conditions over the projected period using the best information available, including growth rates in revenues, costs and estimates of future expected changes in operating margins and cash expenditures. Other estimates and assumptions include terminal value growth rates, weighted average cost of capital and changes in future working capital requirements. The impairment test resulted in an impairment of $547.2 million during the year ended December 31, 2024.

Intangible Assets

Internal-use Software

The Company capitalizes costs incurred in the development of internal-use software during the application development stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Capitalized internal-use software is amortized on a straight-line basis over the estimated useful life of the software once it is ready for its intended use. The estimated useful life of costs capitalized is generally five years. The Company recorded amortization for internal-use software of $13.2 million, $11.9 million and $9.2 million in cost of services and other revenues in the accompanying consolidated statements of operations for the years ended December 31, 2025, 2024, and 2023, respectively.

Finite-lived Intangible Assets

Finite-lived intangible assets consist of identifiable intangible assets acquired in business combinations, such as customer relationships, developed technology and trade names. Finite-lived intangible assets acquired in business combinations are initially recorded at fair value and subsequently presented net of accumulated amortization. These intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for intangible assets was $15.3 million, $15.3 million and $15.7 million in cost of services and other revenues, and operating expenses in the accompanying consolidated statements of operations for the years ended December 31, 2025 and 2024, and 2023, respectively.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Long-Lived Assets

The Company reviews its long-lived assets, which primarily consist of energy storage systems, right-of-use assets, and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset over its remaining useful life.

If such assets are impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. If the useful life is shorter than originally estimated, the Company depreciates or amortizes the remaining carrying value over the revised shorter useful life. Assets to be disposed of by sale are reflected at the lower of their carrying amount or fair value less cost to sell.

Leases

The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The classification of the Company’s leases as operating or finance leases along with the initial measurement and recognition of the associated ROU assets and lease liabilities is performed at the lease commencement date. The measurement of ROU assets and lease liabilities is based on the present value of future lease payments over the lease term. The ROU asset also includes the effect of any lease payments made prior to or on lease commencement and excludes lease incentives and initial direct costs incurred, as applicable.

As the implicit rate in the Company’s leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. The Company considers its credit risk, term of the lease, total lease payments and adjusts for the impacts of collateral, as necessary, when calculating its incremental borrowing rates. The lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise any such options. Rent expense for the Company’s operating leases is recognized on a straight-line basis over the lease term. Variable lease payments are recorded as an expense in the period incurred.

The Company has elected to not separate lease and non-lease components for any leases within its existing classes of assets and, as a result, accounts for any lease and non-lease components as a single lease component. The Company has also elected to not apply the recognition requirement to any leases within its existing classes of assets with a term of 12 months or less.

Convertible Preferred Stock Warrant Liabilities

The Company evaluates whether its warrants for shares of convertible redeemable preferred stock are freestanding financial instruments that obligate the Company to redeem the underlying preferred stock at some point in the future and determined that each of its outstanding warrants for preferred stock are liability classified. The warrants are subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the change in fair value of warrants and embedded derivatives in the consolidated statements of operations.

As discussed in Note 12 —Warrants, upon effectiveness of the Merger, substantially all of the outstanding convertible preferred stock warrants were converted into shares of common stock of Stem. As such, the associated warrant liability was reclassified to additional paid-in-capital upon the Merger and was no longer an outstanding Level 3 financial instrument.

Common Stock Warrants

The Company evaluates common stock warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. The Company assesses whether common stock warrants are freestanding financial instruments and whether they meet the criteria to be classified in stockholders’ equity, or classified as a liability. Where common stock warrants do not meet the conditions to be classified in equity, the Company assesses whether they meet the definition of a liability under ASC 815. Common stock warrants that meet the definition of a liability are recognized on the balance sheet at fair value. Subsequent changes in their respective fair values are recognized in the consolidated statement of operations at each reporting date.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As discussed in Note 12— Warrants, under a warrant agreement dated June 30, 2025, the Company issued common stock warrants (the “2030 Private Placement Warrants”), which upon issuance met the criteria for liability classification under ASC 815.

Asset Retirement Obligations

The Company recognizes a liability for the fair value of asset retirement obligations associated with its energy storage systems in the period in which there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The associated asset retirement costs are capitalized as part of the carrying amount of the energy storage systems and depreciated over the asset’s remaining useful life. This liability includes costs related to the removal of its energy storage systems at the conclusion of each respective customer contract. Subsequent to initial measurement, the asset retirement liability is accreted each period and such accretion is recognized as an expense in the consolidated statements of operations. If there are changes in the estimated amount or timing of cash flows, a revision is recorded to both the asset retirement obligation and the asset retirement capitalized cost.

Financing Obligations

The Company has formed various SPEs to finance the development and construction of its energy storage systems. These SPEs, which are structured as limited liability companies, obtain financing in the form of large upfront payments from outside investors and purchase energy storage systems from the Company under master purchase agreements. The Company accounts for the large upfront payments received from the fund investor as a borrowing by recording the proceeds received as a financing obligation, which will be repaid through host customer payments and incentives received from the utilities that will be received by the investor.

The financing obligation is non-recourse once the associated energy storage systems have been placed in-service and the associated customer arrangements have been assigned to the SPE. However, the Company is responsible for any warranties, performance guarantees, accounting, performance reporting, and all other costs associated with the operation of the energy storage systems. Despite such energy storage systems being legally sold to the SPEs, the Company recognizes host customer payments and incentives as revenue during the period as discussed in Note 3 —Revenue. The amounts received by the fund investor from customer payments and incentives are recognized as interest using the effective interest method, and the balance is applied to reduce the financing obligation. The effective interest rate is the interest rate that equates the present value of the cash amounts to be received by a fund investor in relation to the underlying Projects with the present value of the cash amounts paid by the investor to the Company, adjusted for any payments made by the Company.

Fair Value of Financial Instruments

Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).

Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

Level 3 — Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The Company’s assessment of the significance of a specific input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial assets and liabilities held by the Company measured at fair value on a recurring basis as of December 31, 2025 and 2024, include cash, cash equivalents and restricted cash, warrant liability, and convertible notes.

Revenue Recognition

Revenues are recognized when control of the promised goods or services are transferred to the Company’s customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. The Company generates all of its revenues from contracts with its customers. The Company recognizes revenue through arrangements with customers, host customer arrangements, partnership arrangements, and sale of project assets as described below.

Host Customer Arrangements

Host customer contracts are generally entered into with commercial entities that have traditionally relied on power supplied directly from the grid. Host customer arrangements consist of a promise to provide energy optimization services through the Company’s proprietary software platform coupled with a dedicated energy storage system owned and controlled by the Company throughout the term of the contract. The host customer does not obtain legal title to, or ownership of the dedicated energy storage system at any point in time. The host customer is the end consumer of the energy that directly benefits from the energy optimization services provided by the Company. The term for the Company’s contracts with host customers generally ranges from 5 to 10 years, which may include certain renewal options to extend the initial contract term or certain termination options to reduce the initial contract term.

Although the Company installs an energy storage system at the host customer site in order to provide the energy optimization services, the Company directs how and for what purpose the asset is used through the operation of its software platform and, as such, retains control of the energy storage system; therefore, the contract does not contain a lease. The Company determines the various energy optimization services provided throughout the term of the contract, which may include services such as remote monitoring, performance reporting, preventative maintenance and other ancillary services necessary for the safe and reliable operation of the energy storage system, are part of a combined output of energy optimization services and the Company provides a single distinct combined performance obligation representing a series of distinct days of services.

The Company determines the transaction price at the outset of the arrangement, primarily based on the contractual payment terms dictated by the contract with the customer. Fees charged to customers for energy optimization services generally consist of recurring fixed monthly payments throughout the term of the contract. In certain arrangements, the transaction price may include incentive payments that are earned by the host customer from utility companies in relation to the services provided by the Company. Under such arrangements, the rights to the incentive payments are assigned by the host customer to the Company. These incentives may be in the form of fixed upfront payments, variable monthly payments, or annual performance-based payments over the first 5 years of the customer contract term. Incentive payments may be contingent on approval from utility companies or actual future performance of the energy storage system.

Substantially all of the Company’s arrangements provide customers the unilateral ability to terminate for convenience prior to the conclusion of the stated contractual term or the contractual term is shorter than the estimated benefit period, which the Company has determined to be 10 years based on the estimated useful life of the underlying energy storage systems and the period over which the customer can benefit from the energy optimization services utilizing such energy storage systems. In these instances, the Company determined that upfront incentive payments received from its customers represent a material right that is, in effect, an advance payment for future energy optimization services to be recognized throughout the estimated benefit period. In contracts where the customer does not have the unilateral ability to terminate for convenience without a penalty during the estimated benefit period, the Company determined the upfront incentive payments do not represent a material right for services provided beyond the initial contractual period and are therefore a component of the initial transaction price. The Company revisits its estimate of the benefit period each reporting period. The Company’s contracts with host customers do not contain a significant financing component.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company transfers control of its energy optimization services to its customers continuously throughout the term of the contract (a stand-ready obligation) and revenue is recognized ratably as control of these services is transferred to its customers, in an amount that reflects the consideration the Company expects to be contractually entitled to in exchange for its services. Monthly incentive payments based on the performance of the energy storage system are allocated to the distinct month in which they are earned because the terms of the payments relate specifically to the outcome from transferring the distinct time increment (month) of service and because such amounts reflect the fees to which the Company expects to be entitled for providing energy optimization services each period, consistent with the allocation objective. Annual variable performance- based payments are estimated at the inception in the transaction price using the expected value method, which takes into consideration historical experience, current contractual requirements, specific known market events and forecasted energy storage system performance patterns, and the Company recognizes such payments ratably using a time-based measure of progress of days elapsed over the term of the contract to the extent that it is probable that a significant reversal of the cumulative revenue recognized will not occur in a future period. At the end of each reporting period, the Company reassesses its estimate of the transaction price. The Company does not begin recognition of revenue until the energy storage system is live (i.e., provision of energy optimization services has commenced) or, as it relates to incentive payments, when approval has been received from the utility company, if later.

Partnership Arrangements

Partnership arrangements consist of promises to transfer inventory in the form of an energy storage system to a “solar plus storage” project developer and separately provide energy optimization services as described previously to the ultimate owner of the project after the developer completes the installation of the project. Under partnership arrangements, the Company’s customer is the solar plus storage project developer. The customer obtains legal title to along with ownership and control of the inventory upon delivery and the customer is responsible for the installation of the project in some cases. Once installation of the project is complete, the owner of the solar plus storage project provides energy to the end consumer through a separate contractual arrangement directly with the end consumer. The term for the Company’s contracts with customers under partnership arrangements generally ranges from 3 to 20 years.

The Company determined the promise to deliver the inventory as a component of the solar plus storage project for which the customer is responsible to develop is a separate and distinct performance obligation from the promise to provide energy optimization services.

The Company determines the transaction price at the outset of the arrangement, primarily based on the contractual payment terms dictated by the contract with the customer. Fees charged for the sale of inventory generally consist of fixed fees payable upon or shortly after successful delivery to the customer. For some customers, the contractual payment terms are based on milestone dates of development activities, such as the date customers accept, acquire, or develop project assets or the date customers install or commission hardware on project assets. Such milestone dates may result in unbilled accounts receivable for noncancellable purchase orders when control of hardware is transferred to the customer and Company has legal right to consideration prior to the milestone date of development activities. For certain customers, the Company also guarantees the value of hardware will not decline for a certain period of time, usually six months to one year. The Company accounts for such contractual payments terms and guarantees as variable consideration at each measurement date at its most likely amount to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur. Fees charged to customers for energy optimization services consist of recurring fixed monthly payments throughout the term of the contract. The Company is responsible for designing, procuring, delivering and ensuring the proper components are provided in accordance with the requirements of the contract. Although the inventory is purchased by the Company from a third-party manufacturer, the Company determined it obtains control of the inventory prior to delivery to the customer and is the principal in the arrangement. The Company is fully responsible for responding to and correcting any customer issues related to the delivery of the inventory. The Company holds title and assumes all risks of loss associated with the inventory until the customer accepts the inventory. The Company is primarily responsible for fulfilling the delivery of the inventory to the customer, assumes substantial inventory risks and has discretion in the pricing charged to the customer. The Company has not entered into any partnership arrangements where it is not the principal in the transaction.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company allocates revenue between the hardware and energy storage services performance obligations based on the standalone selling price of each performance obligation. The standalone selling price for the hardware is established based on observable pricing. The standalone selling price for the energy optimization services is established using a residual value approach due to the significant variability in the services provided to each individual customer based on the specific requirements of each individual project and the lack of observable standalone sales of such services. The Company’s partnership arrangements do not contain a significant financing component.

The Company transfers control of the inventory upon delivery and simultaneous transfer of title to the customer. The Company transfers control of its energy optimization services to its customers continuously throughout the term of the contract (a stand-ready obligation), which does not commence until the customer successfully completes the installation of the project. As a result, the time frame between when the Company transfers control of the inventory to the customer upon delivery is generally several months, and can be in excess of one year, before the Company is required to perform any subsequent energy optimization services. Revenue is recognized ratably as control of these services is transferred to its customers based on a time-based output measure of progress of days elapsed over the term of the contract, in an amount that reflects the consideration the Company expects to be entitled to in exchange for its services.

In some partnership arrangements, the Company charges shipping fees for the inventory. The Company accounts for shipping as a fulfillment activity, since control transfers to the customer after the shipping is complete and includes such amounts within cost of revenue.

Some contracts provide our customers the right to liquidated damages against the Company in the event equipment is not delivered according to contract specifications. Liquidated damages are accounted for as variable consideration, and the contract price is reduced by the expected penalty or liquidated damage amount when recognizing revenue.

Sale of Project Assets

For sales of project assets in which the Company transfers 100% of the membership interest in project assets to a customer, the Company recognizes all of the revenue for the consideration received at a point in time when the membership interest was transferred to the customer, which typically occurs when the Company delivered the membership interest assignment agreement to the customer. The transaction price of contract arrangements is comprised of both fixed and variable amounts. Variable consideration is estimated at each measurement date at its most likely amount to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively as such estimates change. Changes in estimates for sales of project assets occur when the actual development expenses vary from estimates made at the time the membership interests transferred to the customer. The cumulative effect of revisions to transaction prices are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. Variable consideration related to the sale of project assets are generally resolved within 60 days of sale of project assets and are currently not material to the Company’s financial statements.

Cost of Revenue

Cost of Hardware

Cost of hardware relates to the sale of hardware and includes the cost of the hardware sold to project developers, which generally includes the cost to purchase the hardware from a manufacturer, shipping, and other costs required to fulfill the Company’s obligation to deliver the hardware to the customer location. Cost of hardware may also include any impairment of hardware held in inventory for sale to a customer. Cost of hardware is recognized when the delivery of the hardware is completed.

Cost of Service and Other

Cost of service and other relates to energy optimization services and includes depreciation of the cost of energy storage systems associated with long-term host customer contracts, which includes capitalized fulfillment costs, such as installation services, permitting and other related costs. Cost of services and other also includes the costs for the development and constructions of project assets. Cost of service and other may also include any impairment of energy storage systems along with energy storage system maintenance costs associated with the ongoing services provided to customers and other amounts not qualifying for capitalization pursuant to the Company’s internal use software capitalization policy. Cost of service and other is recognized as the energy optimization and other supporting services are provided to the Company’s customers throughout the term of the contract.

STEM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STEM US Equity

STEM · 10-K · period ended 2025-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

STEM US Equity☆

STEM · 10-K · period ended 2025-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

STEM US Equity